May 09 Labor & Employment Law Update 

Written by: Crystal M. O'Brien, Esq.

Employers Beware of ‘Negligent Hiring’ Practices

In Phillips v. TLC Plumbing, Inc., an April 3, 2009 opinion, a California Court of Appeal affirmed the summary judgment decision in favor of an employer’s defense to a negligent hiring case.  In the Phillips case, a customer was murdered by a plumber previously employed by TLC Plumbing and the customer’s family alleged that TLC was in part responsible for the death due to its negligence in hiring and retaining the plumber. Apparently, the owner of TLC hired the plumber with knowledge that the plumber was on parole for a domestic violence and/or arson offense involving his (then) wife. 

TLC is alleged to have had a duty to prevent the plumber from establishing relationships with its customers and for failing to protect its customer’s safety from known criminals with a propensity for harming others. However, the courts in this case did not agree that the plaintiffs established sufficient evidence that TLC owed a duty in connection with the unauthorized conduct of its former employee. 

The Phillips court, however, clarified that a cause of action for negligent hiring is established when an employer hires and retains an individual who the employer knows is incompetent and unfit. An employer is therefore directly liable to third persons when it knows or should have known that it hired and retained an individual who possesses characteristics which might pose a particular risk or hazard to customers and other employees and that particular harm materializes.  To read the full decision, click here.

The Phillips decision emphasizes the risk employers assume when they fail to perform background checks, which absolutely should include searches for criminal convictions. The business risks inherent to hiring individuals can be great and extend the scope of a short-sighted decision to customers and clients (external and internal). To learn more about when and how you should perform employment background searches, call MMC’s Labor & Employment Law Department at (800) 899-MMCI (6624). 

Changing Views of the Arbitrability of Employment Discrimination Claims

On April 1, 2009, the U.S. Supreme Court delivered a controversial decision that is certain to halt current momentum among the states to question whether arbitration agreements can be enforced for resolving employment discrimination claims. In 14 Penn Plaza LLC v. Pyett, a (5-4) split decision, the Court held that a collective bargaining agreement which required union members to waive their right to a jury trial and to arbitrate all workplace claims, including employment discrimination claims, could be enforced. The opinion, authored by the often times conservative Justice Thomas, overturns years of precedent established by Alexander v. Gardner-Denver Co., 415 U. S. 36 (1974), which has long been interpreted (until now) as holding that a union may not waive on behalf of its membership individual rights to bring employment discrimination claims in civil court. In other words, joining a union has not previously meant that employees must arbitrate their employment discrimination claims but under the Pyett case, it could mean just that, at least when those claims involve age discrimination. 

In Pyett, a building management employer contracted with a unionized security guard company to assume building security and then reassigned its employees to work as cleaning and maintenance personnel. The reassigned employees organized with the security workers and later brought labor grievances based on wage claims and Age Discrimination in Employment Act (“ADEA”) claims.  The union sought resolution of the wage claims pursuant to its collective bargaining agreement which required binding arbitration of wage claims. However, the union filed private civil claims on behalf of the workers for the employment discrimination claims - outside of binding arbitration. Management sought a court decision compelling workers to arbitrate their employment discrimination claims. The trial court ruled in favor of the workers and held the arbitration agreement was not enforceable with regard to employment discrimination claims. On appeal to the U.S. Supreme Court, the Pyett court ruled that policy favors arbitration and nothing in the ADEA exempted the workers’ claims from being resolved outside of binding arbitration. 

In the wake of pending legislation to make union organization easier, the Pyett case sends a clear  [and politically charged] message that labor union membership is not without cons.  We will keep you posted with more labor law developments that are likely to spawn from the Pyett decision.

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