Ninth Circuit appeals court holds Wal-Mart cannot be held liable for foreign suppliers' labor violations

Plaintiffs in this case, Jane Doe v. Wal-Mart, were employees of suppliers to Wal-Mart who work in foreign countries. Their lawsuit alleged that Wal-Mart should be liable for the suppliers’ labor code violations. The employees worked for companies who manufactured goods for Wal-Mart in countries such as China, Nicaragua, and Bangladesh.

Plaintiffs alleged a unique theory for establishing liability on Wal-Mart’s behalf. They argued that Wal-Mart’s code of conduct for its suppliers (called the “Standards for Suppliers”) established a duty for Wal-Mart to ensure that the suppliers were complying with the foreign countries’ labor laws. Plaintiffs also relied on the Standards’ provision that gave Wal-Mart a right to inspect the suppliers’ to ensure they were complying with the applicable laws.

Wal-Mart filed a motion to dismiss the case on the grounds that under the law Wal-Mart could not be found liable for these third-party suppliers’ foreign labor code violations. The Court agreed with Wal-Mart in holding that the Standard for Suppliers policies did not create an obligation for Wal-Mart to monitor the suppliers’ compliance with the law – it only gave Wal-Mart a right to inspect the suppliers and then cancel orders if violations existed.

The Court also held that the facts plead by Plaintiffs did not make Wal-Mart a joint employer with its suppliers. The Court explained that to be a joint employer, an employer must have “the right to control and direct the activities of the person rendering service, or the manner and method in which the work is performed.” The Court also explained that there needs to be a day-to-day level of control, which simply did not exist in this case.

While Wal-Mart prevailed in this case, it should be a clear warning to employers to be careful in how it enters into relationships with vendors and suppliers. Employers need to be careful about how much control it has over vendors’ employees. If the relationship if not documented properly, or there is day-to-day control over the outside companies’ employees, there may be a possibility that the contracting employer could be liable for the vendors’ labor code violations.

Oral argument of the case can be listened to here

Card Check is Officially Dead, But Has Been Replaced By Bill For Faster Union Elections

As recently as February, President Obama was telling union supporters in emphatic terms that "we will pass the Employee Free Choice Act [a/k/a "card check"]."  According to the New York Times, however, the Democratic majority in the Senate has finally abandoned any attempt to replace secret ballots in union elections with a non-secret "card check" procedure.  Instead, they will supposedly push for speedier elections.

The abandonment of card check was another example of the power of moderate Democrats to constrain their party’s more liberal legislative efforts. Though the Democrats have a 60-40 vote advantage in the Senate, and President Obama supports the measure, several moderate Democrats opposed the card-check provision as undemocratic.

In its place, several Senate and labor officials said, the revised bill would require shorter unionization campaigns and faster elections.

While disappointed with the failure of card check, union leaders argued this would still be an important victory because it would give companies less time to press workers to vote against unionizing.

Having an election on just five or ten days notice will undoubtedly strain the resources of the NLRB -- which must administer and oversee the elections.  And, in any event, the real delays come from post election legal challenges filed by both sides to the campaigning and balloting. 

"Speeding up" elections as consolation for the loss of labor's cherished card check proposal has all the hallmarks of a face-saving way to begin the process of ditching this political hot potato entirely.  Wait and see -- committee members will next demur that their plates are too full with health care and financial issues.  In no time, union election reform will be off the agenda entirely, at least until the next Presidential election cycle.

Employer's Uniform Classification of Its Own Employees Does Not Justify Class Treatment -- Wells Fargo Home Mortgage Overtime Pay Litigation

In re Wells Fargo Home Mortgage Overtime Litigation clarifies the role played by an employer's use of uniform job classifications when deciding to certify an overtime class.       

The opinion arose from Wells Fargo's appeal of the District Court order certifying a class of Wells Fargo "home mortgage consultants" for the purpose of determining whether they had been internally misclassified as exempt from overtime. 

As usual, the Company had an internal policy of designating everyone within this job title as being exempt from overtime regardless of any individual variation in his or her job duties.  Once sued, however, the Company took the arguably inconsistent position that it was impossible to determine overtime eligibility on such a group-wide basis.

The Ninth Circuit first made clear that an employer's internal decision to treat all members of a given job title as exempt from overtime is clearly relevant to class treatment.

The first line of attack, that Wells Fargo's exemption policy was an impermissible factor, is a non-starter. An internal policy that treats all employees alike for exemption purposes suggests that the employer believes some degree of homogeneity exists among the employees. This undercuts later arguments that the employees are too diverse for uniform treatment. Therefore, an exemption policy is a permissible factor for consideration under Rule 23(b)(3).

The District Court had gone much further, however, by employing the logic that “it is manifestly disingenuous for a company to treat a class of employees as a homogeneous group for the purposes of internal policies and compensation, and then assert that the same group is too diverse for class treatment in overtime litigation.”

The Ninth Circuit felt that this went too far and placed too much weight on Wells Fargo's internal overtime classification policy.  In the view of the Appellate Court, this internal policy was relevant, but should have warranted only slight weight in determining whether individual or common issues could be said to "predominate."

Wells Fargo's uniform exemption policy says little about the main concern in the predominance inquiry: the balance between individual and common issues. As such, we hold that the district court abused its discretion in relying on that policy to the near exclusion of other factors relevant to the predominance inquiry

Significantly, the Ninth Circuit made no ruling as to whether a class should be certified in the case.  It merely remanded with directions to re-consider the matter with more weight on the job duties of the position and less weight on the internal "uniform exemption policy."