News & Developments
May 14, 2013
"Unduly Speculative" Front-Pay Award in FMLA Case Vacated
In a notable case regarding proof of damages in Family and Medical Leave Act (FMLA) cases, the Eighth Circuit Court of Appeals recently held, in Dollar v. Smithway Motor Xpress, Inc., No. 11-2093, 2013 U.S. App. LEXIS 6075 (8th Cir. Mar. 27, 2013), that an employer violated the FMLA by firing an employee when it knew she was suffering from an extended period of depression, but vacated the district court’s award of front pay because the award was impermissibly speculative.
In Dollar, the plaintiff was terminated after taking time away from work while suffering from a “substantial and sustained” period of depression. Just prior to her termination, the employer re-assigned her to a different position with similar pay and benefits. However, the employee’s depression-related absence continued, and she was fired before she started in the new position.
After a bench trial, the district court found that the company interfered with the plaintiff’s FMLA rights by terminating her with knowledge of her serious health condition, and awarded backpay of $80,793, liquidated damages in the same amount, and front pay for a period of 10 years in the amount of $134,526. The circuit court affirmed the district court’s finding of a willful violation of the FMLA, giving rise to the liquidated-damages award. Recognizing that the FMLA did not impose a duty of “reasonable accommodation,” the employer’s transfer of the plaintiff prior to her termination triggered the employer’s duty to restore the plaintiff to the same or equivalent position.
The fact that the plaintiff never actually worked in her new position, however, made the district court’s front pay award “unduly speculative.” Front pay is an equitable remedy that may be awarded when reinstatement of the employee is “impractical.” Acknowledging that “some degree of speculation is inescapable” with respect to front pay, the court held that this award was overly speculative because the plaintiff was untested and inexperienced in the position to which she was reassigned. The court also noted that the employer had substantially reduced its workforce in the state between the time of the plaintiff’s termination and the time of trial, and that its future operations in the state were uncertain at best. These “peculiar facts” made the award of front pay “an impermissible windfall for the plaintiff.” Accordingly, the circuit court vacated the front-pay award.
Keywords: litigation, employment and labor relations, FMLA, front pay
— Michael Goodwin, Jardine, Logan & O'Brien, P.L.L.P., St. Paul, MN
NLRB Prevented from Requiring Posting of NLRB Rights Poster
In 2011 the National Labor Relations Board (NLRB) promulgated a rule requiring private employers to display an 11-by-17-inch poster. The poster informed employees of, among other things, their right "to form, join, or assist a union"; "to bargain collectively through representatives of their choosing"; "to strike and picket"; to be free of discrimination based on union activities”; and to wear "union hats, buttons, t-shirts, and pins in the workplace.”
On May 7, 2013, the U.S. Court of Appeals for the District of Columbia Circuit struck down the NLRB’s rule requiring the posting. In particular, the court found that the NLRB exceeded its authority by promulgating the rule. In reaching this holding, the court found that requiring an employer to display the poster or face unfair-labor-practice charges constituted a violation of the employer’s First Amendment right not to speak or endorse a viewpoint with which the employer might disagree.
Read the opinion.
Keywords: litigation, employment law, labor relations,NLRB, poster, U.S. Court of Appeals, collective bargaining, union, unionization, First Amendment, free speech
— Kaleena Weaver, Allen, Norton & Blue, Tampa, FL
SCOTUS Leaves Questions Unanswered on FLSA Collective Action
As indicated in an October 2012 post by this author, the U.S. Supreme Court was set to hear oral arguments in the appeal of Symczyk v. Genesis HealthCare Corp., 656 F.3d 189 (3d Cir 2011) on December 3, 2012. The Court issued its opinion on April 16, 2013. Genesis Healthcare Corp. v. Symczyk, No. 11-1059 (U.S. April 16, 2013).
In Symczyk, the plaintiff brought a Fair Labor Standards Act (FLSA) collective-action claim against the employer for unpaid wages. Before the class was conditionally certified, the employer made a Rule 68 offer of judgment for the full value of the plaintiff’s claims. The plaintiff let the time expire on the offer, thereby rejecting it. The district court held that the plaintiff’s claims became moot upon the offer of full relief, and because she was the only plaintiff at the time, the whole collective action became moot. The Third Circuit reversed, and appeal was taken.
The facts in Symczyk piqued the curiosity of both employee and management-side attorneys. Would this mean that employers could proactively stave off FLSA collective actions by making full offers of judgment under Rule 68 to all opt-in plaintiffs before the class was conditionally certified? And, if so, what would that mean for employee-side attorneys?
Unfortunately, the Supreme Court’s majority opinion does not answer these questions. Because the Symczyk plaintiff did not argue on appeal that the underlying premise of the case—that the unaccepted Rule 68 offer of judgment mooted her individual claim—was in error, the Court assumed that her individual claim was, in fact, mooted. The majority did not address whether or not the mootness determination was correct. Instead, the majority held that because the plaintiff’s individual claim was moot, the court lacked subject-matter jurisdiction over the collective action. Therefore, it reversed the Third Circuit.
In a scathing dissent, Justice Kagan articulates why the issue of mootness is inextricably intertwined with the collective-action question, and that, as a result, the holding of the majority will have no applicability beyond this case. She argues that the majority is incorrect because it bases its decision on a fundamentally flawed principle—that the rejected Rule 68 offer mooted the plaintiff’s claim to begin with. She disagrees, and cautions future courts: “Don’t try this at home.” Genesis Healthcare Corp., No. 11-1059, slip op. at 4 (Kagan, J., dissenting).
Although the majority opinion does not provide guidance to practitioners trying to assess the value of making or rejecting a Rule 68 offer of judgment in an FLSA collective action, Justice Kagan’s dissent certainly signals that using the Rule 68 mechanism to moot such actions is not likely to withstand future scrutiny.
Keywords: litigation, employment law, labor relations, FLSA, Fair Labor Standards Act, collective action, Supreme Court, offer of judgment, Rule 68
— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, Florida
March 7, 2013
District Courts Not Required to Award Liquidated Damages
On February 13, 2013, the Eleventh Circuit held in Moore v. Appliance Direct, that for retaliation cases brought under the Fair Labor Standards Act (FLSA), the district court is not required to award liquidated damages and whether or not to do so is within the district court’s discretion.
The plaintiffs and the individual defendant Sei Pak filed cross-appeals in this case, with the plaintiffs appealing the District Court for the Middle District of Florida’s denial of their motion to add an award of liquidated damages. The plaintiffs previously filed an overtime lawsuit and during the pendency of that suit, the employer changed the status of its drivers from employees to independent contractors. A number of the employer’s current drivers received offers through a third party to continue as independent contractors, but the plaintiffs did not. The plaintiffs then brought a separate lawsuit under section 215(a)(3) of the FLSA for retaliation.
The retaliation suit was stayed against the corporate defendant, Appliance Direct, when it filed for bankruptcy, but proceeded as to the individual defendant, Sei Pak. On appeal, the plaintiffs contended that 29 U.S.C. § 216(b) makes an award of liquidated damages mandatory in retaliation cases, just as in minimum-wage and overtime cases, and can be overcome only by proof of the reasonable good-faith exception found in section 260 of the FLSA. In support, the plaintiffs cited cases from other circuits that they alleged held in favor of mandatory liquidated damages. Defendant Pak argued that the statutory language of section 216(b) renders the grant of liquidated damages in a retaliation case a matter of discretion, resting with the district court.
The court’s decision relied upon the statutory language of the FLSA, specifically section 216(b), which for retaliation claims, permits such damages “as may be appropriate to effectuate the purposes of [the retaliation provision],” thus creating a separate, discretionary standard of damages for retaliation claims. The court held that the retaliation provision of 29 U.S.C. § 216(b) gives the district court discretion to award, or not to award, liquidated damages, after determining whether doing so would be appropriate under the facts of each case. In the instant case, the district court made the determination in this case that it would not be appropriate to award liquidated damages and in declining to do so, it did not abuse its discretion.
Keywords: litigation, employment and labor relations law, FLSA, FLSA Retaliation, 11th Circuit
— Shannon Kelly, Allen, Norton & Blue, P.A., Winter Park, Florida
February 8, 2013
D.C. Circuit: NLRB Has Lacked a Quorum for Over a Year
In its January 25, 2013, opinion in Noel Canning v. National Labor Relations Board, the District of Columbia Circuit Court of Appeals held that the recent appointments of three members of the National Labor Relations Board by President Barack Obama were invalid under the U.S. Constitution. Since the January 4, 2012, recess appointments of Sharon Block, Terence F. Flynn, and Richard F. Griffin were invalid, after the January 3, 2012, expiration of board member Craig Becker’s term, the board had only two validly seated members. Consequently, the board’s actions since January 3, 2012, were without a quorum, and were therefore invalid.
The court’s opinion hinges on the definitions of two terms in the Recess Appointments Clause of the Constitution: “the Recess” and “happen.” First, the court holds that “the Recess” only refers to the time period between terminated sessions of Congress, i.e., intersession periods. According to the court, “the Recess” must be distinguished from “a recess,” which, taken to its logical extreme, could include lunch breaks or weekends.
Congressional sessions have historically been terminated with an adjournment sine die. The first session of Congress, which was not adjourned sine die, closed on January 3, 2012, and the second session of Congress commenced on January 3, 2012. Although the Senate had entered a consent agreement to meet in pro forma sessions every three business days from December 20, 2011, through January 23, 2012, the two business days between January 3, 2012 (when the Senate convened) and its next pro forma meeting did not qualify as “the Recess.” As such, the president lacked the authority to appoint members to the board on January 4, 2012.
The court holds that the president’s actions were further invalidated by the fact that the vacancies did not “happen” during an intersession period. The court interprets the word “happen” to mean “arise,” which means that recess appointments would only be appropriate in circumstances where the vacancy came into being during an intersession period. In the case of the board, member Peter Schaumber’s term expired on August 27, 2010, and member William Liebman’s term expired on August 27, 2011. Both of these expirations occurred when Congress was in session. The circuit court also notes that member Craig Becker’s appointment ended at the close of session on January 3, 2012—not during an intersession period. Because these three board seat vacancies did not “happen” during an intersession period, the president’s appointments to fill them were in contravention of the Constitution, according to the D.C. Circuit.
The court does not indicate whether its opinion should apply to all decisions following the January 4, 2012, appointments. However, labor practitioners who have received decisions from the board in the last year may find it worthwhile to assess the decision’s impact on cases litigated during this period. Notably, the Eleventh Circuit decision in Evans v. Stephens has taken a different view of the board appointments from the D.C. Circuit, and an appeal to the U.S. Supreme Court to resolve this split is possible.
Keywords: litigation, employment and labor relations, National Labor Relations Board, NLRB, Noel Canning, recess appointments, intersession
— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, Florida
February 8, 2013
Illinois Recognizes Privacy Rights
In the recent case of Lawlor v. North American Corp. of Illinois, 2012 IL 112530 (Oct. 18, 2012), the Illinois Supreme Court explicitly recognized the existence of a cause of action for invasion of privacy by intrusion upon seclusion under Illinois law. In that case, Kathleen Lawlor worked for North American Corp. of Illinois as a salesperson. She was to generate business, but management of the accounts was handled by other employees. In August 2005, after quitting, Lawlor began working for Shamrock Companies, Inc., a competitor of North American.
When Lawlor left North American, the company started an investigation to determine if she had violated her noncompetition agreement. North American asked its corporate attorney, Lewis Greenblatt, to conduct the investigation. Its vice president of operations, Patrick Dolan, was to serve as the company contact person. Greenblatt hired Probe, an investigation firm. Dolan provided Greenblatt and Albert DiLuigi, from Probe, Lawlor’s date of birth, her address, her home and cellular telephone numbers, and her Social Security number. Probe used this information when it asked another investigative company, Discover, to obtain Lawlor’s personal phone records.
John Miller, North American’s chief executive officer and president, made the decision to investigate Lawlor. He knew Greenblatt hired Probe to conduct the investigation. Miller later testified that Dolan had the authority to provide Lawlor’s personal information to obtain her phone records.
The information Discover uncovered was sent to Probe, which sent it on to North American. North American’s employees tried to determine if any of the numbers belonged to any of its customers.
DiLuigi testified that Dolan wanted him to obtain Lawlor’s phone records. Significantly, in a pretrial motion, North American agreed that Probe and Discover were agents of Greenblatt.
Lawlor later filed suit against North American seeking unpaid commissions and a declaration that her noncompetition agreement was unenforceable. When she learned of North American’s investigation, Lawlor amended her complaint to allege an “intrusion upon seclusion” tort based upon a “pretexting scheme” in which someone pretended to be her to obtain her phone records. In a counterclaim, North American alleged that Lawlor breached her fiduciary duty of loyalty by attempting to direct business to a competitor while working for North American and by communicating confidential sales information to a competitor.
The jury gave Lawlor $65,000 in compensatory damages and $1.75 million in punitive damages. North American was awarded $78,781 in compensatory damages and $551,467 in punitive damages. The trial court reduced the jury’s punitive damages award to $650,000. The appellate court affirmed the jury’s verdict for Lawlor, reinstated the punitive damages award, and reversed the trial court’s judgment on North American’s breach-of-fiduciary-duty claim. The Illinois Supreme Court reduced Lawlor’s punitive damages award to $65,000.
As concerns this article, the issue for the Illinois Supreme Court was whether to recognize the tort of intrusion upon seclusion. It did.
Section 652B of the Restatement (Second) of Torts provides: “One who intentionally intrudes, physically or otherwise, upon the solitude or seclusion of another or his private affairs or concerns, is subject to liability to the other for invasion of his privacy, if the intrusion would be highly offensive to a reasonable person.” The Illinois Supreme Court had never addressed whether the tort of intrusion upon seclusion is a claim that is recognized in Illinois.
North American argued that there was no evidence that it personally obtained any of Lawlor’s phone logs or that there was an agency relationship between North American and Probe or Discover.
A person who is injured must normally seek his or her remedy from the person who caused the injury. A principal, however, may be held liable for the acts of an agent that cause injury, even if the principal does not engage in any conduct in relation to the plaintiff. Moreover, an agent may also appoint subagents to perform the tasks or functions the agent has undertaken to perform for the principal.
In this case, the jury could reasonably infer that North American knew that Lawlor’s phone records were not publicly available, and that by requesting such records from Probe, North American recognized that investigators would pose as Lawlor to obtain the records.
The jury could also reasonably conclude that North American exercised control over its agent by directing it to obtain specific information and providing it with the necessary tools to accomplish the task.
This case is significant both for Illinois recognition of the tort as well as the “punishment” of an employer that engaged in pretexting.
Keywords: litigation, employment and labor relations, intrusion, seclusion, privacy, Lawlor v. North American Corporation of Illinois
— Michael R. Lied, Howard & Howard Attorneys, P.C., Peoria Illinois
NLRB: Employers Must Check Off Dues after Contract Expiration
In a December 12, 2012, decision, the National Labor Relations Board (NLRB) has overturned its 50-year-old precedent, which had permitted employers to cease deducting union dues from employee wages upon expiration of its collective-bargaining agreement containing the dues check-off provision. WKYC-TV, Inc., 359 NLRB No. 30. In abandoning its 1962 decision in Bethlehem Steel, 136 NLRB 1500, the board determined that its prior precedent had “never provided a coherent explanation” for the rule permitting an employer to cease dues check-off after expiration of the union contract. In reaching this decision, the board relied upon the Ninth Circuit’s case law questioning the board’s prior rationale. Local Joint Executive Board of Las Vegas v. NLRB, 657 F.3d 865, 867 (2011).
In WKYC-TV, the board determined that the dues check-off obligation should be treated no differently than other obligations imposed by the National Labor Relations Act, namely, that an employer is obligated to maintain dues check-off as part of the status quo following expiration of a collective-bargaining agreement during negotiations for a successor agreement. In reaching this conclusion, the board determined that dues check-off is more analogous to traditional terms and conditions of employment, such as wages, hours, and check-off for savings accounts, all of which survive contract expiration as part of the status quo, rather than the “select group” of contractually established terms, such as arbitration provisions, no-strike clauses, and management rights clauses, which do not become part of the status quo after contract expiration.
Noting that, “[m]istaken or not, Bethlehem Steel has been the law for 50 years,” the board elected to apply its new rule prospectively only. In addition, because the board’s rationale rests upon an employer’s obligation to continue to apply the terms of its expired union contract as part of the status quo, employers who desire to cease union dues check-off upon expiration of a collective-bargaining agreement would still be permitted to do so if they negotiate such a provision into the contract itself.
Coming four days prior to the expiration of his term, Member Hayes dissented from the board’s majority decision. Hayes reasoned that dues check-off should be treated consistently with union security provisions, which by statute do not continue in effect following contract expiration. To this end, Hayes noted that the
Bethlehem Steel holding is consistent with the Board’s longstanding, common sense recognition that a union security clause operates as a powerful inducement for employees to authorize dues check off, and that it is unreasonable to think that employees generally would wish to continue having dues deducted from their pay once their employment no longer depends on it.
Keywords: employment litigation, Check Off, NLRB, WKYC-TV, Bethlehem Steel
— Brian Koji, Allen, Norton & Blue, Tampa, FL
NLRB Orders Employer to Reinstate Withdrawn Contract Offer
In Universal Fuel, Inc., 358 NLRB No. 158 (Sept. 27, 2012), the National Labor Relations Board (NLRB) recently ordered an employer to reinstate a previous contract offer that had been withdrawn. The board found that the employer’s conduct, which included withdrawing the prior offer and offering regressive proposals without good cause, amounted to bad-faith bargaining. Accordingly, as part of the remedy, the board directed Universal Fuel to reinstate its prior withdrawn proposal for a period of time and to sign a contract incorporating those terms if the union accepted it.
The employer contended that the board’s remedy was inconsistent with the Supreme Court’s decision in H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970), or with the provisions of section 8(d) of the National Labor Relations Act, 29 U.S.C. § 158(d). In H.K. Porter Co., the Court held that, while the board has the power to compel employers and unions to negotiate in good faith, it did not have the authority to compel the employer to agree to a specific proposal. Similarly, section 8(d) provides, in relevant part, that the obligation to bargain “does not compel either party to agree to a proposal or require the making of concessions[.]”
The board in Universal Fuel rejected the notion that H.K. Porter Co. precluded it from ordering that the employer sign a contract agreeing to the terms of its own prior offer. To this end, the board held that it was “not imposing contract terms on the parties without their consent.” Rather, because Universal Fuel “formulated and voluntarily offered” the proposal, “it can hardly contend that it is being forced to make a concession within the meaning of Section 8(d) by being required to accept the terms of its own offer.”
Notably, there is precedent for the type of remedy ordered in Universal Fuel. See e.g., TNT Skypak, Inc., 328 NLRB 468 (1999), enf’d, 208 F.3d 362 (2d Cir. 2000); Mead Corp. [membership required], 256 NLRB 686 (1981), enf’d, 697 F.2d 1013 (11th Cir. 1983). However, the board has employed the remedy sparingly. As the board continues to take a more aggressive approach in enforcing the good-faith bargaining obligation, employers and their counsel would be wise to stay abreast of developments in this area.
— Brian Koji, Allen, Norton & Blue, Tampa, FL
Drug-Free Workplaces in a Time of Legalization
Employees and employers alike may be wondering what effect the legalization of marijuana in two states in November 2012 may have on workplace drug policies. The short answer? Most likely none.
An employer is entitled to have a drug and alcohol policy that prohibits the presence of mind-altering substances in the workplace. The Drug-Free Workplace Act of 1988 even requires federal contractors to maintain such a policy. 41 USC § 701 et. seq. Additionally, marijuana is still considered a Schedule 1 drug under the federal Control Substances Act (CSA). 21 USC § 801, et. seq. To date, even medicinal marijuana licensure has not been found to override federal laws regulating such substances, nor have employers been required to accommodate “medicinal” usage under the Americans with Disabilities Act (ADA). In fact, illegal drug users are explicitly foreclosed from claiming the protection of the ADA. 42 U.S.C. §§ 12114(a). Thus, while the state law in both Colorado and Washington may have changed this past fall, large-scale workplace changes should not be expected as of yet.
Therefore, employees should make sure they understand the potential employment consequences before they assume legalization has given them a free pass to spark up over the weekend. Employers should use this opportunity to review and evaluate their drug policy to ensure it reflects the company’s intended position on drug use in the workplace. Be sure to clearly communicate that position to employees, so that both employer and employee can make informed decisions.
Keywords: litigation, employment, drug-free workplace, marijuana, ADA, American’s with Disabilities Act, Colorado, Washington
— Kaleena Weaver, Allen, Norton & Blue, P.A., Tampa, FL
November 16, 2012
Employee Petition Could Spark NLRB Charges
With the holiday season upon us, many employers will be increasing their hours of operation in hopes of boosting sales. The increased hours mean more shifts to fill, more employees to hire, and, consequently, the potential for more unfair-labor-practice charges. More charges are likely to arise due to a combination of factors, including the increase in the National Labor Relations Board’s (NLRB) willingness to find protected concerted activity in Internet postings along with an apparent increase in Internet discussion on employment matters.
For example, one employee, after being scheduled to work on Thanksgiving evening, posted a petition on Change.org seeking support for her position that management should not open early to lure in Black Friday shoppers. The employee accused the retail employer of caving in to “Thanksgiving creep,” thereby hurting employees like her who have limited time to spend with loved ones on the holiday. Many employers take a different view. According to various news sources, employers have found that an ample amount of employees volunteer to work on holidays, such that employers often do not have enough shifts to offer.
Regardless of whether you agree with retail outlets opening early to encourage sales, it is likely that the NLRB would hold that employee commentary on the matter would be protected activity. Likewise, in light of the recent NLRB decisions concerning Internet postings, it is also probable that such commentary, if posted online for the purpose of gaining support, would be classified as “concerted” activity. Thus, this one employee’s post on Change.org and the media coverage that followed could trigger re-posting of the petition through social-media outlets and an increase in unfair-labor-practice charges in the event that employers discipline employees involved or otherwise interfere with any protected activity.
It is not inconceivable that unfair labor practices could increase substantially due to new groups of individuals becoming protected by virtue of their online activities. For example, the retail employee who posted on Change.org could file a charge if she perceives she was thereafter treated adversely. Another potentially protected individual could be one of her coworkers who also signed the petition or re-posted it on sites such as Facebook. And what about individuals who advocate in support of petitions of employees of another organization? Would the “zone of protection” argument from recent Title VII retaliation jurisprudence extend to unfair-labor-practice charges? Could any individual who re-posts information such as the retail sales employee’s petition have grounds for asserting protected status? The answers to these questions are not yet known, but it’s fair to say that the employee’s petition could trigger charges that further test the boundaries of the NLRB’s rulings on Internet-based protected concerted activity in the near future.
Keywords: litigation, employment and labor relations law, protected concerted activity, internet post, unfair labor practice charge, Thanksgiving creep
— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, FL
November 15, 2012
EEOC Answers Questions Regarding Violence Victims
A recent “Questions and Answers” publication by the EEOC details how Title VII and the ADA may apply to employment situations involving applicants and/or employees who experience domestic or dating violence, sexual assault, or stalking. Importantly, the Q&A makes it clear that neither Title VII nor the Americans with Disabilities Act (ADA) specifically protect applicants or employees who experience domestic violence. Moreover, courts across the country have not been uniform in the interpretation and extension of the protections found in Title VII and the ADA to domestic violence victims. The protection provided under state law for such persons is varied at best. In the coming years, practitioners can likely expect to see more litigation in this area as it continues to be relatively undefined and as evidenced by the Q&A appears to be an area of interest for the EEOC.
The EEOC’s Q&A sets forth a list of hypothetical scenarios that may violate Title VII or the ADA. One such example highlights how a decision based on sex-based stereotypes—such as where an employer terminates a female victim of domestic violence due to a fear of “potential drama battered women bring to the workplace”—violate the Title VII prohibitions against disparate treatment based on sex. Another example cited by the EEOC of potential unlawful conduct discusses the employer’s obligation to appropriately respond once an employee puts the employer on notice of unwelcome persistent advances by a coworker, such as sitting uncomfortably close, making suggestive comments, blocking the employee’s path, stalking, etc. Even where the employer takes preventive or remedial action, such as transferring the offending employee to a different department, the hypothetical points out that the employer may still be liable if the harassment nonetheless continues without further action taken by management.
The Q&A additionally cautions that an employer may be liable under the ADA in certain situations involving domestic violence victims. In one such example, an employer would be liable for its failure to hire an applicant who it learns was a complaining party in a rape allegation and had received counseling for depression, and the employer decided not to hire the applicant based on a concern she may require future time off for continuing symptoms or treatments. Another example highlights how the ADA’s prohibition against retaliation could apply to domestic violence victims. Specifically, where an employee informs a supervisor she intends to report his unlawful disclosure of the employee’s domestic abuse and concomitant confidential medical information and the supervisor warns the employee he will withhold her raise for reporting his behavior, the ADA’s anti-retaliation provision could be implicated.
While the Q&A makes it apparent that there is no per se protection for domestic violence victims under Title VII and the ADA, it does provide a useful guide delineating numerous instances where the prohibitions under both statutes could be implicated. A key takeaway from the issuance of the Q&A is the recognition that this topic is one likely to be a focus for the EEOC and practitioners in the near future.
Keywords: litigation, employment and labor relations law, EEOC domestic violence, Title VII, ADA, American with Disability Act, discrimination, domestic violence, harassment, dating violence, stalking
— Nicolette L. Bidarian, Allen Norton & Blue, P.A., Orlando, FL
November 15, 2012
Faragher/Ellerth Defense Ineffective Due to Deficient Policy
Earlier this month, a Utah district court granted in part and denied in part the Equal Employment Opportunity Commission’s (EEOC) motion for summary judgment in a racial-harassment case. EEOC v. Holmes & Holmes Industrial, Inc., Case No. 2:10CV955DAJ (C.D. Utah Oct. 10, 2012). In the case, the EEOC sued on behalf of two employees who alleged they experienced a racially hostile work environment. Ruling in the EEOC’s favor on the objective component of the hostile-environment framework, the court noted that the undisputed facts presented the “rare case where there is no dispute as to the pervasiveness of the conduct in question” given that the workplace consisted of a “steady barrage of opprobrious racial comments.”
Indeed, the racially charged conduct was extreme: The human-resources manager had used the term “nigger rig” during a safety meeting to describe work that was poorly done; a supervisor referred to rap music using derogatory language while riding to a work site; and there was racial graffiti both inside and outside of the toilets the employees used. Perhaps most egregious, a superintendent/project manager used the racially derogatory slurs almost every time he saw or addressed the employees, and admitted it was at least 3–4 times per week, which the court calculated to be at least 144 times during the course of the employees’ 48 weeks of employment.
Despite the objective severity and pervasiveness of the conduct, the court denied summary judgment for the EEOC as to the subjective component of the hostile-environment framework. The court’s holding in this respect relied on evidence from a few coworkers who testified that the minority employees did not appear to perceive the conduct as harassing. Significantly, in making this argument, the employer relied in part on evidence that the employees in question themselves used racially charged language in rap music they made outside of work. Although the court ultimately sided with the employer on the subjective component of the analysis, the court found the evidence of rap music irrelevant to the inquiry. The court reasoned that introducing the employees’ off-duty conduct would be tantamount to blaming the victims for the harassment and did not contribute to the analysis of how the employees perceived their environment at work.
Another noteworthy feature of the Holmes decision was that the employer’s reliance on the Faragher/Ellerth affirmative defense was rejected. In this respect, the court held that the employer’s anti-harassment policy was “unreasonable as a matter of law because it direct[ed] victims to report discrimination to their harassing supervisor and provide[d] no alternative means to bypass that supervisor.”
As aptly illustrated by Holmes, employers must be mindful when crafting anti-harassment policies. In particular, employers should ensure that their anti-harassment policies do not generically state that harassment against “protected classes” is prohibited. Instead, the policies should identify the specific classes to whom the policies apply and should provide alternative mechanisms for reporting harassment to a person aside from a victim’s supervisor.
Keywords: litigation, employment and labor relations law, hostile work environment, racial harassment, Faragher, harassment policy, EEOC v. Holmes
SCOTUS to Hear Arguments on Dismissal of FLSA Collective Action
Over time, management-side employment attorneys have come to realize that Rule 68 offers of judgment can be effective tools for resolving Fair Labor Standards Act (FLSA) claims at an early stage. If the employee-plaintiff accepts the offer, the case is concluded. If the employee-plaintiff rejects the offer, and the offer would have covered all of the employee’s damages, the claim is mooted. This results in the FLSA action being dismissed for a lack of subject-matter jurisdiction. Thus, Rule 68 can provide an efficient mechanism for addressing individual FLSA claims economically and swiftly. But does this method work in the context of FLSA collective actions?
According to the Third Circuit Court of Appeals, a rejected offer of judgment under Rule 68 does not deprive the courts of subject-matter jurisdiction in an FLSA collective action. Symczyk v. Genesis HealthCare Corp., 656 F.3d 189 (3d Cir 2011). In deciding Symczyk, the circuit court discussed how a Rule 68-based dismissal could deprive class-action class members of the benefit of the Relation-Back Doctrine. While recognizing that Rule 23 class actions are not the same as FLSA collective actions, the circuit court nonetheless held that the rationale for declining to apply the Rule 68-based dismissal applied equally in the context of an FLSA collective action. Therefore, under the circuit court’s decision in Symczyk, even if the only named plaintiff in an FLSA collective action had his or her claim mooted by an offer of judgment, leaving only the hypothetical and unnamed potential future opt-in plaintiffs in the case, the court retains its subject-matter jurisdiction. The case goes on without a named plaintiff, and attorney fees continue to build.
The Symczyk employer appealed the case to the U.S. Supreme Court, which will hear oral argument on December 2, 2012. The Supreme Court’s decision will undoubtedly impact all employment attorneys who litigate FLSA collective actions. As such, the Employment and Labor Relations Law Committee will be sure to keep ABA members updated on this case, as it develops.
Keywords: litigation, employment and labor relations law, FLSA, Fair Labor Standards Act, collective action, Supreme Court, offer of judgment
— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, FL
October 19, 2012
Third Circuit Clarifies Standards for FLSA Collective Actions
The Third Circuit Court of Appeals addressed several important issues of first impression in Zavala v. Walmart Stores, Inc., 691 F.3d 527 (3d Cir. 2012), further clarifying the two-step process for whether claims can be pursued as a Fair Labor Standards Act (FLSA) collective action.
The Zavala decision represents the culmination of eight years of hard-fought litigation between a group of undocumented workers and Walmart. The plaintiffs alleged that they were recruited to work for Walmart to provide janitorial services and that, in the process, they were subjected to many improper actions by Walmart, including failure to pay wages and overtime. The plaintiffs sought to proceed as a collective action under FLSA. The plaintiffs included myriad other claims in their complaint, such as allegations that Walmart violated Racketeer Influenced and Corrupt Organizations Act (RICO) laws and falsely imprisoned them when they were locked in at night to clean stores for Walmart.
After years of motion practice, the district court dismissed the RICO and false-imprisonment claims, and ultimately refused to permit the action to continue as a collective action. The individually named plaintiffs resolved their claims with Walmart and the case proceeded on appeal to the Third Circuit to decide, among other things, the appropriateness of the district court’s decision to deny collective-action status.
Zavala is helpful for two reasons. First, the court addressed the three standards applied by courts at the second step of certification to determine whether proposed collective plaintiffs are “similarly situated.” 29 U.S.C. § 216(b). The court recognized that it has approved the use of the “ad hoc approach” that “considers all the relevant factors and makes a factual determination on a case-by-case basis.” 691 F.3d at 536. The court went on to describe a number of factors that should be considered in the ad hoc approach, and cited pertinent case and secondary authorities it viewed as helpful in making that determination.
Second, the court addressed an issue that apparently has not been squarely addressed by any other court of appeals—the level of proof the plaintiffs must satisfy to clear the second-stage hurdle. The court held that plaintiffs must establish the factors by a preponderance of the evidence: “That seems impossible unless Plaintiffs can at least get over the line of ‘more likely than not.’” Id. at 537. The court further observed that “[b]eing similarly situated does not mean simply sharing a common status, like being an illegal immigrant. Rather, it means that one is subjected to some common employer practice that, if proved, would help demonstrate a violation of the FLSA.”
Applying the standard in the case before it, the court in Zavala held that collective-action certification was properly denied because the workers were too widely dispersed throughout the country and at many different stores, working for 70 different contractors and subcontractors, and working varying hours. These significant differences in their working conditions rendered the proposed class too unwieldy, and the district court was therefore correct in denying final certification.
The court’s decision in Zavala is a welcome one in that it provides guidance to employees and employers alike in litigating proposed collective actions. The decision undoubtedly shows the uphill battle that exists for employees seeking to certify a broad FLSA collective action of employees who are widely dispersed and arguably subjected to different working conditions.
— Kevin O'Connor, Peckar & Abramson, River Edge, NJ
October 19, 2012
Supreme Court to Decide Whether FLSA Collective Action Is Mooted
The U.S. Supreme Court has granted certiorari in a case of great significance, Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011), cert. granted, 2012 WL 609478 (June 25, 2012), and will hear arguments on December 3, 2012. The sole issue before the court is “[w]hether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff's claims.” In other words, if an employee files a lawsuit against his or her employer on his or her own behalf and on behalf of a potential class of other employees, and the employer offers to pay him or her the most the employee could possibly expect should the case go forward, can the employee insist on having the class action proceed forward?
The defense tactic taken in Symczyk is a common one, with the employer making an offer of judgment in the full amount of the plaintiff’s claim plus reasonable attorney fees. The tactic is common because the costs to defend a class action can easily dwarf the actual amount the employee could ever hope to obtain individually. Because the offer provided for all of the relief that the plaintiff could have received had she pursued the claim through trial, the offer in Symczyk constituted “full relief” of her claims. The employee did not accept the offer, and the employer later moved to dismiss the action as moot.
The list of amici curiae who have filed briefs with the Court shows the importance of these issues. Included among them are the Chamber of Commerce of USA, American Health Care Association, and DRI.
The decision by the Third Circuit was rendered on an appeal from a district-court decision dismissing the action as moot. Addressing an issue of first impression in the Third Circuit, and following the lead of the Ninth Circuit, the Third Circuit in Symczyk held that an offer of full relief made pursuant to Rule 68 of the Federal Rules of Civil Procedure does not automatically moot the claim of an FLSA plaintiff who has not yet moved for conditional certification. The court acknowledged that an offer of complete relief will generally moot the plaintiff’s claim, but then went on to state several policy-based reasons why this “general” rule limiting the jurisdiction of the federal courts should not be applied in the context of an FLSA collective action.
The court opined that, although Rule 68 was designed “to encourage settlement and avoid litigation,” the rule can be manipulated in the class-action context to “frustrate rather than to serve those salutatory ends.” The court observed that it was concerned that any other rule would permit a defendant to “pick off” the claims of the named plaintiff and avoid certification of the class. This, in turn, would require “multiple plaintiffs to bring separate actions, which effectively could be picked off.” This application of the rule “obviously would frustrate the objective of class actions and waste judicial resources.”
The Supreme Court’s decision to hear the appeal is welcome news and will hopefully bring certainty to this area for employers and employees alike.
— Kevin O'Connor, Peckar & Abramson, River Edge, NJ
No Arbitration Required for Unhired Applicant
Arbitration provisions in employment agreements are generally enforceable against the employees who sign them. But what about when the arbitration agreement is in a job application—and the potential plaintiff is an applicant who never got the job?
The U.S. Court of Appeals for the First Circuit held in a recent case that a job applicant was not required to arbitrate her gender-discrimination claim against the company to which she applied, despite the fact that her employment application contained an arbitration provision.
The case, Gove v. Career Systems Development Corporation, No. 11-2468 (1st Cir. July 17, 2012), involved a plaintiff, Ann Gove, who applied for a job at career Systems Development Corporation (CSD). Gove, who was pregnant when she applied, did not get the job. She filed suit in the U.S. District Court for the District of Maine, alleging gender and pregnancy discrimination in violation of Title VII of the Civil Rights Act of 1964 and the Maine human-rights statute.
CSD moved to compel arbitration in the case, arguing that Gove was bound by the arbitration clause contained in her application for employment. The application stated that its submission constituted an agreement to arbitrate “all pre-employment disputes.”
The district court held that there was no valid agreement between the parties to arbitrate Gove’s claims. The appeals court affirmed the district court on different grounds, concluding that it was not the validity of the agreement that was in question, but its scope.
CSD urged the First Circuit to interpret “pre-employment disputes” broadly, as applying to any disputes that arose between the time of application and hiring, whether or not the hiring ever occurred. Gove argued that the court should instead adopt a literal meaning of pre-employment, i.e, if there is no employment, there can be no pre-employment period.
The court held that because the application’s arbitration language was ambiguous, and because Gove had no meaningful opportunity to question or bargain over the terms of the application, the application must be construed, pursuant to Maine contract law, against its drafter, CSD.
Keywords: litigation, employment and labor relations law, First Circuit, arbitration
— Shira Forman, Dornbush Schaeffer Strongin & Venaglia LLP, New York, NY
Fracking Activities Could Pose Heightened Risks to Employers
In recent years, the fracking boom in the United States has led to hundreds of thousands of new jobs in the energy industry. According to a recent report commissioned by America’s Natural Gas Alliance, fracking and other unconventional natural-gas production techniques may create as many as 1.5 million jobs in the United States by 2035.
But along with an increase in a company’s employee pool comes heightened responsibilities for employers in the fracking industry. Not the least of these obligations are those imposed by the Occupational Safety and Health Association (OSHA), the country’s primary federal agency charged with the enforcement of safety and health legislation.
Last month, OSHA, along with the National Institute for Occupational Safety and Health (NIOSH), issued a hazard alert about fracking worker safety, stating that employers must ensure that their workers are properly protected from overexposure to silica in fracking operations. The hazard alert was spurred by a letter from the AFL-CIO, the U.S.’s largest federation of unions, to OSHA, calling for action to protect workers from silica exposure during fracking. Citing a recent field study by NIOSH ascertaining that 79 percent of exposed silica samples exceeded the NIOSH Recommended Exposure Limits, the letter urged OSHA to make a new silica standard and to expand its field work in the fracking industry to include medical surveillance of workers.
The OSHA alert reminds employers that they are “responsible for providing safe and healthy working conditions for their workers,” and cautions that “Employers must determine which jobs expose workers to silica and take actions to control overexposures and protect workers.” According to OSHA, “a combination of engineering controls, work practice, protective equipment, and product substitution where feasible, along with worker training, is needed to protect workers who are exposed to silica during hydraulic fracturing operations.” The alert lists a number of specific practices that employers can implement in their efforts to achieve the goal of worker safety in fracking operations.
The alert is significant to employers, in that it could increase the potential for OSHA investigations of fracking operations, particularly in the event of a report of harm to an employee for silica exposure. The alert also increases the risk that an employee injury could result in a willful violation of the Occupational Safety and Health Act, which carries significant penalties of up to $70,000 per violation. Employers are well advised to take all appropriate safety precautions against potential silica exposure to their employees.
Keywords: energy litigation, fracking, OSHA, NIOSH, silica
— Kelley Edwards, Littler Mendelson P.C., Houston, TX
July 12, 2012
Pharma Sales Reps Qualify for "Outside Sales" Exemption
On June 18, 2012, the U.S. Supreme Court released its much-anticipated decision in Christopher v. SmithKline Beecham Corp. In a 5–4 decision authored by Justice Alito, the Supreme Court determined that the Fair Labor Standards Act’s (FLSA’s) “outside sales” exemption includes pharmaceutical sales representatives (PSRs) who—in a highly regulated industry in which drugs are dispensed only upon a physician’s prescription—perform “detailing” functions such as providing information to physicians, but are not responsible for the transfer of title for any products. In reaching its decision, the Supreme Court afforded no deference to the Department of Labor’s (DOL’s) interpretation of its regulations and found that the text of the FLSA’s “outside sales” exemption mandates a functional, rather than a formal, approach.
The petitioners brought this action in the U.S. District Court of Arizona, seeking back pay and liquidated damages for SmithKline’s failure to pay them for overtime hours. The petitioners alleged that, as PSRs, they worked an average of 10– 20 overtime hours per week but were misclassified as exempt employees. The district court granted SmithKline’s motion for summary judgment, finding that the petitioners were “employed . . . in the capacity of outside sales[men]” under 29 U.S.C. § 213(a)(1). The petitioners moved the court to amend its order, relying primarily on the DOL’s 2009 interpretation of pertinent regulations finding that PSRs do not qualify under the “outside sales” exemption. The district court denied the petitioners’ motion. On appeal, the Ninth Circuit Court of Appeals affirmed, finding that the DOL’s interpretation was not entitled to controlling deference. Because the Second Circuit Court of Appeals previously had determined that the DOL’s interpretation was entitled to controlling deference, the Supreme Court granted certiorari to address the circuit split.
Writing for the majority, Justice Alito first addressed the issue of whether the Court owes deference to the DOL’s interpretation under the Auer v. Robbins standard. Although Auer ordinarily calls for adherence to an agency’s interpretation, the Court noted that such adherence is inappropriate “when the agency’s interpretation is ‘plainly erroneous or inconsistent with the regulation.’” Applying this principle, the Court found that withholding adherence in the present case was appropriate for two reasons.
First, adherence to the DOL’s interpretation would undermine the principle that agencies should provide fair warning of the conduct a regulation prohibits. In the present case, such fair warning simply did not exist. As the Court noted, the pharmaceutical industry had little reason to suspect that its standard practice of treating PSRs as exempt under the “outside sales” exemption violated the FLSA until the DOL’s interpretation in 2009. Despite decades of classification of PSRs as exempt, the DOL never initiated any enforcement actions or provided any other warning of noncompliance.
Second, the Court found that the DOL’s interpretation “plainly lacks the hallmarks of thorough consideration.” Specifically, the DOL’s interpretation took the position that “an employee does not make a ‘sale’ for purposes of the ‘outside salesman’ exemption unless he actually transfers title to the property at issue.” Noting that this interpretation emerged from the DOL’s internal decision-making process without any opportunity for public comment, the Court found that this interpretation is “flatly inconsistent” with the FLSA, which defines “sale” as a “consignment for sale.” Because a consignment for sale does not involve a transfer of title, the Court rejected the DOL’s interpretation.
Having determined that the DOL’s interpretation was due no deference, the Court then focused on the text of the statute and rendered its own interpretation of the “outside sales” exemption. In doing so, the Court noted that the “outside sales” exemption explicitly includes individuals “employed . . . in the capacity of [an] outside salesman.” The Court found that “[t]he statute’s emphasis on the ‘capacity’ of the employee counsels in favor of a functional, rather than a formal inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works.” The Court also looked to the DOL’s regulations for guidance and similarly concluded that the text of the regulations promotes an interpretation inclusive of the PSRs. Finally, the Court noted that its interpretation comports with the apparent purpose of the “outside sales” exemption, which is premised on the belief that exempt employees typically earn salaries well above the minimum wage and receive benefits that set them apart from nonexempt employees. Accordingly, the Court concluded that the petitioners qualified under the FLSA’s “outside sales” exemption.
This decision certainly impacts the pharmaceutical industry directly, reaffirming the industry’s long-standing practice of considering its “sales representatives” as exempt employees. But the Court’s decision has the potential for a broader impact as well. Because the Court noted that the “outside sales” exemption requires a functional, industry-specific approach, this decision likely opens the door for employers in other industries to classify as exempt employees who are engaged in the capacity of outside salespersons but do not directly affect the transfer of title of goods. Further, by labeling the DOL’s interpretation as “flatly inconsistent” with the FLSA and criticizing the DOL’s failure to provide an opportunity for public comment, the Supreme Court struck a blow to the DOL’s aggressive tactics through itsamicus curiae program.
Keywords: litigation, employment and labor relations law, Christopher v SmithKline, FLSA, pharmaceutical sales reps
— Daniel E. Harrell, Seyfarth Shaw LLP, Atlanta, GA
June 28, 2012
Spouse of Undocumented Alien Fails to State Discrimination Claim
The federal Court of Appeals in Chicago recently ruled that an employer did not violate Title VII when it terminated the employment an employee for being the spouse of an “illegal” alien. See Cortezano v. Salin Bank & Trust Company, 2012 WL 1814258 (7th Cir. May 21, 2012).
In 2007, Salin Bank & Trust Co. hired Kristi Cortezano. At that time, Kristi had been married to Javier Cortezano, an illegal alien from Mexico, for six years. While employed at Salin Bank, Kristi named Javier joint owner of her bank account, and helped him open two bank accounts under his individual tax identification number.
Kristi eventually revealed Javier’s unauthorized status to her supervisor; who then notified the bank’s security officer. Concerned about the legality of Javier being on the various bank accounts, the security officer called a meeting with Kristi and her supervisor. At the meeting, Kristi admitted that Javier had illegally entered the U.S., but reported that that he was currently in Mexico trying to obtain U.S. citizenship. The security officer emphasized his concern that Javier was an “illegal alien from Mexico,” and that the accounts must have been opened using fraudulent documentation. That first meeting became heated and ended poorly.
Kristi and her attorney then attempted to schedule a follow-up meeting with the bank. The bank refused, however, to conduct the meeting with Kristi’s attorney present, and she in turn refused to attend without her attorney. She walked out, and shortly thereafter the bank sent her a letter terminating her employment for refusing to participate in the meeting. The next day, the bank reported its findings to federal immigration authorities.
Kristi filed suit against the bank alleging national-origin discrimination under Title VII and several state-law claims. The trial court granted the bank’s motion for summary judgment and Kristi appealed.
On appeal, the court first examined whether discrimination based on the national origin of a person’s spouse falls within the protections of Title VII. It noted that while its sister courts have ruled that Title VII’s protections apply in such cases, it did not need to decide that issue here as it was immaterial to Kristi’s case. The court agreed with the bank that it had proven it terminated Kristi’s employment because of her husband’s status as an illegal alien, not because he was from Mexico.
Having found that the bank’s actions were predicated on Javier’s (illegal) alienage, the court then examined whether Title VII guards against alienage-based discrimination. The court expressed plainly, “it does not,” finding that “national origin” under Title VII means merely the country from which you or your forbears came. Accordingly, the court held that Title VII encompasses discrimination based on one’s ancestry, but not on one’s citizenship or immigration status.As to citizenship/immigration discrimination, the court noted that Kristi had not brought a claim under the Immigration Reform and Control Act (IRCA), a statute that does prohibit discrimination based upon national origin or citizenship status. It noted, however, that such a claim would have been pointless anyway as IRCA’s protections do not extend to “unauthorized aliens.”
Accordingly, the court upheld the district court’s grant of summary judgment to the bank, finding that any discrimination suffered by Kristi was not the result of her marriage to a Mexican, but rather the result of her marriage to an unauthorized alien.
— David N. Michael, Gould & Ratner, LLP, Chicago, IL
June 19, 2012
EEOC Issues New Guidance on Criminal-Background Checks
On April 25, 2012, the Equal Employment Opportunity Commission (EEOC) published a new enforcement guidance entitled “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964.” The guidance provides employers with useful information regarding the agency’s view on the use of criminal-history information when making employment-related decisions.
Title VII is potentially implicated when employers seek to use information gained in background checks to justify a decision relating to hiring, job promotion, performance management, and retention. In the guidance, the EEOC expresses concerns that certain policies, such as a blanket prohibition against hiring someone with a conviction, might have a disparate impact on members of certain protected classes, thus running afoul of Title VII. The guidance also clarifies the EEOC’s position that any decision regarding the use of criminal-history information must be “job related and consistent with business necessity.”
The EEOC makes a distinction between the use of arrest records and conviction records. The fact of an arrest does not establish that any criminal conduct has occurred. Therefore, employment decisions relating to the existence of a prior arrest alone are not job-related and consistent with business necessity and cannot be used to deny an employment opportunity. Criminal convictions, on the other hand, will generally serve as evidence that the person engaged in a particular conduct, and may be relied upon for purposes of screening applicants or employees. However, the existence of the conviction is not enough to meet the “job-related and consistent with business necessity” standard. To meet this standard, the employer must (1) determine that the conviction meets a conduct exclusion under the Uniform Guidelines on Employee Selection Procedures; or (2) develop an individualized assessment, considering the nature of the crime, the time elapsed, and the nature of the job position.
To determine whether a criminal-conduct exclusion is job-related and consistent with business necessity, an employer should review whether its policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of the position. The EEOC cites two circumstances in which employers will usually be able to meet this standard: 1) The employer validates the criminal-conduct screen for the position per the Uniform Guidelines on Employee Selection Procedures, see,29 C.F.R. § 1607.5; or 2) the employer develops a targeted screen considering at least the nature of the crime, the time of the conviction, and the nature of the job (the Green factors), and then provides an opportunity for an individualized assessment of people excluded by the screen.
The enforcement guidance also contains recommendations for employers to consider adopting as best practices. These include:
- Eliminate policies or practices that exclude people from employment based on the fact of a criminal record.
- Develop a narrowly tailored written policy for screening employees and applicants for criminal conduct.
- Train managers, hiring officials, and decision makers about Title VII and the prohibition against employment discrimination as well as on the policy and its implications.
- When asking questions about criminal records, limit inquiry to records for which exclusion would be job-related and consistent with business necessity.
- Keep information about applicants’ and employees’ criminal records confidential and use it only for the purpose intended.
While some were concerned that the new enforcement guidance would constitute a radical departure from previous EEOC policy, for the most part, the guidance is simply a restatement of the commission’s longstanding position on employer use of criminal-background information. However, in light of the new guidance, employers should anticipate greater oversight by the EEOC. While the guidance itself is not a legal mandate, it does provide employers with greater understanding about how the EEOC will analyze charges.
Keywords: litigation, employment and labor relations law, EEOC, Title VII
— Charla Bizios Stevens, McLane, Graf, Raulerson ∓ Middleton
May 16, 2012
The Beginning of the End for McDonnell Douglas?
In January 2012, the Seventh Circuit handed down its opinion in Coleman v. Donahoe, 2012 WL 32062 (7th Cir. 2012), an employment-discrimination case with several ramifications related to the holy grail of employment cases: McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Under McDonnell Douglas, a plaintiff must establish that another “similarly situated” individual, who was not in his or her protected class, was treated more favorably. In response, the employer then must articulate a “legitimate, nondiscriminatory reason” for its action, and if it does so, the burden shifts back to the plaintiff to present evidence that the employer’s stated reason was a pretext. This nearly 40-year-old burden-shifting analysis has been a staple of every employment practitioner’s understanding of pretrial employment-discrimination litigation and, at least in employment-law circles, has the same name recognition as International Shoe v. Washington, 326 U.S. 310 (1945), has throughout the rest of the legal community.
In Donahoe, the Seventh Circuit continued to loosen the standard regarding employees considered “similarly situated” under McDonnell Douglas. The court called for a “flexible, common-sense examination of all the relevant factors” when determining whether a similarly situated individual was treated better. In that case, involving workplace-violence situations, the plaintiff met its burden by showing a common, upper-level supervisor approved the discipline in both situations (even though the direct supervisors were different) and that both situations involved violations of the same workplace-conduct rule (even though the conduct engaged in was not identical). In finding that the plaintiff had met her burden, the court admonished the tendency of district-court judges to require “closer and closer comparability” with the comparison group because doing so would transform the McDonnell Douglas “evidentiary ‘boost’ into an insurmountable hurdle.”
Second, and perhaps more significantly, the concurring opinion—which all three panel members joined—may have forecasted the beginning of the end of the McDonnell Douglas burden-shifting analysis. Judge Wood wrote separately “to call attention to the snarls and knots that the current methodologies used in discrimination cases . . . have inflicted on courts and litigants alike.” She observed that while “McDonnell Douglas was necessary nearly forty years ago, when Title VII litigation was still relatively new in federal courts,” by now the various tests “have lost their utility.” She also pointed out that evidence commonly used in the “similarly situated employee” analysis is the same evidence used in the pretext analysis, thus essentially jumbling the steps of the scheme. Judge Wood suggested scrapping the McDonnell Douglas analysis altogether, and instead, requiring a plaintiff facing summary judgment to “present evidence showing that she is in a class protected by the statute, that she suffered the requisite adverse action (depending on her theory), and that a rational jury could conclude that the employer took that adverse action on account of her protected class, not for any non-invidious reason.”
Judge Wood’s musings on changing the landscape of summary judgment for employment practitioners are interesting and provocative, and there are certainly pros and cons for practitioners on both sides in changing this long-established system. Only time will tell whether other courts will follow the Seventh Circuit’s lead.
May 2, 2012
EEOC Recognizes Gender Identity as a Theory of Proving
On April 20, 2012, the EEOC issued a decision in which it determined that a complaint based on the theory of gender identity or transgender discrimination is cognizable as sex discrimination prohibited by Title VII of the Civil Rights Act of 1964. This decision is important because, in addition to elaborating on the protection provided to transgender individuals under the theory of “sex stereotyping,” the commission further determined that a complainant who can prove that an employer was willing to offer him or her the job when presenting as one gender, but not as the other, proves sex discrimination without presenting any evidence of gender stereotyping.
This decision stems from a failure-to-hire complaint filed by Mia Macy against the Department of Justice related to a position with the Walnut Creek, California, forensics laboratory of the Alcohol, Tobacco, Firearms and Explosives Agency. According to the complaint, in December 2010, Macy initially discussed a position in the forensics lab with the director of the Walnut Creek office. At the time, Macy presented as a man. The director informed Macy in January 2011 that the job was hers pending the completion of a background check. On March 29, 2011, Macy requested that the hiring agency (through whom her recruitment proceeded) inform the director that she was in the process of transitioning from male to female. Several days later, on April 8, 2011, the hiring agency informed Macy that the position with the Walnut Creek forensics lab was no longer available due to budget constraints. Macy later found out, however, that the forensics lab indeed filled the position with another applicant.
Macy filed a formal equal-employment-opportunity complaint on June 13, 2011, indicating that “sex,” “gender identity,” and “sex stereotyping” were the bases for her complaint. Ultimately, the commission issued letters to Macy indicating that it classified her claim as a complaint of discrimination based on “gender identity (female) stereotyping.” The commission further noted that it would process her claim only “based on sex (female) under Title VII[.]” Macy filed a notice of appeal, arguing that the Equal Employment Opportunity Commission (EEOC) has jurisdiction over her entire claim, including claims of discrimination based on “gender identity” or “transgender status.”
On appeal, the commission focused on the issue of whether a complaint of discrimination based on gender identity alone—not relying on the theory of sex stereotyping first recognized in Price Waterhouse v. Hopkins, 490 U.S. 228, 239 (1989)—could proceed under Title VII. Addressing this issue, the commission noted that Title VII’s protections sweep broadly “in part because the term ‘gender’ encompasses not only a person’s biological sex but also the cultural and social aspects associated with masculinity and femininity.” Noting that most courts have found protection for transgender individuals under the “sex stereotyping” theory, the commission further determined that the “sex stereotyping” theory was not the only means of proving cognizable gender discrimination under Title VII. Alternatively, if Macy could prove that the director at the Walnut Creek forensics lab was willing to offer her the position as a man, but not as a woman, she will have proven that the director discriminated against her on the basis of her sex. In other words, “intentional discrimination against a transgender individual because that person is transgender is, by definition, discrimination ‘based on . . . sex,’ and such discrimination therefore violates Title VII.”
While it remains to be seen whether courts will follow the EEOC’s interpretation, this decision nonetheless marks a significant transformation in the law as it relates to gender-identity discrimination. Pursuant to the EEOC’s guidance in this decision, one can expect that additional litigation will arise under not only the traditional “sex stereotyping” theory, but also under the theory that claims of gender identity or transgender discrimination can survive alone under Title VII’s prohibition of discrimination based on sex.
— Daniel E. Harrell, Balch & Bingham LLP, Birmingham, AL
Social Media and Employer Documentation: Risk Containment
The law often falls far behind technology and takes years to catch up. The tension between the sheer popularity and proliferation of social-media technologies and their use in the workplace, on one hand, and the proper documentation of ownership of such technologies, on the other, is both palpable and stark. Employers should stand up, take notice, and properly document these ownership issues to avoid lawsuits.
The common dispute that is surfacing these days centers around ownership of LinkedIn and Twitter accounts. When an employee departs—and the employee and the employer have a different view of who owns the social media accounts (as is often the case)—litigation ensues.
A recent case in the Eastern District of Pennsylvania, Eagle v. Morgan, 2011 WL 6739448 (E.D. Pa. Dec. 22, 2011), provides a glimpse of the types of claims that can surface when there is a dispute over ownership of such accounts. Linda Eagle and several colleagues formed Edcomm, Inc., a financial-services and training company. In 2008, she established a LinkedIn account that she used for both business and personal use. In 2010, Edcomm was sold with Eagle retaining an employment position with Edcomm. In 2011, she was terminated. While employed by Edcomm, Eagle had given her password to Edcomm employees for purposes of maintaining her LinkedIn account and updating it. When Eagle was terminated, the company took her laptop and cell phone, and thereafter locked her out of her LinkedIn account.
When Eagle accessed her account shortly after her termination, she discovered that her LinkedIn profile had been co-opted to basically display the name and photograph of the new CEO of Edcomm, with that new CEO bearing all of her background info, and enjoying her extensive “contacts” that she had built in LinkedIn over the years. Eagle filed suit in the EDPA alleging 11 separate causes of action, including a claim for damages under the Computer Fraud and Abuse Act, Lanham Act, conversion, and numerous other state-law theories. Edcomm filed and served counterclaims, making many of the same claims against Eagle. Among other things, the employer claimed it had the right to the Linkedin account and claimed that Eagle had violated the law by accessing the account.
Although the district court dismissed most of the employer’s counterclaims on a motion, it did leave intact a common-law misappropriation claim against Eagle for her alleged misappropriation of the LinkedIn account and the connections she had gathered over the years, all of which, Edcomm claimed, had been assembled solely at its expense and exclusively for its own benefit.
The Eagle case is one of the first cases involving a claim of misappropriation of a social-media account, and points out the specific need for employers and employees to document exactly who owns that social-media account, and what will happen if employment is terminated. It is not uncommon to now see employers secure an agreement from the employee agreeing to “turn over” to the employer the “contacts” that are built up in a LinkedIn account prior to the employee’s departure, and to forego use of those contacts after employment ends. That begs the question of whether such an agreement is enforceable to the extent the employer then seeks to restrict the employee’s post-employment activities, such as solicitation of those contacts. For that, the law will resort to traditional tests of whether an employer has stated a protectable interest over the underlying contact lists and data.
Another unpublished decision that was released in 2010 came close to ruling on this latter issue, but stopped short. In Sasqua Group, Inc. v. Courtney, 2010 WL 3613855 (E.D.N.Y. 2010), a recruiting firm in the financial-services sector made a claim for injunctive relief stemming from a former recruiter’s use of certain industry contact information in the recruiting industry. Magistrate Judge Kathleen Tomlinson undertook a rather exhaustive analysis of the proliferation of data in the recruiter industry, and also provided a good explanation for the unique role of LinkedIn in such business transactions. In the end, the court in Sasqua recognized the limited circumstances in which an employer can claim a protectable interest over industry data that is available in the public domain, and refused to give the employer an injunction.
Twitter and LinkedIn accounts are each different, and the degree to which an employer can claim “ownership” will change depending upon the context in which the technologies are used and developed. Employers would be well advised to take immediate action to incorporate clauses in their employee handbook and employment agreements to deal with these ownership issues, and minimize the risk of litigation later.
Keywords: litigation, employment and labor relations, Eagle v Morgan, Sasqua Group v Courtney
— Kevin O'Connor, Peckar & Abramson, River Edge, NJ
Gender-Identity-Discrimination Prosecution Comes to Massachusetts
On November 23, 2011, Massachusetts became the 16th state to treat transgender citizens as a protected class. Governor Deval Patrick signed into law the Transgender Equal Rights Bill designed to protect transgender individuals from discrimination in employment, housing, education, and credit. The new law also increases protections for transgender individuals against hate-crime violence.
The amendment to the Massachusetts Fair Employment Practices Act (Mass. G.L. c. 151B) subjects employers to liability for discrimination in hiring, firing, compensation, or in any terms, conditions, or privileges of employment against an individual based on his or her “gender identity.” The new law will take effect on July 1, 2012.
“Gender identity” is defined as “a person’s gender-related identity, appearance or behavior, whether or not that gender-related identity, appearance or behavior is different from that traditionally associated with the person’s physiology or assigned sex at birth. . . .” To be protected under the law, a persons’ gender identity must be “sincerely held, as part of [the] person’s core identity. . . .”
Currently Massachusetts residents are protected under state and federal law against discrimination in employment based on race, color, religious creed, national origin, sex, pregnancy, sexual orientation, genetic information, ancestry, age, disability, veteran status, military service, and gender identity.
Efforts to gain federal protection against discrimination on the basis of both sexual orientation and gender identity have been stalled for many years. The Employment Non-Discrimination Act (ENDA) has been introduced in some form in almost every Congress since 1994. Given the lack of action on the federal front, the individual states have been left to address the issue as they see fit.
Keywords: litigation, employment and labor relations, Transgender Equal Rights Bill, Massachusetts Transgender law
— Charla Bizios Stevens, McLane, Graf, Raulerson & Middleton, NH and MA
February 21, 2012
Eleventh Circuit Deems Transgender Discrimination Sex-Based
Through its recent decision in Glenn v. Brumby, the Eleventh Circuit has recognized that discrimination against transgender individuals constitutes sex-based discrimination under the Equal Protection Clause.
Vandiver Elizabeth Glenn was born a biological male. Since puberty, she had felt that she was a woman, and in 2005, was diagnosed with Gender Identity Disorder (GID). That same year, Glenn began the process of transitioning from male to female. In October 2005, Glenn was hired by the Georgia General Assembly’s Office of Legislative Counsel, headed by Sewell Brumby.
In 2006, Glenn advised her direct supervisor, Beth Yinger, that she was a transsexual, and was engaged in the process of becoming a woman. On Halloween 2006, Glenn, like her fellow coworkers, came to work wearing a costume; she came to work dressed as a woman. Brumby, after seeing her, told Glenn to leave the office, as her appearance was not appropriate. Brumby stated, “it’s unsettling to think of someone dressed in women’s clothing with male sex organs inside that clothing,” and remarked that a male in women’s clothing is “unnatural.” Shortly thereafter, Brumby spoke with Yinger, who informed Brumby that Glenn intended to transition to female.
In the fall of 2007, Glenn advised Yinger that she was ready to proceed with gender transition and would start coming to work as a woman with a new (female) name. Upon hearing this news from Yinger, Brumby terminated Glenn because her “intended gender transition was inappropriate, that it would be disruptive, that some people would view it as a moral issue, and that it would make Glenn’s coworkers uncomfortable.” Glenn sued, alleging two discrimination claims under the Equal Protection Clause.
In particular, Glenn alleged that Brumby discriminated against her based on sex, “including her female gender identity and her failure to conform to the sex stereotypes associated with the sex [Brumby] perceived her to be.” Additionally, Glenn alleged that Brumby discriminated against her based on her medical condition, GID. The district court granted summary judgment to Glenn on her sex-discrimination claim, and granted summary judgment to Brumby on Glenn’s medical-discrimination claim. Both parties appealed.
In assessing Glenn’s sex-discrimination claim, the Eleventh Circuit started by recognizing that the Equal Protection Clause requires the state to treat all similarly situated persons alike or to avoid classifications that are “arbitrary or irrational,” and those that reflect “a bare . . . desire to harm a politically unpopular group.” City of Cleburne v. Cleburne Living Ctr., Inc., 473 U.S. 432, 446-47 (1985) (internal quotations omitted)). “States are presumed to act lawfully, and therefore state action is generally upheld if it is rationally related to a legitimate governmental purpose.” Id. at 440.
However, citing United States v. Virginia, 518 U.S. 515, 555 (1997), the court found that sex-based discrimination is subject to intermediate rather than rational-basis scrutiny under the Equal Protection Clause. Hence, if the state’s discriminatory act against an individual based on gender nonconformity constituted sex discrimination, the state would have to withstand intermediate scrutiny and show that its “gender classification . . . is substantially related to a sufficiently important government interest.” Cleburne, 473 U.S. at 441.
Reasoning that “[t]he very acts that define transgender people as transgender are those that contradict stereotypes of gender-appropriate appearance and behavior,” the Court found that there is a “congruence between discriminating against transgender and transsexual individuals and discrimination on the basis of gender-based behavioral norms.” Hence, discrimination against a transgender individual based on gender-nonconformity is sex discrimination.
The court cited numerous instances where non-transgender individuals had been deemed protected from gender stereotyping: “[C]ourts have held that plaintiffs cannot be discriminated against for wearing jewelry that was considered too effeminate, carrying a serving tray too gracefully, or taking too active a role in child-rearing. An individual cannot be punished because of his or her perceived gender non-conformity.” Accordingly, a transgender individual likewise cannot be “punished” for not conforming to his or her gender role.
The court went on to apply the heightened scrutiny test under the Equal Protection Clause and held that Brumby had failed to provide an “exceedingly persuasive justification” for terminating Glenn. Virginia, 518 U.S. at 546. Brumby’s speculative concern regarding other employees’ discomfort with Glenn’s use of the women’s restroom was “wholly irrelevant to the heightened scrutiny analysis that is required here.” The Eleventh Circuit then affirmed the district court’s judgment granting Glenn summary judgment on her sex-discrimination claim.
— Bona M. Kim, Allen, Norton & Blue, P.A., Winter Park, FL
December 7, 2011
Courts Increasingly Rejecting or Limiting Fee Awards in FLSA Cases
All attorneys who litigate wage and hour claims should be aware that federal courts across the country are increasing the scrutiny of attorney-fees awards in Fair Labor Standards Act (FLSA) cases. As many labor and employment attorneys can attest, private litigation over minimum wage and overtime claims under the FLSA has increased significantly over the last few years. Whether it is a result of individuals having access to information on the Internet or more attorneys advertising for unpaid wage claims, employees are choosing to litigate their claims instead of seeking assistance from the U.S. Department of Labor. To this end, despite the boom in FLSA lawsuits being filed, according to the U.S. Department of Labor the amount of complaints registered for minimum wage and overtime claims decreased by about 25 percent from Fiscal Year 2004 to Fiscal Year 2008.
Meanwhile, the incentive for private attorneys to take these claims lies largely in the fact that successful FLSA litigants are entitled to their reasonable attorney fees, almost without exception. Prevailing plaintiffs often receive attorney-fee awards substantially greater than the actual recovery of the plaintiffs, and courts have traditionally been hesitant to reduce the requested fee amounts. That is, until recently.
While federal judges plainly recognize and enforce the FLSA’s fee-award provision, courts are increasingly employing proactive methods to encourage early resolution of these cases, often by tempering fee awards. Recent examples of justifications and considerations for reducing or even eliminating attorney-fee awards include:
• Determining that the plaintiffs were not “prevailing parties” under the statute because the case had been dismissed with prejudice as moot after the defendant voluntarily paid the overtime compensation and liquidated damages allegedly due (although not the fees incurred), and the court had not issued a judgment or an approval of settlement. Dionne v. Floormasters Enterprises, Inc., 647 F.3d 1109 (11th Cir. 2011); see also Craig v. Digital Intelligence Systems Corp., Case No. 8:10-cv-2549 (M.D. Fla. Nov. 1, 2011).
• Reducing attorney fees to only those hours that could be accounted for in the court’s records because the plaintiff’s attorney had failed to contemporaneously document his time. Scott v. City of New York, 643 F.3d 56 (2d Cir. 2011).
• Regarding “stalling tactics” by the plaintiff’s counsel as a valid factor in support of reducing an award of attorney fees. Lemus v. Burnham Painting & Drywall, Corp., 426 Fed. App’x 543 (9th Cir. 2011).
While these cases are largely bad news for plaintiff’s counsel, the actions of defense counsel have also adversely factored into fee decisions. For example, in affirming a large attorney-fee award, one court noted that defense counsel had not made an attempt to settle the case. Roussell v. Brinker International, Inc., 2011 WL 4067171 (5th Cir. 2011). On the opposite end, courts look favorably upon defense counsel who promptly tender full settlement of the asserted damages. See Dionne, 647 F.3d at 1110–11.
What do these holdings mean for practitioners? Plaintiff’s counsel should employ extra care to strictly adhere to all court rules and orders, including local rules and those rules regarding timely, detailed documentation and submission of billing records. Settlement discussions should take place early and, where possible, court approval of settlement should be secured prior to dismissal of the action. Defense counsel will need to quickly assess the damages plaintiffs are seeking and the case’s settlement posture, and should be prepared to discuss the advantages and disadvantages of settlement versus litigation with their clients.
Whether representing employees or employers in FLSA claims, it is important to remember that courts are taking notice of the increase in litigation over these claims and scrutinizing the attorney-fees awards they carry. This scrutiny can cut both ways—penalizing plaintiff’s counsel for stalling tactics while approving large fee awards where defense counsel refuse to take advantage of reasonable settlement opportunities. Thus, all employment-law attorneys should be aware that, regardless of which party you represent, your actions through the course of litigation will likely contribute to the attorney-fees analysis.
Keywords: litigation, employment and labor relations, FLSA attorney fees
— Shaina Thorpe, Allen, Norton & Blue, P.A., Tampa, FL
Wal-Mart Prevails Before U.S. Supreme Court in Discrimination Case
The wait is over. In a much anticipated decision, the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes et al., issued a ruling on June 20, 2011, in favor of Wal-Mart in what it called “one of the most expansive class actions ever.” The U.S. Supreme Court reversed the Ninth Circuit Court of Appeals and ruled that the certification of the plaintiff class was not consistent with Federal Rule of Civil Procedure 23(a), and the backpay claims were improperly certified under Rule 23(b)(2). The district court and the Ninth Circuit previously approved the certification of a class comprising about one and a half million plaintiffs, current and former female employees of Wal-Mart who allege that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII of the Civil Rights Act of 1964 by discriminating against women. In addition to injunctive relief and declaratory relief, the plaintiffs sought an award of backpay.
The Supreme Court’s Decision
The Supreme Court reversed the Ninth Circuit’s decision. In doing so, the Court found that the class was not consistent with Rule 23(a). Rule 23(a)(2) requires a party seeking class certification to prove that the class has common “questions of law or fact.” The Court found that proof of commonality necessarily overlapped with the plaintiffs’ merits contention that Wal-Mart engages in a pattern or practice of discrimination. However, the crux of a Title VII inquiry revolves around “the reasons for a particular employment decision,” Cooper v. Federal Reserve Bank of Richmond, 467 U.S. 867, 876 (1984), and the class sued for millions of employment decisions at once. The Court found this problematic. According to the Court, “[w]ithout some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.”
In support of its reasoning, the Court cited to General Telephone Co. of Southwest v. Falcon, 457 U.S. 147 (1982), as the proper approach to commonality. According to the Court, on the facts of the Dukes case, the conceptual gap between an individual’s discrimination claim and “the existence of a class of persons who have suffered the same injury,” id. at 157–158, must be bridged by “[s]ignificant proof that an employer operated under a general policy of discrimination.” Id. at 159. The Court found that such proof was absent in this case. In coming to this conclusion, the Court looked at the evidence of both parties. Wal-Mart provided, inter alia, its policy against sex discrimination and its penalties for denials of equal opportunity. The class member’s only evidence of a general discrimination policy was a sociologist’s analysis asserting that Wal-Mart’s corporate culture made it vulnerable to gender bias. Because the sociologist could not estimate what percent of Wal-Mart’s employment decisions might be determined by stereotypical thinking, his testimony was, according to the Court, “worlds away” from “significant proof” that Wal-Mart “operated under a general policy of discrimination.”
The Court did note that Wal-Mart’s corporate “policy” giving local supervisors broad discretion over employment matters, in a largely subjective manner, could create issues. However, according to the Court, although such a policy could be the basis of a Title VII disparate-impact claim, recognizing that a claim “can” exist does not mean that every employee in a company with that policy has a common claim. The Court stated that in a company of Wal-Mart’s size and geographical scope, it is unlikely that all managers would exercise their discretion in a common way without some common direction (i.e., the “glue” holding it together). Likewise, the Court found the class members’ statistical and anecdotal evidence “too weak to raise any inference that all the individual, discretionary personnel decisions are discriminatory.”
The Court also held that the class member’s backpay claims were improperly certified under Rule 23(b)(2) because the claim for monetary relief was not incidental to the requested injunctive or declaratory relief.
Justice Scalia delivered the opinion of the Court, in which Justices Roberts, Kennedy, and Alito joined, and in which Justices Ginsburg, Sotomayor, and Kagan, joined in part. Justice Ginsburg filed an opinion concurring in part and dissenting in part, in which Justices Breyer, Sotomayor, and Kagan joined.
Keywords: Wal-Mart v. Dukes, class certification, class action
Supreme Court Establishes New Obstacle for Defense Attorney Fees
On June 6, 2011, the U.S. Supreme Court added a new hurdle for prevailing defendants seeking to recover attorney fees under 28 U.S.C. § 1988 in multiple-claim suits. In Fox v. Vice, No. 10-114, 563 U.S. __ (June 6, 2011), a unanimous decision authored by Justice Kagan, the Court confirmed that a defendant in a civil-rights fee-shifting case can recover attorney fees only if the plaintiff’s claim was frivolous, while also setting forth an additional requirement—a defendant must now prove that he or she would not have incurred certain fees but for the frivolous claim. Accordingly, if the litigation involves multiple claims, some of which are frivolous and some of which are not, a defendant can recover attorney fees, but only fees related to the frivolous claims and only if he or she can prove that certain fees are attributable exclusively to the defense of that frivolous claim and not the litigation generally.
Justice Kagan’s opinion addresses and analyzes the theoretical basis for an award of attorney fees to a defendant under section 1988. Specifically, the Court noted that “[Section 1988] serves to relieve a defendant of expenses attributable to frivolous charges . . . and a court may reimburse a defendant for costs under § 1988 even if a plaintiff’s suit is not wholly frivolous.” (Slip Op., p. 7). In other words, the Court recognized that fee-shifting for defendants is not an all-or-nothing concept. Nevertheless, the Court further held that “Section 1988 allows a defendant to recover reasonable attorney’s fees incurred because of, but only because of, a frivolous claim . . . [and] if the defendant would have incurred those fees anyway, to defend against non-frivolous claims, then a court has no basis for transferring the expense to the plaintiff.” (Slip Op., pp. 8–9).
Practically, this new rule minimizes the likelihood that a defendant can obtain reasonable attorney fees in a case involving both frivolous and non-frivolous claims. Consider the following hypothetical: A plaintiff asserts race and gender claims under Title VII, as well as a claim under the Americans with Disabilities Act (ADA). The plaintiff relies on a timely filed Equal Employment Opportunity Commission (EEOC) charge to satisfy his or her jurisdictional prerequisites. However, neither the underlying EEOC charge nor any other documentation submitted to the EEOC makes any mention of a claim of disability discrimination. In fact, there is simply no basis for an argument that an ADA claim grows out of the EEOC charge. Based on these facts, the plaintiff’s ADA claim could be frivolous.
Prior to the Fox decision, the defendant in the above hypothetical could argue that he or she is entitled to a reasonable percentage of the total fees related to the defense of the litigation. The Fox rule, however, now requires that the defendant not only establish that the plaintiff’s ADA claim was frivolous, but also prove that certain work related only to that claim and would not have been undertaken but for that claim. As a result, the defendant cannot recover fees for generally taking the plaintiff’s deposition, but instead must prove that a certain subset of the deposition involved questions related only to the ADA claim. The defendant can recover fees for only that portion of the deposition. Likewise, the defendant must prove that a certain amount of the fees attributable to a summary-judgment motion were specifically undertaken only to draft the section of the motion related to the ADA claim. Case law on the issue of attorney fees in fee-shifting scenarios has long recognized the difficulty with attempting to accurately record the apportionment an attorney’s time and effort in this manner. Nonetheless, such a record of apportionment is now required for defendants in fee-shifting cases.
Ultimately, while theoretically sound, the Fox decision makes it nearly impossible for a defendant to recover reasonable attorney fees. Absent the establishment of billing practices that break down tasks by each individual claim—a practice that courts addressing attorney fees often have held is impracticable—defense counsel should not expect to be successful in pursuing a claim for attorney fees under section 1988. Subsequent to this decision, counsel for defendants should consider a potentially frivolous claim at the outset of the litigation and record all time and costs attributable specifically to that particular claim, if possible. Otherwise, attorney fees likely will be difficult to recover, if not unavailable altogether.
— Daniel E. Harrell is an associate in the Birmingham, Alabama, office of Balch & Bingham LLP.
Keywords: Fox v. Vice, section 1988, attorney fees
October 5, 2010
Supreme Court Expands Role of Arbitrators
In Rent-A-Center, West, Inc. v. Jackson the U.S. Supreme Court continued its trend of favoring arbitration by holding that arbitrators have the power to decide whether an arbitration agreement is unconscionable where the agreement explicitly delegates that decision to the arbitrator.
Under the Federal Arbitration Act, delegation is presumptively enforceable unless the arbitration agreement’s other terms pose an impediment to the enforcement of the delegation clause. If there are other factors that prevent the arbitrator from reasonably ruling on the unconscionability of the arbitration agreement, then a court may decide not to enforce the delegation clause.
The Court majority held that “arbitration is a matter of contract,” and concluded that arbitration agreements should be placed on “an equal footing with other contracts” and should be similarly enforced.
Writing for the majority, Justice Scalia wrote that the Court had recognized that parties can agree to “gateway” questions of arbitrability, including whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy. Again, the Court noted this ruling is merely a further extension of arbitration as a matter of contract.
The Court declared that:
An agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeing arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.
This decision is another in a long chain of cases from the Supreme Court favoring arbitration and freedom-of-contract regarding arbitration agreements. The breadth of this decision is yet to be determined. Whether corporations (the usual drafter of most arbitration agreements) prefer arbitrators or courts to be the gateway remains to be seen. There could be a shift toward corporations including an unconscionability delegation as a part of their arbitration agreements. Several other cases are going to be heard that may impact arbitration.
In addition, mandatory arbitration agreements and their scope—after Pyett v. 14 Penn Plaza—continue to receive attention as they should. Recent opinions from the National Labor Relations Board (NLRB) demonstrate that the breadth of the arbitration clause continues to grow even in the labor law context. The NLRB’s general counsel recently :
If mandatory arbitration agreements are drafted to make clear that the employees’ Section 7 [NLRA] rights to challenge those agreements through concerted activity are preserved and that only individuals rights are waived, no issue cognizable under the NLRA is presented by an employer’s making and enforcing an individual employee’s agreement that his or her non-NLRA employment claims will be resolved through the employer’s mandatory arbitration system. In such cases, an employer is acting in accord with its rights under Gilmer and its progeny.
However, a mandatory arbitration agreement that could reasonably be read by an employee as prohibiting him or her from joining with other employees to file an NLRA class action lawsuit is unlawful.
In June 2010, NLRB General Counsel Ronald Meisburg stated:
Employers, nonetheless, may require individual employees to sign a Gilmer waiver of their right to file a class or collective claim without per se violating the Act. So long as the wording of these agreements makes clear to employees that their right to act concertedly to challenge these agreements by pursuing class and collective claims will not be subject to discipline or retaliation by the employer, and that those rights—consistent with Section 7—are preserved, no violation of the Act will be found.
Even if an employee is covered by an arrangement lawful under Gilmer, the employee is still protected by Section 7 of the Act if he or she concertedly files an employment-related class action lawsuit in the face of that agreement and may not be threatened or disciplined by doing so. The employer, however, may lawfully seek to have a class action complaint dismissed by the court on the ground that each purported class member is bound by his or her signing of a lawful Gilmer agreement/waiver.
My prediction is greater focus on arbitration of disputes and enhanced favorability by the Supreme Court. If there is, then the decision in Rent-A-Center, West, Inc. v. Jackson could prove to have a large impact.
— Roger B. Jacobs, Jacobs Rosenberg LLC, Newark, NJ
Sovereign Immunity Trumps FMLA Self-Care Provision
On July 2, 2010, the Supreme Court of Texas rejected a former University of Texas at El Paso (UTEP) employee’s Family Medical Leave Act (FMLA) claim, holding that state agencies enjoy sovereign immunity against claims under the FMLA’s self-care provision.
Alfredo Herrera served as a heating, ventilation, and air-conditioning technician for UTEP. After sustaining an on-the-job injury to his left elbow in March 2005, Herrera took nine months and returned to work in January 2006. Less than one month later, UTEP terminated Herrera. Herrera filed suit, alleging UTEP unlawfully terminated him for having taken personal medical leave under the FMLA’s “self-care” provision, 29 U.S.C. §2612(a)(1)(D), which establishes an eligible employee’s ability to take leave for his or her own serious health condition.
UTEP, a state institution, filed a motion to dismiss, attempting to use state sovereignty as a shield against Herrera’s FMLA claim. Congress cannot undermine a state’s sovereign immunity unless it: (1) unequivocally expresses its intent to do so; and (2) acts under a constitutional provision that gives Congress the power to do so.
The trial court denied UTEP’s motion and the Texas Court of Appeals affirmed, leading to UTEP’s appeal to the Supreme Court of Texas. On appeal, the Supreme Court of Texas acknowledged that the text of the FMLA expressly subjects the states to FMLA claims in 29 U.S.C. § 2617(a)(2), thus satisfying the first step in abrogating sovereign immunity. However, the court found that the second prong could not be satisfied, as Congress did not have authority under the constitution to abrogate Texas agencies’ sovereign immunity under the FMLA’s self-care provision.
In reaching its decision, the Supreme Court of Texas distinguished Herrera’s case from the U.S. Supreme Court case of Nevada Dep’t of Human Resources v. Hibbs, 538 U.S. 721 (2003). In Hibbs, the U.S. Supreme Court held that Congress lawfully abrogated the states’ sovereign immunity by subjecting states to liability for violation of the FMLA’s “family-care provision,” 29 U.S.C. § 2612(a)(1)(C), which provides an eligible employee may take leave to care for a family member with a serious health condition. The Supreme Court of Texas reasoned that while the family-care provision’s application to states was justified by section 5 of the Fourteenth Amendment as a means to enforce guarantees of equal protection, the self-care provision in 29 U.S.C. §2612(a)(1)(D) is not. While the family-care provision is intended to combat gender discrimination, the court found that the self-care provision is not. Accordingly, the Supreme Court of Texas held that UTEP enjoyed protection under the doctrine of sovereign immunity. After further rejecting the plaintiff’s claim that UTEP waived sovereign immunity by acknowledging the FMLA in its Handbook of Operating Procedures, the court dismissed Herrera’s FMLA claim.
According to the Texas Supreme Court, its decision is but a part of an overwhelming trend, as two state high courts and nine federal circuit courts have similarly found Congress lacked authority to abrogate sovereign immunity under the self-care provision, despite Hibbs.
Side Effects of Medication May Constitute Disability under ADA
On April 12, 2010, the Third Circuit Court of Appeals ruled in Sulima v. Tobyhanna Army Depot that the side effects of medication taken to treat a condition could by themselves constitute a disability under the Americans with Disabilities Act (ADA), even when the underlying condition is not itself disabling. This case marks the first time that the Third Circuit has addressed the issue of whether an employee is entitled to protection under the ADA for an impairment that he or she suffers as a result of taking prescription medication. The Third Circuit’s recent decision is consistent with decisions from the Seventh, Eighth, and Eleventh Circuits. Although the Third Circuit concluded in Sulima that the employee in this case failed to demonstrate the necessary “disabling impairment” to qualify for ADA protection, the court set a standard for other employees experiencing side effects from prescription medication.
Sulima, who had been diagnosed as morbidly obese and suffered from sleep apnea, was taking a prescription weight-loss medication. As a result of side effects related to the medication, Sulima took numerous and extended bathroom breaks during the workday. When his supervisors inquired about the breaks, Sulima explained the side effects of his medication advised that he would consult with his doctors as to whether a different prescription was available with fewer side effects. However, Sulima continued to take long bathroom breaks and was transferred out of his work group. No other similar jobs were available. Sulima accepted a “voluntary” layoff and found alternate employment elsewhere. He then sued the defendants, under the ADA and the Rehabilitation Act, arguing that he had been laid off due to a disability or perceived disability. Sulima claimed that the side effects of his prescription medication constituted a disability because they required him to use the restroom frequently.
On appeal, the Third Circuit noted that “the factual situation presented here is somewhat different than a typical ADA claim,” because Sulima claimed “that his impairment under the ADA is based solely on a disorder or condition resulting from the medication, not from the underlying health problem that the medication is meant to treat.” The Third Circuit adopted the factors set forth in the Seventh Circuit’s decision in Christian v. St. Anthony Medical Center that a plaintiff must show to establish a disability due to “the effects of a treatment for a condition that is not itself disabling”: (1) whether the treatment is medically necessary in the prudent judgment of the medical profession; (2) whether the treatment is not just an “attractive option” and there is no available, equally effective alternative that lacks the side effects in question; and (3) whether the treatment is required solely in anticipation of an impairment resulting from the plaintiff’s voluntary choices.
Applying this analysis, the Third Circuit held that Sulima was not disabled under the ADA. According to the court, because Sulima’s doctor discontinued his use of the medication after being informed of the adverse side effects, Sulima could not demonstrate that the medication was “medically necessary” or “required ‘in the prudent judgment of the medical profession.’” In addition, Sulima did not present evidence that the medication being prescribed was the only effective treatment for his conditions or that any other treatments would have caused the same side effects. Finally, the court did not find that the two-month period during which Sulima suffered the side effects was “a long enough duration to qualify for ‘disability’ under the ADA.”
Although in this case, the Third Circuit rejected the employee’s claims, employers and employees should be mindful of the court’s holding that the side effects of medication taken to treat a condition could by themselves constitute a disability under the ADA, even when the underlying condition is not itself disabling.
— Robyn H. Lauber, Esq.