Top Developments in COVID-19 Litigation
Jason A. Levine, Ryan Martin-Patterson, Stephen Tagert
This week’s top COVID-19 litigation developments are: Amazon’s settlement with the NLRB over an employee walkout; a class action against New York City over its use of a “secret” maximum price list in price-gouging enforcement; a securities suit against a biotech company over misstatements regarding a COVID-19 test it was developing; and a class action against Walmart by hourly employees claiming they improperly lost pay during mandatory COVID screenings.
1. Amazon Settles With NLRB Over COVID-19-Related Walkout
Overview: Amazon has settled a complaint by the National Labor Relations Board regarding accusations that Amazon interrogated and threatened to discipline employees for participating in a walkout over COVID-19-related safety conditions.
Settlement Agreement: The NLRB’s complaint alleged that on March 21, 2020, Amazon threatened to discipline and interrogated employees who organized a walkout relating to COVID-19 safety issues. In the settlement agreement, Amazon agreed: (1) to post notices that it will not discipline workers for participating in activities aimed at improving working conditions through unionization; (2) to let workers engage in such activities without direction from their managers; (3) to refrain from disciplining workers for engaging in protected concerted activity; and (4) to refrain from asking employees about whether they support protected activities. The settlement agreement also specifies that Amazon does not admit that it violated the National Labor Relations Act.
Our Take: Companies have faced unprecedented challenges during the pandemic, and their actions remain subject to scrutiny under labor laws. Company procedures, protocols and training may help avoid liability in this area.
2. Class Action Lawsuit Alleges NYC Price-Gouging Enforcement Is Based on a “Secret List” With Maximum Allowable Price
Overview: Union Square Supply, Inc. filed a proposed class action complaint against Mayor Bill de Blasio, New York City, and other New York City-affiliated defendants. The complaint alleges that in enforcing price-gouging rules, the city violated plaintiffs’ civil rights by using a “secret list” with maximum allowable prices per many retail items.
Complaint: The complaint alleges that New York City enacted a temporary emergency rule in March 2020 prohibiting price-gouging, which was defined as selling goods or services at an “excessive” price of more than 10 percent above the price at which the similar goods or services were sold before the state of emergency. That rule became permanent in June 2020. The city assessed Union Square with a $21,000 penalty for price-gouging on PPE, hand sanitizer, and disinfectant cleaners. When Union Square asked the Department of Consumer and Worker Protection to disclose its maximum price list, it refused. The complaint lists other instances of class members having similar interactions with the city as well.
The complaint asserts claims under the Due Process Clause of the Fourteenth Amendment and the Excessive Fines Clause of the Eighth Amendment. It also alleges that the city has implemented and maintained an unconstitutional policy associated with its price-gouging enforcement.
Our Take: We have previously covered price-gouging enforcement activities located in other parts of New York, but this case could bring to light more information about the state’s price-gouging enforcement during the pandemic. We will pay close attention to see whether this case slows the recent enforcement uptick we have seen, and if it yields a publicly-available price list for retail goods in New York City.
3. Pharmaceutical Company Sued for Securities Violations for Misstatements About COVID-19 Test
Overview: On March 18, 2021, investors sued a pharmaceutical company in California for allegedly misstating the readiness of its test for COVID-19.
The Complaint: According to the complaint, plaintiffs invested roughly $2,664,000 into an entity managed by one of the defendants, who misappropriated those funds. In the first quarter of 2020, when employees at the entity were being laid off due to its precarious financial position, it represented that it would sell 100,000 units of its screening test in the United States and another 100,000 in Europe. The company then allegedly continued to make misleading statements about the readiness and marketability of its COVID screening test, all while its financial position was rapidly deteriorating. The complaint states that the investors only learned of the misleading nature of these statements when the company was indicted and sued in civil court by the SEC. The complaint asserts that the investors were wrongly denied the opportunity to convert their preferred shares into common shares before those events, at a time when the plaintiffs would have been able to realize significant profits on the sale of such shares.
Our Take: The complaint highlights the many different types of suits that may be brought against companies that misstate their readiness to offer products to fight COVID. Aside from criminal and regulatory violations, companies may also be liable to investors under federal and state securities laws for false or misleading statements. Companies offering COVID-related products should be very careful that the products work, and that their statements about the products are accurate.
4. Walmart Employees File Class Action for Unpaid COVID-19 Screening Time
Overview: On March 22, 2021, current and former Walmart retail associates brought a putative class action against the retailer, alleging they were owed unpaid wages for time spent undergoing COVID-19 screenings at work.
The Complaint: According to the complaint, in the spring of 2020, Walmart implemented a company policy mandating that retail employees undergo a COVID-19 screening before each shift. Walmart allegedly did not pay its employees to undergo these screenings, which averaged 10 to 15 minutes in length, until November 2020, when it began adding 5 minutes to each employee’s daily recorded time. Plaintiffs allege that employees who did not comply with the policy could face discipline, up to and including termination. The named plaintiffs claim that they were paid between $12.90 and $14.50 an hour while they were covered by this policy. Plaintiffs allege that Walmart violated Arizona wage and record-keeping laws, and was unjustly enriched. They seek damages in the form of unpaid wages plus $250 for each first statutory violation and $1,000 for each subsequent violation.
Our Take: Walmart employees are not the only ones seeking compensation for COVID-19 screenings; Amazon has also faced its share of COVID-related wage litigation. Retailers and other large employers who require hourly employees to undergo time-consuming screenings for COVID may face litigation over any accommodation they offer, or fail to offer, to these employees.