Employment Law Alert

Employee Participation in Internal Investigation Not Covered by Anti-Retaliation Provision of Title VII, According to Second Circuit

Mitchell Boyarsky — Thu, 17 May 2012 10:01:04 -0500

The Second Circuit, in a case of first impression, ruled that an employee is not protected against retaliation prohibited by Title VII of the Civil Rights Act of 1964 (“Title VII”) for participating in an investigation of sexual harassment conducted by an employer before a charge of discrimination has been filed with the Equal Employment Opportunity Commission (“EEOC”). Although under Title VII, employers are duty-bound to appropriately remedy discrimination and harassment in the workplace uncovered by such investigation, employers in the Second Circuit can breathe a modest sigh of relief that a negative employment action affecting an employee who claims protection under Title VII based on “participating” in an investigation following an internal complaint is not actionable.

Factual Background

In Townsend v. Benjamin Enterprises, Inc., plaintiff Martha Diane Townsend alleged that defendant Hugh Benjamin, the sole Vice President of Benjamin Enterprises, Inc. (“BEI”) and husband of defendant Michelle Benjamin, the President of BEI, sexually harassed her. Plaintiff Karlean Victoria Grey-Allen, BEI’s Human Resources Director, conducted an investigation in which she allegedly, inappropriately revealed confidential information during the investigation. Michelle Benjamin terminated Grey-Allen before she completed the investigation, which Grey-Allen claimed was retaliatory based on her participating in the internal investigation.

The District Court dismissed Grey-Allen’s retaliation claim on summary judgment. After a trial, a jury returned a verdict in favor of Townsend against all defendants. The defendants moved for judgment as a matter of law or for a new trial, which the District Court denied. The District Court found that the Farragher/Ellerth affirmative defenses to sexual harassment (established by showing the employer exercised reasonable care to prevent and promptly correct any sexually and harassing behavior, and the employee unreasonably failed to take advantage of any protective or corrective opportunities provided by the employer) are unavailable when the supervisor who committed the sexual harassment, in this case Hugh Benjamin, is sufficiently senior such as to constitute a “proxy” or “alter ego” of the employer. Absent Benjamin’s alter ego status, under Farragher/Ellerth the company could have escaped liability for harassment if it had demonstrated that it conducted an investigation of Townsend’s complaints and took appropriate remedial action.

Grey-Allen appealed the order granting summary judgment on her retaliation claim. The defendants appealed the order denying their motion for judgment as a matter of law of for a new trial. On appeal, the Second Circuit affirmed the District Court’s decision.

Anti-Retaliation Protections

In granting summary judgment, the District Court concluded that although Grey-Allen was investigating an allegation of sexual harassment, the investigation was not connected to any charge of discrimination filed with the EEOC. In interpreting the language of the “participation clause” of Title VII, the Second Circuit looked to other Courts of Appeals which consistently have held that the protections afforded to employees under Title VII from retaliation do not apply to an internal investigation by an employer that is not associated with a formal EEOC proceeding.

Alter Ego Liability

The Circuit Court concluded that Hugh Benjamin’s high managerial rank and significant control over the company’s operations sufficiently enabled a jury to reasonably conclude he was a proxy or alter ego of the company. The Court also ruled that, although the District Court’s jury instructions on the alter ego theory were an error because they lowered the threshold to find Hugh Benjamin an alter ego, the error was harmless because a reasonable juror could not find that he was not an alter ego given the facts of the case. Significantly, he reported directly to the President, exercised managerial responsibility for the company’s day-to-day operations and was a corporate shareholder. Thus the Second Circuit affirmed the District Court’s ruling that the Farragher/Ellerth defense was not available to the company.

Analysis for Employers

Before a formal charge of discrimination has been filed, an employer has a better chance of withstanding a retaliation claim based on its taking action against an employee who participates in an internal investigation. Often an employer may not receive immediate notice from a state agency or the EEOC when a complaint is filed. Therefore, an employer still may be at risk when acting based upon its findings in an investigation and negatively affects an employee who participates in the investigation. Nevertheless, the earlier it implements remedial steps, the better its chances to overcome a retaliation claim. Furthermore, the employer should appropriately document its findings and formulate well-reasoned bases for any response it implements. Finally, employers should train managers to understand potential ramifications resulting when company policy is violated by senior managers. Gibbons attorneys in the Employment & Labor Department are available to assist employers in workplace investigations and related litigation.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

Court Applies the Brakes to "Quickie" Election Rules

James J. La Rocca — Wed, 16 May 2012 11:55:28 -0500

As previously discussed on the Employment Law Alert, the National Labor Relations Board (the “Board” or the “NLRB”) recently implemented a rule that could speed up the union election process and, in turn, leave employers with less time to communicate their positions on unions to employees. Yesterday, the United States District Court for the District of Columbia declared the rule invalid because only two Board members were “present” when the NLRB passed the rule last December. The Court explained that the Board did not satisfy the National Labor Relations Act’s requirement that the NLRB have a quorum (typically the presence of three Board members) to conduct business when it voted on the rule. “According to Woody Allen, eight percent of life is just showing up,” wrote the Court. “When it comes to satisfying a quorum requirement, though, showing up is even more important than that.”

The Board was comprised of three members when it voted on the final rule, but one of the three Board members, Brian Hayes, took no action whatsoever regarding the adoption of the final rule. The Court noted that Member Hayes merely received electronic notification that the final rule had been circulated for a vote. It did not find his earlier votes against prior versions of the rule and a vote regarding a procedural issue surrounding the final rule sufficient to constitute his presence at the vote on the final rule.

Significantly, the Court did not opine on the legality of the substance of the rule. We must wait to see whether the current Board will try to adopt the rule, and, if so, whether the rule will survive additional legal challenges. In addition to challenges to the rule’s substance, business groups may challenge the current Board's authority to adopt the rule in the first place. On January 4, 2012, President Obama appointed three new members to the Board as "recess" appointments, but it is not clear that the Senate actually was on recess at the time. There, of course, remains the possibility that the Board will appeal the Court’s ruling as well. We will keep you posted.

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Employers potentially subject to union organizing should speak with a lawyer in Gibbons Employment & Labor Law Department about measures they can take to insulate themselves from unionization, and minimize the chances that their workers look outside their organizations to resolve workplace issues.

James J. La Rocca is an Associate in the Gibbons Employment & Labor Law Department.

Denying a Disabled Employee's Request to Fill a Vacant Position as an Accommodation Because More Qualified Candidates are Available Remains Problematic Under the ADA

Richard S. Zackin — Fri, 11 May 2012 10:24:52 -0500

Are employers obligated, as a reasonable accommodation, to fill a vacant position with an employee whose disability renders him unable to perform his own job when other candidates for the vacant position are more qualified? The position of the Equal Employment Opportunity Commission (EEOC) that employers have that obligation under the Americans with Disabilities Act (ADA) was recently rejected by a three-judge panel of the Court of Appeals for the Seventh Circuit. But the panel took the unusual step of recommending that the issue be considered by the court en banc (i.e. by the entire membership of the Seventh Circuit). In the great majority of circuits, the issue remains unsettled, and employers must tread carefully when responding to such accommodation requests.

The Seventh Circuit’s Decision

In EEOC v. United Airlines, Inc., the EEOC brought suit under the ADA against United Airlines (United) on behalf of five United employees who were unable to continue in their current positions because of their disabilities and whose applications for vacant positions were rejected under United’s policy of requiring such employees to compete for vacant positions. The ADA expressly provides that a reasonable accommodation “may include . . . reassignment to a vacant position." 29 U.S.C.§ 12111(9)(B). Under United’s policy, to receive priority consideration for placement in a vacant position as an accommodation a disabled employee must be at least tied in qualifications with the best applicant. The District Court dismissed the EEOC’s action, ruling that it was bound by the Seventh Circuit’s 2000 decision in EEOC v. Humiston-Keeling, where the court had rejected the EEOC’s position that policies requiring disabled employees to compete for vacant positions violated the ADA.

In United Airlines, the EEOC asked the Seventh Circuit to reverse its decision in Humiston-Keeling in light of the Supreme Court’s subsequent decision in US Airways, Inc. v. Barnett in 2002. There, the Supreme Court held that ordinarily it would be an “undue hardship” under the ADA to require an employer to forego its well established seniority system in filling a vacant position in favor of a disabled employee. But seniority systems aside, the Court ruled that merely because an employer’s policy for filling vacancies is disability-neutral does not make “unreasonable” a disabled employee's accommodation request to fill a vacant position for which he is qualified. Thus, presumably, an employer’s policy of filling a vacant position with the most qualified employee is not by itself a valid basis on which to reject an accommodation request from a disabled employee qualified to fill the vacancy, and the employer would have to demonstrate why requiring it to disregard its policy would constitute an “undue hardship” under the circumstances.

In United Airlines, the panel hearing the appeal concluded that it did not have the authority to reverse the Court’s earlier decision in Humiston-Keeling. Finding the logic of the EEOC’s position persuasive, however, the panel “strongly” recommended en banc consideration of the issue. The other circuits that have considered the precise issue are divided. The Eighth Circuit has adopted the Seventh Circuit’s position, but the Ninth and Tenth Circuits have concluded that employers must demonstrate “undue hardship” for ADA purposes when rejecting an accommodation request for a vacant position and cannot merely rely on the availability of more qualified candidates.

Conclusion

It is likely that the Supreme Court will take up this issue at some point. Indeed, the Supreme Court granted certiorari in the above-noted Eighth Circuit case, but the case settled before the Court could render a decision.

Employers should review requests to fill vacant positions as an accommodation on a case-by-case-basis. Although in most jurisdictions there is currently no definitive ruling on the issue, an employer who cannot demonstrate undue hardship when denying such a request in favor of a more qualified employee runs a not insignificant risk that it will not fare well in any ensuing litigation.

If you have any questions regarding the accommodation of disabled employees, please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department with any questions that you may have.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.

New Updated FMLA Forms Issued by DOL

Mitchell Boyarsky — Mon, 07 May 2012 09:20:04 -0500

Without any substantive changes, new updated model Family and Medical Leave Act (FMLA) forms have been issued by the United States Department of Labor (DOL) website and are available on the DOL website (in the section for Wage and Hour Division Forms). Employers using the former model FMLA forms on the DOL website should replace their prior versions, which expired on December 31, 2011, with the new versions. Employers using their own FMLA forms should include appropriate language to prevent employee disclosure of genetic information prohibited by the Genetic Information Nondiscrimination Act of 2008 (GINA). Such language should generally be included in the employer’s FMLA policies and other employee communications. The Equal Employment Opportunity Commission regulations suggest a "safe harbor” notice to include in such communications to effectively lessen the chance of an inappropriate disclosure of genetic information. The notice, set forth in Section 1635.8(b)(1)(i)(B) of the Regulations, provides:

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that neither you nor your physician (or your family member’s physician) provide any genetic information when responding to any requests for medical information. “Genetic information,” as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

We recommend employers include this language in its Certification of Health Care Provider and its Notice of Eligibility and Rights and Responsibilities, even though the model forms do not contain the “safe harbor” notice.

Certain states provide for a state-equivalent to FMLA leave for serious health conditions of employees and their immediate family members or for other forms of leave for medical reasons. If a state requires additional or different leave notification and forms, an employer should continue to comply with those state requirements. However, it also should consider including the GINA “safe harbor” notice in its employee communications and notices.

For templates of these updated forms including the GINA notice, please contact an attorney in the Gibbons Employment & Labor Law Department.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

The EEOC Holds that Title VII Protects Transgender Employees

Michael J. Riccobono — Wed, 02 May 2012 11:09:58 -0500

Introduction

In a decision reversing nearly three decades of prior rulings, the Equal Employment Opportunity Commission (“EEOC”) has ruled that a “complaint of discrimination based on gender identity, change of sex, and/or transgender status is cognizable under Title VII.” In doing so, the EEOC – the agency of the United States Government charged with the enforcement of federal anti-discrimination laws – has expanded upon the definition of discrimination “because of sex” expressly bringing transgender individuals within its purview.

Factual Background

In Macy v. Holder, the Complainant, Mia Macy, a transgender woman, had applied for a position with the Bureau of Alcohol, Tobacco, Firearms and Explosives Agency at its Walnut Creek crime laboratory. While still presenting as a man, and during a preliminary telephone conversation with the Director of the laboratory, during which Macy’s qualifications were discussed, the Director told her that she would be able to have the position “assuming no problems arose during [the] background check.” In a later conversation with the Director only a few weeks later, the Director reasserted that the job was hers pending the completion of the background check. Shortly thereafter, Macy informed “Aspen of DC” (a government contractor responsible for filling the position) that she was in the process of transitioning from male to female and requested that Aspen inform the Director of the Walnut Creek laboratory of this change. Approximately one week later, Macy received an email from Aspen stating that, due to federal budget reductions, the position at Walnut Creek was no longer available. Upon following up with an agency EEO counselor, however, she was told that the position had actually been filled with a different applicant who was the “farthest along in the background investigation.” Believing this reason to be a pretext for discrimination, Macy filed a complaint with the EEOC, which administratively adjudicates employment discrimination claims involving federal government employees and applicants. On her complaint form, Macy checked off “sex” and the box “female,” and then typed in “gender identity” and “sex stereotyping” as the basis of her complaint.

EEOC Decision

“As used in Title VII,” the EEOC found, “the term ‘sex’ encompasses both sex - that is, the biological differences between men and women - and gender.” Citing the United States Supreme Court’s landmark holding in Price Waterhouse v. Hopkins and its progeny, the EEOC held that Title VII bars discrimination not only on the basis of biological sex, but because of gender stereotyping, as well. The EEOC reasoned that “discrimination based on sex includes discrimination based on a failure ‘to conform to socially-constructed gender expectations.’” For example, the EEOC theorized that Macy could establish a case of sex discrimination by showing one of the following scenarios: (1) that she did not get the job because the employer believed that biological men should consistently present as men and wear male clothing; or (2) that she did not get the job because the Director was willing to hire her when he thought she was a man, but was not willing to hire her once he found out that she was now a woman. “Thus,” the EEOC found, “a transgender person who has experienced discrimination based on his or her gender identity may establish a prima facie case of sex discrimination through any number of different formulations.”

Impact on Employers

While the EEOC’s interpretation of Title VII is not binding in a court of law, the Courts often defer to it and therefore employers in both the public and private sector should take note of the Macy decision. In addition, while federal courts have taken different positions on the issue of transgender status discrimination, more recent decisions have agreed with the EEOC’s conclusions in Macy. Accordingly, employers should seriously consider revising their anti-harassment and discrimination policies so as to include gender identity and gender expression as protected characteristics. Moreover, employers should be aware of their own state discrimination laws that may address this issue. In New Jersey, for example, the Law Against Discrimination already prohibits discrimination based on one’s “gender identity or expression,” which is defined as “having or being perceived as having a gender related identity or expression whether or not stereotypically associated with a person’s assigned sex at birth.”

The attorneys in the Gibbons Employment & Labor Law Department are available to provide additional information and training with regard to employers’ efforts to maintain a discrimination and harassment-free workplace.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

"Quickie" Election Procedures Take Effect Today

James J. La Rocca — Mon, 30 Apr 2012 09:00:25 -0500

On December 22, 2011, the National Labor Relations Board (the “Board” or the “NLRB”) issued another “union-friendly” rule that could speed up the union election process, leaving employers with limited time to respond to a union organizing drive. A pending lawsuit challenging the legality of the new rule is outstanding. Notwithstanding, the rule applies to all newly-filed election petitions effective today as the court has not postponed the rule’s effective date despite the ongoing litigation. The court will rule on the legitimacy of the rule by May 15 (before an election could take place under the new rule).

Initial Hearing to Take Place a Week or Two After a Petition’s Filing

A memorandum recently issued by the NLRB’s Office of the General Counsel directs the Regional Offices to hold an initial hearing within five working days of a petition’s filing. The Regions may grant adjournments, but the hearing must take place no later than 14 days after the petition’s filing absent extraordinary circumstances. In short, a pre-election hearing almost always will take place a week or two after a petition is filed.

Pre-Election Hearings Limited to Questions Concerning Representation

In an attempt to hasten the pre-election process, the new rule limits pre-election hearings to questions concerning representation. This includes questions regarding limited issues, such as election bars, jurisdictional questions, unit eligibility formulas, unit scope determinations and whether a petitioned-for unit is appropriate. This generally will not include questions concerning the voting eligibility of individual workers, which formerly were “fair game” for the pre-election hearing. An election usually will be held before questions about the eligibility of individual workers are addressed.

Pre-Election Appeals to the Board Extremely Limited

Under the new rule, the parties must wait until after the election to appeal pre-election determinations to the Board absent special permission. Special permission is limited to extraordinary circumstances when it appears the determination at issue would evade review unless addressed pre-election. Previously, a party could file a pre-election request for review to the Board and another request for review after the election. Additionally, parties now only can appeal a Hearing Officer’s rulings during the pre-election hearing to the Regional Director and only if the Regional Director allows the appeal.

Post-Hearing Briefs Subject to Hearing Officer’s Discretion

Under the new rule, parties can file post-hearing briefs only if the Hearing Officer allows them to do so. Where Hearing Officers permit briefs, they can limit the scope of the brief and set forth deadlines for the submissions, thereby, further expediting the process.

No More Waiting Period After Direction of Election

An employer has up to seven days after the direction of an election to supply the Regional Director with a list of eligible voters. The union has a right to have this list (referred to as the Excelsior List) for at least 10 days prior to the election. The General Counsel memorandum highlights that the union can waive this right. Accordingly, the Regional Director can schedule the election less than 10 days after deciding to hold the election because the new rule eliminates a previous recommendation that the Regional Director schedule an election no sooner than 25 days after directing an election.

Limited Ability to Challenge Votes at Post-Election Hearing

Post-election hearings to address ballot challenges and objections are more limited now. For instance, the General Counsel memorandum explains that the Regional Director may schedule a hearing only if the objecting party offers evidence that could overturn the election, or that raises material and substantial issues about a voter’s eligibility. Additionally, the Regional Director, not the Board, will decide all exceptions to a Hearing Officer’s post-election report. (However, the Board still could grant a request for review of the Regional Director’s decision on the exceptions.)

* * * * *

Employers potentially subject to union organizing should speak with a lawyer in Gibbons Employment & Labor Law Department about implementing a contingency plan that would enable them to effectively respond to an organizing campaign in light of the new rule, which may require them to act very swiftly if they want to provide their workers with the facts about unions prior to an election. We will update you regarding the court’s upcoming decision about the rule’s legality.

James J. La Rocca is an Associate in the Gibbons Employment & Labor Law Department.

The New EEOC Guidance Regarding Criminal Background Checks

Susan L. Nardone — Thu, 26 Apr 2012 13:16:40 -0500

On Wednesday, April 25, 2012, the Equal Employment Opportunity Community issued its long awaited Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act, updating and clarifying its prior guidance on the subject. The good news? Employers may continue to use criminal background checks as a screening tool for applicants and employees. However, employers are specifically discouraged from asking about a criminal record on the application and are encouraged to conduct an individualized assessment of the applicant/employee when job exclusion occurs because of a criminal record. Employers should review their policies to ensure compliance with the EEOC’s latest recommendations.

The new guidance contains a lengthy discussion of arrest and conviction statistics among the population, emphasizing that individuals in certain protected classes – African-American and Hispanic men in particular – are more likely to be adversely affected by an otherwise neutral criminal background check policy. Concerns about the disparate impact on these groups provides the foundation for the EEOC’s position on the use of and parameters for criminal background checks.

Many employers’ policies already utilize the factors articulated by the Eighth Circuit in Green v. v. Missouri Pacific Railroad, further developed by the Third Circuit in El v. Southeastern Pennsylvania Transportation Authority, and incorporated in the latest and prior EEOC guidance. The Green factors – the nature of the crime, the time elapsed, and the nature of the job – are used to determine whether an exclusion is job-related for the position in question and consistent with business necessity. In considering the nature of the offense, the EEOC suggests looking at the harm caused by the crime, the legal elements, and the severity. The EEOC offers no specific guidance on the appropriate time period, indicating that it depends on the facts and circumstances, but suggests that recidivism rates may provide guidance. For the nature of the job, the EEOC recommends looking at the essential functions and duties of the job and the environment in which it is performed.

According to the new guidance, “[t]o establish that a criminal conduct exclusion that has a disparate impact is job related and consistent with business necessity under Title VII, the employer needs to show that the policy operates to effectively link specific criminal conduct, and its dangers, with the risks inherent in the duties of a particular position.” The EEOC suggests that an employer can consistently meet this test by (a) validating the screen using the Uniform Guidelines on Employee Selection Procedures or (b) developing a targeted screen that takes into account the Green factors and then offers an opportunity for an individualized assessment. The individualized assessment gives the applicant/employee notice of the results and then an opportunity to offer additional information demonstrating why the exclusion should not apply.

According to the EEOC, the employer must have some basis for drawing a connection between the crime and its importance to the job, such as "fact-based evidence, legal requirements, and/or relevant and available studies." By way of example, a policy that excludes an applicant convicted of theft or dishonesty for a position in which the applicant would have access to personal financial information or money where the conviction occurred in the four years prior to the application may be an appropriate targeted exclusion if the employer can explain, with reference to some fact or study, why the policy was adopted. The examples the EEOC gives include national criminal data and recidivism research.

Also of note in the guidance:

Title VII does not preempt federal laws that prohibit employment of individuals with specific convictions in certain industries or positions in the public and private sector.
State and local laws are preempted by Title VII if they result in an unlawful employment practice. This means that following a state or local law is not a defense - the employer must still show job relatedness and business necessity.

The EEOC offers a number of “Employer Best Practices,” including the elimination of policies that exclude individuals because of any criminal record, the development of narrow policies and practices that closely correlate the essential job requirements with the specific offense, documented justification for the policy procedure, and training of managers.

For a related article on the new EEOC Guidance, including commentary by Gibbons Employment & Labor Law Director, Susan L. Nardone, click here. To discuss any of your company’s employment or e-discovery needs, contact any attorney in the Gibbons Employment & Labor Law Department.

Susan L. Nardone is a Director in the Gibbons Employment & Labor Law Department.

D.C. Circuit Enjoins NLRB Employee Rights Posting Requirement - Deadline for Compliance Delayed Pending Resolution of Legal Challenges

Kristin D. Sostowski — Wed, 18 Apr 2012 19:12:40 -0500

The U.S. Court of Appeals for the D.C. Circuit entered an order yesterday in National Association of Manufacturers v. National Labor Relations Board, enjoining an NLRB posting requirement that would require most private sector companies to post a Notice of Employee Rights under the National Labor Relations Act in their workplaces. The D.C. Circuit ruling came on the heels of the District of South Carolina’s opinion last Friday in the Chamber of Commerce v. NLRB case, which held that the NLRB exceeded its authority when it approved the posting requirement.

As we reported Monday in the Employment Law Alert, the deadline for employers to comply with the NLRB’s posting requirement had been set for April 30, 2012. Following the D.C. Circuit’s ruling, the NLRB announced that in light of the D.C. Circuit order and “the strong interest in the uniform implementation and administration of agency rules,” it will not implement the final rule requiring posting of the employee rights notice until the legal challenges to the rule are resolved by the courts. Accordingly, employers are not required to comply with the posting requirement until further notice.

The Employment Law Alert will continue to follow this issue and will post additional updates as they become available. In the meantime, if you have questions regarding the NLRB Notice of Employee Rights or its implications for your company, please contact an attorney in the Gibbons Employment & Labor Law Department.

Kristin D. Sostowski is a Director in the Gibbons Employment & Labor Law Department.

April 30, 2012 Deadline for Compliance with NLRB Employee Rights Posting Requirement May Be Extended Again

Kristin D. Sostowski — Mon, 16 Apr 2012 13:08:01 -0500

As we have previously reported in the Employment Law Alert, an National Labor Relations Board (NLRB) final rule adopted last August requires most private sector employers -- including companies that are not unionized -- to post in their workplaces a Notice of Employee Rights under the National Labor Relations Act. The deadline for employers to comply, which has been extended twice in the wake of lawsuits challenging the Board’s authority to issue the rule (see our follow-up reports here and here), is currently set for April 30, 2012.

Last Friday, with the deadline for posting only two weeks away, the District of South Carolina issued a opinion in the Chamber of Commerce v. NLRB case, holding that the NLRB exceeded its congressional authority when it approved the posting requirement and striking down the rule. This decision conflicts with a ruling by the District Court for the District of the District of Columbia last month in National Association of Manufacturers v. NLRB. That court upheld the posting requirement, but held that certain of the enforcement provisions violated the NLRA.

As of now, the NLRB posting requirement remains scheduled to go into effect on April 30, 2012. Accordingly, private sector employers subject to the jurisdiction of the NLRB should continue their preparations to comply with the new rule and to address employee questions that may arise in response to the Notice. The Employment Law Alert will continue to follow this issue and will post additional updates as they become available.

Details regarding the Notice and the posting requirements as they currently stand follow.

The Employee Rights Notice

The vast majority of private sector employers are under the broad jurisdiction of the NLRB and required to post the NLRB Notice. The Notice advises employees of their rights under the National Labor Relations Act (NLRA), including, but not limited to, the rights to:

Organize or join a union;
Discuss wages, benefits, other terms and conditions of employment or union organizing with co-workers or a union; and/or
Take action with co-workers to improve working conditions.

The Notice also includes contact information for the NLRB and basic information regarding NLRB enforcement procedures.

Physical Posting Requirements

Employers are required to post the 11-by-17-inch Notice, which may be printed from the NLRB website in two formats, in a conspicuous location in the workplace, including all places where notices to employees (e.g., notices regarding employment laws and Company personnel rules/policies) are customarily posted. In lieu of the NLRB-provided poster, employers are permitted to post a consolidated Federal labor and employment law poster from a commercial service that includes the NLRB Notice. However, the size, content and format must be consistent with the Notice provided on the NLRB website.

Federal contractors that have already posted the Department of Labor’s notice regarding employees’ NLRA rights will be deemed in compliance with the NLRB’s posting rule, and are not required to post a second NLRB Notice.

Electronic Posting Requirements

In addition to the physical posting, companies that typically communicate with employees about personnel rules/policies via an intranet or internet site must also post the NLRB Notice or a link to the Notice on that website. The electronic posting requirement may be satisfied by displaying either an exact copy of the NLRB Notice or a link to the NLRB website that contains the Notice. If a link is used, the link must read “Employee Rights under the National Labor Relations Act.” Employers are not required to distribute the NLRB Notice to employees via e-mail, social media or electronic means other than an intranet/internet site.

Posting in Languages Other Than English

The final rule also requires employers with a substantial percentage of employees who are not proficient in English to post the NLRB Notice in the employees’ native language. If at least 20 percent of a company’s employees are not proficient in English and speak another language, the Notice must be posted both in English and the other language. If a company’s workforce includes two or more groups of employees, each constituting at least 20 percent of the workforce, who are not proficient in English and speak other languages, the company is required to physically post the Notice in the language spoken by the larger group (in addition to posting the English Notice), and then may either post the Notice in the language(s) spoken by the other group(s) or distribute copies of the Notice to those employees in their language(s). In addition, if posted electronically, the NLRB Notice must be posted in each of the languages spoken by at least 20 percent of a company’s workforce. Translations of the Notice in more than 20 languages are located here.

Consequences of Failure to Post

Under the final rule, failure to post the NLRB Notice may be considered an unfair labor practice and may subject a company to a cease and desist order and/or the imposition of other remedial measures by the NLRB. If an employee files an unfair labor practice charge, the NLRB may extend the normal six-month statute of limitations for charges if the employer failed to post the NLRB Notice, putting the employee on notice of his/her rights under the NLRA. In addition, if the company is found to have knowingly and willfully refused to comply with the posting requirement, that failure may be considered evidence of unlawful motive in an unfair labor practice case involving other alleged violations of the NLRA.

Employee Questions About the Notice and Unions

As a result of the new NLRB Notice, employees may approach their supervisors with questions about the Notice or unions more generally. In light of the serious legal consequences that may result from conduct or statements by supervisors that can be considered interference with the rights of employees under the NLRA, we recommend that employers take steps to educate their supervisors regarding the new Notice and employees’ rights under the NLRA, in writing and/or through in-person supervisor training.

We will continue to follow this issue and will post additional updates in the Employment Law Alert as they become available. In the meantime, if you have questions regarding the new NLRB Notice, supervisor training or the implications of the new Notice for your company, please contact an attorney in the Gibbons Employment & Labor Law Department.

Kristin D. Sostowski is a Director in the Gibbons Employment & Labor Law Department.

Quinlan v. Curtiss-Wright: Plaintiff-Employee Bears Burden of Proving Front Pay Damages

Michael J. Riccobono — Thu, 12 Apr 2012 13:07:42 -0500

Introduction

In the latest chapter of the ongoing case of Quinlan v. Curtiss-Wright Corporation, the New Jersey Appellate Division has ruled that while an employer, found to have terminated an employee in violation of the New Jersey Law Against Discrimination (“the LAD”), has the burden of persuasion to establish a plaintiff’s failure to mitigate damages with respect to back pay, the employer does not have the burden of persuasion with respect to a plaintiff’s failure to mitigate future losses, including front pay. In reversing a jury award for front pay in the amount of $3,650,318 because of improper jury instructions on the front pay issue, the Appellate Division suggested a framework for proper jury instructions on front pay damages and referred the issue to the Model Civil Jury Charge Committee. The Court also reversed the jury’s punitive damages award of over $4.5 million, concluding that that award was linked to the front pay award. The Court held that a new trial was required on both the front pay issue and on punitive damages.

Background

As we previously reported in 2009 and 2010, the Quinlan case has been the subject of much judicial review in recent years. Briefly summarized, the plaintiff, Joyce Quinlan, was employed as the Executive Director of Human Resources at Curtiss-Wright Corporation. She alleged that Curtiss-Wright discriminated against her in violation of the LAD by giving a promotion she sought to a man who was then made her supervisor. To support her case, Quinlan, due to her position in the Human Resources department, was able to collect over 1,800 pages of confidential documents, including a copy of her supervisor’s prior performance appraisal. Rather than produce this document in the course of discovery during the lawsuit, Quinlan’s counsel surprised the supervisor with it at his deposition. Shortly thereafter, Curtiss-Wright terminated Quinlan’s employment for breach of company policies and theft of company property. Quinlan then added a retaliation claim to her pending lawsuit, claiming that Curtiss-Wright had terminated her in retaliation for engaging in “protected activity” in prosecuting her discrimination claim.

Jury Award

At the conclusion of the case, the jury awarded Quinlan an aggregate sum of $4,565,479 in compensatory damages, including $3,650,318 in future (i.e., post-trial) economic losses, including front pay. In addition, the jury awarded Quinlan $4,565,479 in punitive damages, a figure that matched the aggregate award for compensatory damages. After appeals of other discrete issues were ultimately decided by the New Jersey Supreme Court, the case was remanded to the Appellate Division for a determination of issues not considered by the Supreme Court, including the propriety of the front pay award and the adequacy of the jury instructions regarding same.

Appellate Division Decision

The Appellate Division described “front pay” as “a concept that attempts to project and measure the on-going economic harm, continuing after the final day of trial, that may be experienced by a plaintiff who has been wrongfully discharged in violation of anti-discrimination laws.” The Court observed that front pay “generally compensates for the immediate loss of the position until the position would have ended or the employee would have left the company.” Importantly, however, the Court noted that “the purpose of front pay . . . is to ensure that a person who has been discriminated against . . . is made whole, not to guarantee every claimant who cannot mitigate damages by finding comparable work an annuity to age 70.”

The Appellate Division concluded that the trial court’s jury instructions on front pay “erroneously imposed a burden upon defendant to prove that plaintiff would not mitigate her damages in the future after the [conclusion of the trial].” Specifically, the flawed jury instructions provided that defendant not only “had the burden of proving plaintiff’s failure to mitigate damages in the past with respect to back pay, but also bore that same burden to prove that she will fail to mitigate her future losses with respect to front pay.” The Court noted that such an instruction “placed the onus on defendant to prove something that is inherently very difficult to prove - that plaintiff will fail to mitigate future damages that have not yet even occurred,” especially given the fact that such a finding largely turns upon a plaintiff’s own post-trial decisions and matters substantially within her own volition and control. Finding that such an obligation would impose a burden on the defendant-employer “in the prohibited realm of speculation,” the front pay award was vacated and the issue was remanded to the trial court. Likewise, because the front pay issue was “inextricably intertwined with the quantum of punitive damages awarded” (which mirrored the total compensatory damages), the Court also vacated the award of punitive damages.

Recommendations for Jury Instructions

Having determined that it is improper to adopt an explicit jury instruction that places upon either party an evidential burden of proving, or disproving, a plaintiff’s post-trial fulfillment of her duty to mitigate damages, the Appellate Division adopted the preferable approach of requiring the plaintiff to prove the likely duration of her future lost income, without expressing that evidential burden in terms of “mitigation.” In this regard, the Court ruled that both sides were entitled, but not required, to present statistical and “employability” evidence through expert witnesses. The Court recommended that the jury “ further be advised that in assessing such a front pay claim, they should keep in mind that plaintiff will bear an on-going obligation to reasonably mitigate her damages in terms of her future conduct.” Additionally, the trial court’s instructions also must adequately inform the jury that the “plaintiff bears the burden of proving that the damages she claims are either permanent or will last for a reasonably determinable time.” The Appellate Division referred the issue to the Model Civil Jury Charge Committee to develop a recommended charge for such cases to assist the bench and the bar.

Conclusion

As the Quinlan Court recognized, a “plaintiff may choose to maximize her future earnings after trial, or she may choose not to do so.” As such, the plaintiff-employee - and not the defendant-employer - is ultimately responsible for proving that her compensable injuries are permanent or will endure into the future for a reasonably likely time. It would be inherently unfair to require a defendant-employer to hypothesize as to what potential jobs will be obtainable in the future market and to further demonstrate to the jury that plaintiff will not pursue them. Moreover, as the Court noted, front pay awards are often contingent upon factors presently unknowable and subject to considerable change, such as market trends, a plaintiff’s employability, and whether plaintiff would have remained in the same position if not for the discrimination. A proper assessment of front pay damages thus requires a careful balancing of these considerations, and, when confronted with front pay claims, employers should seriously consider retaining statistical and employability experts who can address the relevant factors as articulated by the Court.

For additional details regarding the decision in Quinlan, or to discuss any of your company’s employment-related needs, contact an attorney in the Gibbons Employment & Labor Law Department.

Michael J. Riccobono is an Associate in the Gibbons Employment & Labor Law Department.

Third Circuit Opens the Door for "Hybrid" Wage & Hour Claims in New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands

Peter J. Dugan — Wed, 04 Apr 2012 13:21:27 -0500

On March 27, 2012, the United States Court of Appeals for the Third Circuit issued a precedential decision in Knepper v. Rite Aid Corp. which dramatically alters the landscape for wage and hour litigation for employers operating in the jurisdictions within the Third Circuit, i.e., in New Jersey, Pennsylvania, Delaware, and the U.S. Virgin Islands. Specifically, the Third Circuit ruled that the procedures for litigating a class action alleging state wage and hour violations is not “inherently incompatible” with the procedures for litigating a collective action under the federal Fair Labor Standards Act (“FLSA”). As a result, courts in these jurisdictions may well see a wave of hybrid class/collective actions alleging wage and hour violations under both the FLSA and the corresponding state wage and hour laws in the same complaint.

Background

The Knepper plaintiffs are assistant store managers who had “opted in” to a national FLSA collective action filed against Rite Aid in the Middle District of Pennsylvania. Under the FLSA, courts can assert jurisdiction only over those employees who affirmatively “opt in” to the lawsuit. The lawsuit alleged that Rite Aid misclassified the plaintiffs as exempt from the federal overtime and minimum wage requirements. Subsequently, these individuals filed their own separate class actions in federal courts in Maryland and Ohio under Rule 23 of the Federal Rules of Civil Procedure alleging violations of those states’ wage and hour laws. In a class action certified under Rule 23, the court acquires jurisdiction over all class members, but individual members may elect to “opt out” of the lawsuit. These newly filed lawsuits were ultimately transferred to the Middle District of Pennsylvania. That court dismissed the state law claims because, in its view, the Rule 23 “opt-out” process for litigating class actions under the state-law claims was “inherently incompatible” with the “opt-in” process utilized in FLSA collective actions. Over the years, numerous federal district courts in the Third-Circuit have reasoned that the contrast between an opt-in and opt-out procedure bars federal courts from hearing such dual-filed wage and hour actions.

The Third Circuit Decision

After analyzing the text and legislative history of the FLSA, the Third Circuit found no evidence of Congressional intent to preclude the joinder of “opt out” class action claims under state law with “opt in” FLSA claims. Thus the Third Circuit reversed the district court, stating: “[i]n sum, we disagree with the conclusion that jurisdiction over an opt-out class action based on state-law claims that parallel the FLSA is inherently incompatible with the FLSA’s opt-in procedure.” Moreover, the Court noted that many other circuits, specifically, the Second, Seventh, Ninth, and D.C. circuits have found that such dual filing “does not defeat otherwise available jurisdiction.” In reversing the District Court, the Court of Appeals opened the door for dual-filed and hybrid wage and hour actions in the Third Circuit.

Employer Takeaways

In light of this development, employers with operations in the Third Circuit may be forced to litigate wage and hour claims under both federal and state law as part of the same lawsuit. The differing statutes of limitations, recoverable damages and burdens of proof as between the FLSA and the various state laws will certainly complicate the litigation of these claims, making them more costly for employers to litigate and more difficult to settle and subjecting employers to a wider array of damages.

Given this development, now is a good time for employers with operations in New Jersey, Pennsylvania, Delaware, and Virgin Islands to communicate with experienced wage and hour counsel regarding strategies to avoid wage and hour litigation. If you have any questions, please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.

Peter J. Dugan is an Associate in the Gibbons Employment & Labor Law Department.

EEOC Publishes New ADEA Regulations for the "Reasonable Factors Other Than Age" Defense

Richard S. Zackin — Fri, 30 Mar 2012 13:15:21 -0500

The Equal Opportunity Commission (“EEOC”) today published its final regulations and commentary concerning the “reasonable factors other than age” provision of the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (“ADEA”), as that provision pertains to claims of disparate impact. A disparate impact claim is one that alleges that the implementation by an employer of a policy or practice, although non-discriminatory on its face, has had an adverse impact on a category of employees protected by the laws against discrimination in employment.

Although Congress in 1991 specifically amended Title VII of the Civil Rights Act to provide for disparate impact claims, 42 U.S.C. § 2000e -2(k), the ADEA has never expressly allowed such claims. Nevertheless, in Smith v. City of Jackson, 544 U.S. 228 (2005), the U.S. Supreme Court held disparate impact claims could be asserted under the ADEA. The Court ruled, however, that there is a significant distinction between disparate impact claims brought under Title VII (which prohibits discrimination based on race, color, religion, sex or national origin) and disparate impact claims under the ADEA (which prohibits discrimination based on age for employees 40 years of age and older). Under Title VII, once the plaintiff demonstrates that the employer’s policy or practice has had a statistically adverse impact on a protected group, the employer, to avoid liability, must demonstrate that the policy or practice “is job related for the position in question and consistent with business necessity.” Citing to the “reasonable factors other than age,” provision of the ADEA, the Court in Smith held that employers faced with an age discrimination disparate impact claim were not required to make a showing of “business necessity” but need only demonstrate that its policy or practice is “reasonable.” Thus, as the Court ruled, “disparate impact liability under the ADEA is narrower than under Title VII.”

The new regulations appear to be consistent with Supreme Court decisions setting forth the parameters of disparate impact claims in at least three respects. First, they provide that plaintiffs alleging that an age-neutral policy or practice has had a disparate impact on older workers have the burden to isolate and identify the specific policy or practice that allegedly caused the statistical disparities. 29 C.F.R. § 1625.7(c); Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989). Second, if the employer asserts a “reasonable factors other than age” defense (referred to as the “RFOA defense”), it is the employer who bears the burden of production and persuasion to establish the defense. 29 C.F.R. § 1625.7(d); Meacham v. Knolls Atomic Power Lab., 554 U.S. 84 (2008). Third, the reasonable factors other than age provision is not available as a defense to a claim of disparate treatment (intentional discrimination). 29 C.F.R. § 1625.7(d); Smith v. City of Jackson, 544 U.S. at 238-39.

The major significance of the new regulations is found in their characterization of what is a “reasonable” policy or practice and in their elaboration of the criteria to be considered in analyzing an RFOA defense for “reasonableness.” Under the regulations, a reasonable factor other than age is one “that is objectively reasonable when viewed from the position of a prudent employer mindful of its responsibilities under the ADEA under like circumstances” to be determined “on the basis of all the particular facts and circumstances surrounding each individual situation.” The employer must demonstrate that the reasonable factor “was both reasonably designed to further or achieve a legitimate business purpose and administered in a way that reasonably achieves that purpose in light of the particular facts ad circumstances that were known, or should have been known, to the employer.” 29 C.F.R. § 1625.7(e(1).

In its commentary, the EEOC expressly disavows that its characterization of “reasonableness” is akin to the “business necessity” defense applicable to Title VII disparate impact cases. Nevertheless, the EEOC cautions that employers must do more than merely demonstrate that the policy or practice in question is rational or non-arbitrary. Smith v. City of Jackson did not open the floodgates for ADEA disparate impact claims. Whether there will be any significant increase in ADEA disparate impact claims as a result of the new regulations interpreting the RFOA defense remains to be seen.

The regulations’ enumerated criteria for analyzing reasonableness are:

The extent to which the employer’s practice is related to the employer’s stated business purpose;
The extent to which the employer defined its practice accurately and applied it fairly and accurately, including the extent to which the employer provided supervisors with guidance or training about how to apply the practice and avoid discrimination;
The extent to which the employer limited supervisors’ discretion to assess employees subjectively, particularly where the criteria that the supervisors were asked to evaluate are known to be subject to negative age-based stereotypes;
The extent to which the employer assessed the adverse impact of its employment practice on older workers; and
The degree of the harm to individuals within the protected age group, in terms of both the extent of injury and the numbers of persons adversely affected, and the extent to which the employer took steps to reduce the harm, in light of the burden of undertaking such steps.

29 C.F.R. § 1625.7(e)(2). The regulations themselves and the commentary make clear that that additional criteria may be relevant and that the presence or absence of one or more of the enumerated considerations will not be dispositive on the “reasonableness” issue.

Obviously, the regulations do not provide a bright line test for “reasonableness.” At this point it is unknown to what extent the “prudent employer” standard announced in the regulations will be interpreted by courts as requiring affirmative steps by employers to guard against the adverse impact of its policies or practices on older workers. Employers will have to carefully consider the new regulations on a case-by-case basis, especially if the employer has reason to suspect that a given policy or practice is having an adverse impact on older workers.

Please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department with any questions that you may have.

Richard S. Zackin is a Director in the Gibbons Employment & Labor Law Department.

Third Circuit Finds That Failing to Produce Original Documents May Constitute Sanctionable Spoliation

Susan L. Nardone — Tue, 27 Mar 2012 15:14:14 -0500

Although in recent years employers have become increasingly focused on the preservation, discovery and production of electronically-stored information, the Third Circuit’s January 4, 2012 decision in Bull v. United Parcel Service serves as a reminder to companies that original documents can and often do play a critical role in employment litigation matters. The preservation and discovery of originals should not be overlooked. Employers should be certain to both request original documents in discovery (and pursue their production through motion practice as necessary) and take necessary steps to preserve originals when litigation is threatened or commenced.

In Bull, the Third Circuit was asked to review the District of New Jersey’s dismissal with prejudice of the plaintiff’s discrimination claim as a sanction for her failure to produce original notes from her health care provider. The primary issue in Bull was whether the production of only copies, when the original documents were available, constituted spoliation and justified the harsh sanction imposed by the District Court. The Third Circuit agreed with the District Court, in part, holding that “producing copies in instances where the originals have been requested may constitute spoliation if it would prevent discovering critical information.” However, the Court determined that based upon the facts of this case, the District Court had abused its discretion when it dismissed the plaintiff’s claims with prejudice.

Factual and Procedural Background

After suffering a work-related injury to her shoulder. UPS offered Plaintiff Lauren Bull a temporary work assignment and, when that assignment ended, she was out of work on Workers’ Compensation. Bull returned to work with restrictions imposed by her health care provider that, in the view of UPS, made it impossible to assign her work. Thereafter, Bull submitted two notes, a few months apart, from a different health care provider. UPS found the two notes to be inconsistent and illegible and requested, but was never provided with, the originals. Bull did not respond to requests that she provide a new doctor’s note and more information, and her discrimination suit followed.

During discovery, Bull produced copies of the notes in question, not the originals. When at trial UPS objected to the introduction of copies of the notes, Bull’s counsel insisted that the originals were no longer available, and the court overruled the objection. Further questioning (some by the Court) revealed that the original notes were at Bull’s home. Bull’s counsel explained that he had asked Bull multiple times for the original notes and she was not able to locate them. Although UPS suggested a less severe sanction, the District Court declared a mistrial and invited UPS to submit a motion for sanctions for Bull’s failure to produce the original notes. Five days later, Bull produced the original notes to the Court. The Court dismissed the case with prejudice, ruling that Bull’s failure to produce the original notes constituted spoliation.

Third Circuit’s Decision

The Third Circuit first examined whether producing copies instead of original documents constituted sanctionable spoliation. The Court affirmed its broad interpretation of spoliation, citing its decision in Brewer v. Quaker State Oil Refining Corp., when it wrote in the context of an adverse inference instruction: “[w]hen the contents of a document are relevant to an issue in a case, the trier of fact generally may receive the fact of the document’s nonproduction or destruction as evidence that the party that has prevented production did so out of the well-founded fear that the contents would harm him.” Equating the destruction of evidence with nonproduction, the Court reasoned that “under certain circumstances, nonproduction of evidence is rightfully characterized as spoliation.”

Having concluded that production of copies when originals have been requested may constitute spoliation, the Court turned to whether spoliation had occurred in this case. According to the Court, spoliation occurs when “the evidence was within the party’s control; the evidence is relevant to the claims or defenses in the case; there has been actual suppression or withholding of evidence; and the duty to preserve the evidence was reasonably foreseeable to the party.” There was no question that the first two elements were met. However, the Court disagreed with the District Court’s conclusion that Bull had intentionally withheld the originals despite knowledge of UPS’ repeated demands that the originals be produced. In what reads as a results-oriented decision, the Court concluded that Bull’s failure to turn over the originals was likely inadvertent, as there was no evidence that she actually knew that a request for the originals had been made. This was so despite a statement on the record during trial by Bull’s attorney that he had repeatedly requested the originals from Bull and Bull told him they were no longer available; and Bull’s testimony that she had never looked for the original documents. The Court also disagreed with the District Court’s characterization of “repeated requests” by UPS for the original documents. Bound by the slim record before it, the Third Circuit chastised the District Court for failing to develop an adequate record for its review.

The Court agreed with the District Court’s conclusion that Bull had a foreseeable duty to preserve and turn over the original notes but not without stating its “reservations.” In an interesting footnote, the Court acknowledged a “growing concern” relating to electronic documents and the difficulty of defining what constitutes an ”original” document. According to the Court, this leads to difficulty in determining “where the boundary of the objectively reasonable duty to preserve such documents lies.” In the Court’s view, counsel is obligated to ensure that their communications are clear in terms of what must be searched for, maintained and produced.

Having concluded that the original notes were not intentionally withheld and that there was no bad faith on Bull’s part, the Court held that the District Court had abused its discretion in finding that sanctionable spoliation had occurred. Although the Court’s conclusion rendered a review of the sanction imposed unnecessary, the Court nevertheless reviewed the record “in an abundance of caution” to determine whether dismissal with prejudice was appropriate. The Court reviewed each of the factors enunciated in Poulis v. State Farm Fire and Cas. Co. and concluded that the District Court had abused its discretion in ordering dismissal.

Implications for Employers

The Third Circuit’s decision is a mixed bag for employers. The Court’s determination that the failure to produce originals when requested can constitute spoliation has the potential to impact parties on both sides. The decision is tempered by its requirement that the original must contain “critical information” that could not be gleaned from a copy. In this case, the Court’s decision was further watered down by the less than compelling factual record and the Court’s apparent inclination to give the plaintiff the benefit of every doubt.

What lessons can be learned from this case? Employers involved in litigation should make an early request for the preservation and production of original documents and if originals are not made available, should pursue their production through motion practice. Waiting until trial to take issue with the failure to produce originals was UPS’ downfall. Similarly, employers must be certain to retain original documents when litigation is threatened or commenced to avoid being on the receiving end of a spoliation allegation.

To discuss any of your company’s employment or e-discovery needs, contact any attorney in the Gibbons Employment & Labor Law Department.

Susan L. Nardone is a Director in the Gibbons Employment & Labor Law Department.

Healthcare System and its CEO Held Not Liable by New York District Court for Wage Claims at Single Hospital in the Hospital System

Mitchell Boyarsky — Wed, 07 Mar 2012 13:25:02 -0500

The issue of whether a hospital system (operating over 25 facilities) and its Chief Executive Officer can be held liable for wage claims by workers employed at a single entity within the system was decided by the Eastern District of New York in Wolman v. Catholic Health System of Long Island, Inc. Applying traditional tests to assess “joint employer” liability, the District Court concluded that plaintiffs did not plead the basic elements in the complaint to hold the hospital system and its CEO liable for alleged unpaid wages. The Court reached a similar conclusion regarding several underlying claims -- failure to compensate employees for meal periods and for time spent pre- and post-shift -- based on plaintiffs’ inadequate pleadings.

Factual Background

Three plaintiffs, who were employed at the Good Samaritan Hospital, commenced a putative class action against the Hospital, the entire Catholic Health System of Long Island and its CEO under the Fair Labor Standards Act (“FLSA”) and the New York Labor Law (“NYLL”). They sought overtime and additional wages for which they were not compensated. On behalf of a putative class, they claimed they often worked through lunch yet were not paid because of an automatic timekeeping deduction for meal periods, they worked before and after their scheduled shifts and they were not compensated for attending training programs. The proposed class included up to 15,000 employees.

In moving to dismiss the complaint, the Hospital, the Health System and its CEO argued that the complaint did not adequately establish each defendant was part of the employer-employee relationship. Defendants further argued that plaintiffs were not entitled to the claimed compensation because the alleged work at issue was not compensable.

Court’s Ruling

The Court, utilizing the “economic realities” test, considered whether any entity beyond Good Samaritan Hospital could be held liable as alleged in the complaint. This analysis requires scrutinizing the degree of formal control exercised over an employee. In the absence of formal control, the Court considered the degree of “functional control” exercised over the employee. The Court found unpersuasive plaintiff’s allegations that the Health System presented itself as a unified and integrated entity, utilized the same meal-deduction policy, had common ownership and was engaged in a joint venture. The Court also rejected arguments of agency or alter-ego relationship because the complaint merely asserted conclusory statements to support these theories.

The Court employed the same economic realities test to consider whether the CEO could be held liable. It concluded that his alleged responsibility to manage the Health System, to make decisions affecting staff benefits, Health System operations and significant functions and to create and/or implement policies failed to state a plausible claim against the CEO. In sum, the CEO did not “possess the power to control the workers in question.” The complaint did not claim the CEO had any direct involvement with the employees. Furthermore, the Court noted that the more numerous the employees the less the courts are likely to hold a senior executive individually liable.

Finally, the Court analyzed whether the lead plaintiffs properly asserted claims for denial of wages and concluded that they did not meet their burden for many of their claims. In some instances, the Court differentiated between viable claims asserted by one plaintiff and insubstantial claims asserted by other plaintiffs.

Analysis for Employers

Individual liability and corporate organization liability are often litigated. In some cases, courts have found senior executives to be potentially liable. The determination will depend on the extent of control exercised by the senior executives. Likewise, the mere identification of an entity as part of larger organization or system will not alone create liability of the larger entity for wage claims asserted against the smaller company or component. Gibbons attorneys in the Employment and Labor Department are available to assist employers with these matters.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

NJ Department of Labor Re-Adopts Inside Sales Exemption

Carla N. Dorsi — Tue, 06 Mar 2012 13:29:26 -0500

Effective February 21, 2012, the inside salesperson exemption was re-adopted by the New Jersey Department of Labor and Workforce Development (NJDOL) as part of the Administrative Exemption contained in New Jersey’s wage and hour laws. When the NJDOL adopted the so-called “white collar” exemptions for Administrative, Executive, Professional, Outside Sales, and Computer employees as contained in the Federal Fair Labor Standards Act (“FLSA”) in September 2011, it eliminated this long-recognized exemption. As we previously reported, the NJDOL later admitted that the elimination of this exemption was inadvertent and proposed regulations to reinstate it.

Those regulations have been adopted and N.J.A.C. 12:56-7.2(c) now states:

"Administrative" shall also include an employee whose primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commissions and a total compensation of not less than $400.00 per week.

If you have any questions regarding the treatment of employees as exempt or non-exempt or the proposed adoption of the inside sales exemption, please feel free to contact any one of the attorneys in the Gibbons Employment & Labor Law Department.

Carla N. Dorsi is a Director in the Gibbons Employment & Labor Law Department.

New Jersey District Court Enjoins Former Financial Services Employee from Taking Customer Information

Mitchell Boyarsky — Fri, 17 Feb 2012 10:42:35 -0500

In a case to be noted by financial services entities that are signatories to the “Protocol for Broker Recruiting,” a New Jersey District Court issued a preliminary injunction to a financial services employer, Ameriprise Financial Services, Inc. (“plaintiff”) to prevent a former financial advisor employee from retaining certain client information that he downloaded from his computer prior to his departure from plaintiff. Plaintiff was a party to the “Protocol for Broker Recruiting” that prescribes a method for a departing employee to retain certain client information when leaving for another financial services institution. To grant the injunction, the Court found that plaintiff showed it likely would succeed on its underlying breach of contract claim, it would suffer immediate irreparable harm absent the injunction, defendant would not suffer harm if enjoined, and the injunction favors the public’s interest. The Court essentially decided that if the Protocol is not followed in the first instance, a departing financial representative’s subsequent compliance is tainted and insufficient to withstand subsequent legal challenge.

Factual Background

In Ameriprise Financial Services, Inc. v. Paul Koenig, defendant, had access to confidential information which included customer lists, contact information, financial information and new client prospects. Plaintiff adopted “The Protocol for Broker Recruiting” (“Protocol”) which prescribes a method for a financial services employee to retain certain customer information when departing to join a new financial services employer and permits the employee to solicit clients after joining the new firm, absent some other contractual or common law limitation on solicitation. The Protocol further provides that if the steps in the Protocol are followed, the departing employee and the new employer will not be liable for damages for retaining the information. When defendant began employment, he signed a Financial Advisor Agreement (“FA”) agreeing not to reveal certain confidential information of plaintiff.

Plaintiff terminated defendant for insubordination because he refused to attend a mandatory meeting. Defendant then attempted to resign by complying with the Protocol, which plaintiff refused to accept. However, after the termination, plaintiff found several client paper files missing, and it forensically determined that before his termination, defendant sent emails to his personal email with client contact information. Plaintiff also found that certain contact information and client meeting information had been deleted from its client contact database. Plaintiff filed a lawsuit for breach of contract, tortious interfrence with contract, misappropriation of trade secrets and unfair competition. Plaintiff also made a motion for a temporary restraining order.

Court’s Ruling

The District Court applied the standard for deciding requests for temporary injunctive relief -- the existence of immediate irreparable harm, the likelihood of success on the merits, the potential harm to the party to be enjoined and the public interest -- and with respect to the breach of contract (FA) claim, granted an injunction. The Court required defendant to return confidential customer information removed from plaintiff “in excess” of information permitted under the Protocol. The Court noted that while a former employer should not be able to undermine a financial representative’s efforts to follow the Protocol by refusing to accept the representative’s submission, the defendant’s departure did not comply with the spirit of the Protocol. Email was sent to a personal email account containing client financial plans -- which exceeds the information permitted to be transferred under the Protocol. In analyzing the misappropriation of trade secrets claim, the Court found that plaintiff did not show irreparable harm, yet it did not need to decide this issue because it separately granted the injunction on the breach of contract claim and limited the relief to requiring return of client information “in excess” of that covered by the Protocol.

Further Analysis

In addition to the result of the preliminary injunction being granted, the case is significant because the Court noted that certain client information at issue may constitute trade secrets under New Jersey law. The definition of trade secrets, which has been a hotly contested subject, has recently been codified by the new New Jersey Trade Secrets Act. Furthermore, the Court disregarded defendant’s argument that the “fluid nature of the industry” often involves brokers switching firms and taking clients with them, i.e., the basis for the Protocol, which undermined plaintiff’s claim of irreparable harm. In response, the Court noted that “disclosure of confidential information could put [the former employer] at a competitive disadvantage and result in loss of customer trust and goodwill.” For signatories to the Protocol and their employees, the Court’s holding in Ameriprise suggests that strict adherence to the Protocol is likely to be enforced by New Jersey District Courts.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

Supervisor Can Be Held Liable Individually Under FMLA, Third Circuit Holds

Mitchell Boyarsky — Thu, 09 Feb 2012 12:02:49 -0500

In a case of first impression, the Third Circuit Court of Appeals held that a supervisor may be individually liable for violating the Family and Medical Leave Act (“FMLA”). While noting that individual liability is not recognized in some Circuit Courts, the Third Circuit in Haybarger v. Lawrence County Adult Probation and Parole reached a contrary conclusion.

Factual Background

The plaintiff in Haybarger had diabetes, heart disease and kidney problems requiring her to miss work frequently for medical attention. Her direct supervisor disciplined her concerning her attendance as well as her job performance and placed her on a 6-month probationary period. He also prepared an annual performance review which identified her attendance deficiencies. At the end of the probationary period, the supervisor recommended to his superior that the defendant County terminate the plaintiff’s employment. Although the supervisor did not have the authority to make the termination decision, it appears his recommendation to terminate was given significant weight, and he attended the termination meeting.

The plaintiff sued, asserting claims under the Americans with Disabilities Act, the Pennsylvania Human Relations Act (“PHRA”), the Rehabilitation Act and the FMLA. The defendant County moved to dismiss all of the claims, which the District Court granted except for the Rehabilitation Act claim against the County and the FMLA and PHRA claims against the individual supervisor. After discovery, the defendants moved for summary judgment. The District Court granted summary judgment to the individual supervisor, concluding that although the FMLA provides for individual liability, plaintiff did not present evidence of “sufficient control over the [employee’s] conditions and terms of employment” to impose such liability. On appeal, the Third Circuit reversed the decision of the District Court.

Court’s Rationale

In reaching its decision, the Third Circuit construed the definition of “employer” under various laws and interpretations including the FMLA and that of the Fair Labor Standards Act (“FLSA”) containing a similar definition, the Department of Labor’s implementing regulations, and the rationale of the Fifth and Eighth Circuits addressing individual liability claims. The Court held that “just as a real estate management company acting as an agent for building owners may be liable as an employer under the FLSA, an individual supervisor working for an employer may be liable as an employer under the FMLA.” Finally, the Court applied the “economic realities” test, which analyzes whether the purported supervisor exercised the control of an “employer” over the employee. Here, the Court found that sufficient evidence existed regarding the presence of control over the plaintiff to create an issue of fact to deny summary judgment to the individual defendant. Specifically, the Court found that even if the supervisor lacked the authority to terminate the plaintiff, he exercised substantial authority over her termination decision by preparing her termination letter and attending her termination meeting. In addition, the Court noted the individual supervisor’s control over the plaintiff’s employment conditions prior to her termination involved supervising her work, preparing her performance reviews and disciplining her, which further establishes control.

Implications for Employers

The concept of individual liability, especially for an employer which may defend the individual, is more of a tactic by a plaintiff to “personalize” the lawsuit rather than just involving a corporate defendant. Individual liability may exist even if the individual supervisor acted within the scope of his/her duties that involved discipline, termination or some other adverse consequence to the employee. It is not clear from Haybarger whether others involved in such decision-making, such as human resources and legal department personnel, could potentially be liable. However, Haybarger highlights the need for employers to follow a protocol when making decisions that adversely affect an employee’s terms and conditions of employment, to ensure that those participating in the decision-making are trained properly and that documentation concerning the decision-making process is prepared so that an individual supervisor is not left alone or unchecked to decide these matters.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

U.S. Department of Labor Publishes Proposed Rules for Military FMLA

Kelly Ann Bird — Wed, 08 Feb 2012 09:07:03 -0500

On Monday, January 28, 2012 the United States Department of Labor (DOL) announced that it would publish a Notice of Proposed Rulemaking addressing statutory amendments to the Family and Medical Leave Act (FMLA) provisions concerning military family leave and flight crew eligibility. The proposed rules will be published in the Federal Register and interested parties may submit written comments within a defined period of time, which has not yet been specified.

The DOL’s proposed rules implement and interpret, as well as propose expansion of, amendments to the FMLA that were incorporated in the National Defense Authorization Act for Fiscal Year 2010 (NDAA 2010) and the Airline Flight Crew Technical Corrections Act (AFCTCA), which was enacted in 2009. Although the NDAA was silent as to its effective date, certain provisions required clarification or definition by the DOL. The proposed rules address those provisions as well as implement those that did not require definition or clarification.

A number of areas of the military family leave provisions of the FMLA are discussed in the proposed rules. Of primary interest, the rules:

Extend the period within which a military service member’s caregiver may apply for FMLA leave to 5 years beyond the service member’s separation from the military;
Expand eligibility for caregiver leave to include caring for service members with conditions that arise after the service member has separated from military service;
Expand the definition of serious illness or injury to include those arising from a pre-existing condition;
Increase to 15 days the allotment of time family members may spend with military members who are on rest and recuperation leave;
Expand qualifying exigency leave eligibility to employees with service members deployed in the Regular Armed Forces (the DOL considers this provision effective October 29, 2009, the date the NDAA 2010 was enacted); and
Clarify that qualifying exigency leave is contingent on deployment to a foreign country (the DOL considers this provision effective October 29, 2009, the date the NDAA 2010 was enacted).

The proposed rules also address revised eligibility for FMLA leave for airline flight crew employees, who on account of airline industry restrictions are generally unable to meet the FMLA’s 1,250 hour requirement. As the AFCTCA specified, an employee who has worked or been paid for 504 hours of service over the course of a year and who has worked or been paid for sixty percent of his or her assigned hours has met the FMLA hours/service time requirement. Employers should note that, because the DOL was not required to engage in rulemaking or issue regulations concerning the AFCTCA, the DOL has deemed the provisions of that statute effective as of December 21, 2009, the date on which it was enacted.

We will update this blog when the proposed rules have been published. If you have questions regarding employer obligations under the FMLA, please feel free to contact any of the attorneys in the Gibbons Employment & Labor Law Department.

Kelly Ann Bird is a Director in the Gibbons Employment & Labor Law Department.

New Jersey Framework for Analyzing Attorneys' Fee Awards, Including Contingency Fee Enhancements, Unchanged

James J. La Rocca — Thu, 02 Feb 2012 11:56:33 -0500

Last week, the New Jersey Supreme Court reiterated that lawyers who represent clients on a contingency basis in disputes brought under New Jersey laws that permit the recovery of attorneys’ fees can recover an additional fee “enhancement” pursuant to the framework the Court set forth nearly 20 years ago in Rendine v. Pantzer, 141 N.J. 292 (1995). The decision, Walker v. Guiffre, Case Nos. 72-10, 100-10 (N.J. Jan. 25, 2012), is noteworthy for businesses that all too frequently must weigh the risk of paying their opponents’ attorneys’ fees when deciding whether to settle disputes – particularly those companies that wishfully thought the reins on contingency fee enhancers might be tightened in light of two recent decisions by New Jersey appellate courts.

The New Jersey Appellate Division ruled in Walker v. Giuffre, 415 N.J. Super. 597 (App. Div. 2010) and Humphries v. Powder Mill Shopping Plaza, that the framework established in Rendine required modification to comply with the U.S. Supreme Court’s decision in Perdue v. Kenny A., 130 S. Ct. 1662 (2010). The Court in Perdue examined attorneys’ fee awards under federal laws and held, in part, that contingency fee enhancements were improper under federal fee-shifting statutes. The N.J. Supreme Court in Walker analyzed the New Jersey appellate decisions on a consolidated basis and explained that the U.S. Supreme Court decision in Perdue had no impact on the longstanding holding of Rendine. It reasoned that the N.J. Supreme Court already had considered the very arguments and considerations set forth in Perdue when it decided Rendine, including the conclusion that contingency fee enhancements are improper under federal fee-shifting statutes. In short, the framework set forth in Rendine, which permits contingency fee enhancements under New Jersey fee-shifting statutes, remains good law.

Among New Jersey laws that permit the recovery of attorneys’ fees and, therefore, the potential for a contingency fee enhancer, are the two laws most frequently implicated in New Jersey employment lawsuits: the New Jersey Conscientious Employee Protection Act (“CEPA”) and the New Jersey Law Against Discrimination (the “LAD”). A number of laws outside the employment context likewise place businesses on the defensive and permit the recovery of attorneys’ fees, including the New Jersey Consumer Fraud Act (“CFA”). (A listing of New Jersey statutes that permit fee-shifting can be found here.) Notably, the court’s decision in Walker arose from claims brought under the CFA and LAD.

Significantly, CEPA, the CFA and the LAD are one-sided fee-shifting statutes that only allow an individual who brings a successful claim to recover attorneys’ fees. Companies that successfully defend such claims cannot receive a similar award. Accordingly, while businesses must weigh the risk of paying the other side’s lawyer when sued under these statutes, an individual who files a claim does not face the same risk. The company’s risk naturally is increased where there also is the potential for a fee enhancement, which, as Walker reminds us, remains as viable a consideration under New Jersey law as it has since the Court’s decision in Rendine.

Attorneys’ fee awards typically are calculated by multiplying the reasonable number of hours an attorney spent working on a case by a reasonable hourly rate. The court in Rendine (a LAD case) decided that an enhancement to this award should be available where an attorney takes a case predominantly on a contingent basis, so as to compensate the lawyer for the added risk undertaken in the representation. As announced by the court in Rendine, these contingency fee enhancers ordinarily range between five and 50 percent of the attorneys’ fee award, and most frequently fall in the 20 to 35 percent range. A 100 percent enhancement is possible, but limited to the exceptional case where there is no prospect for a large damage award and where the relief sought is primarily non-monetary and equitable in nature. Other factors that influence the size of a contingency enhancement include the strength of the claim and whether the attorney mitigated the risk of nonpayment in any way.

For additional details regarding the decision in Walker, contact an attorney in Gibbons Business and Commercial Litigation or Employment & Labor Law Departments.

James J. LaRocca is an Associate in the Gibbons Employment & Labor Law Department. This blog also appears on the Gibbons Business Litigation Alert.

Failure to Notify Employee of FMLA Rights Prevents Dismissal of FMLA and Disability Retaliation Claims According to NJ District Court

Mitchell Boyarsky — Tue, 31 Jan 2012 09:28:41 -0500

The Federal Family and Medical Leave Act (“FMLA”), which, among other things, affords eligible employees up to 12 weeks of unpaid leave for the employee’s own serious medical condition and reinstatement to the employee’s former or equivalent position, includes stringent notice obligations for employers. A New Jersey District Court recently reinforced the importance of complying with the statute’s notice requirements. In Antone v. Nobel Learning Communities, Inc., the court denied the defendant employer’s motion to dismiss, rejecting its argument that the employee was not protected by the FMLA when she was terminated more than 12 weeks after she commenced leave because the employer failed to provide the requisite FMLA information to the employee. The Court similarly denied the employer’s motion to dismiss disability retaliation claims based on improper notification required by the FMLA.

Federal FMLA Notice Requirements

An employee seeking to take a leave of absence under the FMLA does not need to specifically request “FMLA Leave.” Rather, the employee need only notify the employer of the need for leave. This notification triggers the employer’s obligation to inform the employee of his/her eligibility to take FMLA leave within 5 business days absent extenuating circumstances and of his/her rights and responsibilities with regard to such leave. This eligibility and rights and responsibilities notice must detail the “specific expectations and obligations of the employee and explain any consequences of a failure to meet these obligations” and may be accompanied by an required Certification of Health Care Provider form. Once an employer designates a leave as covered by the FMLA, it must provide a designation notice which informs the employee of the amount of leave counted against the employee’s FMLA leave entitlement. The Department of Labor provides sample notices of eligibility and designation, as well as health care provider certifications for an employee’s own health condition and that of a family member, when applicable.

Relevant Facts

The Plaintiff in Antone experienced health problems which affected her ability to stoop, bend and walk. On or about May 28, 2009, Plaintiff informed Defendant’s Human Resources Administrator that she needed time off for medical treatment in a hospital, a reason permitted to take FMLA leave. More than a month later, Defendant sent Plaintiff a Certification of Health Care Provider Form. Defendant, however, failed to provide an eligibility notice or otherwise inform Plaintiff of her rights under the FMLA including her right to take 12 weeks of leave. Plaintiff timely returned the completed Health Care Provider form to Defendant indicating that she would return to work by August 28, 2009 – 12 weeks and 8 days after she began leave. In late August, Defendant informed Plaintiff that she would be terminated because her physician approved her to return on August 28, which is 8 days after the 12 weeks expired.

Plaintiff claimed that Defendant discriminated against her in violation of the FMLA, interfered with her rights under the FMLA and retaliated against her in violation of the Americans with Disabilities Act (“ADA”) and the New Jersey Law Against Discrimination (“LAD”) both of which protected disabled individuals from retaliation for engaging in protected activity. She also sued her supervisors individually. Nobel moved to dismiss Plaintiff’s complaint arguing that Plaintiff was not protected by the FMLA because she was terminated after her FMLA expired. Defendant similarly moved to dismiss Plaintiff’s retaliation claims.

Court’s Decision

The Court denied Defendant’s motion to dismiss the FMLA discrimination claim and the retaliation claim similarly because Nobel did not provide Plaintiff proper and timely notice of her rights under the FMLA. Although Plaintiff was terminated after she exhausted 12 weeks of leave, the Court found that had Plaintiff been given the appropriate notice and knew when her leave expired, she could have taken a shorter leave and returned immediately after 12 weeks.

With regard to the disability claim, an employer is required to engage in a dialogue known as the interactive process with an employee claiming to be disabled to consider providing the employee a reasonable accommodation. An employee’s request for an accommodation is considered “protected activity.” Both the ADA and LAD prohibit an employer from retaliating against an employee who engages in protected activity. Here, the Court found that after Plaintiff exhausted her FMLA she might have been entitled to additional leave under the ADA and the LAD as a reasonable accommodation which she was prevented from . The Court held that an allegation of firing an employee who engages in protected activity (i.e., requests a reasonable accommodation) is retaliatory and sufficient to withstand a motion to dismiss.

Practical Guidance for Employers

When an employee requests a leave of absence, an employer covered by the FMLA should carefully consider the basis for the request and timely provide required information in writing to the employee requesting leave. If an employer fails to provide the requisite notification and information or delays providing it, the omission could later taint an employment action. Attorneys in Gibbons Employment & Labor Department are available to assist employers with FMLA and disability leave management needs.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.