Today, the U.S. Supreme Court held that a Title VII plaintiff challenging a job transfer that was allegedly ordered because of her sex but did not result in a decrease in pay or benefits may still state a claim for relief if she can show the transfer brought about some harm with respect to an identifiable term or condition of employment.  The identifiable harm she must demonstrate need not be significant.  In Muldrow v. City of St. Louis, the plaintiff-employee brought suit against her employer after she was transferred from her job as a plainclothes officer to a uniformed officer position.  Her pay and rank remained the same, however, her schedule, responsibilities and perks changed.  Rather than working with high-ranking department officials on priority issues, her new work involved supervising the day-to-day activities of patrol officers and she lost access to the departmental vehicle she was able to take home.

The district court granted summary judgment and the court of appeals affirmed because Muldrow had not suffered a materially significant disadvantage and the job transfer made only minor changes to our working conditions and no changes to her title salary or benefits.  The Supreme Court reversed holding that while the plaintiff must show that the transfer brought about some harm with respect to an identifiable term or condition of employment, that harm need not be significant.  Further, the Court stated that the harms identified by Muldrow which included a less advantage work schedule, loss of a department vehicle and change in responsibilities met “that test with room to spare.”  Consequently, the Court reversed the summary judgment and remanded the case back to the trial court for further proceedings.

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

In an important case, the U.S. Supreme Court recently clarified generally the costs or expenditures an employer would have to incur before it can show that a particular accommodation of religious beliefs constitutes undue hardship under Title VII of the Civil Rights Act.  In a unanimous opinion, the Court held that an employer denying a religious accommodation to an employee must show that the burden of granting the accommodation would result in substantial increased costs in relation to the conduct of the employer’s business.

In that case, Gerald Groff is an Evangelical Christian who worked for the United State Postal Service.  A tenant of Groff’s religious belief is that Sunday should be devoted to rest and worship -not work.  When he started working at the postal service, his job did not generally require Sunday as the USPS did not ordinarily deliver mail on Sunday.  However, when the USPS entered into an agreement with Amazon to facilitate Amazon’s Sunday deliveries, the USPS began requiring employees to assist with Sunday deliveries.  To avoid Sunday work, Groff transferred to different USPS facilities.  However, eventually, he was unable to avoid working at facilities that did not require, at least on a rotating basis, work on Sunday.  When Groff was subjected to progressive discipline rather than work on Sunday, Groff resigned his employment and claimed constructive discharge.

The Court revisited the fifty-year old Hardison test for determining what constitutes undue hardship under Title VII.  The Hardison test had been interrupted by many lower courts as holding that an employer need not incur more than “de minimus” expense to accommodate an employee’s sincerely held religious belief.  The Supreme Court explained how the “more than de minimus cost” language found its way into their earlier decision and went on to state lower courts has misconstrued their holding by latching on the “de minimus” language while ignoring other references in Hardison to “substantial” “costs” or “expenditures.  And, the Court observed, Hardison’s principal issue was whether Title VII required an employer and union who agreed on a seniority system had to deprive senior employees of their seniority rights to accommodate a junior employee’s religious practices; not whether the costs incurred by the employer constituted undue hardship.

To clarify Hardison, the Court held that “’undue hardship’ is shown when a burden is substantial in the overall context of an employer’s business” when taking “into account all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size and operating cost of an employer.”

The Court rejected Groff’s suggestion that the Court should incorporate the decades of jurisprudence construing “undue hardship” under the American’s with Disabilities Act jurisprudence into its Title VII undue hardship jurisprudence.  Similarly, the Court maintained its view that employers with bona fide seniority systems need not deprive more senior employees of their seniority rights to accommodate the religious beliefs of more junior employees.  And, the Court suggested (and the concurring opinion confirmed) that in evaluating an accommodation’s effect on the employer’s business, a court may consider the effect the proposed accommodation has on co-workers.  What will not constitute undue hardship, however, are the effects on the employer’s business caused by co-worker dislike of religious practice or expression in the workplace of the mere fact of accommodations in the workplace.  Other effects on co-workers, however, may well be considered.

Finally, the Court suggested that certain proposed accommodations may not satisfy the new undue hardship test like offering voluntary shift swapping, offering incentive pay for co-workers to pick up shifts where the costs are not substantial or the administrative costs of coordinating work coverage.  But at the end of the day, the Court left it to the lower court to work through these issues in the first instance and otherwise provided little guidance for employers.

The unanimous opinion in Groff v. Dejoy is available here.

In a rare employment case issuing from the Texas Supreme Court, the Court held that morbid obesity, without some evidence that it is caused by an underlying physiological disorder or condition, does not qualify as a disability under state ant-discrimination laws.  The case  arose following the termination of a medical resident who was employed by the Texas Tech University’s Health Sciences Center (the “Center”).  Dr. Niehay was a medical resident in the Center’s Emergency Department.  She brought suit under the Texas Commission on Human Rights Act (“TCHRA”), claiming that her employer terminated her employment because it regarded her morbid obesity as a disability and then discriminated against her by terminating her employment because of her obesity.

Dr. Niehay is 5’9” tall and weighed as much as 400 pounds with a body mass index of 59.07.  Morbid obesity is defined as having a body mass index in excess of 40.  Likely as a result of her obesity, Dr. Niehay had performance issues that caused her co-workers to complain about her performance.  After repeated complaints about her performance, attendance, professionalism and patient care, the employer terminated her from the residency program.  She brought suit  arguing disability discrimination on account of her morbid obesity..

On the record before the Texas Supreme Court, there was no evidence that Dr. Niehay’s obesity was caused by a physiological disorder or condition, or that staff of the employer regarded her obesity as being caused by such disorder or condition.  The Court distinguished obesity that is caused by an underlying disorder or condition from obesity that is a physical characteristic caused by a person’s lifestyle choices or eating habits.

This case will have very limited impact on Texas employment litigation.  As the Center noted in its Brief, and the Court repeated in its opinion, in the thirty years since the passage of the ADA, the Texas state courts have reported only three cases where morbid obesity was the disability.  Thus, these cases are not frequently brought.  Moreover, most employees bringing a disability discrimination claim based on morbid obesity should have little trouble presenting some evidence that the employee’s obesity is caused or contributed to by some underlying psychological disorder or condition.

The opinions in Texas Tech Health Sciences Ctr. v. Niehay are available here (Majority, Concurring & Dissenting)

Beginning on September 1, 2023, the Texas Labor Code will prohibit race discrimination on the basis of an employee’s hair texture or a protective hairstyle commonly or historically associated with race.  Protected hairstyle includes braids, locks, and twists. Twenty states have pass similar laws commonly referred to as CROWN Acts.  CROWN is an acronym for Creating a Respectful and Open World for Natural Hair.

The Texas amendment makes it unlawful for an employer, labor union or employment agency to adopt or enforce a dress or grooming policy that discriminates against a hair texture or protective hairstyle commonly or historically associated with race.  Texas employers should review their dress, appearance and grooming codes to ensure they are in line with the new Texas prohibition.

A copy of the new law is accessible here.

A recent decision of the National Labor Relations Board (the “Board”) concluded that standard nondisparagement and confidentiality provisions found in many employee severance agreements violate federal labor law because they have a reasonable tendency to interfere with and restrain employees’ prospective rights to engage in protected concerted activity, bargain collectively and form unions for their mutual aid and protection.

McLaren MacComb (the “Hospital”) operates Methodist hospital; a 2,300 employee facility, located in Michigan.  Approximately 350 of the Hospital’s service employees are represented by a union.  In June 2020, after the start of the COVID-19 pandemic, the Hospital furloughed eleven employees who were members of the union.  The Hospital did not notify the union in advance of the furloughs nor did it bargain with the union over the effects of the layoffs.

Each of the furloughed employees was provided with a severance agreement providing a broad release of claims in return for severance payments.  The Hospital did not provide the union with advance notice of the severance terms nor bargain with the union prior to entering individual agreements with the represented workers.  The severance agreements contained confidentiality and nondisparagement provisions.  These provisions were challenged by the Board’s General Counsel as having a chilling effect on an employee’s Section 7 rights (i.e., the right to form and join unions, collectively bargain and engaged in protected concerted activity) and arguing that the mere proffer of the agreements with these overly broad provisions constituted an unfair labor practice.

The challenged provisions stated:

  1. Confidentiality Agreement. The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.
  2. Non-Disclosure. At all times hereafter, the Employee promises and agrees not to disclose information, knowledge or materials of a confidential, privileged, or proprietary nature of which the Employee has or had knowledge of, or involvement with, by reason of the Employee’s employment. At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer, its parent and affiliated entities and their officers, directors, employees, agents and representatives.

The severance agreement provided for monetary and injunctive sanctions in the event of breach of these provisions.

The General Counsel challenged these provisions of the agreement arguing that they unlawfully restrained and coerced the furloughed employees in the exercise of their Section 7 rights.  The Board agreed.

With respect to the nondisparagement provision, the Board observed that:

Public statements by employees about the workplace are central to the exercise of employee rights under the Act. Yet the broad provision at issue here prohibits the employee from making any “statements to [the] Employer’s employees or to the general public which could disparage or harm the image of [the] Employer”—including, it would seem, any statement asserting that the Respondent had violated the Act (as by, for example, proffering a settlement agreement with unlawful provisions). This far reaching proscription—which is not even limited to matters regarding past employment with the Respondent—provides no definition of disparagement  . . . .

Instead, the comprehensive ban would encompass employee conduct regarding any labor issue, dispute, or term and condition of employment of the Respondent. As we explained above, however, employee critique of employer policy pursuant to the clear right under the Act to publicize labor disputes is subject only to the requirement that employees’ communications not be so “disloyal, reckless or maliciously untrue as to lose the Act’s protection.” Further, the ban expansively applies to statements not only toward the Respondent but also to “its parents and affiliated entities and their officers, directors, employees, agents and representatives.” The provision further has no temporal limitation but applies “[a]t all times hereafter.”

The end result is a sweepingly broad bar that has a clear chilling tendency on the exercise of Section 7 rights by the subject employee. This chilling tendency extends to efforts to assist fellow employees, which would include future cooperation with the Board’s investigation and litigation of unfair labor practices with regard to any matter arising under the NLRA at any time in the future, for fear of violating the severance agreement’s general proscription against disparagement and incurring its very significant sanctions. The same chilling tendency would extend to efforts by furloughed employees to raise or assist complaints about the Respondent with their former. . .  coworkers, the Union, the Board, any other government agency, the media, or almost anyone else. In sum, it places a broad restriction on employee protected Section 7 conduct. We accordingly find that the proffer of the nondisparagement provision violates Section 8(a)(1) of the Act.

And regarding the confidentiality provision, the Board stated:

The [confidentiality] provision broadly prohibits the subject employee from disclosing the terms of the agreement “to any third person.” The employee is thus precluded from disclosing even the existence of an unlawful provision contained in the agreement. This proscription would reasonably tend to coerce the employee from filing an unfair labor practice charge or assisting a Board investigation into the Respondent’s use of the severance agreement, including the nondisparagement provision. Such a broad surrender of Section 7 rights contravenes established public policy that all persons with knowledge of unfair labor practices should be free from coercion in cooperating with the Board. The confidentiality provision has an impermissible chilling tendency on the Section 7 rights of all employees because it bars the subject employee from providing information to the Board concerning the Respondent’s unlawful interference with other employees’ statutory rights.

The confidentiality provision would also prohibit the subject employee from discussing the terms of the severance agreement with his former coworkers who could find themselves in a similar predicament facing the decision whether to accept a severance agreement. In this manner, the confidentiality provision impairs the rights of the subject employee’s former coworkers to call upon him for support in comparable circumstances. Additionally encompassed by the confidentiality provision is discussion with the Union concerning the terms of the agreement, or such discussion with a union representing employees where the subject employee may gain subsequent employment, or alternatively seek to participate in organizing, or discussion with future co-workers. A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment. Id. Conditioning the benefits under a severance agreement on the forfeiture of statutory rights plainly has a reasonable tendency to interfere with, restrain, or coerce the exercise of those rights. unless it is narrowly tailored to respect the range of those rights. Our review of the agreement here plainly shows that not to be the case. We accordingly find that the proffer of the confidentiality provision violates Section 8(a)(1) of the Act.

That the Board found the mere proffer of an agreement with these provisions in it to be unlawful should be concerning to employers.  These provisions are routine and standard in many severance agreements offered to employees being laid off by companies.  Employers should consult their labor and employment counsel and review their standard severance forms to determine whether their provision might inadvertently commit an unfair labor practice and whether these provisions add value to the severance arrangements.

The NLRB’s McLaren decision can be accessed here.

 

Employees bringing claims under Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act must exhaust their administrative remedies with the EEOC prior to filing suit against an employer.  These administrative remedies include timely filing charge of discrimination, obtaining a right to sue letter and timely filing the lawsuit within 90 days after the receipt of the right to sue letter.  There are two general exceptions to the rule that suits after to be filed within 90 days of receipt of the right to sue letter –equitable estoppel and equitable tolling.  Equitable estoppel addresses misconduct of the employer/respondent that results in the employee missing his procedural deadlines.  Equitable tolling involves tolling caused by the EEOC misleading the employee on the nature of his rights.  This case involved equitable tolling where the plaintiff files an untimely lawsuit because the plaintiff is misled by the EEOC about this filing deadlines.

In Berstein v. Maximus Federal Services, Inc., Kevin Berstein was fired after he was accused of sexual harassment.  Berstein filed a charge of discrimination with the EEOC alleging that he was sexually harassed by two female co-workers and then terminated in retaliation after he reported the harassment to management.  The EEOC closed its investigation and sent its and notice of right to sue letter to the employee’s attorney. Because the Commission did not have the employee’s correct address, the employee did not receive the initial right to sue letter.  Thereafter, and within the 90 days to initiate a lawsuit, the EEOC sent a second right to sue letter to the employee and his attorney.  The second right to sue letter inaccurately stated that the employee had 90 days from the second letter to initiate a lawsuit.  The employee filed his lawsuit within 90 days of the second notice.

The employer moved to dismiss the case arguing that since the plaintiff had not filed suit within 90 days of the initial right to sue notice, the claim was barred.  The district court agreed stating that this was not an exceptional case where equitable tolling was appropriate and that Berstein’s counsel’s receipt of the initial right to sue letter was sufficient to commence the filing deadline for the lawsuit.

On appeal, the court of appeals agreed that there was no dispute that the employee’s attorney’s presumptive receipt of the initial right to sue letter commenced the 90-day limitations period for filing suit even though it was never received by the employee.  Berstein argued, however, that the deadline for filing suit should be equitable tolled because the EEOC’s second right to sue letter mislead him about the nature of his rights as to when he had to file his lawsuit.  Noting its past precedent in a two-letter filing case, the Fifth Circuit stated that where the EEOC makes an affirmatively incorrect statement about the nature of plaintiff’s, equitable tolling might be available.  Because the district court failed to address or distinguish this past precedent or explain why equitable tolling did not apply in this case, the Fifth Circuit reversed and remanded the case for further consideration as to whether the EEOC’s second notice of right to sue that said the employee had to file suit within 90 days of that letter mislead the plaintiff about his filing deadlines.

You can download the case here.

A recent United States Supreme Court decision provided two reminders for employers utilizing a day-rate compensation scheme. First, employers must pay their day-rate employees overtime or risk potential liability under the FLSA. Second, employers cannot shield themselves from FLSA overtime liability by directing the Court to only their annualized compensation of employees or their job duties. If a highly compensated supervisory employee’s salary is computed solely by multiplying the number of days worked and the employee’s daily rate, that supervisory employee is nonexempt and subject to the FLSA’s protections. So, how did we get here and what does that
mean for employers who pay their employees on a purely day rate basis?

In Helix Energy Solutions Group, Inc. v. Hewitt, Michael Hewitt, a former supervisory employee of Helix, brought a lawsuit against Helix in the Southern District of Texas seeking overtime pay under the FLSA. Helix denied that Hewitt was entitled to overtime pay, relying on Hewitt’s supervisory duties and annualized compensation exceeding $200,000 as proof that Hewitt qualified as a “highly compensated employee” and was therefore exempted from the FLSA overtime requirements as a bona fide executive.

The Court rejected Helix’s argument, however, and looked squarely at the method of compensation Helix used to pay Hewitt to determine that he was, in fact, entitled to overtime pay. An employee is considered a bona fide exempt executive if the employee: (1) received a predetermined and fixed salary that does not vary based upon the hours the employee actually worked; (2) receives a weekly salary that exceeds a set amount, presently $684 a week; and (3) performs certain job duties consistent with that of an executive. If only two of these three factors are met, but the third is not (for example, if an employee is paid a day rate that equals at least $684 a week and the employee performs supervisory duties but the amount paid is not predetermined and fixed), the employee is still entitled to overtime pay.

The Supreme Court’s holding means that even those employees who are “highly compensated” may still be entitled to overtime pay if the employee’s paycheck is based solely on a daily pay rate. Employers should therefore: (1) pay overtime to day rate employees for any hours worked over 40 in a week; or (2) have a weekly minimum salary guarantee for day rate employees that is above the minimum salary threshold (to then pay on a day-rate basis with a minimum salary guarantee, a reasonable relationship must exist between the guaranteed amount and the amount actually earned).

Helix Energy Solutions Group v. Hewitt

In a significant case involving an employer’s obligation to transfer a disabled employee, who cannot perform the essential functions of the employee’s current position, to an open, vacant position, the Fifth Circuit Court of Appeals held that an employer’s policy of hiring the most qualified candidate to fill vacant positions need not be ignored by placing a less qualified, disabled employee meeting the minimum qualifications for that position in that position absent special circumstances.  Stated another way, an employer is not ordinarily required to provide a competition-free transfer to a vacant position as a reasonable accommodation to a qualified individual with disability.

The court remanded the case to the district court for further consideration to determine if the EEOC can raise a genuine issue of material fact that there are special circumstances in this particular case, justifying an exception to the most-qualified applicant policy such that the exception constitutes a reasonable accommodation. Thus, while a claim that a failure to provide a competition-free transfer or reassignment to an open position as a reasonable accommodation is not foreclosed as a matter of law, this case puts the employee to the burden of showing that hers is an extraordinary case and that special circumstances exist that warrant making an exception to the most-qualified applicant hiring policy.

You can download EEOC v. Methodist Hospitals of Dallas here.

 

 

The results of three pending cases could greatly increase the amount of employment-related litigation Texas employers may face in 2023 and beyond.  In Groff v. DeJoy, Postmaster General of the United States Postal Service, the U.S. Supreme Court is considering what the lengths to which an employer must go to accommodate an employee’s sincerely held religious beliefs.  The Court has long applied a lower accommodation obligation for religious beliefs than it requires for disability accommodations.  Under existing law, the Hardison test, any religious accommodation that requires more than de minimis cost is considered an undue hardship.  And, accommodations that burden co-workers but not the business itself, are also considered an undue hardship that need not be provided by the employer.  If Groff prevails in the appeal, employers will be burdened with substantially more requests for religious accommodation and may have to engage in similar interactive processes and accommodation obligations as is required under the Americans with Disabilities Act.

In Hamilton v. Dallas County, No. 21-10133 (5th Cir. Aug. 3, 2022), the Fifth Circuit Court of Appeals, sitting en banc, is considering whether the ultimate adverse employment action is required to have an actionable Title VII discrimination claim.  In that case, the Court is reviewing the Dallas County jail’s gender-based scheduling policy that limits the days on which female detention officers could have off based on purported safety concerns but that did not otherwise effect pay, benefits or other terms and conditions of employment of the officers constitutes an adverse employment action that could be remedied under Title VII’s anti-discrimination provisions.  A win for Hamilton would greatly expand the types of employment actions that employers could be sued for and increase the number of employment claims against which employers would have to defend –including even minor or trivial employment actions.

Finally, in Texas Tech University Health Sciences Center – El Paso vs. Niehay, the Texas Supreme Court will consider whether discrimination based on obesity that is not caused by some other underlying medical condition can constitute disability discrimination under the state’s employment discrimination laws.  With 41.9 percent of American considered obese, according to the Centers for Disease Control, the number of Texan that could use the state anti-discrimination laws to challenge an adverse employment action would increase dramatically.

Subscribe to the Texas Employment Law Update to follow the results of these decisions.

 

 

On January 5, 2023, the Federal Trade Commission (FTC) issued Notice of Proposed Rulemaking announcing that it was proposing an administrative rule that would end the use of all noncompetition agreements in employment relationships outside the context of the sale of a business. The proposed rule, among other things, labels the following as unfair methods of competition: “an employer to enter[ing] into or attempt[ing] to enter into a non-compete clause with a worker; maintain[ing] with a worker a non-compete clause; or represent[ing] to a worker that the worker is subject to a non-compete clause where the employer has no good faith basis to believe that the worker is subject to an enforceable non-compete clause.”

In addition to preventing noncompetition agreements from being entered into in the future, all noncompetition agreements in effect at the time of promulgation of the proposed rule would have to be rescinded following a notice period and prior to the compliance date¬—180 days after publishing of a Final Rule. The only instance where a noncompetition agreement would remain effective and enforceable is in the sale of a business. It is noteworthy that the proposed rule states that the rule will supersede all state laws that encompass noncompetition agreements, so regardless of where you conduct business, this rule will impact you. The proposed rule, if passed, would effectively eliminate the enforceability of covenants not to compete nationwide.

Apparently unaffected by the proposed rule are restrictive covenants that prevent post-employment solicitation of customers, employees or vendors as well as confidentiality and nondisclosure provisions so long as they are not so broad as to effectively act as a noncompete precluding an employee from working in a particular industry.

What should employers do now?  First, don’t panic.  It is unlikely that any final rule published by the FTC will be in the same form as the proposed rule.  Any final rule actually published by the FTC will likely be different than the proposed rule and may have carveouts and exceptions (e.g., high level executives, employees of tech or financial services firms  and highly compensated employees)

Moreover, it is unlikely that a final rule will be published for months, years or if at all and whether a final rule will survive inevitable court challenges.  There is substantial question about whether the FTC has the authority to impose such a marketplace-wide rule.

Second, employers should review their existing noncompetes to ensure that they contain post-employment customer and employee nonsolicitation provisions where appropriate (e.g., sales employees, managers and supervisors of sales employees and executives).

Third, make sure the agreements with employees adequately protect against the disclosure of confidential, proprietary and/or trade secret information.  Most well-drafted noncompetition agreements will already contain these protections but its a good exercise to check and confirm.

Finally, if an employer is not currently using noncompetition agreements but believes it has legitimate business reasons for doing so, the employer should consult with its employment counsel to determine if it is prudent to implement the noncompetition obligations prior to publication of any FTC final rule.  There is a possibility that any final rule could be limited to noncompetition agreements entered after the effective date of a Final Rule and that existing noncompetes could be grandfathered or exempt from the rule.

A copy of the Proposed Rule published on the FTC’s website is accessible here.