Seventh Circuit Follows Fifth Circuit in Holding FLSA Collective Action Opt-In Notices Should Not be Sent to Employees with Valid Arbitration Agreements

On January 24, 2020 in the case of Bigger v. Facebook, Inc., the Seventh Circuit held that a federal district trial court should not authorize notice of a Fair Labor and Standards Act (FLSA) collective action suit to employees of the defendant company who are ineligible to join the suit because they entered into agreements to resolve disputes exclusively via arbitration. The Seventh Circuit warned that without such limitations, FLSA collective actions run the risk of abuse for being too broad to opt-in and cause unfair harm to employers.

The appellate decision stems from FLSA collective action claims. Typically, early on in these types of litigation cases, plaintiffs will request that courts authorize written notice to potential plaintiffs of the opportunity to join in the collective action suit, in order to certify the collective class. These notices are generally sent to current or previous employees of a defendant employer, allowing them the opportunity to “opt-in” as another plaintiff in the suit.

In Bigger v. Facebook, Inc., a former Client Solutions Manager claimed that Facebook misclassified her as an overtime-exempt employee in violation of the FLSA. Plaintiff Bigger asked the United States District Court for the Northern District of Illinois to conditionally certify a collective action class and to authorize opt-in notice to a national collective of fellow Facebook Client Solutions Managers. In opposition to the request for notice, Facebook argued that most of the employees Bigger proposed to notify had previously entered into arbitration agreements. Facebook asserted these employees should not be classified as potential opt-in plaintiffs due to being limited to resolving disputes with Facebook through arbitration. Thus, Facebook asserted these employees should not receive any notice. The District Court held it was too early to make merits determinations at the conditional certification stage of an FLSA collective action and therefore authorized notice to the entire group plaintiff proposed, regardless of whether they had signed arbitration agreements or not.

Upon appeal, the Seventh Circuit held that the District Court should have allowed Facebook to prove that a large number of its employees had entered into arbitration agreements. The Seventh Circuit noted that the ruling is to protect employers from unfair or “dangerous” harm by stating, “notice giving, in certain circumstances, may become indistinguishable from the solicitation of claims . . . .” The Seventh Circuit thus concluded that district courts must give employers a chance to show that potential notice recipients have valid arbitration agreements.

The Seventh Circuit’s decision in Bigger followed the similar Fifth Circuit ruling last year of In re JPMorgan Chase and Company, 916 F.3d 494 (5th Cir. 2019). The rulings in these cases present a number of considerations for employers. On one hand, these rulings can make it harder for plaintiff’s counsel to use opt-in notices to identify potential plaintiffs for FLSA claims. While on the other hand, employers could run the risk of bearing the cost of arbitration for hundreds of potential FLSA claims upfront if such an issue were to arise, but be limited to arbitration.

VW Contributor: Ryan Coufal
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Scandalous Trademarks: What You Need to Know.

The Lanham Act, which governs trademarks that are registered through the United States Patent and Trademark Office (“USPTO”), expressly prohibits the registration of marks that are deemed scandalous, immoral, or deceptive. This prohibition has historically prevented brands from using marks that could fall into this category, even if the mark is appropriate for the situation. However, in 2019, this prohibition was expressly overridden and these types of marks are now eligible for registration and protection under the Lanham Act.

During the summer of 2019, the United States Supreme Court determined that the prohibition against scandalous marks contained in the Lanham Act is an unconstitutional prohibition on protected speech. See Iancu v. Brunetti, 488 U.S. ___ (2019). Essentially, the Court decided that this amounted to viewpoint discrimination, in violation of the First Amendment. As a result, the USPTO is required to accept and consider scandalous trademark registration applications.

For businesses, artists, and musicians that utilize what was deemed scandalous marks by the USPTO as part of their operations, now is the time to act to protect the intellectual property. Although the USPTO hasn’t reported a rush applications that fit this category, now that these previously un-protected marks are protectable, it is expected that the volume of applications will increase.

VW Contributor: Alex Rainville
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Supreme Court to Determine Whether Fossil Must Turn Over Profits for Trademark Infringement

Fossil, Inc., the luxury goods retailer, could owe a manufacturer, Romag Fasteners, Inc., its profits for infringing on Romag’s trademark. The issue of whether Fossil owes Romag approximately $6.7 million dollars in profits gained by using the infringing trademark depends on whether the remedy of disgorgement of profits by a party infringing on a trademark requires willfulness by the infringing party.

The issue arises from Fossil using a magnetic snap fastener on some of its bags, purchasing some of the fasteners directly from Romag. However, Fossil also purchased some fasteners that looked nearly identical to those of Romag from another source, likely knowing that the fasteners were counterfeit and infringed on the trademark of Romag. Despite this knowledge, Fossil proceeded to use them anyways in “callous disregard” to the rights of Romag. In a moment of luck for Romag, an employee discovered the counterfeit products when visiting a Macy’s, finding the Fossil bags with the counterfeit fastener. Romag successfully argued that Fossil infringed on their trademark rights, but an open question regarding the remedy remains. The United States Supreme Court will determine whether the remedy includes the profits of Fossil, and such decision will be based on whether Fossil must willfully infringe on Romag’s trademark rights or if “callous disregard” is sufficient to entitle Romag to the profits of Fossil.

This case highlights the broader importance of protecting the brand and intellectual property of a company. Traditionally, this means taking active steps to ensure that the trademarks, copyrights, trade secrets, and patents are protected under applicable law, but it should also mean proactively verifying that the initiatives of the company don’t infringe on the rights of another. Failure to take consider trademark rights, as Fossil is learning the hard way, could result in disgorgement of profits.

VW Contributor: Alex Rainville
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Circuit Courts Continue to Rule in Agreement that Future Potential Disabilities are not a “Disability” under the ADA

The Seventh and Eleventh Circuit Courts of Appeal recently joined the Eighth, Ninth, and Tenth Circuits, in holding that individuals with no current disability cannot be regarded as disabled under the Americans with Disabilities Act (ADA).  The mere possibility or even likelihood the individual will develop an impairment or disability in the future is not sufficient to sustain a cause of action under the ADA.  In Shell v. Burlington Northern Santa Fe Railway Co., 941 F.3d 331 (7th Cir. 2019) and EEOC v. STME, LLC, 938 F.3d 1305 (11th Cir. 2019) the Seventh and Eleventh Circuits respectively, refused to extend protections under the ADA to employees with a “perceived risk” of potential impairment.

In Shell, a transportation company refused to hire a job applicant with a body mass index (BMI) over 40, which is classified as Class III Obesity or “extreme” or “severe” obesity.  The Defendant had a policy that prohibited individuals with a BMI over 40 from being employed in “safety-sensitive” positions, due to individuals with Class III Obesity being at an increased risk for sleep apnea, diabetes, or heart disease, conditions that could lead to dangerous consequences while on the job.  The Seventh Circuit first noted that obesity in and of itself does not qualify as a disability under the ADA, unless it is caused by an underlying physiological disorder or condition.  Likewise, obesity alone does not qualify as a disability even if the individual’s obesity may increase the likelihood that he or she will develop a future qualifying ADA disabling impairment.  The condition of being “regarded as” having an impairment applies when an individual has been subjected to an impairment, in a past or present sense, not a perceived future impairment that has not yet occurred.  Thus, the Seventh Circuit held that since Defendant only declined to hire the Plaintiff based on a perceived future impairment and not a current ADA disability, the ADA did not afford protection to the Plaintiff.

The employer in STME fired an employee who had traveled to Ghana during an Ebola outbreak in countries neighboring Ghana, even after the employer raised concerns about the Plaintiff making such a trip.  The employer’s decision was based on a potential future impairment, which is not protected by the ADA under the “regarded as” theory of recovery, which requires a current impairment.  The potential physical or perceived impairment of Ebola was not enough to get ADA protection; the Eleventh Circuit found there was no violation of the ADA in the firing of the Plaintiff.

Both cases demonstrate a continued trend at the appellate level of federal courts that future or potential impairments are not protected under the ADA.  This should be good news to employers who have concerns about potential impairments with employees and whether they feel such concerns could impact the ability for that employee to perform their job functions.

VW Contributor: Ryan J. Coufal
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New York enacts “Women on Corporate Boards Study” law

On the heels of California requiring all corporations headquartered in the state to have at least one woman on its board of directors, with increasing diversity requirements in future years, New York has decided to study the issue. At the end of 2019, New York passed a law that requires all corporations that do business in New York to report the gender composition of its board.

The New York “Women on Corporate Boards Study” law is broader than the law enacted by California in that it pertains to any corporation doing business in New York, as opposed to headquartered in its state. As a result, this law will likely lead to a large volume of data to study the issue, with reporting required for both public and private corporations. The reporting requirement starts on June 27, 2020, and New York will compile year over year trends before publishing the first report no later than February 1, 2022.

Currently, California, New York, Colorado, Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Washington, Maryland, and Illinois have introduced or passed a law pertaining to gender diversity on the board of directors. For corporations, these initiatives will increase board compliance obligations, but may also have an impact on the makeup of the board itself. At least, that is what the state of New York is hoping to accomplish.

VW Contributor: Alex B. Rainville
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Fortnite Under Siege

Fornite, the video game by Epic Games that has taken the world by storm, has been subject to a number of copyright infringement claims for dances performed by characters in the game. The dances causing problems include those that are well known and new viral sensations such as the “Carlton,” “Backpack Kid” flossing, “Milly Rock” dance, and Halloween “Pump It Up.” While most are relatively standard copyright infringement claims, alleging the characters doing the dances in the game infringe on the copyright, one claim, for infringement of the “Running Man” dance, has an interesting twist.

A recent decision by the United States Supreme Court mandated that a copyright owner must register the work with the Copyright Office prior to filing a claim for copyright infringement. As a result, many claims, including those against Epic Games, were withdrawn until the work could be registered. However, the owners of the “Running Man” dance elected to amend their claim, from a copyright infringement claim to trademark infringement claim. As a defense to trademark infringement, Epic Games is asserting that the claims are preempted by the Copyright Act. Although no one disputes that the name of a dance can be protected under trademark law, it is unclear whether a court will decide if the dance itself is protected; typically a dance is protected by copyright, as choreography.

This could open the door for more claims against Epic Games for dances used in Fortnite, but the more impactful consequence is the potential to further define the scope of what constitutes a trademark. If it is ultimately determined that a dance can be a protectable trademark, that would add to the list of protectable marks, which already includes color, scent, sound, designs, layouts, and words.

VW Contributor: Alex Rainville
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Sixth Circuit Holds Employers cannot shorten time frame to file Title VII Discrimination Claims

Date: December 31, 2019

The federal Sixth Circuit Court of Appeals recently held that employers cannot reduce the time employees have to file a charge alleging Title VII employment discrimination under the Civil Rights Act of 1964.  The court found that contractual provisions and clauses that shorten Tile VII’s statute of limitations 300-day filing time frame are unenforceable.

Title VII prohibits discrimination by an employer on the basis of race, color, religion, sex, and national origin, and requires employees to first file a discrimination complaint with the Equal Employment Opportunity Commission (EEOC).  The statutory deadline requires charges to be filed within 300 days of the alleged unlawful employment action, and cannot be changed by contract.  After a charge is filed, the EEOC can investigate the allegations, or take administrative remedial measures to resolve the issue (such as mediation).  Alternatively, the EEOC can grant the employee a right-to-sue letter, giving the employee a chance to sue the employer outright in court on their own.  If an employee receives this letter, they have ninety (90) days to file a lawsuit in federal court against their employer.

In the Sixth Circuit case, the Plaintiff’s employment contract contained a provision waiving her right to sue if she waited longer than six (6) months following a discrimination event to file a claim.  The lower federal district court initially adopted the employer’s deadline-shortening clause, but the Sixth Circuit reversed the decision on a case of first impression, stating “[W]here statutes that create rights and remedies contain their own limitation periods, the limitation period should be treated a substantive right . . . [a]nd this type of substantive right generally is not waivable in advance by employees.”  The court distinguished Title VII’s statute of limitations from those under the Employee Retirement Income Security Act of 1974 (ERISA) or Section 1981 claims in that those statutes rely on general limitation periods created by other statutes.  Title VII’s statute of limitations to bring a discrimination claim is found within its own text.  The court also held that Title VII created a “uniform, nationwide system using ‘an integrated, multistep enforcement procedure.’”  The court rejected the employer’s policy of imposing contractual limitations on Title VII’s statutory remedies because it would disrupt Title VII’s uniform national procedures.

The Sixth Circuit oversees federal district courts in Kentucky, Michigan, Ohio, and Tennessee.  Nevertheless, this case provides context to federal questions and interpretations of federal authority, and provides a framework of considerations should you have a business practice that is any state.

VW Contributor: Ryan Coufal
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