Poster for The Stimulus Bill Whistleblower Provision

In an earlier post, I mentioned that after it came out of the conference committee, section 1553(e) of the Stimulus Bill (the "American Recovery and Reinvestment Act of 2009") included a provision that requires employers who receive stimulus funds ("covered funds") to "post notice of the rights and remedies provided under this section.

Congress often requires employers to post notices of rights under various employment statutes but those statutes are almost always enforced by the United States Department of Labor. The DOL, however, has no authority under the Stimulus Bill whistleblower statute, (even to draft a poster) so I thought I would try to fill the void. I take the posting requirement at its word, that is, the poster must state the rights and remedies under section 1553.

NOTICE OF RIGHTS PURSUANT TO SECTION 1553 OF THE

American Recovery and Reinvestment Act of 2009

Section 1553 of the American Recovery and Reinvestment Act of 2009 ("Recovery Act") prohibits employers from retaliating against any employee because the employee provided information to Congress, a State or Federal regulatory or law enforcement agency, a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct), a court or grand jury, the head of a Federal agency, or their representatives, information that the employee reasonably believes is evidence of—

(1) gross mismanagement of an agency contract or grant relating to covered funds;

(2) a gross waste of covered funds;

(3) a substantial and specific danger to public health or safety related to the implementation or use of covered funds;

(4) an abuse of authority related to the implementation or use of covered funds; or

(5) a violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) or grant, awarded or issued relating to covered funds.

The term "covered funds" means any contract, grant, or other payment received by any non-Federal employer if the Federal Government provides any portion of the money or property that is provided, requested, or demanded at least some of the funds are appropriated or otherwise made available by the Recovery Act.

If you believe you have been retaliated against because you provided information regarding covered funds, you should promptly seek relief by submitting a complaint to the inspector general of the agency for whom the work was performed or the agency that funded the work.

The Inspector General investigates your complaint and submits a report to the Agency. If the Agency finds in your favor it may:

(A) Order the employer to take affirmative action to abate the reprisal.

(B) Order the employer to reinstate the person to the position that the person held before the reprisal, together with the compensation (including back pay), compensatory damages, employment benefits, and other terms and conditions of employment that would apply to the person in that position if the reprisal had not been taken.

(C) Order the employer to pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys' fees and expert witnesses' fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal, as determined by the head of the agency or a court of competent jurisdiction.

If the Agency denies your complaint or if it has not rendered a final decision within 210 days or if it declines to render a decision, you have bring a civil action against the employer to seek compensatory damages and other relief available in the appropriate district court of the United States.

Your rights under Section 1553 of the Recovery Act are in addition to any other rights you may have under any other federal, state or local law.

Preparing for Fair Pay Legislation - Part 9A

In my prior post, I emphasized the need to only group similar situated employees together. I should have mentioned another reason for this.

When defending a compensation discrimination claim, one of the initial battles that must be fought is over who are the proper comparators to the employee. In Ledbetter v. Goodyear Tire & Rubber Co., 127 S. Ct. 2162 (2007), for example, the district court upheld the jury's verdict of discrimination saying that the jury could have based its decision on Ledbetter's comparison to the highest paid of four managers (one other was, of course, Ledbetter).

Understand that the battle is not over who is the proper comparator but who are the proper comparators. If there is more than one comparator, the court should not permit the employee to make a comparison to only the highest paid or a higher paid employees. There is ample precedent for this in discrimination decisions:

"A plaintiff who wants a court to infer discrimination from the employer's treatment of comparable cases has to analyze a goodly sample.” Kuhn v. Ball State Univ., 78 F.3d 330, 332 (7th Cir. 1996). Another court of appeals refused to permit a plaintiff to rely upon a single comparator in an Age Discrimination in Employment Act case explaining that courts cannot view a comparison to a single member of a protected class in a vacuum. Simpson v. Kay Jewelers, 142 F.3d 639, 645-47 (3d Cir. 1998). And in Bush v. Commonwealth Edison Co., 990 F.2d 928, 931 (7th Cir. 1993), the Seventh Circuit opined that "a black plaintiff cannot establish racial discrimination by singling out one white person who was treated more favorably when there were other white persons who were treated less favorably than other black persons.”

To get to the point, when employers group similarly situated employees together "on the same page" that makes it much easier for a revewing agency or court to agree that the comparison to the group not to just the highest paid individual is the appropriate comparison.

Preparing for Fair Pay Legislation - Part 9

This is the fourth part of guidance on how employers can better protect themselves from compensation discrimination claims.

#5 – Group employees into similarly situated job groups

The very first instruction the EEOC states in the Compensation Discrimination Compliance Manual is “Investigators should identify similarly situated employees both inside and outside the charging party's protected class.”

Therefore, in setting salaries or salary increases, if comparisons are made between or among employees (as they almost always are), the employee groupings should be unambiguously defined and the grouping should be limited to employees who are similarly situated.
Avoid the expediency of lumping employees into one or two ill-defined categories in which the employees do not perform the same or similar work.

Why? The Equal Pay Act looks to whether the compared employees are performing “equal work;” Title VII examines whether the plaintiff’s job is “similarly situated” to the jobs worked by the comparators. Employers who “compare” the salaries of employee “A” with employee “B” will have a more difficult time proving that they were not really working in comparable jobs. If you must group dissimilar jobs (say, for purposes of dividing up a finite pot of money), make sure the paperwork unambiguously states the reason for the grouping.

Group employees by the job being performed – not by the characteristics of the employee who holds the job. Beck-Wilson v. Principi, 441 F.3d 353, 363 (6th Cir. 2006) (“the comparison at the prima facie stage is of the jobs and not the employees”). An employee who has worked for 10 years may rightly deserve (all other things being equal) to be paid more than an employee who has worked 5 years, but if they perform the same or similar job, they should be included in the same comparison group. The relative experience, of course, may be used to justify any salary disparity.

When investigating or prosecuting a claim of compensation discrimination, the EEOC (or OFCCP as the case may be) can and will "revise" an employer’s pay categories in order to compare employees who are performing the same or similar work. The EEOC instructs its investigators:

The investigator should determine the similarity of jobs by ascertaining whether the jobs generally involve similar tasks, require similar skill, effort, and responsibility, working conditions, and are similarly complex or difficult. The actual content of the jobs must be similar enough that one would expect those who hold the jobs to be paid at the same rate or level. Job titles and formal job descriptions are helpful in making this determination, but because jobs involving similar work may have different titles and descriptions, these things are not controlling. Similarly, the fact that employees work in different departments or other organizational units may be relevant, but is not controlling.
* * *
Factors other than job content also may be important in identifying similarly situated comparators. For example, minimum objective qualifications, such as a specialized license or certification should be taken into account. Persons in jobs requiring certain minimum objective qualifications should not be grouped together with persons in jobs that do not require those qualifications, even though the jobs otherwise are similar. Although minimum objective qualifications should be taken into account in defining the pool of similarly situated employees, employees' relative qualifications should not be considered at this stage.

Preparing for Fair Pay Legislation - Part 8

This is the third part of guidance on how employers can better protect themselves from compensation discrimination claims. I combine two shorter points into one post.

#3 – Use All of Factors Set Out In the Compensation Policy

The ultimate goal of most compensation policies is that employees who perform similarly within a similar rate range penetration should receive similar raises (typically measured in percentages) or similar salaries (depending upon other factors such as the value of longer experience).

To achieve this goal, make sure your written policy includes all of the relevant factors (dicussed in step number 1) and that all of these factors are fully evaluated in a consistent, non-discriminatory basis for every employee. If a certain factor does not apply or has not been met by the employee, the analysis should so state (see step number 4, below, for how to articulate this last point). Make sure the explanations given for pay decisions are consistent with the written compensation policy and what the employee is told at the time the compensation decision is announced.

Not following a written pay policy is usually worse than not having one. As addressed in step number 1, so I will again emphasize that your pay policy should be tailored to the employer’s actual practices.

Employers make mistake in compensation decisions they wouldn't make elsewhere. Employers that would never make the same mistake in a termination or promotion decision have been known, for example, to pay males more only because the employer viewed males as the “head of the household.” The legal theory is no different than the legal theory which condemns imposing a “no-premarital sex” policy on a non-married female employee once the employee becomes pregnant but never imposing any discipline on any unmarried male employee when the employer knows the male employee has engaged in pre-marital sex. Compare Cline v. Catholic Diocese of Toledo, 206 F.3d 651, 667 (6th Cir. 2000) with Boyd v. Harding of Memphis, Inc., 88 F.3d 410, 414 (6th Cir. 1996).

On the other hand, absent significant evidence that it causes a disparate impact, there is nothing wrong with a neutrally applied policy of paying “heads of household” more than others. EEOC v. J.C. Penney, Co., Inc., 843 F.2d 249 (6th Cir. 1988).

#4 –Articulate a Specific Rationale for Each Compensation Decision

An employer has no legal obligation to explain its compensation policies or its pay increase decisions to employees. Nevertheless, it is a good practice to have a compensation policy that is distributed to employees. The reasons for this are discussed in step number 1. There is also a strong benefit to offering to explain a particular pay increase decision to an employee. For one, an employer who knows it will need to explain its reasons will often put more thought into clearly articulating those reasons.

Compensation discrimination lawsuits are typically brought by employees who did not receive any explanation or a rational explanation for a particular pay decision. An explanation also provides the employee with concrete feedback on how the employee’s performance affects the employee’s salary. Of course, the discussion can be a trap for an employer who gives inconsistent or incomplete reasons for a particular salary decision.

Good business practices aside, courts, especially the Sixth Circuit, require employers to do more than simply state a bald-faced reason for a decision. Thus, it is legally insufficient to justify a salary differential merely by saying that employee “A” performed better than employee “B.” An employer’s “explanation of its legitimate reasons must be clear and reasonably specific.” Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 258 (1981); see also Wright v. Murray Guard, Inc., 455 F.3d 702, 708 (6th Cir. 2006) (employer must base decision on particularized facts before it at the time decision is made and employee can show pretext by showing employer failed to make a “reasonably informed and considered decision”); Chapman v. AI Transport, 229 F.3d 1012, 1034-35 (11th Cir.2000) (if an employer rejects an applicant because he gave a “poor interview,” the employer must explain what specific characteristic it perceived as “poor”).

The burden, which applies equally to compensation decisions, is not onerous. The employer should, however, be as specific as possible. Remember, under federal and state law, you can now be sued for ages old compensation decisions so it will benefit you in the long run to be specific and accurate in documenting the reasons for compensation decisions.

Finally, if the performance policy sets goals by which performance will (or may) be “measured,” an employer must also make sure that its compensation policy justifiably and equally accommodates employees who achieve these goals. Of course, the difficulty of meeting those goals can justify different results, just so long as employees who have comparably difficult goals are treated the same.

State Legislation affecting Tennessee Employers

I've been focusing as of late on federal law changes but last Thursday (Feb. 12, 2009) was the unlimited filing deadline for the Tennessee senators to submit proposed legislation. After Thursday, each senator is limited to proposing nine bills.

If there is one thing that our Tennessee government does well it is websites. The Supreme Court, the Governor and the General Assembly all have first class websites. For this post, I went to the Tennessee General Assembly website and searched for bills containing the word "employer." You can see the total results of the search here: http://wapp.capitol.tn.gov/apps/billsearch/billsearchadvanced.aspx?terms=employer&searchtype=all

Several bills struck me as interesting - bearing in mind that I am not attempting to forecast which of these has a chance at passing.

Senate Bill 0156 would codify the "at will" employment doctrine, preclude handbooks from being construed to create a contract of employment and permit discharges except for certain exceptions. It appears this bill has already been withdrawn.

SB0381/HB0873 would permit private employers to pay employees on a monthly basis.

SB0469/HB0480 would amend the THRA so that an "English only" employment policy is not a discriminatory practice if it is a legitmate business necessity. Current law at least arguably already permits this.

SB0682/HB1161 would amend the Tennessee Public Protection Act (which prohibits discharging employees for refusing to participate in or remain silent about illegal activities) but the changes appear to be largely cosmetic.

SB1442/HB0775 would enact the "Healthy Families Act" and require private employers who employ twenty-five (25) or more employees for twenty (20) or more weeks in a calendar year to provide at least seven (7) days of paid sick and vacation leave annually for employees who work more than thirty (30) hours a week. Employees who work not less than twenty (20) nor more than thirty (30) hours a week shall receive at least four (4) days of paid sick and vacation leave annually. Employees who work not less than one thousand (1,000) nor more than one thousand five hundred (1,500) hours annually shall receive at least two (2) days of paid sick and vacation leave annually. Leave would have to be approved in advance unless there is a "bona fide emergency or health condition which prevents the employee from giving notice in advance." Paid sick and vacation leave may be used to address the employee's own medical needs or the medical needs of the employee's immediate family.

SB1664/HB0776 would adopt the Pay Equity in the Workplace Act. This was introduced in 2007 but failed to pass despite receiving considerable attention. It would do much the same as the Paycheck Fairness Act pending in Congress (though, because of the way "employer" is defined, this bill would apply only to the smallest employers).

SB1731/HB0397 would prohibit employers from requiring employees to use vacation time while on family or medical leave.

SB1752/HB0826 would require employers to pay tipped employees at a rate not less than the standard federal minimum wage per hour but would permit credit for tips or gratuities received to be counted toward the minimum wage calculation. SB1902/HB0064 would also affect tipped employee wages. While the wording of this bill is somewhat different it would accomplish the same purpose as SB1752/HB0826. Neither bill does much more than what federal regulations already require except that federal law requires employers pay at least $2.13 an hour while this would require payment of half the minimum wage, the end result, requiring minimum wage, is the same. Unlike federal law, neither bill says anything about calculating overtime for tipped employees.

HB0311/SB0083 would prohibit local governments from adopting minimum wage laws.

HB0256/SB0661 would exclude from workers' compensation injuries that occur during recreational activities, are not required by the employer, and do not directly benefit the employer. This would address the confusion generated by the inconsistent decisions in Young v. Taylor-White, LLC, 181 S.W.3d 324, 330 (Tenn. 2005), which held that the employee's voluntary recreational activities were not within the course of employment and Gooden v. Coors Tech. Ceramic Co., 236 S.W.3d 151, 153 (Tenn. 2007), which "clarified" that the voluntary nature of an activity is only one factor to consider in determining whether an injury occurs in the course of employment. Golden then held that the employee's participation in the recreational activity in question was a regular incident of employment because the employer knowingly permitted the activity to occur several times a week.

Clicking on the bill numbers will take to a page that shows the current status of each bill so you can periodically check to see whether any of them might be moving toward passage.

Stimulus Bill Whistleblower Provision - Conference Version

I previously posted about the different versions of the whistleblower provision in the stimulus bill.

The stimulus bill whistleblower statute finally adopted by the conference committee (where members of both houses of Congress meet to resolve difference in bills both have passed), is quite different, better in some ways, worse in others, and still ambiguous (Congress gift to lawyers?) in troubling ways.

The link above is to the pages of the stimulus bill (this link is to Congress' website where I obtained the stimulus bill).

Here is a quite and dirty summary of the changes and a short commentary about them.

Protected activity is now tied to complaints about mismanagement, waste, and abusive spending of stimulus (what the statute calls "covered" funds). The bill stills protects complaints about public health but now those complaints must be about "a substantial and specific danger to public health or safety related to the implementation or use of covered funds." My concern with the provision as it came out of the Senate and House was that neither version specified that complaints must be related to stimulus spending. That ambiguity has been resolved.

I originally said neither version of the bill expressly covered "internal" complaints, that is, complaints by employees to supervisors. It now does. Complaints to "a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct)" are protected even if the employee's "disclosure [was] made in the ordinary course of an employee's duties."

It also means that if you do not receive stimulus money (directly or indirectly), complaints by your employees about your spending are not covered by the whistleblower provision. (They may be covered by other whistleblower statutes, however, depending on whether or not your company does business with the government.) The provision still covers state and local governments that receive stimulus money as well as the contractors and subcontractors who perform work for the state or local government using stimulus money.

Complaints must still be submitted to the inspector general ("I.G.") of the respective agency. My concerns about the I.G. and whether it has employees qualified to investigate retaliation claims still stands.

The conference added a section that addresses who has to establish what. The employee must show the protected activity "was a contributing factor" in the retaliatory action (don't get tied up about causation levels, there is no difference between a "because of" or "motivation" or "contributing" factor as humans are not capable of understanding these degrees of motive).

The provision goes on, however, to add that "circumstantial evidence" can be used to establish a contributing factor" and that includes "evidence that the official undertaking the reprisal knew of the disclosure" or that the reprisal occurred within a "period of time after the disclosure such that a reasonable person could conclude that the disclosure was a contributing factor." This is, of course, based upon the illogical "temporal proximity" causality. The irony is that a "reasonable" person (that is, a person who relies on "reason") would not, by definition, rely upon temporal proximity because it is an illogical doctrine.

Note that the statute does not say either knowledge alone or temporal proximity alone automatically satisfies the contribution factor test. It simply says either "may demonstrate" causation. That leaves it open for employers to argue other factors show there is no causation.

Employers may also defeat causation by showing with clear and convincing evidence that they would have made the same decision regardless of the even if the employee had not made the protected disclosure. Unlike the Title VII version of this defense, this is an absolute defense.

The I.G. still does not have to make a decision on the record so there is no requirement for a hearing at the agency level. The stimulus bill gives the parties the right to obtain a copy of the agency file (with limited exceptions) if the claim goes to litigation in federal court.

The conference committee added a new provision (not found in either version) that prohibits "any agreement" that would waive the "rights and remedies" in the statute. This includes a prohibition on arbitration unless the arbitration is authorized by a collective bargaining agreement. What Congress seems to be trying to do is prohibit predispute waivers of rights but read literally, this provision would make unenforceable any settlement of a stimulus bill whistleblower claim.

Because the provision still fails to include a statute of limitations, the prohibition against "any agreement" waiving rights or remedies is particularly troubling. Presumably, a court or agency approved settlement would be enforable but the provision does not authorize any agency or court to approve settlements. Without authorization, agencies and courts are unlikely to act (though a court could enter a "final" judgment). What employer (or employee) wants to wait some three to four years before knowing if a settlement is enforcable.

Finally, covered employers must post a notice about the "rights and remedies" under the whistleblower provision.

Preparing for Fair Pay Legislation - Part 7

This is the second part of guidance on how employers can better protect themselves from compensation discrimination claims.

#2 – Consistently Base Compensation Decisions On Non-Discriminatory Factors

First, it is easy enough to articulate that an employer should be consistent in applying its compensation policy. In practice it is not quite so simple.

If you are ever investigated by the EEOC over a compensation discrimination charge, the EEOC will first establish the appropriate comparison group (more on this later) and then look to see if a disparity exists within the group. If a disparity exists, the EEOC then asks whether the employer can “satisfactorily explain” the disparity. For the most part, the employer’s obligation to explain a prima facie disparity is not materially different than it is in any other type of discrimination lawsuit.

Because employers usually make pay decisions for each employee annually, there is a lot more fodder for an investigator to find an inconsistency than in the “routine” termination claim. Thus, in evaluating whether its salaries are defensible, an employer should review the explanations for all salaries to see whether it consistently explains all disparities.

Don’t, in other words, rely on an explanation that would not hold water if applied to other (non-protected class) employees.

In a variation on the consistency theme, the EEOC advises its investigators that “[t]he employer's explanation should account for the entire compensation disparity.” That is, the EEOC will examine whether the employer’s explanation for a disparity adequately justifies the amount of the disparity. To do this, the EEOC looks at whether the employer has consistently applied the stated reason for the disparity in setting other employees’ salaries.

For example, if the employer relies on educational background as the reason for a particular salary disparity, do the salaries of other similarly situated (non-protected class) employees reflect similar disparities that can be attributed to educational levels?

Unfortunately, the EEOC and OFCCP tend to regard compensation decisions as being divisible into separately identifiable factors. In the “real world,” however, many factors go into setting an employee’s salary. Short of a rigid, seniority based pay scale, few if any compensation systems can be cleanly dissected into component parts. (This is why courts have recognized that perfect consistency is itself suspicious and that courts must examine overall patterns instead of relying on isolated inconsistencies. Kuhn v. Ball State Univ., 78 F.3d 330, 332 (7th Cir. 1996)).

Second, many employers fail to appreciate that a commonly used compensation practice has been held to be discriminatory on the theory that it proliferates a past discriminatory pay practice.

Some courts (including the Sixth Circuit) believe that federal law prohibits an employer from paying an employee a starting salary based on the employee’s prior salary. Courts that adhere to this belief reason as follows:

• Premise: Studies have shown that women earn less than men from private employment.
• Conclusion: All market wages (including prior salaries) must be discriminatory and therefore must be ignored when setting starting salaries.
• Practical Consequence: Employers are forbidden to set starting salaries based on competitive markets because prior salaries reflect economic competition.

As I previously noted, some courts, Wernsing v. Ill. Dept. of Human Servs., 427 F.3d 466 (7th Cir. 2005), believe this reasoning is a flawed interpretation of the Equal Pay Act (and Title VII). Rather, the problem is that it assumes a female employee’s salary with her previous employer was lower than it should have been because of discriminatory market conditions. That may or may not have been true but the point is that no other discrimination theory permits an employee to prove discrimination based upon assumption about the past practices of an employee’s previous employer.

Whatever doubts there are about the continued viability of the “starting salary” theory of discrimination, employers are best advised to not become the “test case” which seeks to overrule an outdated and ill-conceived legal theory. In practice, therefore, an employer should not simply establish a starting salary based on what the employee was earning in a previous job.

A corollary principle occurs when an employer hires a male employee at a salary greater than that paid to its existing female employees. If this occurs, an employer should (1) make sure the basis for the pay differential is defensible and, if not, (2) consider increasing the compensation of the existing employees. (Remember that you cannot decrease compensation in order to comply with the EPA.)

For example, in Balmer v. HCA, Inc., 423 F.3d 606, 613 (6th Cir. 2005), the decision to pay a newly hired male a higher salary than paid to existing female employees was justified by evidence that the male “asked for a higher salary than Plaintiff, had a higher salary history than Plaintiff, and most importantly, the ultimate decision maker at HCI determined that [the male] had greater relevant industry experience than Plaintiff.”

In EEOC v. Aetna Ins. Co., 616 F.2d 719 (4th Cir.1980), the Fourth Circuit held that Aetna's decision to pay a newly hired male insurance underwriter more than existing female underwriters “was attributable to the existence of two distinct salary programs” and “was explained by [his] experience and background, two considerations which were not sex-linked.”

There is nothing inherently discriminatory with an employer relying upon market surveys to set pay scales. If an employer uses market surveys it must use them consistently among the protected classes. Employees, the EEOC, and the OFCCP can, for example, prove a pay scale is discriminatory because it was “depressed because of intentional sex discrimination, consisting of setting the wage scale for female guards, but not for male guards, at a level lower than its own survey of outside markets and the worth of the jobs warranted.” County of Washington v. Gunther, 452 U.S. 161, 166 (1981).

This rule applies not only to comparable jobs but across the board. That is, if you base compensation on “market surveys” for some jobs, either use “market surveys” for all jobs or make sure that the jobs which are below market are not those predominantly occupied by females or any other protected class.

For an unusual spin on this point consider the decision in Arrington v. Cobb County, 139 F.3d 865, 870 (11th Cir. 1998), where the court permitted an employee to assert an EPA claim based upon the fact that the employer paid her male successor a higher salary than she had earned when she performed substantially equal work.

Next up, using all the factors in your compensation policy.

H.R. 1 - The Stimulus Bill - Whistleblower Provisions

Just for fun (OK, maybe I could have used a better word) I looked at the stimulus bill (HR 1 - officially designated as the "American Recovery and Reinvestment Act of 2009") that is making its way through Congress right now to see what, if any, provisions it would have that might affect employers.

Bear in mind that there are multiple versions of the bill and what is ultimately passed may differ radically from what is in the versions right now. A lot can happen during the "conference," when designated members of each body meet to hash out the differences between what each has passed. Still, we can get a feel for what is likely coming by looking to see what is in both versions of HR 1.

There are several provisions that might affect employers in some way (it is a stimulus bill designed to create job, after all) but the provision that stood out to me was the retaliation section. This provision, found in both the house and senate versions, would create a retaliation claim for employees who are retaliated against because they "blew the whistle" on (being general here) gross mismanagement or waste in federal contracts a "substantial and specific danger to public health or safety" or a "violation of law" related to a contract or grant of funds appropriated by the stimulus bill. My observations about the terms of this provision follow the statute.

With the aid of the "compare" feature in Microsoft Word, we can see the differences between the current Senate (Sec. 1518) and House (Sec. 1243) versions. Words in the Senate but not the House versions are in red and struck-through (hopefully, it depends on how your browser displays the code) while words in the House but not the Senate version are in teal and underlined. (And if you can't see any of these editing marks, click here for an Adobe readable copy).

SEC. 1518.1243. PROTECTING STATE AND LOCAL GOVERNMENT AND CONTRACTOR WHISTLEBLOWERS.

(a) Prohibition of Reprisals- An employee of any non-Federal employer receiving covered funds made available in this Act may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing to the Board, an inspector general, the Comptroller General, a member of Congress, or a the head of a Federal agency head, or their representatives, information that the employee reasonably believes is evidence of--

(1) gross mismanagement of an executive agency contract or grant relating to covered funds;

(2) a gross waste of coveredexecutive agency funds;

(3) a substantial and specific danger to public health or safety; or

(4) a violation of law related to an executive agency contract (including the competition for or negotiation of a contract) or grant, awarded or issued relating to covered fundscarry out this Act.

(b) Investigation of Complaints-

(1) IN GENERAL- A person who believes that the person has been subjected to a reprisal prohibited by subsection (a) may submit a complaint to the appropriate inspector general. of the executive agency that awarded the contract or issued the grant. Unless the inspector general determines that the complaint is frivolous, the inspector general shall investigate the complaint and, upon completion of such investigation, submit a report of the findings of the investigation to the person, the person's employer, the head of the appropriate agencyFederal agency that awarded the contract or issued the grant, and the Board.

(2) TIME LIMITATIONS FOR ACTIONS-

(A) IN GENERAL-(2)(A) Except as provided under subparagraph (B), the inspector general shall make a determination that a complaint is frivolous or submit a report under paragraph (1) within 180 days after receiving the complaint.

(B) EXTENSION- If the inspector general is unable to complete an investigation in time to submit a report within the 180-day period specified underin subparagraph (A) and the person submitting the complaint agrees to an extension of time, the inspector general shall submit a report under paragraph (1) within such additional period of time as shall be agreed upon between the inspector general and the person submitting the complaint.

(c) Remedy and Enforcement Authority-

(1) AGENCY ACTION- Not later than 30 days after receiving an inspector general report underpursuant to subsection (b), the head of the agency concerned shall determine whether there is sufficient basis to conclude that the non-Federal employer has subjected the complainant to a reprisal prohibited by subsection (a) and shall either issue an order denying relief or shall take 1one or more of the following actions:

(A) Order the employer to take affirmative action to abate the reprisal.

(B) Order the employer to reinstate the person to the position that the person held before the reprisal, together with the compensation (including back pay), employment benefits, and other terms and conditions of employment that would apply to the person in that position if the reprisal had not been taken.

(C) Order the employer to pay the complainant an amount equal to the aggregate amount of all costs and expenses (including attorneys' fees and expert witnesses' fees) that were reasonably incurred by the complainant for, or in connection with, bringing the complaint regarding the reprisal, as determined by the head of the agency.

(2) CIVIL ACTION- If the head of an executive agency issues an order denying relief under paragraph (1) or has not issued an order within 210 days after the submission of a complaint under subsection (b), or in the case of an extension of time under subsectionparagraph (b)(2)(B), not later than 30 days after the expiration of the extension of time, and there is no showing that such delay is due to the bad faith of the complainant, the complainant shall be deemed to have exhausted all administrative remedies with respect to the complaint, and the complainant may bring a de novo action at law or equity against the employer to seek compensatory damages and other relief available under this section in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy. Such an action shall, at the request of either party to the action, be tried by the court with a jury.

(3) EVIDENCE- An inspector general determination and an agency head order denying relief under paragraph (2) shall be admissible in evidence in any de novo action at law or equity brought in accordance withpursuant to this subsection.

(4) JUDICIAL ENFORCEMENT OF ORDER-(4) Whenever a person fails to comply with an order issued under paragraph (1), the head of the agency shall file an action for enforcement of such order in the United States district court for a district in which the reprisal was found to have occurred. In any action brought under this paragraph, the court may grant appropriate relief, including injunctive relief and compensatory and exemplary damages.

(5) JUDICIAL REVIEW- Any person adversely affected or aggrieved by an order issued under paragraph (1) may obtain review of the order's conformance with this subsection, and any regulations issued to carry out this section, in the United States court of appeals for a circuit in which the reprisal is alleged in the order to have occurred. No petition seeking such review may be filed more than 60 days after issuance of the order by the head of the agency. Review shall conform to chapter 7 of title 5, United States Code.

(d) Rule of Construction- Nothing in this section may be construed to authorize the discharge of, demotion of, or discrimination against an employee for a disclosure other than a disclosure protected by subsection (a) or to modify or derogate from a right or remedy otherwise available to the employee.

(e) Definitions-

(1) NON-FEDERAL EMPLOYER RECEIVING FUNDS UNDER THIS ACT- The term `non-Federal employer receiving funds made available in this Act' means--

(A) with respect to a Federal contract awarded or Federal grant issued to carry out this Act, the contractor or grantee, as the case may be, if the contractor or grantee is an employer; or

(B) a State or local government, if the State or local government has received funds made available in this Act.

(2) EXECUTIVE AGENCY- The term `executive agency' has the meaning given that term in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403).

(3) STATE OR LOCAL GOVERNMENT- The term `State or local government' means--

(A) the government of each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin Islands, the Northern Mariana Islands, or any other territory or possession of the United States; or

(B) the government of any political subdivision of a government listed in subparagraph (A).

My observations:

This applies to any employer that receives stimulus funds. That includes states, cities and counties.

The "whisteblowing" must be to the Feds. Internal whistleblowing, i.e., to the employer, is not expressly covered. (Note that some courts might disagree and hold complaints to the employer are covered.)

The IG of each federal agency would investigate and make a recommendation to the federal agency as to whether the employer has retaliated against the employee. This is unlike most other federal retaliation provisions which are litigated before the Department of Labor. I suspect few if any agency IG offices have employees who have any experience ruling on retaliation claims. This could be a disaster (for both sides) in the making.

The IG apparently does not have to hold a hearing much less give the employer notice of a hearing. In fact, the statute does not specifically require the IG to even notify the employer that a claim has been filed before the IG issues its report ("the inspector general shall investigate the complaint and, upon completion of such investigation, submit a report") or the Agency issue a final ruling. Of course, an employer could argue the Due Process Clause in the Fifth Amendment requires notice and an opportunity to respond to any complaint. It is also hard to see how the IG could "investigate" without hearing from the employer.

The absence of a requirement to hold a hearing on the record is particularly troubling. The retaliation provisions enforced by the DOL require compliance with the Administrative Procedures Act. This provision does not. That could mean each Agency could decide on the procedures it would use to decide whether an employee has been retaliated against. Neither employees nor employers benefit from not having a hearing that the public could attend. (The APA would, however, apply to judicial review of any agency final decision.)

The two versions seem to disagree on what is protected activity. Under the House version, blowing the whistle on gross mismanagement of any government contract or grant seems to be protected, even if the government contract or grant had nothing to do with stimulus money. The Senate version requires the whistle be blown about stimulus funds. Under the circumstances, I suspect this is inaccurate drafting by the House as the intent seems to be to protect against waste and gross mismanagement of stimulus funds.

There is no specific statute of limitations on when an employee can complain to the IG. The DOL retaliation provisions require a complaint be filed within 30 days (in some cases) or (in others) within 180 days. The absence of a statute of limitations creates an interesting dilemma. There is a general 4 year statute of limitations, 28 U.S.C. § 1658, but it applies to the commencement of a "civil action," and in a somewhat similar context, the word "action" has been held to mean the filing of a complaint in court. Whether that time limit would apply to the time for filing a complaint with the IG remains to be seen. If not, what would be the time limit for complaining to the IG? The statute doesn't say.

If the agency does not issue a final ruling on the complaint within 210 days after it is made, the employee can file a civil action in federal court. You have to wonder whether this complaint must be filed within 4 years of the retaliatory action. Note also, that the 210 days is for a final agency action, not just the IG report to the agency.

One way an employee can blow the whistle is to complain about a "substantial and specific danger to public health or safety." Note that while employer must be one that receives stimulus money, nothing in this subsection say the danger to public health and safety must otherwise be connected to stimulus funds.

One thing is for sure, the stimulus will be good business for lawyers of all persuasions, though I am not so sure that creating more work for attorneys is the kind of economic stimulus the President envisioned.

Preparing for Fair Pay Legislation - Part 6

I have expressed my doubts as to whether or not the Lilly Ledbetter Fair Pay Act of 2009 is going to bring about a rush of new compensation discrimination litigation. (Ironically, despite the jokes, many lawyers have a serious problem understanding money calculations, even those which don't require much more than simple addition and multiplication.)

But I said I would offer some guidance on how employers can better protect themselves from compensation discrimination so I should follow though on this promise. It will come in handy if Congress ever passes the Paycheck Fairness legislation.

Establish and Follow a Written Compensation Policy

No law or court case says an employer must have a written policy on any subject, including compensation. In fact, courts have held the absence of a written policy is not itself evidence of discrimination. Brownlow v. Edgecomb Metals Co., 867 F.2d 960, 964 (6th Cir. 1989). The same court, in the same context (a reduction in force) also held the lack of an "objective plan" along with evidence of slipshod practices can be evidence that the employer's motive is not free from bias. So, on the belief that a written plan is better than no plan, the first step in avoiding compensation discrimination liability is to have a written compensation plan. Blair v. Henry Filters. One of the principal reasons every employer should have a written compensation policy that accurately reflect its practices is because under the Equal Pay Act, the employer must prove that pay differences among employees performing "equal" work are legitimate. Employer don't need to needlessly complicate litigation by causes doubts about the factors that play a role in setting or increasing pay.

Honestly, any employer that sets or increase pay has a compensation “policy” or “practice.” Some employers believe putting a policy about compensation in writing too “restrictive” and eliminates “flexibility.” Not surprisingly, as I mentioned above, courts tend to regard this explanation as an excuse for concealing discrimination. In reality, the problem is not caused by the purported “lack of flexibility” of a written policy but in the fact that many employers have compensation policies that simply do not reflect their actual compensation practices.

There is no “sample” or “one size fits all” compensation policy. Every employer’s compensation goals are different. Nevertheless, there are several “musts” that should be included in every compensation policy:

• Carefully incorporate every factor you will use in making a compensation decision.
• Evaluate every word in the policy to ensure it correctly and fully states your compensation policy. Beck-Wilson v. Principi, 441 F.3d 353, 367 (6th Cir. 2006) (holding a jury had to decide an Equal Pay Act claim because Agency's own handbook refuted its explanation of why it had two different pay scales).
• Have only one document that states your compensation policy; that helps you be consistent.
• The policy should distinguish between factors that “will” affect compensation decisions (e.g. performance, for one) and those that may play a role under certain conditions (e.g. bonuses or extra compensation due to company business performance).
• Do do not restate the same compensation concepts or factors in different ways. Again, consistency.
  
• Include a non-discrimination statement.
• Allow for exceptions, e.g., red-circling. 29 C.F.R. § 1620.26 (“red-circle rate” can be a valid “factor other than sex.”).
• Allow for pay decreases, the possibility of no pay increase, or deductions from compensation under certain circumstances “except where prohibited by law” (i.e., you may not lower a male’s pay to pay a female “equal” pay and you may not withhold from an employee’s compensation if it would take the hourly pay rate below the minimum wage).
• As a result of Ledbetter, employers should permanently retain any records that affect or play any role in setting compensation.
• Include the following type of language: “Neither this nor any other policy constitutes a contract of employment for a definite term. This policy may be modified at any time by [Employer].” (Note that this last point is written for Tennessee employers. Employers in other states should use language relevant to their at will rules.)

These are, of course, merely consideration for the policy. I hestiate to say much more than the categories of topics that should be in a policy because every employer should tailor the practices to their needs and legal obligations. What matters for some employers won't matter a whit for others.

The next post will focus on the importance of consistency and neutrality in setting or increasing salaries.

The Attitude of EEOC Counsel

I recently posted about a Seventh Circuit decision that held an employer that settles a charge of discrimination must still comply with an EEOC subpoena. As I said there, the employer stood on principles and lost only because agencies have power that, while not absolute, is substantial and courts have no basis, short of a showing that the EEOC request is unduly burdensome or otherwise inappropriate, to refuse enforcement. It is better, I said, to cooperate even if you are sure you are right.

I should rest on my prior comments about the decision. After all, it is a pretty unique situation and not likely to re-occur. I can't held but comment, however, on the EEOC's press release about the decision (I will explain why in a minute). The EEOC quotes its lead attorney in the case as cautioning:

• Some recalcitrant employers and their counsel attempt to avoid accountability for employment discrimination through adoption of what they consider effective counter-strategies. Such strategies may include filing lawsuits against those who complain of discrimination, conducting endless discovery so as to draw out litigation for years, and, as in this case, getting one or two possible victims of the discrimin­ation which may have been visited upon a class to cut a quick and often cheap deal. Those strategies are, in the final analysis, never really effective against the EEOC. We’re pleased to see that point made once again made so forcefully in this important decision by the Seventh Circuit. (My emphasis.)
  

Remember, this is the case where the employer implemented a policy of refusing to hire anyone who had been convicted of a violent crime after two of its employees were murdered in violent confrontations in the workplace. The employer didn't ban applicants simply because of prior arrests, it didn't ban applicants because of prior convictions, its policy focused on convictions for violent crimes.

The decision, moreover, made it clear that the EEOC was not investigating a case of intentional discrimination. The EEOC was looking to see whether the policy was unintentionally discriminatory, on the assumption that some races might be more heavily impacted by the policy than others. Now, I am prepared to assume that the employer's practice might have led to a statistical disparity merely because there are more minorities than non-minorities convicted of violent crimes. (To know for sure, we would have to look at several factors and that isn't the point of this post.)

Even if there is a disparity, as the court recognized at oral argument and in its decision (both available through this page) there is a substantial question as to "whether the EEOC is acting prudently by devoting time of both its staff and Watkins to shortlived practices by an entity that is no longer an operating company, and whose rule may well be amply supported by 'business necessity' given its history of workplace violence."

So, the clear message the EEOC's counsel (and the reason I am saying something further here) is sending employers is that the EEOC presumes you are trying to undermine your employee's rights. Even when you are trying to protect your employees from workplace violence, the agency stills believes you are out to do the wrong thing toward your employees.

I am not saying the agency should blindly trust employers and forgoe discrimination investigations. Simply that, if you are ever inclined to think that the EEOC investigator is "your friend," don't. They aren't.

Preparing for Fair Pay Legislation - Part 5

Compensation discrimination claims are no different than any other employment decision. The problem is that this is a doubled-edge sword. An employer need not treat a compensation decision any differently than it treats any other employment decision – conversely, however, an employer that does not treat compensation decisions with the care it treats other employment decisions is needlessly exposing itself to liability.

No federal or Tennessee law imposes any obligation on an employer other than the obligation to not discriminate against an employee because of the employee’s race, sex, national origin, religion, creed, age or disability. So, the very term "fair pay" is misleading. Fair pay isn't required (nor it is an absolute defense), what is required is non-discrimination.

The fundamental complication that compensation discrimination claims raise – a concern not present in any other aspect of the employment relationship – is caused by the sheer number of compensation decisions made each year. Most employers make compensation decisions at least annually with respect to almost every employee. By comparison, some employers are fortunate enough to make only an “occasional” (comparatively speaking) termination or promotion decision.

Think of it this way. How many employees do you know who believe they deserve to earn a higher salary? Now, how many employees do you know who, in your mind, are overpaid? These are the number of potential compensation discrimination claims you could, in theory, face on an annual basis.

When we talk in terms of “compensation discrimination” most employers think about the Equal Pay Act (EPA), 29 U.S.C. § 206(d). This statute, incorporated into the Fair Labor Standards Act, was passed in 1963, a year before Congress passed the Civil Rights Act that includes Title VII, 42 U.S.C. § 2000e-2.

In the decades since these statutes were passed, courts have continued to dispute the interplay between Title VII and the EPA. E.g., Korte v. Diemer, 909 F.2d 954, 957 (6th Cir. 1990) (jury verdict on EPA claim required finding for plaintiff on Title VII claim); contra Fallon v. State of Illinois, 882 F.2d 1206, 1213-18 (7th Cir. 1989) (requiring employee to establish discriminatory intent through the traditional Title VII allocation of proof even if the employee could prove an EPA claim). Some courts (including the Sixth Circuit) generally treat the two statutes as being essentially identical. Other courts have recognized that there are important differences between the two statutes but it is still not clear how these differences will affect employers.

The most notable distinction between the EPA and Title VII is that the EPA only prohibits sex-based discrimination while Title VII prohibits discrimination because of race, sex, religion or national origin. Of course, the prohibitions in the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 636, and the Americans with Disabilities Act (ADA), 42 U.S.C. § 12101, would also cover discriminatory compensation claims under their respective prohibitions.

The second important distinction is in how the statutes allocate who has to prove whether an employee’s pay is or is not discriminatory. An employee in an EPA case must establish that the employee received lower wages than paid to the opposite sex for equal work on jobs requiring substantially equal skill, effort, and responsibility. See Buntin v. Breathitt Cty. Bd. of Educ., 134 F.3d 796, 799 (6th Cir. 1998) “Whether the work of two employees is substantially equal ‘must be resolved by an overall comparison of the work, not its individual segments.’”

If so, the employer must then prove that the differential is caused by: (1) A seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (3) a differential based on a factor other than sex.

As mentioned previously, the last defense (any other factor other than sex) has generated considerable controversy among the courts and is the current target of a proposed amendment ( a prior post discussed one of the principal effects of HR 11/12 and S.182). The Sixth Circuit adheres to the proposition that the fourth defense “does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason.” Beck-Wilson v. Principi, 441 F.3d 353, 365 (6th Cir. 2006). While some courts also impose this requirement, other courts do not. See Wernsing v. Ill. Dept. of Human Servs., 427 F.3d 466 (7th Cir. 2005).

In contrast, under Title VII and all other federal statutes, the employee must prove either (1) that the employer’s illegal motive was the reason for the discriminatory compensation (the traditional “disparate treatment” method) or (2) that a neutral policy had the result of causing discriminatory compensation and that the policy was cannot be justified by a legitimate business reason (the traditional “disparate impact” method).

Under federal law, a disparate impact is found only after the employee has proven a neutral practice causes a disparity between classes of employees that is not justified by legitimate business necessity. Bacon v. Honda of America Mfg., Inc., 370 F.3d 565, 576 (6th Cir. 2004). Once a disparity has been shown to exist, a violation may be proven with evidence that an “alternative employment practice” would have eliminated or resulted in less of a disparity. Compare 42 U.S.C. § 2000e-2(a)(1) (disparate treatment) with 42 U.S.C. § 2000e-2(k) (disparate impact).

This blog is necessarily general. For more specific guidance, employers and their counsel should consult the two sources from the EEOC and the Office of Federal Contract Compliance Programs (or “OFCCP”) have each published guidelines addressing compensation discrimination. The EEOC’s “compliance manual” and the OFCCP’s “interpretive standards.” Each agency states how it will analyze compensation discrimination charges. And while not everything the agencies say on the subject is entirely accurate, it is always helpful to know the agencies' position(s).

Future posts, interspersed around other issues, will address the ways employers can maximize their chances of prevailing in compensation discrimination litigation.