Fifth Circuit Holds that Employee's Internal Complaints of Securities Violations Do Not Qualify for Dodd-Frank Whistleblower Protection

In a recent opinion of the Fifth Circuit Court of Appeals, the federal appellate court held that a former employee terminated after making internal complaints to his employer about possible securities violations, but who never made complaints to the S.E.C., was not a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd Frank"). 

Khaled Asadi was hired by G.E. Energy ("G.E.") in 2006 as its Iraq Country Executive.  In 2010, Iraqi officials reported to Asadi a concern that a new female G.E. employee had been hired to gain favor with an Iraqi official in negotiating a joint venture agreement.  Believing that this conduct could potentially violate the Foreign Corrupt Practices Act, Asadi reported this information to his supervisor and other G.E. officials.  Thereafter, Asadi received a negative performance review and was terminated within one year following the report.

Asadi sued claiming that his termination violated the Dodd Frank whistleblower-protection provisions.  G.E. moved to dismiss on the grounds that because his complaint was made internally to G.E., Asadi did not qualify as a Dodd Frank Whistleblower and arguing that the Dodd Frank Act did not apply extraterritoriality.  The trial court concluded that the Dodd Frank Act did not apply to whistle-blowing activity outside the U.S. and dismissed the complaint without addressing whether Asadi was a whistleblower.

On appeal, the Fifth Circuit examined the provisions of the Dodd Frank Act to determine whether Asadi was entitled to whistleblower protections.  First, the court analyzed the statute's definition of the term "whistleblower" and concluded that the statute mandates a report to the SEC to be included within the term's definition.  Second, the court rejected an SEC regulatory definition of "whistleblower" concluding that the Commission's definition improperly expanded the Congressional definition of a whistleblower and was therefore entitled to no deference.  Because Asadi had made no report of securities violations to the SEC, he was not a Dodd Frank whistleblower.  Stated another way, the court held that the "whistleblower-protection provision creates a private right of action only for individuals who provide information relating to a violation of the securities laws to the SEC."

The takeaway from Asadi is that an employee in Texas, Louisiana and Mississippi seeking the whistleblower protections of the Dodd Frank Act (and the incentive programs) must make a report of alleged securities violations directly to the SEC.

You download a complete copy of Asadi v. G.E. Energy (U.S.A), LLC  here.

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U.S. Supreme Court Adopts "But For" Causation Standard for Title VII Retaliation Cases

In a case appealed from the Fifth Circuit Court of Appeals, the U.S. Supreme Court held that a plaintiff in a Title VII retaliation case may prevail only when he shows that he would not have suffered an adverse employment action “but for” his engaging in protected activity.

In the first retaliation case in several years to side with the employer’s position, the Court held that Title VII retaliation plaintiff’s “claims must be proved by traditional principles of but-for causation.” Stated another way, the plaintiff must prove that the “unlawful retaliation would not have occurred in the absence of the alleged wrongful action or actions of the employer.” 

In reaching its conclusion, the majority noted the increase in retaliation filings and the importance of having a fair and responsible allocation of resources in the judicial and litigation systems. The Court also observed that setting a lower standard of causation could contribute to the increase in the filings of frivolous claims. Justice Kennedy described a hypothetical that one can image occurs all too frequently in reality.

Consider . . . the case of an employee who knows that he or she is about to be fired for poor performance, given a lower pay grade, or even just transferred to a different assignment or location. To forestall that lawful action, he or she might be tempted to make an unfounded charge of racial, sexual, or religious discrimination; then, when the unrelated employment action comes, the employee could allege that it is retaliation.

It is unlikely, however, that the more direct “but-for” standard of causation will stem the rising tide of retaliation charges.

You can read a full copy of the UTSW v. Nassar here [pdf].

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Fifth Circuit Holds that Volunteer Firefighter is not an "Employee" for Purposes of Title VII

In an issue of first impression in this Fifth Circuit, the Court held that a volunteer firefighter making a Title VII claim of sexual harassment is not an “employee” for purposes of the statute and therefore had no legal claim.

The case arose from a suit filed by a former firefighter for the Livingston Parish Fire Department who claimed that she was subjected to sexual harassment during her tenure with the Department. She filed a charge of discrimination and later sued. The Department defended on the grounds that as a volunteer, Juino was not an “employee” for purposes of Title VII and therefore could not bring a claim. Further, the Department argued that it was not an employer for Title VII purposes because while its membership roster had approximately 70 firefighters, only three were paid employees and therefore they lacked the threshold 15 employees for Title VII coverage.

The trial court accepted the Department’s arguments and entered judgment in its favor. On appeal, the Fifth Circuit Court of Appeals was charged with deciding, for the first time in the Circuit, whether (and under what circumstances) volunteers are employees for purposes of Title VII.

The Court analyzed the two different approaches considered by the Circuit Courts that have addressed the issue --the threshold remuneration test and the incidents of employment relationship test. In the threshold remuneration test adopted by most of the Courts addressing the issue, the plaintiff-volunteer must make a threshold showing that she received remuneration or some other significant indirect benefit. The incident of employment test, adopted by two Circuits, treats remuneration as merely one factor in determining the overall employment relationship rather than the dispositive factor. The Fifth Circuit concluded that the threshold remuneration test was the proper test to apply in its jurisdiction.

Having determined that the threshold remuneration test was the appropriate test to apply, the Court analyzed Juino’s engagement with the Department to determine whether she was an employee. Juino received $2 per emergency call; life insurance; uniform and badge; emergency response gear and training. During her engagement, Juino responded to 39 calls for a total monetary remuneration of $78. These benefits, the Court concluded, were merely incidental to her volunteer service for the District and unlike the significant indirect benefits received by volunteer firefighters in other reported cases where the volunteers were determined to be employees (e.g., retirement and pension benefits, life insurance, death benefits, disability insurance, tax exemptions for unreimbursed business expenses, scholarships for dependents, reduced rates on commemorative license plates and limited medical benefits). The Court concluded that Juino’s indirect benefits were too insignificant to pass the threshold remuneration test and she was therefore not an employee for Title VII purposes.

The takeaway from this opinion is not only that volunteers are not covered by the protections of Title VII, but unpaid interns are also likely not covered. Moreover, if volunteers and unpaid interns are not “employees” for Title VII purposes, it follows that their numbers should not be counted in determining “employer” coverage under the statute.  Moreover, given that other federal employment statutes use the same definition of "employee", it is likely that volunteers and unpaid interns lack coverage under those statutes as well.

You can read the entire opinion in Juino v. Livingston Parish Fire District No. 5 here.

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Fifth Circuit Holds That Attorney's Fees Not Recoverable In Title VII Mixed-Motive Retaliation Case

In a recent case from the Fifth Circuit, the Court held that attorney’s fees are not recoverable for a prevailing plaintiff in a Title VII mixed-motive retaliation case. In Carter v. Luminant Power Serv. Co., the plaintiff employee brought a Title VII discrimination and retaliation claim alleging that he was disciplined for his complaints of racial discrimination. A jury found that Carter’s complaints motivated Luminant’s disciplinary decision but it also found that Luminant would have made the same decision despite Carter’s complaints (i.e., the mixed-motive defense). Because the plaintiff only prevailed on his retaliation claim and the employer established its mixed-motive defense, the trial court taxed court costs against the plaintiff employee. Carter asked the trial court to re-tax costs and attorney’s fees against Luminant because he prevailed on his retaliation claim.  The trial court refused to do so concluding that the fees and costs shifting provisions of Title VII do not apply to a mixed-motive retaliation claim. 

The Fifth Circuit affirmed the trial court reasoning that since the mixed-motive fee and cost shifting provisions of Title VII only refer to the prohibitions against Title VII discrimination action, those provisions did not apply to mixed-motive retaliation actions.

 

You can download a copy of Carter v. Luminant Power Serv. Co., here.

 

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Employment Lawyers Must Document Their Efforts to Recover Attorney's Fees under Texas Commission on Human Rights Act

Prevailing plaintiffs in employment discrimination, harassment and retaliation cases can recover attorney's fees their attorney's incur in prosecuting those claims.  In many instances the attorney's fees sought can exceed the monetary relief the plaintiff obtains and can act as a serious impediment to prompt settlement. 

Since most of these cases are done on a contingency fee basis (i.e., the employee's attorney only gets paid if the plaintiff recovers either through settlement or trial), there is wide disparity of the type of records plaintiff employment lawyers keep.  The Supreme Court of Texas recently clarified that in order for an attorney to recover fees under the lodestar method, at a minimum, the attorney must present documentation showing: 1) the services performed; 2) the identity of the person performing the services; 3) the amount of time spent by the person; 4) the hourly rate of the person; 5) when the services were performed; and 6) how much time was spent performing the services.

This result will not seem shocking or surprising practitioners used to federal court practice where lodestar fees and contemporaneous time records are the norm; however, it is good to see the Texas Supreme Court formally adopt this practice for proceedings under state law in state court.

A copy of the Court's opinion can be downloaded here.

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Dodd-Frank Act Effect on Employer Arbitration Programs

The Dodd-Frank Act created a "reward" (bounty) program for  whistle blowers that voluntarily provide original information of fraud or unlawful activity in violation of the Sarbanes-Oxley Act, the Foreign Corrupt Practices Act and other securities law violations.  The Dodd-Frank Act also provides whistle blowers protection from retaliation and renders pre-dispute arbitration agreements of whistle blower or retaliation claims unenforceable.  

As a result of the provisions regarding pre-dispute arbitration agreements, a number of plaintiff-employees have attempted to invalidate their arbitration agreements based on the Dodd-Frank and Sarbanes-Oxley Act provisions.  A recent federal trial court opinions illustrates the limits of those efforts.

In Holmes v. Air Liquide, Inc., the plaintiff asserted claims under the ADA, Texas Labor Code and Title VII following his termination.  During his employment with the company, he signed an arbitration agreement agreeing to submit all disputes to mandatory, binding arbitration.  When the employer sought to compel the case to arbitration, the plaintiff argued that the agreement was rendered invalid and unenforceable with the passage of Dodd-Frank.  While ducking the issue of whether the invalidity of pre-dispute arbitration agreements applies only to claims asserted under Dodd-Frank (as opposed to other federal statutes like the ones Holmes sued on), the Court held the arbitration agreement was valid and enforceable because the agreement was entered before the passage of Dodd-Frank and the statute should not be applied retroactively.  Consequently, the Court enforced the arbitration agreement and compelled the parties to engage in arbitration.

A full copy of the Court's opinion is available for download here.

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Texas Law Prohibits Employers from Requiring Employees to Purchase Employer's Goods

As I was driving home last night, NPR played a clip from the 1947 folk song "16 Tons."  Its a catchy tune about 1940's coal mining.  The chorus of the song has the coal miner asking St. Peter to delay his death because he owes his soul to the company store.  Employers used to provide "company stores" for employees where they could purchase items (usually at inflated prices) from a store owned by the employer.  Employees "paid" for their purchases through debts secured against their wages.  Here is Tennessee Ernie Ford's rendition of "16 Tons."

While there are few employers that maintain "company stores," many states have enacted laws that prohibit employers from requiring employees to purchase the employer's products. Some employers have been sued because they maintained policies that require employees to buy and wear their brands while working --the modern equivalent of the "company store."    

Texas has a law that prohibits employers from requiring, through coersion, employees to purchase items from the employer.  The Texas Labor Code provides a modest monetary penalty for any person that requires or attempts to require an employee to purchase food, clothing or merchandise from a place or store. Despite the fact that this law has been in place since 1993, there are no Texas cases citing the section.  This suggests that Texas employers are not requiring employees to purchase items from the employer or the statute's lack of a civil remedy (i.e., a cause of action to sue for in court) means that these practices aren't seeing the light of courthouse.

A copy of the Texas Labor Code provision is available here.

Fifth Circuit Sets Two Year Statute of Limitations for False Claims Act Retaliation Cases

The federal False Claims Act (aka Qui Tam statute) provides a cause of action for an employee who is retaliated against for attempting to prevent its employer from making fraudulent claims for payment to the United States.  An open issue in the Fifth Circuit (the federal court of appeals covering appeals from Texas, Louisiana and Mississippi) was how quickly a plaintiff had to file a lawsuit for retaliation under the statute. In Riddle v. Dyncorp Inter. Inc., the Court clarified that the appropriate statute of limitations for an FCA retaliation claim in Texas is two years.  

In Riddle, the plaintiff alleged that he was a senior employment manager for Dyncorp until he was terminated.  Prior to his termination, Dyncorp, according to Riddle, contracted with the federal government to create a database but took no meaningful steps to fulfill the obligation.  He claims that when he protested the inaction, he was marginalized at work and eventually fired.  He filed his complaint against Dyncorp and three employees 178 days after his termination.  The company moved to dismiss the complaint alleging that a 90 day statute of limitations (borrowed from the Texas Whistleblower Act) applied to the claim and was untimely.  The trial court accepted this argument and dismissed the complaint.

On appeal, the Fifth Circuit Court of Appeals reversed the trial court and concluded that a two year statute of limitations applied to the claim.  When a federal cause of action fails to set a statute of limitations, the court is required to look at the most closely applicable state law claim and apply its statute of limitations.  Here, the court of appeals had to determine whether the 90 days statute of limitations from the Texas Whistleblower Act or the general two year statute of limitations applying to personal injury claims and is the default limitations period under Texas law applied.  Given that the Texas Whistleblower Act applies only to public employees and requires the exhaustion of any administrative appeals processes of the public employer, the Court found a sufficient number of differences between the FCA and TWA such that the 90 day limitations period was inapplicable.  Instead, the Court held that an FCA retaliation claim is more closely akin to a Sabine Pilot wrongful discharge claim (i.e., termination for refusal to perform an illegal act) because it is available to all employees (except those covered by contract or CBA) and has no administrative prerequisites that must be exhausted before bringing suit.  The Sabine Pilot claim has a two year statute of limitations.  Consequently, the Court concluded that the two year limitations period was appropriate, reversed the trial court's dismissal, and remanded the case back to the trial court for further proceedings.

A full copy of the Court's opinion is available here.

Follow me on Twitter @RussellCawyer

Should You Ever Hang Up on the Texas Workforce Commission?

In Texas, employees and employers are entitled to a telephone hearing before a hearing officer if either party disagrees with an initial determination issued by the Commission in unemployment benefit and Texas Pay Day Act claims.  There are some occasions, however, where an employer may consider foregoing these telephone conferences --even if it means losing the unemployment benefit claim.

Telephone hearings before hearing officers are conducted under oath and are recorded.  This constitute sworn testimony that will be binding on the parties in subequent proceedings.  Some attorneys representing employees use these telephone hearings to conduct discovery on potential discrimination, retaliation, harassment or wage and hour claims they may be thinking about filing.  If you appear for an administrative telephonic appeals hearing without your labor and employment counsel and the employee on the other side has a lawyer; think long and hard about whether you want to participate further in the proceeding without advice of counsel.  You might win the battle (i.e., the telephone hearing) but lose the war by having the testimony offered at the hearing used against the employer in a more significant lawsuit with more exposure.  Sometimes it may be better to just hang up and not oppose the unemployment benefit claim.

Follow me on Twitter @RussellCawyer.

What is Employment Practices Liability Insurance and Does My Company Need It?

Employment Practices Liability Insurance, or EPLI, is business insurance an employer can purchase that will provide protection from losses caused by certain employment disputes with current or former employees. EPLI is in addition to commercial general liability or umbrella policies that normally contain exclusions for most employment claims.

EPLI normally covers the employer, its employees and executives for losses (including defense costs) attributed to claims for discrimination, harassment and retaliation; wrongful discharge; defamation (i.e., libel and slander); invasion of privacy and false imprisonment.  It normally does not include coverage for wage and hour claims (FLSA); claims for breach of contact or claims by independent contractors; claims arising under WARN, NLRA, OSHA, ERISA, COBRA and some ADA claims. It will also not include coverage for attorney’s fees associated with claims brought by the employer against the former employee such as counter claims (e.g., breach of contract, theft of trade secrets). Depending on the state where the claim is made, punitive damages may also be excluded or uninsurable.

Defense costs, including attorney’s fees, are often the largest expense an employer faces in defending an employment claim brought by a former employee. Even a frivolous claim or a claim the employer eventually wins is expensive to defend. These fees and costs are usually covered by EPLI but have the effect of decreasing the amount of coverage available to pay a judgment or settlement. Another potential limitation of EPLI coverage is that the insurance company normally gets to select the defense counsel that will defend the employer for covered claims. If selection of or use of particular lawyer is important (i.e., your normal labor and employment counsel), the employer should have included in its policy a provision that gives it the right to select defense counsel. 

EPLI policies are normally claims made policies. A "claims made" policy means that it will only protect against losses that occurred during the policy period and that are reported within a short period following the end of the policy period. Because an employer may learn of a potential claim until months after the employee leaves employment (and potentially after the expiration of the policy period), the employer may want to consider purchasing additional coverage that will extend the protection the employer has for up to a year after the end of the policy period (aka tail coverage).  Failure to timely make a claim and put the insurance carrier on notice of the potential claim can be grounds for the carrier to deny the claim.

EPLI can also be expensive. Rates depend on a variety of factors including the location(s) where the employer has employees; the number of employees; the employer turnover rate; and prior history of employment litigation among others. However, EPLI can be an important part of many business' overall risk avoidance or minimization strategy. If you have questions about whether EPLI is right for your business, contact your insurance broker or your labor and employment attorney.  

Follow me on Twitter @RussellCawyer

Fifth Circuit Holds Title VII Damage Caps Apply "Per Party" Not "Per Claim"

In an issue of first impression in the Fifth Circuit, the U.S. Court of Appeals holds that Title VII's damages cap apply on a "per party" basis rather than on "per claim."  In Black v. Pan American, the Plaintiff, Carleen Black, prevailed on her Title VII and TCHRA claims of sex discrimination and retaliation.  The jury awarded Black $3.45M in back pay and compensatory damages.  Prior to entry of judgment, the trial court reduced the jury's award to $500,000 representing $300,000 in back pay and $200,000 in compensatory and punitive damages.

On appeal, plaintiff argued that the Title VII damage caps ($200,000 in this case based on the size of the employer) should be applied on a "per claim" rather than on a "per party" basis.  If the Plaintiff's argument was accepted, her judgment would include $600,000 for capped compensatory and punitive damages rather than $200,000 because she prevailed on three capped claims.  In holding that Title VII's damage caps apply "per party" rather than "per claim," the Court first noted that the Sixth, Seventh, Tenth and D.C. Courts of Appeals had held that caps apply per party.  The Court then examined the statute and concluded that "the plain language of Section 1981a(b)'s cap applies to each party in an action." Consequently, the Court affirmed the trial court's judgment that capped Black's compensatory and punitive damages at $200,000.

You can download a complete copy of the Court's opinion in Black v. Pan American Laboratories, LLC here.

Follow me on Twitter @RussellCawyer.

El Paso Court of Appeals Recognizes Private Right of Action for Retaliation for Assisted Living Facility Employees

In an issue of first impression, the El Paso Court of Appeals has held that the Assisted Living Facility Licensing Act creates a private right of action for an employee who has filed a complaint, grievance of providing information in good faith relating to personal care services of the assisted living facility.

In Emeritus Corp. v. Blanco, Blanco was Interim Executive Director for an Assisted Living Facility in El Paso.  During her employment, she complained about inadequate staffing and training to her superiors.  Ultimately, Blanco tendered her two week notice of resignation.  Shortly before her scheduled final day of employment, she sent  an email to seven Emeritus employees and supervisors further detailing her concerns that patient care and safety she attributed to the lack of staff and inadequate training.  Her resignation was accepted the following day.

She brought suit alleging that she had been retaliated against and constructively discharged because of her complaints about patient care and safety.  A jury returned a verdict in her favor for lost wages and mental anguish in the amount of $128,500.  Emeritus appealed, in part, arguing that the ALFLA provided no private cause of action for retaliation because the Act, while expressly prohibiting retaliation, provided not right to bring a lawsuit.

In reaching its decision, appellate court reviewed a variety of the statutes under the Health & Safety Code.  It noted that some of the provisions contain anti-retaliation provisions and create private rights of action; some have anti-retaliation provisions but only provide for administrative penalties; and one that prohibits retaliation but provides neither an administrative penalty or private right of action.  The Court reasoned that by interpreting the ALFLA to expressly prohibit retaliation but not provide a remedy for retaliation would lead to an absurd result and render the retaliation provisions meaningless.  Therefore, it recognized an implied private cause of action for an employee believing he or she has been retaliated against.

This opinion appears to be in contrast to the longstanding rule in Texas that it is for the Legislature to create new causes of action and not for judicial bodies to do so.  Given the lack of an express private right to file a lawsuit under the statute (when other provisions of the Health & Safety Code provide a remedy), I expect an appeal to the Texas Supreme Court with amicus briefs from the Assisted Living Facility interest and business groups that think a judicially created private cause of action in the absence of express statutory provision providing for such is unsupported by Texas jurisprudence.

You can download a complete copy of the Court's opinion in Emeritus Corp. v. Blanco here.

Follow me on Twitter @RussellCawyer.

Wal-Mart v. Dukes Not Evidence of High Court Pro-Business Slant

I keep reading reports that Wal-Mart v. Dukes, where the Court reversed a class certification including 1.5 million women (who worked all over the U.S. under different supervisors at different stores) that was based on the company giving supervisors too much discretion, 125 anecdotal stories and an expert report employing dubious social framework analysis, demonstrates that the Court has a pro-business slant.  (Examples here, here and here).  These articles are prompted largely by the Senate Judiciary hearing held June 29, 2011 entitled "Barriers to Justice and Accountability: How the Supreme Court's Recent Rulings will Affect Corporate Behavior."  I disagree that the Court has a pro-business bias in employment discrimination, harassment and retaliation cases.

In the four employment cases heard this term, the Court found for the employee/plaintiff on three of those cases --all retaliation cases.  For example, in Kasten the Court held that employees can engage in FLSA-protected activity by making complaints orally rather than just in writing.  In Thompson, the Court held that an employee who has never engaged in Title VII protected activity can bring a retaliation claim if they are closely associated with another that has engaged in protected activity.  Finally, in Staub, the Court held that an employee can maintain a USERRA retaliation case even where the decision maker is unaware of the employee protected activity if the plaintiff can show that

Dukes is an example of a case that should have never been certified as a disparate treatment (i.e., intentional discrimination) case in the first place.  Nothing more; nothing less.  In fact, Dukes was more of a procedure case than it  ever was an employment discrimination case.  Certainly, it is not proof that the Supreme Court has a pro-business bias.

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Fifth Circuit Holds Loss of Consortium Damages Unavailable To Spouse of Successful Title VII Plaintiff

The Fifth Circuit held today that a spouse of a successful Title VII plaintiff cannot maintain a legal claim for loss of consortium (i.e., loss of spousal services) under state and federal law.  In Barker, Tracey Barker was a civilian worker employed by Halliburton (aka KBR).  She claimed she was subjected to sexual harassment, retaliation and various other torts while working for Halliburton in Iraq.  She and her husband filed suit in federal district court but the wife's claims were compelled to arbitration and the husband's claims were abated pending the arbitration. 

Ms. Barker won $1.23 million from the arbitrator (reduced from $2.93M) on the Title VII claims but the tort claims for assault, battery, intentional infliction of emotional distress and false imprisonment were dismissed.  (Note:  Who says arbitrators don't render large awards in employment cases?).  Mr. Barker's claims were dismissed by the federal district court because it held he could not maintain a claim that was solely derivative of his wife's tort claims where those tort claims had been dismissed by the arbitrator and the only successful claim was under Title VII.

The Fifth Circuit Court of Appeals affirmed reasoning that:

Under Texas law, a loss of consortium claim is derivative of the tortfeasor's liability to the physically injured spouse.  Thus, when a husband asserts a loss of consortium claim, he must establish that the tortfeasor was liable for the tort claim of his physically injured wife.  Galen Barker's argument fails for two reasons.  First, Galen Barker's claim must derive from a successful tort claim.  Therefore, in Texas, a loss of consortium claim may not derive from a spouse's federal civil rights claim.  The second reason Galen Barker's argument fails is because the arbitrator dismissed Tracey Barker's tort claims.  Galen Barker's loss of consortium claim must derive from his wife's successful tort claim for her physical injuries.  That is not possible here because the arbitrator dismissed Tracey Barker's tort claims with prejudice.

Consequently, if a Texas employer is faced with an employee-spouse's loss of consortium claim that derive solely from violations of civil rights laws, the employer should consider asking the court to dismiss the spouse's claims. You can download the complete opinion of Barker v. Halliburton here.

State of Texas Immune from Worker's Compensation Retaliation Claims

In today's Supreme Court of Texas orders, the Court held that the State of Texas (including its political subdivisions such as counties) is immune from worker's compensation retaliation suits.  You can read a full copy of the Court's opinion in Travis Central Appraisal District v. Norman here.

Oral Complaints of Wage and Hour Violations Sufficient to Provide Protection from Retaliation

The Fair Labor Standards Act is the federal law that requires most employers to pay a minimum wage and overtime.  The FLSA also includes an anti-retaliation provision that prohibits an employer from discharging any employee who has "filed a complaint" under the FLSA because of that complaint.  The issue at the high court in Kasten v. Saint-Gobain Performance Plastics Corp., was whether an oral complaint constitutes the "filing of a complaint" under the anti-retaliation provisions of the FLSA.

Kasten filed his suit after his employment ended claiming that he was retaliated against for making oral complaints about the Company's placement of time clocks that Kasten believed had the effect of preventing workers from receiving credit for time spent for donning and doffing work-related protective gear.  In other words, Kasten alleged that he made complaints to his employer that employees were not being paid for all working time as required by the FLSA.  Kasten apparently never put his complaints in writing.  The trial court dismissed Kasten's claim holding that Kasten failed to engage in legally protected activity under the FLSA because the Act did not cover oral complaints. 

The U.S. Supreme Court reversed the judgment against Kasten and held that the FLSA's statutory language prohibiting retaliation for filing a complaint includes oral as well as written complaints. The Court arrived at its decision by interpreting the statutory phrase itself and by taking into account the remedial purpose of the anti-retaliation provisions.  Consequently, when an employee makes an oral complaint about an FLSA violation, he or she has filed a complaint for purposes of the FLSA's anti-retaliation provisions and can bring a suit alleging that he or she was discharged in violation of the Act.

A full copy of the Court's opinion in Kasten v. Saint-Gobain Performance Plastics Corp. can be accessed here.

 

USERRA Provides No Cause of Action for Hostile Environment Discrimination

In an issue of first impression, the U.S. Court of Appeals for the Fifth Circuit (the federal appellate court hearing cases from Texas), held that the Uniformed Services Employment and Reemployment Rights Act (USERRA) provides no cause of action for a hostile work environment that is created because of a service member's military service. 

The Plaintiffs, in Carder v. Continental Airlines, Inc.,  alleged that Continental created a hostile work environment through "harassing, discriminatory, and degrading comments and conduct relating to and arising out of" their military service through a continuous pattern of harassment.  They further alleged that "Continental has . . .  chided and derided plaintiffs for their military service through the use of discriminatory conduct and derogatory comments regarding their military service and military leave obligations."  Examples cited in the suit included: 

  • placing onerous restrictions on taking military leave and arbitrarily attempting to cancel military leave;
  • making derisive and derogatory comments to pilots about their military service such as "If you guys take more than three or four days a month in military leave, you're just taking advantage of the system.";  "I used to a guard guy, so I know the scams you guys are running."; "Your commander can wait.  You work full time for me.  Part-time for him.  I need to speak with you, in person, to discuss your responsibilities here at Continental Airlines."; Continental is your big boss, the Guard is your little boss."; "It's getting really difficult to hire you military guys because you're taking so much military leave."; "You need to choose between CAL and the Navy."

The Court affirmed the trial court's dismissal of the hostile work environment claim concluding that Congress never intended to create such a claim. The Court's rationale was premised on two important points.  First, unlike Title VII, which prohibits discrimination in the "terms, conditions or privileges of employment", USERRA merely covers "benefits of employment".  The Court reasoned that the use of different phrases expressed Congressional intent to cover a narrower set of circumstances that would give rise to a claim than Title VII afforded.  Second, the Court observed  that the Department of Labor had promulgated regulations interpreting USERRA and included no reference to harassment or hostile work environment thereby providing further support that it should not be interpreted as providing such a cause of action.

For these reasons, the Court held that USERRA affords no cause of action for discrimination or harassment based on a hostile work environment theory. You can access the full opinion in Carder v. Continental Airlines, Inc. here.

Supreme Court Blesses Cat's Paw Theory of Discrimination

The U.S. Supreme Court recently considered the circumstances when an employer may be liable for employment discrimination based on the unlawful, discriminatory animus of an employee who influenced, but did not make, an ultimate employment decision.   This theory is commonly referred to as the Cat's Paw theory derived from fable about the monkey who convinces the cat to reach into the fire to pull out the roasting chestnuts.  The cat gets burned while the monkey makes off with the chestnuts.  In discrimination cases, the Cat's Paw theory refers to a situation where a supervisor with a discriminatory animus who influences, but does not make, the adverse employment decision.

The facts of Staub are straight forward.  In Staub, the employee complained that several of his direct supervisor were hostile to his reserve military service that periodically required him to miss work.  The employee complained that this hostile supervisors wrote him up on several occasions that were motivated by his military service.  Specially, Staub's direct supevisor issued him a corrective action for violating a company rule requiring him to stay in his work area when he was not working with a patient.  Several months later, a co-worker complained that Staub's frequent availablility.  On another occasion, the hostile supervisor reported that Staub had left his workstation without permission in violation of the earlier corrective action.  A hospital executive, whom had no discriminatory animus, reviewed Staub's file and made the decision to terminate his employment; at least in part on information contained in the file that was initiated by Staub's direct supervisors (and whom allegedly had discriminatory intent).  Staub appealed his termination through the hospital's grievance procedure but the decision stood.  Staub won at trial, but on appeal, the Seventh Circuit Court of Appeal reversed holding that since there was no evidence that the ultimate decisionmaker had a discriminatory animus, Staub could not hold the hospital liable for the discriminatory animus of a supervisor who was not the ulimate decisionmaker. 

The Supreme Court reversed the court of appeals.  As the Court stated, "If the employer's investigation results in an adverse action for reasons unrelated to the supervisor's original biased action . . . then the employer will not be liable."  However, "the employer is at fault [when] one of its agents committed an action based on discriminatory animus that was intended to cause, and did in fact cause, an adverse employment decision."  The core holding of the opinion is that "if a supervisor performs an act motivated by [discriminatory] animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under [the law]."

Staub substantially expands the scope of situations where employers can be held liable for discrimination based on the acts of nondecisionmaker supervisors. You can access a full copy of Staub v. Proctor Hospital here.

What others are saying about Staub.

Mrs. Palsgraf and the Cat's Paw Doctrine

With a Friend Like Justice Scalia . . . Cat's Paw Decision Not Very Employer Friendly

The Supreme Court Upholds Cat's Paw Theory of Liability in Anti-Military Discrimination Case

 

Supreme Court Recognizes Third-Party Retaliation Claims under Title VII

The U.S. Supreme Court announced that employees, who never engaged in protected activity, can bring third-party retaliation claims against their employers when they suffer an adverse employment action due to their connection with a person who has engaged in protected activity.

The facts of Thompson v. North American Stainless are straightforward.  In February 2003 North American Stainless was advised by the EEOC that Miriam Regalado filed a sex discrimination charge of discrimination against it.  Three weeks later, Regalado's fiancee, Eric Thomas, was terminated.  Thomas filed a charge of discrimination of his own alleging that he was fired in retaliation because his fiancee filed a charge of discrimination.  The EEOC found that Thomas had been retaliated against and issued a right to sue letter when conciliation was unsuccessful.

When the case reached the trial court, the judge dismissed the suit finding that Title VII did not recognize third-party retaliation claims.  Because the case was decided on a motion to dismiss (prior to any discovery), the reviewing courts were required to take Thomas' allegation as true (i.e., that he was in-fact, terminated for his fiance's charge of discrimination).  The Sixth Circuit Court of Appeals affirmed the dismissal for a different reason.  The Sixth Circuit concluded that Thomas never engaged in protected activity because he didn't filed a charge on his or his fiance's behalf prior to his termination and therefore he couldn't bring a retaliation claim.

The U.S. Supreme Court reversed.  Justice Scalia wrote, in a unanimous opinion (Kagan not participating) that the Court has little trouble concluding that if Thomas was fired because his fiancee filed a charge of discrimination, then he has a claim under the anti-retaliation provisions of Title VII.  The Court refused, however, to provide a bright line test as to which third-parties might have a claim stating:

We expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize. . .   The significance of any given act of retaliation will often depend upon the particular circumstances.

 In holding that Thompson had a claim, the Court next concluded that Thompson had standing to sue.  The Court held that a plaintiff within the zone of interest sought to be protected by Title VII (i.e., protecting employees from unlawful actions of employer), has standing to bring a claim against his employer even though the employee had not engaged in protected activity himself.  The Thompson opinion clearly expand the scope of potential plaintiffs that can bring claims against their employers regardless of whether or not they engage in protected activity.

You can read the full opinion here

New Filing Reminds Employers of Employee Protection for Jury Service

Barry Shlachter of the Fort Worth Star Telegram reports today on an employment dispute you rarely see these days.  Shlachter profiles a new lawsuit filed by Saginaw resident Corey Gillespie against Dee King Trucking of Amarillo.  According to the article, Gillespie (a relatively new employee (and importantly not an independent contractor) with the company) was summoned for jury duty in Tarrant County for a misdemeanor criminal case.  Upon advising his employer of his call to service, the company dispatcher told him to "pick up the load or you're jobless." 

As always, there are two sides to the story.  The article explains that the company reassigned Gillespie's truck, with his cooperation, because neither knew how long his jury service would last.  Moreover, the company claims that its repeated and multiple attempts to contact Gillespie after his service to arrange for his transportation to Amarillo to pick up his truck were met with only a text message response that the employee had a bad feeling and was going to pass.

While cell phone records, the trial judge's testimony (the trial judge apparently talked to Gillespie's employer upon being informed he was jobless and was informed that Gillespie had not lost his job) and other documentary evidence may be key to determining what really happened, with fact questions like these, a jury is likely to be left to decide which version of the truth it believes.  Since most jurors are likely to be employees themselves and all are fulfilling their civic duty by serving on a jury, it is easy to imagine how they might empathize with a plaintiff like Gillespie.  This case provides an important reminder of an employer's duties with respect to an employee's jury service. 

In Texas, a private employer may not terminate the employment of a permanent employee because the employee serves as a juror.  Independent contractors and temporary employees are not protected by the Texas law.  An employee who is terminated in violation of the Texas statute is entitled to reemployment, 1-5 years of compensation and attorney's fees.  The Act further provides for criminal penalties and contempt sanctions.  Similarly, federal law affords jurors in the federal court system with similar protection.

You can access Barry Shlachter's article about the Gillespie case here for several weeks before it is achieved by the paper.

City of Houston Adds Sexual Orientation and Gender Identity as Prohibited Types of Discrimination

By Executive Order dated March 25, 2010, Houston Mayor Annise Parker, added sexual orientation and gender identity as protected categories under the City's anti-discrimination, harassment and retaliation policy.  The Order prohibits discrimination, harassment and retaliation based on gender identity and sexual orientation in all of the City's employment, contracting and vending activities and in the provision and accessing of all City services, facilities, programs and activities.

Specifically prohibited the policy are the following:

  • Failing or refusing to hire, recruit, appoint, promote or train any individual or otherwise discipline, demote, transfer lay off, fail to recall, or terminate any individual because of such individual's sexual orientation and/or gender identity;
  • Limiting, segregating or classifying employees or applicants in a way that would deprive, or tend to deprive, any individual of equal opportunity or otherwise adversely affect the status of the employee or applicant because of the individual's sexual orientation or gender identity;
  • Failing or refusing to recommend any contract or purchase for award based on a contractor or vendor's sexual orientation or gender identity;
  • Failing to make available to any member of the public or employee use of a city facility or receipt of city service because of their sexual orientation or gender identity;
  • Impeding access by an employee or member of the public to a city restroom facility that is consistent with and appropriate to that person's expression of gender identity;
  • Limit participation by any city employee or member of the public in any city-sponsored activity because of the person's sexual orientation or gender identity in which they would otherwise be permitted to participate.

 You can access a full copy of the Executive Order here.

Last Rites for Neutral Absence Control and Maximum Duration of Leave Policies?

For more than 15 years Texas employers have used the application of uniformly enforced neutral absence control policies setting a maximum duration an employee can be away from work as a defense to workers' compensation retaliation claims.  The defense was first solidified by the Supreme Court of Texas in in its 1996 Continental Coffee Prod. v. Casarez case.  See 944 S.W.2d  (Tex. 1996).  Employers who end the employment relationship with a worker's compensation claimant for violating reasonable absence control rule will not normally be liable for workers' compensation retaliatory discharge claims if rule is uniformly enforced (i.e., it is applied to all types of absences and not just those arising from on-the-job injuries).  Following Casarez Texas employers routinely included neutral policies setting forth neutral absence control policies that set maximum durations of time for employees to be away from work (excepting from the maximum duration certain types of statutory protected leaves like FMLA and USERRA leave).

The continuing viability of the neutral absence control policy is in jeopardy with the passage of the ADA Amendments Act.  The ADA Amendments Act substantially expanded the number of employees who can claim disabled status and are therefore entitled to reasonable accommodation.  Reasonable accommodation may include modification of employer policies that might enable the employee to be able to return to work --including, perhaps, an extension of a leave of absence past the maximum set forth in the employer's written policies.

The EEOC has been targeting inflexible leave of absence policies as violating the ADA with greater frequency.  Last September the EEOC sued UPS challenging the company's policy of allowing a maximum 12 months of medical leave claiming that the policy does not adequately accommodate employees with disabilities.   The EEOC also sued Supervalue, Inc./Jewel-Osco over their leave of absence policies that limited the amount of leave an employee could take and challenged another policy that limited participation in the employer's light duty program to only those employees recovering from a work-related injury --something court's had previously held was permissible.  The EEOC also challenged another leave of absence policy it characterized as "inflexible" on behalf of a pregnant employee against D.R. Horton by using the ADA rather than the Pregnancy Discrimination Act.  Indicating that the EEOC's efforts are having some success, the EEOC recently obtained a consent degree against Sears and a $6.2 million settlement of ADA claims arising from Sear's use of an inflexible workers' compensation leave of absence policy that terminated the 235 employees upon the exhaustion of the leave of absence period. Clearly, inflexible neutral leave policies having setting forth maximum durations for leaves of absence are in the cross-hairs of the EEOC.

The ADA Amendments Act and challenges to neutral absence control and maximum duration of leave policies put Texas employers to a Hobson's choice.  The uniform, mechanical application of such policies provide an employer a defense to a Texas workers' compensation retaliation claim.  Now, however, the policy might give rise to a claim of failure to reasonably accommodate an employee with a disability who needs an extension of the maximum leave period to return to work.  Employers should reevaluate their leave of absence policies to make sure they are sufficiently flexible as to provide reasonable accommodation to qualified individuals with disabilities.  By making exceptions to neutral absence control or maximum duration of leave policies, the exceptions may dilute the protections those policies once provided against workers' compensation retaliation claims.  

Photo courtesy of Sharon Ellman, Ellman Photography.

 

Supreme Court Holds Collective Bargaining Agreement Can Require Arbitration of Age Discrimination Claims

Today, the U.S. Supreme Court held that provisions in collective bargaining agreements that clearly and unmistakably require union members to submit statutory discrimination claims to the grievance and dispute resolution provisions of the agreement are binding and enforceable. 

In 14 Penn Plaza LLC v. Pyett ,  a dispute arose over a commercial office building's reassignment of night watchmen employees (whose duties were outsourced) to less desirable positions such as light duty cleaners and porters.  The reassigned employees, members of the Service Employee International Union, Local 32BJ, filed a grievance with the union contending that the reassignments violated, among other things, the CBA's ban on age discrimination.  When the grievances were unsuccessful, the Union requested arbitration under the dispute resolution procedures of the CBA.  The union later withdrew the grievances to the extent they complained about age discrimination prohibited by the contract but continued to press for arbitration on the remaining claims.

The disgruntled reassigned employees then filed a charge of discrimination with the EEOC over their reassignment claiming the reassignments were discriminatory.   After the EEOC issued a right to sue letter and the employees sued in federal district court, the defendant filed a motion to compel arbitration relying on the language of the grievance and dispute resolution procedures of the CBA with the union that stated:

§ 30 NO DISCRIMINATION. There shall be no discrimination against any present or future employee by reason of race, creed, color, age, disability, national origin, sex, union membership, or any other characteristic protected by law, including, but not limited to, claims made pursuant to Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the New York State Human Rights Law, the New York City Human Rights Code, . . . or any other similar laws, rules, or regulations. All such claims shall be subject to the grievance and arbitration procedures (Articles V and VI) as the sole and exclusive remedy for violations. Arbitrators shall apply appropriate law in rendering decisions based upon claims of discrimination.

The trial court and Second Circuit Court of Appeal refused to compel arbitration holding that a CBA could not waive the bargaining unit members' right to a judicial forum over statutory civil rights claims created by Congress.

The Supreme Court reversed holding that where the intent to submit statutory discrimination claims to the grievance and dispute resolution procedures of the CBA is clear and unmistakable (an issue that was not in dispute before the court --i.e., the parties agreed that the language was sufficiently explicit) nothing precluded the union's ability to waive its members right to a judicial forum to resolve those discrimination claims.  A majority of the Court rejected the employee's argument that the union was waiving important, substantive rights to be free from age discrimination. 

The Court noted that the union had not waived (nor could it) the employee's right to be free from and to challenge employment actions that were based on unlawful motivations such as age discrimination.  Rather, the Court observed, the Union had merely negotiated for and agreed that such claims would be resolved in a forum other than a judicial one --i.e., arbitration.  Consequently, the Court held that to the extent the employees were to litigate their statutory age discrimination claims they would have to do so within the confines of the grievance and dispute resolution procedures of the CBA.

As a consequence of this ruling it is unlikely that unions will agree in future negotiations that their grievance and arbitration procedures include employment discrimination and civil rights claims.  Placing the unions in the position of using limited resources to arbitrate otherwise individual claims is unlikely to be something that benefits the majority of the bargaining unit members.  This potential conflict of interest is something most unions would prefer to avoid. 

Other commentators have suggested, and I agree, that the holding of this case is likely to be limited because Congress may seek to overturn it as it did with the Court's Ledbetter decision.  See Jottings by an Employer's Lawyer and The Delaware Employment Law Blog

Another potential consequence is that the existence of a mandatory arbitration provision in a CBA covering employment discrimination claims may be an important factor the EEOC considers in deciding whether to litigate over a particular charge of discrimination.  Under the current law the EEOC is not be bound by the grievance and arbitration provisions in CBA's (nor individual employment contracts between employees and employers) and it could vindicate an employee's rights in a federal judicial forum notwithstanding the CBA.

Until legislation is passed to overturn 14 Penn Plaza, employers and unions with CBAs that clearly and unmistakably include employment discrimination and civil rights claims in the grievance and dispute resolution provisions will now be forced to resolve those disputes in an arbitral forum.

EEOC Charge Filings Surged in 2008

The EEOC recently released the latest statistics detailing the number of charges of discrimination filed in 2008.  Last year marked the largest number of charges filed in a single year totaling 95,402 charges of discrimination.  While every category of charges increased (and the total increased 15.2 percent over 2007), charges of age discrimination and retaliation increased the most at 28.6 and 22.6 percent respectively. 

Disability discrimination claims saw the least amount of growth at 9.6 percent.  However, with the passage of the ADA Amendments Act in 2008, I expect 2009 disability discrimination claims to be up sharply during 2009.  Equal Pay Act claims were also up 16.6 percent and with the passage of the Lilly Ledbetter Fair Pay Act, claims arising under that statute will also likely increase in 2009 and beyond.  With escalating unemployment, the deepening recession, and an increase in the EEOC’s budget, I expect charge filings for 2009 will again set an all-time record for charge filings across all categories and an uptick in resulting civil rights litigation against employers.