A Reminder about Treating Employees Consistently

For some jobs, even private sector jobs, not getting (or maintaining) a government issued security clearance is a fundamental job requirement.  There are numerous court decisions upholding terminations from employment because the government revoked the clearance of the employee.  There is even a special provision in Title VII which states that it is not illegal to fire (or refuse to hire) an employee who cannot possess a clearance if the position requires the holding of a clearance.  42 U.S.C. 2000e-2(g).

A decision issued today (Zeinali v. Raytheon Co.) by the Ninth Circuit (which governs federal laws in the west coast states), serves as a reminder that even "sure things" have a catch, that being treating employees consistently. The court held that it could not review the government's clearance decision (in this case the government refused to grant a clearance).  It refused to go so far as to refuse to review the employer's decision to fire the employee because the employee failed to obtain a clearance.  There was no doubt, the decision stated, the employee was told the position required a clearance.

What went wrong was that there were two other employees (in jobs similar to that held by the plaintiff) who  had security clearances revoked but the employer had not terminated either employee.  So, for all the bluster and worry about whether or not courts may review decisions based upon the loss of a security clearance, the decision came down to whether or not the employer had treated the employee worse that it treated other, similarly situated, employees.

Proving Compensation Discrimination

One of the difficulties in developing a sound compensation system is to measure both the value to the company and the value to the market.  Every compensation system I have defended has tried to do both, though, as a recent Seventh Circuit decision (Randall v. Rolls-Royce, March 30, 2011), shows, the two goals don't always co-exist all that comfortably.  

The exempt employee compensation system for Rolls-Royce's manufacturing plant in Indianapolis balanced both goals, as the court described:

Rolls-Royce determines the compensation of its employees (all its employees, but this case concerns just those exempt from the minimum-wage and maximum-hours provisions of the Fair Labor Standards Act) in two steps. The first is to establish a broad pay range for each class of employees whom it deems of equal value to the  company. We’ll call these broad ranges “compensation categories.” The class is spread over five of these  categories. The second step, which is based on Rolls-Royce’s recognition that it must meet competition from other employers for the employees it wants to hire or retain, is to create within each broad range a narrower range based on prevailing market wages for each of the jobs in question—“prevailing market wages” meaning wages offered by competing employers. Because of these ranges within ranges, the class that the plaintiffs want certified sprawls over twenty different compensation grades, including supervisory and nonsupervisory positions and encompassing starting salaries ranging from $40,050 to $190,750.

Rolls-Royce’s expert showed that any seeming sex-based disparity in base pay (that existed before this system was adopted) disappeared once "differences in the jobs performed by male and female employees in each compensation category are corrected for." Plaintiff's expert, however, failed to adjust for differences in the jobs occupied by male and female employees. 

It's OK, in other words, to have broad "compensation categories" and still make market-based distinctions for the specific jobs that fall within those categories.

Sixth Circuit Holds Protected Activity Must be Personal

First, I should mention that the prior post was written shortly before I left on vacation so let me apologize for the gap between posts here.

Not long after I returned the Sixth Circuit issued an important decision. It is important for what the court didn't do and for the caution the court issued. The decision in Thompson v. North American Stainless was issued by the full court. Like all other federal courts of appeals, the Sixth Circuit most often convenes 3 judge panels to resolve appeals. It can, however, convene the full court if a sufficient number of judges agree that there is an issue the entire court needs to resolve. Most of the time, the reason to convene the full court is that there are at least two decisions from the 3 judge panels that cannot be reconciled. That was the primary reason for the full court to hear the decision in Thompson.

A 3 judge panel in Thompson had held that someone who had not personally engaged in protected activity could nevertheless be retaliated against in violation of Title VII. The panel imposed a rather unmeasureless standard, saying the "victim" only had to have some relationship - in that case the spouse - to someone who had engaged in protected activity.

That decision was not entirely consistent with other panel decisions or what a majority of the court thought was the "plain text" of Title VII. So, reversing the panel, the full court, by a 10 to 6 vote, held that the person claiming to have been retaliated against must show that he or she personally engaged in protected activity. I won't go into the majority's reasoning other than to say they agreed with other courts of appeals that the relevant language in Title VII mandated the holding.

The decision is important for employers because it gives them some means of assessing who is within the protected activity realm. Had it held, as the panel did, that someone who is merely associated with another who has engaged in protected activity, the set of employees who could sue for retaliation would be markedly expanded. While Thompson relied upon his fiancé’s protected activity, the holding would have been expanded to children, siblings, friends and so forth. The set of those potentially protected would have been virtually limitless.

The full court decision is good news but there are several important cautions. First, an employee such as Thompson could have easily engaged in some protected activity merely, for example, by letting the employer know he supported his fiance's position. It would not have required much effort as I explained in discussing the Supreme Court's decision in Crawford v. Metro. Gov’t of Nashville and Davidson County, Tenn., — U.S. — , 129 S. Ct. 846 (2009).

Second, as the full court acknowledged, even if Thompson had no claim, his fiancé could still argue that Thompson was termination was directed at her. Remember, on this point, that the Supreme Court has said the retaliation provision in Title VII does not confine retaliatory acts to those related to employment or the workplace.

So while the full court's decision is a victory for Tennessee employers, it still doesn't mean employers have free reign to retaliate against someone for what their spouse may have alleged. The far better method, of course, is to make sound decisions based upon the facts by conducting as thorough an investigation as the incident demands.

Arbitrating Discrimination Claims

I was modestly surprised by the Supreme Court's arbitration decision this week. In 14 Penn Plaza LLC v. Pyett, the Supreme Court held that "a collective-bargaining agreement ["CBA"] that clearly and unmistakably requires union members to arbitrate ADEA claims is enforceable as a matter of federal law." I had expected (assumed is more like it) the Court would do what it had previously done, find some way to avoid addessing the main issue. Let's start with some history.

In Alexander v. Gardner-Denver Co., 415 U. S. 36 (1974), the Supreme Court held that a union employee could pursue a Title VII claim even though the employee had already lost an arbitration at which the parties had disputed the same facts presented in the race discrimination claim. In its decision the Court distinguished between "contractual and statutory rights" and stated that "there can be no prospective waiver of an employee's rights under Title VII." This meant, to the "lower" courts, that employees could both arbitrate their contract rights under the CBA and pursue their discrimination claims with the EEOC and in court.

Subsequent decisions from the Supreme Court, however, undermined Alexander's statement that the discrimination statutes prohibited arbitration of discrimination claims. Those decisions, however, construed individual employment contracts, not collective bargaining agreements and for some time, the Supreme Court seemed content to permit the "tension" (the term a court uses to say "our decisions are not logically consistent") between individual arbitration agreements and CBA arbitration agreements.

Then, some 11 years ago, in Wright v. Universal Maritime Service Corp., 525 U.S. 70, 82 (1998), the parties raised the same issue decided in Penn Plaza. The Court ducked the issue, however, because clause in the CBA was not "clear and unmistakable." So even if an arbitration clause in a CBA could include discrimination claims, the clause in Wright would fail the clear and unmistakable standard primarily (but not only) because it required arbitration of "matters in dispute," did not explicitly incorporate any statutory antidiscrimination requirement or even have a no discrimination clause in the bargaining agreement. Picking up on these points, the Sixth Circuit in Kennedy v. Superior Printing Co., 215 F.3d 650, 654 (6th Cir. 2000), held that a "general anti-discrimination provision [in a bargaining agreement] that prohibits various forms of discrimination against employees" does not force union employees to arbitrate discrimination claims where the arbitration clause only applied to the interpretation of the contract and did not specifically require arbitration of discrimination claims. And in Bratten v. SSI Servs., Inc., 185 F.3d 625, 631 (6th Cir. Tenn. 1999), the court held that where the CBA arbitration clause "does not mention statutory claims, but only states in boilerplate fashion that it applies to "any grievance arising under the terms of this contract or an alleged violation thereof" was not a sufficient waiver of statutory rights.

The clause in Penn Plaza squarely presented the issue because it not only prohibited discrimination and listed the relevant state and federal discrimination statutes by name, it then said (in the no-discrimination clause) that "All such claims shall be subject to the grievance and arbitration procedures . . . as the sole and exclusive remedy for violations." The clause was, in fact, so clear that the employees' never argued that it was not a clear and unmistakable waiver until they filed their merits brief in the Supreme Court.

So the practical question employers should ask, after Penn Plaza, will be whether or not the no-discrimination clause or the arbitration clause contains a clear and unmistakable waiver of the right to pursue statutory discrimination claims in federal court. What Penn Plaza does is remove the final hurdle to this inquiry by saying that a CBA can, if sufficiently clear, require employees and employers to arbitrate discrimination claims. Penn Plaza does leave open the possibility that there may be some statutes which might prohibit arbitration but, so far, those statutes do not include Title VII, the ADEA or the ADA. Neither does USERRA, but there is a bill pending in Congress (H.R. 1474) which would prohibit arbitration of USERRA claims unless the agreement to arbitrate arises after the "dispute arises." Even here, the bill provides that the prohibition on arbitration does not "preclude the enforcement of any of the rights or terms of a valid collective bargaining agreement." And whether Congress might act to legislatively overturn the Penn Plaza decision remains to be seen.

So what does a CBA have to say to require (or not) discrimination claims be arbitrated? The clause in Penn Plaza is the clearest example. On the other extreme, Wright says a general "all disputes" arbitration clause is not enough. The Sixth Circuit decisions I mentioned earlier hold that unless the CBA specifically says (at a minimum) that discrimination claims are subject to the arbitration clause, they are not sufficient. Also, the decisions might be construed to say that a CBA arbitration clause must not just mention "age discrimination" claims (for example) but must also specifically mention the statute (the "Age Discrimination in Employment Act") in question. I am not so sure that it makes sense to require the statute be mentioned. Think about it, if your clause says that all rights protected by "Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e" must be arbitrated, that is not as informative (to a non-lawyer) as telling employees that all claims for race, sex, national origin and religious discrimination must be arbitrated. But, as the contract lawyers in my firm constantly say, when you draft a contract you use the language that you know works.

And remember, to quote the Penn Plaza decision, "[u]nion members may also file age-discrimination claims with the EEOC and the National Labor Relations Board, which may then seek judicial intervention under this Court's precedent. See EEOC v. Waffle House, Inc., 534 U. S. 279, 295–296 (2002)." In other words, no matter how clear the arbitration clause is, it will not prevent the EEOC or the NLRB from investigating or litigating a discrimination or NLRA claim against an employer (or union).

Preparing for Fair Pay Legislation - Part 1

With Congress on the brink of passing legislation that would make significant changing to the Equal Pay Act and Title VII's Compensation Discrimination case law, I thought it would help to post several blogs explaining the changes and how Tennessee employers can be prepared for the changes that seem likely. Of course, until legislation is finally enacted, this is tentative.

Most of Congress wants to change two aspects of compensation discrimination law. First, they want to overturn the perceived effect of Ledbetter v Goodyear Tire & Rubber Co. Inc. which had held an employee's claim was filed too late because she could not (and made no effort to) show that a discriminatory decision was made within the limitations period. Second, Congress would amend the Equal Pay Act to change what an employer must show to prove a factor other that sex was the reason for a pay difference. This bill would also increase the damages and penalties an employee would receive if pay discrimination is proven.

I could write much on how Congress perceives inequities. There are significant faults in the rationale members of Congress and the supporters of this legislation give as the necessity for these bills (especially the part that would change the effect of Ledbetter). This is not really the place for having an extended discussion of those faults.

The better and more interesting discussion would be whether the changes Congress seems poised to make will help in solving the problems they have identified. Study after study, as reported in the media and the Internet, proclaim that women are paid less than men for the same work. (So says a GAO Report from 2004 - reporting from 1983 to 2000, women earned 21 percent less, a figure the GAO said was diminishing. The worst "studies" are those, such as one reported last year in Crane's which draws conclusions based upon whether people perceive themselves to be underpaid.) Broadly defined statistics that cover multiple jobs in different companies are unreliable in forecasting whether individual employers permit pay disparities. Since I have no empirical basis for disputing that (and am not so naive as to think that all pay disparities everywhere have been eradicated), I take it as a given for purposes of the present discussion.

Pending now are two bills (HR 11 and S.181). HR 11 passed the House on January 9, 2009. It consists of two parts (each part responds to one of the concerns listed previously).

Part I would change the outcome in Ledbetter and let employees sue for pay discrimination (if the difference is caused by sex, race, age, disability, national origin or religion) for as long as the disparity in pay continues. Backpay would, however, be capped at two years prior to the filing of the charge (a cap that currently exists). So, where Ledbetter held a discriminatory pay decision made decades earlier could not be a timely discriminatory act, the intent of this legislation would be to let the lower paid employee sue and recover for a few years of the disparity so long as the improperly motivated pay disparity continues to exist. The employee could also recover other damages as already allowed by Title VII and the ADA (but the ADEA does not authorize compensatory or punitive damages).

The Senate will probably vote on its bill (S.181) as early as Wednesday, January 21, 2009, though several Republican senators (including both from Tennessee) have sponsored an amendment which, to my thinking, could be worse, as it would create uncertainty as to when the time for filing a charge (on any action, not just compensation claims) starts and eliminate the existing requirement that employees must act diligently in determining whether they have been discriminated against. Right now, S.181, only addresses the effect of the Ledbetter decision.

How would these changes affect Tennessee employers? Depending on what is passed, they might not notice much of a change at all. A few years ago, the Tennessee Supreme Court held employees could sue for present and past damages so long as the employee can show they are presently being paid less than their peers and the reason for the difference is prohibited (the THRA, of course, prohibits much the same things as Title VII, the ADEA and ADA). Tennessee law thus, in this way, goes further than what Congress would authorize.

How can an employer protect themselves from suits over decisions made years earlier? One change was sanctioned by a 2004 Sixth Circuit decision which held that employers and employees may contract for shorter (or longer) time periods in which to sue than allowed by law. An employer that does this, should observe several precautions designed to increase the chance the clause will hold up in court:

• Have the employee sign the document or application in which the limitation exists. The Sixth Circuit decision and other similar decisions are based upon principles of contract law, and the failure of the employee to sign may result in a missing element of a contract -- mutuality or mutual assent (that is, a signature showing agreement to the terms).
  
• Make sure the time period to which the limitation has been reduced is reasonable. It is strongly suggested that any reduced limitations period not be less than six months in the employment context.
  
• Do not attempt to limit an employee’s right to file suit against the company, file a charge of discrimination with any federal or state agency, or to limit the type of actions that an employee may bring. Prospective waivers of substantive rights are not only frowned upon they are invalid. Worse still, you could end up being sued by the EEOC which takes the position that Title VII (ADEA, ADA etc.) is violated if an employer merely presents an employee with a contract that limits the employee's ability to participate in commission proceedings, though on this last point, it lost the lawsuit because the employee never signed and the employer never enforced the document in question.

These are not the only changes an employer can (and should) make. Limiting the time for suit only goes so far. In coming posts, I will address other practices an employer can adopt that would help identify and eliminate unexplainable pay disparities that might lead to a lawsuit.

For procedural reasons, even if the Senate adopts S.181, as it presently exists, the differences with HR.11 would have to be resolved before any bill could be presented to the President. Those differences (right now) are primarily how the "Fair Pay Act" (Part II of HR.11) would amend the Equal Pay Act. In the next post, I'll focus on those changes, though if Congress adopts one of the Republican Amendments, I would necessarily devote the post to explaining more about that.