Employer Law Report

Court Orders Plaintiff-Employee to Produce Social Media Postings on Claimed Emotional Distress, Alternative Potential Stressors and More

Sara Hutchins Jodka — Tue, 18 Jun 2013 09:46:28 -0500

Our colleagues at the Technology Law Source Blog advise of a new interesting case concerning the discovery of social media account information in a disability discrimination case. There are two noteworthy pieces to this case. First, the New York federal court judge provides a good roadmap as what information posted on social networking sites is relevant and discoverable in a cases where damages from emotional and physical injury are sought. Second, by ordering plaintiff’s counsel to review the plaintiff’s postings for relevance – not Plaintiff – and produce them, the court offered another option on the always-frustrating issue of how to get social media information from the computer to the requesting counsel’s hand. We will leave the real heavy lifting to the Technology Law Source Blog, but in sum, here is what the court ordered was to be produced and what was not.

Categories of Information to Be Produced

Evidence of Emotional Damages: The court noted that the relationship of routine expressions of mood to a claim for emotional distress damages is tenuous, much more so than the obvious link between posts showing the plaintiff engaging in physical activity that would not be feasible given the plaintiff’s claimed physical injury. With this, the court concluded that routine status updates and/or communications on social media websites were not relevant to the plaintiff’s emotional damages claim, but found that some limited social networking postings should be produced on the emotional damages issue:

Plaintiff must produce any specific references to the emotional distress she claims she suffered or treatment she received in connection with the incidents underlying her … Complaint (e.g., reference sot a diagnosable condition or visits to medical professional). Moreover, in seeking emotional distress damages, Plaintiff has opened the door to discovery into other potential sources/causes of that distress. Thus any postings on social networking websites that refer to an alternative potential stressors must also be produced.

Social Media Evidence of Physical Damages: As for social media posts that would be relevant on the physical damages issue, the court noted “[p]ostings or photographs on social networking websites that reflect physical capabilities inconsistent with a plaintiff’s claimed injury are relevant.” However, because it was unclear whether plaintiff was seeking damages for a physical injury, the court directed the plaintiff to confirm if she was pursing relief for physical damages, and if so, to identify her alleged harm. In the event the plaintiff does, the court promised to address the scope of social networking discovery on physical damages. So, we will have to see what happens.

Social Media Evidence About Allegations in the Complaint: The court found that the defendant-employer’s request for information on “any accounts of the events alleged in plaintiff’s Amended Complaint – contradictory or otherwise…” was relevant and ordered all information that “exists on any social networking accounts maintained by the Plaintiff” to be produced.

Method of Production

On the issue of physical production of social media information, the defendant-employer had asked the plaintiff to sign an authorization for the release of records from the social accounts so it could subpoena the social networking hosting companies directly. Without acknowledging that subpoenaing a social networking company for records is an uphill battle in and of itself, the court did note that there was no reason to go through a third-party provider when plaintiff has access to the requested information herself, and directed that plaintiff’s postings be reviewed for relevant by plaintiff’s “counsel and that Plaintiff’s counsel – not Plaintiff – make a determination regarding the relevant of the postings, keeping in mind the broad scope of discovery contemplated under Rule 26.”

This case provides good roadmap for employers seeking discovery of social media information, not just in structuring interrogatories, but also in providing instructions in those interrogatories about how the information is to be reviewed for relevance and produced.

You can find the full Technology Law Source post and a copy of the court’s decision in Giacchetto v. Patchoque-Medford Union Free School District, here.

You Choose, You Lose! Supreme Court Rules "Arbitrator's Construction Holds, However Good, Bad, or Ugly" In Upholding Class Arbitration Proceedings

Sara Hutchins Jodka — Thu, 13 Jun 2013 13:51:07 -0500

In Oxford Health Plans, LLC v. Sutter, a case addressing an arbitration clause that was silent as to whether it permitted class-wide arbitration, the United States Supreme Court held that so long as an arbitrator's decision construes the parties' contract, the arbitrator has not "exceeded his powers" – which would permit a court to vacate the decision under §10(a)(4) of the Federal Arbitration Act (“FAA”) – and the arbitrator’s constructions should be upheld, “however good, bad, or ugly.”

Before we dig into Sutter, we have to go back a little to 2010 when the Supreme Court issued its decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., and held that the FAA bars class arbitration unless the parties have specifically agreed to it. Many, including Oxford Health who relied on Stolt-Nielsen heavily in its briefing, read Stolt-Nielsen as the curtain closing on class-wide arbitrations, but Sutter (and AT&T Mobility LLC v. Concepcion) makes clear that class-wide arbitration was not eradicated by Stolt-Nielsen.

The Facts Are Not Complicated, But the Procedure Is a Little Muddled
Sutter, a pediatrician, provided medical services to Oxford Health Plans’ insureds under a fee-for-services contract that required binding arbitration of contractual disputes, though it did not specify whether it covered class claims. The arbitration clause more broadly provided in relevant part:

“No 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.”

Nevertheless, Sutter filed a proposed class action claiming Oxford failed to properly pay him and others like him who had similar contracts with Oxford. Oxford moved to compel arbitration, and the parties agreed the arbitrator should decide whether the contract authorized class arbitration. The arbitrator found that it did, reasoning that the clause sent to arbitration “’the same universal class of disputes’ that it barred the parties from bringing ‘as civil actions’ in court: the ‘Intent of the clause’ was ‘to vest in the arbitration process everything that is prohibited from the court process.’” Oxford then filed a motion to vacate the arbitrator’s decision claiming the arbitrator “exceeded [his] powers” under the FAA. The trial court denied the motion, and the Third Circuit affirmed.

While Sutter proceeded to arbitration, the Supreme Court decided Stolt-Nielsen and held that an arbitrator may employ class procedures only if the parties have authorized him to do so. Oxford asked the arbitrator to reconsider his decision on the class arbitration in light of Stolt-Nielsen, and the arbitrator held that Stolt-Nielsen had no effect on Sutter because the agreement at issue authorized class arbitration. Oxford then renewed its motion to vacate the arbitrator’s decision on the same basis as before. Once again, the trial court denied the motion and the Third Circuit affirmed.

Now On to the Fun Stuff – The Supreme Court’s Decision and Analysis
The heavy burden required to overturn an arbitrator’s opinion was critical in the Supreme Court’s analysis. Oxford argued that the arbitrator’s decision should be vacated under §10(a)(4) of the FAA, i.e., that the arbitrator “exceeded [his] powers .” However, the Court stated, “’[i]t 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 review of its (de)merits….Only if ‘the arbitrator act[s] outside the scope of his contractually delegated authority ‘—issuing an award that ‘simply reflect[s] [his] own notions of [economic] justice’ rather than ‘draw[ing] its essence from the contract] ‘—may a court overturn his determination.”

The Supreme Court looked at the arbitrator’s ruling, which recited the “question for construction” the parties had submitted to him: “whether [their] Agreement allows for class action arbitration.” The arbitrator concluded that the arbitration clause “on its face...expresses the parties’ intent that the class action arbitration can be maintained.”

In trying to undue the arbitrator’s decision, Oxford relied on Stolt-Nielsen and argued that §10(a)(4)’s heavy burden can be met when an arbitrator imposes class arbitration without a sufficient contractual basis and argued that a court can vacate an arbitrator’s decision for misconstruing a contract to approve class proceedings.

But, as the Supreme Court found, Oxford got it wrong because, Stolt-Neilsen and Oxford Health are distinguishable. In distinguishing the two cases, the Supreme Court emphasized that in Stolt-Neilsen, the parties stipulated they had not reached an agreement on class arbitration, so the arbitrators did not construe the contract, and did not identify any agreement authorizing class proceedings. Thus, the Supreme Court “overturned the arbitral decision there because it lacked any contractual basis for ordering class procedures, not because it lacked, in Oxford’s terminology, a ‘sufficient’ one.’” However, in Sutter, the Supreme Court found the arbitrator did construe the contract and found that it permitted class arbitration. So, in order to overturn the arbitrator’s decision, the Court would have to find that the arbitrator misinterpreted the parties’ intent, but that analysis is not allowed by the FAA (which only allows a court to vacate an arbitral decision when the arbitrator has strayed from his delegated task interpreting the contract, not when he performed that task poorly). By contrast, in setting aside the arbitrators’ decision in Stolt-Nielsen, the Supreme Court found not that they had misinterpreted the contract, but that they had abandoned their interpretive role.”

“The arbitrator’s construction holds, however good, bad, or ugly….Oxford chose arbitration, and it must now live with that choice.”

Takeaways:
Reading Stolt-Nielsen and Sutter together, here is what you get: When parties agree to submit a dispute to arbitration, a party can represent a large class of similarly situated claimants in the dispute only if the parties have agreed to permit such action. If the agreement is not clear with respect to permitting a class-wide arbitration and the parties have agreed that the arbitrator should make that decision, courts cannot overturn that decision even if it is wrong so long as the arbitrator based his decision on an interpretation of the arbitration clause.

Sutter reaffirms the Supreme Court’s ringing endorsement for arbitration in Concepcion, where it held that most collective and class waivers are unconscionable and preempted by the FAA. It also reiterates the deference to be given arbitrators when it comes to their interpretation of arbitration agreements by upholding an arbitrator’s interpretation of a “silent” class-wide arbitration despite any clear language in the underlying contract to that effect.

There are some gaps. While Stolt-Nielsen set forth a critical principle regarding the availability of class-wide arbitrations, it did not determine “what contractual basis may support a finding that the parties agreed to authorize class-action arbitration” leaving open the issue of whether parties’ consent to class-wide arbitration must be expressly provided for in the arbitration provision, or if it could be inferred from the arbitration agreement itself. Sutter did not provide any clarification on what it means for an arbitrator to be “arguably construing” the arbitration agreement. If it turns out that it is enough for an arbitrator to say his or her finding of consent to class-wide arbitration is based upon the arbitral agreement, regardless of the actual analysis, Sutter severely shrinks the reach of Stolt-Nielsen. One thing to keep in mind, as Justice Alito pointed out in his concurring opinion in Sutter, even though the arbitrator permitted class arbitration, the decision cannot bind absent class members because arbitration is a matter of consent and there is no indication that any of the absent class members consented to the arbitrator’s authority. So, whatever the award ends up being, there may be collateral attacks by absent class members making the complex class arbitration more than Sutter wanted too! But, as the title indicates, you choose, you lose. In this case, that might be true for both parties.

As highlighted by a footnote in the decision and in the concurrence, the result might well have been different had Oxford not agreed to the arbitrator deciding the issue but instead argued that it was a “question of arbitrability.” The latter includes “gateway matters, such as whether parties have a valid arbitration agreement at all or whether a concededly binding arbitration clause applies to a certain type of controversy” which are “presumptively for courts to decide.” As the footnote continues, “a court may therefore review an arbitrator’s determination of such a matter de novo absent ‘clear and unmistakable’ evidence that the parties wanted an arbitrator to resolve the dispute.” Returning to the issue at hand, the court then continued:

...Stolt-Nielsen made clear that this court has not yet decided whether the availability of class arbitration is a question of arbitrability. ...But this case gives us no opportunity to do so because Oxford agreed that the arbitrator should determine whether its contract with Sutter authorized class procedures. See Brief for Petitioner 38 n.9 (conceding this point). Indeed, Oxford submitted that issue to the arbitrator not once, but twice — and the second time after Stolt-Nielsen flagged that it might be a question of arbitrability.

Commensurately, in his concurrence, Justice Alito stated that “If we were reviewing the arbitrator’s interpretation of the contract de novo, we would have little trouble concluding that he improperly inferred ‘[a]n implicit agreement to authorize class action arbitration ... from the fact of the parties’ agreement to arbitrate.’” (citing Stolt-Nielsen). Accordingly, although upholding the arbitrator’s decision to allow class arbitration, the court reserved the final determination of arbitrability after Stolt-Nielsen for another case on another day.

A Review of the Supreme Court’s Review Of Class Actions and What’s on the Horizon.
Sutter is just the latest opinion the Supreme Court has issued concerning class actions this term. It has already decided: Amgen, Inc. v. Connecticut Retirement Plans, where it held proof of materiality is not a prerequisite to certification of a securities-fraud class action seeking money damages for alleged violations of Securities and Exchange Commission Rule §10(b) and Rule 1; Trust Funds Standard Fire Insurance Co. v. Knowles, where it held that a named plaintiff cannot bind the class by stipulating to damages under the $5 million cap to defeat jurisdiction under the Class Action Fairness Act, which we wrote about here; Comcast Corp. v. Behrend, where it held that a trial court may not certify a class action without first resolving whether the plaintiff class has introduced adequate evidence to show that the case is susceptible to an award of class-wide damages, which we wrote about here; Genesis HealthCare Corp. v. Symczyk, where the court held that because plaintiff had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness, which we wrote about here.

We are currently waiting for one more decision from the Supreme Court on class actions this term. Express Co. v. Italian Colors Restaurant. The issue certified in that case is whether the Federal Arbitration Act permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim.

Mental Block: Ohio Supreme Court Affirms Denial Of Workers' Compensation Benefits For PTSD Not Caused By Physical Injury To Claimant

Brian Hall — Mon, 10 Jun 2013 09:10:57 -0500

In August 2009, Shaun Armstrong sustained minor physical injuries in a motor vehicle accident while in the scope of his employment. The other driver, who plowed into the back of Armstrong's truck, was killed.

Armstrong's workers' compensation claim was allowed for neck and back injuries. He also sought an allowance for PTSD, which the Industrial Commission also allowed. Armstrong's employer appealed the PTSD allowance to the common pleas court on the grounds that the PTSD was not caused by his physical injuries.

The parties stipulated that Armstrong had PTSD and conducted a bench trial to determine whether he was entitled to workers' compensation benefits for the condition. Armstrong's psychiatric expert witness testified that his physical injuries contributed to and were causal factors in his development of PTSD. The employer's expert, however, testified that Armstrong's physical injuries did not cause his PTSD, which instead was caused by witnessing the accident and “the mental observation of the severity of the injury, the fatality, [and] the fact that it could have been life-threatening to him at some point.” The employer's expert also believed that Armstrong would have developed PTSD even without his physical injuries.

The trial court held that Armstrong's PTSD was not compensable because it did not arise from his physical injuries. The Second District Court of Appeals affirmed, holding that the applicable statutory definition of “injury” includes psychiatric conditions only when they arise from a compensable physical injury. The court of appeals further determined that competent, credible evidence supported the trial court's factual finding that Armstrong's PTSD did not arise from his physical injuries.

On appeal, the Supreme Court in Armstrong v. John R. Jurgensen Co. was asked to address whether Ohio Revised Section 4123.01(C)(1) limits workers' compensation coverage for psychiatric conditions to those conditions caused by the claimant's compensable physical injury. That statute provides that psychiatric conditions are excluded from the general definition of “injury,” “except where the claimant's psychiatric conditions have arisen from an injury or occupational disease sustained by that claimant.”

Armstrong's employer argued that R.C. 4123.01(C)(1) requires a direct and proximate causal relationship between the physical injury and the mental condition, but Armstrong maintained that "arisen from" is a broader concept than "caused by" and that his PTSD was compensable because it arose contemporaneously with the incident giving rise to the workers' compensation claim, regardless of whether an actual causal relationship between the physical and mental conditions existed.

The Court rejected Armstrong's statutory construction, noting that "the plain language of R.C. 4123.01(C) and (C)(1) requires that to constitute a compensable injury for purposes of workers' compensation, a psychiatric condition must be causally related to the claimant's compensable physical injury. Accordingly, the statute must be applied as written." The court suggested that any concerns regarding the narrowness of this statutory interpretation needed to be raised with the General Assembly.

Takeaways: Because it limits the compensability of psychiatric conditions, which are notoriously difficult to defend against, the Armstrong decision of course is a very favorable decision for employers. Setting aside the reasonable debate as to whether an injured worker like Armstrong should be permitted to recover workers' compensation benefits for their psychological injuries, the Supreme Court definitely got this one right as a matter of statutory construction. Indeed, the legislature has made it very clear as a matter of public policy that purely psychiatric conditions should not be compensable in Ohio in the absence of some physical injury.

No No No...Not In Our Court. Sixth Circuit Uses Dukes v. Wal-Mart To Block Class Certification and Extends It To Bar Hiring Discrimination Class Claims

Sara Hutchins Jodka — Fri, 07 Jun 2013 12:13:06 -0500

In Davis v. Cintas Corp., No. 10-1662 (6th Cir. May 30, 2013), the Sixth Circuit affirmed the denial of a class certification bid in a sexual discrimination hiring case à la Wal–Mart Stores, Inc. v. Dukes and dismissed the plaintiff’s individual disparate treatment claim where the plaintiff claimed she was at least as qualified (if not more so) than male candidates who were hired. By way of key takeaways, Davis demonstrates that the Sixth Circuit endorses Dukes, so much so that it used the United States Supreme Court’s analysis in Dukes, which covered pay and promotion in employment class claims, and extended it to take down hiring, pre-employment class claims.

Factual Background
The crux of the claims (Tanesha Davis was the named plaintiff and sued on behalf of herself and those similarly situated to her) was that Cintas discriminated against females in hiring by refusing to hire them for the company's entry-level sales jobs. Specifically, that Cintas’ company-wide “Meticulous Hiring System” — which was made up of a 16-step process (that included interviews, route rides, and background screens among others) used to hire Service Sales Representatives (“SSRs”) was discriminatory. Evidence introduced in the case demonstrated that, historically, Cintas' SSRs were predominantly male, but after the company put the Meticulous Hiring System into practice in 2003, the percentage of women hired rose noticeably.

Davis claimed that Cintas' hiring practices led to company-wide gender discrimination in violation of Title VII, and the she herself had been subjected to disparate treatment on two separate occasions; once in 2003 when she applied for a position while managing a LensCrafters store, and in 2004. During the 2003 hiring process, the interviewer's notes indicated that she (yes, the interviewer was a female, which came into play in the Sixth Circuit’s discussion of the issue) screened out Davis because she said she disliked having to sell products she believed were overpriced and wanted to continue working at LensCrafters. In 2004, Davis got further along in the hiring process — she made it through the initial screen and went on a route ride — but the interviewer noted that, while Davis "did a lot of things well out on the route," he did have concerns about her level of physical energy and her efficiency. That critique cost Davis the position.

After Davis was not hired, she sued, but she was not the first to make such claims against Cintas. The first case started in California and it was later accompanied by Serrano v. Cintas, a case in the Eastern District of Michigan, with which Davis' case was later consolidated. In her suit, like the other two, Davis sought to bring class action claims for “all females who unsuccessfully applied for the SSR job..." and individual claims regarding her individual disparate treatment.

The district court denied Davis’ motion for class certification citing differences among hiring managers at different locations, as well as conflicts among the then plaintiff representatives and the proposed classes and threw out her individual claims as well. Davis appealed, and during that appeal, the United States Supreme Court decided the employer-friendly, anti-class action case, Dukes.

First Things First – The Class Claims
Given the Supreme Court's analysis in Dukes, there was little doubt that the Davis case would not be certified. Specifically, Davis argued the class certification portion of her case almost exactly like the Dukes plaintiffs did to the Ninth Circuit, who had been successful in their arguments until the Supreme Court overruled the Ninth Circuit. For example, she argued that the company's hiring practice was nationwide and faulted Cintas' corporate culture. She also presented expert testimony that Cintas had a "white-male dominated business culture", and produced statistical and anecdotal evidence to prove her claims.

The Sixth Circuit first reviewed the class claims pleaded under Rules 23(a)(2) and, relying heavily on Dukes, found that Davis could not establish the required commonality element. Under Dukes, Davis had to demonstrate that Cintas “used a biased testing procedure” or “operated under a general policy of discrimination." Davis did not and could not argue that there was some objective hiring criteria that led to the gender discrimination. Instead, she argued, wrongfully, that the discrimination was the result of individual hiring manager preference. No objective hiring criteria → no common question of fact → no commonality.

As for all of the evidence — sociological, statistical, anecdotal and otherwise — the Sixth Circuit determined it was “…not sufficient to show a uniform, companywide practice of exercising discretion in a way that favored men over women…” and found Cintas’ experts more persuasive.

Davis had also moved for class certification under Rule 23(b)(2), which provides that class certification is permissible where a class representative meets all the Rule 23(a)’s requirements and “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” The district court had found that Davis did not meet this requirement because her claim for backpay monetary relief required an “individualized determination[]” that was not appropriate for a Rule 23(b)(2) class.

At the Sixth Circuit level, Davis argued that her “shortfall-based model” for calculating damages, which was different than the trial-by-formula system the Supreme Court rejected in Dukes, was sufficient to meet the Rule 23(b)(2) requirements. I will not go into any detail about Davis’ proposed method for calculating backpay damages other than to say that it would have required the court to declare Cintas’ hiring practices discriminatory, issue an injunction ordering Cintas to hire class members “randomly selected in numbers equal to the proven shortfalls for each facility,” and calculate backpay liability for the class by multiplying the proven shortfall time lost wage and distribute that among class members. Whew, that was a lot, not to mention confusing. And apparently, I am not the only one to think so because the Sixth Circuit, without much ado, found Davis’ proposed system as suffering from many of the same issues as the trial-by-formula theory, and in fact, found it “even more troubling,” and held that the individualized monetary relief sought was not incidental to the injunctive and declaratory relief and affirmed the district court’s denial of class certification.

Next Up – Disparate Treatment
Davis’ remaining claims alleged disparate treatment. In those claims she alleged that she had been discriminated against because of her sex when she was rejected for employment in 2003 and 2004. These claims fared slightly better than her bid for class certification — well her 2003 one did anyway.

With respect to the 2003 rejection, the court found that the district court should not have granted summary judgment because Cintas’ proffered reason for not hiring her, i.e., her dislike for “up-selling,” her desire to remain employed part-time at LensCrafters, and that she was applying for other jobs was enough for Davis to meet her pretext burden because the court did not buy Cintas' reasoning in light of the fact that the company moved three men who were less qualified than Davis farther along in the hiring process.

On the 2004 non-hire, the Sixth Circuit affirmed summary judgment, concluding that the fact that Davis, unlike the two male candidates who were being considered, failed to demonstrate an adequate level of physical energy for the positions for which Cintas was hiring was sufficient to exclude her from the hiring process. Davis’ disparate treatment claim on the 2003 hiring issue is the only claim that remains pending.

Takeaways. As far as using the class certification process for Title VII claims, the Sixth Circuit resoundingly endorsed Dukes, which is great news for employers. This case, however, gives employers a little something extra because unlike Dukes, which concerned pay and promotion decisions, Davis concerned discriminatory hiring practices, meaning that employers within the Sixth Circuit can rely on Dukes and Davis to challenge class actions alleging pre-employment and employment discrimination.

Davis is helpful to employers in challenging plaintiff’s formulaic models for determining individuals damages for backpay and front pay. With Dukes, the trial-by-formula method is out and with Davis, so is the shortfall-based model.

Pick Your Poison - Violate State or Federal Law? Court Finds That Complying with State Law On Employee Criminal Background Checks Is Not a Defense to a Title VII Disparate Impact Claim

Sara Hutchins Jodka — Mon, 03 Jun 2013 10:06:24 -0500

I present on the topic of background checks often, and when it comes to Q&A time, I almost always get the question (or some variation of it): "How does Title VII come into play when an employer has state law requirements regarding criminal background checks?" In Waldon v. Cincinnati Public Schools, No. 1:12-CV-00677 (S.D. Ohio Apr. 23, 2013), the Southern District of Ohio shed some light on this particular employer predicament and demonstrates the potential for employment discrimination liability for employers who have overly broad exclusionary hiring policies based on past criminal conduct, even when those policies are required by state law.

In 2007, the Ohio legislature amended a state law to require criminal background checks of all current public school employees, including those not responsible for the care, custody, or control of children. (HB 190, eff. Nov. 14, 2007) According to the law, if an employee had been convicted of any of a number of specified crimes, no matter how far in the past they occurred, nor how little they related to the employee's present qualifications, the law required the employer to terminate the employee.

To comply with the law, in 2008 the Cincinnati Public Schools terminated 10 employees with criminal convictions, nine of which were African American. Two of those nine, Gregory Waldon, who was found guilty of felonious assault in 1979 and incarcerated for two years, and Eartha Britton, who was convicted in 1983 of acting as a go-between in a $5.00 marijuana deal, sued the school district alleging that the state law had a racially discriminatory impact on African Americans contrary to Title VII and comparable Ohio state law.

The Defendant filed a motion to dismiss asking the court to throw out Plaintiffs' suit claiming it simply followed Ohio law when it terminated their employment. The Defendant contended it maintained no particular employment practice that caused a disparate impact, and that it was a business necessity for it to follow Ohio law and that to force it to litigate the suit would force it to defend a criminal records policy it had no role in creating.

The terminated employees argued that Title VII trumps state law, such that their terminations were "unlawful employment practices" based on disparate impact" and that compliance with the state law was no defense because a violation is a violation. In Plaintiffs' view, "whether Defendant was complying in good faith to state law goes to the remedy the Court should ultimately craft, and not to whether the terminations were in violation of Title VII."

The court found that Plaintiff "adequately plead[ed] a case of disparate impact" and that there was "no question that Defendant did not intend to discriminate"; however, the court went on to note that "intent is irrelevant" in a disparate impact case and the practice it "implemented had a greater impact of African-Americans than others."

The biggest issue on briefing was whether Plaintiffs could even attack Defendant's facially-neutral policy based on the state law mandate. The court rejected "Defendant's view that the state law must 'purport' to discrimination in order to be trumped by Title VII. Such a view would gut the purpose of Title VII ...." Quoting Title VII, the court went on to note that an employer may defend against a prima facie showing of disparate impact only by showing that the challenged practice is "job related for the position in question and consistent with business necessity".

While the court noted that the policy at issue was a "close call," the court went on to note that the Defendant's failure to take into consideration any reason why the policy should not be applied to excluded individuals resulted in a disparate impact:

Obviously the policy as applied to serious recent crimes addressed a level of risk the Defendant was justified in managing due to the nature of its employees’ proximity to children. However, in relation to the two Plaintiffs in this case, the policy operated to bar employment when their offenses were remote in time, when Plaintiff Britton’s offense was unsubstantial, and when both had demonstrated decades of good performance. These Plaintiffs posed no obvious risk due to their past convictions, but rather, were valuable and respected employees, who merited a second chance. "To deny job opportunities to these individuals because of some conduct which may be remote in time or does not significantly bear upon the particular job requirements is an unnecessarily harsh and unjust burden." Buck Green, 523 F.2d [1290,] 1298 [8th Cir. 1975]. Under these circumstances, the Court cannot conclude as a matter of law that Defendants’ policy constituted a business necessity.

Basically, the court concluded that once the school district saw that nine of the ten employees being fired were African American, it did not have to follow the state law because Title VII trumps state mandates, and went on to provide that, instead of just following the state law mandate, the school district should have raised questions with the state board of education regarding the disparity: "The Court cannot conclude that Defendant was compelled to implement the policy, when it saw that nine of the ten it was terminating were African-American. ... Title VII trumps state mandates, and Defendant could have raised questions with the state board of education regarding the stark disparity it confronted." While the court did not go into any further detail, it appears that the court presumed the Defendant could have asked the board of education whether it was okay to apply a state law it believed would have a disparate impact. Upon review of the law, however, there does not appear to be any language that gives an employer any right or ability not to follow the law with the permission of a school board. Not to mention, whether Defendant could have appealed to the school board or whether the board of education could have or would have done anything counter to the state mandate is another question, and one not addressed by the court or in the parties' briefs. Essentially, according to the court, the school district could not show that Plaintiffs posed an obvious risk to school children based on their past convictions and therefore could not establish a “business necessity.” The case remains pending.

Takeaways: Talk about being in a tough spot ... this case should be titled Rock v. Hard Place! Does an employer violate state law or violate Title VII? Obviously, this case leaves more questions than it answers and should serve as a big wake-up call for employers. The result is particularly harsh for employers in certain industries, e.g., education, childcare, healthcare, transportation, finance, that are required by state law to conduct employee criminal history checks because those employers cannot use state law as a defense to ignore Title VII or (and even though the Waldon court did not cite to it) the EEOC's Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII, which became effective April 24, 2012 ("Enforcement Guidance"). The EEOC made clear in its Enforcement Guidance that state law regarding the use of criminal histories in employment may be pre-empted by Title VII. The obvious problem is what employers are to do when state laws require them to conduct criminal background searches for certain positions and keeps them from hiring employees who are unable to pass a screen? As this case demonstrates and reminds employers that, unlike federal laws or regulations, state and local laws are preempted by Title VII if they “purport[] to require or permit the doing of any act which would be an unlawful employment practice” under Title VII.

As such, if an employer's policy on criminal background checks is not job related and consistent with business necessity in conformity, even if the employer complies with the state law, that same policy may violate Title VII if it has a discriminatory impact. In other words, compliance with a state or law cannot be used as a defense to Title VII liability. To minimize the risk of disparate impact liability, employers should:

Avoid policies excluding individuals from employment based on any criminal conviction.
In cases where an employer has an exclusionary policy, including those mandated by state or local law or regulation, make sure that it is narrowly tailored and focuses on criminal convictions that are relevant to the nature of the employment at issue.
Before using an exclusionary policy, no matter how tailored, to exclude an applicant or employee from an employment opportunity, conduct an individualized assessment of the employee's (or applicant's) actual fitness for the job in question, considering such factors as: the facts or circumstances surrounding the offense or conduct; the number of offenses for which the individual was convicted; older age at the time of conviction, or release from prison; evidence that the individual performed the same type of work, post conviction, with the same or a different employer, with no known incidents of criminal conduct; the length and consistency of employment history before and after the offense or conduct; rehabilitation efforts, e.g., education/training; employment or character references and any other information regarding fitness for the particular position; and whether the individual is bonded under a federal, state, or local bonding program.

Technology Law Source 2.0

Brian Hall — Tue, 28 May 2013 12:52:47 -0500

We wanted to take a moment to share the redesigned Porter Wright Technology Law Source blog with you.

Technology Law Source is designed for readers to quickly and easily learn about concepts that cut across the traditional lines of intellectual property and extend to evolving technologies, as well as concerns with privacy and data security.

Our authors routinely update the blog to provide the latest news and information about a range of areas relating to the industry, including:

Copyright
Data breach
Data security
Database management
Electronic commerce
Electronic discovery
Electronic medical records
Enforcements, disputes, and litigation
HIPAA and HITECH Act compliance
International law and regulation
Internet law
Legal issues in use of social media
Online commerce
Online marketing, advertising, and promotions
Outsourcing
Patent filing, prosecution, and enforcement
Regulatory environment in privacy
Trade secret protection and enforcement
Trademark selection, enforcement, and brand protection
Workplace privacy matters

We invite you to visit the blog, and let us know what you think.

Twitter's Vine Video App Is the Latest App to Sprout Social Media Risks for Employers

Sara Hutchins Jodka — Fri, 24 May 2013 12:33:20 -0500

There is no doubt you know what YouTube is, but do you know about Vine? Well, Vine is a video app released by Twitter earlier this year that allows users to capture and share short looping six-second videos to Twitter and allows the user to tag people in the post. The app is easy to use and works a lot like Instagram (many call it the Instagram of video). When you tweet from Vine, it embeds your looped video — or what looks like an animated GIF — in your tweet and includes sound. Videos from Vine’s Make-a-Scene app appear in expanded tweets and play automatically. Vine videos can also include different clips stitched together into one video, rather than just allowing one continuous shot. In introducing the app, Twitter said the "brevity of the videos ... inspires creativity."

Sounds fun, right? Well, Vine already had a porn problem, and when employers hear the words "creativity" and "video" in the same sentence they get scared, and with good reason. It was only a matter of time until workplace videos started to pop up. In a recent article, "The Latest Social Media Concern for Employers", The Wall Street Journal focused on the app and how searching such terms as "bored," "work" or "hatework" brings up some troubling workplace postings. Examples include videos of employee venting about their employers, a uniformed employee smoking from a bong and another of an employee looking through what appeared to be confidential documents. You can take a look for yourself. Here are a few fun ones: #sick #job #work; #wishIWasWorkingForXbox; and #Job #bor3dness #work4it, which contains footage of warehouse employees appearing to attempt sexual relations with a shelving unit, running and screaming through the facility and playing with safety equipment.

Daniel A. Schwartz, an employment law attorney at Pullman & Comley LLC in Hartford, Connecticut and editor of Connecticut Employment Law Blog, has been on top of this issue from the get go and has written a couple of great posts on this subject, which include links to some Vine workplace videos. He also noted the dangers of this App and with smartphones in general in the WSJ article: “Employers who are just concerned about what their employees are just doing on Facebook are missing the bigger picture of how smartphones are infiltrating the workplace.”

Takeaways: New technologies like Vine are popping up (or sprouting if you will) at an ever increasing pace, particularly for mobile devices. As more and more employees are bringing their mobile devices to work, employers must stay on top of these technological developments not only to take advantage of them for their own marketing purposes, but also to ensure that their workplace policies apply as broadly as possible to cover all new technologies, such as Vine, as they develop. This includes implementing proper BYOD policies and training employees to make clear what employees are and are not allowed to share on Vine and other social media platforms. With that, I'll leave it to Mr. Schwartz because I think he summed it up best: “Vine is one of the fastest growing social networks. And people aren’t posting what they had for breakfast anymore.”

When Employee Taunts Employer via Facebook to "FIRE ME. ...Make my day. . ." NLRB Memo Concludes the Employer Can Go For It

Sara Hutchins Jodka — Wed, 22 May 2013 14:49:06 -0500

The National Labor Relations Board Office of the General Counsel released an Advice Memorandum in Tasker Healthcare Group, d/b/a Skinsmart Dermatology ("Tasker") Case 04-CA-094222 on May 16, 2013 and concluded that an employee was not engaged in protected concerted activity when she posted comments to a Facebook group message that taunted her employer to "FIRE ME ... Make my day ..."

The Charging Party was employed by Tasker, which was a medical office with approximately nineteen employees. The Charging Employee along with a few current and former employees engaged in a private Facebook group message to organize a social event. The first hour of the exchange was non-eventful and focused on planning the social event. Things soon got interesting when a former employee made a joke. In response, the Charging Party mentioned that a former employee who had previously left was coming back to work and speculated that Tasker may make the returning employee a supervisor. The Charging Party then attacked her current supervisor claiming he "tried to tell [her] something today and [she] said aren't you the supervisor for mind and body ... in other words back the freak off..." But Charging Party was not done there and added, "[Tasker is] full of shit ... They seem to be staying away from me, you know I don't bite my [tongue] anymore, FUCK ... FIRE ME ... MAKE my day ..." Other than Charging Party, no other current employees took part in this portion of the conversation, but one did pipe up after Charging Party complained following a two hour lull that she had been deserted and there was "[n]o one to make [her]laugh." In response, the current employee said she made the Charging Party laugh and added "it's getting bad there [at Tasker], it's just annoying as hell. It's always some dumb shit going on." The Charging Party did not have anything substantive to add to this and no other current employee added anything else work-related.

As you might have guessed, one of the current employees included on the group message who did not say anything during the exchange showed the Facebook posts to the employer. The employer took Charging Party up on her request to be fired stating that it was "obvious" that she was not longer interested in working there, and indeed made her day.

The employee filed a charge alleging that her termination violated the National Labor Relations Act ("NLRA") because her Facebook comments constituted protected concerted activity. In an Advice Memorandum, the NLRB Office of the General Counsel concluded that the employee's Facebook message did not constitute protected concerted activity because they did not involve shared employee concerns over terms and conditions of employment. To understand this conclusion, it is important to understand the NLRB's test for concerted activity, which is whether the activity is engaged "in with or on the authority of other employees, and not solely by and on behalf of the employee himself" and includes circumstances where employees seek to "initiate or to induce or to prepare for group action," and where individual employees bring "truly group complaints" to the employer's attention. However, comments made "solely by and on behalf of the employee himself are not concerted" are not protected and neither is "mere griping" by an employee who does not look forward to any action.

Applying this to the facts at hand, the Advice Memorandum found that the employee's comments merely expressed an "individual gripe rather than any shared concerns about working conditions." Specifically, the employee's comments telling a supervisor to "back the freak off"; stated her employer was "full of shit"; and that her employer should "FIRE ME ... Make my day" reflected individual "griping" and personal contempt rather than shared employee concerns over terms and conditions of employment. In addition, there was no evidence that any of the Charging Party's coworkers interpreted the postings as shared concerns over their working conditions, not even the posting "it's getting bad there[,] it's just annoying as hell" because it was ambiguous and bore no relation to the Charging Party's earlier comments.

Takeaways: This one is a win for employers, but employers are still reminded to be cautious when terminating an employee for the things they say on social media. This case demonstrates that even when an employee's comments on social media are so outrageous that they literally ask the employer to fire the employee, the employer must still do some analysis to determine whether the comments may constitute concerted protected activity under the NLRA. So employers keep the NLRB's standard for concerted protected activity in mind before terminating an employer for social media posts and ask yourself: (1) What was said? (2) Who said it? (3) Who commented on it or chimed in on the conversation? (4) Could it be considered shared employee concerns about terms and conditions of employment?

Sixth Circuit Upholds Summary Judgment for Employers in Two Cases Brought by Terminated Pregnant Employees

Brian Hall — Mon, 20 May 2013 15:27:22 -0500

Two Sixth Circuit decisions issued last week underscore the hazards associated with terminating an employee between the time that she announces her pregnancy and any time shortly after she returns from pregnancy leave. Fortunately, both decisions, which uphold lower court summary judgment decisions, also demonstrate that an employer can escape liability when it has valid reasons for the termination, even when the termination was made at a time that was temporally close to the pregnancy announcement or the pregnancy itself. In the first decision, Madry v. Gibraltar National Corporation, the court upheld summary judgment for the employer on Madry’s claim that the FMLA required her employer, Gibraltar, to reinstate her to the position that she held prior to her leave. Gibraltar defended on the grounds that an employee returning from FMLA leave is not entitled to restoration unless she would have continued to be employed if she had not taken FMLA leave. Gibraltar claimed that Madry was terminated for lack of work caused by economic reasons. It does not appear that Madry relied on the retaliation provisions of the FMLA nor any state or federal pregnancy discrimination statutes to support her contention that her termination was unlawful.

Madry offered four reasons why the employer’s “lack of work” explanation should not be believed. First, she argued that another similarly situated employee whom the employer identified as having also been laid off during her FMLA leave for a “lack of work” really was a “problem employee who at best was laid off for multiple reasons and at worst because she performed poorly.” The court, however, easily rejected this argument because it did not refute that “lack of work” was one of the reasons for the layoff. Second, she argued that the economic data did not support the employer’s claim that it suffered a downturn in business, but in fact shows that business was slightly increasing. The court again, however, rejected this argument because the economic data for the critical two months leading up to the decision not to reinstate Madry supported the employer’s argument that its business was in decline prior to the termination decision. In addition, to the extent that Madry argued that Gibraltar was required to show that her termination was economically required, the court noted that reducing labor costs and improving efficiency are valid business reasons for conducting layoffs, even when the degree to which such actions are motivated by economic hardship is debatable. Third, Madry argued that any terminations occurring after her termination were irrelevant to her claim and Gibraltar’s proffered reason for her termination. Though the Sixth Circuit agreed with this argument, it also held that this evidence is not necessary in finding the employer’s proffered reason legitimate, as the pre-termination economic data amply supported its burden of production. Finally, Madry argued that Gibraltar did not produce any company communications from around the time of her leave and termination that indicate a necessity for company layoffs as a result of reduced business. The court held, however, that the lack of any formal communications regarding the necessity to lay off employees does not render its decision unreasonable.

In the second case -- Megivern v. Glacier Hills Incorporated -- the plaintiff alleged that her employment was unlawfully terminated on the basis of her pregnancy and that her employer interfered with benefits due her under the FMLA and ERISA. The facts of this case are quite long and involved. Suffice it to say that Megivern had ongoing performance issues that resulted in her being placed on a performance improvement plan (“PIP”) approximately two weeks after announcing her pregnancy to co-workers. Approximately five weeks later, she was terminated for not improving to satisfactory status after being placed on the PIP. As these cases typically develop, in upholding the lower court’s grant of summary judgment in Glacier Hills’ favor, the Sixth Circuit focused ultimately on whether Megivern had sufficient evidence to prove that Glacier Hills’ proffered performance reasons for the termination decision were pretextual. In particular, the court found that the temporal proximity between the pregnancy announcement and the termination was not sufficient by itself to establish pretext. Instead, the court required Megivern to present other, independent evidence of pretext, which she was unable to do. The court rejected Megivern’s primary argument that the reasons for her termination shifted over time, finding instead that “the rationale given for terminating Megivern’s employment was clearly articulated in the termination notice prepared by Thompson and has remained the same since. In addition, the court not surprisingly found that the final decision-maker’s failure to congratulate her on her pregnancy did not provide evidence of pretext, especially since there was no evidence that Megivern had ever told that she was pregnant directly. Finally, Megivern presented “me too” testimony from three other employees who contended that they too were treated badly based on their pregnancy, but the court upheld the rejection of this evidence because the others’ situations were all factually distinct from Megivern’s.

Madry and Megivern demonstrate that an employee’s pregnancy does not immunize her from discipline or termination. This, of course, does not mean that a discipline or termination decision is not going to result in lengthy and costly litigation against a potentially sympathetic plaintiff. Nevertheless, particularly where legitimate business reasons -- whether they be economic or performance-based -- can be documented, the employer may be better served by taking the litigation risk rather than whatever risks may be associated with retaining the employee.

Court Rules Employer Cannot Force a Former Employee to Update LinkedIn Profile

Sara Hutchins Jodka — Fri, 17 May 2013 14:14:58 -0500

In today's world of social media, we know that employees live online. With LinkedIn, this includes having a living resume for anyone with a LinkedIn account to see. The up-to-date part, or rather how up-to-date someone's LinkedIn profile (or resume) is, has become somewhat of a concern. The recent case of Jefferson Audio Video Sys. Inc. v. Light (W.D. Ky. May 8, 2013) demonstrates how the updating of a LinkedIn profile can become a concern for employers, particularly as it pertains to an employer's former employees.

Here is the situation: An employee leaves a company for whatever reason yet fails to update his or her LinkedIn profile. To anyone who views the individual's profile or searches the company's name, the individual appears to be a current employee.

In Jefferson, the employer Jefferson Audio Video Systems, Inc. ("Jefferson") sued former employee Gunnar Light ("Light") in part because he said some pretty awful things about the company to a customer while employed and, in part, because he would not update his LinkedIn profile. So, how did that turn out for the employer? Not so well.

Jefferson hired Light as a Sales Manager. During a sales meeting with a customer, Light allegedly made some less-than-flattering statements about the company to the customer, including comments that Jefferson was "unorganized," that "they don't know what's going on," "they've made a mess of things," "I unfortunately am stuck with this Company that is very dysfunctional," and suggested that the fact that Jefferson had a business at all was "a miracle." While Light made the sale despite his employer bashing, the sale was for less than Jefferson had anticipated. Not surprisingly, when Jefferson became aware of Light's statements about the company, it fired him.

Jefferson sued Light alleging numerous state law claims including: defamation, tortious interference, breach of fiduciary duty, trade, disparagement, fraudulent misrepresentation, and breach of contract. Light moved to throw out Jefferson's lawsuit, and the court did.

Light’s failure to update his LinkedIn profile provided the basis for Jefferson's claim for fraudulent misrepresentation. Jefferson claimed that for several months following Light's May 9, 2011 termination, he "falsely represented on social media outlets, such as LinkedIn, that he held the position as ... International Managing Director after his date of termination." According to the opinion, Jefferson had contacted Light twice in May 2011 to request that he update his social media to indicate that he was not a current employee of Jefferson. Light responded that "he intended to promptly update his employment profile," but he did not change his information until after he received a third request in June, in which the company said it would file a formal complaint with LinkedIn.

The court found that Jefferson failed to plead the claim with the required particularity because Jefferson failed to "indicate it reasonably relied on Light's misrepresentation" and admitted as much in its response brief that it was "not asserting that it a was defrauded by Light but, instead, is making a claim that Light's fraudulent misrepresentation to the world damaged [Jefferson]." Because Jefferson failed to assert facts that it reasonably relied on Light's misrepresentation itself, a requirement to the claim, the court found the claim lacking and threw it out.

The company also attempted to argue that it was somehow advocating that Light committed fraud on potential third-party customers, but the court did not buy that argument either.

[C]iting no case law in support of its argument, [Jefferson] urges this Court to expand the scope of an actionable fraud claim by permitting it to assert a claim based upon third party rights. [Jefferson] wants to stand in the place of those customers with reference to the issues of intentional misrepresentation and reliance upon the same. While novel in its genesis, Kentucky courts have not recognized such an argument."

As an aside, the court's decision throwing out the employer's defamation claims is also instructive for employers because the court did a nice job of outlining what constitutes defamation in this setting and what does not. Here, the court tossed the employer’s defamation claims because it found Light's statement to be "protected expressions of opinion," which are not actionable as they are expressions that merely voice "subjective thought". So employers a caution: Statements of opinion, rather than fact, typically won’t provide a basis for a defamation claim.

Takeaways: Employers, while it is understandable that you do not want a terminated former employee holding out that he or she still works for you, it may not be worth your time to try to force the former employee to update their social medial through the courts. It might be more worthwhile to contact LinkedIn who may take up the issue with the user based on their user terms and conditions. In any case, if the saying "it's easier to find a job when you already have a job" is true, allowing a former employee to keep a "currently employed" status might allow your former employee to get a new job faster. The upside for you, it will stop unemployment payments to the former employee and, if the employee had a wrongful termination claim against you, it will stop any potential back pay from continuing to accrue. Another thought, you may include in the employee's offer letter and/or separation agreement a provision where the employee agrees to update all social media to reflect that he or she is no longer employed with the company no later than three days (or whatever you deem reasonable) after separation of employment for whatever reason.

Federal Contractor Update: Contractors Must Begin Using New Census Data Next Year

Jamie LaPlante — Thu, 16 May 2013 09:09:48 -0500

The Office of Federal Contract Compliance Programs (OFCCP) recently released a notice that the 2006-2010 census data must be used for all affirmative action plans for plan years beginning on January 1, 2014, and OFCCP will begin using 2006-2010 census data to evaluate affirmative action plans and efforts as of that same date. Keep in mind that, since the data was released in late November 2012, federal contractors were permitted to voluntarily begin using the census data, which is based on a compilation of 2006-2010 American Community Survey (ACS) data. Contractors should keep in mind that the data is coded and categorized differently than the 2000 census data and should plan accordingly regarding the preparation of any 2014 affirmative action plans.

Union Organizing Posting Rules: Reminder that Federal Contractors and Subcontractors Must Still Post

Mike Underwood — Wed, 15 May 2013 01:40:08 -0500

Recently, we pointed out that the effort by the National Labor Relations Board to impose on all employers an obligation to post notices about union organizing rights remains stalled. That article resulted in some questions about whether federal contractors and subcontractors are still required to post a notice about union organizing. The posting obligation for federal contractors and subcontractors is based on Executive Order 13496, which was signed by President Obama in 2009 and took effect in June, 2010. That obligation remains in effect for federal contractors and subcontractors. It is not changed by the NLRB's stalled effort to extend the obligation to all employers.

NLRB Posting Rule Dealt Another Blow

Mike Underwood — Mon, 13 May 2013 08:38:53 -0500

It has been almost a year since there was news to report about the NLRB proposed rule requiring employers to post notices about union organizing rights. As you might recall, the NLRB issued the rule in the fall of 2011 and it caused immediate controversy. Many in the business community considered the posting an unwarranted effort by the NLRB to support union organizing. Many considered the rule to go well beyond the NLRB's authority under the National Labor Relations Act. Lawsuits were filed in two federal district courts challenging the NLRB's authority to issue and enforce the rule. The lower court decisions in those cases were in conflict. A district court in South Carolina ruled that the NLRB had exceeded its authority and could not enforce the rule. The district court for the District of Columbia upheld the NLRB's right to issue and enforce the rule in general, but overruled two specific aspects of the rule. Both of these lower court decisions were appealed to the federal Courts of Appeal; the Fourth Circuit Court of Appeal which covers South Carolina and the D.C. Circuit Court of Appeal. As a result of the litigation, in April of 2012, the NLRB issued an indefinite stay on the enforcement of the rule. Since then, we have been waiting to see how the issue would be decided by the Courts of Appeal.

On Tuesday, the D.C. Circuit Court of Appeal issued its decision in National Ass'n of Manufacturers, et al. v. National Labor Relations Board, et al. (U.S. Court of Appeals for the District Court of Columbia Circuit, Case No. 12-5068). The Court found that the NLRB cannot enforce the posting rule. The majority decision invalidates the rule because it essentially forces an employer to communicate to its workforce about unionization. The majority found that doing so violates the employers' right under the National Labor Relations Act to speak or be silent about union organizing issues. Because the rule was invalidated on those grounds, the majority decision does not address the question of whether the NLRB can even issue a rule requiring employers to take some affirmative step, like a posting. One of the arguments in the case was that the NLRB's specific role under the law is conducting union organizing elections and investigating alleged unfair labor practices, and that they have no authority to make employers do anything outside that limited role.

So, where do things stand now? The NLRB had already imposed an indefinite stay on enforcing the rule, so clearly the rule is currently dead. The decision by the D.C. Circuit Court of Appeals may make it less likely the rule will ever re-surface. But do not be too sure of that.

The NLRB will probably continue to fight the case pending in the Fourth Circuit Court of Appeals to see if it can obtain a different result there. The NLRB can also appeal the issue to the United States Supreme Court. Certainly, we will report on any further developments.

Don't Expect Any New Right-to-Work Legislation in Ohio...Until Perhaps After 2014

Jason Starling — Mon, 06 May 2013 11:19:36 -0500

First it was Wisconsin. Then Indiana. Then Michigan of all places. Right-to-work legislation is being considered, and in some cases passed, by legislatures throughout the Rust Belt. Given that trend, and the economic benefits to businesses and the state that follow with right-to-work, it was only a matter of time before regional pressures led the Ohio legislature to consider the idea notwithstanding the previously failed attempts on Senate Bill 5.

Just recently, two Ohio House of Representatives members, Kristina Roegner (R-Hudson) and Ron Maag (R-Lebanon), announced they are sponsoring bills that would enact right-to-work for both the public and private sectors in Ohio. There are two proposed avenues: by statute or by a constitutional amendment engraining right-to-work in the Ohio Constitution. The legislation encompasses a basic right-to-work provision and only prevents an employee from being forced to join a union or pay dues to a union as a condition of employment.

However, just the other day, all of this became a moot point—for now. Ohio Senate President Keith Faber announced that right-to-work legislation will not be taken up by the Ohio Senate. This effectively makes right-to-work “dead in the water.” It also has been reported that Governor John Kasich was not particularly interested in the idea. As of April 8, 2013, the New York Times’ expert pollster and election predictor Nate Silver of the FiveThirtyEight blog, places Governor Kasich in “better shape” for his reelection in 2014. According to Mr. Silver, surveys are showing Governor Kasich currently has a 50% job approval rating. This compares to a job approval rating in the 30s for Kasich in 2011 when Senate Bill 5 was in the forefront. For Kasich, he has nothing to gain (and everything to lose) by forcing a controversial issue and reigniting the firestorm.

But the question may be one of timing. Governor Kasich is up for reelection in 2014. Republicans are also trying to hold the U.S. House of Representatives and make gains in the U.S. Senate. Motivating unions to campaign with their union dues and get-out-the-vote efforts in 2014 by pushing right-to-work does not seem like the wisest course of action for Republicans in Ohio. It would heavily motivate the Democratic Party and Democratic voters. This was explicitly acknowledged by Ohio Senate President Faber, when he said “[t]he only purpose this discussion serves right now is to generate a bunch of breathless fundraising appeals from the Ohio Democratic Party.”

So, for now, right-to-work is on the minds of Ohio’s Republicans, but the expectation is no legislation will be forthcoming. Expect the issue to die out in time for the 2014 election, but then it may rear its head once again in 2015. If right-to-work can be enacted in Michigan, it can certainly be enacted in Ohio.

Ohio's Sixth District Court of Appeals Finds a New Way to Expand Scope of the Employer Intentional Tort Statute

Jason Starling — Thu, 02 May 2013 08:24:28 -0500

Until the Ohio legislature enacted R.C. 2745.01 in 2005, the employer intentional tort exception to workers’ compensation immunity exasperated Ohio employers. Under the exception as interpreted by the Ohio Supreme Court, employers could be held liable for an intentional tort (with the accompanying tort damages such as punitive damages) so long as they had knowledge of a dangerous condition in its workplace that was substantially certain to cause injury and nevertheless required its employee to work under that condition. This was a very relaxed standard for an “intentional” tort and one that was made even more relaxed by increasingly liberal interpretations from Ohio appellate courts.

R.C. 2745.01 was designed to raise the standard by requiring employees to prove that the employer acted with “deliberate intent” to cause an employee to suffer an injury, a disease, a condition, or death. The statute created only two presumptions of a deliberate intent to injure: (a) if an employer deliberately lied to an employee about whether a substance was toxic or hazardous and as a result that substance injured the employee, or (b) if an employer deliberately removed an “equipment safety guard” and as a result of the removal the employee was injured. In those two circumstances, specific intent would be presumed.

Once the Ohio Supreme Court upheld the constitutionality of R.C. 2745.01 the plaintiffs’ bar attempted to find ways around the statute to once again open up the lucrative business of employer intentional torts. However, one-by-one early successes by the plaintiffs’ bar in the appellate courts have been overturned in the Ohio Supreme Court.

For example, in Houdek v. ThyssenKrupp Materials N.A., Inc., the Ohio Supreme Court rejected the Eighth Appellate District’s finding that R.C. 2745.01 did not really require deliberate intent to injure in order to establish an employer intentional tort. Similarly, in Hewitt v. L.E. Myers Co., the Ohio Supreme Court rejected the Sixth Appellate District’s broad interpretation of an “equipment safety guard” to include personal protective equipment (rather than a guard attached to a piece of a equipment) Had it been upheld, the lower court decision in Hewitt in effect would have imposed an affirmative duty on employers to make available personal protective equipment at the risk of being found liable for an employer intentional tort. In reaching its decision, the Ohio Supreme Court in Hewitt defined an equipment safety guard as “a device designed to shield the operator from exposure to or injury by a dangerous aspect of the equipment.”

Despite the Ohio Supreme Court’s rejection of expansive interpretations of employer intentional torts from the intermediate courts of appeal, the Sixth Appellate District again has attempted to find a way around the statute. Specifically, in Pixley v. Pro-Pak Industries, Inc., the Sixth District concluded, contrary to the Supreme Court's Hewitt decision, that for purposes of interpreting R.C. 2745 an equipment safety guard need not be a device “designed to shield the operator [of the equipment] from injury.” Therefore, according to the Sixth District non-operators injured by removal of such a device from a piece of equipment could obtain a presumption of specific intent and proceed to a jury on an employer intentional tort claim. This interpretation by the Sixth District, if upheld by the Ohio Supreme Court, would substantially expand the scope of the intentional tort exception by expanding the types of devices that can constitute equipment safety guards as well as expanding the types of employees who could argue for the exception.

Attempting to find a way to square its conclusion with the Ohio Supreme Court’s holding in Hewitt, the Sixth District in Pixley engaged in an analysis consisting of three main arguments. First, the Sixth District stated that the portion of the high court’s decision in Hewitt that defined equipment safety guard as one “designed to shield the operator” was merely dicta because whether the plaintiff was an “operator” of the equipment at issue was not before the Ohio Supreme Court in Hewitt. Second, the Sixth District relied upon a one-sentence summary opinion by the Ohio Supreme Court reversing a different court of appeals and instructing it to apply the new standard for removal of equipment safety guards outlined in the high court’s Hewitt decision. According to the Sixth District, this one-sentence summary opinion was instructive because the reversal allegedly would not have been necessary if the Ohio Supreme Court had intended to limit the definition of equipment safety guards to those “designed to shield the operator.” Finally, the Sixth District analogized the scenario before it to the other exception in R.C. 2745.01 regarding deliberate lies to employees on toxic or hazardous substances. According to the Sixth District, this other exception does not limit itself to those employees who actually handle the toxic or hazardous substance and, likewise, the equipment safety guard exception should not be so limited.

The reasoning of the Sixth District described above is unconvincing to say the least. For example, at the same time the Sixth District convinces itself to deviate from the Ohio Supreme Court’s definition of equipment safety guard as “a device designed to shield the operator” because this portion of the definition is allegedly dicta from the Hewitt case, the Sixth District relies upon the one-sentence summary reversal by the Ohio Supreme Court in another case as somehow persuasive when that one-sentence summary reversal is itself is no better than dicta for the point the Sixth District wants to make. This appears to be selective reliance on and rejection of dicta. In fact, it is not even clear that the one-sentence summary reversal at all stands for the proposition advocated by the Sixth District; simply reversing a court of appeals decision in one sentence because a new standard is announced does not create persuasive authority and it is very likely the Ohio Supreme Court simply wanted the lower court to re-analyze the case using the current standard. As another example, the Sixth District’s third argument analogizing to the exception on deliberate lies about toxic or hazardous substances ignores the basic fact that this exception and the equipment safety guard exception are different exceptions. There is nothing in the statute, or in the principles of statutory interpretation, that says these two exceptions must be interpreted as being analogous in their scope.

At a more basic level, the Sixth’s District reasoning is not convincing from a practical perspective. The purpose of the exceptions in R.C. 2745.01 is to provide rebuttable presumptions of specific intent in circumstances where the employer’s action clearly demonstrates specific intent. If an employer deliberately removes an equipment safety guard and the operator of the equipment from which the guard was removed is injured, then it is reasonable to conclude the employer was specifically intending to hurt that operator. This presumption makes sense because the employer knows that the operator will use the machine, and it is presumed the employer knows that removing an equipment safety guard for that machine will cause injury. Those two presumptions lead to a presumption of specific intent; that is, a deliberate targeting of the employee for injury. The same presumptions do not exist if, for example, a bystander employee is somehow injured in addition to the operator when the operator uses the machine without the equipment safety guard. The injury of the bystander is not necessarily foreseeable and, if it is not foreseeable, it is difficult to see how there should be an automatic rebuttable presumption of specific intent for the injured bystander. Perhaps the bystander employee can prove the employer knew he or she would be in proximity to the machine, but that is proof independent of what would be required under the equipment safety guard exception and, therefore, the exception alone should be insufficient for that bystander employee. And, quite frankly, the actions of the employer toward the bystander employee look more akin to a lesser mental state such as recklessness or knowledge rather than specific intent.

It remains to be seen whether the employer will appeal the Sixth District’s decision to the Ohio Supreme Court and we have yet another case before the high court reversing an Ohio court of appeals on the scope of employer intentional tort liability. For employers, this case demonstrates that the battle by the plaintiffs’ bar to keep employer intentional torts alive is far from resolved.

NLRB Issues Third Facebook Firing Decision (Employers 1, Employees 2). Would Bettie Page Roll Over In Her Grave?

Sara Hutchins Jodka — Thu, 25 Apr 2013 12:46:36 -0500

The National Labor Relations Board (NLRB) has issued its third Facebook firing decision. In Design Technology Group LLC dba Bettie Page Clothing (Case No. 20-CA-035511, 359 NLRB No. 96), the Board found that the employer, a clothing store, violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by discharging three employees for engaging in what the Board deemed protected concerted activity after the employees posted messages on Facebook complaining about their working conditions. The Board also held the store violated the NLRA by maintaining a “Wage and Salary Disclosure” rule in its handbook prohibiting employees from disclosing information about wages or compensation to any third party or other employees.

The employees worked at a retail store in a tourist area in San Francisco. The store closed an hour later than other stores in the area, and employees claimed they felt unsafe leaving when the area was deserted. The employees directed their concerns to the manager, who they claimed did nothing. The employees went over the manager's head to the store owner who said they would close the store earlier. The manager got upset because the employees went around her to the owner and verbal arguments between the manager and employees ensued. So what did the employees do? Well, they did what every 20-something-disgruntled-clothing-store employee does when they are mad — they took to Facebook and posted about the situation to hundreds of their closest “friends.” While some comments were clearly unprotected venting that were not directed specifically to work conditions, e.g., “bettie page would roll over in her grave” and “I’m physically and mentally sickened,” one zinger was a more than a rant: “hey dudes it’s totally cool, tomorrow I’m bringing a California Worker’s Rights book to work. My mom works for a law firm that specializes in labor law and BOY will you be surprised by all the crap that’s going on that’s in violation 8) [sic] see you tomorrow!”

And as many 20-something-clothing-store employees would do, one employee who saw the posts showed them to the owner who subsequently fired the other three employees. One of the terminated employees filed an unfair labor practice charge with the NLRB challenging the termination and the employer’s policy that prohibited employees from discussing their wages and salary.

By now, I think we know how this story ends. The NLRB found the Facebook posts were part of the employees' efforts to get the clothing store to close earlier based on safety concerns and thus, the store committed an unfair labor practice when it fired the employees. Neither the ALJ nor the Board bought the employer’s argument that the posts were an attempt to entrap the employer into firing the employees and were not intended for employees' mutual aid and protection. Going one step further, the NLRB held the posts themselves constituted protected concerted activity under the NLRA. Specifically, the NLRB found: “The Facebook postings were complaints among employees about the conduct of their supervisor as it related to their terms and conditions of employment and about management’s refusal to address the employees’ concerns,” the board's decision said. “Such conversations for mutual aid and protection are classic concerted protected activity, even absent prior action.” The Board ordered the store to reinstate all three employees and to give them back pay. That reunion should be interesting!

Takeaways:

This should be old hat by now as it follows the Board’s rulings in Karl Knauz Motors, Inc., case i.e., the “this is your car on drugs” and the Hispanics United of Buffalo Inc. case, i.e., the “a coworker feels that we don’t help our clients enough,” but, nevertheless, here we go again. If an employee complains in any forum about their working conditions, including on social media, those complaints likely are protected and an employer may not take adverse action against the employee for those complaints/posts.
Employers cannot issue gag orders and prohibit their non-management employees from talking about their wage and salary information. An employer can argue that this information is confidential, but they will lose this argument in favor of an employee’s rights under the NLRA.

NLRB Issues Advice Memorandum Weighing In On Confidentiality of Employer Investigations

Brian Hall — Tue, 23 Apr 2013 08:22:21 -0500

Back in August, we alerted you to an NLRB decision in Banner Health System dba Banner Estrella Medical Center and James A. Navarro, Case No. 28-CA-023438, in which the Board held that an employer’s blanket rule requiring employees to maintain the confidentiality of pending internal company investigations violated the employees’ Section 7 right to discuss discipline or disciplinary investigations involving their fellow employees. At the time, we expressed the concern that the NLRB's position complicates an employer’s ability to protect the integrity of an ongoing investigation. Nevertheless, at the time, we recommended that employers should treat each investigation on an individualized basis and that employers should document its specific business rationale for requesting employee confidentiality during an investigation.

Last week, the NLRB’s Division of Advice issued a Memorandum revisiting this issue. In Verso Paper, NLRB Div. of Advice, No. 30-CA-89350, 1/29/13 [released 4/16/13] Associate General Counsel Barry J. Kearney advised that the employer maintained an overbroad rule requiring employee confidentiality to maintain the integrity of all internal investigations. The company’s Code of Conduct specifically provided:

Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up. To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

Reviewing this policy, Mr. Kearney reiterated the Board’s position from Banner Health that an employer must show more than a generalized concern with protecting the integrity of its investigations. “Rather, an employer must ‘determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, and there [was] a need to prevent a cover up." Thus, according to Kearney, a blanket rule prohibiting employee discussions of ongoing investigations is unlawful because it does not require the employer first to demonstrate a particularized need for confidentiality in any given situation. He therefore advised the NLRB’s Region 30 Director to issue a complaint against the employer in the absence of settlement.

In a footnote to his Memorandum, Mr. Kearney provided employers with a safe harbor policy that would avoid the potential Section 7 pitfalls. Specifically, he noted that the first two sentences of the employer’s rule lawfully set forth a legitimate interest in protecting the integrity of its investigations and then recommended modifying the remainder of the rule to lawfully advise employees that:

Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

It is easy for employers to make any necessary changes to its policies. In addition, there is not a lot of gray area in the Board’s position as there was with respect to social media policies. Therefore, it is unlikely that we will see any actual litigation arising out of the Verso complaint if it gets issued or regarding any other similar company policies. As we previously pointed out, however, it is hard to imagine many, if any, internal investigations that could not be thwarted by the loose lips of co-workers. As a result, I expect that the next significant clash on this issue that goes before the Board will address actual employee discipline cases. When that happens, we will see how far the Board is willing to go to protect employees who interfere with their employer’s internal investigations.

Genesis: A Unicorn, or the Beginning of a New Tactic? Supreme Court Holds Employers Can "Pick Off" a Named Plaintiff and Defeat a FLSA Collective Action with an offer of Judgment, but Leaves Open If All Employers Can Employ This Strategy

Sara Hutchins Jodka — Thu, 18 Apr 2013 09:39:26 -0500

By a tight five-to-four decision, the United States Supreme Court's Genesis Health Care Corp. v. Symczyk decision provides employers a method to "pick off" the lead plaintiff in an FLSA collective action using a Federal Rule of Civil Procedure 68 offer of judgment and by doing so, take out the remaining collective action. For reasons we will explain in a bit, however, the Court merely "assumed" -- without deciding -- that an unaccepted Rule 68 offer of judgment that offers complete relief moots the named plaintiff's individual claim and, in the absence of any other claimant having opted into the action, the individual plaintiff lacks any personal interest in representing others in the case. Because the Court was unwilling to resolve the predicate issue as it was anticipated it would, however, there remains a split among the circuit courts of appeal as to the effect of the Rule 68 offer of judgment under this scenario. As a result, the four dissenting justices argued, the decision “aids no one, now or ever” and should simply be forgotten.

Because the circuits are split on the mootness issue, employers should take Genesis for what it is: A potential weapon to stop frivolous wage/hour cases before they become expensive collective actions and further indication of the Supreme Court's efforts to limit the ability to bring class and collective actions – at least in those Circuits -- the Third, Fourth, Seventh (and perhaps the Fifth, which appears to be leaning this way) – that already have held that an unaccepted offer of judgment moots an individual plaintiff's claims. Unfortunately for those employers in Ohio, the Sixth Circuit, along with the Second, has gone the other way, rendering this strategy useless here – until the Supreme Court ultimately decides to actually resolve the split.

The Back Story: This case originated when respondent Laura Symczyk ("Symczyk") filed this case on behalf of herself and "all other persons similarly situated" as a collective action under the Fair Labor Standards Act ("FLSA") against her former employer, the petitioners, alleging the company's automatic meal break deduction policy violated the FLSA because it failed to pay employees for compensable work. While Ms. Symczyk purported to bring the case as a collective action, rather than a single-plaintiff lawsuit, she remained the sole plaintiff.

When the petitioners answered the complaint, and before Symczyk could move for conditional certification, they served Symczyk a Federal Rule of Civil Procedure Rule 68 offer of judgment and offered her $7,500 for her alleged unpaid wages, "reasonable attorneys' fees, costs, and expenses" as the Court would determine. The petitioners gave Symczyk ten days to respond, and when she did not, petitioners filed a motion to dismiss for lack of subject matter jurisdiction arguing they had offered Symczyk complete relief on her individual damages claim and she no longer had a personal stake in the outcome of the case. Symczyk argued in response that the petitioners were trying to "pick off" the named plaintiff before the collective action could play out.

The District Court found that because no other individuals had joined the suit and the Rule 68 offer of judgment fully satisfied Symczyk's individual claim, Symczyk's claim was moot and it dismissed her suit for lack of subject matter jurisdiction.

On appeal, the Third Circuit reversed. In holding that the case was not moot, the Third Circuit explained that the defendants' attempts to "pick off" the named plaintiff with a Rule 68 offer could short circuit the collective action process and frustrate the goals of collective actions. The Third Circuit remanded the case to allow Symczyk to seek conditional certification.

The Supreme Court's Decision: The Supreme Court overturned the Third Circuit. While most waiting for this decision expected the Supreme Court to resolve the issue of whether an unaccepted offer of judgment under Rule 68 that fully satisfied a plaintiff's claim renders a claim moot, it did not. While recognizing this is an issue on which the circuit courts remain split, the Court refused to decide this significant issue. Rather, the Court chose to "assume" Symczyk's individual claims were moot because she had conceded the point at the district court level and had not filed a cross-petition challenging it. The majority then determined that Symczyk had no "personal interest" left in the case to represent the other employees who had failed to join the suit, and therefore had no other "continuing interest to preserve her suit".

As the Court explained:

Under the FLSA,...,"conditional certification" does not produce a class with an independent legal status, or join additional parties to the action. The sole consequence of conditional certification is the sending of court-approved written notice to employees,..., who in turn become parties to a collective action only by filing written consent with the court, § 216(b). So even if respondent were to secure a conditional certification ruling on remand, nothing in that ruling would preserve her suit from mootness.

Although the Court upheld the dismissal in Genesis by assuming mootness, its refusal to settle the circuit court split leaves the viability of the Rule 68 strategy up in the air.

While the majority also weighed in on a couple of other points, the mootness issue is the main one that sent four of the Justices into dissent. The dissenting justices argued that a mere offer to pay off a litigant, when that offer simply went unaccepted, is not enough to end a lawsuit. Since the majority proceeded on the false assumption that that satisfied the federal court rule governing such payment offers, the remainder of the Court majority’s analysis was beside the point, and the situation would not recur in any other case, the dissenting opinion asserted.

Justice Kagan's dissent, which is dripping with sarcasm, is an entertaining read and is one I am sure we will see cited down the road as this issue plays out in the lower courts, especially as she notes: "The Court today resolves an imaginary question based on a mistake the courts below made about this case and others like it."

Takeaways:

Some employers Have a New Tool to Defeat Single-Plaintiff Collective Actions: While the dissenting opinion hypothesizes that a factual scenario like the one presented in Genesis is essentially a unicorn as resolves an imaginary question that does not and will never exist, this decision potentially gives employers, except those in the Second and Sixth Circuits, a tool to stop a lawsuit at the starting line. If an employer can stop a purported collective action prior to the notice stage, it can stop a plaintiff's lawyer from identifying other class members through the notice process and effectively kill the suit before it gets out of the gate.
Genesis Extends the Supreme Court's Growing Intolerance for Class Actions to Include Collective Actions Brought Under the FLSA. This case takes its proper place among Wal-Mart v. Dukes, Amgen v. Connecticut Retirement Plans & Trust Funds and Comcast Corp v. Behrend as further narrowing certification standards under Rule 23, and now in the FLSA collective action context.
The Court's Clear Distinction Between FLSA Collective Actions and Opt-Out Class Actions Under Rule 23 Will Be Cited in Many Case to Come. It is also worth noting that the majority noted for the first time since its 1989 Hoffmann-LaRoche v. Sperling decision that "Rule 23 class actions are fundamentally different from collective actions under the FLSA." Unlike in a Rule 23 action, conditional certification of an FLSA collective action does not produce a class with an independent legal status, the decision said. This part of the decision is important because the Court has signified its stance that collective actions are inherently different from class actions. We can expect to see Genesis cited in hybrid class/collective action cases by employers seeking to separate the two into separate actions.

U.S. Supreme Court decision: U.S. Airways, Inc. v. McCutchen

Ann Caresani — Thu, 18 Apr 2013 07:40:03 -0500

The United States Supreme Court issued an opinion earlier this week in an ERISA case regarding the breadth of Section 502(a)(3) relief, and the common-fund doctrine. While the decision was unanimous on the primary issues, the Court surprised us with a 5-to-4 split on a secondary issue. Overall, the decision in U.S. Airways, Inc. v. McCutchen is favorable for employers sponsoring health care plans. The decision is also favorable for health care plan participants in the aggregate because it allows for control of plan costs, and premiums, at a critical time when plans are gearing up for 2014 health care reform cost increases.

We discussed the facts and prior decisions in this case in considerable detail in a prior blog. You might want to review that blog to put this decision in context. To summarize, a health care plan provided that it would cover expenses caused by a third-party, subject to the condition that the plan be reimbursed from any monies recovered from a third party. (This is a common provision in ERISA health care plans, intended to control costs for all participants and to avoid costly litigation over recovery.) Mr. McCutchen was in an auto accident with another vehicle, and the plan paid $66,866 of health care plan expenses he incurred due to that accident. After Mr. McCutchen recovered funds from the other driver and his own insurer for underinsured motorist coverage, the plan sought reimbursement of expenses it had paid, in accordance with plan terms. He refused to repay anything, and the case headed to court.

Eventually, the U.S. Supreme Court agreed to hear the case to resolve a circuit split on whether "equitable defenses" could override an ERISA plan's reimbursement provision. Justice Kagan delivered the opinion, joined by four other justices. Applying prior case law (Sereboff v. Mid Atlantic Medical Services, Inc.), the Court first held that in a Section 502(a)(3) action based on equitable lien by agreement, the ERISA plan's terms govern. Neither general unjust enrichment principles nor specific doctrines reflecting those principles can override the applicable contract. Accordingly, the plaintiff's argument that double-recovery rules prevailed over plan terms was rejected. The participant was being held to the agreement to reimburse in the event of recovery.

The Court next rejected the Department of Labor's argument that the common-fund rule has a special capacity to trump a conflicting contract. The common-fund rule provides that "a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." The Court found that this rule was treated the same as any other rule: ERISA plan terms prevail.

Then, the Court took a somewhat surprising next step. It found a "contractual gap" in the plan document regarding the cost of recovery. The Court found that the common-fund doctrine provided the best indication of the parties' intent, requiring the attorney's fees to be paid before the plan was reimbursed. The Court's majority thought it was unfair that plaintiff would have been "in the hole" for $866 if the common-fund doctrine had not been applied.

The $866 arose based on four agreements the plaintiff entered into: with the plan, attorney, and two other parties. Another view of the $866, from the other plan participants' perspectives, is that the $866 was not a hole, but was plaintiff's gamble that he could pay an attorney a 40% contingency fee on the entire recovery, and keep the approximately $66,000 remaining, rather than repaying anything to the plan.

In a dissent, Justice Scalia (joined by three other justices, including Chief Justice Roberts) agreed with the majority on the primary issues, but disagreed regarding the "contractual gap." In the dissent's view, the parties had conceded that the plan provided for full reimbursement, without any contribution to attorney's fees and expenses. Therefore, the issue of whether the plan was ambiguous as to attorney's fees was not before the Court, and the Court should not have applied the common-fund doctrine.

What does this decision mean for plan sponsors? U.S. Airways, Inc. v. McCutchen informs us that ERISA plan provisions prevail: health care plan sponsors can write provisions regarding reimbursement from recovery, and participants who accept payment of expenses under those conditions are expected to honor the agreement. The decision also leaves plan sponsors with a decision to make regarding whether to explicitly disclaim the common-fund doctrine in their plan documents. The Court's majority explained that where a plan rejects the common-fund doctrine, people like the plaintiff would make different judgments. Whether such a change in judgment is a bad thing, or a good thing, is something for plan sponsors to consider as they redesign their health care plans to comply with health care reform.

It Is All About How You Handle an Equal Opportunity Harasser: Sixth Circuit Finds Employer Correctly Killed Two Birds with One Stone

Sara Hutchins Jodka — Tue, 16 Apr 2013 08:15:17 -0500

Cases involving an equal opportunity harasser are usually entertaining, but Colston v. Cleveland Public Library, (6th Cir. Apr. 15, 2013) is also educational because it demonstrates how an employer can properly get rid of an equal opportunity harasser and defeat discrimination and harassment claims based on the harasser's conduct at the same time.

Plaintiff Mary Jane Colston was, and still is, a union security officer with the Cleveland Public Library ("CPL"). Ms. Colston alleged that the CPL, along with several of its employees, sexually harassed her, retaliated and discriminated against her because of her gender, and was liable to her for intentional infliction of emotional distress. She also charged the CPL with negligently hiring Melvin Abrams, the CPL's former Assistant Chief of Security, against whom the bulk of Ms. Colston's allegations were ultimately directed. The CPL and the individually-named defendants prevailed on all claims at the district court and Sixth Circuit court levels.

Here is what I found most interesting about this case. A person who harasses everyone, male or female, is not harassing or discriminating against someone because of gender. The standard for gender discrimination under Title VII and the Ohio Civil Rights Act, Ohio Revised Code 4412.02 is that to be actionable, the verbal or physical harassment must be "because of sex." Similarly, to establish a hostile work environment, a plaintiff must demonstrate that the harassment was "based on sex." In other words, a plaintiff seeking protection under the discrimination laws must affirmatively establish that he or she was "treated differently than similarly situated" individuals because of gender. If the same demeaning or derogatory conduct is directed at men and women alike, it is not "because of" or "based on" gender and is not actionable.

Ms. Colston cited a few different ways she suffered discrimination and/or a hostile work environment, but none were deemed actionable. Ms. Colston claimed that Mr. Abrams engaged in "unprofessional" behavior by using insulting and profane language and made comments about her physical appearance. Now, if Mr. Abrams had been speaking just to Ms. Colston, referring to just Ms. Colston's physical appearance, or using a gender-specific epithets like "bitch," the courts may have upheld these claims, but that is not what happened. Here, Ms. Colston admitted that Mr. Abrams was insulting and profane to all officers, male and female, and referred to them as "imbeciles" and "idiots," and that he commented on their personal lives and about their manliness and weight. Ms. Colston testified that Mr. Abrams "just basically emasculated the men right in front of me" and that he repeatedly made comments about the physical appearance of other male officers, including that they were overweight and looked sloppy in their uniforms. The good news for Mr. Abrams, and in turn the CPL, is that the courts found that no discrimination against Ms. Colston because of her gender and found that she was not subjected to an unlawful hostile work environment based on her gender.

The bad news for CPL is that it had a rogue, equal opportunity harasser – a bully – on its hands.

But...because it properly addressed the conduct of its equal opportunity harasser, it also defeated the remainder of Ms. Colston's claims. With respect to Ms. Colston's hostile work environment claim, the evidence demonstrated that every time Ms. Colston complained about Mr. Abrams, the CPL responded immediately with an investigation into the matter, which resulted in disciplinary action. In fact, after Ms. Colston’s first complaint, the CPL hired an independent investigator to investigate, which resulted in a five-day unpaid disciplinary sanction for Mr. Abrams. The second time Ms. Colston complained, the CPL hired another independent investigator to investigate. That investigation led to Mr. Abrams being placed on administrative leave; however, he resigned before his pre-termination hearing. Because the CPL properly responded to all of Ms. Colston's complaints, the courts determined that she could not support a claim for hostile work environment.

The Takeaways: This case provides guidance to employers about how to properly respond to complaints of discrimination and harassment. In the event an equal opportunity harasser is identified, it is important that the employer investigate, document and discipline. Taking these steps promptly will help an employer not only identify and get rid of an equal opportunity harasser, but they will help protect against discrimination/harassment claims based on the equal opportunity harasser's conduct.