Constitutionalizing Title VII - Ricci v. DeStefano

Yesterday's decision in Ricci v. DeStefano probably received more publicity than it's due because Supreme Court nominee Sonia Sotomayor was on the panel that decided the appeal in the court of appeals. Nevertheless, the decision is an important one under Title VII for any employer who would avoid disparate impact liability.

In reading Ricci, I was reminded of a remark in Personnel Adm'r of Massachusetts v. Feeney, 442 U.S. 256, 277-79 (1979), that "Discriminatory intent is simply not amenable to calibration." Ricci demonstrates this point perfectly and the difference between intentional discrimination (also called "disparate treatment") and unintentional discrimination (called "disparate impact) continues to confound courts, lawyers and employers.

The facts in Ricci can be simply stated. The city gave a test to those who wanted to be promoted in the fire department. While the test was constructed to be racially neutral, it ended up favoring whites over blacks to a statistically significant degree. After deliberations, the city junked the test results. (This is an oversimplification. Other relevant facts will be added when the discussion warrants.)

The first question the Court decided was whether the City's rejection of the test results was "because of race." The majority got straight to the point and held that it was:

The City rejected the test results solely because the higher scoring candidates were white. The question is not whether that conduct was discriminatory but whether the City had a lawful justification for its race based action.

Slip op. at 19-20

Having decided the city's action amounted to overt racial discrimination, the only other issue was whether the decision was nevertheless justifiable because the city feared a disparate impact lawsuit from the black employees who fared worse than whites on the exam.

Employers take action based upon the fear of lawsuits all the time. Nor is the subject a new one for the Court. One of the statutory defenses in Title VII lets an employer make a decision because of sex but it is nevertheless a lawful on if sex is a bona fide occupational qualification ("BFOQ") for the job. Successful BFOQ defenses are rare, however, as Johnson Controls found out a number of years ago when it unlawfully prohibited females (unless they were infertile) from working on an assembly line making car batteries. UAW v. Johnson Controls, 499 U.S. 187 (1991). One of the more commonly permitted BFOQs is to require guards who have contact with male prisoners to be male. Dothard v. Robinson, 433 U.S. 321 (1977). But Title VII limits the BFOQ defense to sex, religion and national origin. It is not available for race discrimination claims. 42 U.S.C. § 2000e-2(e).

Without any statutory authority to guide it, the Court had to hold that the employer's fear of a disparate impact lawsuit could only justify a decision when (1) the city would be actually liable for a disparate impact or (2) under some lesser threshold than actual liability. It chose the latter, adding to Title VII a standard the Court had adopted in constitutional challenges. Government decisions based upon race, the Court explained, "are constitutional only where there is a 'strong basis in evidence' that the remedial actions were necessary." Slip op. at 22 (citing Richmond v. J. A. Croson Co., 488 U. S. 469, 500 (1989)). There is much that could be said about the reasoning behind this part of the Court's decision – I won't go into it here.

Under the Court's adopted standard, caving to political pressure is not a defense to a Title VII lawsuit. Carried to its logical conclusion, the decision means that an employer (public or private) cannot reject results derived from validly established criteria simply because the results show a statistically significant disparity. The Court explained: "The problem for [the City] is that a prima facie case of disparate-impact liability—essentially, a threshold showing of a significant statistical disparity, Connecticut v. Teal, 457 U. S. 440, 446 (1982), and nothing more—is far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results." Slip op. at 28. What the City had to do was honestly analyze whether it had (or lacked) a valid defense to a disparate impact lawsuit. While the City argued it had a valid concern, the Court rejected these arguments as being "based on a few stray (and contradictory) statements in the record." (The Court's reasons for rejecting the City's arguments are interesting but I won't go into those because they are case specific and any employer who needs to determine whether it has a valid defense to a disparate impact claim should hire qualified counsel.)

From the standpoint of advising employers, what is most troubling about the Ricci is the lack of protection it gives employers who face the difficult choice of being sued no matter what the employer does. (The Court did say that because New Haven should not have thrown out the test results, it could not be liable when the results are implemented. Slip op. at 34. That is a small consolation to New Haven and no help at all to other employers). So, an employer that concludes it lacks a "strong basis in the evidence" for refusing to throw out a test cannot prevent the filing of a disparate impact lawsuit nor can it be assured it will win that lawsuit. Nothing in Ricci requires any court or a jury to defer to an employer's findings. The best (and perhaps only) thing an employer can do is to accurately and honestly assess the merits of the disparate impact claim.

To be sure, Ricci does not invalidate "an employer's affirmative efforts to ensure that all groups have a fair opportunity to apply for promotions and to participate in the process by which promotions will be made." Slip op. at 25. Nor does Ricci preclude so called "voluntary compliance efforts."

Many Tennessee employers will never have to be concerned about the impact of Ricci. At its foundation, the decision means that Title VII does not permit an unfounded fear of a lawsuit to justify an otherwise discriminatory decision. As I said, that is not a new concept. The decision could, however, invalidate any employment decision that is intended to alleviate a statistical imbalance within a hiring pool or other employee population "absent a strong basis in evidence of an impermissible disparate impact." So, any employer that develops a pool of applicants (or employees) and makes a decision (or avoids making a decision) based upon the perceived statistical impact of the decision should consult with counsel before taking any action.

What does Gross Really Mean for Employers?

Gross is, if you don't know, today's U.S. Supreme Court decision which has been heralded with the following sensational (at least in this context) headlines:

Business Gets Stronger Hand in Age Cases (Wall Street Journal)

Supreme Court makes age bias suits harder to win (L.A. Times)

Worker Age-Bias Suits Limited by U.S. Supreme Court (Bloomberg)

Not surprisingly, one senator (Leahy) has already called for its reversal, accusing the Supreme Court of "overreaching" and disregarding precedent.

Employers might think from these headlines that the Supreme Court outright abolished age discrimination altogether.

But focusing, as I try to do, on how the decision actually impacts employers, I would be hard-pressed to say that it changes much of anything.

For quite a while (as in decades) the Supreme Court has recognized, in all sorts of discrimination cases (including NLRA cases a nd constitutional retaliation claims) that employers don't always act with singular motives and that multiple motives usually go into any one employment decision. Sometimes one of these motives is illegal.

For example, an employee who misses a lot of work may justifiably be fired, but suppose part of the reason is that the employee is pregnant. Either motive, alone, might have led to the firing. A legitimate motive is mixed into an illegitimate one. So how does this get sorted out? Badly, in most cases.

Twenty years ago, a divided Supreme Court decided a sex discrimination case against Price Waterhouse brought by a female who had not been promoted to being a partner. She argued her sex played a role and there was some evidence that some of the voting partners had a stereotyped view of how a female should look and act as a Price Waterhouse partner. The Court held the female could sue under Title VII even if she could only show her sex played some role, though not a but-for role, in the vote. It also held, however, that if Price Waterhouse showed she would not have been made a partner despite the stereotyped statements, she would lose.

Congress was OK with the idea that an employee could win a sex discrimination case with only showing a mixed motive but it didn't like the idea that the employer who was motivated by the employees sex to some degree could get off scott free. Congress amended Title VII, giving us the "motivating factor" standard and providing that an employee can partially win a mixed motive case. Congress meant well, no doubt, but the statute has badly confused judges, jurors and lawyers. While Congress amended Title VII, a similar change was not made to the ADEA.

Ostensibly, in Gross, the Supreme was being asked how Price Waterhouse applied to an ADEA claim, that is, what does it take to create a mixed motive case as opposed to a single motive case. The Court, having seen the mess Price Waterhouse created, responded by saying, "enough." We screwed up in Price Waterhouse, we wish we had never heard of a mixed motive. Saying the Price Waterhouse "mixed motive" standard was not compatible with the ADEA, the Court held that an employee claiming age discrimination must prove age was the motive for the decision, not just one of several motives. Age had to have made a difference.

Gross (actually his lawyers) wanted to be able to argue to a jury that the employer had more than one motive for firing him (and that one motive was his age) because, under the cases, that meant the jury would then be told that the employer bears the burden of proving the employee would have been fired even without the illegal motive. Employee lawyers like to press this point because it give an imprimatur to the jury's natural inclination that the employer should justify its decision rather than require the employee to prove they were discriminated against.

Lawyers, you see, love to argue over who has the "burden of persuasion" a topic that, in the real world, makes utterly no difference whatsoever. It is sort-of like the saying, "close only counts in horseshoes." In a legal case, the burden of persuasion only affects what happens when proof is missing and what happens when the evidence is equally divided. Take, for example, our situation above, where the pregnant employee is fired for missing work. The employee could prove sex motivated the decision by showing others who were not pregnant missed as much or more work and were not fired. The pregnant employee bears the burden of persuasion here - it is not up to the employer to prove that it treated all other employees, pregnant and non-pregnant, equally. Of course, if the evidence is there, you can bet that a smart employer's lawyer will put on this evidence of equal treatment. Frankly, I win a lot of cases because the other side fails to ask for this kind of evidence in discovery. Forget about the equally divided cases, that is akin to counting angels on the head of a pin.

To bring this to a resolution, today's decision holds the mixed motives analysis doesn't apply to age discrimination claims. Effectively, that means Price Waterhouse is dead. Good riddance.

Don't celebrate just yet. It may make an age case harder to prove in a legal sense but a strong age case - or even a not so strong age case - will still let a jury find discrimination. Even under Gross decision, an employee simply needs to show that had the employee been substantially younger (5 to 10 years, depending on the court you are in) the decision would have been different. That can be shown in any number of ways, as I've discussed here for some time.

Don't think this means you can start being stupid. Proper documentation, treatment of employees, and investigations are every bit as important today as they were yesterday.

Unfortunately, it probably means Congress will now amend the ADEA to incorporate the mixed motive language from Title VII. While could slap together something, amending the ADEA the right way won't be easy. Age discrimination is unlike sex or race discrimination in many ways. Pensions and other benefits turn on age, in part. It took several years for the impact of the ADEA on those and other issues to be sorted out (the Supreme Court, only last year, had to sort out how the ADEA affected certain disability retirement issues).

Practically, Title VII is meant to combat outright racial and sexual bias. Age discrimination, however, is really more about combatting the stereotype that older workers are more costly and less productive. Some, in the younger generation, may have an outright bias against older folks but by and large most recognize that we will all be older someday. Age matters, in some situations, and hopefully someone in Congress will realize this.

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.

General Assembly Clarifies that State Whistleblower Statute Applies to Public Employees

In a prior post, I listed several bills pending in the General Assembly that might affect Tennessee employers. I was checking the status of these bills today and saw that on May 7, 2009, the Governor signed into law amendments to the Tennessee's Whistleblower statute, T.C.A. 50-1-304. I had earlier said that these amendments looked to only clarify some minor points – and that is correct – but figuring out exactly what the revision "clarifies" is not really all that clear. The amendment changes the first three subsections of 50-1-304. Before the recent change, the statute read:

(a) As used in this section:

(1) "Employee" includes an employee of the state, or any municipality, county, department, board, commission, agency, instrumentality, political subdivision or any other entity of the state;

(2) "Employer" includes the state, or any municipality, county, department, board, commission, agency, instrumentality, political subdivision or any other entity of the state; and

(3) "Illegal activities" means activities that are in violation of the criminal or civil code of this state or the United States or any regulation intended to protect the public health, safety or welfare.

(b) No employee shall be discharged or terminated solely for refusing to participate in, or for refusing to remain silent about, illegal activities.

(c) In addition to all employees in private employment, this section applies to all employees who receive compensation from the federal government for services performed for the federal government, notwithstanding that the persons are not full-time employees of the federal government.

These three subsections would be replaced by the following two subsections:

(a) As used in this section:

(1) "Employee" includes, but is not limited to:

(A) A person employed by the state, or any municipality, county, department, board, commission, agency, instrumentality, political subdivision or any other entity of the state;

(B) A person employed by a private employer; or

(C) A person who receives compensation from the federal government for services performed for the federal government, notwithstanding that the person is not a full-time employee of the federal government;

(2) "Employer" includes, but is not limited to:

(A) The state, or any municipality, county, department, board, commission, agency, instrumentality, political subdivision or any other entity of the state;

(B) A private employer; or

(C) The federal government as to an employee who receives compensation from the federal government for services performed for the federal government notwithstanding that the person is not a full-time federal employee; and

(3) "Illegal activities" mean activities that are in violation of the criminal or civil code of this state or the United States or any regulation intended to protect the public health, safety or welfare.

(b) No employee shall be discharged or terminated solely for refusing to participate in, or for refusing to remain silent about, illegal activities.

If you are wondering whether the amendment is materially different from the existing version, join the club. Call me dense but both old an new define "employee" and "employer" in semantically indistinguishable terms. The definition of "illegal activities" is identical. The legislative history indicates the legislation: "clarifies that the civil cause of action for the retaliatory discharge of an employee for reporting illegal activities applies to state employees, private employees, and certain persons paid by the federal government." On the Senate floor, the sponsor explained that the bill "is simply intended to clarify existing law" regarding the types of employees to which the law applies because of some "debate in the judiciary." When asked how the bill changes current law, the senate sponsor explained that the placement of the word "includes," in the existing statute, at the entrance of the section caused confusion but admitted she wasn't sure why there was a debate in the judiciary.

I am not sure there ever was a debate in the judiciary. I couldn't find evidence of one in the court decisions and the Tennessee Supreme Court, in Guy v. Mut. of Omaha Ins. Co., 79 S.W.3d 528, 537 (Tenn. 2002), said "The statute also extends protection to public employees, which is a significant departure from the common law." And if you think the judges might have talked amongst themselves and decided the statute was ambiguous, the problem there is that most judges are far too busy to engage in behind the bench debates about the meaning of a statute. I won't say it couldn't or didn't happen but in the grand scheme of things, I could think of a lot more state statutes that needed clarification much more than did the whistleblower statute.

I won't resolve this issue here. I simply wanted to update the blog to note the bill has passed the General Assembly and was signed by the governor on May 7, 2009. We now have clarification that someone (not me) thought was necessary but in practical terms, the clarifying amendment to T.C.A. § 50-1-304 does not and was not intended to change anything meaningful. Sometimes the absence of change is itself is good news.

As an aside, however, employers may get a kick out of the comments by Senator Henry, the only senator to vote against the bill, who complained that the bill "encourages tattle-tales." He got that one right.

Sixth Circuit Clarifies Adverse Employment Action Standard

Today, the Sixth Circuit issued a decision that addressed whether certain post-charge employment actions amounted to an adverse employment action. The employee had previously complained about not obtaining certain promotions. His latest complaint added a retaliation claim based upon the following retaliatory acts: (a) one of his work packages was held up for a week by his supervisor; (b) he was moved to a new work unit by another supervisor; (c) he was required to leave a note whenever he left his work station; and (d) a Team Leader told him that any high school kid could perform his job.

The court held, however, that none of these acts rose to the level of being an adverse employment action as defined by Burlington N. and Santa Fe Ry. Co. v. White, 548 U.S. 53, 67 (2006). They "amount[ed] to nothing more than petty slights and minor annoyances." As to (a) it was the supervisor's job to detect problems in the work packages submitted to him and holding up one of the plaintiff's packages for a few days until it was complete was not unreasonable. The transfer claim failed to be adverse because the employee wanted a transfer (he was not getting along with his supervisor) and the employee failed to show "that being transferred to a new work unit resulted in significantly different responsibilities, a change in benefits, or any other negative effect." The employer imposed the note requirement on other employees and, while the remark was clearly insulting, it was not enough, by itself, to be materially adverse.

I have written previously about adverse employment action decisions post-Burlington. From an employer's point of view, the most troublesome aspect of Burlington was that it adopted a very liberal standard for what is an adverse employment actions in retaliation claims and did not clearly delineate the standard it adopted. That left a void the courts of appeals have had to fill and it has taken some time for that to occur. In the Sixth Circuit, at least, it does not appear that the "post-Burlington" standard is markedly different than the pre-Burlington standard but that is not too surprising since Burlington affirmed the Sixth Circuit's decision holding a transfer to a job that was physically more demanding was an adverse employment action.

So, while today's decision is a welcome affirmation that not every job transfer will be an "adverse employment action," it is still important for employers to carefully evaluate any job transfer (of an employee who has complained about discrimination) to ensure that the transfer does not change the responsibilities, benefits or have any other negative effect. Of course, Burlington does not prohibit transfers even if they are adverse. Employers may take adverse action against an employee even after the employee has complained but, if so, the employer is well advised to have sound reasons for the decision.

Defining “Illegal Activities” for Whistleblowers

Today, the Tennessee Court of Appeals issued a decision that addresses what are "illegal activities" as meant by the Tennessee whistleblower statute, Tenn. Code Ann. § 50-1-304. The statute defines "illegal activities" as "activities that are in violation of the criminal or civil code of this state or the United States or any regulation intended to protect the public health, safety or welfare." That leaves a lot of room for interpretation and Tennessee courts have fleshed in some of answers.

The court of appeals' decisions agree on several important points. First, does the activity, as reported violate a "regulation intended to protect the public health, safety or welfare." Second, not every regulatory violation constitutes an "illegal activity" under the statute. Employees must prove "more than that their employer violated a law or regulation. They must prove that their efforts to bring to light an illegal or unsafe practice furthered an important public policy interest, rather than simply their personal interest."

This decision goes slightly further in making explicit what it had held previously, an employee is not protected simply because the employee believes the conduct is illegal. Rather, the conduct must actually be illegal; if it not, the employee complaints are not protected.

The issue in this case was whether the employee's reports of his supervisor viewing "scantily clad women, sometimes not clothed" on the supervisor's work computer was an "illegal activity." The images themselves were not outright "illegal" (as in child pornography or something else) and the court was a complaint about seeing these kind of images at work was a report of illegal activity.

While the court held for the employer, employers should act with caution; without counsel's advice, it is easy to be wrong about what is illegal activity. It is just as easy for an employer as an employee. So, employers should not base employment decisions solely on whether the employee's assertions constitute "illegal activities." The risk is too great. For example, here the plaintiff (a male) did not assert he thought the images on the computer were sexual harassment. Without saying that the images would have been harassment (there are decisions saying these probably would not have been), had a female employee complained and then been terminated, the complaint about the images might have been protected under the Tennessee Human Rights Act or Title VII.

So while the decision helps bring clarity to a vague statute, as a practical matter, the issue is only relevant after litigation ensues.

Employee Improvement Plans, Adverse Action and Retaliation

A month after taking FMLA, Dynetta Cole's employer, the State of Illinois, told her she had to agree to an employee improvement plan or she would be fired. She refused and was fired. Cole worked in the governor's office, filing and responding to correspondence. Before she took FMLA, Cole's supervisors had problems with and received complaints about Cole. Cole then took FMLA to recover from a car accident. She returned part-time but the problems remained, leading her supervisors to create an employee improvement plan designed to improve her attendance, attitude and job performance. The attendance portion of the plan focused on having Cole better communicate when she needed to be out of the office and suggested she write out her daily and weekly schedule for her supervisors. The attitude section was based upon multiple complaints from constituents and co-workers and suggested Cole be 'more aware of her tone" and work on being a "better listener." The job performance section noted Cole generally completed her duties but she had let her filings fall behind causing a strain on her co-workers (who apparently had trouble finding documents due to Cole's part-time status). Cole refused to sign the plan asserting she had received good performance evaluations and that any difficulties she had were due to cultural differences. After refusing a second opportunity to sign, Cole was fired. She sued contending retaliation under the FMLA.

The court initially held that Cole failed to show her termination was motivated by her taking FMLA leave as opposed to her twice-refusal to sign the improvement plan. The timing of her firing, two months after her FMLA leave was not enough. Cole also argued forcing her to sign the improvement plan was itself discriminatory, arguing that the plan was a "negative factor" for her using FMLA leave and was thus absolutely prohibited by the FMLA regulations. The court disagreed, holding the improvement plan was not a retaliatory adverse employment action in that it would not cause a reasonable employee to forego exercising rights under the FMLA. (More on that in a minute.) The court reasoned that the plan was not "onerous" the most it did was require Cole to submit daily and weekly schedules (which could be altered with advance notice). That was not enough because "a reasonable employee plans her day" and this task could actually improve work habits and productivity. The other requirements, saying she needed to be a better listener and be aware of her tone, were minor impositions at most.

The court's decision is significant because it applies the Supreme Court's 2006 decision in Burlington N. & Santa Fe Ry. v. White, 548 U.S. 53 (2006), to employee improvement plans. Before Burlington several decisions (including a Sixth Circuit decision) had held improvement plans were not adverse action but Burlington changed the legal criteria for what is a retaliatory adverse employment action. This decision construes the pre-Burlington decisions as entirely consistent with Burlington's holding.

One of the key points of the decision was that the plan itself did not put Cole intractably on the path to termination, had she signed it, she may have satisfied her supervisors and been able to keep her job. That distinguished it from situations where the employer had given the employee the choice of resigning or taking a lower paying job.

Employers in Tennessee are stuck with some pretty ridiculous caselaw on temporal proximity so the approach in Cole is a welcome alternative to taking immediate adverse action when an employee's performance lags after the employee returns from FMLA leave (or engages in some other protected activity). It is important, however, not to make the plan too "onerous;" but any plan that simply says to an employee, do your job, let us know when you will be at work, and don't be rude to customers and co-workers is hardly likely to be onerous.

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).

New Decision Roundup – Cat’s Paws, Investigations and Comp Time

I usually devote each post to one decision or some part of recently introduced legislation. Several court decisions were released last week but none, in its own right (especially in light of my prior blog posts) justifies my usual (too-involved) devotion. That said, I thought I would just give a short description of the decisions and say why each merits some short attention.

Proctor Hospital fired a reservist (for "insubordination, shirking, and attitude problems) who the sued it under USERRA, claiming his military service was the real reason for his firing. A jury agreed with him but the court of appeals in Chicago set the verdict aside because the court improperly admitted "anti-military" evidence that was not shown to have influenced the final firing decision. The decision has some excellent legal points for employment defense lawyers about whether the judge or the jury determines whether statements should be admitted but for employers (especially for those who read this blog), the message should be familiar. The issue here was whether the decision-maker was free of the anti-military statements made by the subordinate because the decision-maker conducted an "independent investigation" by "look[ing] beyond" the reports of misconduct from the biased supervisors and determined, based upon the employee's poor employment history with the hospital. Interestingly, while the Seventh Circuit essentially coined the "cat's paw" phrase in the discrimination context and other courts have used the phrase, the Seventh Circuit's approach to it is pretty demanding as compared to the Sixth Circuits. Under the Seventh Circuit decisions (and other courts as well), the decision-maker must truly rubber stamp the biased decision of a subordinate. The court says the standard requires the employee to show the decision-maker was blindly reliant on the report. The standard on this issue in the Sixth Circuit is far less clear but for the reasons I've given in prior posts, employers won't err by conducting in-depth investigations.

The Sixth Circuit has brought some needed clarity to what evidence is required before an employee can show the employer's reason for firing is so unreasonable as to be pretextual. One of the Home Depots in Nashville fired an assistant store manager ("ASM") because, on two occasions, she violated the company "no-self-service" policy that prohibits employees from ringing up their personal transactions. The ASM knew of the policy and its purpose (preventing employee theft) but had not been disciplined between the first and second infractions. Home Depot – wait for it – conducted an investigation, met with the ASM, reviewed security camera footage of the infraction and the decision to fire the employee was consistent with its practice in 18 other similar situations. This isn't a "cat's paw" case, however, because there was no evidence that any manager had made sex-based comments. The ASM's argument was that her firing was "unreasonable." While the "fairness" of a firing decision is not the issue in a discrimination claim, pretext can be shown under Sixth Circuit decisions where the firing is so unreasonable that it tends to show the employer was not being honest about its reasons. Prior decisions have, however, muddied the water somewhat giving the ASM the opportunity to argue that firing her for only two violations was so extreme it was unreasonable. That argument failed here, the court said, because Home Depot's "overly strict interpretation" of its "no-self-service" policy was not alone enough to show pretext. What had to be shown was that the ASM's interpretation of Home Depot's rule was "far superior" to how Home Depot interpreted it. In other words, Home Depot might not have won if its interpretation was a pretty-good stretch under terms of its policy; an example of this appears in Mickey v. Zeidler Tool & Die Co., 516 F.3d 516, 527 (6^th Cir. 2008). It also helped, the court said, that Home Depot conducted a "reasonable investigation prior to [the ASM's] termination, which strongly supports the view that it made an honest rather than a pretextual decision when it relied on the self-service rule to terminate her." So, aside from the obvious help the investigation made, before terminating someone based upon a policy violation, be sure the policy language can be reasonably interpreted to prohibit the conduct for which you are going to terminate the employee. This case shows the policy doesn't have to explicitly prohibit the conduct but your interpretation of the policy must still be reasonable.

Turning to a completely different subject, the Seventh Circuit has clarified the DOL Wage and Hour rules on how cities must grant requests to use compensatory time ("comp time) for police officers under the FLSA. The dispute concerned Chicago taking the position that it, not the police officers, was entitled to name the date and time the officers could use their comp time. The officers, Chicago said, could only submit requests and the police department simply needed to offer some leave within a reasonable time of the request. It left the decision as to what was a reasonable time to the shift supervisors. The DOL regulation, 29 C.F.R. §553.25, says employee who request using comp time must be permitted to use the time off within a reasonable period after making the request unless that would unduly disrupt operations. Unlike other courts, the seventh circuit rejected Chicago's attack on the regulation and held that Chicago had improperly denied leave requests. The proper method, the court said, is that the "employer must ask whether leave on the date and time requested would produce undue disruption, and only if the answer is yes may the employer defer the leave—and then only for a 'reasonable time.'" Governmental employers should note that the DOL has proposed amendments to § 553.25 (among other things) which would no longer require employer to grant the leave on the date requested (you can keep up with the status and read comments about the proposed regulations at regulations.gov). Instead, the regulations as proposed would not require a public agency to allow the use of compensatory time on the day specifically requested, but only requires that the agency permit the use of the time within a reasonable period after the employee makes the request, unless the use would unduly disrupt the agency's operations. The lesson to be learned, whatever the new regulations say, is don't refuse comp time leave requests if they are inconvenient. There is a process that must be followed.

Firing an Employee on His Return from FMLA Leave

As lawyers, we sometimes have a non-practical view of the workplace. For example, to us the FMLA is about "leave" when in reality, the more fundamental point of the FMLA is to project the employee's job when the need for leave ends. The right to medical leave would be worthless without the right to reinstatement, a point the Sixth Circuit made last August.

A court of appeals decision last week, however, addressed a situation where the employer discovered performance problems while the employee is on FMLA leave. Mr. Cracco worked as a Service Center Manager for Vitran Express, a trucking company, at one of its Illinois terminals. He took approved leave for a medical condition and Vitran hired "several replacements" to cover his job while he was gone. The replacements discovered numerous problems, disorganization, not following of procedures, freight sitting on the dock, damaged fright hidden, safety concerns, customers complaining, overtime not being handled properly, and discrepancies in freight records. Based on these reports, the company launched an investigation, determining that Cracco had not simply made mistakes but had engaged in "deliberate attempts to disguise late and damaged deliveries." For that reason, Vitran then fired Cracco the day he returned from FMLA leave.

Cracco sued, claiming retaliation and interference under the FMLA. The court rejected all of his arguments. On the retaliation claim, the court held that the FMLA did not per se prohibit an employer from terminating an employee because, while the employee was on leave, the employer learned of misconduct. Notice the "but for" connection here. If the employee had not gone on medical leave, the employer might never have learned of the faked records. But that is not enough in itself to show legal causation under the FMLA.

Cracco's FMLA inference claim foundered because of that portion of the FMLA which provides that an employee's right to reinstatement is not absolute and the employee is not entitled to "any right, benefit, or position of employment other than any right, benefit, or position to which the employee would have been entitled had the employee not taken the leave." 29 U.S.C. § 2614(a)(3)(B). So, an employee is not entitled to reinstatement if the employer can "present evidence to show that the employee would not have been entitled to his position even if he had not taken leave." Now here is the important point about Cracco v. Vitran.

Vitran presented "substantial evidence" that Cracco had faked records, of its investigation and how it learned of the misconduct in the first place. In contrast, the employee presented "no evidence" that the reports were not made or that Vitran's investigation was not an honest attempt to ascertain the accuracy of the allegations.

There's no question that an employer may take employment action against an employee for what the employer discovers while the employee is on FMLA leave. The real issue is what is behind the discovery. Honest investigations, as I have stressed elsewhere, are the key. Even on the interference claim, the issue in this case wasn't whether or not the misfeasance had occurred but whether or not the employer honestly believed it occurred. The employer showed this by conducting a thorough investigation – though oddly enough, the court never mentioned whether or not the employee had been interviewed as part of the investigation. (There would have been good reasons for not interviewing the employee: he was on medical leave and the performance issues were self-evidence in the delivery records). There was also a lack of evidence regarding how the employer had treated similarly situated employees and this evidence can be quite crucial in any discrimination lawsuit.

A word to the wise. Because the taking of FMLA leave is itself protected, the timing of any employment action is going to look bad so a smart employer will be extra-careful in documenting the investigation, the basis for the decision and whether any other remotely similar incidents are distinguishable or not.

The Dangers of Quantifying Performance

Last week, the Sixth Circuit affirmed a six million dollar compensatory damages award (most of which was back pay and front pay) in an age discrimination claim case against New York Life. (The court awarded an additional $6 million in punitive damages but I will focus only on the merits of the age discrimination claim).

I've written on a related topic in a prior post, involving an appeal of another age discrimination claim where Sears terminated a store manager for poor performance. That store manager argued she was treated worse than other younger store managers but Sears relied upon two key facts, that the fired store manager was truly the worst performer of the lot and that the comparisons the fired store manager drew were mixed, in the sense that she tried to cherry-picked the comparators.

Contrast that with what happened in the New York Life ("NYL") case. NYL also quantified its managers' performance. Instead of relying, as Sears did, on store sales metrics (that is, figures that were largely objective), NYL's metrics were a mix of subjective and objective factors. NYL used "an index that it calls Growth Profitably and Accountability ("GPA") as one means of measuring a manager's performance." (The GPA scores could range from 0 to 4.) I won't go into how GPAs were derived, it is enough to say that when NYL fired the plaintiff, it said it was because he missed reaching a goal (hiring a certain number of sales employees), a goal he missed hitting by one (debatable) point. So, (a) comparatively low GPA + (b) missing a goal by one point = (c) termination of employment.

Aside from attacking the accuracy of his GPA, the fired manager presented strong evidence that NYL had deviated from applying its "normal rules" (remedial action procedures for when a manager has a low GPA) to other, younger managers, without doing the same for him. Unfortunately for NYL, the GPA calculations made it easy for the plaintiff to demonstrate the favoritism of younger managers. The court devoted several pages to discussing how the younger managers (in other geographic areas) had GPA's similar to the fired manager but received promotions or were not put on "performance warnings" and were not terminated. Of course, NYL argued the fired manager's comparisons were invalid but the court of appeals rejected that argument out of hand (perhaps too readily, I would argue) largely because the GPAs for the younger managers were every bit as bad as the fired managers' GPA. They were, in reality, so stark, NYL's attempt to explain them away them fell flat.

I wanted to write about this decision to make several points.

First, consistency is crucial. If there are reasons to make distinctions, make sure to document them clearly in the appropriate document.

Second, if you are going to quantify performance, don't try to quantify subjective factors and then make fine distinctions between close numbers. That is, if the numbers you use are going to be relatively close together (say 12 versus 13 on a 20 point scale), that distinction isn't going to come across all that well when a court looks at the raw numeric score. (Recall Sears not only used objective figures –poor store sales – it also included several anecdotes which demonstrated why the fired store manager didn't have a clue how to effectively manage a store.) When the numbers are close – or when the employee misses a goal by a small amount – quantification makes it much easier for the employee to effectively argue that the employer failed to accurately evaluate the employee's performance.

Third, don't fall into the trap of thinking that putting numbers on an employee's performance necessarily makes that performance assessment "objective" or easier to defend. Neither is true, unless you are perfectly entirely consistent (an almost impossible outcome). Don't get me wrong, if the numbers are based on objective factors (or even largely objective factors), they can be quite useful (as long as you treat similarly situated employees the same). But when employers try to turn subjective factors into objective-seeming figures, they simply change the focus of the argument from the accuracy of the performance assessment to whether the individual's performance "factors" were properly scored vis-à-vis the other employees. Simply put, I would much rather defend a detailed explanation of an employee's performance written in plain English than one where the employer has developed 12 different performance factors and put a number next to each factor for each employee.

Job Reassignments and Reasonable Accommodations

One of the more controversial topics under the ADA is to what extent is an employer obligated, as a reasonable accommodation, to transfer an employee to another (vacant) job. It is controversial because, by definition, reassignment only comes into consideration when the employee (the EEOC says), because of a disability, "can no longer perform the essential functions of his/her current position, with or without reasonable accommodation" or undue hardship. It doesn't help that the EEOC takes the position that "The employee does not need to be the best qualified individual for the position in order to obtain it as a reassignment" leading some courts to disagree with the EEOC.

With passage of the 2008 amendments to the ADA, employers are going to find themselves having to address many more requests for accommodations, a good number of which are going to be job transfer requests. I'm not going to go into all of the rules and considerations that go into whether to accommodate such a request. If you want a refresher, the EEOC's Enforcement Guidance on Reassignments, gets close enough.

What I want to talk about is some of the reasons why, not too long ago, Liberty Mutual Insurance Company found itself on the losing end of a failure to reasonably accommodate ruling by the United States Court of Appeals for the First Circuit (governing primarily the New England States) and will, it looks like, have to pay a former insurance salesman more than $1.3 million in damages (attorney fees will be additional). Of course, what I know of the case is based solely on what is written in the court's decision.

Kevin Tobin worked for Liberty Mutual selling insurance for nearly thirty-seven years. Mr. Tobin has bi-polar disorder, diagnosed several years before his termination, and it ultimately appears to have prevented Tobin from performing up to standards in his current sales position. In fact, the court of appeals, in an earlier ruling, upheld Liberty Mutual's decision to terminate Tobin because of his "longstanding performance difficulties" but ordered a trial on Tobin's accommodation claim. At the trial, Tobin argued a reasonable accommodation would have been to assign him to manage "mass marketing" accounts, accounts that are group insurance programs offered to businesses and other institutions in which employees or members are able to purchase insurance policies at a discount. These "MM" accounts are highly sought-after because of the volume and ease at which some can be managed. Liberty Mutual refused, saying that Tobin's sales record made him ineligible for the MM assignments because they were awarded as perks to the best performing agents and that Tobin, because of his disability, could not have handled the stress of the MM accounts in any event. (Stress, the evidence showed, tended to worsen Tobin's mental problems.)

Where Liberty Mutual's case fell apart was in asserting reasons that were not supported by the facts.

It may be true that MM accounts were largely (or even overwhelmingly) assigned as perks for the best performers. There was evidence, including from Tobin's former manager and other sales employees, that MM accounts were not uniformly so assigned. So, while it is true that uniformly applied seniority rules do not have to be ignored in making an accommodation, US Airways, Inc. v. Barnett, 535 U.S. 391, 404-05 (2002), the catch is that where "one more departure [from the practice] will not likely make a difference," the employee may be able to show a deserved accommodation was wrongly denied.

So in deciding whether or not to transfer an employee with a disability to a vacant job, never look to what you think the transfer standards should be. You must look at your actual past practice in filing the position before denying the accommodation.

Liberty Mutual's other argument – that Tobin's disorder rendered him incapable of handling some of the MM accounts – also fell flat. Sure, the court acknowledged, Liberty Mutual could point to MM accounts that Tobin probably could not handle due to the pressure but that didn't mean, the court said, Tobin could not manage any MM account. There was testimony that some MM accounts were "easy" to manage. Again, the thoroughness of the evaluation at the time was what hung out to dry Liberty Mutual.

Reading between the lines, my take on this case is that Liberty Mutual finally ran out of patience with Mr. Tobin. The court said Liberty Mutual had engaged in the "interactive process" and made other accommodations than the ones at issue in this lawsuit. The provided accommodations, it appears, were geared toward helping the employee perform his old job, there was no indication, Liberty Mutual offered any other accommodation (in this instance, some other vacant job Tobin could have performed). Remember, once an employer offers an accommodation that is reasonable, the employee cannot reject it and demand the employer provide a preferred accommodation.

An employer does not always have to have the patience of Job (it helps, of course) but just a little more patience – in the form of giving Tobin at least the opportunity to fail in working on the MM accounts (or some other job) - could have possibly avoided the outcome in this case.

One of the best services an employment attorney can provide a client is to say when the client is about to make a mistake. It isn't easy or fun to give that message (there is an art to the delivery) but it often saves the client years of heartache, worry, significant money and the risk inherent in litigation. A good defense lawyer also knows how important it is to ask probing and "difficult" questions in rendering advice. So too must an HR manager. If you are going to bet the farm on a position, don't simply ask, "what is the rule," also ask, "what exceptions have been made to that rule." (And take it as a given that no rule is without some exception, even if only a potential one.)

Not every exception or potential exception will require you to grant the accommodation request, however. Under Barnett, the test is whether "one more exception" would make a difference. To determine that, you must examine all the facts, not simply those that might fit the desired outcome.

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.