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Practice Points

 

August 31, 2016

Navigating the Defend Trade Secrets Act


Under the Defend Trade Secrets Act (DTSA), which amends the Economic Espionage Act of 1996, 18 U.S.C. 1831 et seq., there is a federal private right of action for misappropriation of trade secrets. The DTSA applies to any misappropriation of trade secrets that occurs on or after the effective date of the act, or May 11, 2016, and has a three-year statute of limitations. Thus, as of that date, companies that are victims of trade-secret theft will have an alternative to state law (and thus, to the state courts in which cases often are brought) to bring a civil action to enjoin violations of trade-secret theft and to seek a remedy for violations that already have occurred.


State Law
Although there are similarities between the DTSA and state trade-secrets acts, the uncertainty of protection for trade secrets from one state to another, and as the chilly reception in some state courts to out-of-state plaintiff companies, created bipartisan support for the DTSA. With its federal forum and federal remedy, it is anticipated that the DTSA, over time, will create a nationwide body of law and provide a degree of predictability to company litigants.


The DTSA does not preempt state trade-secrets laws, and state law and state courts will remain an option for victims of trade-secret theft. Companies still will need to consider whether the state law and court is preferable to the DTSA and federal court. However, the DTSA will help protect trade secrets across multiple jurisdictions. Even companies with operations in only one state can benefit significantly from access to federal courts and federal judges under the DTSA, particularly if the relevant state courts have been slow to respond, or even hostile, to trade-secrets litigation. Moreover, the DTSA does not prevent companies from having their cases heard in federal court alongside parallel, “pendent” claims under any state trade-secret act—in effect, favorable state trade-secret law may accompany federal DTSA claims in the same case.


Inevitable Disclosure
One important distinction between the DTSA and some state trade-secret laws may be the potential availability of the “inevitable disclosure” doctrine under state law in some circumstances. The DTSA expressly rejects the “inevitable disclosure” doctrine; it precludes a court from enjoining a person from entering into an employment relationship based on inevitable disclosure. The act further requires evidence of threatened misappropriation, rather than merely information that the person knows.


Seizure Orders
The DTSA’s most significant substantive addition to trade-secret protection, and certainly its most controversial, is its authorization of ex parte seizure orders. The DTSA, however, strictly limits the ability of a court to issue a seizure order. Filing a complaint does not mean that a seizure order will be automatic, even likely. Fairly substantial proof will be required to obtain this extraordinary interim remedy. In addition, a court can impose significant sanctions on a plaintiff who wrongfully obtains an order to seize another’s property.


Notice
The DTSA imposes conditions on a successful plaintiff’s recovery of attorney fees and exemplary damages. Attorney fees and exemplary damages are not recoverable unless the employer has provided the defendant employee, consultant, or contractor with notice of certain immunity from criminal and civil prosecution granted by the DTSA to persons who disclose trade secrets by the means provided by the DTSA (principally, to government agencies and under seal in court proceedings). The notice must be in any contract or agreement that governs the use of trade secrets or confidential information. It applies to contracts and agreements that are entered into, or updated, after enactment of the DTSA. Therefore, all new non-disclosure agreements, confidentiality agreements, employment agreements, consulting agreements, and independent (or other) contractor agreements containing non-disclosure provisions must include the required notice. Failure to include the notice may preclude availability of a significant financial recovery.


*          *          *

Significant, too, is what the DTSA does not change, in particular, the need to adhere to best practices in protecting trade secrets. The DTSA does not eliminate the need for companies to identify their trade secrets, protect them against inappropriate use or disclosure, and establish the steps taken to maintain their secrecy. For example, documents containing trade secrets should be labeled as confidential, their distribution should be limited, they should be maintained in secure areas (e.g., locked cabinets), and individuals who are privy to such secrets should be trained on the nature of that information and how to safeguard it. Similarly, access to computer files containing such information should be restricted, and those with access should be trained on the files’ confidentiality. Following such steps not only can limit the risk of inappropriate use or disclosure, but also may prove invaluable when seeking a court’s protection for the trade secrets involved. All this will remain true under the DTSA.


For companies with multi-state operations, and even for companies with single-state operations but whose trade secrets are portable across state lines (by hard copy documents or electronically), the DTSA affords a new weapon to protect trade secrets nationwide. In addition, because trade secrets litigation often involves violations of non-competition or non-solicitation agreements, such claims also may be brought in federal court in tandem with the alleged DTSA violation. Thus, the DTSA may provide a new, meaningful alternative to state-court litigation when seeking to protect trade secrets and related unfair competition.


Clifford R. Atlas and John A. Snyder, Jackson Lewis P.C., New York, NY


 

August 19, 2016

Notice Required for Termination under USERRA


In the recent case of Starr v. QuickTrip Corp., No. 15-5079, 2016 U.S. App. LEXIS 12972 (10th Cir. July 13, 2016), the Tenth Circuit reinforced that an employer’s obligation toward reemployed veterans extends far beyond non-discrimination. For certain reemployed veterans, the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. §§ 4301–35, requires not only good cause for termination, but also that the employee have notice that the conduct in question would give the employer cause to terminate him or her.


Plaintiff Starr, a reservist in the Oklahoma National Guard, returned to his employment at QuickTrip in June 2012 following a nine-month tour in Afghanistan. The plaintiff claimed that his supervisor, a former marine, made two comments showing an anti-military animus—specifically, that he asked Starr if he had “got all of his killing done” and that he told him “you ought to just go back into the military since you like it so much.”


In August 2012, just two months after Starr returned to work, QuickTrip fired him for violating its written “no call/no show” policy three times. That policy provided that an employee who arrived to work more than two hours late and who had not called to notify his supervisor is subject to a written warning for a first offense and termination for the second offense. When Starr first violated the policy in July 2012, QuickTrip chose not to give him a written warning in light of his recent military service. When Starr violated the policy a second time less than a week later, QuickTrip gave him a written warning that advised him that his next violation would result in further discipline including termination. Despite the written warning, Starr testified that the personnel manager told him that he would “be okay” if he missed a shift as long as he called his supervisor before the next working day. That alleged comment was denied by the personnel manager. In late August, Starr failed to report to work or call within two hours of his start time, and he was fired for his violations of the no call/no show policy.


Starr brought claims under two distinct provisions of USERRA. Starr’s “discriminatory termination” claim was brought under 38 U.S.C. § 4311(a), which prohibits employers from taking adverse employment action against service members based on their membership in or obligations to the armed services. The Tenth Circuit affirmed the grant of summary judgment in favor of QuickTrip on the discriminatory-termination claim. The court explained that “while Starr’s supervisor’s comments may be insensitive, they do not unambiguously express an anti-military sentiment—especially in this context, where the supervisor is a former service-member himself.”


While Starr’s discriminatory-termination claim failed as a matter of law, his claim for “premature termination” under 38 U.S.C. § 4316(c)(1) did not. Under that provision, a reemployed service member may not be discharged except for cause within either six months (if his or her employment prior to reemployment was 30–180 days) or one year (if his or her employment prior to reemployment was greater than 180 days) of his or her reemployment. To prove cause, an employer must show both that (1) it was reasonable to terminate the employee based on his or her conduct and (2) the employee had notice that the conduct in question would give the employer cause to terminate him or her. 20 C.F.R. § 1002.248(a).


Starr did not dispute that he had violated the no call/no show policy and that his violations were good cause for termination. Rather, he claimed that he did not have notice that he would be fired for violating the written two-hour policy because the company made exceptions for him in the past and because the personnel manager had told him that he would be okay as long as he called his supervisor before the next day. The district court rejected these arguments and granted summary judgment for QuickTrip on Starr’s premature-termination claim.


The Tenth Circuit reversed the grant of summary judgment on the premature-termination claim. The court agreed with the district court that QuickTrip’s willingness to excuse Starr’s prior violations did not bar it from enforcing its written policy based on continuing violations. However, the court disagreed with the district court’s conclusion that, even if the personnel manager made the alleged (and disputed) comment, no reasonable jury could conclude that Starr relied on that comment in light of the written policy and the written final warning. As the court explained: “Especially given QuickTrip’s willingness to deviate from its policy in the past, a rational jury could find that Starr reasonably relied on the personnel manager’s assurance that he would be given similar leeway in the future.”


Human resources representatives and supervisors need to be aware that when it comes to terminating reemployed veterans, non-discrimination is not sufficient. Even good cause is not sufficient. In addition, they need to ensure that the veteran had prior notice that the conduct at issue would be cause for termination.


Trish Higgins, Orrick Herrington & Sutcliffe, Sacramento, CA


 

June 8, 2016

Title VII Defendant Need Not Obtain Favorable Judgment on Merits to Be "Prevailing Party"


The U.S. Supreme Court recently clarified, for the first time, that a Title VII defendant need not obtain a favorable judgment on the merits to be a “prevailing party” for the purpose of an award of attorney fees. A Title VII defendant can be a “prevailing party” even if the [trial] court’s final judgment rejects the plaintiff’s claim for a non-merits reason.” CRST Van Expedited, Inc. vs. Equal Employment Opportunity Commission, Case No. 14-1375, ___ U.S. ___ (May 19, 2016), Slip. Op. at *12. The trial court has the discretion to award attorney fees to such a prevailing defendant when it determines that the plaintiff’s claims were “frivolous, unreasonable, or groundless.”


In the CRST case, a CRST employee filed a charge with the Equal Employment Opportunity Commission (EEOC) alleging that she had been sexually harassed by two male trainers. The EEOC informed CRST of the charge, investigated the allegations, and then informed CRST that CRST had subjected the charging employee and “a class of employees and prospective employees to sexual harassment.” The EEOC offered to conciliate, but conciliation did not resolve the dispute.


The EEOC then filed suit against CRST, in its own name, under section 706 of Title VII. During discovery, the EEOC identified an additional 250 women who allegedly had been discriminated against. The district court dismissed all of these claims, including claims on behalf of 67 women whose claims were barred on the ground that the EEOC had not adequately investigated or attempted to conciliate them.


The district court dismissed the suit and invited CRST to apply for attorney fees. The court awarded CRST $4 million in fees, finding that CRST had prevailed on the claims for over 150 of the women, including the 67 claims dismissed because of the EEOC’s failure to satisfy its presuit requirements.


The Eighth Circuit reversed, holding that a Title VII defendant can be a prevailing party only by obtaining a “ruling on the merits.”


The Supreme Court reversed. It emphasized that a Title VII plaintiff must obtain an “enforceable judgment[t] on the merits” or a “court-ordered consent decre[e],” to be a prevailing party. However, a Title VII defendant can prevail if it obtains a favorable final judgment for any merits or non-merits reason. If a defendant prevails under that standard, the court then has the discretion to award attorney fees if it determines that the plaintiffs’ claims were “frivolous, unreasonable, or groundless.”


John Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

May 18, 2016

EEOC Issues Nationwide Procedures on Position Statements


The Equal Employment Opportunity Commission (EEOC) has issued its first-ever nationwide procedures on respondent position statements as well as guidance on effective position statements. These procedures, along with the EEOC’s Digital Charge System, make significant changes in some jurisdictions, while in essence formalizing existing practices in others.


In summary, the procedures state as follows:


  • Charging parties will have the ability to review position statements after they are filed.
  • Respondents must identify and maintain confidential information provided as part of position statements.
  • Respondents must provide support for any requested extensions of time to submit position statements.
  • As described more fully below, the substance of position statements must meet certain expectations.

Potential for EEOC to Provide Position Statement to Charging Party

The position statement procedures provide for respondent position statements and any accompanying non-confidential documentation to be released to a charging party upon the request of a charging party or his or her representative. The charging party then will have the opportunity to submit a rebuttal, which will not be provided to the respondent.


These procedures will require extra care when relying on confidential information. However, the EEOC procedures likely will not affect case outcomes, because similar procedures already have been in place in many state equal-employment-opportunity agencies and the EEOC in some jurisdictions.


Presenting Confidential Information

Under the EEOC’s procedures, when submitting position statements and supporting materials, respondents must provide any confidential information in separate attachments labeled, as applicable, “Sensitive Medical Information,” “Confidential Commercial Information,” “Confidential Financial Information,” or “Trade Secret Information.” They also must submit an explanation justifying the confidential nature of such information.


The EEOC has advised that it “will not accept blanket or unsupported assertions of confidentiality.” Generally, respondents now must upload position statements and attachments, both confidential and non-confidential portions, onto the EEOC’s Digital Charge System, instead of faxing or mailing the documents.

For purposes of these procedures, the EEOC already has identified the following as confidential information that should be provided in separately labeled attachments:


  • sensitive medical information (except for the charging party’s medical information, which the EEOC will not treat as confidential information for the purposes of its investigation)
  • Social Security numbers
  • confidential commercial or confidential financial information
  • trade-secret information
  • non-relevant personally identifiable information of witnesses, comparators, or third parties—including dates of birth in non-age cases, home addresses, personal phone numbers, and personal email addresses
  • any reference to charges filed against the respondent by other charging parties

When reviewing a respondent’s submission, the EEOC may redact confidential information prior to releasing the submission to the charging party.


Given these procedures, position statements should refer only to the attachments containing the confidential information, rather than identify the confidential information with any specificity. In addition, respondents should consider referring to comparators by pseudonym to protect their privacy. Respondents also should consider taking into consideration the context of the information provided in the event that, despite the use of a pseudonym, the charging party might reasonably determine the identity of that individual.


Requesting an Extension of Time

The EEOC advises that it will grant requests for extension of time only when there is evidence that the respondent is acting diligently to supply the necessary information. The EEOC has identified a partial submission of information related to the allegations in the charge as evidence of due diligence. A respondent should submit a written request for an extension of time as early as possible in advance of the due date. The request should detail the reason for the extension and specify the amount of additional time needed to reply. Filing a request for an extension of time does not automatically relieve the respondent of complying with the deadline. The EEOC states that, if a respondent does not submit a position statement or respond to its requests for information, the EEOC may proceed directly to a determination on the merits of the charge based on the information at its disposal or subpoena specific information related to the allegations in the charge.


Substance of Position Statement

The EEOC’s guidance on effective position statements provides that position statements should be “clear, concise, complete and responsive,” and,“at a minimum,” should “include specific, factual responses to every allegation of the charge, as well as any other facts” and documentary evidence that the employer deems relevant for consideration. Position statements that simply deny the allegations of the charge likely will be deemed not to meet this standard. The EEOC may conclude the respondent has no evidence to support its defense if it submits only an advocacy statement without documentation.


The EEOC also advises employers to provide specific categories of information:


  • the number of employees
  • a staffing or organizational chart
  • copies of any applicable practices, policies, or procedures
  • the identities of similarly situated individuals who were and were not similarly affected
  • a description of their circumstances

When deciding what information to include in a position statement, employers should carefully assess the allegations in the case and the relevant information needed to respond on a case-by-case basis. In light of the EEOC’s nationwide procedures, the usual approach to EEOC charge responses (cooperating with the agency to provide no more and no less information than that which is relevant) will be even more important. Respondents should analyze their cases carefully to strike the proper balance in deciding what information to provide.


Digital Charge System

Large employers that frequently receive charges from the EEOC may establish one point of contact for service of digital charges. For employers who have not made such arrangements, the EEOC’s practice is to obtain a respondent email address from the charging party and use that email address for the service of the digital charge. The case-specific password for the Digital Charge System is provided only to the person receiving the charge by email, and is not printed on the charge or any of the associated papers. Thus, if the person receiving the charge does not save the password, the organization will be locked out of the system. Accordingly, whoever receives the charge should preserve the password for later use.


John Snyder, Jackson Lewis, New York, NY


 

March 30, 2016

What Utah Employers Need to Know About H.B. 251: Post-Employment Restrictions Act


On March 22, 2016, the governor of Utah signed into law H.B. 251, the Post-Employment Restrictions Act. This was one of the most controversial bills considered this last session, and it underwent many changes through the course of debate and negotiation. The bill limits the scope of Utah post-employment restrictive covenants entered into on or after May 10, 2016, and could likely have an impact on enforcement of older non-compete agreements as well. It specifies that a non-compete agreement is void if it purports to extend for more than one year following the termination of employment. The bill provides also for remedies to employees, including attorney fees, costs, and actual damages for an employer’s attempt to enforce an unenforceable post-employment restrictive covenant. The bill does not expressly limit the remedies section to post-May 10, 2016, non-competes.


The bill’s restrictions as to the scope of non-compete agreements are not retroactive and, as such, do not affect the enforceability of agreements entered into prior to May 10, 2016. The bill also explicitly excludes from its purview “reasonable” severance agreements, nonsolicitation, nondisclosure, and post-employment restrictive covenants related to the sale of a business. The implication is that post-employment restrictive covenants will require specific consideration in exchange for the restrictions.


The caution here is that Utah employers will now need to review their current form agreements to ensure they will not be void with respect to employees who sign them following the May 10, 2016 deadline. Employers should also review all of their current agreements to determine whether the agreements may be unenforceably overbroad under current case law, thus potentially exposing them to a judgment for attorney fees, costs, and damages.


Mark O. Morris and Jordan Lee, Snell & Wilmer, LLP, Salt Lake City, UT


 

March 2, 2016

An Employer Tool for the DOL's New Overtime Rule


Barring a miraculous "oh, nevermind" moment from the U.S. Department of Labor, employers will begin paying overtime to many previously exempt employees later this year. The DOL's proposed rule is set to raise the salary threshold for exemption from the current $23,660 to $50,440. The final rule is now expected to be published in July. While it is possible that the DOL may decide to raise the threshold to some amount less than $50,440, it is highly unlikely that the current level will be left in place.


Once the new limit is set by the DOL, employers will have two main options: (1) increase workers’ salary above the new salary-basis threshold, to avoid paying overtime, or (2) leave employees in the nonexempt category and pay them overtime. Without appropriate planning, employers are likely to face budgetary uncertainty and perhaps disgruntled employees.


Because exempt employees don't typically record their work hours, it may be difficult for them to accurately estimate the overtime hours they have worked historically and anticipate working in the future. So, before the final rule is set, employers should consider requiring exempt employees earning less than $50,440 annually to track their weekly hours worked. Doing so will provide employers with valuable information and help them decide on an appropriate hourly pay rate for a soon-to-be non-exempt employee.


A tool for calculating an hourly rate based on an employee's weekly salary and anticipated overtime:


Below is an Excel spreadsheet formula and an example that may be helpful in arriving at an hourly rate to pay employees so that their final pay is similar to their previous salary even when the employee works overtime. Column A of the spreadsheet should include the weekly salary of the employees and Column B should list all the weekly hours that you anticipate the employee will work. To determine the hourly rate to pay the employees, Column C should include the following formula:


 =(A4/10)/((0.15*(B4-40))+4)


A few example results are set out below:


Weekly Salary

Hours per Week

Hourly Rate

550

50

$10.00

600

45

$12.63

570

48

$10.96

620

52

$10.69

585

43

$13.15

600

60

$8.57

535

40

$13.38

550

37

$15.49

550

33

$18.64

673

50

$12.24


If Sue is employed by Widget Co. as an exempt employee earning $31,200 annually or $600 a week, it is highly likely that she will be a non-exempt employee before the end of the year. When the new overtime regulations become effective, if Widget reflexively sets Sue's hourly rate at $15 an hour (her weekly salary of $600 divided by 40 hours), then it could be in for a rude awakening. If Sue routinely works 45 hours a week (5 hours of overtime), then Widget's overtime payment obligation will be $112.50 per week or $5,850 over the year.


On the other hand, if Widget tracks Sue's work hours for several months before the new salary threshold goes into effect, it would learn that she typically works 45 hours a week and can plan accordingly when establishing her hourly rate. Using the methodology above, if Widget sets Sue's hourly rate at $12.63 an hour, and Sue works 45 hours, she will earn $599.93 per week. Her straight-time pay will be $505.20 (40 x 12.63 = 550.20), her overtime pay will be $94.73 (5 x 18.945 = 94.73), and her overall weekly pay will be $599.93 (550.20 + 94.73 = 599.93).


With a little planning and execution, employers can avoid at least some of the unpleasant effects of the DOL's new overtime rule.


Gary R. Wheeler, Constangy, Brooks, Smith & Prophete, Jacksonville, FL


 

January 5, 2016

First Circuit Affirms HHS Is Not "Employer" of Terminated Subcontractor


The First Circuit Court of Appeals recently affirmed a district court’s summary judgment that the U.S. Department of Health and Human Services (HHS) was not the “employer” of a HHS subcontractor’s terminated employee under the joint-employer doctrine. Casey v. HHS,  No. 15-1115 (1st Cir. Dec. 7, 2015).


The plaintiff-employee in Casey was hired by STG International, Inc. HHS hired STG, ultimately as a subcontractor to another general contractor, to operate a Civilian Health Promotion Services (CHPS) Program at Hanscom Air Force Base in Bedford, Massachusetts. STG hired Casey as a nurse coordinator to teach health and wellness classes to government personnel at Hanscom.


STG paid plaintiff-Casey’s salary and benefits. STG provided W-2 forms to Casey. Casey’s immediate supervisor was Jesse Burk, an employee of the general contractor. Burk reported to Susan Steinman, an employee of defendant HHS.


In November 2011, Casey had an altercation at work with an employee of the general contractor. Casey reported to military police that the other employee had assaulted her. Shortly thereafter, a government employee in charge of overseeing the CHPS Program at Hanscom, Judith Holl, sent an email to Burk (Casey’s immediate supervisor) urging that Casey be terminated. Burk contacted Steinman (Burk’s immediate supervisor). Holl, Burk and Steinman all agreed that Casey should be terminated. Thereafter, Burk notified Casey, by telephone, that her employment was terminated. Military personnel escorted Casey off the Hanscom facility.


Casey sued STG, HHS, and others for gender discrimination in violation of Title VII. Casey asserted that she had been unlawfully terminated in retaliation for reporting to Hanscom authorities that she had been assaulted by a fellow employee. HHS moved for summary judgment on the basis that HHS was not Casey’s employer. The district court entered judgment for HHS on that basis.


The First Circuit affirmed HHS’s summary judgment, applying traditional joint-employment-doctrine factors to conclude that HHS was not Casey’s employer:


Control: HHS did not exert direct, daily control over the manner in which Cased performed her job.

Compensation: STG set Casey’s salary, provided her benefits, and sent W-2’s to Casey. DHHS had no involvement whatsoever regarding these compensation matters.

Right to Discharge: Only STG could actually terminate Casey’s employment. Although DHHS had some influence on STG, DHHS had no authority to accomplish the firing.

Belief of the Parties: Both Casey and DHHS understood that Casey was an employee of STG. All of Casey’s employment paperwork explicitly stated that Casey was an STG employee. Moreover, STG’s subcontract expressly provided that “[a]ll persons furnished by [STG] . . . shall be considered solely [STG’s] employees. . . .”


John F. Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

November 9, 2015

Facebook Comments May Constitute "Protected Concerted Activity" under NLRA


The Second Circuit Court of Appeals recently affirmed a National Labor Relations Board (NLRB) ruling that employees’ critical comments about their employer on Facebook may constitute “protected concerted activity” under the National Labor Relations Act (NLRA). Three D, LLC d/b/a Triple Play Sports Bar and Grille, 2nd Cir. Nos. 14-3284, 14-3814 (Oct. 21, 2015). Employee public comments concerning labor disputes are protected activity under the NLRA. However, such comments can lose their protection if they are “sufficiently disloyal” or defamatory.


The employees in Triple Play were engaged in an informal dispute with their employer concerning alleged errors by the employer in calculating withholding taxes. One employee posted a Facebook “like” of another employee’s Facebook status update: “Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money . . . WTF!!!!” Another employee posted the comment: “I owe too. Such an asshole.” Triple Play terminated two of the employees based on these comments.


The terminated employees brought unfair-labor-practice charges against Triple Play. The NLRB held that the terminations violated the NLRA as the employees’ comments were protected concerted activity.


The Second Circuit affirmed the NLRB, holding that the employees’ Facebook comments were protected concerted activity under the NLRA: (1) the comments were “concerted activity” because they were exchanged (albeit via a public medium) among current Triple Play employees; and (2) the comments were “protected” because they related to the employees’ tax withholding dispute with their employer.


But the required analysis does not end with a determination that there is “protected concerted activity.” An employee’s protected NLRA section 7 rights must be balanced against an employer’s interest in preventing disparagement of its products and services and protecting the reputation of its business. For these reasons, an employee’s otherwise protected public comments may lose their protection if they are sufficiently disloyal or defamatory.


An employee’s public comments are sufficiently disloyal to lose their NLRA protection if they amount to criticism of the employer that is disconnected from any ongoing labor dispute. The Facebook comments at issue in Triple Play were directly connected to the parties’ tax withholding dispute.


Moreover, the employees’ Facebook comments were not defamatory. They did not even mention Triple Play’s products or services.


Finally, an employee’s otherwise protected comments can lose their protected status if the employee uses obscenities in the presence of the employer’s customers. Nonetheless, the Second Circuit concluded that using obscenities on Facebook was not equivalent to an employee using obscenities in the physical presence of customers. To apply the obscenity rule to Facebook discussions would have an impermissible chilling effect on virtually all employee online speech.


John F. Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

September 9, 2015

What Does It Mean to "Delete" a Customer's Personal Information?


Can a company be held liable if, after agreeing to “delete” a customer’s personal information, it blocks public access to that information but keeps it in the company’s database? Following the recent data breach of servers hosting Ashley Madison’s customer information, this question may soon be answered.  


Ashley Madison is an online dating and social-networking service marketed to people who are married or otherwise in a committed relationship. The company, which has approximately 37 million users, was recently hacked by a group (or individual) called Impact Team. Impact Team has indicated that part of its motive for targeting Ashley Madison is the company’s allegedly inaccurate claim that, in exchange for a $19 fee, it will “fully delete” a customer’s account information. According to Impact Team, this $19 fee does not buy complete erasure of a customer’s digital interactions with Ashley Madison—which, given the nature of the service the company provides, is presumably what the customer believes (or at least hopes) he is paying for. Instead, the company merely limits the ability of other Ashley Madison members, and the general public, to view the customer’s account. The customer’s information, meanwhile, remains in Ashley Madison’s database. (Ashley Madison has denied Impact Team’s allegations regarding its deletion policy and, since the breach, has waived its fee for deleting a customer’s account.)


Ashley Madison’s privacy policy, which has been in place since 2011, indicates that the company will keep the personal information a customer provides for as long as the customer’s profile “stays active or hidden.” Neither the privacy policy nor the FAQs page on the company’s website explains whether the profile information of a customer who pays to delete his account is actually removed—both from public view and from the company’s database—or, instead, is merely “hidden” from public view, but still maintained by Ashley Madison.


Assuming, as Impact Team alleges, that Ashley Madison has been keeping the personal information of customers who paid the company to “fully delete” that information, the company may be exposed to liability under section 5(a) of the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce. . . .” Although it has not yet filed charges against Ashley Madison, the Federal Trade Commission (FTC)—which, over the past five years, has actively filed charges against companies that, in the agency’s view, have failed to keep their privacy promises to customers—may ultimately decide to do so. Impact Team has begun disclosing to the public customer information it stole from Ashley Madison’s servers. If the information of customers who paid Ashley Madison to delete their accounts is among that disclosed, the FTC may conclude that the company’s deletion policy constitutes a deceptive trade practice.


Such customers may also file civil lawsuits against the company, alleging, for example, that Ashley Madison’s failure to scrub their information completely—both from public view and from the company’s database—constituted fraud or breach of contract, which, in light of the recent data breach, has exposed them to identify theft and other misuse of their personal information. While some courts have been reluctant to allow cases seeking redress for potential future harm to proceed, finding the damages sought too speculative to confer standing, the Court of Appeals for the Seventh Circuit recently held that, at the motion to dismiss stage, allegations of future injury suffice.


In addition to legal liability, companies that promise to delete customer information, but fail to follow through, risk significant reputational harm. As people, many of whom have spent a decade or more building their online footprints, become increasingly cognizant of the need to carefully and thoughtfully manage their online presence, customers will look to the companies they patronize to aid them in that pursuit—and, using tools such justdelete.me, will be able to gauge which companies are willing and able to do so.


In light of the legal and reputational risks discussed above, companies should thoroughly review their customer information deletion policies and protocols. They should determine what “level” of information removal they currently provide, and should balance the costs of offering more complete removal—such as loss of continued access to customer information or costs associated with technology upgrades—against the benefits of doing so—primarily, mitigating the risks of reputational harm and legal liability to the companies. Once companies have settled on their policies, the crucial next step is to clearly communicate these policies to their customers. Not every customer will insist that companies wipe his or her informational slate clean; those who do, however, will look unfavorably on companies that fail to make them aware that they have not done so.   


Damon W. Silver, Jackson Lewis P.C., New York, NY


 

July 16, 2015

Ninth Circuit: Sex Is Occupational Qualification for Female Prison Job


The Ninth Circuit Court of Appeals recently held that sex is a bona fide occupational qualification (BFOQ) for certain guard positions at two women’s prisons in the state of Washington. Teamsters Local Union No. 117 v. Washington Department of Corrections, ___ F.3d ___, 2015 U.S. App. LEXIS 9883 (9th Cir. 2015).


Washington’s Decision to Hire Only Women
The Washington Department of Corrections (WDC) runs two women’s prisons. For decades, men dominated the ranks of prison guards. In the 1980s, the WDC, faced with a shortage of female guards, permitted male guards to perform random, clothed body searches of female inmates. Female inmates sued, asserting that the cross-gender pat-downs were unconstitutional. The Ninth Circuit agreed, holding that the searches were a violation of the Eighth Amendment’s prohibition against cruel and unusual punishments.


In the following years, the WDC received widespread allegations of sexual abuse of female inmates. In 2007, female inmates filed a class action against the WDC, alleging numerous sexual assaults by male guards against them. In response, the WDC conducted an internal investigation that confirmed numerous instances of sexual assault. The WDC also hired consultants to review prison practices. The consultants recommended the establishment of certain sex-specific posts in the female prisons.


In 2008, the WDC submitted a request to the Washington Human Rights Commission that it approve the identification of 110 female-only guard-post assignments at the two female prisons. The WDC identified each position, explaining the job duties and why the positions required a female guard. The WDC stated that limiting the identified positions to females would:


  • reduce the risk of sexual misconduct
  • reduce allegations of sexual misconduct (founded or unfounded)
  • protect male staff exposed to vulnerable situations
  • protect the privacy and dignity of female inmates

In 2009, the commission approved the WDC’s request for all 110 positions. The 2007 class action settled soon thereafter.


The Teamsters’ Challenge
The Teamsters, which represents about 6,000 corrections officers in Washington, sued the WDC, alleging that the sex-based staffing policy violates the civil rights of male prison guards under Title VII. The district court granted summary judgment for the WDC on the Teamsters’ sex-discrimination claim. It ruled that judicial deference to the reasoned judgment of state prison officials was warranted, and concluded that the staffing policy was justified as a BFOQ for each applicable job category to protect the privacy of inmates.


The Ninth Circuit’s Analysis

The Ninth Circuit began its analysis by noting that a facially discriminatory employment practice, such as the WDC’s sex-based hiring policy, may still be legal if sex is a BFOQ for the applicable positions. That narrow exception to illegality under Title VII is found at 42 U.S.C. § 2000e-2(e)(1):


it shall not be an unlawful employment practice for an employer to hire . . . employees . . . on the basis of . . . sex. . . in those instances where . . . sex . . . is a bona fide qualification reasonably necessary to the normal operation of that particular business . . . .


To justify discrimination under the BFOQ exception, the WDC was required to show, by a preponderance of the evidence, that (1) the job qualification justifying the discrimination was reasonably necessary to the “essence” of its business; and (2) sex was a legitimate proxy for determining whether a correctional officer has the necessary job qualifications.


By this standard, sex-based BFOQs will be “few and far between.” However, numerous circuit courts have upheld sex-based correction-officer assignments in women’s prisons.


The court concluded that the WDC’s sex-based policy was “reasonably necessary” to the “essence of prison administration.” The Teamsters asserted that the sex ban was overly broad, but the appellate court disagreed. The WDC policy was carefully crafted to the staffing needs to fit each guard post, targeting only guard assignments that require direct day-to-day interaction with inmates and entail sensitive job responsibilities such as conducting pat and strip searches, and observing inmates while they shower and use the restroom.


The sex-based policy was reasonably necessary to the essence of the guard positions at issue:

  • Security: Security at the prison was enhanced because female guards would not need to be continually moved from one part of the prion to another to perform emergency searches and the like if a female was not in the immediate vicinity of an emergency event.
  • Inmate Privacy: Inmates have a protectable interest in not being viewed unclothed by members of the opposite sex; male guards cannot be placed in areas where that will happen.
  • Preventing Sexual Assault: The vast majority of sexual assaults, and allegations of sexual assault, involved male guards; the WDC had a legitimate objective to reduce such incidents.

Finally, the WDC proved that sex was a “legitimate proxy” to achieve the foregoing goals. Its decision was based on a detailed deliberative process that produced broad, objectively-verifiable evidence justifying the exclusion of males from narrowly defined positions. The Teamsters did not propose a compelling alternative to the sex-based policy that would effectively achieve the WDC’s legitimate goals.


Lessons to Be Learned
There are going to be few instances where sex will be a legitimate BFOQ for a job position. The Teamsters case presented a job position—a guard in a female prison—that constituted the rare exception that proves the general rule. If an employer does assert that sex is a BFOQ that is “necessary” for the “essence” of a position in its business, the employer had better be well-armed with substantial, convincing, and objectively verifiable evidence that there is no better “proxy” (job qualification) for an employee to effectively perform the requirements of the position at issue.


John Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

June 30, 2015

Release of "Any and All Claims" Does Not Preclude Unpaid Overtime Claims


Former employees of TXL Mortgage Corporation are free to pursue a claim for unpaid overtime under the Fair Labor Standards Act (FLSA) despite a previous settlement agreement under which the former employees released TXL from “all actual or potential claims.” See Bodle v. TXL Mortgage Corporation, No. 14-20224 (5th Cir. June 1, 2015).


While many courts disallow private settlements of FLSA claims without supervision of the Department of Labor or a court, the Fifth Circuit carved out an exception to this general rule in Martin v. Spring Break ’83 Productions, LLC, 683 F.3d 247 (5th Cir. 2012), where it enforced an unsupervised settlement of an FLSA claim for unpaid wages because the settlement resolved a “bona fide dispute” regarding hours worked.


TXL former employees Ambre Bodle and Leslie Meech argued that the Martin exception did not apply to their prior settlement with TXL because the settlement resolved an unrelated prior state court action concerning alleged violations of a non-compete agreement. Specifically, TXL filed suit in state court alleging that Bodle and Meech violated covenants of a non-compete agreement when they resigned from TXL and subsequently began to work for a direct competitor. The parties reached a private settlement agreement that resolved the state-court action and included a release that provided: “[t]his is meant to be, and shall be construed as, a broad release” of any claims against TXL.


The Fifth Circuit agreed with Bodle and Meech’s arguments distinguishing the Martin case, and held that the settlement agreement reached in the prior state-court action did not bar their claims for unpaid overtime under the FLSA because the settlement did not resolve a “bona fide dispute as to hours worked or compensation due.” The court found that, unlike the employees in Martin, Bodle and Meech did not receive compensation for unpaid overtime and the issue of unpaid overtime was never raised in negotiations of the settlement. The prior state-court action did not involve a FLSA claim, and there was no factual development of the number of unpaid overtime hours or compensation owed. Thus, the court found that: “[t]o deem the plaintiff[s] as having fairly bargained away unmentioned overtime pay…would subvert the purposes of the FLSA: namely, in this case, the protection of the right to overtime pay.”


Kindall C. James, Liskow & Lewis, Houston, TX


 

June 26, 2015

Faragher-Ellerth Defense Available in Vicarious-Liability Cases


In Aguas v. State of New Jersey (A-35-13) (072467) (N.J. Feb. 11, 2015), the plaintiff, an employee with the New Jersey Department of Corrections (NJ DOC), alleged that she was subjected to sexual harassment by two of her male supervisors on several occasions. Prior to filing suit, Aguas verbally complained to the NJ DOC about the alleged harassing conduct. On March 8, 2010, the NJ DOC’s Equal Employment Division (EED) notified Aguas that it had initiated an investigation of her complaint. The EED conducted 20 interviews over the course of several weeks and ultimately determined that the plaintiff’s allegations were unsubstantiated.


Notably, plaintiff Aguas, on March 10, 2010—only two days after being notified by the EED that it had begun investigating her harassment claims—filed a lawsuit, including the state as a named defendant, alleging that the two supervisors subjected her to a hostile work environment based on her gender and retaliated against her when she objected to their conduct, in violation of the New Jersey Law Against Discrimination. Aguas, however, did not allege that the NJ DOC took any tangible employment action against her. In its answer to the complaint, the state asserted affirmative defenses based on its anti-harassment policy and the prompt and thorough investigation of the employee’s complaint. After discovery, the trial court granted summary judgment in favor of the state, holding that, although plaintiff Aguas made a prima facie showing that she was subjected to severe and pervasive sexual harassment, the State had established an affirmative defense, because the NJ DOC’s anti-harassment policy required complaints to be in writing, and Aguas failed to comply with that policy by complaining verbally.


Aguas appealed and the Appellate Division affirmed the lower court’s grant of summary judgment and further held that Aguas failed to establish that her most senior supervisor used his authority to control Aguas’s day-to-day working environment as a means to aid in his sexual harassment of her. Aguas once again appealed, and the New Jersey Supreme Court found in favor of the employer and, in doing so, adopted the standard set forth by the U.S. Supreme Court in Burlington Industries v. Ellerth, 524 U.S. 742, 765 (1998) and Faragher v. City of Boca Raton, 524 U.S. 775, 807–08 (1998), which standard, in federal jurisprudence, is referred to as the “Faragher-Ellerth defense.” As the New Jersey Supreme Court decreed, the Faragher-Ellerth defense is available to an employer in a lawsuit alleging hostile-work-environment sexual harassment, if the employer can show that it “exercised reasonable care to prevent and correct promptly any sexually harassing behavior, and the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise,” and “provided that the employer has not taken an adverse tangible employment action against the plaintiff employee.”


Essential to the New Jersey Supreme Court’s ultimate conclusion that the Faragher-Ellerth affirmative defense was available to the state was the NJ DOC anti-discrimination policy and the enforcement of that policy with respect to the plaintiff’s complaint of harassment. The Aguas court carefully noted that the NJ DOC had implemented a robust, written anti-discrimination policy that clearly described the prohibited behavior, the obligation to ensure a harassment-free workplace, the sanctions for failing to do so, the procedures for reporting harassing behavior, the procedure for investigating complaints, and the remedial steps to be taken when a complaint of harassment or discrimination is substantiated. The court also weighed in its decision the fact that the employer required all employees to receive training on the anti-discrimination policy, the extensiveness of the NJ DOC investigation of the complaint, that Aguas filed the lawsuit before the investigation was complete, and the absence of an adverse employment action against her.


The Aguas case represents a major milestone in New Jersey employment law, as previous rulings in New Jersey had hinted at, but never expressly provided that a Faragher-Ellerth-type affirmative defense was available for employers in suits alleging vicarious liability for supervisory harassment. However, one element of the Aguas ruling that has been largely overlooked is the New Jersey Supreme Court’s expansion of the definition of “supervisor” for purposes of determining whether an employer can be held vicariously liable for the harassing acts of an employee’s supervisor. More specifically, the Aguas court adopted the definition of “supervisor” used by the U.S. Equal Employment Opportunity Commission (EEOC), which is broader in scope than the definition used to determine questions of vicarious liability in federal Title VII cases. This distinction is no small one, because the broader New Jersey definition, in practice, could significantly increase the potential pool of individuals whose conduct can expose the employer to liability.


The Aguas case presents a number of very clear takeaways for employers in New Jersey and nationwide regarding methods they can employ to reduce their exposure to claims of vicarious liability for the allegedly harassing conduct of supervisors:


  • Implement a written anti-discrimination policy that clearly describes: (a) the types of conduct prohibited, (b) the obligation to ensure a workplace free of harassment and discrimination, (c) the protocols for reporting misconduct, (d) the employer’s procedure and timeline for investigating claims, and (e) the remedial steps to be taken when a claim is substantiated.
  • Enforce the policy as written and investigate each complaint.
  • Thoroughly document the investigation, as that documentation may be the evidence relied upon in the event of a lawsuit.
  • Care should be taken to ensure that the investigator does not have a stake in the outcome of the investigation (e.g., don’t assign investigation to a friend or ally of the accused supervisory employee).
  • Provide initial and periodic follow-up training on the anti-discrimination policy and give each employee a personal copy of the policy to keep for reference.
  • Do not take any adverse employment action (demotion, termination, etc.) against the complaining employee relating to that employee’s reporting of allegedly harassing behavior.
  • The employer should also consult an employment attorney to ensure its anti-discrimination policy is compliant with federal law and any applicable state law in each state in which the employer operates.

Keywords: litigation, employment law, labor relations, Faragher-Ellerth, affirmative defense, employer, vicarious liability, agency law, Title VII, EEOC, discrimination, harassment, sexual harassment, hostile work environment, gender, supervisor, adverse employment action, tangible employment action, Aguas, New Jersey, Department of Corrections, anti-discrimination policy, anti-harassment policy


Charn Reid, Brooks Pierce, LLP, Greensboro, NC


 

May 20, 2015

NLRB Strikes Down Macy's Employee Confidentiality Provisions


An administrative law judge (ALJ) of the National Labor Relations Board (NLRB) recently struck down certain confidentiality provisions in Macy’s employee handbook on the ground that the provisions violate Macy’s employees’ section 7 concerted-activity rights under the National Labor Relations Act. Macy’s, Inc., NLRB ALJ No. 1-CA-123640 (May 12, 2015). The ALJ held that on the face of the challenged confidentiality provisions, an employee could reasonably construe Macy’s prohibitions against (1) disseminating employee personal data, (2) using Macy’s logo, and (3) directly responding to government investigations as prohibiting or limiting protected concerted activity under the National Labor Relations Act (NLRA). As a result, the offending confidentiality provisions violated section 8(a)(1) of the NLRA. The ALJ ordered Macy’s to either rescind the illegal provisions within 14 days or revise them. Macy’s also was ordered to post a notice to employees penned by the ALJ. This ALJ decision may have far-reaching consequences for how businesses protect their confidential business information.


Macy’s Confidentiality Provisions
The Macy’s case was submitted to the ALJ on a stipulation of facts among Macy’s, the charging party—the United Food and Commercial Workers Union Local 1445, and the NLRB’s general counsel. The stipulation delineated three Macy’s policies that were the focus of the ALJ’s analysis:  prohibitions regarding (1) dissemination of employees’ personal data, (2) use of Macy’s logo, and (3) employees directly responding to government investigations.


The ALJ’s Analysis
The ALJ began his analysis by acknowledging that the standard for determining whether Macy’s challenged policies violated the NLRA was established by the NLRB in Lutheran Heritage Village—7 Livonia, 343 NLRB 646 (2004). The initial inquiry under the Lutheran Heritage test is whether the subject policy explicitly restricts activities protected by section 7. If so, it is illegal. If not, the policy will be deemed unlawful “upon a showing of one of the following: employees would reasonably construe the rule to prohibit protected activity, or the rule has been applied to restrict that activity.” [Emphasis added.]


The ALJ acknowledged that the challenged Macy’s policies did not explicitly restrict protected section 7 activities. He further acknowledged that the parties had stipulated that the policies were neither promulgated in response to union activity nor applied in a manner to restrict section 7 rights. However, the ALJ concluded, based on the face of the challenged policies themselves, that a Macy’s employee could reasonably construe the policies to prohibit protected section 7 activity. Therefore, Macy’s restrictions against disseminating employees’ personal data, the use of its logo, and direct responses to government investigations were unlawful. Furthermore, Macy’s savings clause did not cure the illegality of those policies.


Lessons to Be Learned
The Macy’s ALJ adopted an expansive reading of the Lutheran Heritage test to invalidate Macy’s restrictions on the use of employee personal data, use of the company’s logo, and direct responses to government investigations. In doing so, the ALJ invalidated Macy’s challenged rules without engaging in any meaningful analysis of the employees’ and Macy’s competing rights and obligations. For example, employees have the right to the privacy of their personal information under various federal and state laws. The ordered rescission of Macy’s policies to protect that personal data could result in violations of employees’ privacy rights, while impeding Macy’s ability to protect that personal data.


Similarly, the ALJ stated that he could “see no valid business reason” for Macy’s restriction on the use of its “well known and easily recognized logo.” But Macy’s has a strong business interest in protecting the substantial time and money it has invested in building the goodwill associated with its well-known logo. And Macy’s has a legal right to prohibit others from using its logo without its permission. Indeed, Macy’s could lose its legal rights in its logo if it does not police against unauthorized use. With the ALJ-ordered rescission of its logo policy, Macy’s valuable intellectual-property rights could be put in jeopardy.


Perhaps the most important takeaway from the Macy’s case is that employers must explicitly, and prominently, state in their corporate policies that the employer’s legitimate restrictions to protect employee personal data or corporate intellectual property are not intended to inhibit employees from engaging in protected concerted activity, and will not be applied by the employer to interfere with that activity. Had Macy’s included such disclaimers at the front of its handbook—instead of in a separate document some seven months after the handbook was given to employees—Macy’s seemingly reasonable restrictions might have been deemed lawful.


John Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

April 28, 2015

Fifth Circuit Differentiates "Color" from "Race"


In Etienne v. Spanish Lake Truck & Casino Plaza, L.L.C., No. 14-30026 (Feb. 2, 2015), the Fifth Circuit addressed a unique issue under Title VII of the Civil Rights Act of 1964, as amended. Specifically, the Fifth Circuit found that, under certain circumstances, “color” can be a discrete basis for alleged discrimination, separate and apart from discrimination based on “race.” Title VII prohibits discrimination in employment decisions based upon an employee’s race, color, religion, sex, or national origin; however, the “color” basis is often overlooked. Discrimination claims based on a claimant’s skin color are typically labeled as claims for “race” discrimination rather than discrimination based on “color.”


The plaintiff in Etienne worked as a waitress and bartender for the defendant casino, and was passed over for a position that was ultimately filled with a white employee. The plaintiff claimed that the white employee was less qualified for the position, and presented an affidavit stating that the general manager granted responsibilities to employees based on their skin color, and that he wouldn’t permit “a dark skinned black person” to handle money. The plaintiff also stated that she was told multiple times that the manager thought she was “too black” to do various tasks at the casino. The defendant countered with evidence showing that five of the casino’s six management positions were filled by African Americans.


The district court granted summary judgment for the defendant. The Fifth Circuit reversed finding that the district court erroneously treated the case as one of race discrimination and “relied heavily on the fact that most of the managers at Spanish Lake were of the black race.” The Fifth Circuit held that, although it had never expressly addressed such a claim, a discrimination claim based on “color” but not “race” is an actionable claim under the “clear and unequivocal” text of Title VII.


Kindall C. James, Liskow & Lewis, Houston, TX


 

March 30, 2015

SCOTUS Issues Ruling on Accommodation of Pregnant Employees


The U.S. Supreme Court on March 25, 2015, decided Young v. United Parcel Service, Inc. (UPS), 575 U.S. ___ (2015).The issue in the case was whether, and in what circumstances, the Pregnancy Discrimination Act (PDA), 42 U.S.C. § 2000e(k), requires an employer that provides work accommodations to non-pregnant employees with work limitations to also provide work accommodations to pregnant employees who are “similar in their ability or inability to work.” UPS offered a “light duty program” to workers who were injured on the job, were disabled under the Americans with Disabilities Act (ADA), or had lost their Department of Transportation (DOT) certifications. UPS, however, did not provide any such accommodations to pregnant employees who were not medically disabled. Young challenged the policy, arguing that the PDA requires an employer to provide pregnant employees light duty work if it provides similar work to other employees in other circumstances.


Young worked as a part-time driver for UPS where her responsibilities included pickup and delivery of packages. She had suffered several prior miscarriages so when she became pregnant, her physician limited her to lifting 20 pounds during the first 20 weeks of her pregnancy and 10 pounds thereafter. Her normal job requirement was that she be able to lift parcels weighing up to 70 pounds herself and 150 pounds with assistance. UPS did not allow Young to work under this restriction, resulting in her staying out of work without pay for most of her pregnancy and ultimately losing her health-insurance benefits. Young filed suit, and UPS responded by saying that other employees who had been accommodated fell within one of the three categories referenced above; and since Young did not, there had been no discrimination.


The Fourth Circuit Court of Appeals granted UPS’s motion for summary judgment, ruling that (1) the employer did not “regard” a pregnant employee as disabled under the Americans with Disabilities Act (ADA); and (2) employers are not required under the PDA to provide pregnant employees with light duty assignments as long as the employer treats pregnant employees the same as non-pregnant employees with respect to offering accommodations. That court further referred to UPS’s policy as “pregnancy blind,” showing no discriminatory animus toward pregnant workers.


The Supreme Court reversed the decision and remanded the case back to the trial court to allow Young to pursue her claim. The Court, refusing to accept the interpretation of the PDA espoused by either party, concluded that because Young had alleged disparate treatment, she could seek to prove her claim using the burden-shifting framework of McDonnell Douglas Corp. v. Green. In other words, Youngwould first need to make a prima facie showing of discrimination “by showing actions taken by the employer from which one can infer, if such actions remain unexplained, that it is more likely than not that such actions were based on a discriminatory criterion illegal under Title VII.” In her case, this meant showing that she belonged to the protected class, that she sought accommodation, that the employer did not accommodate her, but did accommodate others “similar in their ability or inability to work.” Thereafter, the burden would shift to UPS to justify its refusal to accommodate Young based on “legitimate, non-discriminatory” reasons. The fact that the accommodation might be expensive or inconvenient for the employer is not necessarily sufficient justification. Even once the employer presents its justifications, the employee has an opportunity to show that the reasons offered are pretext for discrimination.


The Court concluded that Young had created a sufficient factual issue regarding whether UPS provided more favorable treatment to non-pregnant employees in situations that could not be distinguished from hers to allow her to take her case to a jury.


Charla Bizios Stevens, McLane, Manchester, NH


 

March 27, 2015

Three-Month Drug Abstention Is "Currently Engaging" under ADA


The U.S. District Court for the District of Puerto Rico recently dismissed a terminated employee’s Americans with Disabilities Act (ADA) discrimination claim on the basis that she was “currently engaged” in the illegal use of drugs—despite the allegation of her complaint that she had ceased her illegal use of drugs three months prior to her termination. Quinones v. Univ. of Puerto Rico, D.P.R. No. 14-1331 (JAG) (Feb. 13, 2015). The plaintiff’s current illegal drug use did not constitute a “disability” under the ADA, and the effects of that drug use established that she was not a “qualified” disabled individual under the ADA. However, the plaintiff’s complaint did state a viable claim for retaliation under the ADA.


Underlying Facts
In July 2011, plaintiff Dr. Karina Quinones was admitted to the ophthalmology residency program of the University of Puerto Rico School of Medicine (UPR). In March 2011, prior to her admission to the residency program, Quinones had enrolled herself in an alcohol-rehabilitation program to treat her alcoholism. Upon release from that program with a number of prescriptions, Quinones began to use the drugs in a manner not prescribed by her physician.


Once enrolled in the residency program, Quinones developed an addiction to Soma, Ambien, and Adderall. Her addiction to Adderall caused visual disturbances, speech problems, and dizziness. As a result of her active addiction to those prescription drugs, the plaintiff began having problems complying with the requirements of the residency program. She met several times with a committee overseeing the program to discuss her performance. However, on September 12, 2012, the plaintiff was terminated from the program.


On September 27, 2012, Quinones sued UPR in the Superior Court of Puerto Rico to gain readmission into the program. In response, UPR agreed to stay its termination of the plaintiff and granted her a temporary leave while UPR considered her request for a reasonable accommodation. On April 29, 2013, UPR rejected Quinones’s accommodation request because: (1) she could not comply with the essential functions of her position; (2) she had a high risk of relapse; and (3) she would require constant supervision, which would impose an undue hardship on the residency program. Quinones sued UPR (and certain UPR employees) asserting claims, inter alia, of disability discrimination and retaliation under the ADA. The UPR defendants moved to dismiss the complaint for failure to state a claim pursuant to FRCP 12(b)(6).


Disability Analysis
The district court dismissed Quinones’s disability-discrimination claim because “current,” active illegal drug use does not constitute a “disability” under the ADA.


42 U.S.C. §12114(a) expressly provides that “ . . . a qualified individual with a disability shall not include any employee or applicant who is currently engaging in the illegal use of drugs, when the covered entity acts on the basis of such use.” (emphasis added).


42 U.S.C. §12114(b) provides a “safe harbor” for “recovering” drug addicts:


Nothing in subsection (a) of this section shall be construed to exclude as a qualified individual with a disability an individual who:


(1) has successfully completed a supervised drug rehabilitation program and is no longer engaging in the illegal use of drugs, or has otherwise been rehabilitated successfully and is no longer engaging in such use;


(2) is participating in a supervised rehabilitation program and is no longer engaging in such use; or


(3) is erroneously regarded as engaging in such use, but is not engaging in such use[.] (emphasis added).


The statutory provisions do not set forth a bright-line test for an employer to determine if an employee is “currently” engaging in illegal drug use or is “no longer engaging” in such use. Is an employee “currently” engaging in illegal drug use if he smoked a joint a week ago, a month ago, or a year ago? To answer that question, a number of courts have adopted a conceptual standard that an employee may be considered to be “currently” using drugs if the employer has a “reasonable belief” that the drug abuse remains an “ongoing problem.” See Mauerhan v. Wagner Corp., 649 F.3d 1180, 1187 (10th Cir. 2011); Zenor v. El Paso Healthcare System, Ltd., 176 F.3d 847, 856 (5th Cir. 1999).


With respect to defining the length of time necessary for abstinence to dispel a conclusion of active drug use, courts have found that an employee is still “currently” engaging in illegal drug use if his or her period of abstinence from drugs is one month (Shafer v. Preston Mem’l Hosp. Corp., 107 F.3d 274, 278 (4th Cir. 1997), abrogated other grounds, Baird ex rel. Baird v. Rose, 192 F.3d 462 (4th Cir. 1999)); six weeks (McDaniel v. Miss. Baptist Med. Ctr., 877 F.Supp. 321, 328 (S.D. Miss. 1995)); seven weeks (Baustian v. State of La. (910 F.Supp. 274, 277 (E.D. La. 1996)); and two months (Vedernikov, M.D. v. W.Va Univ., 55 F.Supp. 518, 522–23 (N.D. W.Va 1999)).


Conversely, a court has indicated that one year of abstinence establishes that an employee is no longer “currently” engaged in illegal drug use. U.S. v. Southern Mgm’t Corp., 955 F.2nd 914 (4th Cir. 1992).


In the Quinones case, the plaintiff’s complaint asserted that she had abstained from illegal drug use for “a little over three months” at the time she was fired. The district court held that this use was recent enough for UPR to conclude that the plaintiff was not a “recovering drug user” under the ADA safe-harbor provision. Thus, Quinones’s “current” drug use was not a disability under the ADA.


Qualification Analysis
The district court held that Quinones’s complaint would have to be dismissed on the separate ground that she was not a “qualified” disabled person. The essential functions of the ophthalmology residency program require a resident to perform delicate and potentially hazardous procedures involving patients’ eyes. The plaintiff’s admitted “visual disturbances, speech problems[,] and dizziness” caused by her illegal drug use made it clear that she could not perform the essential functions of the job.


Retaliation Analysis
Incredibly, the Quinones court held that the plaintiff’s complaint did state a legally sufficient claim for retaliation under the ADA—despite the fact that the plaintiff was neither “disabled” nor “qualified” for the residency position.


The district court held that there was, plausibly, and at the pleading stage, a causal connection between Quinones’s filing of her ADA claims and her termination. The court concluded that there was sufficient “temporal proximity” between her September 28, 2012, initial complaint, UPR’s October 9 temporary rescission of the plaintiff’s termination, and UPR’s ultimate termination of the plaintiff on April 29, 2013, to establish a causal connection for a retaliation claim at the pleading stage.


The district court’s finding that there could be a causal connection between Quinones’s termination and the filing of her ADA claims is surprising in light of the fact that the court was required, under 42 U.S.C. § 12114(a), to conclude that UPR’s termination of the plaintiff was “on the basis of [her ‘current’ illegal drug] use.” It is fundamentally inconsistent for the court to conclude that UPR did not engage in disability discrimination because it terminated Quinones on the basis of her current illegal drug use, but then also conclude that there is a causal connection between her termination and Quinones’s protected activity for proposes of an ADA retaliation claim.


John Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

March 11, 2015

Department of Labor Expands FMLA Coverage for Same-Sex Spouses


Same-sex spousal rights, particularly in the area of employment law, are in a state of flux. This conundrum will hopefully be resolved later this year when the U.S. Supreme Court issues a ruling on a collection of four cases concerning the power of the states to ban same-sex marriages and to refuse to recognize such marriages performed in another state.


In the meantime, the U.S. Department of Labor (DOL) took action of its own, announcing a final rule to revise the definition of spouse under the federal Family and Medical Leave Act (FMLA) in light of the Supreme Court’s decision in United States v. Windsor, which found section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional. The final rule amends the definition of “spouse” under the FMLA so that eligible employees in legal same-sex marriages will be able to take FMLA leave to care for their spouses or family members, regardless of where they currently live or work.  


As proposed under the final rule, the meaning of “spouse” under the FMLA would depend on the law of state in which the marriage was celebrated, not the law of the state where the employee lives or works. For example, if a business is located in Ohio and the business’s employee lives and works in Ohio (which does not currently permit same-sex marriages), but travels to New York for a lawful and valid same-sex wedding ceremony, the Ohio business would be required to grant the employee in the same-sex marriage the same FMLA benefits as it would to any other “spouse.”


The DOL’s final rule takes effect March 27, 2015, which means that businesses have only a few weeks to update their FMLA policies and practices for this important change by, for example:


  • Training human resources personnel and supervisors on the new FMLA definition of “spouse.”
  • Reviewing and amending the company’s written FMLA policy and procedures, as well as all FMLA-related forms and notices, to the extent that they specifically define the term “spouse” in a way that does not account for the new final rule.
  • Remembering that the FMLA does not protect civil unions or domestic partnerships, so employers are advised to determine whether FMLA applies in any particular situation. That said, employers are free to provide greater rights than those required under the FMLA.

If the Supreme Court rules later this year that all states must recognize valid same-sex marriages entered into in other states, then the necessity of this DOL regulatory change is short-lived. Nevertheless, until then, employers are cautioned to remember that the new meaning of “spouse” under the FMLA depends on the law of the state in which the employee’s marriage was celebrated, not the law of the state where the employee lives or works.


Each case is different, and companies should never assume that all such situations require identical responses.


Jennifer R. Phillips, Snell & Wilmer, Phoenix, AZ


 

February 27, 2015

Be Cautious When Attempting to Enforce Non-Compete Agreements


In Boudreaux v. OS Restaurant Services, LLC, et al., a Louisiana federal district court refused to dismiss an employee’s unfair-trade-practices claims based on allegations that his former employer had knowingly attempted to enforce an unenforceable non-competition agreement. The employee had signed an employment agreement containing non-competition and non-solicitation provisions during his employment with Outback Steakhouse. Following his termination, the employee sought employment with a competing steakhouse, but the competing steakhouse refused to hire him because of the restrictive covenants in his employment agreement with Outback. The employee then sued Outback, seeking an injunction and a declaratory judgment that the non-competition provisions were unenforceable. After his first two complaints were dismissed, the employee filed a third amended complaint, asserting claims for violations of the Louisiana Unfair Trade Practices Act (LUTPA) and for intentional interference with business relations. Outback responded by filing a motion to dismiss pursuant to Rule 12(b)(6).


The court denied the motion, finding that the plaintiff had stated a plausible claim under both theories. Although LUTPA does not specifically define which actions constitute an unfair trade practice, the court observed that other Louisiana courts have recognized that enforcement of an invalid non-competition agreement can form the basis of a LUTPA claim. The employee had alleged that Outback had knowingly sought to enforce an unenforceable non-competition agreement, and that the employee’s ability to obtain employment had been negatively impacted. Accepting these allegations as true, the court found that the employee had stated a plausible claim that Outback had engaged in an unfair or deceptive trade practice, in violation of LUTPA.  


With respect to the intentional-interference-with-business-relations claim, the court explained that the employee was required to allege that the defendant acted with “actual malice.” The court observed that the employee’s allegations regarding the business-relations claim were essentially the same as those made in support of his LUTPA claim. The employee had specifically alleged that Outback “maliciously and intentionally” breached its obligation not to attempt to enforce the unenforceable non-competition agreement. Although Outback contended that it was only protecting its legitimate business interests, the court found that the employee’s allegations were sufficient to state a plausible claim that its motivations were malicious, rather than legitimate. The court therefore held that the amended complaint stated a valid claim under Louisiana law that Outback had improperly influenced others not to deal with the employee.


Although the court’s ruling did not address the ultimate merits of the employee’s claims, the Boudreaux decision nevertheless demonstrates that Louisiana employers and employers in other states with laws prohibiting unfair trade practices should be cautious in drafting and attempting to enforce non-competition agreements against former employees.


Wm. Brian London, Liskow & Lewis, New Orleans, LA


 

February 18, 2015

Is There Privilege Between EEOC Attorneys and Potential Claimants?


The Federal Rules of Civil Procedure protect privileged documents from being discovered. Fed. R. Civ. P. 26(b)(1). A common example of a privilege is that between an attorney and client. “The attorney-client privilege protects confidential disclosures made by a client to an attorney in order to obtain legal advice . . . as well as an attorney’s advice in response to such disclosures.” In re Grand Jury Investigation, 974 F.2d 1068, 1070 (9th Cir. 1992) (citations omitted). “Whether a privileged attorney-client relationship exists rests upon the client’s intent to seek legal advice and the client’s belief that he is consulting an attorney, i.e., someone who will keep the communications confidential.” EEOC v. Johnson & Higgins, Inc., 1998 U.S. Dist. LEXIS 17612, at *11 (S.D. N.Y. 1998) (citation omitted).


This inquiry can be a rather simple one. For example, an individual client walks into an attorney’s office for a consultation. The individual then speaks with the attorney about his case. The attorney agrees to represent the individual. As long as the privilege has not been waived in any way, it can generally be assumed that it would extend to the attorney and his client. Where it gets tricky is when the “attorney” is a government agency, such as the Equal Opportunity Employment Commission (EEOC). When the EEOC communicates with potential claimants, could those communications be covered under the attorney-client privilege? The answer depends on the desire of the claimants to be represented by the EEOC.


In E.E.O.C. v. ABM Industries Incorp., et al., Case No. 1:07-cv-01428-LJO-BAK GSA, at *1 (E.D. Cal. 2009), the court answered this question in the negative, compelling the EEOC to produce documents that it sent to the defendant’s employers in the form of cover letters and questionnaires.


In ABM, the defendants requested the EEOC to produce the “form of cover letter and the form of questionnaire it sent to current and former janitorial employees of ABM.” The EEOC objected on the basis of attorney-client privilege. According to the EEOC, these communications were made to potential claimants and disclosing these communications would reveal key litigation strategy.


The court got right down to the heart of the issue: the professional relationship between the EEOC and the ABM janitorial employees. In this case, the ABM janitorial employees had not expressed a desire to be represented by the EEOC. Also, the cover letter sent to the janitorial employees did not make it clear it wanted responses only from people who wanted to be represented by the EEOC. In other words, the ABM court emphasizes the objective behavior of the “potential claimants” to determine whether they wanted an attorney-client relationship to exist in the first place. “The mere fact that the letter and questionnaire was sent to a group of potential claimants (and/or witnesses) does not suffice to create the privileged professional relationship.”


This case appears to make it clear the importance of whether a potential claimant actually wants to be represented by the EEOC. For instance, the court cited to Bauman v. Jacobs Suchard, 136 F.R.D. 460 (N.D. Ill. 1990), noting its distinction from the ABM matter in that the potential claimants in Bauman had expressed a desire to be represented by the EEOC.


It is the burden of the party asserting the privilege to show that one exists. See In re Grand Jury Witness (Salas and Waxman), 695 F.2d 359 (9th Cir. 1982). Based on the ABM opinion, if the EEOC claims that communications between it and its potential claimants are privileged, then the EEOC has the burden of proving the potential claimants wanted to be represented by the EEOC. The EEOC cannot unilaterally designate these communications to be privileged without doing so.  


Mallory Schneider Ricci, Constangy Brooks & Smith, LLP, Nashville, TN


 

February 9, 2015

D.C. Circuit Requires NLRB to Reconsider Hat Policy Decision


The National Labor Relations Board (NLRB) in February 2014 concluded that an employer’s hat policy violated section 7 of the National Labor Relations Act (NLRA) because the policy prohibited employees from wearing baseball caps bearing union insignia. On January 16, 2015, the U.S. Court of Appeals for the District of Columbia Circuit determined that the board reached its decision too hastily, and remanded the case back to the NLRB for reconsideration.


The employer, World Color (USA) Corp., is a wholly-owned subsidiary of Quad/Graphics, Inc. The policy at issue, which was enacted as part of a broader employee-safety provision, mandated, in relevant part, that “[b]aseball caps are prohibited except for Quad/Graphics baseball caps worn with the bill facing forward.” In response to the new policy, the Graphic Communications Conference of the International Brotherhood of Teamsters filed an unfair-labor-practice charge with the NLRB, alleging that the policy interfered with employees’ rights under the NLRA to engage in concerted activities for the purpose of collective bargaining.


An administrative-law judge (ALJ) determined that the employer’s hat policy violated the employees’ rights to wear union insignia at work and that World Color had failed to establish the existence of any special circumstances—such as, for example, employee safety, concerns about gang activity, or employee appearance—justifying enforcement of the policy. The ALJ then recommended an order prohibiting World Color from enforcing what the ALJ referred to as a “discriminatory” hat policy. World Color opposed the ALJ’s decision and the case was referred to a three-member panel of the NLRB for consideration.


The NLRB panel struck the portion of the ALJ’s order referring to the hat policy as discriminatory and, instead, based its decision on what it referred to as the policy’s overbreadth. Notably, the board’s overbreadth determination was premised upon its conclusion that it was “undisputed that the policy on its face prohibits employees from engaging in the protected activity of wearing caps bearing union insignia.” The NLRB accordingly ordered World Color to rescind its hat policy, draft a revised policy, and post a notice at its facility informing employees that the NLRB found that World Color had violated federal labor laws.


Upon World Color’s petition for review, the U.S. Court of Appeals for the District of Columbia Circuit took exception to the NLRB’s main conclusion as to the hat policy’s “undisputed” prohibition, on its face, of the wearing of a hat bearing union insignia. In particular, the appeals court found that the board should have applied the two-step inquiry set forth in Guardsmark, LLC v. NLRB, 475 F.3d 369 (D.C. Cir. 2007). The Guardsmark inquiry first requires the board to examine whether the policy at issue explicitly restricts section 7 activity; if it does, the policy violates the NLRA. If the policy does not explicitly restrict protected activity, then the board must apply the second step of the inquiry, and consider whether (1) employees would reasonably construe the language of the policy to prohibit section 7 activity; (2) the policy was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of section 7 rights.


According to the appeals court, however, the NLRB “short-circuited this inquiry at its first step by concluding that there was no dispute regarding whether the policy facially prohibited employees from wearing caps bearing union insignia.” The court then explicitly disagreed with the board, finding, instead, that “[a]lthough the policy restricts the type of hat that may be worn, it does not say anything about whether union insignia may be attached to the hat.” The court further noted that World Color’s main uniform policy permits employees to accessorize in good taste and states that the uniform policy will be applied in accordance with applicable laws, presumably signaling the employer’s intent to honor its obligations under the NLRA. Concluding that the premise upon which the board’s decision was based was contradicted by the record, the appeals court remanded the case back to the NLRB for reconsideration.


In light of the appeals court’s finding that the hat policy does not, on its face, violate the NLRA, the board, in reconsidering the legality of the hat policy, will no doubt confine its evaluation of the policy to the second step of the Guardsmark inquiry. Given the board’s recent decisions, it will be interesting to see how many additional cases find their way to the courts in the future. Stay tuned.


Keywords: litigation, employment law, labor relations, National Labor Relations Board, NLRB, National Labor Relations Act, NLRA, section 7, special circumstances, D.C. Circuit, District of Columbia, court of appeals, World Color, Guardsmark, Teamsters, union insignia, uniform policy, hat policy, baseball cap, protected activity, labor law


Charn Reid, Brooks Pierce, LLP, Greensboro & Raleigh, NC


 

January 28, 2015

Nike Lawsuit Will Test Company Security Initiative


On December 8, 2014, athletic shoe manufacturer Nike filed suit in Multnomah County Circuit Court in Portland, Oregon, against three of its former designers alleging a misappropriation of Nike’s trade secrets and conspiracy to start a new, competing business venture.


The lawsuit claims that three former designers, Denis Dekovic, Marc Dolce, and Mark Miner “conspired to and developed for themselves, and then for Adidas, a strategic blueprint for a creative design studio to compete against Nike, began consulting with Adidas and misappropriated Nike trade secrets for use in their new business venture” and seeks $10 million in alleged damages.


In the complaint, Nike alleges that the defendants knowingly violated several agreements signed with Nike at the outset of their employment. All three defendants signed non-competition agreements pursuant to which they agreed to: (1) not to compete with Nike during and for a period of one year following their employment; (2) not to use or disclose any of Nike’s confidential information and to return all copies of such information upon leaving Nike’s employment; and (3) not to solicit other Nike employees away from Nike to a competitor.


The defendants also signed employee invention and secrecy agreements, by which each of them “assign[ed] to Nike all . . . inventions . . . conceived” during his employment term with Nike relating “in any way” to Nike’s “business . . . or products.” The defendants further agreed to disclose promptly in writing to Nike all such inventions conceived during their employment with Nike whether or not such inventions were assignable under either of the agreements.


Nike’s complaint describes the extensive, company-wide efforts taken to protect its confidential information. Since 2012, Nike has invested more than $1.5 million in a company-wide security initiative known as “Keep it Tight” or “KIT.” As described in the complaint, KIT is a program designed to educate employees regarding the protection of Nike’s proprietary and confidential information, including its product-design information. The KIT initiative provides employees with online training on the topics of social media, information security, device (laptop/mobile) security, and workplace and situational-awareness security. Nike asserts that there has been, and continues to be, significant publicity of the KIT principles on postings throughout the Nike campus and on Nike’s internal employee website and social-media platforms. Nike has apparently gone to great lengths to prevent leaks of proprietary, confidential, and trade-secret information and reinforces the company-wide culture of locking down such information.


Nike claims the three designers stole a “treasure trove of Nike products designs, research information and business plans” in an effort to market themselves to Adidas. Dekovic in particular, had the contents of his laptop copied, which gave him access to “thousands of proprietary documents relating to Nike’s global football (soccer) product lines.” The lawsuit identifies that the information taken by the defendants is among the most important and highly confidential information in Nike’s athletic-footwear business. Disclosure of any of this information, it claims, “would irreparably harm Nike, by, among other things, enabling a competitor to effectively undermine and counter Nike’s performance in the athletic markets for the next three to four years.”


On December 9, 2014, Nike filed a motion for temporary restraining order and preliminary injunction. The Multnomah County Circuit Court granted Nike’s motion in part and issued a temporary restraining order against all three defendants on December 11, 2014.


However, on December 24, 2014 both parties agreed to vacate the court’s temporary restraining order and instead, stipulated to a preliminary injunction enjoining the defendants from the following until July 6, 2015:


  • consulting with any other company in any industry in which Nike participates
  • disclosing any Nike trade secrets or other proprietary information
  • directly or indirectly soliciting, diverting, or hiring away Nike employees or Nike-sponsored athletes

The preliminary injunction also includes provisions from the court’s December 11, 2014, temporary restraining order, requiring the defendants to return copies of Nike’s trade secrets and other confidential and proprietary information, and to disclose the identity of any persons or entities to whom or which defendants disclosed Nike’s trade secrets and other confidential and proprietary information.


Both parties agreed to appear before the court June 22–25, 2015, for a trial on Nike’s claims for injunctive and equitable relief. A pivotal issue expected to be extensively litigated at trial is the effectiveness of Nike’s “Keep It Tight” program and the steps Nike undertook to protect its trade secrets and other proprietary information. The lawsuit, involving one of Oregon’s most famous companies, is particularly significant because it may provide a useful road map and guidance for other employers who, in an increasingly digital and global economy, are continually striving to safeguard their trade secrets and proprietary and confidential information to maintain their competitive advantage and market share, and avoid unfair competition.


Shawn N. Butte and John A. Snyder, Jackson Lewis P.C.


 

January 27, 2015

Judgment Denied to Employer on Homicidal Employee's ADA Claim


The U.S. District Court for the Eastern District of Pennsylvania recently denied judgment on the pleadings to an employer on an Americans With Disabilities Act (ADA) claim of a terminated employee who had notified his supervisor that, inter alia, “I wanna kill someone/anyone.” Walton v. Spherion Staffing, LLC, No. 2-13-cv-06896-GAM (E.D. Pa Jan. 13, 2015). The court acknowledged that the case “tests the outer bounds of the Americans With Disabilities Act in the context of workplace violence.” However, viewing the complaint in the light most favorable to the plaintiff, as required under FRCP 12(c), the court concluded that the plaintiff had stated a plausible claim under the ADA that his employment was terminated because of his mental disability—depression—rather than as a result of workplace misconduct.


The facts “ably pleaded by Plaintiff’s counsel” established that plaintiff Taj Walton began his employment with defendant Spherion Staffing, LLC, in 2007. Spherion is a staffing agency that places employees in various work assignments. Spherion assigned the plaintiff to work at Tech Data Corp. in October 2011. On November 21, 2011, the plaintiff experienced suicidal ideations for the first time, while traveling to work at Tech Data. The next day, the plaintiff experienced suicidal thoughts again, and for the first time, homicidal ideations. In the words of the plaintiff’s counsel, “[r]ecognizing that he needed immediate medical attention,” the plaintiff wrote a note and left it for his Spherion supervisor, Lizelle Parks, at Tech Data. It read:


Lizelle, Please Help Call [telephone number provided] Mom [telephone number provided] Dad The police I’m scared and angry. I don’t know why but I wanna kill someone/anyone. Please have security accompany you if you want to talk to me. Make sure, please. I’m unstable. I’m sorry Taj.


Parks was not at the Tech Data site that day. However, a security guard read the note and called the police. The plaintiff waited outside for the police to arrive and drive him to a hospital. He was not restrained while waiting for the police.


Thereafter, the plaintiff was diagnosed with depression. For a couple of weeks, he tried to contact Parks to tell her of his depression diagnosis and his need for medical care. The plaintiff informed other Spherion employees of these facts while trying to communicate with Parks. When the plaintiff finally reached Parks, on December 11, she told him that his employment was terminated, his health insurance cancelled, and he was prohibited from working at any Spherion locations.


The plaintiff claimed that Spherion and Tech Data terminated his employment based on his disability, and failed to accommodate his depression, in violation of the ADA. Spherion moved for judgment on the pleadings, asserting that it had no choice but to fire the plaintiff for his potentially dangerous misconduct—that the plaintiff’s misconduct took him outside the protection of the ADA.


The district court acknowledged the difficult balance of interests presented by the facts before it—the protection of the plaintiff’s rights and need for treatment under the ADA versus Spherion’s obligation to provide a safe workplace for its employees. However, at the pleading stage, and drawing all inferences in favor of the plaintiff, the court determined that the plaintiff should be able to obtain discovery to try to establish his claim.


The court identified three primary bases for its decision. First, the court concluded that the plaintiff had not actually engaged in any misconduct, had not actively made any threat of harming anyone at the workplace. Instead, the plaintiff’s note was a “plea for help.” “Plaintiff neither committed nor threatened violent acts, but rather sought assistance.”


Second, the court acknowledged the substantial body of case law, cited by Spherion, holding that proclivities toward violence and threats toward coworkers are not protected under the ADA. Indeed, many employers have issued zero-tolerance policies regarding workplace violence, as recommended by the Occupational Safety and Health Administration. Moreover, Spherion emphasized an influential Seventh Circuit case, Palmer v. Circuit Court of Cook County Ill., 117 F.3d 351 (7th Cir. 1997), which notes that an employer puts itself in jeopardy of being deemed negligent if it retains a violent employee and he or she hurts someone at work. But the Pennsylvania district court found the Seventh Circuit’s analysis to be faulty—in the overwhelming majority of jurisdictions, employers would be immune from tort liability to an injured employee who is covered by workers’ compensation.


Third, the court suggested that Spherion might have prevailed on its Rule 12(c) motion if it had fired the plaintiff on the day he wrote the note revealing his homicidal ideations. On that day, Spherion had no knowledge that the plaintiff had a disability. Therefore, the plaintiff’s perceived misconduct could have been the only basis for his termination. But by the time Spherion terminated the plaintiff’s employment—some three weeks after his note— Spherion knew that the plaintiff had a disability. In the view of the court, “[u]nder the pleaded complaint, if a genuine threat existed, it had passed.” As a result, the court noted, there was a plausible inference from the complaint that Spherion discharged the plaintiff as a result of his disability and “need for urgent and presumably expensive medical attention, rather than as a result of any workplace threats.”


John F. Stock, Benesch Friedlander Coplan & Aronoff LLP, Columbus, OH


 

January 16, 2015

Is Your Miniature Horse Needed Because of a Disability?


It’s the busy shopping season, and a customer, who does not seem to have any disabilities, comes in with a miniature horse on a leash. What do you do? Well, there are only two questions you can legally ask this person in this situation. The first is above in the title. The other is “What work or task has your miniature horse been trained to perform?” That’s it. Not “What disability is your miniature horse trained to assist?” Not “Can we see some medical documentation for your disability and need to have a service animal?” Not “Can we see certification that your miniature horse is actually a service animal?” And yes, if you were wondering, a miniature horse can be a service animal.


Under Title III of the Americans with Disabilities Act (ADA), private businesses that are publicly accessible must permit the use of a service animal by an individual with a disability. The Department of Justice (DOJ) defines a service animal as a dog that is individually trained to work or perform tasks for an individual with a disability including a physical, sensory, psychiatric, intellectual, or other mental disability. The DOJ later revised this definition to include miniature horses. Any other species of animal, wild or domestic, trained or untrained, is not considered a service animal. The work that a service animal completes must be directly related to the person’s disability. This includes pulling a wheelchair, guiding the blind, alerting people who are deaf, alerting or protecting a person having a seizure, and performing other tasks.


There are several traps and pitfalls for the unknowing employer or business.


Service animals are allowed to go everywhere the public is allowed. Under the ADA, service animals are working animals—not pets—so they must be allowed everywhere the public is allowed. Even if your business has a “no-pets” policy, a service animal is still allowed on premises. A service animal, however, may be prohibited from certain areas if its presence interferes with a legitimate safety requirement of the facility (i.e. surgery room or burn unit in a hospital). Businesses that sell food still must allow service animals in the public areas even if state or local health codes prohibit animals on site.


Service animals may be removed from the premises if not under control. A service animal may be removed if: (1) it is not housebroken or (2) it is out of control and the owner is not able to control it. An owner shall have the service animal on a harness, leash, or other tether unless the owner cannot use these due to a disability or the restraint would interfere with the service animal’s performance of task. If no harness is used, the animal must be under the owner’s control via voice command, signals or other method.


If a service animal is removed, continue to allow access to owner. A business should continue to allow the owner to obtain goods, services, and accommodations without having the animal on the premises after removal of the service animal.


You cannot isolate people with service animals. People who use service animals cannot be treated less favorably than other patrons or charged additional fees not charged to other patrons without animals. If an establishment normally charges a deposit or fee for individuals with pets, it must waive this fee for service animals. However, if an establishment normally charges a fee for the damage an individual causes, it may also charge the owner for any damage caused by the service animal. Further, fear or allergies are insufficient reasons to preclude access a service animal. An accommodation should be made to place the person with allergies and the service animal in different places in the room or in different rooms, if possible.


Staff are not required to provide for the care or supervision of a service animal.


An emotional support animal is not a service animal. While emotional support animals or comfort animals are often used as therapy animals, they are not considered service animals under the ADA; however, other laws may require an accommodation for emotional support animals. If an animal is merely to provide emotional support and has not been trained to provide a task directly related to a disability, you do not need to make an accommodation under the ADA.


Other state and federal laws may define service animals more broadly than the ADA. For example, the definition of service animal is broader under the Fair Housing Act and Air Carrier Access Act, and these acts, including others, may mandate accommodations for emotional-assistance animals. There are also state regulations that may require you to allow your employees with medical conditions and disabilities to bring in their service animal and/or emotional support pets.


If your business is open to the public, it is likely that you must comply with one or more of the laws requiring access by service animals. Figuring out how to accommodate service animals can be difficult, but whatever you do, be sure to keep some hay handy.


Karl O. Riley, Snell & Wilmer L.L.P., Las Vegas, NV


 

January 8, 2015

Employers Must Be Cautious Using Good-Faith Defense in FLSA Actions


In Scott v. Chipotle Mexican Grill, Inc., No. 12-08333, 2014 U.S. Dist. LEXIS 175775 (S.D.N.Y December 18, 2014), the court held that the employer waived the attorney-client privilege by invoking a good-faith defense and thereby putting at issue otherwise privileged communications between the employer and its lawyers regarding the classification of employees under the Fair Labor Standards Act (FLSA). In asserting its good-faith defense, the employer claimed to have relied on state and federal regulations but specifically denied relying “upon advice of counsel.” However, the court found that “such artful pleading cannot negate an element of a statutory defense, especially here, where it is evident that [the employer] did in fact have the advice of counsel on the very topic at issue.” The court held that “where the defendant has clearly benefitted from the advice of counsel on the very issue on which it asserts good faith, it puts its relevant attorney-client communications at issue and thereby waives its privilege.”


The FLSA allows a defendant to avoid liability for failure to pay overtime if the defendant “pleads and proves that the act or omission complained of was in good faith in conformity with and in reliance on any written administrative regulation, order, ruling, approval, or interpretation” of the administrator of the Wage and Hour Division of the Department of Labor. 29 U.S.C. § 259. The act also allows an employer found liable for past wages to avoid liability for liquidated damages by proving a reasonable, good-faith belief that it was not violating the FLSA. 29 U.S.C. § 260. Additionally, an employer’s lack of willfulness limits the statute of limitations for claims under the FLSA from three to two years. 29 U.S.C. § 255(a). The court’s decision in Scott, however,demonstrates that employers must proceed with caution when asserting such “good faith” defenses to alleged violations of the FLSA. If an employer relies on advice of counsel in determining the proper classification of its employees, asserting such a defense could subject its otherwise privileged communications with counsel to discovery.


Kindall James, Liskow & Lewis, Houston, TX


 

December 17, 2014

Drafting Litigation Hold Letters in FLSA Putative Collective Actions


The boundaries of an employer’s preservation duties are determined by asking two questions: When does the duty to preserve attach and what evidence must be preserved? See Tracy v. NVR, Inc., 2012 WL 1067889, at *5 (W.D.N.Y. March 26, 2012). Usually, these two questions can be answered relatively simply. As to the first, employers are required to preserve evidence when it has notice that the evidence is relevant to current litigation or could be relevant to future litigation. Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2nd Cir. 2001), cert. denied, 534 U.S. 891 (2001). The second question is where things can get tricky. Usually employers are required to preserve what they know, or reasonably should know, is relevant to the litigation, is reasonably calculated to lead to the discovery of admissible evidence, is reasonably likely to be requested during discovery, and/or is the subject of a pending discovery request. Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217 (S.D.N.Y. 2003) (Zubulake IV). Think that’s easy? Try figuring that out when you don’t know who the plaintiffs are yet.


In FLSA putative collective action cases, parties are caught between a rock and a hard place when trying to conduct discovery before the parties know who will be in the class of plaintiffs and whether the putative class will be certified by the court. Exactly how much electronically stored information (ESI) does an employer have to hold onto at this point? The answer, as always, is it depends. Here are four things you should keep in mind when trying to guide an employer in the right direction:


1. Every current and former employee who might opt in to the lawsuit is a potential plaintiff, and therefore, a “key player.”
In Zubulake IV the court set forth the “key players” doctrine. This doctrine defines which non-party corporate employees’ discoverable material must be preserved. The duty applies to individuals “likely to have discoverable information that the disclosing party may use to support its claims or defense.” Zubulake IV, 220 F.R.D. at 218.


In a 2012 decision, the Southern District of New York in Pippins v. KPMG, LLP established the parameter of the key players doctrine in Fair Labor Standards Act (FLSA) putative collective action cases. The court cast a rather wide net in finding that not only are all parties to the action key players, but every potential plaintiff receiving opt-in notices for the FLSA collective action are as well.


Keep this in mind when drafting your litigation holds. Employers are obligated to not only preserve parties’ ESI, but potential parties as well.


2. Determine whether documents pertaining to potential opt-in plaintiffs contain direct evidence regarding their work hours and duties.
While the Pippins case is still good precedent, it has been distinguished in one aspect. That is when ESI concerning potential opt-in plaintiffs does not contain direct evidence of their work hours and duties.  2012 WL 1067889, at *5 (W.D. N.Y. March 26, 2012).  Thus, ESI pertaining to potential opt-in plaintiffs that contains indirect evidence of hours and duties, such as quarterly market supports and customer surveys, likely do not need to be preserved.


3. Parties should consider opportunities to sample large quantities of ESI as a way to potentially limit their preservation burdens.
In Pippins, the court acknowledged the importance of proportionality and how it can be determinative when deciding a motion for protective order. However, the court could not conduct a proportionality analysis (weighing the costs of e-discovery against the potential benefits) because the defendant refused to provide the plaintiff with any samples of the plaintiffs’ hard drives for examination. Not only did this undermine any argument made by the defense regarding the unreasonable costs of e-discovery, but also it infuriated the court.


4. It pays to engage in good-faith discussions with opposing counsel as early as possible regarding the scope of preservation.
In Pippins, the court faulted the parties—the defendant in particular—for failing to cooperate and communicate with one another. The defendant refused to provide samples of ESI to the plaintiff and then sought an order that it had no obligation to preserve it. This led to the defendant having to preserve ESI for all plaintiffs and potential plaintiffs. Ouch. The court described the defendant’s burden in preserving all of this information as “self-inflicted” due to its own “recalcitrance.” Thus, cooperation and communication are key when preparing to preserve evidence and could save an employer from incurring costs associated with discovery motions and even preservation itself.


Mallory Schneider Ricci, Constangy, Brooks & Smith, LLP, TN


 

December 10, 2014

NLRB Begins to Define Limits on Protection for Facebook Posts


The National Labor Relations Board (NLRB) has been called upon with increasing frequency over the past two years to determine whether employees’ work-related Facebook posts are the type of concerted activity afforded protection under section 7 of the National Labor Relations Act. In the great majority of the cases it has considered, the board has determined that the employees’ work-related communications via social media were indeed concerted, protected activity and hence subject to the protections of section 7 of the act. This trend perhaps led both employers and employees to reach the conclusion that employees’ social-media posts about their employers are simply off-limits under the act. In a recent decision, however, the board provided a very clear example of the type of social-media communications that, although concerted, can be so inappropriate as to lose their section 7 protection.


In Richmond District Neighborhood Center, 361 NLRB No. 74 (2014), the sole issue before the board was “whether an August 2, 2012 protected concerted Facebook conversation between two of the Respondent’s employees lost the Act’s protection.” The two subject employees—Moore and Callaghan—were employed by the Beacon Teen Center in San Francisco, an organization that provides afterschool and summer programming and activities for local junior high and high school students. For the 2011–2012 school year, Moore was employed as a program leader and Callaghan was an activity leader. It is the employer’s practice, at the end of each year’s summer program, to determine whether to extend offers of employment to each employee for the upcoming school year and summer program. At the conclusion of the 2012 summer program, the employer extended offers of employment to both Moore and Callaghan for the 2012–2013 school year and 2013 summer program. Moore, however, was demoted to the position of activity leader due to a negative performance evaluation.


After receiving their offer letters, in August 2012, the two employees engaged in a profanity-laced Facebook exchange, which included a former student participant in the program, about their plans for the upcoming school year at the Beacon Teen Center. In relevant part, the two employees discussed their intent to engage in excessive absences from work, plan activities for the students without obtaining management’s authorization for the activities or the attendant expenses, play loud music, and teach the student participants to “graffiti up the walls.” The employees’ exchange was visible to any person designated as a “friend” of either of the employees. On the following day, another employee sent screen shots of the Facebook exchange to management and the employer rescinded both employees’ rehire offers based solely on those Facebook communications. The employees challenged their terminations and an administrative law judge (ALJ) heard the case and ruled in favor of the employer, concluding that the employer “could lawfully conclude that the actions proposed in the Facebook conversation were not protected under the Act and that the employees were unfit for further service.”


Upon its review of the case, the NLRB affirmed the ALJ’s ruling, but took issue with the fact that in arriving at his conclusion, the ALJ applied a subjective standard based upon what the employer could have reasonably believed about the employees’ conduct. The board stated that the correct standard to be applied is, instead, an objective one: “whether the employees’ conduct was so egregious as to take it outside the protection of the Act, or of such character as to render the employees’ unfit for further service.”       


Applying the objective standard, the board concluded that “the pervasive advocacy of insubordination in the Facebook posts, comprised of numerous detailed descriptions of specific insubordinate acts, constituted conduct objectively so egregious as to lose the acts protection and render Callaghan and Moore unfit for further service.” The board noted that the employer was not required to wait for the employees to follow through on the misconduct they advocated. Notably, the board’s decision was not based in any way on the employees’ use of profanity in their posts, but relied solely on the character of the misconduct they endorsed.


So, the takeaways from the Richmond District Neighborhood Center decision are:


  • There is a limit to the section 7 protection afforded to employees’ Facebook posts, even where those posts qualify as concerted activity.
  • The use of profanity alone, even when it is pervasive, is insufficient to negate the act’s protection of employees’ work-related Facebook communications.
  • Because the standard to be applied in evaluating employee’s work-related Facebook posts is an objective one, the NLRB—and not the employer—will have the final say as to whether the subject social media posts were the type of concerted activity the act is intended to protect.

Keywords: litigation, employment law, labor relations, National Labor Relations Board, NLRB, National Labor Relations Act, NLRA, Section 7, Section 8, protected concerted activity, objective standard, social media, Facebook, insubordination, Beacon Teen Center


Charn Reid, Brooks Pierce, LLP, Greensboro & Raleigh, NC


 

December 3, 2014

Five Keys to Enforceable Employment Arbitration Agreements


Employment arbitration agreements can create an efficient and economical mechanism to resolve disputes between employers and employees arising from the employment relationship. Such binding arbitration agreements also can help to relieve congestion in court dockets. For such reasons, the U.S. Supreme Court has reiterated, in a series of recent high-profile cases, the strong policy of the Federal Arbitration Act (FAA) to encourage arbitration. See AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (section 2 of the FAA reflects a liberal policy favoring arbitration; classwide arbitration prohibition upheld); American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) (courts must “rigorously enforce” arbitration agreements according to their terms; bar to classwide arbitration on federal statutory claims upheld).


Below are five keys to enhancing the enforceability of employment arbitration agreements.


1.         A clear agreement to arbitrate. The language of the documents by which the employee agrees to arbitrate employment-related disputes must be very clear in notifying the employee that he or she is agreeing to arbitrate. Indeed, the employee should be required to sign multiple documents assenting to arbitration. For example, the employment application should clearly notify the applicant that he or she agrees to arbitrate employment disputes by signing and submitting the application to the employer, with prominent language such as the following:


DO NOT SIGN UNTIL YOU HAVE READ AND UNDERSTAND THIS STATEMENT


I, [applicant] agree that I will settle any and all claims, disputes, or controversies arising out of or relating to my application or candidacy for employment, terms of employment, and cessation of employment with Employer, exclusively by final and binding arbitration before a mutual arbitrator. . . .


For an arbitration agreement to cover certain federal statutory claims, such as Age Discrimination in Employment Act claims, the arbitration agreement may be required to provide the employee with certain statutorily defined protections, such as a right to revoke consent to the agreement within seven days after signing it.


The employee should be required to sign a receipt that he or she has received and read the employer’s employee handbook. That receipt also should have the employee acknowledge that any employment-related dispute will be resolved by binding arbitration.


Finally, the employee should also be required to sign the arbitration agreement itself, again acknowledging the parties’ consent to resolve all disputes by binding arbitration.


2.         Mutually binding arbitration. Both the employer and the employee must agree to submit disputes arising from the employment relationship to binding arbitration. A one-sided agreement, by which the employee is required to arbitrate his or her claims, but the employer may file its claims in court, is a recipe to have a court determine that the agreement is not enforceable. Mutuality of obligation is essential.


3.         Splitting arbitration costs. Many employment arbitration agreements provide that the employer and employee will split the costs of arbitration—often with a cap on the employee’s share of arbitration costs. Such provisions are not per se invalid. However, care must be taken to ensure that the employee’s share of costs is not so onerous as to render prosecution of a claim cost prohibitive—a determination that is made on a case-by-case basis. To help prevent such a circumstance, the arbitration agreement should contain a provision that the arbitrator has the authority to reduce the employee’s share of costs upon application and an appropriate showing by the employee. A mechanism for reducing the employee’s cost burden in appropriate circumstances will heighten the likelihood of enforceability of the cost-splitting provision.


4.         Locale of arbitration. The arbitration agreement should provide a locale for the arbitration hearing that is reasonable under the circumstances. Generally, the locale of the arbitration hearing should be no farther than a few hours’ travel by car for the employee. The employee should not be required to travel halfway across the country to attend the arbitration hearing.


5.         Severability of provisions. It is vitally important that the arbitration agreement contain a provision by which the employer and employee clearly agree that each and every provision of the agreement is severable. A provision such as the following might be used:


If any court determines that a particular provision of this arbitration agreement is invalid or unenforceable, no other provision of the agreement is thereby rendered invalid. The court shall sever the unenforceable provision, but shall enforce the remaining provisions of the agreement—especially the parties’ agreement to arbitrate all claims arising from employer’s employment of employee.


A severability clause is crucial to protecting the enforceability of the arbitration agreement if it is challenged by the employee in court.


An employment arbitration agreement can save time and costs, and will be enforceable, if it is balanced and reasonable.


John F. Stock, Benesch, Friedlander, Coplan & Aronoff, LLP, Columbus, OH


 

November 20, 2014

Avoiding Holiday Liability


‘Tis the season to be jolly. However, while you are enjoying the holiday cheer and a cup of hot chocolate, don’t forget to take a moment to assess the potential legal liability that this holiday season may bring. Well-meaning practices could have serious legal ramifications, so here are some tips to avoid finding a proverbial lump of coal in your stocking in the form of a new lawsuit.


Holiday Parties
Holiday parties should be unforgettable because of the festivities and fun, not because of the legal consequences that follow. Employers should consider the following holiday-party best practices to protect themselves and their employees:


  • Avoid using religious terms when describing office celebrations. Rather than referring to a party as a “Christmas party,” it should be referred to as a “holiday party” or “annual celebration.”
  • If you choose to play holiday music, select non-religious songs (think “Winter Wonderland,” not “Away in a Manger”).
  • As the Seventh Circuit observed, “At the risk of playing the Grinch, however, we note that office Christmas parties also seem to be fertile ground for unwanted sexual overtures that lead to Title VII complaints.” Employers have a legal duty to prevent harassment at holiday parties, just like they have a legal duty to prevent harassment in the office. Therefore, publish or republish the company’s sexual-harassment policy before holiday parties take place. Remind employees that holiday festivities do not offer an excuse for violating a sexual-harassment policy. If a company does not have a written policy or if you have not yet required your employees to attend harassment training this year, this would be a good time to take action.
  • If alcohol is served, keep consumption lawful and in check. Limiting access to alcohol by placing restrictions on the type served, the time available (such as by closing the bar well before the party ends) or the number of drinks served (such as through drink tickets) may reduce the possibility that employees will drink to excess. Providing food is also a good idea, as it typically slows the absorption of alcohol into the bloodstream. Providing plenty of non-alcoholic beverages is also a wise choice.
  • Hire professional bartenders and require IDs from guests who do not appear to be 21 or older. Ask the bartenders to keep their eyes open for obviously intoxicated employees. In addition, assigning designated managers to remain sober and monitor the intoxication of employees can serve as both a deterrent to excessive drinking and a safeguard against liability in the event that someone overindulges.
  • Arrange designated drivers or cabs to ensure that all persons have a safe way to get home. Consider offering incentives to employees who offer to be designated drivers and/or prepaid cab vouchers to employees.
  • Make clear that employee attendance at the holiday party is voluntary and that employees are not required to attend. To that end, do not distribute bonuses at the holiday party. If a holiday party is mandatory or if you hold it during regular work hours, then you will need to pay your non-exempt employees for the time they spend at the party.
  • Consider inviting spouses, significant others, families, and important clients. Inviting employees’ families and the company’s important clients and others with whom the company conducts business can change the atmosphere of a company party and discourage inappropriate behavior. If you invite clients to the party, however, remember that employers can be liable for harassment perpetrated by third parties.
  • The time and place of the party will go a long way toward setting the tone, and picking the right ones can help eliminate problematic behaviors. A daytime event is far less likely to result in excessive drinking, or otherwise result in employees behaving inappropriately. Additionally, an event on a weekday, when employees know they have to work the next day, is likely to be more tame than one on a weekend. As far as location goes, if alcohol is being served at the party, the employer may be better off hosting an event offsite.
  • Check with your insurance carrier to make sure that your general liability policy will cover your holiday party. Some general liability policies have an alcohol exclusion, so be sure to determine whether your policy includes such as exclusion before you decide to provide alcohol.
  • Most importantly, if there is a problem—deal with it promptly. Every act of sexual harassment—whether by a coworker, a client, or supervisor should be taken seriously. Prompt action designed to stop any further harassment not only demonstrates that the employer does not condone such behavior, but may prevent certain behavior from being imputed to the employer. Also, a record of consistent and effective response to incidents is important because the employer’s entire record of dealing with such matters is considered when evaluating liability.

Conclusion
When getting ready for the holidays, don’t forget the potential for liability, as compliance with the law takes no holiday. Have a safe and enjoyable holiday season and think twice before you hang mistletoe in the office.


* This is an excerpt from the original article "Avoiding Holiday Liability," which appeared in Snell & Wilmer's November 2014 edition of the Workplace Word.


Matt P. Milner, Snell & Wilmer, Tucson, Arizona


 

November 14, 2014

KS Supreme Court: FedEx Drivers Employees, Not Independent Contractors


Substance prevails over form in the Kansas Supreme Court, as it ruled on October 3, 2014, that FedEx Ground drivers are employees, not independent contractors, under Kansas law.


Despite FedEx’s efforts to carefully structure its drivers’ operating agreements so that it could label the drivers as independent contractors, the court held that “[n]otwithstanding the form or labels utilized, we must determine whether the substance of the relationship between FedEx and its delivery drivers renders the drivers employees within the meaning of the [Kansas Wage Payment Act]. Ultimately, we determine that form does not trump the substantive indicia of an employer/employee relationship.”

The Kansas Supreme Court opinion was in response to two certified questions arising out of a class-action lawsuit pending in the Seventh Circuit, and will significantly impact other class-action lawsuits alleging that FedEx misclassified its workers, in which drivers are seeking back compensation as well as expenses that FedEx had charged to the drivers as independent contractors. Lead counsel for the California plaintiffs, Beth Ross, estimates that FedEx’s exposure could be $250 to $300 million, excluding mandatory attorney fees, in California alone.


The court repeatedly emphasized that the right to control is the key question in the determination of whether a worker is an employee or independent contractor. The right to control the “manner and means by which” a worker achieves certain goals is likely the most important aspect of this test. The court noted that FedEx’s own carefully drafted driver operating agreement directs “such things as delivery days and times; delivery methods; reporting requirements; vehicle identification, specifications, and maintenance; and driver appearance.” In addition, the court pointed out a multitude of other FedEx controls over drivers, including “manuals, handbooks, memoranda, training videos, and other means of communication that direct the manner and means of delivering packages.”


The control test is a fact-intensive inquiry and is different for each case. Some factors weighed in favor of finding an independent-contractor relationship, but these were mostly related to the workers’ responsibility to pay their own expenses, which is obviously the most beneficial aspect for FedEx. The court ultimately determined that “[e]ven where the factors should point us toward finding that the drivers are independent businesspersons, FedEx’s control and micromanaging undermine the benefit that a driver should be able to reap from that arrangement.”


Matthew P. Clune and Matthew A. Spahn, Martin, Pringle, Oliver, Wallace & Bauer, LLP, Kansas City, MO and Wichita, KS


 

June 6, 2014

Act Aims to Bolster Rights of Sexual-Assault Victims in the Military


In most of the United States, when a victim suffers from sexual assault, the victim is entitled to have his or her attacker prosecuted in a public court. If a victim suffers a sexual assault at the hands of a coworker or a supervisor in a private workplace, the victim can likely rest assured that he or she will not have to work with his or her attacker again and that the attacker will likely be terminated. The employer would have the responsibility to investigate the incident, remove the coworker or supervisor from the employee’s workflow, and take disciplinary action, likely including termination, against the coworker or supervisor.

However, if a victim and the attacker are members of the military, victims are not entitled to this justice or assurance. Instead, presently, the attacker is not tried by a jury of his or her peers and the decision whether to prosecute the attacker is made by the attacker’s chain of command.


In November 2013, Senator Kirsten Gillibrand (D-NY) introduced the Military Justice Improvement Act of 2013 because she was concerned about a rash of sexual assaults against military members in which the victims did not obtain justice and the attackers were not prosecuted or were not issued sentences commensurate with their crimes. Senator Gillibrand was also concerned that victims were concerned about whether to even report that they had been sexually assaulted because of concerns that their attackers were within or could influence their chain of command.


The act would have required that an independent military prosecutor would decide whether to prosecute any crime punishable by one year or more in confinement. The act also would have left the decision whether to prosecute crimes that are uniquely military in nature within the accused’s chain of command.


On March 6, 2014, the Senate voted on a motion to invoke cloture, which failed by five votes. Senator Gillibrand’s bill has been returned to the calendar, essentially pending indefinitely.


Senator Gillibrand’s bill has raised concern about the issue of sexual assault in the military, and more incidents are being reported. Despite the Senate’s failure to take action on the bill, sexual assault remains an outstanding issue for members of the military.


The Department of Defense’s FY 2013 Annual Report on Sexual Assault in the Military concluded that during FY13, there were 5,061 reports of sexual assault, which was a 50 percent increase from the FY12 number of reports. The report asserted that the increase in reporting reflected an increase in crime, however, and asserts that there was a substantial increase of reports of incidents that victims experienced prior to joining the military.


Despite this assertion, there are still frequent reports of sexual assault of military members—or the improper handling of such reports—in the news. For example, in late April 2014, the military announced that it had suspended and rebuked Major General Michael Harrison, the commander of the U.S. Army forces in Japan, for paying insufficient attention to reports of inappropriate behavior and sexual assault by a colonel on his staff. Harrison waited months to report the colonel’s sexual assault of a woman—which was not the only misconduct the colonel was accused of. Harrison did not take action until the woman went outside of the chain of command. Despite the fact that Harrison neglected complaints against the colonel, the Army assigned him to a prominent position in the Pentagon.


In the private sector, a supervisor who neglected or ignored employees’ complaints of inappropriate behavior and sexual assault would be held individually liable for damages suffered by the employee-victim in question under many state and county human-rights acts across the nation. If the employer then reassigned the supervisor to another prominent position, the employer would likely increase its liability if the supervisor ignored additional complaints in the future and could even be held liable for retaliation against the employee-victim if the supervisor remained within his or her chain of command.


By taking the decision about whether to prosecute a crime out of the traditional chain of command, Senator Gillibrand’s bill would provide military victims of sexual assault with an increased layer of protection from not only sexual assault but also from retaliation for reporting sexual assault. Although this is not as much protection as private employees are afforded, Senator Gillibrand’s bill would show servicemembers that the military will protect its soldiers from sexual assault and that sexual assault will not be tolerated in the workplace.


Adam Carter and R. Scott Oswald, The Employment Law Group, PC, Washington, D.C.


 

April 28, 2014

SCOTUS: Michigan Voters May Mandate Race-Neutral Admissions


On April 22, 2014, the Supreme Court, in its plurality opinion in Schuette v. Coalition to Defend Affirmative Action, upheld the right of Michigan voters to enact an amendment to its state constitution providing that public colleges and universities “shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin[.]”


The Michigan voters amended the state constitution in 2006 in response to earlier Supreme Court affirmative-action decisions in 2003 that had upheld the limited use of race-based admissions criteria for public universities. Specifically, the Court’s 2003 decisions in Gratz v. Bollinger and Grutter v. Bollinger permitted the narrow use of race-based criteria, and upheld the application of such criteria as applied to the University of Michigan’s law school, but struck down the criteria as overly broad for the University’s undergraduate program.


The Sixth Circuit struck down, on equal-protection grounds, the Michigan constitutional amendment. A plurality of the U.S. Supreme Court reversed the Sixth Circuit. Justices Roberts, Kennedy, and Alito, after noting that the issue in the case did not involve the legality or merit of using race-based admission criteria, held that the equal-protection clause of the federal constitution did not provide the authority for the federal courts to intervene in the question decided by Michigan voters.


Justices Scalia and Thomas reached the same conclusion, but would have expressly overruled the principle set forth in the Court’s prior precedent, which was relied on by the Sixth Circuit. Justice Breyer also concluded that the constitutional amendment should be upheld. Noting that the Court’s prior cases permit, but do not require, the use of race-based admissions criteria, Breyer concluded that the ballot box was the appropriate forum for the citizenry to debate the merits of the issue.


Justices Sotomayor and Ginsburg dissented, contending that the Michigan voters had impermissibly changed the rules of the political process in a manner that burdened minorities, which required invalidation under the equal-protection clause.


Justice Kagan did not participate in the decision.


Keywords: litigation, employment law, labor relations, Affirmative Action, Supreme Court, Schuette v. Coalition to Defend Affirmative Action, Michigan Constitution, Gratz, Grutter


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

April 22, 2014

SCOTUS Rejects Florida Governor's Appeal Regarding Drug Testing


On April 21, 2014, the U.S. Supreme Court denied certiorari in Scott v. American Federation of State, County and Municipal Employees Council 79. In that case, Governor Rick Scott of Florida sought to challenge the Eleventh Circuit’s decision, which struck down his executive order mandating suspicionless drug testing of all 85,000 state employees employed under the governor’s purview in Florida and all job applicants for such positions.


In its decision, the Eleventh Circuit comprehensively reviewed prior Supreme Court precedent and held that a broad mandate requiring drug testing of all state employees violated the Fourth Amendment, but that a narrow program implementing suspicionless testing for safety-sensitive positions would be constitutional.


In seeking certiorari to the Supreme Court, Governor Scott had sought to expand permissible drug testing by public employers beyond the circumstances permitted in the Court’s prior cases dating back to the 1989 decisions in Skinner v. Railway Labor Executives’ Ass’n and National Treasury Employees Union v. Von Raab. Notwithstanding Governor Scott’s invitation, the Supreme Court’s rejection of certiorari seemingly signals the Court’s reluctance to review its prior precedent in this area, at least for the time being.


Keywords: litigation, employment law, labor relations, drug testing, Fourth Amendment, Scott v. AFSCME, Supreme Court, Eleventh Circuit


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

April 15, 2014

NLRB: Employers Cannot Require Positive Attitudes


The National Labor Relations Board (NLRB), in its April 1, 2014, decision in Hills and Dales General Hospital, struck down an employer policy prohibiting, among other things, employee “negativity.”


In this case, the hospital maintained a “Values and Standards of Behavior Policy.” That policy provided, in part, that employees were prohibited from making “negative comments about our fellow team members.” The policy also stated that employees will “represent [the hospital] in the community in a positive and professional manner in every opportunity.” Additionally, the policy also stated that employees “will not engage in or listen to negativity or gossip.”


The NLRB, analyzing the policy under the standard outlined in its Lutheran Heritage Village-Livonia decision, found these provisions to be impermissibly overbroad on the basis that employees would reasonably construe the language to prohibit protected concerted activity under section 7 of the National Labor Relations Act. Specifically, the NLRB held that “the prohibitions on ‘negative comments’ and ‘negativity’ . . . are unlawful.” The NLRB continued, “[t]he requirement that employees ‘represent [the hospital] in the community in a positive and professional manner’ is just as overbroad and ambiguous as the proscription of ‘negative comments’ and ‘negativity[.]’”


In light of the NLRB’s decision and its recent focus on such overbroad policies, employers would be wise to review existing employee-conduct policies and revise them to include more specific illustrations of what is and is not permitted. An example of a specific policy, which was implemented by Wal-Mart and which was determined by the NLRB’s former acting general counsel to pass muster under the NLRA, is available as an attachment to the General Counsel’s May 30, 2012 memorandum discussing employer social-media policies.


Keywords: litigation, employment law, labor relations, NLRB, Hills and Dales General Hospital, NLRA, Section 7


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

April 14, 2014

Eleventh Circuit Upholds FMLA Waivers


The Eleventh Circuit, in Paylor v. Hartford Fire Insurance Co., upheld the validity of employee waivers of claims arising under the Family and Medical Leave Act (FMLA), as long as the claim accrued prior to the date the waiver is executed. The court expressly rejected the argument that FMLA claims cannot be waived while a request for leave is outstanding. In so holding, the court determined that the proper focus was not on whether the employee had previously made an FMLA request at the time the waiver was executed, but rather, whether the adverse action at issue had occurred and the claim therefore accrued.


Paylor involved an employee of Hartford Fire Insurance Co. who submitted a request for FMLA leave in early September 2009. Two weeks later, after receiving a poor performance review, Hartford gave Paylor the option of agreeing to a performance-improvement plan and facing possible dismissal or accepting a severance package of 13 weeks of pay in exchange for a resignation and a general release. Paylor accepted the severance package, resigned her employment, and executed the release agreement. Notably, the release agreement specifically waived all employment claims, including claims arising under the FMLA.


Notwithstanding the release, Paylor filed suit and contended that the release of her FMLA claims constituted an invalid "prospective" waiver because she had made a request for FMLA leave at the time of her separation and would have been entitled to such leave had she not separated. The district court enforced the waiver and granted the employer's summary judgment. The Eleventh Circuit affirmed.


The Eleventh Circuit agreed with the premise that prospective FMLA rights could not be waived, citing Department of Labor FMLA regulation 29 U.S.C. § 825.220(d), which provides, in relevant part:


"Employees cannot waive, nor may employers induce employees to waive, their prospective rights under FMLA. . . This does not prevent the settlement or release of FMLA claims by employees based on past employer conduct without the approval of the [DOL] or a court. "


The court interpreted "prospective to mean "'a waiver of something that has not yet occurred, such as a contractual waiver of future claims[.]" Because the conduct Paylor complained of—being presented with the choice to accept the severance package or placed on the performance-improvement plan—had already occurred when she signed the waiver, it was not an impermissible waiver of a future claim. The fact that had she not resigned she would have been entitled to FMLA leave and restoration to her job following the conclusion of her leave was irrelevant.


Keywords: litigation, employment law, labor relations, FMLA, Paylor, Eleventh Circuit, prospective waiver


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

March 25, 2014

SCOTUS: Severance Payments are "Wages" For FICA Purposes


On March 25, 2014, the U.S. Supreme Court held, in United States v. Quality Stores, Inc., that severance benefits paid to laid-off employees are considered “wages” for purposes of Federal Insurance Contributions Act (FICA) taxes— i.e., Social Security and Medicare taxes. As a consequence of the Court’s holding, employers who pay severance to employees should ensure that FICA taxes are paid from any such amounts.


In 2001, Quality Stores entered into bankruptcy proceedings, necessitating the closing of some of its facilities and the layoff of thousands of its employees. Quality Stores offered severance payments to over 3000 of its laid-off employees pursuant to several severance options, which were generally based on job grade, management level, and years of service. Quality Stores initially reported the severance payments as “wages” on employee W-2 forms and paid the employer’s required share of FICA taxes. Quality Stores later sought a refund of the FICA taxes after concluding that the severance payments should not have been “wages” for purposes of payment of FICA taxes. The bankruptcy court agreed and directed a tax refund, and the Sixth Circuit affirmed.


The Court concluded that FICA’s broad definition of wages included severance payments. Under that definition, wages include “all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash.” Although the statutory definition also contains a specific list of exceptions to this broad definition, none of those exceptions are applicable to severance pay. In reaching its holding, the Court reasoned that, “[l]ike health and retirement benefits, stock options, or merit-based bonuses, a competitive severance payment package can help attract talented employees.”


Keywords: litigation, employment law, labor relations, Severance, FICA, taxes, United States v. Quality Stores


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

March 24, 2014

FLSA Does Not Prohibit Class Waiver in Arbitration Agreement


The Eleventh Circuit, in Walthour v. Chipio Windshield Repair, LLC, held that the Fair Labor Standards Act (FLSA) does not prohibit an employer from enforcing an arbitration agreement that prohibited the arbitration of class claims.


In Walthour, the court upheld an order compelling arbitration of a minimum-wage and overtime compensation claim brought by two former employees on behalf of themselves and others similarly situated. In addition to compelling arbitration of employment disputes, the arbitration agreement at issue also included a class-action waiver that stated, “By signing this agreement, employee and employer are each giving up his/her/its right to a jury trial and his/her/its right to participate in a class action because all claims will be resolved exclusively through arbitration” and “Employee and employer agree that each may bring claims against the other only in his/her/its individual capacity and not as a plaintiff or class member in any purported class or representative proceeding.”


The plaintiffs contended that this provision barring class arbitration proceedings was contrary to the FLSA and that the right to pursue a collective action under section 16(b) of the FLSA could not be waived. Accordingly, the arbitration agreement could not be enforced to preclude the collective action argued the plaintiffs.


After reviewing the Supreme Court’s recent case law applying the Federal Arbitration Act (FAA), including the Court’s 2013 decision in American Express Co. v. Italian Colors Restaurant, the Eleventh Circuit rejected the plaintiffs’ arguments. In so doing, the Court held that nothing in the FLSA expressed a contrary congressional command overriding the FAA’s requirement that arbitration agreements be enforced.


The Eleventh Circuit’s decision follows similar decisions from several other circuits that have recently reached the same conclusion, including the Second, Fourth, Fifth, and Eighth Circuits.


Keywords: litigation, employment law, labor relations, FLSA, class waiver, Federal Arbitration Act, FAA, Walthour v. Chipio Windshield Repair, arbitration


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

March 13, 2014

Employees on Military Leave Entitled to Equal Treatment


On February 27, 2014, the Eighth Circuit held in Dorris v. TXD Services, L.P., No. 1203096 (8th Cir. Feb. 27, 2014) that an employer’s obligation—pursuant to the Uniformed Services and Reemployment Rights Act (USERRA), regarding rights and benefits not determined by seniority—to treat employees taking military leave equally but not preferentially in relation to peer employees taking comparable non-military leaves (generally provided under the employer’s contract, policy, practice, or plan) may include assisting the military employee with employment to a successor company when his or her original employer was bought out by another company while he or she was on military leave.


More specifically, an issue in this case was whether an employee who had been on military leave when his employer was bought out by another company was denied an employment benefit because he was not included on a list to the new company as an active employee. The court reasoned that pursuant to USERRA, an employer has a duty not to discriminate against an employee on long-term military leave and that with regard to rights and benefits not determined by seniority, employers must treat employees taking military leave equally but not preferentially in relation to peer employees taking comparable leaves.


The Eighth Circuit concluded that a jury could find that having a chance to transfer employment from the original employer to the subsequent company that bought out the original employer constitutes an advantage or benefit of employment. As such, the Eighth Circuit reversed the district court’s finding of summary judgment regarding the USERRA claim and remanded the case. The Eighth Circuit also clarified the burden shifting between the parties, explaining that once the plaintiff could establish that being on the list was a benefit of employment and that his military service was a motivating factor for not being on the list, the burden would shift to the original employer to demonstrate that it would have taken the same action irrespective of the plaintiff’s military service, meaning anyone similarly on furlough or a leave of absence would not have been included on the list either.


Keywords: litigation, employment law, labor relations, USERRA, Military Leave, Dorris, TXD Services, Eighth Circuit, successor employer


Dahlia Dorman, Modrall Sperling, Albuquerque, NM


 

March 13, 2014

NLRB Sheds More Light on Why Facebook Post Not Protected Activity


On February 12, 2014, a three-member panel of the National Labor Relations Board (NLRB) issued a decision in World Color (USA) Corp., a wholly owned subsidiary of Quad Graphics, Inc. and the Graphic Communications Conference of the International Brotherhood of Teamsters, Local 715-C, 360 NLRB No. 37, Cases 32-CA-062242 and 32-CA-063140, affirming the finding of the the administrative law judge (ALJ) that the hat policy of the respondent, a company that prints commercial inserts for newspapers, violated section 8(a)(1) of the National Labor Relations Act (NLRA). The NLRB panel reversed the ALJ’s finding that the company’s statement to the complainant/employee about his Facebook posts violated section 8(a)(1).


The employee was the lead press operator and also a member of the union’s negotiating committee, who posted comments on his Facebook page for approximately six months where he criticized the company and discussed the union in response to another person’s post. The employee’s Facebook friends included some coworkers and his shift supervisor. The employee and his shift supervisor socialized outside of work too.


Later in this time period, the company reassigned workers due to a decline in business. The company’s process for reassignments included identifying the best operators for each shift based upon their strengths and weaknesses. All shifts were affected by the reassignment, but did not reduce employees’ number of work hours, pay, or job duties. The employee claims that when he asked his shift supervisor why reassignments occurred, his shift supervisor explained that it was more than just production and asked the employee if he did not think that management knew about the employee’s Facebook posts. The ALJ determined that the employee’s shift supervisor’s response violated section 8(a)(1). The ALJ’s analysis focused whether an employer’s statement constitutes an implicit or explicit threat of retaliation for engaging in protected activity, the test for which is determining whether the remarks may reasonably be said to have a tendency to interfere with the free exercise of employee rights under the act. Here, the ALJ held that the employee could reasonably believe that his reassignment was retaliation for his Facebook posts, which the ALJ found constituted protected activity.


The NLRB panel, however, disagreed and reversed the ALJ’s finding. The NLRB panel held that the record failed to demonstrate that the employee’s Facebook posts were protected activity. While in previous cases, the NLRB has held that Facebook posts among employees regarding the terms and conditions of employment constitute protected activity. In this particular case, the record failed to show that the employee’s posts concerned the terms and conditions of employment, failed to show that the employee’s posts were intended for or in response to his coworkers, failed to identify the coworker by name regarding the union comments, and the fact that the shift supervisor’s statement implied that the company reacted adversely to the employee’s posts was “insufficient to bridge the evidentiary gap.” Ultimately, the NLRB panel held that the record failed to show that the shift supervisor’s conduct was directed at or in response to an actual or suspected protected activity by the employee or that the employee would reasonably interpret his shift supervisor’s statement as interfering with, restraining, or coercing him from engaging in protected activity.


Both the ALJ and the NLRB panel agreed that the company’s hat policy was separate from the uniform policy because the hat policy was set forth in the employee guidelines’ protection-of-employee-and-facilities section, not the dress-code section, and because the hat policy was developed by the company’s safety, security, and human-resources departments. More importantly, wearing baseball caps enabled employees to secure their hair to their heads to prevent their hair from being caught in the high-speed presses in the pressroom. The ALJ and the NLBR panel determined that the company failed to establish any special circumstances that justified its new hat policy—which required that employees only wear hats from vendors approved by the company with the company’s logo and that the hat must face forward—and that by implementing a hat policy that prohibited employees from displaying a union logo or insignia, the company violated section 8(a)(1) of the NLRA.


Keywords: litigation, employment law, labor relations, NLRB, NLRA, Facebook, social media, protected concerted activity, uniform policy, hat policy, World Color Corp.


Dahlia Dorman, Modrall Sperling, Albuquerque, NM


 

January 27, 2014

SCOTUS: Donning and Doffing Safety Gear Not Compensable


On January 27, 2014, the U.S. Supreme Court in Sandifer v. United States Steel Corp., held that the Fair Labor Standards Act (FLSA) does not require that employees who spend time donning and doffing safety gear be paid minimum wage or overtime compensation for that time where an applicable collective-bargaining agreement provides that the time is not compensable.


In the case, current and former employees of U.S. Steel claimed entitlement to be paid for the time they spent donning and doffing protective gear that U.S. Steel required the employees to wear. The protective gear included items such as hardhats, flame-retardant jackets, steel-toed boots, leggings, gloves, safety glasses, earplugs, and respirators. Although such donning-and-doffing time would ordinarily have been compensable under the FLSA, U.S. Steel argued that 29 U.S.C. § 203(o) allowed it to consider such time as noncompensable. Section 203(o) provides, in relevant part, that “any time spent in changing clothes or washing at the beginning or end of each workday” need not be considered hours worked to the extent it is “excluded . . . by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee.” As the Court noted, “[s]imply put, the statute provides that the compensability of time spent changing clothes or washing is a subject appropriately committed to collective bargaining.”


In response to U.S. Steel’s argument, the employees argued that donning and doffing specialized safety gear did not qualify as “changing clothes.” The Court rejected the employees’ argument, noting that section 203(o)’s provision regarding “changing clothes” contains no distinction for protective clothing versus ordinary clothes designed for decency or comfort. Lastly, with respect to the few items that the Court agreed would not constitute "clothes"—i.e., safety glasses, earplugs and respirators—the Court held that the time at issue for donning and doffing those items would not change the result. The time spent, as a whole, would still be accurately characterized as “time spent in changing clothes” notwithstanding the minimal time devoted to changing non-clothes items.


Keywords: litigation, employment law, labor relations, FLSA, donning, doffing, overtime compensation, hours worked, Supreme Court


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

January 27, 2014

Time to File ERISA Appeal Not Extended by Pending Fee Dispute


On January 15, 2014, a unanimous Supreme Court in Ray Haluch Gravel Co. v. Central Pension Fund of International Union of Operating Engineers and Participating Employers clarified the timeline for appeal in cases where a motion for attorneys fees remains pending after the underlying liability issue has been determined. The Court held that the 30-day deadline to appeal final decisions under 28 U.S.C. § 1291 and Rule 4 of the Federal Rules of Appellate Procedure runs from the date of the liability determination notwithstanding a continuing fee dispute, even where the underlying fee dispute can be characterized as part of the dispute on the merits.


The decision in Ray Haluch Gravel involved a claim by the pension fund to collect employer contributions required under ERISA. In addition to seeking pension contributions from the employer, the fund also sought attorney fees recoverable under both the Employee Retirement Income Security Act (ERISA) and the parties’ collective-bargaining agreement. The district court found in favor of the fund on June 17 with respect to the unpaid contributions and awarded attorney fees thereafter on July 25. The employer filed an appeal on August 15—within 30 days of the order awarding fees, but more than 30 days after the order awarding payment of the pension contributions.


The Supreme Court held that the order determining liability that was issued on June 17 constituted a final order for purposes of appeal and therefore the 30-day deadline to appeal commenced on that day. In so holding, the Court applied its prior decision in Budinich v. Becton Dickinson & Co., in which the Court held that an order on liability is final notwithstanding a pending fee dispute arising under statute. The company in Ray Haluch Gravel argued that Budinich was distinguishable because the fee dispute in its case arose under the language of the collective-bargaining agreement and was therefore characterized by the company part and parcel of the underlying liability dispute. The Supreme Court was not persuaded and held that the 30-day deadline runs from the liability order despite a pending fee dispute and regardless of the origins and characterization of the fee dispute.


Keywords: litigation, employment law, labor relations, Ray Haluch Gravel, Budinich, Appeal deadlines, ERISA


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

January 23, 2014

NLRB Expands Bar on Mandatory Agreements Barring Collective Actions


On January 17, 2014, administrative law judge Lisa Thompson issued a decision finding Leslie’s Poolmart, Inc., violated section 8(a)(1) of the National Labor Relations Act (NLRA) by requiring employees, as a condition of employment, to agree to individual arbitration agreements, even though the arbitration agreements did not expressly prohibit employees from pursuing class, collective, or representative actions. In so ruling, the judge found that agreements, in which the employer intends to bar class, collective, or representative actions, are unlawful even where the agreement does not expressly bar such actions.


Judge Thompson’s decision expands on the prior holding of the National Labor Relations Board (NLRB) in D.R. Horton, Inc., which held that an employer violates the NLRA when it requires employees, as a condition of employment, to agree to an arbitration agreement that expressly bars collective, class, or representative actions. The NLRB reasoned that such agreements unlawfully restrict the employees’ section 7 rights to engage in concerted action for mutual aid or protection.


In Leslie’s Poolmart, the arbitration agreement at issue only provided, in relevant part, that the employer and employee agreed “to the resolution by arbitration of all claims or controversies” and that “[t]he only claims that are arbitrable are those that . . . would have been justiciable [sic] under applicable state or federal law.” As the judge noted, the arbitration agreement does not, on its face, prohibit an employee’s right to assert classwide, collective, or representative actions in an arbitral or judicial forum.


In February 2013, after a former employee sued Leslie’s Poolmart in court asserting a collective action seeking unpaid overtime compensation, the employer filed a motion to compel arbitration of the individual claims and to dismiss the collective claims. In turn, the employee filed an unfair-labor-practice charge with the NLRB asserting that the employer’s arbitration agreement violated the NLRA.


Based on these facts, the judge concluded, “even though the agreement is silent regarding the filing of collective actions, Respondent violated Section 8(a)(1) of the [NLRA] because, by its own contentions and actions, it essentially mandates that employees waive, as a condition of employment, their right to file class, collective, or representative claims in an arbitral or judicial forum.”


The judge’s decision in this case is noteworthy for several reasons. First, it is an apt reminder that even arbitration agreements that do not explicitly bar collective actions, as was the case in D.R. Horton, can nonetheless violate the NLRA where the intent of the arbitration agreement, as expressed by the employer’s words and conduct, is to bar such claims. Second, the decision also highlights the continuing applicability of the principle established in D.R. Horton in the eyes of the NLRB, notwithstanding that the D.R. Horton decision has come under considerable criticism and has even been overruled by the Fifth Circuit. Employers, employees, and their respective counsel, would be wise to follow the progress of the decision in Leslie’s Poolmart decision as it will likely provide the NLRB with its first opportunity to rule on the continued vitality of the principle it established in D.R. Horton following the Fifth Circuit’s overruling of that decision.


Keywords: litigation, employment law, labor relations, NLRB, NLRA, D.R. Horton, Leslie’s Poolmart, Arbitration


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

January 8, 2014

NLRB Throws in the Towel on Employee-Rights Poster


The National Labor Relations Board (NLRB) announced on January 6, 2014, that it has decided not to appeal recent decisions from two circuit courts invalidating the board’s rule requiring most private employers to post a notice of employee union rights.


The rule provided that employers covered by the National Labor Relations Act would be guilty of an unfair labor practice if they failed to post the employee rights poster on their property. The notice-posting requirement, which was widely supported by unions and decried by business groups, was invalidated in separate decisions by the District of Columbia Circuit Court of Appeals in May 2013 and the Fourth Circuit Court of Appeals in June 2013.


The effect of the board’s decision not to appeal the case to the U.S. Supreme Court is that employers are no longer compelled by the NLRA to post the notice. In its announcement, however, the board notes that the poster remains available on its website and “may be viewed, displayed and disseminated voluntarily.” The board also took the opportunity to remind the public that it also has a mobile phone app available to provide employees, employers, and unions of their rights under the NLRA.


Keywords: litigation, employment law, labor relations, NLRB, NLRA, employee rights poster


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

December 20, 2013

SCOTUS to Decide Affordable Care Act's Contraception Mandate


On November 26, 2013, the Supreme Court granted two certiorari petitions, agreeing to hear and decide the legality of the Affordable Care Act’s mandate requiring for-profit employers to include coverage for contraceptives in their insurance coverage offered to employees.


In Hobby Lobby Stores, Inc. v. Sebelius, the Tenth Circuit, sitting en banc, held that requiring employers to provide contraception coverage violated the Religious Freedom Restoration Act. That act provides protections for religious expression. In reaching its decision, the Tenth Circuit held that corporations, just like individuals, possess constitutional religious-expression rights. A December 16, 2013, decision from the U.S. District Court for the Eastern District of New York recently reached the same result.

In contrast, the Third Circuit, in Conestoga Wood Specialties Corp. v. Sebelius, upheld the contraception mandate as applied to a for-profit company owned by a Mennonite family. With numerous similar cases pending throughout the country, the Supreme Court’s decision should resolve the conflict.


Briefing in the case will be completed in early 2014, with oral argument likely in spring 2014. A decision is anticipated in mid-2014.


Keywords: litigation, employment law, labor relations, Affordable Care Act, ACA, contraception mandate, Supreme Court, Religious Freedom Restoration Act


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

December 20, 2013

MSPB's Ruling in Chandler Sets Standard for Furlough Appeals


Sequestration came about because of congressional failure to come up with a plan for deficit reduction. The sequester is a round of undesirable budget cuts that took effect in March 2013 through the end of the fiscal year. Sequestration had a swift and sudden impact on federal agencies in various forms. Federal employees were not immune to the cuts imposed by Congress. One way agencies handled imposed budget cuts was to place employees on furloughs of varying lengths—periods where they were barred from work duties and pay.


The natural question for these employees is whether there is an avenue for redress. Employees do have the right to challenge furloughs to the Merit System Protections Board (MSPB), which is an independent, quasi-judicial body in the executive branch. In 2013, all of the agency-imposed furloughs were less than 30 days. Where a furlough of less than 30 days is challenged, the agency must show that its decision was taken for “the efficiency of the service.” (A period of more than 30 days is treated like a reduction-in-force with different standards.) An employee can also challenge the furlough on the grounds that it was applied in a discriminatory manner or that it was a disciplinary action in disguise.


The MSPB’s Chandler Decision
As a result of the recent round of furloughs, the MSPB issued a decision to guide administrative-law judges in adjudicating appeals of furloughs. In Chandler v. Department of Treasury, 2013 MSPB 74, a majority of the three-member board explained the legal background applicable to furlough appeals while adjudicating several discovery rulings.


The board started by defining a furlough as “the placing of an employee in a temporary status without duties and pay because of a lack of work or funds or other nondisciplinary reasons.” The board found especially relevant that furloughs are instituted for nondisciplinary reasons and “short term solutions to transitory problems, such as budgetary shortfalls, and that they have only a temporary effect on an individual’s employment status.” Because of this nature—that is, that they are not personal to the affected employee—the board applies a standard requiring the agency to show “that the furlough was a reasonable management solution to the financial restrictions placed on it and that the agency applied its determination as to which employees to furlough in a ‘fair and even manner.’” The board continued that this means the furlough action must be applied “uniformly and consistently” in the same way a reduction in force is applied. This means that agencies must treat “similar employees similarly and to justify any deviations with legitimate management reasons.”


The board noted that efficiency of the service determinations do not look directly into spending decisions or allocation of furlough days for employees who are not similarly situated. Instead, the focus of the efficiency of the service inquiry is the “uniform and consistent application of the furlough, including whether the agency used a furlough to target employees for personal reasons.”


The board went on to consider various discovery holdings. It held that decisions related to the wisdom of spending decisions, union negotiations, and allocations of funding could not be probed. But it held that tailored discovery requests to specific decisions related to overtime payments, lengths of furloughs for similarly situated employees, bonuses, and processes for furlough determination were appropriate for discovery requests.


Practical Considerations
While sequestration adversely affected many federal employees in the form of furloughs, those affected need to review whether in their own personal circumstances there was any action in the furlough process showing that the agency did not apply it “uniformly and consistently.” For example, in the case of an agency furloughing thousands of employees for the same days and lengths of time, an appeal to the board is unlikely to gain traction. But if one employee out of the thousands was singled out, where similarly situated employees continued to work, the employee may have grounds for an appeal. Any inconsistencies will aid the employee’s appeal.


Additionally, if an employee does submit an appeal, he or she should tailor discovery requests so that they focus on evidence that can show that the manager or agency treated the employee differently from similarly situated employees.


Finally, because of the evolving political climate, there is the possibility of further furloughs in the coming budget years. Federal employees should be aware that certain states do provide unemployment benefits in certain circumstances that overlap with furloughs. Most states require a certain number of non-work days during a week to be eligible. Depending on how the furlough is structured, employees may have access to these benefits.


Keywords: litigation, employment law, labor relations, Merit System Protections Board, MSPB, Chandler v. Department of Treasury, sequestration, furloughs


R. Scott Oswald, managing principal, The Employment Law Group, PC


 

December 18, 2013

DOL Delays Implementation of Controversial New Persuader Rules


The latest rulemaking agenda from the Department of Labor (DOL) indicates that the agency intends to publish its new controversial rule redefining reporting requirements that employers and labor-relations consultants must make to the federal government in March 2014. The DOL had previously planned to publish the new rule in November 2013.


Section 203 of the Labor-Management Reporting and Disclosure Act (LMRDA) requires employers and their labor-relations consultants to report to the government all agreements or arrangements regarding activities where the object is to persuade, directly or indirectly, employees “as to the manner of exercising, the right to organize and bargain collectively through representatives of their own choosing[.]” Notably, if applicable, the LMRDA’s reporting requirement mandates extensive reporting of financial information for both employers and their consultants.


Section 203(c) of the LMRDA provides an exemption to these broad reporting requirements, exempting arrangements whereby the consultant only agrees to give “advice” to the employer on labor matters. Historically, the DOL has taken the position that this exemption covered labor-relations consultants, including attorneys, if the consultant or attorney has no direct contact with employees and only provides materials or advice to the employer on labor matters.


The DOL’s proposed rule changes the agency’s historical interpretation of the advice exemption in an effort to narrow the exemption and broaden the reach of the LMRDA’s reporting requirements. In particular, the proposed rule defines the term “advice” as “an oral or written recommendation regarding a decision or course of conduct.” In contrast, reportable “persuader activity” refers to “a consultant’s providing material or communications to, or engaging in other actions, conduct, or communications on behalf of an employer that, in whole or in part, have the object, directly or indirectly, to persuade employees concerning their rights to organize or bargain collectively.” The practical effect of the rule change would be to sweep within the LMRDA’s financial-reporting requirements a whole range of activities previously exempted, such as preparing materials and speeches for employers regarding unionization and drafting handbooks and policies which touch upon union and other labor issues, for example.


Once enacted, the new LMRDA rules will likely be subject to legal challenges from employer groups and management labor consultants and law firms.


Keywords: litigation, employment law, labor relations, Labor-Management Reporting and Disclosure Act, LMRDA, advice exemption, persuader activities, DOL


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

December 17, 2013

SCOTUS Upholds ERISA Plan's Statute of Limitations


On December 16, 2013, a unanimous Supreme Court upheld a contractually imposed three-year statute of limitations set forth in a long-term-disability insurance policy. In Heimeshoff v. Hartford Life & Accident Ins. Co., the Court affirmed the dismissal of the plan participant’s claim seeking long-term-disability benefits for her failure to initiate suit within the applicable three-year period.


Notably, the plan, which was governed by the Employee Retirement Income Security Act (ERISA), provided that the three-year limitations period commenced when “proof of loss” was due, not when the plan’s administrative-claims process was completed. Because judicial review under section 502(a)(1)(B) seeking to recover benefits due under an ERISA plan may not be initiated until the participant exhausts the administrative process, the practical effect of the plan’s statute of limitations in Heimeshoff’s case was that the time period for filing suit was shortened to approximately a year after the final administrative denial of her claim.


Writing for the Court, Justice Thomas noted that ERISA does not establish a uniform statute of limitations. Rather, ERISA plans often contractually establish a limitations period in the terms of the plan itself. Accordingly, the Court reviewed the three-year limitations period, commencing when proof of loss was due, under the framework it articulated in Order of United Commercial Travelers of America v. Wolfe, which governed enforceability of contractual limitations periods. Under Wolfe, a contractual statute-of-limitations period will be enforced if it reasonable and as long as there is no contrary controlling statute. The Court in Heimeshoff determined that the three-year period, even though it commenced earlier than the date on which Heimeshoff could initiate her lawsuit, was nonetheless reasonable and not contravened by statute.


In reaching its holding, the Supreme Court resolved a split in the circuit courts, approving the results reached by Second and Sixth Circuits, while disapproving the contrary results reached by the Fourth and Ninth Circuits.


Keywords: litigation, employment law, labor relations, ERISA, Supreme Court, statute of limitations


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

December 12, 2013

SCOTUS Dismisses Labor-Neutrality-Agreements Case


A little less than a month after hearing oral argument, the Supreme Court dismissed the case challenging the legality of labor-neutrality agreements. In its December 10, 2013, order, the Court dismissed the writ of certiorari in Unite HERE Local 355 v. Mulhall, Case No. 12-99, as “improvidently granted.”


In Mulhall, the Court initially agreed to consider the issue of whether labor-neutrality agreements violate section 302 of the Labor Management Relations Act of 1947 (commonly known as the Taft-Hartley Act). Neutrality agreements between employers and unions often include provisions in which the employer agrees to provide union-organizing assistance to the union—such as access to facilities and employee names and addresses—in exchange for the union’s commitment not to picket, strike, or engage in other disruptive conduct.


In this case, Mulhall filed suit against the employer and the union, asserting that the neutrality agreement violated section 302, which makes it unlawful for an employer to pay or deliver, and a union to request or receive, “any money or other thing of value,” except in nine specific enumerated exceptions. Specifically, Mulhall alleged that the agreement’s provisions allowing the union access to, and use of, nonpublic areas of the employer’s property to conduct union organizing activities, and that furnishing the union with monthly lists of employees and their addresses violated section 302.


After the district court dismissed the case, the Eleventh Circuit reversed, holding that the neutrality agreement could constitute a “thing of value” under section 302. Mulhall v. UNITE HERE Local 355, 667 F.3d 1211 (11th Cir. 2012). The union, citing contrary decisions from the Third and Fourth Circuits, sought review by the Supreme Court, which initially agreed to hear the case.


Although the Court’s dismissal of the case did not elaborate on its reasoning, a dissent joined by three justices offers some insight. Specifically, Justice Breyer, joined by Justices Sotomayor and Kagan, noted that the Court had concerns over whether the case was moot and whether Mulhall had standing. The mootness issue arose as the neutrality agreement, by its terms, appears to have expired with the union failing to gain recognition as the employees’ collective-bargaining representative. At oral argument, however, Mulhall pointed out that the union has a parallel case pending in which the union contends the agreement should be extended.


In addition to mootness and standing, the dissent also raised the possibility that the Court’s prior decisions permitting private causes of action for section 302 violations may no longer be valid in light of more recent trends. Rather than dismiss the petition and permit the circuit conflict to remain, the dissent would have favored further briefing on these threshold issues to determine whether a decision on one of those bases was appropriate.


At this point, the case will be remanded back to the district court for continued litigation of Mulhall’s claim. As such, once a final decision is made on the legality of the neutrality agreement, it is conceivable that the case could once again progress on appeal to the Eleventh Circuit and possibly the Supreme Court.


Keywords: litigation, employment law, labor relations, neutrality agreement, Mulhall, section 302


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

November 22, 2013

Eleventh Circuit Weighs in on NLRB Recess Appointments Issue


With the Supreme Court poised to decide the constitutionality of President Obama’s 2012 recess appointments of three members of the five-member National Labor Relations Board (NLRB) during its current term, the Eleventh Circuit has become the fourth circuit to weigh in on the issue.


On November 15, 2013, the Eleventh Circuit, in Ambassador Services, Inc. v. N.L.R.B., sided with the NLRB and held that the recess appointments of board members were valid. As such, the Court held that the NLRB did not lack a quorum to issue an order finding Ambassador Services in violation of the National Labor Relations Act.


In reaching its holding, the Eleventh Circuit relied entirely on its 2004 en banc decision in Evans v. Stephens. In that decision, the Court upheld the recess appointment of William H. Pryor to the Eleventh Circuit.


Contrary to the Eleventh Circuit, the D.C. Circuit held, in its January 2013 Noel Canning v. N.L.R.B. decision, that the three recess appointments to the NLRB were unconstitutional and that the board therefore lacked a quorum to issue decisions. Since the D.C. Circuit’s decision, the Third and Fourth Circuits have followed suit in holding the recess appointments unconstitutional.


The Supreme Court is slated to hear oral arguments in the Noel Canning case on Monday, January 13, 2014. See the NLRB’s brief and Noel Canning’s brief in the Supreme Court.


Keywords: litigation, employment law, labor relations, recess appointments, NLRB, Supreme Court, Eleventh Circuit


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

November 12, 2013

SCOTUS to Consider Legality of Labor-Neutrality Agreements


On November 13, 2013, the Supreme Court heard arguments in Unite HERE Local 355 v. Mulhall, Case No. 12-99. In Mulhall, the Court is considering whether a labor-neutrality agreement between an employer and a union violates section 302 of the Labor Management Relations Act of 1947 (commonly known as the Taft-Hartley Act).


Section 302 makes it unlawful for an employer to pay or deliver, or agree to pay or deliver, “any money or other thing of value” to a union seeking to represent its employees, except in nine specific enumerated exceptions. Section 302 also contains a reciprocal obligation making it unlawful for a union to request, receive, or accept any money or other thing of value from an employer.


In Mulhall, the employer and the union entered into an agreement whereby the union promised to contribute substantial money and other resources to support a gambling-ballot proposition favored by the employer (a casino). In exchange, the employer agreed to remain neutral and refrain from opposing the union’s efforts to unionize its workforce; to allow the union access to, and use of, non-public areas of its property to conduct its organizing activities; to furnish the union with monthly lists of its employees and their addresses to facilitate union organizing; to voluntarily recognize the union as the exclusive representative of its employees based solely on authorization cards and without seeking a secret-ballot election supervised by the National Labor Relations Board; and to agree to allow a third-party arbitrator to set the terms of a collective-bargaining agreement establishing the wages, hours and terms and conditions of employment for its employees.


Martin Mulhall, an employee of the casino, filed suit against the employer and the union asserting a violation of section 302. After the district court dismissed the case, the Eleventh Circuit reversed, holding that the neutrality agreement could constitute a “thing of value” under section 302. Mulhall v. UNITE HERE Local 355, 667 F.3d 1211 (11th Cir. 2012). In reaching this decision, the Eleventh Circuit reasoned that, “[i]f employers offer organizing assistance with the intention of improperly influencing a union, then the policy concerns in § 302—curbing bribery and extortion—are implicated. . . . [I]nnocuous ground rules can become illegal payments if used as valuable consideration in a scheme to corrupt a union or to extort a benefit from an employer.”


The union, citing contrary decisions from the Third and Fourth Circuits, sought review by the Supreme Court, and the Court granted certiorari. See Mulhall’s brief and the employer’s brief in the Supreme Court. A decision in the case is expected in mid-2014.


Keywords: litigation, employment law, labor relations, neutrality agreement, Mulhall, section 302


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

November 6, 2013

Employment Non-Discrimination Act Moves Forward in Senate


On November 5, 2013, the Senate voted to move the Employment Non-Discrimination Act (ENDA) to a floor debate, cutting off the prospect of a filibuster on the bill. The Senate bill, S. 815, generally makes it unlawful for an employer, employment agency, or labor organization to discriminate against an individual “because of such individual’s actual or perceived sexual orientation or gender identity.” The current version of the bill exempts certain religious institutions and associations.


A version of ENDA previously failed by one vote in the Senate when last considered in 1996. If the bill wins passage in the Senate, which is expected, it would likely face a more difficult task in the House of Representatives, where Republicans currently enjoy a majority. However, advocates for the bill are optimistic that the bill will eventually pass and note that the bill does already has some Republican support from influential representatives such as Paul Ryan of Wisconsin. Should the bill pass both the House and Senate, there is no doubt that President Obama, a strong advocate of the bill, would sign it into law.


Update: On November 7, 2013, the Senate passed the bill by a margin of 64–32. Prospects for the bill's passage in the House are less certain, where it is unclear when, if ever, the bill would be introduced for a vote.


Keywords: litigation, employment law, labor relations, ENDA, Employment Non-Discrimination Act, sexual orientation


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

October 31, 2013

Griffin Confirmed as NLRB General Counsel


On October 29, 2013, the Senate confirmed Richard Griffin as general counsel of the National Labor Relations Board (NLRB) for a four-year term. Griffin had previously served as an NLRB board member after being appointed by President Obama as a recess appointment in January 2012. After the D.C. Circuit Court of Appeals ruled that the recess appointment was unconstitutional, a decision that is currently on appeal to the Supreme Court, President Obama agreed to remove Griffin as a board member and nominated him for the general counsel position. His confirmation by the Senate fell along party lines (55–44), with only one Republican voting in favor of confirmation.


Griffin is a long-time labor lawyer and previously served as a lawyer for the International Union of Operating Engineers. In addition to serving as an NLRB board member, Griffin has also previously served as a staff attorney at the agency.


Keywords: litigation, employment law, labor relations, Richard Griffin, NLRB, recess appointment


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

October 1, 2013

FLSA Claim for Time Spent Walking to and from Time Clock Rejected


Laborers’ time spent changing clothes before they punched in for the day and after they punched out was excluded by custom or practice under a collective-bargaining agreement from the hours for which the laborers were employed, according to the Eighth Circuit’s recent decision in Adair v. ConAgra Foods, Inc, No. 12-3565, 2013 U.S. App. LEXIS 18135 (8th Cir. Aug. 30, 2013). Therefore, the time spent donning and doffing their uniforms was not a “principal activity” that began and ended the work day, and the employer was not required by the Fair Labor Standards Act (FLSA) to compensate the laborers for the time spent walking between the changing stations and the time clock. The court’s holding differs from case law in the Sixth Circuit as well as the position of the secretary of labor.


In Adair, the employer operated in a facility in Missouri where it produced frozen foods. Workers were required to wear protective clothing at the facility and the clothing was laundered on site. Employees began their day by changing into protective clothing and then walking to a time clock to punch in. They ended their day by punching out and then walking back to a changing station to change out of their protective gear. The express terms of the applicable collective-bargaining agreement excluded the changing time from the employees workday.


The employees argued that changing into their clothes was a “principal activity” under the FLSA, and therefore their workday began and ended at the changing station. Accordingly, the employees argued that the employer was violating the FLSA by not paying them for the time spent walking between the changing station and the time clock. The district court agreed with the employees and denied the employer’s motion for summary judgment on that issue. The district court also certified that question for interlocutory appeal, and the appellate court accepted review. The employees had also argued that their protective gear was not “clothes” within the meaning of the FLSA. The district court disagreed and granted the employer’s motion for summary judgment on that issue; that ruling was not appealed.


The circuit court reversed the district court’s denial of summary judgment on the walking-time issue. The FLSA provides that “any time spent in changing clothes or washing at the beginning or end of each workday” is excluded from “the hours for which an employee is employed,” as long as those hours have been “excluded from measured working time” by custom or practice under a collective-bargaining agreement. 29 U.S.C. § 203(o). The “clear implication” of that section, the court held, is “that clothes changing and washing, which are otherwise a part of the principal activity, may be expressly excluded from coverage by agreement,” quoting from Steiner v. Mitchell, 350 U.S. 247, 255, 267 (1956). Changing into the gear was not a “principal activity” because it is not an activity that the employee is “employed to perform,” even if it is “basic” to the employee's work, the court held, disagreeing with the Sixth Circuit’s decision in Franklin v. Kellogg Co., 619 F.3d 604, 619 (6th Cir. 2010). The court distinguished IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), which had held that an activity that is “integral and indispensable to a principal activity is itself a principal activity,” because in that case there was no collective-bargaining agreement that excluded donning and doffing.


The Adair court’s decision is also contrary to the Department of Labor’s current position that an activity that is excluded from the workday under a collective-bargaining agreement can constitute a “principal activity” under the FLSA. The secretary’s position, however, had “changed with the electoral winds” and was therefore was entitled to “considerably less deference than a consistently held agency view.”


Keywords: litigation, employment and labor relations law, FLSA, Fair Labor Standards Act, donning, doffing, principal activity


Michael Goodwin, Jardine, Logan & O'Brien, P.L.L.P., St. Paul, MN


 

August 8, 2013

Eighth Circuit Affirms FLSA Recovery for Undocumented Workers


The Eighth Circuit Court of Appeals recently held that undocumented workers are entitled to the protections of the Fair Labor Standards Act (FLSA). In Lucas v. Jerusalem Cafe, LLC, No. 12-2170, 2013 U.S. App. LEXIS 15320 (8th Cir. July 29, 2013), the court affirmed a judgment in favor of six restaurant workers who claimed that their employers had willfully violated FLSA minimum wage and overtime rules. The court joined the Eleventh Circuit and a number of federal district courts in holding that the FLSA applies to undocumented workers.


The plaintiffs in Lucas worked at the Jerusalem Cafe in Kansas City, Missouri. The employees, who were Guatemalan nationals without authorization to work in the United States, were paid in cash at fixed weekly rates that did not vary based on the number of hours worked. None of the plaintiffs were paid overtime, and some were paid less than minimum wage. After a four-day jury trial, the jury found in the workers’ favor, rejecting the employers’ explanation that the workers were “volunteers” at the restaurant. The district court awarded $141,864.04 in actual damages for unpaid FLSA wages and an equal amount in liquidated damages based on the jury’s finding that the employers willfully failed to pay FLSA wages. The court also awarded $150,627 in legal fees and $6,561.63 in expenses. The district court denied the employers’ post-trial motions, rejecting the employers’ argument that the employees were prohibited by law from receiving wages because they were “undocumented aliens.” The district court also rejected the argument that the workers lacked standing to sue under FLSA due to their immigration status.


The appellate court affirmed. First, the court held that “aliens, authorized to work or not, may recover unpaid or underpaid wages under the FLSA.” The court followed the Eleventh Circuit’s decision in Patel v. Quality Inn S., 846 F.2d 700 (11th Cir. 1988), and noted the agreement of numerous district courts and the secretary of labor on the applicability of the FLSA to undocumented workers. Undocumented workers are “employees” within the FLSA’s broad definition of that term. Congress had provided for a number of specific limitations to the definition of employee, but there was no evidence of congressional intent to exclude undocumented workers from this definition.


The court also followed another Eleventh Circuit decision, Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299 (11th Cir. 2013), in rejecting the employer’s argument that the Immigration Reform and Control Act of 1986 (IRCA) implicitly amended the FLSA to exclude unauthorized aliens. The court also rejected the employers’ argument that the Supreme Court’s decision in Hoffman Plastic Compounds, Inc. v. NLRB, 535 U.S. 137 (2002), implies that undocumented workers are not covered under the FLSA. Although the Hoffman Court held that unauthorized aliens were not eligible for backpay under the National Labor Relations Act (NLRA), the Court did re-affirm a previous decision holding that the provisions of the NLRA do apply to undocumented workers. See Sure-Tan, Inc. v. NLRB, 467 U.S. 883, 893–94 (1984). In addition, the employer’s argument was contrary to the secretary of labor’s longstanding position that the FLSA applies to aliens without employment authorization, a position that the court held was entitled to Skidmore deference. The court also held that the legislative purposes of the IRCA and the FLSA were not in conflict, because both the “IRCA and FLSA together promote dignified employment conditions for those working in this country, regardless of immigration status, while firmly discouraging the employment of individuals who lack work authorization.”


Finally, “because the FLSA gives the workers a right to sue the employers and obtain a real remedy for a statutory wrong,” the court held that the workers had both Article III standing and prudential standing to recover damages. Noting a circuit split on the issue of prudential standing, the Court declined to decide whether prudential standing is a non-waivable jurisdictional bar because the workers had, in fact, demonstrated the existence of prudential standing. Because the workers were “employees” within the meaning of the FLSA, they fell within the “zone of interests” protected by the statute.


Judge Loken filed a concurring opinion, expressing his view that the holding in Hoffman could apply with equal force to the awarding of liquidated damages under the FLSA. The award of liquidated damages was not challenged on appeal, however, and therefore the issue was not properly before the court.


Michael Goodwin, Jardine, Logan & O'Brien, P.L.L.P., St. Paul, MN


 

August 1, 2013

Senate Confirms Full National Labor Relations Board


Following a recent Senate vote, on July 30, 2013, a full National Labor Relations Board (NLRB) has officially been confirmed. The board now consists of the following five-members:


Chairman Mark Gaston Pearce has served as the board’s chairman since August 27, 2011. Chairman Pearce’s background is in plaintiff- and union-side private practice and also includes prior work in a regional office of the NLRB.


Philip Miscimarra comes from a management-side background in private practice and is a senior fellow at the University of Pennsylvania’s Wharton Business School, where he serves as the employment law advisor in the center’s Financial Services Group. He has authored several employment-law books.


Nancy Jean Schiffer previously practiced privately representing labor unions and workers. Shifting to the role of staff attorney, she has since spent many years representing the United Auto Workers and most recently served as the general counsel of the AFL-CIO.


Kent Hirozawa most recently served as the chief counsel to NLRB Chairman Pearce. Prior to that, he practiced as a regional field attorney for the NLRB, clerked in the U.S. Court of Appeals for the Second Circuit, and has practiced privately in the area of labor and employment law.


Harry Johnson has spent his career representing employers in a range of labor and employment issues, focusing primarily on wage-hour compliance. He also presents and produces a video podcast on employment-law matters for in-house attorneys and human-resource professionals.


Brian Koji, Allen, Norton & Blue, Tampa, FL


 

July 3, 2013

SCOTUS Issues Two Significant Decisions Addressing Class Arbitration


The U.S. Supreme Court has recently issued two decisions that confirm the benefit of including express waivers of class arbitration in arbitration agreements. On June 10, 2013, the Court decided Oxford Health Plans v. Sutter, in which it upheld an arbitrator’s finding that the parties’ agreement permitted class arbitration despite the absence of a provision in the agreement expressly addressing the issue. The arbitration clause provided that “[n]o civil action concerning any dispute arising under this Agreement shall be instituted before any court, and all such disputes shall be submitted to final and binding arbitration. . . .” The parties agreed that the arbitrator should decide whether this provision authorized class arbitration, and the arbitrator concluded that it did. Based on the language of the parties’ agreement, the arbitrator “reasoned that the clause sent to arbitration ‘the same universal class of disputes’ that it barred the parties from bringing as ‘civil actions in court . . .,” and that a class action “‘is plainly one of the possible forms of civil action that could be brought’ absent the agreement.” The arbitrator therefore “concluded that ‘on its face, the arbitration clause . . . expresses the parties’ intent that class arbitration can be maintained.’”


Oxford filed a motion in federal court to vacate the arbitrator’s decision pursuant to section 10(a)(4) of the Federal Arbitration Act (FAA), arguing that the arbitrator had exceeded his contractually delegated authority under the parties’ agreement. Oxford relied on the Court’s previous ruling in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), holding that an arbitrator may employ class procedures only if the parties authorize them. The district court and the Court of Appeals for the Third Circuit both upheld the arbitrator’s decision, and the Supreme Court unanimously affirmed. Emphasizing the heavy burden placed on a party seeking vacatur of an arbitration award under section 10(a)(4), the Court stated: “It is not enough . . . to show that the [arbitrator] committed an error—or even a serious error. . . .” “Because the parties bargained for the arbitrator’s construction of their agreement an arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court’s view of its (de)merits.” Oxford Health Plans, 2013 U.S. Lexis 4358, at *9. The Court distinguished Stolt-Nielson because the parties in that case stipulated that they had never reached an agreement on class arbitration.


Just 10 days after issuing its decision in Oxford Health Plans, the Court decided American Express Co. v. Italian Colors Restaurant, in which a class of merchants accepting American Express cards claimed that American Express had violated antitrust laws. The agreement between the parties required all disputes to be resolved by arbitration and provided that “there shall be no right or authority for any Claims to be arbitrated on a class wide basis.” Despite this provision, the plaintiffs filed suit and argued that the arbitration provision was unenforceable because the cost of individually arbitrating their federal statutory claims would be cost-prohibitive. The district court rejected the plaintiffs’ argument and dismissed the lawsuit on the basis of the arbitration provision; however, the U.S. Court of Appeals for the Second Circuit reversed. The Court granted certiorari, vacated the judgment, and remanded the case back to the Second Circuit for further consideration in light of Stolt-Nielsen, but the Second Circuit stood by its decision.


The Court again granted certiorari and in a 5–3 decision, it held that the FAA does not permit courts to invalidate a contractual waiver of class arbitration on the ground that a plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery.The Court reasoned that because arbitration is a matter of contract, courts must “rigorously enforce arbitration agreements according to their terms” in the absence of a contrary legislative command. American Express Co., 2013 U.S. Lexis 4700, at *8. The Court found no contrary legislative command in federal antitrust laws, and rejected the contention that congressional approval of Rule 23 of the Federal Rules of Civil Procedure established an entitlement to class proceedings to vindicate a statutory right. The Court also rejected application of the “effective vindication doctrine,” which courts previously relied on as a basis for invalidating class-arbitration waivers where the expense of individually arbitrating a federal statutory claim would be cost-prohibitive. The Court explained: “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.


In closing, the Court stated that its decision in AT&T Mobility LLC v. Concepcion “all but resolves this case.” There it invalidated a state law conditioning enforcement of an arbitration agreement on the availability of class procedure and “specifically rejected the argument that class arbitration was necessary to prosecute claims ‘that might otherwise slip through the legal system.’”


Given the widespread use of arbitration provisions in contracts of employment, attorneys practicing employment law should be familiar with both the Oxford Health Plans and American Express decisions. Further, employers requiring employees to sign arbitration agreements as a condition of employment should consider revising such agreements to include express waivers of class arbitration if they have not done so already.


Kindall C. James, Liskow & Lewis, New Orleans, LA


 

June 25, 2013

SCOTUS: "But For" Standard Applies to Title VII Retaliation Claims

On the heels of narrowing the definition of “supervisor” for purposes of liability under Title VII of the Civil Rights Act of 1964, the Supreme Court dealt a second major blow to employees on June 23, 2013 by making it harder for them to prove retaliation claims under that same statute.


University of Texas Southwestern Medical Center v. Nassar dealt squarely with the issue of defining the proper standard of causation for claims of retaliation under Title VII. There were two options at the Court’s disposal: (i) the easier-to-satisfy “motivating factor” test; or (ii) the more-difficult-to-satisfy “but-for” standard. Under the motivating-factor test, an employee could prove retaliation by showing that their decision to report or notify the employer of possible discrimination was a motivating factor in the employer’s decision to terminate the employee or take some other adverse employment action. On the other hand, under the but-for causation standard, the employee would have to prove that he or she would have retained their job or avoided some other adverse employment action in the absence of the employer’s retaliatory intent.


In this case, the plaintiff-employee relied on the motivating-factor test in prevailing against the employer at the trial-court level, and argued for its application before the Supreme Court. The U.S. government also advocated for the motivating-factor test as the proper causation standard. Unfortunately for this employee, and employees bringing retaliation claims in the future, the Court disagreed and found that the stricter but-for test applied.


The majority issued its decision under the presumed belief that Congress enacted Title VII with general principles of tort law in mind, the but-for causation standard being one of those principles. With those tort principles as a backdrop, the Court reasoned that both the text of Title VII and the structure of how the statute is written led to the conclusion that the but-for test is the proper causation standard for retaliation claims. The Court noted that Congress was deliberate in placing the “motivating factor” standard in the section of the statute that deals with discrimination—separate from the section that addresses retaliation. In doing so, the majority acknowledged that, within the context of this statute, retaliation was not a form of discrimination. Had Congress intended to apply the motivating-factor standard to retaliation claims, it would have written the statute that way, as it has in other discrimination statutes. In reaching its decision, the majority also elected not to give deference to the Equal Employment Opportunity Commission’s interpretation and guidance on this issue.


The result of Nassar is that employees must prove claims of Title VII discrimination and retaliation under two different standards, the new standard for retaliation being much more difficult to satisfy. Heightening the causation standard for retaliation claims may also curb the increasing influx of retaliation claims filed in recent years, which the majority recognized as a problem that was impacting the “fair and responsible allocation of resources in the judicial and litigation systems.”

The Nassar case was hotly contested and resulted in a 5–4 decision with a strong dissenting opinion written by Justice Ginsburg. In that dissent, Justice Ginsburg emphasized the practical complexities of having dual causation standards under Title VII and urged Congress to overturn the majority’s decision.


In the end, while it remains to be seen whether this decision will curb frivolous and costly retaliation claims by employees, June 24, 2013, represents a very good day for employers.


Nicholas Casolaro, McLane, Graf, Raulerson & Middleton, P.A., Manchester, NH


 

June 25, 2013

SCOTUS Limits Definition of “Supervisor” in Harassment Cases


The U.S. Supreme Court issued the anxiously awaited case of Vance v. Ball State University on June 24, 2013. In a 5–4 decision authored by Justice Alito, the Court decided the question of who qualifies as a "supervisor" in a Title VII claim of harassment based on race, an important question because employer liability under Title VII is dependent on whether the alleged harasser is a supervisor or simply a co-employee.


In Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998), the Supreme Court held that an employer is vicariously liable under Title VII for severe or pervasive harassment of an employee by a supervisor. Such liability exists regardless of whether the employer is aware of the discrimination. A company is strictly liable for the actions of a supervisor that result in a "tangible employment action." Such actions include hiring, firing, failing to promote, discipline, demotion, or effecting significant changes in working conditions or benefits. Companies can also be held liable for harassment by a supervisor when a tangible employment action does not result if the supervisor has created a hostile work environment and the employer is unable to establish an affirmative defense. An employer establishes such a defense by showing 1) that it exercised reasonable care to prevent and promptly correct any harassing behavior or 2) that the plaintiff unreasonably failed to take advantage of any preventative or corrective opportunities provided by the company.


If, however, the alleged harasser is a co-employee, the employer is not liable unless the employer was negligent in allowing the conduct. If, for example, an employer failed to respond appropriately to a complaint of harassment by a co-worker, liability might result.


In hearing the Vance case the Court took the opportunity to resolve a conflict among the circuit courts of appeals as to the definition of “supervisor.” The Court adopted the more conservative of the approaches and held that an employer is vicariously liable for an employee’s harassment “only when the employer has empowered that employee to take tangible employment actions against the victim.” In doing so, the court rejected the definition promoted by the Equal Employment Opportunity Commission, which had previously been relied on by several circuit courts.


The matter originated with the claim by Maetta Vance, an African American employee of Ball State University, alleging that she was the victim of discrimination by a fellow food-service worker, Saundra Davis. The parties agreed that Davis did not have the power to hire, fire, demote, promote, transfer, or discipline Vance although they largely disagreed about the extent of power Davis otherwise had over Vance. Under the definition adopted by the Court, Davis was not a supervisor, and Vance’s action against her employer was dismissed.


The practical impact of this decision is quite favorable to employers for two reasons. First, it adopts a more limited definition of supervisor, narrowing the scope of employees for whose conduct a company might be liable even if it is unaware of their specific actions. Second, it increases the opportunity for lawsuits to be decided early on by summary judgment because there is far less subjectivity in the determination.


Charla Bizios Stevens, McLane, Graf, Raulerson & Middleton, P.A., Manchester, NH, and Woburn, MA


 

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


 

May 13, 2013

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


 

April 18, 2013

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


 

December 28, 2012

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


 

December 28, 2012

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


 

December 19, 2012

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


Shaina Thorpe, and Kaleena Weaver, Allen, Norton & Blue, P.A., Tampa, FL


 

October 24, 2012

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


 

August 8, 2012

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


 

August 8, 2012

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.


David N. Michael and Jordan M. Hanson, Gould & Ratner LLP, Chicago, IL


 

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


 

March 14, 2012

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


 

March 14, 2012

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


 

June 20, 2011

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.


John A. Ybarra and Michael A. Wilder, Littler Mendelson, P.C., Chicago, Illinois.


Keywords: Wal-Mart v. Dukes, class certification, class action


 

June 20, 2011

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.