Hunton Employment & Labor Law Perspectives

NLRB v. Noel Canning: Recent Developments

Hunton & Williams LLP — Wed, 22 May 2013 15:34:58 -0500

NLRB Asks Supreme Court To Review Decision That Struck President Obama’s Recess Appointments

On April 25, 2013, the National Labor Relations Board (“NLRB” or “Board”) filed a petition for a writ of certiorari asking the United States Supreme Court to review the decision in NLRB v. Noel Canning in which the D.C. Circuit Court of Appeals held that President Obama’s January 2012 recess appointments to the NLRB were unconstitutional. The Court ruled President Obama’s appointments were not valid because the Senate was not in “the Recess” at the time he made them and thus, the Board lacked the required quorum needed to conduct business. Under the Recess Appointments Clause of the Constitution, the President is able to bypass Senate approval and fill executive vacancies “that may happen during the Recess of the Senate.” The Court held “the Recess” means the intersession break between annual Senate sessions, not any intrasession break during an ongoing session. It also held an executive vacancy does not “happen” during the Recess unless the office actually becomes vacant during such a recess.

The petition presents two questions to the Supreme Court: 1) “Whether the President’s recess-appointment power may be exercised during a recess that occurs within a session of the Senate, or is instead limited to recesses that occur between enumerated sessions of the Senate,” and 2) “Whether the President’s recess-appointment power may be exercised to fill vacancies that exist during a recess, or is instead limited to vacancies that first arose during that recess.” In the Board’s view, the President’s power is not limited to inter-session recesses, and the President may fill a vacancy that exists during a recess, whether or not the vacancy arose during that recess. The Board argues that Noel Canning would have “serious and far-reaching consequences” and that it “repudiates understandings of the Recess Appointments Clause that have been maintained and relied on by the Executive for most of the Nation’s history.”

Seventy-Two Cases Challenge NLRB’s Authority Based On Noel Canning Decision

While the Board continues to hear and decide disputes during the pendency of the Noel Canning appeal, employers all over the country are appealing NLRB decisions based on the reasoning in Noel Canning. At least 72 cases pending in federal appeals courts challenge the Board’s authority. Employers argue that Noel Canning was decided correctly by the D.C. Circuit, that the President’s recess appointments were unconstitutional and, therefore, the Board lacked a quorum in any decisions issued after January 4, 2012, when the President made the recess appointments. Hunton & Williams attorneys are taking part in the action and recently submitted briefs in two recess appointment cases that are the lead cases raising this issue in their respective Circuit Courts. See the briefs submitted in Huntington Ingalls Incorporated v. NLRB in the Fourth Circuit and Big Ridge, Inc. v. NLRB in the Seventh Circuit.

Third Circuit Holds President Obama’s Becker Appointment Invalid -- Expands Noel Canning Reasoning And Impact

On May 16, in a significant development, the Third Circuit held in NLRB v. New Vista Nursing & Rehabilitation that the Recess Appointments Clause is strictly limited to intersession breaks between annual Senate sessions. In going even further than the D.C. Circuit in Noel Canning, the Third Circuit held that the appointment of Board Member Becker, who was appointed during a March 2010 intrasession break, was also invalid, potentially opening up for challenge an even larger number of active NLRB cases in which Member Becker participated.

Employers Beware: Psychiatry's Latest Diagnostic Manual (DSM-5) Creates New Mental Disorders, Expands Others

Hunton & Williams LLP — Mon, 20 May 2013 13:16:17 -0500

For 60 years psychiatrists and other mental health professionals have been using the American Psychiatric Association’s “Diagnostic and Statistical Manual of Mental Disorders” (DSM) as the “bible” for diagnosing mental diseases and disorders. Health and disability insurance providers use the DSM in deciding what conditions and treatments to cover, as do government agencies in determining eligibility for benefits and services. These and other factors make the DSM an unusually powerful document.

The latest DSM revision (the DSM-5) is set for release later this month. It creates several new mental disorders and broadens the definition of a number of existing ones. These changes will affect employers in a variety of ways, from expanded protection under the ADA and FMLA to increased benefit costs.

“Medicalizing” Ordinary Life?

The revision has attracted scathing criticism from a number of experts, including an unlikely one: Dr. Allen Frances, the emeritus chairman of the psychiatry department at the Duke University School of Medicine and the head of the task force that prepared the DSM-4.

Writing in PsychologyToday.com, Dr. Frances calls the DSM-5 “deeply flawed” and with “many changes that seem clearly unsafe and scientifically unsound.” He fears the new manual will lead to “massive over-diagnosis and harmful over-medication” and complains that the DSM-5 task force is guilty of “medicalizing” the challenges of ordinary life.

Dr. Frances lists ten “reckless and untested ideas” that he claims will dramatically expand the number of people diagnosed with mental disorders. For instance, he predicts the DSM-5 will trigger a “fad” of diagnosing Adult Attention Deficit Disorder, leading to “widespread misuse of stimulant drugs for performance enhancement;” that normal grief over the death of a loved one will be mischaracterized as “Major Depressive Disorder;” that aging workers with everyday forgetfulness will be wrongly labeled as suffering from “Minor Neurocognitive Disorder;” and that physicians will obscure the “already fuzzy boundary” between Generalized Anxiety Disorder and the worries of everyday life. He also notes that DSM-5 has taken overeating and “turned it into a psychiatric illness called Binge Eating Disorder;” he warns of a slippery slope in which careless use of terms such as “behavioral addictions . . . can spread to make a mental disorder out of everything we like to do a lot.”

Dr. Frances isn’t the only one with serious objections. A May 7, 2013 article in Time.com reports that the National Institute on Mental Health (a major funder of mental health research) has declined to use the DSM-5’s diagnostic system in its science programs. Among other concerns, NIMH director Dr. Thomas Insel objects that DSM diagnoses are based on “a consensus about clusters of clinical symptoms” rather than objective laboratory measures. He says, “patients with mental disorders deserve better.”

Despite the criticism, the APA shows no sign of backing down. DSM-5 goes on sale on May 27 and is already available for pre-order on Amazon.com.

Implications for Employers: Some Early Predictions

Here are a few predictions about what the new DSM-5 will mean for employers:

The EEOC will embrace the DSM-5’s expansive view of mental disorders and treat most of its newly-established conditions as disabilities for purposes of the Americans with Disabilities Act.
EEOC will re-evaluate its longstanding ADA interpretive guidance on the definition of “physical or mental impairment” (see Appendix to 29 CFR §1630.2(h)), which states that an “impairment” does not include “common personality traits such as poor judgment or a quick temper where these are not symptoms of a mental or psychological disorder.”) The agency will more closely scrutinize disciplinary decisions and seek to force employers to reasonably accommodate allegedly disabled employees whose poor performance and conduct are more likely attributable to ordinary characteristics such as lack of motivation, incompetence, unwillingness to follow company rules, and inability to get along with supervisors and coworkers.
Requests for time off that employers now routinely deny will require more scrutiny to determine if there is ADA or FMLA protection, as primary care physicians (who already prescribe most psychiatric medications) fall in line with DSM-5’s expansive diagnostic criteria.
Employer costs for benefits such as short-term disability will continue to increase, as will workers’ compensation costs in states with expansive definitions of what constitutes an occupational injury or disease.
Employees suing their former employer for infliction of emotional distress will find it easier to obtain a medical diagnosis to support their claim.
Daubert motions (seeking to exclude psychiatric testimony) will increase in employment cases, based on the argument that the DSM-5 is not generally accepted in the psychiatric community and/or that important parts of it are “scientifically unsound,” as Dr. Frances says.

D.C. Circuit Strikes Down NLRB Union Posting Rule -- Silence Is Golden, At Least For Now

Hunton & Williams LLP — Thu, 16 May 2013 10:13:26 -0500

On May 7, 2013, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit invalidated a rule promulgated by the NLRB that would have required employers to post notices of employee’s rights under the National Labor Relations Act (“NLRA”) in the workplace. According to the Court, employers have the right not to speak, and thus can be silent, on these issues. Another case regarding the same issue is currently pending on appeal in the Fourth Circuit.

The NLRB’s posting rule, which was issued in August 2011, caused a great deal of concern among employers. The rule would have required all employers to post notices informing employees of their rights under the NLRA, the NLRB’s contact information, and basic enforcement procedures under the NLRA. The rule also contained three enforcement mechanisms: (1) that an employer’s failure to post the required notice would automatically constitute an “unfair labor practice” in violation of the NLRA; (2) that an employer’s refusal to post the notice could be considered by the NLRB as evidence of unlawful motive in cases where motive is an issue; and (3) that the NLRB could toll the 6-month limitations period for filing an unfair labor practices charge if the employer failed to post the required notice.

For employers, at least for now, silence is golden. In striking down the rule, the Court of Appeals largely based its decision on the concept that employers have the right “not to speak” on certain labor issues. Section 8(c) of the NLRA provides that the expression or dissemination of views, arguments, or opinions cannot constitute an unfair labor practice, as long as the expression contains no threat of reprisal or promise of benefit. The Court reasoned that employers’ right to express and disseminate non-coercive speech under § 8(c) necessarily includes “the right of employers (and unions) not to speak.” Thus, the Court held that the NLRB’s posting rule violated § 8(c) because it made an employer’s silence an unfair labor practice or evidence of an unfair labor practice. The Court also struck down the third enforcement mechanism -- the tolling provision -- as a modification of the statute that was beyond the NLRB’s powers.

Having ruled that all three enforcement mechanisms of the posting rule were invalid, the Court of Appeals held that the posting rule itself was invalid because it was not severable from the enforcement mechanisms. (The NLRB had stated during its rule-making process that it would not have issued the posting rule depending solely on voluntary compliance.)

Georgia Supreme Court Denies Application Of Inevitable Disclosure Doctrine As Stand-Alone Claim

Hunton & Williams LLP — Mon, 13 May 2013 11:21:48 -0500

In Holton v. Physician Oncology Services, LP, et al., Case No. S13A0012 (May 6, 2013), the Georgia Supreme Court limited the use and application of the inevitable disclosure doctrine by declining to recognize it as an independent cause of action.

The inevitable disclosure doctrine allows an employer to restrict former employees from working for a competitor by demonstrating that the former employees will necessarily rely upon knowledge of the employer’s trade secrets in performing their new job duties.

In August 2009, Plaintiff Holton joined Defendant Physician Oncology Services, LP, which provided radiation therapy services to cancer patients, as vice president and chief operating officer, eventually becoming the company’s president. During his employment with Physician Oncology Services, Holton was responsible for overseeing the operations of seven facilities in the Atlanta-metro area.

In January 2011, Physician Oncology Services merged with Vantage Oncology, LLC, which operated 45 radiation oncology treatment centers in twelve states, including five in Atlanta. For five months after the merger, Holton had oversight responsibility for the Atlanta treatment centers before changing responsibilities to handle facilities exclusively in other states. In October 2011, Vantage terminated Holton.

One month later, Holton became chief executive officer of Radiation Oncology Services of America, Inc. (“ROSA”), a competitor of Vantage with four centers in Atlanta, none of which were to be under Holton’s oversight. Vantage sought an injunction, claiming in part that Holton would inevitably disclose and use Vantage’s trade secrets. The trial court granted Vantage’s request, determining that there was a substantial likelihood that Vantage would prevail on the merits of its claim that Holton would inevitably disclose its confidential information and trade secrets if employed by ROSA.

Holton appealed the trial court’s ruling challenging, among other things, that Vantage was likely to prevail on its claim for the inevitable disclosure of trade secrets because Georgia had not adopted the inevitable disclosure doctrine, and because there was no evidence that Holton had any Vantage document, nor recalled any of its trade secrets.

Georgia Supreme Court Denies Application Of Inevitable Disclosure Doctrine As Stand-Alone ClaimThe Georgia Supreme Court sided with Holton on this issue, emphasizing that the doctrine “remains the subject of considerable disagreement” among courts, and that case law in other states is inconsistent about whether the doctrine should be recognized at all and, if so, recognized as a stand-alone claim. Rejecting Vantage’s argument that the Court had previously applied the doctrine in Essex Group, Inc. v. Southwire, Co., the Holton Court held that “the inevitable disclosure doctrine is not an independent claim under which a trial court may enjoin an employee from working for an employer or disclosing trade secrets.” Notably, the Court expressly declined to address whether the doctrine may be applied to support a claim for the threatened misappropriation of trade secrets.

EEOC Wins $240 Million Jury Verdict

Hunton & Williams LLP — Wed, 08 May 2013 11:46:19 -0500

The Equal Employment Opportunity Commission (“EEOC”) announced that it won what it describes as a “historic” verdict last week when an Iowa federal jury awarded $240 million to a group of intellectually disabled plant workers who were subjected to disability-based discrimination and harassment. The award is the largest in the agency’s history. The EEOC’s General Counsel, David Lopez, remarked that the verdict is “one of the EEOC's finest moments in its ongoing efforts to combat employment discrimination.”

The lawsuit, EEOC v. Hill Country Farms Inc., was brought under the Americans with Disabilities Act (“ADA”) by 32 intellectually disabled workers who formerly worked at a turkey manufacturing plant in Muscatine County, Iowa. At trial, the EEOC presented evidence that the intellectually disabled workers were frequently called “retarded,” “dumb ass,” and “stupid.” The workers reported being hit, kicked, and forced to carry heavy weights as punishment. The workers were allegedly required to live in “deplorable and substandard” living conditions maintained by the Company and denied access to medical care. The EEOC told the jury that the vulnerable workers were treated “like property” rather than individuals with legitimate ADA-protected disabilities. The workers alleged that, for twenty years, they were paid significantly less than their non-disabled counterparts and subjected to physical and verbal abuse.

At the time of the plant’s closing in 2009, the workers earned $65 per month while their non-disabled counterparts were paid $11 to $12 per hour.

The $240 million jury award consisted of $7.5 million to each plaintiff – $5.5 million in compensatory damages and $2 million in punitive damages. The award, however, is likely to be reduced pursuant to statutory caps limiting compensatory and punitive damages to $300,000 each. With regard to payment of back wages, the EEOC had previously secured a $1.3 million wage discrimination verdict for the same workers, which resulted in an award of $28,000-$45,000 per plaintiff.

“The verdict sends an important message that the conduct that occurred here is intolerable in this nation, and hopefully will help to restore dignity and acknowledge the humanity of the workers who were mistreated for so many years,” said EEOC Chair Jacqueline A. Berrien.

Some commentators expect the verdict to embolden the EEOC, which has faced a number of high-profile setbacks in recent years. While that remains to be seen, the verdict will, at the very least, be used by the agency when it urges Congress for increased enforcement funding.

NLRB Releases Guidance On Workplace Investigation Confidentiality Policies

Hunton & Williams LLP — Thu, 02 May 2013 09:31:57 -0500

Furthering its controversial ruling in Banner Health System d/b/a Banner Estrella Medical Center, 358 NLRB No. 93 (July 30, 2012), the National Labor Relations Board’s Office of the General Counsel recently released a memorandum providing additional guidance on the confidentiality of internal workplace investigations. Banner Health held that to require confidentiality of investigations, an employer must show more than a generalized concern with protecting the integrity of its investigations. Rather, an employer must “determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, and there [was] a need to prevent a cover up.”

The memorandum, dated January 29, 2013, addressed a policy of Verso Paper, an employer operating paper mills across the country. Verso Paper’s Code of Conduct prohibited employees from discussing ongoing investigations. The provision stated:

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

The NLRB found the rule to be overbroad “because the Employer cannot maintain a blanket rule regarding the confidentiality of employee investigations, but must demonstrate its need for confidentiality on a case-by-case basis.”

Relying in part on Banner Health, the NLRB stated that an employer violates Section 8(a)(1) of the National Labor Relations Act when it maintains a work rule that reasonably chills employees in the exercise of their Section 7 rights, including the right to discuss discipline or disciplinary investigations involving their fellow employees. The Board stated that an employer may only prohibit employees’ discussions during an investigation if it demonstrates that it has a legitimate and substantial business justification that outweighs the Section 7 right.

The Board found that Verso Paper’s policy violated Section 8(a)(1) because it did not take into account the employer’s burden to show in each particular situation that a business justification for confidentiality outweighed employees’ Section 7 rights. Further, “[t]he Employer may not avoid this burden by asserting its need to protect the integrity of every investigation, but rather must establish this need in the context of a particular investigation that presents specific facts giving rise to a legitimate and substantial business justification for interference with the employees’ Section 7 right.”

The Board’s holding and guidance leave employers in an untenable position. On one hand, according to the NLRB, employers may not have a blanket requirement of confidentiality for investigations. On the other hand, their obligation to prevent harassment or other violations of Title VII (for example), acknowledged in cases such as Faragher v. City of Boca Raton, 524 U.S. 775 (1998), could be hindered by the inability to require confidentiality of investigations. For example, without a requirement of confidentiality, some employees may be uncomfortable reporting instances of discrimination or harassment or truthfully participating in an investigation.

Regardless of the wisdom of the NLRB’s guidance, employers should consider and document the Banner Health factors, including the basis for confidentiality, in every workplace investigation.

Hospitals May Be OFCCP-Covered Subcontractors

Hunton & Williams LLP — Mon, 29 Apr 2013 10:43:30 -0500

The Office of Federal Contract Compliance Programs (“OFCCP”) has a long history of attempting to assert jurisdiction over hospitals. A recent federal court ruling confirms that, despite some recent victories for hospital employers in this area, hospitals may indeed find themselves subject to OFCCP jurisdiction.

The U.S. District Court for the District of Columbia recently ruled in UPMC Braddock v. Harris, D.D.C. No. 09-01210 (2013), that three Pittsburgh hospitals are covered federal government “subcontractors” because they contracted with an HMO to provide medical services to Federal employees and their beneficiaries. The court found the hospitals’ provision of medical services was “necessary” to the HMO’s contract with the Office of Personnel Management (“OPM”).

The Court affirmed a decision of the Administrative Law Judge (“ALJ”), holding the ALJ had not abused his discretion in finding the hospitals to be covered by the OFCCP’s subcontractor regulation. The OFCCP’s regulations define a subcontractor as one who has an agreement or arrangement “(1) [f]or the purchase, sale or use of personal property or nonpersonal services, which in whole or in part, is necessary to the performance of one or more [prime]contracts or (2) [u]nder which any portion of the contractor's obligation under any one or more contracts is performed, undertaken or assumed.” 41 CFR 60-1.3. A significant fact in the Court’s analysis was that the HMO provided not just health insurance, but also health care services, to the OPM. The HMO depended on the hospitals to provide those medical services. Thus, according to the Court, the hospitals are covered federal subcontractors.

In its ruling, the Court rejected several arguments raised by the hospitals against OFCCP jurisdiction:

Employers cannot preclude subcontractor status by contract. The Court rejected a claim that the prime federal contract excluded medical providers from the definition of “subcontractor.” The Court reasoned that a contract provision that conflicts with federal law is invalid.
Most services provided the Government are covered “nonpersonal” services. The hospitals argued they provide “personal services”, i.e., medical care, to the HMO. The court disagreed, finding they provide “nonpersonal services” that support subcontractor status. Analogizing to another Federal Acquisition Regulation, the Court reasoned that “personal services” are those where there is an employer-employee relationship between the Government and the subcontractor’s personnel.
Consent is not required for subcontractor status. The hospitals noted that their contracts with the HMO did not include equal employment opportunity (“EO”) clauses. Thus, they claim they never consented to OFCCP jurisdiction. The Court rejected this view because the OFCCP’s regulations incorporate the EO clauses into every federal contract and subcontract, regardless of whether they are explicitly cited.

This case is the latest in a long-running and contentious debate between hospitals and the OFCCP. It confirms that subcontractor status can attach without the awareness of the covered employer. It also reiterates the OFCCP’s continued practice of broadly construing its jurisdictional reach. Hospitals who contract with HMOs should determine whether the persons being served are Federal employees and beneficiaries, and if so, should evaluate OFCCP coverage.

New York City Council Passes Law Prohibiting Discrimination Against The Unemployed In Hiring

Hunton & Williams LLP — Tue, 16 Apr 2013 13:14:33 -0500

On March 13, 2013, the New York City Council, over Mayor Bloomberg’s veto, passed a law prohibiting discrimination against the unemployed in hiring. The law, effective June 11, 2013, amends the New York City Human Rights Law to expand the class of protected individuals to include the unemployed. The law applies to employers in New York City who employ four or more persons (including employees and/or independent contractors). The law defines an unemployed person as someone “not having a job, being available for work, and seeking employment” and prohibits covered employers from basing employment decisions “with regard to hiring, compensation or the terms, conditions or privileges of employment on an applicant’s unemployment.” Additionally, it prohibits all employers from advertising that a particular position requires applicants to be currently employed or that the employer will not consider applicants who are unemployed.

The law contains several exceptions to the prohibition against discrimination on the basis of unemployment, allowing employers to consider unemployment when there is a “substantially job-related reason for doing so,” to inquire into the circumstances surrounding the applicant’s separation from prior employment, to consider and give priority to the employer’s current employees, and to negotiate and establish compensation or terms and conditions of employment based on the applicant’s level of experience. A particularly interesting and potentially significant portion of the law provides that plaintiffs can sue under a disparate impact theory. Thus, if plaintiffs can prove that an employer’s facially neutral policy or practice had the effect of excluding the unemployed, then the employer must plead and prove as an affirmative defense that the policy or practice is based on a “substantially job-related qualification or does not contribute to the disparate impact.”

Employers who employ employees in New York City should take steps to ensure that they comply with this new law. These measures can include communicating with recruiting companies and human resources personnel to ensure they are properly trained to interview and screen candidates, and reviewing job postings to avoid prohibited statements regarding unemployment status.

Seventh Circuit Reminds Asset Purchasers Of Successor Liability Risks Related To Federal Labor And Employment Laws

Hunton & Williams LLP — Mon, 08 Apr 2013 11:25:17 -0500

Many buyers in asset sales may assume that if the seller and buyer agree that the buyer does not assume the seller’s liabilities, the buyer would have no liability for employment-related issues pertaining to the seller prior to the sale. A recent Seventh Circuit decision authored by the influential Judge Posner in Teed v. Thomas & Betts Power Solutions, L.L.C. reminds purchasers that their assumption is not necessarily true, as the Seventh Circuit noted that when liability is based upon a violation of a federal labor or employment statute, courts apply a more aggressive standard of successor liability than the typical state-law standard to which courts might otherwise look.

In Teed, the purchaser specifically disclaimed any liability when it bought the assets of the seller for previous wage and hour violations under the Fair Labor Standards Act (“FLSA”). Following the sale, the aggrieved employees substituted the purchaser as the defendant in a lawsuit brought against the seller (presumably because the seller was insolvent). In considering the purchaser’s objection to the substitution on the basis of its disclaiming of liability in the asset purchase agreement, the Seventh Circuit held that “(w)e suggest that successor liability is appropriate in suits to enforce federal labor or employment laws—even when the successor disclaimed liability when it acquired the assets in question—unless there are good reasons to withhold such liability.” Although the Seventh Circuit articulated some potential good reasons for withholding liability, such as the successor lacking notice of potential liability and where workers file a flurry of frivolous lawsuits just before a bankruptcy reorganization in the hopes of substituting a solvent acquirer for their employers as a defendant in such suits, the Seventh Circuit did not find such good reasons to exist in Teed, and therefore held that the purchaser is a valid defendant in this FLSA suit.

We expect that aggrieved employees of a seller will attempt to impose successor liability most commonly when the seller is insolvent. Regardless, the Seventh Circuit’s decision provides critical reminder to purchasers that they need to conduct complete and accurate due diligence on actual and potential labor and employment litigation and risks before purchasing the assets of a seller.

Supreme Court Heightens Scrutiny Of Evidence Offered In Support Of Class Certification

Hunton & Williams LLP — Thu, 04 Apr 2013 09:29:18 -0500

On March 27, 2013, the U.S. Supreme Court held that evidence of class-wide injury must survive a “rigorous analysis” before a putative class can be certified. Comcast Corp. v. Behrend, No. 11–864, 2013 WL 1222646, at *5 (U.S. March 27, 2013). While the Comcast case involved subscribers to Comcast’s cable television service who filed a class action lawsuit alleging anti-trust violations and monopolization, the decision is significant for employers facing class actions.

In Comcast, the plaintiffs sought class certification under Federal Rule of Civil Procedure 23(b)(3), which permits certification if “the court finds that questions of law or fact common to class members predominate over any questions affecting only individual members.” The district court held that in order to satisfy Rule 23(b)(3), plaintiffs must show that individual injury resulting from the alleged antitrust violation was “capable of proof at trial through evidence that [was] common to the class rather than individual to its members” and that damages could be measured on “class-wide basis” by a “common methodology.” Behrend v. Comcast Corp., 264 F.R.D. 150, 154 (E.D. Pa. 2010), aff’d, 655 F.3d 182 (3d Cir. 2011), rev’d, 2013 WL 1222646 (U.S. March 27, 2013). While the plaintiffs put forth four different theories alleging antitrust violations, the district court accepted only one as capable of showing injury on a class-wide basis. To establish damages, the plaintiffs relied solely on the testimony of one expert, whose damages model did not isolate damages based on which of the four theories caused them. The district court certified the class and Comcast appealed, citing the limitations of the plaintiffs’ damages model. Behrend, 264 F.R.D. at 190-91, aff’d, 655 F.3d 182 (3d Cir. 2011), rev’d, 2013 WL 1222646 (U.S. March 27, 2013). The court of appeals affirmed, holding that any inquiry into the methodology of the damages model was an inquiry into the merits, and thus, prohibited at the class certification stage. Behrend, 655 F.3d at 206-07, rev’d, 2013 WL 1222646 (U.S. March 27, 2013).

Building on its recent decision in Wal-Mart v. Dukes, the Supreme Court reversed, stating that class certification under Rule 23(b) called for “rigorous analysis.” The Court stated that such an analysis will often overlap with the merits of the underlying claim and that the Rule 23(b)(3) “predominance” criterion may be more demanding than a Rule 23(a) analysis. Ultimately, the Court held that “[b]y refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry.” Comcast Corp. v. Behrend, No. 11–864, 2013 WL 1222646, at *5 (U.S. March 27, 2013). With regard to the plaintiffs’ expert’s damages model, the Court emphasized the model’s failure to measure the damages attributable to the specific theory of antitrust violation on which the plaintiffs’ claims were based. In light of this shortcoming, the Court said, the model “cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).” Id.

The Behrend decision is a significant win for defendants—including employers—in class action litigation. Class certification is generally the most crucial part of a class action lawsuit and can often have serious ramifications on settlement negotiations. By requiring lower courts to take a closer look at plaintiffs’ evidence prior to certification and to consider defendants’ arguments even if they relate to the merits of the underlying claim, the Court’s decision should make it more difficult to get a class certified.

Mandatory Flu Vaccination Policies

Hunton & Williams LLP — Mon, 01 Apr 2013 12:50:05 -0500

The 2012-2013 flu season continues to take a toll on the workplace. According to the Centers for Disease Control (”CDC”), this year’s flu season began four weeks earlier than most recent seasons and, as of the week ending March 9, 2013, flu season activity has remained elevated across the United States. Having already taken the lives of 64 children, and with adult numbers unavailable until the end of the flu season, many employers are considering the implementation of mandatory flu vaccination policies. While such policies may serve business and safety needs of protecting their workplace and workforce, employers should ask themselves the following three questions before adopting such a policy:

What are the business needs for implementing the policy?

Prior to implementing a mandatory flu vaccination policy, employers need to carefully evaluate the business and safety needs for the requirement. Whether out of a concern for the safety of patients or customers or the need to ensure an adequate and fully-staffed workplace, an employer needs to be ready to identify these reasonable business interests should an employee or applicant challenge the policy.
Is your workforce unionized?

Under the National Labor Relations Act, flu vaccination policies must be collectively bargained. Accordingly, unionized employers cannot unilaterally impose a mandatory flu vaccination policy without first providing notice to the union and bargaining at the union’s request. Despite this, unionized employers need to carefully evaluate the management rights clause contained in their collective-bargaining agreement. The National Labor Relations Board recently issued an opinion finding that a union waived the right to bargain over a flu vaccination policy by agreeing to the management rights clause in the parties’ collective bargaining agreement. Virgina Mason Hospital, 358 NLRB No. 64 (2012). The Board recognized that this waiver allowed the hospital to require non-immunized nurses to wear face masks.
How will you enforce the policy?

When adopting a mandatory flu vaccination policy, employers must be prepared to address objections raised by their employees. The Equal Employment Opportunity Commission takes the view that employees may be exempt from mandatory vaccination policies based on an Americans with Disabilities Act “disability” or a sincerely held religious belief, practice, or observance. Pandemic Preparedness in the Workplace and the Americans With Disabilities Act (2009). Such sincerely held religious beliefs do not have to be mainstream or widely recognized religions and may include lifestyle choices such as veganism. See Chenzira v. Cincinnati Children’s Hosp. Med. Ctr., No. 1:11-CV-00917, 2012 WL 6721098, at *4 (Dec. 27, 2012)(the court declined to dismiss plaintiff’s religious discrimination claim when her employer terminated her employment after she refused to be vaccinated for the flu on account of her veganism). Despite this expansive definition, the EEOC stated that it is unlikely that religious beliefs include “secular philosophical opposition to vaccination.” EEOC Informal Discussion Letter (Mar. 5, 2012). When an employee raises a health or religious-based objection to the vaccination policy, the employer needs to discuss reasonable accommodations with the employee. Such reasonable accommodations may include entirely excusing the employee from the policy, requiring the employee to wear a protective facemask or temporarily transferring the employee to another position. Employers need not offer these reasonable accommodations if providing them would cause “undue hardship.” In determining whether undue hardship exists, the EEOC found the following factors relevant: (1) the assessment of the public risk posed at a particular time; (2) the availability of effective alternative means of infection control; and (3) the potential number of employees who actually request accommodation. EEOC Informal Discussion Letter (Mar. 5, 2012).

In addition to tackling objections raised by employees, employers need to implement the policy across its workforce uniformly. Employers should not terminate summarily an employee who refuses a flu vaccination without first engaging in a discussion to determine whether the employee is objecting for health or religious based reasons. Furthermore, employers might consider gradual discipline for first-time offenders such as issuing a letter of instruction.

Chicago Police Officer's Lawsuit Claims Checking Emails Outside Of Work Should Be Compensated as Overtime

Hunton & Williams LLP — Wed, 27 Mar 2013 09:50:58 -0500

A pending federal case highlights some of the wage-and-hour pitfalls emerging from the use of e-mail and smartphones. Chicago Police Department Sergeant Jeffrey Allen originally filed his suit, alleging overtime compensation violations under the Fair Labor Standards Act (FLSA) in 2010. On January 14, 2013, U.S. Magistrate Judge Sidney Schenkier of the Northern District of Illinois, Eastern Division, granted Allen’s conditional certification for a collective action under the FLSA. In his suit, Allen claims that the City of Chicago violated the FLSA when it failed to compensate him, an hourly non-exempt employee, and a putative class of Chicago police officers for time spent reading and responding to emails via city-issued BlackBerries outside of normal working hours.

In his complaint, Allen’s proposed group of plaintiffs for the collective action included “All Police Department members . . . who worked ‘off the clock’ using Police Department issued PDA’s or other electronic communication devices without receiving compensation for each hour worked . . . .” Allen alleged that he and roughly 200 other officers in the Chicago Police Department’s Bureau of Organized Crime were required to use their police department issued devices to perform work outside of normal business hours and were then pressured into not reporting the overtime worked. The city responded by stating that it had in place procedures for reporting overtime and that the plaintiff failed to take advantage of them. Allen, however, claims that the bureau had an “unwritten” rule which held that officers who wanted a promotion were expected not to report overtime for hours spent responding to emails and calls while they were off-duty. Having obtained conditional certification, Allen now must notify other potential plaintiffs of the suit, who then have until April 8 to opt in. Following the April 8 deadline, the court will hold a status hearing and proceed with the case.

To determine that Allen had made a modest factual showing that he and other officers were subjected to an unwritten policy of not being paid for the off-duty use of their Blackberries, the court focused on the depositions of eight Chicago Police Department officers. These depositions, the court said, indicated that “Sergeants and Lieutenants in the [Bureau of Organized Crime] believed that they were expected to check and possibly respond to emails and calls made to their department-issued BlackBerries while they were off-duty without being compensated for these activities.”

Employers must remain conscious of the demands and expectations they place on hourly employees with regard to electronic communications after hours. The advent of smartphones and laptops has greatly improved efficiency in the workplace, but this case may serve as an example of the risks associated with unclear expectations on remote and after-hours communication.

Ninth Circuit Reconsiders Class Certification Under Dukes

Hunton & Williams LLP — Mon, 25 Mar 2013 11:51:04 -0500

California employers may be familiar with Wang v. Chinese Daily News, a wage-and-hour class action that has been in litigation for almost a decade. The latest decision in this case, a published opinion from the Ninth Circuit on March 4, 2013, offers a boost to defense counsel who face a class actions in this circuit.

Wang, filed in March 2004, is a relatively small class action (only about 200 employees) in which plaintiffs assert claims under the FLSA and California law for unpaid overtime, denial of meal and rest breaks, and for wage statement / termination pay. The plaintiffs sought damages, restitution, attorney fees, and injunctive relief. The district court (Judge Marshall of the Central District) certified the class under Rule 23(b)(2), finding that the claims for injunctive relief and those for damages were on “equal footing,” and alternatively under Rule 23(b)(3), finding that the plaintiffs’ challenge to an allegedly uniform policy satisfied the requirement that common questions predominate. The court found on summary judgment that the employees in question were not exempt, and there was then a 16-day jury trial, resulting in a special verdict for over $2.5 million in damages. The court denied injunctive relief, holding that monetary damages were an appropriate remedy. The Ninth Circuit affirmed certification under Rule 23(b)(2) and declined to address the district court’s predominance analysis under Rule 23(b)(3) (which had already been criticized by other Ninth Circuit decisions).

That might have been the end of Wang but for the game changing case of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). On a petition for certiorari, the Supreme Court GVR’d Wang (Grant certiorari, Vacate decision, Remand) for reconsideration in light of Dukes. This most recent decision is the Ninth Circuit’s application of Dukes to the district court’s certification order, which the panel this time reversed and remanded for the district court to reconsider its Rule 23 analysis.

We have already begun to see the effect of the Supreme Court’s holding in Dukes that class certification under Rule 23 now requires a “rigorous analysis” and “significant proof.” (Indeed, this blog has recently discussed class cases that failed these new requirements.) In Wang, the Ninth Circuit reiterated that the test of commonality is satisfied, not by mere common questions, but rather “the capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation.” Dukes, 131 S. Ct. at 2551. Even in this much smaller class, the court noted, “there are potentially significant differences among the class members.” The court thus remanded for the district court to determine whether the plaintiffs have shown “significant proof that [Chinese Daily News] operated under a general policy” that violated federal and state labor laws.

Dukes rejected the Ninth Circuit’s “equal footing” analysis of claims for monetary damages and injunctive relief under Rule 23(b)(2), and the Wang plaintiffs conceded that certification under Rule 23(b)(2) could no longer stand. The court remanded for reconsideration of the predominance requirement, noting again the Circuit’s disapproval of an analysis that was focused almost completely on the fact that a common policy was alleged and challenged. In effect, the court observed, the district court had created a presumption that certification is proper given such a common policy, notwithstanding “the existence of other potential issues that may make class treatment difficult if not impossible.” (quoting In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 958 (9th Cir. 2009)). Rule 23(b)(3) requires consideration of “the balance between individual and common issues,” id., and “a district court abuses its discretion in relying on an internal uniform exemption policy to the near exclusion of other factors relevant to the predominance inquiry,” (quoting Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 946 (9th Cir. 2009)). Moreover, the court noted, the predominance analysis of the plaintiffs’ meal break claims should be conducted in light of the Brinker decision.

The court added one more paragraph to its analysis, a paragraph that has major implications for the litigation of class actions in the Ninth Circuit. If the district court does decide that the class can still be certified, the court noted, it should then reconsider the amount of damages. Dukes disapproved “Trial by Formula”; accordingly, even in a class action, damages calculations must be based on “individualized determinations of each employee’s eligibility” for monetary relief. (quoting Dukes, 131 S. Ct. at 2561). Moreover, the court reminded the district court of Dukes’s holding that employers have the right to litigate any individual affirmative defenses they may have with respect to the claims of particular class members.

This holding has important implications even beyond the issue of proving damages. A certification analysis considers in part whether a class action will be predominated by individual issues and whether the litigation is manageable as a class. If an employer can raise a multitude of affirmative defenses (and possibly counterclaims?) related to individual employees, query what such a trial plan might look like. And if there are going to be issues of proof relating to the hours each employee actually worked, or whether the employer knew or should have known that the employee was working during the meal break, or other issues that require individual determinations to protect the employers’ due process rights, it will be all the more difficult to establish that class litigation is desirable, effective, or even feasible. At a minimum, the “rigorous analysis” required of district courts in the Ninth Circuit just became even more rigorous, and defense counsel (and this blog) will watch closely to see how courts grapple with these additional requirements.

Economic Loss Rule May Not Protect In Employment Cases

Hunton & Williams LLP — Fri, 22 Mar 2013 08:24:59 -0500

The Florida Supreme Court issued an opinion on March 7, 2013 that eliminated an oft-used tool in the defense arsenal by limiting application of the economic loss rule to products liability cases.

High Court Limits Plaintiffs Ability To Cap Damages Prior To Class Certification

Hunton & Williams LLP — Thu, 21 Mar 2013 12:20:32 -0500

On March 19, in The Standard Fire Insurance Company v. Knowles, No. 11-1450, the United States Supreme Court ruled that stipulations by a named plaintiff on behalf of a proposed class prior to certification cannot serve as the basis for avoiding federal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA”).

In Knowles, the named plaintiff filed a proposed class action in Arkansas state court alleging defendant The Standard Fire Insurance Company (“Standard Fire”) failed to include a general contractor fee in its homeowners’ insurance loss payouts. Standard Fire Ins. Co. v. Knowles, No. 11-1450, Slip Op. at 1-2. In his complaint, Knowles sought to certify a class of hundreds or thousands of other policy holders. Id. at 2. He also included a stipulation that he and the class would not seek aggregate damages exceeding $5 million. Id.

Standard Fire removed the case to federal court, relying on CAFA which affords federal courts original jurisdiction over class actions where, among other requirements, the aggregate amount of all claims exceeds $5 million. Id. The federal district court found the aggregate amount in controversy exceeded $5 million, but remanded to state court based on Knowles’ stipulation that he and the proposed class would not seek more than $5 million in damages. Id. Standard Fire appealed the decision to the Eight Circuit, which declined to hear the appeal. Id.

In reversing the district court’s decision to remand the case to Arkansas state court, the Supreme Court relied on the basic premise that “[s]tipulations must be binding.” Id. at 3. The Court further reasoned that Knowles’ stipulation could not bind the class members because a named plaintiff in a class action “cannot legally bind members of the proposed class before the class is certified.” Id. at 4. Thus, while Knowles’ stipulation validly bound Knowles from seeking more than $5 million in damages, it could not bind any other potential class members. Id. Moreover, the Court recognized that requiring federal courts to “ignore nonbinding stipulations does no more than require the federal judge to do what the statute requires, namely “aggregat[e] the “claims of the individual class members.” Id. at 6 (quoting 28 U.S.C. § 1332(d)(6)). Ultimately, the Court held that any other outcome would run counter to CAFA’s objective of ensuring “Federal court consideration of interstate causes of national importance.” §2(b)(2). Id. (quoting § 2(b)(2), 119 Stat. 5)).

The Knowles decision has had an immediate impact on class action cases in the Eighth Circuit. Just hours after the opinion was released, the court in Dalton v. Aldi, Inc., Case No. 4:13-cv-00249-JCH (E.D. Mo. Mar. 19, 2013), a privacy case involving flash cookies, sua sponte denied the plaintiff’s motion to remand. The Dalton case is one of a number of recently filed putative class action cases brought in Missouri alleging damages from the purported use of Flash cookies on the defendants’ respective websites. Prior to the Supreme Court’s grant of certiorari in Knowles, several of the matters had been settled for nominal damages and hundreds of thousands of fees for plaintiffs’ attorneys in Missouri state court. Knowles has likely significantly reduced the ability of plaintiffs to maintain such privacy actions in state court, but the downside for defendants is that future plaintiffs will have little incentive to cap their damage claims. This decision also likely limits the possibility of an early agreement as to the aggregate value of a class action lawsuit. In the past, class action defense attorneys comfortable litigating in state court could incentivize class action plaintiffs to seek less than $5 million in damages by agreeing not to remove their cases to federal court ultimately allowing for speedy resolutions to the matters.

OFCCP Rescinds and Replaces "Rigid" Standards for Investigating Pay Discrimination Cases In Favor of "Case-by-Case" Approach

Hunton & Williams LLP — Mon, 18 Mar 2013 07:59:55 -0500

Effective February 28, 2013, the Office of Federal Contract Compliance Programs (“OFCCP” or “Office”) has rescinded two guidance documents implemented during the Bush administration that outlined methods for investigating and evaluating pay discrimination claims against federal contractors and replaced them with new guidelines emphasizing a case-by-case approach that provides investigators with authority to conduct more thorough investigations and identify a broader range of compensation-related discrimination. The first document, Interpreting Nondiscrimination Requirements of Executive Order 11246 With Respect to Systemic Compensation Discrimination (“Compensation Standards”), set forth the procedures OFCCP followed when issuing a notice of violation for pay discrimination; and the second document, Voluntary Guidelines for Self-Evaluation of Compensation Practices for Compliance with Nondiscrimination Requirements of Executive Order 11246 (“Voluntary Guidelines”), contained directions that federal contractors themselves could follow to preemptively show compliance with their obligation to evaluate their internal pay practices for fairness.

OFCCP criticized the former Compensation Standards as using an overly-narrow, “one-size-fits-all” definition of pay discrimination that only addressed differences in actual pay rates among pools of workers in the same job category but not less-obvious forms of compensation discrimination relating to job assignments, promotional opportunities, access to overtime, commissions and bonuses, and other things. They also imposed rigid limits on the groups of workers that OFCCP could compare to evaluate discrimination and required that a notice of violation be supported by anecdotal evidence. The Voluntary Guidelines likewise hindered OFCCP efforts to remedy pay discrimination by allowing contractors to self-audit their compensation systems based on a single statistical model, thereby shielding themselves from enforcement action, even if an alternate model evidenced systemic compensation discrimination against a protected class of workers.

The notice of final rescission withdrawing the Compensation Standards and Voluntary Guidelines includes new guidance for federal contractors setting forth the procedures, analysis, and protocols that OFCCP will utilize going forward when conducting compensation discrimination investigations. The new guidelines bring OFCCP’s efforts to investigate pay discrimination into line with the standards used by courts to evaluate pay discrimination claims brought by individual workers, the EEOC, and the DOL under Title VII and stress investigations should be conducted on a “case-by-case” basis to assess whether a material difference in compensation based on a protected characteristic exists and if there is a legitimate explanation for any disparity. Additionally, OFCCP will no longer require anecdotal evidence before issuing a notice of violation and instead may seek a remedy for compensation discrimination regardless of whether individual workers realize they are being underpaid.

A “frequently asked questions” guide concerning OFCCP’s new procedures for reviewing contractor compensation systems and practices is available on the Office’s website. OFCCP plans to develop technical assistance, webinars, and other resources for federal contractors to ensure they have ample information about how to comply with the law. Federal contractors are encouraged to review the new guidance to better understand their potential exposure under the expanded scope of future OFCCP compensation discrimination investigations, which may now include review of a contractor’s compensation policies and data, along with other statistical and non-statistical analyses and consultation with labor economists and experts.

USCIS Issues Revised Form I-9; Prior Versions Become Invalid On May 7, 2013

Hunton & Williams LLP — Fri, 15 Mar 2013 11:03:30 -0500

On March 8, 2013, USCIS issued a major revision of its Form I-9 Employment Eligibility Verification form, pursuant to a Federal Register announcement.

The newly revised Form I-9 adds data fields, including the employee’s foreign passport information, telephone and email address; improves and expands the form's instructions (now six pages); and revises the form layout to two pages, one for the employee and one for the employer.

Employers should begin using the new Form I-9 immediately, but are required to use it beginning May 7, 2013. On that date, all prior versions of Form I-9 – (Rev. 08/07/09) Y and (Rev. 02/02/09) N – will become invalid.

Updated IRS Correction Program For Retirement Plan Errors

Hunton & Williams LLP — Thu, 14 Mar 2013 14:44:05 -0500

The Internal Revenue Service recently issued an updated version of the Employee Plans Compliance Resolution System (“EPCRS”), which allows companies to voluntarily correct errors in the administration and documentation of their retirement plans (including 401(k) and 403(b) plans). IRS Revenue Procedure 2013-12 continues EPCRS, but makes a number of changes and adds clarity to several areas of the program that caused confusion in the past.

The new guidance keeps in place the three basic EPCRS correction components: (1) self-correction under which plan sponsors simply correct certain types of errors without any formal IRS filing; (2) voluntary correction program (VCP) under which plan sponsors file an application with, and receive a formal compliance statement from, the IRS approving the correction method; and (3) audit closing agreement program (Audit CAP), under which errors discovered during an IRS audit can be corrected without jeopardizing the plan’s tax qualified status.

Significant changes and clarifications to EPCRS in Revenue Procedure 2013-12 include:

An overhaul of the VCP submission process, including new required forms (Forms 8950 and 8951) and a new address for VCP submissions;
Formal processes and guidance for correcting plan document failures under 403(b) plans;
Clarification regarding the use of qualified nonelective employer contributions (QNECs) to correct certain nondiscrimination testing failures (including the IRS position that corrective QNECs cannot be paid from plan forfeiture amounts);
Guidance for Code §436 failures in defined benefit plans (benefit limitations based on the plan’s funded status);
Clarification on the procedures that must be followed to locate lost participants;
Relief for failing to adopt amendments required in connection with a determination letter;
Update of the Audit CAP sanction schedule for non-amendment failures; and
Clarification and additional guidance on certain types of corrections, including excluded employees, early inclusion of employees, spousal consent and late plan amendments

The new rules become effective on April 1, 2013, however, plan sponsors may submit VCP applications using the new rules (including, the new IRS forms) before the effective date. Sponsors also may continue using the EPCRS rules in Revenue Procedure 2008-50 instead, until March 31, 2013, but those submissions must be filed at the VCP Washington address.

When Pregnancy Disability Leave Is Not Enough

Hunton & Williams LLP — Wed, 13 Mar 2013 08:53:58 -0500

What should an employer do when a pregnant employee has used all of her allotted leave under CFRA (the California Family Rights Act) and PDLL (Pregnancy Disability Leave Law) but is still not yet able to return to work? Following the appellate court’s recent decision in Sanchez v. Swissport, Inc., No. B237761 (Cal. Ct. App. Feb. 21, 2013), the employer may be required to grant even more leave.

Plaintiff Sanchez was employed by Swissport, an airport ground services company, as a cleaning agent. In February 2009, she was diagnosed with a high-risk pregnancy requiring bedrest. Sanchez applied for and received 19 weeks of leave under CFRA and PDLL, but when she was still unable to return to work in July 2009 at the end of that leave, Swissport terminated her employment.

Sanchez filed suit, alleging various causes of action under FEHA (the California Fair Employment and Housing Act), predicated primarily on discrimination (sex, pregnancy, and pregnancy-related disability) and failure to accommodate and engage in a timely, good faith interactive process. She argued that she would have been able to return to work shortly after delivery in October 2009, so it would be a reasonable accommodation to provide extended leave until that time. In the complaint, she alleged that the requested reasonable accommodation would neither create an undue hardship upon Swissport nor adversely impact the operation of Swissport’s business.

Swissport demurred, arguing that it had provided all of the leave mandated by CFRA and PDLL, thus fulfilling its obligations under the FEHA. It contended that the language of the PDLL, which is itself contained within the FEHA, specifically provides that a pregnancy-disabled employee is allowed to take leave “not to exceed four months and thereafter return to work.” Ca. Gov’t Code § 12945, subd. (a)(1). Because Swissport had provided all the leave required by the statute, it argued, Sanchez’s claims should be dismissed. The superior court agreed and sustained the demurrer, finding that “at the time of her termination in July 2009, plaintiff was unable to perform her essential job functions at all. . . . [S]ection 1940 subdivision [(a)] does not prohibit an employer from discharging an employee who is unable to perform her essential duties even with accommodation.”

The Los Angeles Court of Appeals (Second District) reversed in a published decision, holding as a matter of first impression that exhaustion of all pregnancy disability leave does not preclude a claim under the FEHA. Rather, the court noted, the plain language of the PDLL “makes clear that its remedies augment, rather than supplant, those set forth elsewhere in the FEHA.” See § 12945, subd. (a). Accordingly, because the PDLL by its own terms may not be construed “in any way to diminish” the coverage of a pregnancy-related medical condition under the FEHA, § 12945, subd. (b), analysis of a plaintiff’s FEHA claims proceeds independently of the PDLL.

Moreover, the court cited established caselaw that extended leave may constitute a reasonable accommodation, particularly when the disability and need for accommodation will be finite. The court noted that Swissport may well want to challenge Sanchez’s allegation that her leave would impose no undue hardship. But at the demurrer stage, the allegations in the complaint are assumed to be true and thus were sufficient to state a claim. The court further held that, just as failure to provide additional leave could support a claim for failure to make a reasonable accommodation, so too did Swissport’s failure to discuss Sanchez’s requested accommodations give rise to a claim for failure to engage in the interactive process as required by statute.

Employers should be alert that extended pregnancy leave and interactive discussion about the same might be a new expectation of the California courts, even after the express statutory leave is exhausted.

Transgender Employees: Which Bathroom To Use?

Hunton & Williams LLP — Mon, 11 Mar 2013 08:08:46 -0500

CNN is reporting that a Colorado school has decided that a 6-year-old boy, who identifies as a girl, and whose family is raising her as a girl, must use the boy’s bathroom or the staff or nurse’s bathroom for sick children. The family is worried about the stigmatizing impact this would have, and is worried about bullies, and has decided to keep the child home for now.

This story brings the national spotlight on an issue that employers are increasingly facing in the workplace. Transgender is a protected class in many cities and states across the Country, including California. Employers often face the same question the Colorado school is grappling with. Which bathroom should the transgender employee use? The courts have not provided a definitive answer to this question, and there is little to no guidance from cities or states on this issue. Transgender groups have published a number of opinions on the subject. Options will often depend on the employer’s workplace, the number and types of bathrooms that are available, and the employees at issue. What is considered “reasonable” in one workplace, may not work in another, and employers have to be careful about the issue of stigma that is raised by the Colorado girl’s parents. As a protected class, there will always be a question of whether the transgender employee was discriminated against somehow by the employer’s decision on which bathroom that employee can use.