Federal drug test rule upheld; immigration class action advances; more.

Aug 1, 2009

0809cover.jpgDirect Observation Rule for Urine Tests Upheld
BNSF Railway Co. v. U.S. Dept. of Transp., D.C. Cir., No. 08-1264 (May 15, 2009).

The U.S. Circuit Court of Appeals for the District of Columbia has upheld U.S. Department of Transportation (DOT) regulations that require "direct observation" of drug test urine specimen collection from workers returning to safety-sensitive functions after testing positive for or refusing to submit to a drug test.

Professional Pointer:Although this case relates only to employees subject to DOT regulations, it demonstrates how government agencies can require employers to go to great lengths in meeting compelling public interests.

Under federal law, companies with transportation activities subject to regulation by the DOT must implement programs for pre-employment, post-accident and random drug testing of employees who perform such activities. Individuals who test positive or who refuse to submit to testing are barred from performing safety-sensitive duties until they complete a treatment program. These individuals must pass a "return-to-duty" urine test before resuming safety-sensitive duties and must pass at least six unannounced "follow-up" urine tests within the next 12 months.

In June 2008, the DOT adopted regulations in response to concerns that there was rampant cheating and substitution of urine samples among drivers and other transportation workers.

To combat efforts to cheat or evade return-to-duty and follow-up testing, the regulations require a same-gender observer to "watch the urine go from the employee’s body into the collection container" for such tests. The regulations specify that, immediately prior to the sample collection, employees must lift or lower clothing to expose their genitals and allow observers to verify the absence of any cheating devices.

Soon after the regulations were enacted, several transportation workers’ unions and the BNSF Railway Co. sued the DOT to prevent enforcement, alleging that the rule constituted arbitrary and capricious agency action and violated the Fourth Amendment’s protection against unreasonable searches. Note that the rule was challenged by labor unions—and an employer concerned about being forced to administer, and subject employees to, highly intrusive tests.

The D.C. Circuit rejected the petitioners’ arguments and upheld the regulations. The court concluded that the rule was not arbitrary and capricious because it was based on a rational connection between the facts found by the agency and the rule adopted to address those facts. The court defended the DOT’s conclusion that employees returning to duty following a positive drug test and treatment program were more likely to attempt to cheat. The court acknowledged the department’s evidence and arguments that returning employees have a heightened incentive to cheat, in part because of heavy sanctions imposed on repeat violators such as a "two strikes and out" policy commonly adopted by employers in the industry. The policy requires termination upon a second drug violation.

The court rejected the petitioners’ argument that the direct observation rule violated the Fourth Amendment’s protection against unreasonable searches. Although the court acknowledged that compulsory urine testing was subject to the Fourth Amendment and that the regulations applied even if there was no particular suspicion of cheating, it found that drug testing for transportation safety falls into the "special needs" exception to the requirement for search warrants because the government’s interest in conducting the search outweighs individuals’ privacy interests. The court noted that the government has a compelling interest in transportation safety and that, while "direct observation is extremely invasive," individuals’ interests are diminished because they are performing safety-sensitive functions within a closely regulated industry.

The court further observed that those subject to "suspicionless" direct observation testing already have been deemed to have violated the DOT’s regulations by either testing positive for drugs or by refusing to submit to a drug test. The intrusive nature of direct observation, the court noted, "is mitigated by the fact that employees can avoid it altogether by simply complying with the drug regulations."

By Chris Arbery and Robert Dumbacher, attorneys at Hunton & Williams LLP in Atlanta.

Violation of Immigration Laws Can Support Class Action

Williams v. Mohawk Indus. Inc., 11th Cir., No. 08-13446 (May 28, 2009).

Employees of a manufacturer in Georgia have another chance to proceed with a class action alleging that the company engaged in a racketeering conspiracy to hire illegal workers and to depress the wages of legal employees. Although the district court had denied class certification, the 11th U.S. Circuit Court of Appeals held that the denial was an abuse of discretion and remanded the case for the district court to conduct a more thorough inquiry to determine whether certification of a class would be appropriate.

Professional Pointer:Employers should ensure that they remain in compliance with all applicable laws—even laws such as RICO that might not appear to have a direct impact on their employees.

In January 2004, a number of employees of Mohawk Industries Inc., including Shirley Williams, filed a lawsuit against the employer based on a novel theory: that the company had hired undocumented workers as part of an unlawful conspiracy, for which the legal employees sought remedies under the federal and state Racketeer Influenced and Corrupt Organizations (RICO) laws. The plaintiffs claimed, among other things, that Mohawk worked with temporary employment agencies to form an "enterprise" for the purpose of hiring illegal workers and reducing the wages of legal workers.

Although the company filed a motion to dismiss the RICO claims, the district court denied the motion, and the 11th Circuit upheld this decision. The company petitioned for review, and the U.S. Supreme Court ultimately declined to hear the case. After the case was remanded to the district court, the plaintiffs filed a motion for certification of a class of employees at a number of Mohawk facilities. If certified, the class would potentially consist of thousands of employees and the stakes of the litigation would be greatly increased.

The plaintiffs argued that their claims raised common questions of fact and law and that their claims were typical of those in the prospective class. The district court denied certification of a class, but the 11th Circuit reversed, finding that the plaintiffs satisfied the commonality and typicality requirements for class certification.

By Chris Arbery and Marcia Alembik, attorneys at Hunton & Williams LLP in Atlanta.

Lawsuit Advances on End of Retiree Health Benefits

Poore v. Simpson Paper, 9th Cir., No. 05-36060 (May 21, 2009).

Retiree health benefits can be a pricy legacy cost, and unvested benefits can be an attractive target of cost-cutting. However, as recently ruled by the 9th U.S. Circuit Court of Appeals, the temptation to cut benefits that are unvested in the traditional sense, or permanently unalterable, can result in expensive liabilities.

Professional Pointer:With major business transactions such as closures or relocations, analysis of benefits fund obligations is paramount. Unexpected withdrawal liability can quickly become costly.

Simpson Paper Co. owned and operated the Evergreen Mill in West Linn, Ore., until 1996, when it shut down for economic reasons. Hourly employees were represented by the Association of Western Pulp and Paper Workers and employed pursuant to collective bargaining agreements.

Under those labor contracts, retirees were eligible for medical benefits contained in a Simpson benefit book. The benefit book, in turn, promised health benefits to early retirees and their eligible dependents until the age of 65, they became eligible for Medicare or death, whichever came first. The benefit book further provided that Simpson had the "right to alter, amend, delete, cancel or otherwise change [benefits] at any time, subject to negotiation with the union."

According to a closure agreement negotiated with the union in 1996, Simpson provided retiree health benefits to employees who were to start receiving pension benefits as a result of the closure. In 2002, Simpson announced an intent to phase out retiree health benefits. On July 1, 2004, Simpson ceased all such benefits. Several retirees and their dependents subsequently sued Simpson, alleging breaches of the Employee Retirement Income Security Act and the Labor-Management Relations Act.

In a unanimous panel opinion, the appeals court held that the plaintiffs could proceed to trial on their claims.

By Scott M. Wich, an attorney with the law firm of Clifton Budd & DeMaria LLP in New York.

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