24 Hour Fitness operates health clubs and fitness facilities across the country.  As part of its operations, 24 Hour Fitness employs sales representatives.  As a condition of employment, employees are required to enter into arbitration agreements to arbitrate their employment disputes with their employer.  FLSA claims (i.e., overtime and minimum wage claims) are covered within the scope of the arbitration agreement.  John Carey was a sales representative for 24 Hour Fitness.  He signed a handbook acknowledgment containing the arbitration agreement.  Not only did the arbitration agreement require the arbitration of disputes, it further provided that disputes could not be brought as class actions or in representative capacities.  Unfortunately for the employer, the handbook also included a provision that permitted it to revise, delete or add to the handbook at any time and that it would communicate those changes to the employees through official written notices.  Nothing in the policy precluded the employer from applying changes to the arbitration agreement retroactively. 

After Carey’s employment ended, he filed an FLSA collective action seeking unpaid overtime on behalf of all similarly-situated employees.  24 Hour Fitness moved the court to compel arbitration.  Carey, in response, argued that he agreement was illusory because the employer retained the right to unilaterally amend the agreement. 

The Fifth Circuit Court of Appeals found against the employer holding that its arbitration agreement was unenforceable.  The Court held that the arbitration agreement was illusory because: 1) 24 Hour Fitness retained the right to alter, amend or changes the policy at any time; 2) the policy did not foreclose the prospect of unilateral amendments to claims existing on or before the amendment; and 3) nothing in the policy precluded the employer from applying any of its changes retroactively.  As a result, 24 Hour Fitness will be left to defend Carey’s lawsuit in Court, with a jury, and potentially as a collective action. 

The take-away form the opinion is that regardless of the type of ADR you use (e.g., arbitration, waiver of jury trial), if the agreement is contained in an employee handbook, ensure that the handbook’s express contractual disclaimer contained in the handbook (You know, that provision that says nothing contained in this agreement is intended to create an express or implied contract) carves out those ADR procedures and specifically states that such provisions are intended to be contractual in nature; that the employer and employee are bound by such provisions and that neither party may alter or amend the contract unilaterally.  At a minimum, if the employer wants to retain the right to unilaterally amend the policy, it should state that the employer cannot amend it to apply retroactively to claims that existed prior to the amendment and notice to the employee. 

A full copy of Carey v. 24 Hour Fitness is available here. 

Follow me on Twitter @RussellCawyer.

 

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.

A new Fifth Circuit case reveals the consequence that can occur when an employer and its managers fail to take harassment complaints seriously; fail to promptly and thoroughly investigate the complaints; and reach conclusions following the investigation that just plain wrong.   In Cherry v. Shaw Coastal Inc., a male employee (Cherry) complained that his immediate male supervisor was making making inappropriate comments of a sexual nature and causing unwanted physical contact. Because I don’t want this blog to show up in Google’s search results for unsavory topics, I’ll let you read the opinion itself the graphic details of the egregious, same-sex sexual harassment that was experienced by Cherry.  Needless to say, it included unwelcome comments of a sexual nature and unwanted touching that the jury concluded amounted to sexual harassment by the male co-worker.

The conduct of was so severe that one of Cherry’s co-workers initially complained about what he witnessed.  Cherry also made repeated complaints to the managers in his supervisory chain.  The supervisors receiving the complaints failed forward them to human resources as required by company policy and instead questioned whether the conduct complained of was merely horsing around.  Cherry ultimately went directly to human resources and made a complaint.  Despite the fact that Cherry made an estimated ten complaints, had an eyewitness to the harassment, and text messages demonstrating the unwelcome sexual comments, the company’s human resources staff concluded there was "insufficient evidence" to corroborate the complaint.  Cherry and the alleged harasser were placed on different work crews, but Cherry complained that he continued to get "dirty looks" from the alleged harasser.  Finally, six months after the first complaints of harassment occurred, Cherry resigned his employment specifically pointing the on-going harassment and retaliation to which he claimed he he was subjected.

A jury found in favor of the Cherry on the sexual harassment claim but the trial court entered judgment in favor of the company.  On appeal, the court of appeals reversed the trial court.  The Court found that the Company had done enough to avoid a punitive damages finding (i.e., that the company did not act with malice or reckless disregard) because it had a policy against sexual harassment with a complaint procedure and, while not acting promptly, ultimately transferred the harasser to a different crew.

As to liability for the sexual harassment, the Court found that there was sufficient evidence to support the jury’s verdict and that the company did not act promptly.  The Court concluded that the human resources department’s decision not to act because of "insufficient evidence" could be reasonably interpreted as a failure to take prompt remedial action.  Consequently, the appeals court reversed the judgment in favor of the employer and directed the trial court to enter judgment in favor of the plaintiff-employee on the sexual harassment claim.

You can take a few things away from the Cherry opinion:

  • Ensure supervisors are trained on their responsibilities under the company’s sexual harassment policy and make sure they forward complaints they receive to human resources for investigation;
  • Don’t conclude there is insufficient evidence of company violations where the complaining employee has eyewitness corroboration and text messages to support his claim;
  • Investigate all complaints of alleged harassment promptly.

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

Follow me on Twitter @RussellCawyer.

Last week there was a lot of coverage about Mitt Romney’s remarks on being able to terminate those who provide services to him.  In viewing his remarks, I think the criticism of his comments comes, not so much from what he said, but how he said it.  In a somewhat cavalier manner, Romney said he liked have the option to be able fire people; not that he liked firing them.   Here is the context of what he had to say:

Romney’s remarks have been construed to mean that he likes firing people; something I don’t think he said or meant.  However, I’ve written before on the dynamics of terminating the employment relationship with employees.  Studies have shown that losing a job can be one of the most stressful life events one can experience –akin to the loss of a family member or divorce.  And while terminating the employment of an employee is not normally easy, it is an inevitable part of most manager, supervisor and human resource professional’s job.  

Terminating the employment relationship with an employee is a serious matter and should be treated as such.  When communicating the decision, an employer should be guided by being as compassionate as is possible under the circumstances.  That doesn’t mean that the decision is debated with the employee.  Rather, it goes more into delivering the planning of the announcement. Plan to communicate the decision in a way that will minimize the trauma to the employee to the extent possible.  Take steps to ensure that the employee is not unduly embarrassed by the decision.  It is good to remember that we are all human before communicating an employment termination decision, particularly where there is not egregious.  We all have families to support and the decisions made by employers, and the employees who call upon employers to make those decisions, have consequences.  Communicate adverse employment actions to employees accordingly.  And never, never (whether you are running for President or not) tell anyone you like firing people.

Follow me on Twitter @RussellCawyer.  

There are a few pockets in the state where lawyers representing employees still vigorously fight the arbitration agreements their clients signed with employers agreeing to arbitrate all disputes. One of the pockets is in El Paso, Texas as evidenced by the number of opinions out of the court of appeals addressing the enforceability of an arbitration agreement between employers and employees.

An example of one of these challenges is found in the recent opinion of Mendivil v. Zanios Foods, Inc.  In Mendivil, the plaintiff-employee challenged the arbitration agreement he signed with his employer when he wanted to sue in court under a workers’ compensation retaliation theory. Mendivil challenged the agreement on a variety of grounds including the fact his employer did not promise to arbitrate its disputes with Mendivil; he had to arbitrate his claims in New Mexico rather than El Paso; he had give notice of intent to arbitrate within thirty days of the incident and respond to all correspondence from his employer within ten days or waive arbitration; and he had to pay for one-half of the arbitration fees. In legalese, Mendivil claimed the agreement was illusory and not supported by adequate consideration (because the employer made no return promises) and was legally unconscionable (because it made him arbitrate far away, bear one-half of the arbitration expenses and make requests for arbitration on short time tables). 

 

The court of appeals considered Mendivil’s challenge to the trial court’s order to arbitrate. The appeals court was persuaded that the agreement was unsupported by adequate consideration because the employer made no promises to Mendivil and that alone was sufficient to warrant reversal of the trial court’s arbitration order.   

 

The takeaway from this case is twofold. First, an employer that desires to enforce an arbitration programs with its workforce must make sure the agreement is supported by valuable consideration. This is usually accomplished by having the employer make the return promise to arbitrate all of its disputes it has with employees. The mutual promises to arbitrate claims will almost always suffice as adequate consideration to support the arbitration agreement. Second, arbitration is meant to be a meaningful alternative to a judicial forum. Where a party uses the arbitration agreement to impose onerous conditions far more restrictive than would be found in a judicial forum, the court will view the enforceability of the agreement more skeptically. Remember, pigs get fat but hogs get slaughtered.

 

You can download a full copy of the Court’s opinion in Mendivil v. Zanios Foods, Inc. here.

 

Follow me on Twitter @RussellCawyer.

Yesterday, the U.S. Supreme Court unanimouslyy held that the ministerial exception bars a federal employment discrimination suit brought by a teacher challenging her church-employer’s decision to terminate her employment.  While this holding is limited to religious affiliated employers, it firmly establishes the ministerial exception as a bar to certain employment discrimination claims against religious organizations.

Plaintiff Cheryl Perich was a teacher at the Hosanna-Tabor Evangelical Lutheran School –a school affiliated with the Lutheran Church.  The school had two kinds of teachers –lay and called teachers.  Called teachers were regarding as having been drawn to their vocation by God and had to complete certain religious academic requirements and become "Commissioned" in the Lutheran faith.  Lay teachers were not required to undergo the religious training or ordination requirements.  Moreover, lay teachers were only used when called teachers were unavailable.  Perich stated out as a lay teacher but was asked to, and agreed to become a called teacher.

Perich subsequently developed narcolepsy during the 2004-05 school year and took disability leave.  The school contracted with a substitute teacher to complete the academic year.  When Perich wanted to return to work, the school declined because it had replaced her position with the substitute.  Perich was offered  a paid continuation of her health insurance in return for her resignation. She refused the offer and instead reported to work.  When asked to leave, she refused to leave until she was provided a note confirming she had reported to work. She was later told by the principal that she would likely be fired to which she responded that she had spoken to an attorney and intended to assert her legal rights.  The school terminated her employment for insubordination and disruptive behavior as well as the damaged she allegedly caused to her relationship with the school by threatening to take legal action.

Perich filed a charge of disability discrimination and the EEOC issued a cause finding and filed suit on her behalf against the school claiming that she was fired in retaliation for threatening to file an ADA lawsuit.  The church and school defended against the disability claim arguing that the First Amendment’s Establishment Clause’s (i.e., the provision that precludes the government from passing any law establishing a religion or interfering with the free exercise of religion) ministerial exception prohibited the application of the ADA claim against it because it would undermine the church’s decision in who become and remains a minister of the church.  The EEOC argued that the Court should not recognize a ministerial exception.  The Court rejected the Commission’s arguments holding that to do so would effectively allow the government decide for the church who could act on its behalf as a minister.

Significant aspects of the case included that the teacher was ordained by the church as a minister.   While most of the duties she performed were similar to non-ordained teachers, she also taught religion class, led students in daily prayer and devotional exercises, took her students to a weekly school-wide chapel service and led the chapel service twice a year.  Both the church/school and the teacher held the teacher out as a minister with a role distinct from most of its members; her role required a significant degree of religious training and a formal process of commissioning and that her job duties reflected a role in conveying the church’s message and carrying out its mission.  Because she qualified as a minister, the Court concluded that the EEOC’s action challenging the decision to terminate her employment would be tantamount to dictating to the church who could and could not be a minister on the church’s behalf.  As such, the ADA claim was barred by the First Amendment’s Establishment Clause and ministerial exception. 

The quick takeaways from the case are:

  • Ministerial exception exists;
  • It only applies to religious groups and organizations (although what qualifies as a religious group or organization is unclear);
  • The ministerial exception does not only protect religious organizations from suits alleging religious discrimination;
  • Ministerial exception applies to internal decisions of the religious organization in deciding who to select or retain as a minister;
  • Ministerial exception is not limited to the head of a religious congregation but it is unclear how far the exception can be extended;
  • Holding is limited to cases where minister brings an employment discrimination claim challenging a church’s decision to fire her.

It will be left to the lower court’s to flesh out the outer boundaries of the ministerial exception to determine who qualifies as a minister and what decisions can be said to interfere with the religious body’s free exercise of religion.

You can download a full copy of the Court’s opinion here.

Follow me on Twitter @RussellCawyer.

On January 25, 2012, at 12:00 p.m. I’ll be speaking on a panel titled "Title VII Litigation: Persistent Evidentiary Challenges."  The webinar will cover common evidentiary issues that employment lawyers who try discrimination, retaliation and harassment claims face including:

  • Admission and exclusion of "me too” evidence;
  • “Other supervisor” evidence, including Cat’s Paw Liability case developments;
  • After-acquired evidence;
  • Character evidence;
  • Evidence from social media websites;
  • “Stray remarks” doctrine;
  • “Similarly situated” defense; and
  • “Better qualified” defense

Readers and subscribers of the Texas Employment Law Update (RSS-feed and e-mail subscriptions) receive a 50 percent discount on registration.  To get more information on this webinar or to register using the discount, click here.

Follow me on Twitter @RussellCawyer.

Wow!  That is all I could say after I read the recent NLRB decision holding that an employer’s requirement that employee sign mandatory arbitration agreements waiving the right to litigate claims in a collective or class action violates the National Labor Relations Act.  

In the case styled D.R. Horton, Inc. and Michael Cuda, the Board considered an arbitration program used nationwide by the home builder employer.  The arbitration agreement, signed by all employees, required that all disputes be resolved through arbitration and that no disputes would be arbitrated on a class or collective basis in any forum, judicial or arbitral.  When Michael Cuda sought to bring a nationwide wage and hour class action on behalf of all of the company’s superintendents, the company sought to enforce the arbitration agreement and its mandate that claims be litigated individually –not collectively.  Cuda filed an unfair practice charge claiming that the waiver of arbitrating or litigating claims on a representative, class or collective action basis violated the employees’ Section 7 rights to engage in mutual aid or protection.  

Since the U.S. Supreme Court decision in Concepcion, more employers have incorporated strategies to ensure that claims are litigated on a level playing field by requiring employees to arbitrate or litigate those claims on an individual (or non-class action) basis.  Notwithstanding the Board’s commentary to the contrary (i.e., the Board professed that the decision would impact few agreements), the Board’s decision will have widespread ramifications on companies use of arbitration programs.  Despite the disadvantages that arbitration carries, one advantage was the widespread belief that employers could better manage the prospect of having to litigate class actions with large numbers of their workforce through arbitration agreements designed to decide claims on an individual basis. The decision in D.R. Horton eliminates that potential advantage of arbitration.  Moreover, the Board’s decision is not limited to arbitration programs and its rationale may be applied outside of arbitration agreements such as agreements with individual employees

Finally, because it is a decision applying federal labor law, a law that applies to most employers and employees, the Board’s position could have wide-reaching, adverse consequences for employers seeking to control the risk of defending against class or collective actions.  This is an important decision that warrants following through the inevitable appeal that D.R. Horton will make.

You can download a full copy of the Board’s decision here.

Follow me on Twitter @RussellCawyer.

 

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. 

The current federal administration is making significant changes in employment law through its rulemaking and regulatory authority rather than seeking Acts of Congress.  Another example of this method of legislature-through-rulemaking is the new federal regulation taking effect on January 3, 2012 that prohibit all commercial motor vehicle drivers from using hand-held telephones while driving.  The new rules provide significant penalties for drivers and employers of drivers caught violating them.

In summary, the final rule provides as follows:

  • Restricts use of hand-held mobile telephone by drivers of commercial motor vehicles;
  • Prohibits employers of CMV drivers from requiring or allowing drivers to use hand-held mobile telephones while driving and provides a civil monetary penalty of up to $11,000 per violation;
  • Imposes new driver disqualification sanctions for drivers violating the rules, or state law equivalents, on multiple occasions;
  • Requires states, within three years, to implement the new rules regarding disqualifying CDL drivers for violating the new serious traffic violation of using a hand-held mobile telephone while driving a commercial motor vehicle;
  • Provides limited exceptions for communications to law enforcement personnel and emergency services;
  • Applies to school bus drivers and drivers of small, passenger-carrying vehicles (designed to transport 9-15 passengers), not for direct compensation that were otherwise exempt from the Federal Motor Carrier Safety Regulations;
  • Defines "use [of] a hand-held mobile telephone" to include holding, dialing and reaching in a proscribed manner to conduct voice communication;
  • Includes "push-to-talk" functions within definition of hand-held mobile telephone. 

If you are a CDL driver or employer of CDL drivers, you should review these regulations carefully and update your fleet management and employee handbook policies accordingly.  A full copy of the final regulation can be accessed here.

Follow me on Twitter @RussellCawyer.