Jottings By An Employer's Lawyer

Tuesday, April 26, 2005

"Not As the Crow Flies" FMLA Regulation Valid

FMLA regulations have had their problems passing judicial scrutiny, but the 5th Circuit upholds the Secretary's method of calculating the 75 mile rule, affirming a summary judgment dismissing the claim of an employee that he had been terminated after taking FMLA leave. Under the FMLA, if there are less than 50 employees within 75 miles of your worksite, even though you meet all other conditions, you are not eligible for FMLA leave.

Here, the question was how the 75 miles was to be measured, as the crow flies or over public roads, as specified in 29 C.F.R. § 825.111(b). In Bellum v. PCE Constructors, Inc. (5th Cir. 4/25/05) [pdf] the Court had no qualms giving Chevron deference to the rule. Bellum had argued that since the statute said 75 miles and did not set out a rule for how it was to be measured it should be done literally.

The Court first determined whether the statute was ambiguous in light of the traditional rules of statutory interpretation which include "the text itself, its history, and its purpose." Here, by means of a hypothetical using the Grand Canyon the Court illustrated how Bellum's rule would seriously undermine the purpose of the 75 mile rule, to minimize the impact on employers with limited work forces:
Suppose that Company A had its headquarters along the south rim of the Grand Canyon and a branch office on the other side only 25 miles away as the crow flies. Suppose further, quite plausibly, that the shortest distance between the two by public roads is 120 miles. Now, imagine that Company B has its headquarters next to a straight-line interstate highway and a branch office 80 miles away also right along the interstate. Under Bellum's reading of the statute, Company A would be bound by the FMLA but Company B would not be. Given that the purpose of the exception at 29 U.S.C. § 2611(2)(B)(ii) is to relieve the burden of FMLA compliance on companies with widely dispersed operations, it would make no sense to construe the statute in a way that subjects Company A but exempts Company B.
Having concluded from this that Congress' failure to provide a statutory means of calculating the 75 miles left an "implicit statutory gap," the Court found the Secretary's interpretation easily passed the test of not being " arbitrary, capricious, or manifestly contrary to the FMLA."

That second step (and standard) was important because in its own case law, the 5th Circuit had adopted the "as the crow flies" calculation for how the 100 mile rule for the service of process is determined. This was pointed out in a post-argument submission as a follow up to a question by one of the members of the panel. Having found a 5th Circuit case endorsing the crow-flying rule, Bellum and his counsel were no doubt encouraged. It was not meant to be however as the Court dealt with it in this footnote:

In Sprow, we concluded that measuring "as the crow flies" is the proper method for measuring the 100-mile distance for service of process under what was then FED. R. CIV. P. 4(f) and is now FED. R. CIV. P. 4(k)(1)(B). 594 F.2d at 417-418. In coming to this conclusion, we specifically rejected the use of road miles because that standard lacks uniformity and simplicity. Id. Even assuming arguendo that Rule 4(k)(1)(B) and 29 U.S.C. §2611(2)(B)(ii) are similar enough to warrant comparison, it is not necessary for us to address whether the considerations discussed in Sprow would lead to a better rule than the one devised by the Secretary of Labor because, in a Chevron case like this, the only question for us is whether the Secretary's construction of the statute is permissible, not the best. Having found that it is permissible, our inquiry is at an end.

In short, when dealing with regulations, never underestimate the power of Chevron.


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Monday, April 25, 2005

Hiring For Security Sensitive Positions - Check Out This White Paper

The American Society of Safety Engineers Council on Practices and Standards (that's a mouthful) have just released a white paper on Pre-Employment Testing and Investigation for Security-Sensitive and Other Positions. What are security-sensitive positions you might ask? Their list would cover those jobs where employees:
  • Handle currency.
  • Have access to confidential information.
  • Have routine access to building master control and key systems.
  • Are responsible for the care or instruction of children.
  • Work in an area designated as a security-sensitive.
  • Drive company vehicles and/or equipment.

One item that caught my eye was

DNA or Fingerprint Checks —As technology advances and as databases become more extensive and better-connected, DNA and fingerprint testing becomes more important as a method of evaluating applicants. From a risk management perspective, not identifying someone's history with respect to an issue such as child molestation is foolish for positions in which your applicant will be dealing with children. There are also laws that require fingerprinting for certain positions, such as childcare workers, law enforcement and some social service employees.
The paper doesn't quite make clear the import of its reference to DNA checks, but it does make me think that legislators who are rushing to pass laws prohibiting use of DNA information may have more relevance to the real world than I have customarily thought.

Of course, having just returned from 3 marvelously cool days at Jazz Fest, and all the pleasantries that New Orleans offers in way of music and food (well not ALL, but I did partake of my fair share) it could just be that my brain is addled. When I dig out of the accumulated email and other issues and realign the synapses, more regular posting will hopefully follow.

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Monday, April 18, 2005

Posting Envy

Oh to be able to post the following:
Lack of Posts
Sorry for the lack of posts. I am in Switzerland for work related matters.
As found in full last Friday at Mathias' Unions-Firms-Markets blog.
Actually, my posting may be light later this week and early next week as I head to the Big Easy and the first week end of one of the best music festivals around, the New Orleans Jazz & Heritage Festival, better known as Jazzfest.

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Not Quite Man Bites Dog, Chapter 2

I have refrained from addressing the issue of blogging in the workplace, not because it's not topical, but because others seem to be covering it very well, particularly George Lenard at George's Employment Blawg. Check out this post for his series of comments. And also possibly because I have always had sort of a "stick my head in the sand approach" to the idea of "permission needed." (Perhaps taking a lesson from the first woman admiral in the U.S. Navy and computer pioneer, Grace Hopper, known for her famous quote: "It's always easier to ask forgiveness than it is to get permission.")

The first time I was asked about my blog by anyone outside my normal every day circles, that question did come up. Although my answer didn't show up in the American Lawyer article way back in November '02, I remember telling Matt Black that I had not at the time, (nor did I ever) ask permission of the management committee at my then firm. Maybe I wasn't too worried because at least in Black's view, I wasn't doing anything terribly controversial:

Functional though the format can be, attorneys may have difficulty satisfying its inherent bias: punchy, attitudinal expression. Demonstrating expertise in public can make one cautious. "I've been careful not to do anything very far out," concedes Fox. It shows. Only one visitor to Fox's site has posted a comment. Fox says he is "still trying it out," and hasn't formally alerted anyone to the site. (emphasis added)
Not sure I have advanced all that far since then.

However, that was just a long winded way of getting to today's post, which is in fact about the employee as blogger issue. Fast Company's lead to its story, Blogging at Work, got my attention:

The debate over employee blogs has reached new heights ever since a blogger who works for a blog company has been reprimanded for blogging about employees blogging.
Sort of like an employee of a union filing an unfair labor practice charge, which was the first chapter of Not Quite Man Bites Dog . As the story (originally in the New York Times) plays out, it wasn't a serious reprimand, (the company was Technorati), in fact it sounds more like a mild mannered request. Still it makes a good point -- when a company whose core business involves blogging is sensitive, it's easy to see how employers who still think a blog is some sort of mud pit or jelly roll, would be concerned.

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Sunday, April 17, 2005

Near MDV in Ageism Case in Tacoma

It is just under the bar for the million dollar verdict category, still the story on a $974,000 verdict by a Tacoma jury caught my attention for a couple of reasons. One was the use of the term "ageism" which is not all that often used. A little internet checking shows there may be a reason why the term sounded strange. One activist, Cynthia Rich, quoted in a 2003 Met Online article said:

Ageism is 40 years behind the other isms, such as sexism, racism, and lesbianism. ... Ageism is a form of sexism because it is mostly directed at old women.

Just because it has not caught up to the other 'isms, does not mean it is any less oppressive in the eyes of a professor of Women's Studies quoted in the same article, “Ageism is part of the matrix of oppression when you talk about gender, race, class, or sexual orientation."

According to the Tacoma News Tribune, the verdict was somewhat unusual because Brian Watson was only 49 years old. The 21 year Wyeth employee did not fault the elimination of his senior account manager dealing with Safeway stores. Safeway had apparently consolidated its regional and local buying and only made such decisions at a national level. His complaint was that he wasn't able to find another position, including one for national sales manager that went to a 35 year old female with no prior experience in pharmaceutical sales, his area of expertise.

The other phrase that caught my attention was Wyeth's statement that he was not a "high potential employee" worthy of promotion. Judgments about potential it seems to me are quite often problematic. I wonder if they are really worth the effort and risk?

This was clearly not an open and shut case, after 3 weeks of trial the jury spent almost two full days in deliberation. And it is clearly not the end of the story, because as I have done before and probably should put in every story about an MDV, the quote from my Civil Procedure professor, Pappy Jones --- "Remember, ladies and gentlemen, there's no cash register at the back of the court room." But that's cold comfort for the trial lawyer and those involved in the trial during the period between verdict and the final resolution, no matter how it turns out. Wyeth brands that the plaintiff managed included Robitussin, Dimetapp and Advil. Wonder if they have a good antacid?

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Thursday, April 14, 2005

"For Cause" May Differ For Purposes of Termination or Severance

Hired as a consultant, Lynn Joy was given a contract that entitled her to one year's base salary (which was $210,000) if she was terminated, provided she was terminated "for reasons other than cause," a word not defined in the contract. When she was terminated for failing to meet a billing requirement, her employer claimed it was "for cause" and denied the severance pay.

The Court first noted the problems with dictionary definitions in ascertaining the intent of drafters since they usually give a range of "linguistic possibilities," but "rarely do they help a court decide which one the drafter of the contract or statute in question intended." Here it was even worse, as the court picked a definition which Judge Posner finds it clear that the contract actually precluded.
The employer, apparently recognizing the error, didn't attempt to defend the judge's choice but posed its own -- "cause" meant unsatisfactory performance as judged by it. The employer backed it up with a string of citations which do in fact uphold terminations based on such a definition. Unfortunately, for the employer, Judge Posner one of the most prolific writers ever to sit on a bench, could envision a difference between what is meant in a clause allowing termination of a contract as opposed to one granting severance pay. As he explained:

Business firms almost always reserve the right to fire an employee (unless the employee is protected by a collective bargaining agreement) if the firm decides that the employee's performance is unsatisfactory. But it is precisely because of the insecurity of such employment -- the determination that Joy's performance was unsatisfactory was based on a criterion selected by the firm after she went to work for it, rather than being specified in her employment contract -- that employment contracts often provide for severance pay. Joy was leaving a good job to go to work for HGI and in doing so may have been taking a risk (though, with her mentor leaving Hewitt, maybe there would have been a risk in her remaining there), especially since she was going to be working in what was a new line of business for HGI. If she lost her job she would need money to tide her over while she looked for a new job. Hence the severance-pay provision in her employment contract with HGI.

And because of this, Judge Posner notes, with, as he says "considerable irony":

The precise meaning that the word bears in the contract cannot be determined just from reading the contract, as HGI argues. It is a considerable irony that a firm that is in the business of consulting on executive compensation failed to draft a contract that clearly specified the compensation rights of one of its own executives.

Bottom line, there is joy in the Joy household as the summary judgment was reversed and sent back for further proceedings. Joy v. Hay Group, Inc. (7th Cir. 4/8/05) [pdf].

Although that is the important part for Ms. Joy, Judge Posner is not through educating, noting the different circumstances where evidence might be allowable to determine the meaning of "cause" in this contract. Even if the meaning of the contract had been clear on its face, that did not necessarily mean all extrinsic evidence is excluded:

Extrinsic evidence, which is to say evidence besides just the written contract itself, is admissible to demonstrate that the contract may not mean what it says, provided the evidence used to show this is "objective" in the sense of not being merely self-serving, unverifiable testimony.

The latter clause is important as it would have excluded what Joy had offered here, testimony by two ex-employees, both of whom had grudges with the employer. But since in this case the meaning was not clear, any admissible evidence is available at the trial, including her two witnesses. Admissible -- yes, but as Judge Posner noted in closing, "whether they will be believed is, of course, another matter."

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1st Circuit - Post Reeves v. Sanderson Analysis of Pretext Evidence

Much has been written and even more has been said (some of both by me) of the problems obtaining summary judgment after the Supreme Court's decision in Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133 (2000). Although it may have made it more difficult, in fact summary judgment is still available. This week the 1st Circuit affirmed what it found to be a well reasoned summary judgment opinion, specifically to make the point that mere attacks on an employer's articulated reason for a decision are not sufficient to preclude summary judgment, even post-Reeves.

Noting that both parties agreed plaintiff had established a prima facie case of age discrimination, the Court found the real battle turned over whether his evidence of pretext was sufficient. Alas, for the plaintiff, it was not:

Plaintiff attempts to establish this kind of pretext by firing a spirited volley of some twelve charges, with the hope that the resulting smoke will be considered proof of fire. We consider them carefully but conclude that the smoke dissipates with the firing of each charge.

Ronda-Perez v. Banco Bilbao (4/13/05) [pdf].

A good case for employers and their counsel that summary judgment is not nearly as close to extinction as some would have you believe.

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Wednesday, April 13, 2005

The Conscientious Objecting Pharmacist - An Appropriate Follow Up to the Prior Post

If I had a better system for posting I would have combined the prior post on the Workplace Religious Freedom Act and this articulation of one side of a debate that seems to have gotten a lot of press lately, Martyrs and Pestles - Should pharmacists be allowed to refuse to dispense birth control?

Although I have not done any in depth analysis, my guess is that this issue would become more legally significant to an employer, as opposed to just a difficult pragmatic and moral issue, if the WRFA were to become law. That is certainly the hope and view of some advocating its passage. The Family Council's website discussion of the WRFA clearly states their view of its purpose:

Policy Goal: The passage of the Workplace Religious Freedom Act (WRFA) would help to ensure that American workers will not have to choose between their faith and their job. The WRFA would create a climate that encourages both the government and private sector to greet employee requests for religious accommodation with respect and consideration rather than suspicion.

And then goes onto give the following as an example of a case that would presumably have been different under the WRFA:

In 1996, Kmart fired Karen Brauer, an Ohio pharmacist, for refusing to dispense Micronor, a birth-control pill. K-mart did so even though Ms. Brauer had informed them when she was hired in 1989 that, based on her religious beliefs, she would not do so.

Regardless of your view on the merits of this debate, it is hard for me to buy this argument of the Family Council:

The WRFA would restore the intent of Congress in Title VII by providing clear statutory guidance to those employers who wish to comply with the law but are unsure what level of deference the law requires. The WRFA is also good for business, as it is likely to significantly reduce employee lawsuits and any associated costs.

I think it is going to be a hard sell to many experienced in this field to suggest that business will benefit by the creation of an expansion of rights in a contentious area, where the ultimate method of resolution is a lawsuit. While bright line rules might accomplish that, it seems highly unlikely that the WRFA would give such clear guidance. Actually, there is already a fairly bright line as to the extent of an employer's obligation to accommodate religious beliefs under Title VII. It is based on the Supreme Court's decision in Trans World Airlines v. Hardison (1977) and over 25 years of further court interpretation. It is that line that the WRFA would change, which if I am not wrong would mean another substantial period of uncertainty while the courts tell us what the language passed by Congress means in the reality that is the workplace as scrutinized in the court room.

The argument for the validity of the WRFA should be on the basis of whether the costs that will be incurred by business (which of course ultimately means by all of us as consumers), as well as the costs to those who might be harmed by newly empowered employees exercising rights given them by the WRFA, are worth it to obtain the policy goal being sought.

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Workplace Religious Freedom Act - Consensus On Neither the Right Nor Left

The Missouri Valley TimesNews carries an article by First Amendment Center Senior Scholar Charles C. Haynes, For advocates of workplace religious liberty, hope springs eternal, discussing the odd partnerships created by the Workplace Religious Freedom Act (S. 677), which was recently introduced for the 7th consecutive Congress. Given that the Senate co-sponsors are on the two ideological extremes, Santorum (R- Pa) and Kerry (D - Mass), you might expect smooth sailing. But as Haynes, a supporter of the bill points out, on both sides of the spectrum there are those with doubts about the wisdom of this legislation. One of the principal objectors, the ACLU, would apparently accept a modified bill, so this is one of those pieces of legislation that may someday have a chance.

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College Kids - A Worker's Best Friend?

Well maybe or maybe not. Professor Bainbridge certainly has one side of the argument with his photo post, On not having a clue, discussing the irony of littering campus with posters in support of those workers whose job will include picking them up. [Thanks to Professor Volokh of the Volokh Conspiracy for the heads up.] Actually the fact that college kids might be clueless about having someone pick up after them, does not strike me as exactly news, but Professor Bainbridge makes a good point.

On the other side, in fairness to the college age activists, the Georgetown student hunger strike in support of living wages for campus workers did seem important to the Georgetown's administration "compromise agreement" on a living wage for its employees. Check out A Living Wage Victory at the Georgetown Independent.

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When Your Expert Takes the 5th

More for the "you can't make this stuff up" category. The Washington Post story, For the Expert Witness, a Few Tough Questions has the story of the downfall of a self-professed expert, Robert David Madrid. His c.v. included:
an undergraduate degree from the University of Maryland, a master's degree from Georgetown University, a medical degree from Harvard and a PhD from the Massachusetts Institute of Technology.
Given those credentials, one might question why he was working for a P.I. firm in Anniston, Alabama. It all resolved itself in the following court room colloquy, where in today's parlance, you might say he pulled a Greenberg:
"Included in [your] CV . . . are some specific mentions of schools that you claim you have attended," the prosecutor said. "Did you, in fact, attend the University of Maryland?"

Madrid responded, "On the advice of counsel, I plead the Fifth Amendment."
Thanks to Blog702 for the heads up.

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Tuesday, April 12, 2005

Is My One Man Quest Against Bullying Failing? "Bully case verdict ..."

Check out the story in the next issue of the American Medical News, Bully case verdict a warning to doctors ... , which gave me considerable pause when a reader who has apparently followed my campaign against the bullying cause of action was kind enough to send it to me last night. You can see some of my earlier posts about a bullying cause of action here, here and here, where more than a year ago I noted "employers will rue the day that either the legislature or judiciary start down this broad and ill defined path."

But at least according to the lead paragraph of the AMN story we appear closer to the top of that slippery slope:

When a jury recently ordered an Indiana heart surgeon to pay $325,000 to a hospital employee on a claim of "workplace bullying," experts who have studied the subject said it was a significant decision in a growing, yet murky, area of law.

Basically, heart surgeon, Dr. Daniel H. Raess, apparently yelled at a perfusionist, (the professional who operates the heart/lung machine), John E. Doescher, one time too many. What Dr. Raess's attorneys would ultimately describe as "nothing more than a shouting match between two adults," where "both men were giving as good as they got" according to a story in the Indianapolis Star, ended up in a lawsuit in Marion County, Indiana.

Curious as to exactly how the Indiana courts managed to become the first state to adopt the new cause of action of "bullying," I was mollified with a little googling, to find that it had not done so, instead it was the standard (albeit not a favorite of mine) cause of action, intentional infliction of emotional distress. See the report of the jury verdict at

For more on the details of the trial check out the Indianapolis Star post-trial story. Although a verdict for the plaintiff, the jury was not as incensed as it could have been, refusing to award punitive damages. Some of plaintiff's counsel's final argument actually gave a motive rooted in a more traditional claim, whistleblowing:

During his final argument, [plaintiff's attorney] described Raess as a domineering manager who viewed himself as untouchable and wanted to put Doescher in his place when the perfusionist threatened to tell hospital administrators that Raess had verbally abused other members of his staff. "It's not abuse, according to him, to yell and scream and cuss at somebody," Betz said of Raess. "He was on his throne over there."

Still, the importance of this case should not be overlooked for what it is -- a real triumph for the "anti-bullying" forces, which have managed to make this case somewhat of a cause celebre for their budding movement.

First, counsel for Doescher utilized the bullying terminology in describing his case:

This is the story of the ruination of a 17-year career of a perfusionist by Dr. Raess because of a workplace bullying incident," said Kevin Betz, Doescher's attorney.

It also marked the first time that Dr. Gary Namie, the founder of the Workplace Bullying and Trauma Institute, has been allowed to testify in court on his specialty. Not too surprisingly, according to the Star, in Dr. Namie's view:
The case is a clear-cut example of the phenomenon [of workplace bullying]. I concluded based on what I read and heard, Dan Raess is a workplace abuser.
And Dr. Namie not only testified, but was spinning the story to the Indianapolis Star, post-trial, emphasizing his particular cause, claiming, "this is the first time a workplace bullying case has been heard in the United States." The story also notes that laws to make workplace bullying illegal have been introduced in both the Washington and Hawaii legislatures, which of course has been heartily supported by his organization.
Interestingly according to their website, Dr. Namie came to the cause when:

Life for Gary changed in 1996 when his wife -- Dr. Ruth, with her doctorate in clinical psychology -- was trampled by a horrific woman boss. The couple's subsequent fight for justice led to their 1998 founding of the Campaign Against Workplace Bullying, bringing the international adult anti-bullying movement to America.

And the media likes the story, see "Workplace Bullying in the Public Eye" at Dr. Namie's Work Doctor website. For example, the Star followed their trial reporting with a discussion piece on March 20th, Workplace bullies more than mean, Mistreatment on the job on the rise experts say. The first expert noted for that proposition was from none other than the Workplace Bullying and Trauma Institute:

People finally realize what they've been going through has a name," said Natalie Nissen with the Workplace Bullying & Trauma Institute in Bellingham, Wash. "They call and say, 'Oh. That's me. I've been bullied.' We are constantly noticing an increase in the number of calls we get."

Although the Star article does note, "no hard statistics exist to confirm workplace bullying is, in fact, on the rise", that does not preclude the reporter from from saying in the next sentence, "most counselors and psychologists say the phenomenon is explosive."

And now, those like me who practice on the employer side of the docket, are adding to the publicity (including of course this post itself), for example see a report from a leading Indianapolis law firm which notes "a new trend appears to be emerging," which it bases on "the popularity of workplace bullying legislation combined with the jury verdict in the Doescher case," all of which according to the article "suggest[s] that employers must brace themselves for the emergence of a new potential risk of liability." That frankly seems a little overblown since none of the legislation has passed and the Doescher case is a trial court verdict using a traditional cause of action that is being spun to be the bullying case break through.

But, there is no question, that the anti-bullying forces have been successful enough to semantically change the debate, in this one instance from the rather clinical sounding "intentional infliction of emotional distress" to "bullying in the workplace" which may more easily connect with the hearts and minds of jurors, and thus potentially the pocket books of employers. I think we are a few steps closer to that slippery slope.
UPDATE: The case was reversed and remanded for retrial by the Indiana Court of Appeals on December 8, 2006. See First "Bullying" Case Goes Down in Flames .
2nd UPDATE: On 4/8/08, the Indiana Supreme Court reversed the decision of the Indiana Court of Appeals and reinstated the trial court judgment against the surgeon. See, Bullying Indiana Style Makes a (Limited) Comeback.


Hi! I just wanted to say thanks so much for your work.
I was mobbed from 1999-2002, and it nearly killed me. At that time, I had no words for it, nor did I believe the behavior existed outside my situation.
The supervisor who mobbed me also mobbed my next two successors. After the third person left this position, I began to realize that the problem was not me...and then I found the book "Mobbing." And that's when a whole new world opened up to me.
I am happily employed now but I do think about what happened to me every day. If you want details about my situation, please respond in Ninevah, the yahoo community for workplace mobbing. Thanks again.
I agree that workplace bullying is a problem and I think that it should be thought of as simply an umbrella term for sexual and other forms of harassment. I sympathize with the idea that employers face too much legislation in the workplace. However, a recent experience has changed my mind on bullying. I was terminated for allegedly harassing a woman because I told her that I did not like her from my personal mail account. The termination followed a defamatory perfomance review from the same manager and several weeks of isolation and backstabbing by same manager. This is bullying because it seems that the manager is allowed by the (high profile) company to defame and humiliate employees, while the slightest irritable gesture on the part of the target is ``harmful and intimidating``, to the point of warranting termination. Bullying is meant to damage the career and value creation potential of the target, taking value AWAY from employers. Bullies rob their own companies in the same way that other white collar criminals do.
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Sunday, April 10, 2005

North Carolina: Home of National Champs and Latest MDV

Last Monday night the Tarheels of N.C. were cutting down the nets, the traditional spoils for the NCAA basketball champions. Late Friday afternoon in Durham, just a dozen miles away from the Tarheels Chapel Hill campus, a federal court jury took less than 1 ½ hours to award a whistleblower $1.59 million. John Stevenson of the Herald-Sun covered the trial and had the story headlined, Ex-city worker awarded $1.5M.

Based on Stevenson's stories during the coverage of the trial (see links below), Ava Hinton was a 17 year employee in the City Housing Department. She claimed she had reported problems with the City's small business loan department. Apparently the program began in 1999, and under it the city :

lent $828,000 in federal money to 24 businesses in an attempt to spark entrepreneurial activity in low- and moderate-income areas of the community. But some recipients gave false addresses and then disappeared, while others repaid little or nothing.

The program was ended in July, 2001.

Hinton was not fired until July, 2003. The City claimed she was fired for wrongfully approviing $1,280.50 to be used on weatherizing improvements owned by her and her mother. Hinton admitted that it was a "mistake" but testified that it had been approved by her supervisor.

In looking at the evidence as reported in the Herald-Sun, it is easy to see why the City spokesperson said after the trial:

"We are shocked by the verdict. We don't believe it is supported by the evidence in any way. We are looking at all our options, including the option of appeal.

From the stories it appeared -
  • the City learned about the problems with the small business loan program from a federal audit, not just Hinton;
  • the program had been eliminated for more than 2 years before Hinton was fired;
  • the problem with the weatherization authorization by Hinton was uncovered because of an inquiry by a federal agency which prompted an audit of files;
  • when the issue was discovered, Hinton was put on administrative leave and then terminated following the completion of the investigation.

On the other hand (and when there is a large verdict, there is always another view):

  • Hinton claimed the Housing Director who fired her had her own conflict of interests, based on the employment of the Mayor and a personal relationship with an independent agency which was involved in the controversy over the program;
  • there was testimony from a terminated (and one would assume disgruntled) employee that the the Housing Director said she "finally had a reason" to terminate Hinton (a statement denied by the Housing Director); and
  • 2 employees of an agency (but not under City supervision) had committed a similar violation to Hinton's and not been terminated; and
  • at a grievance hearing, the hearing examiner suggested that Hinton should be reinstated.

In a post-trial statement, Hinton's counsel said he had offered to settle the case for $15,000 and reinstatement, which obviously sounds a lot more reasonable now. It also would seem to mean that the case ended up playing out a lot stronger than he thought it would.

The good news for the City, besides that this is a long way from the end of the process, the federal judge threw out the claim for punitive damages. The bulk of this award, $1.5 million was for mental anguish. Think what it could have been.

To check out the day by day description of the trial from Stevenson's reporting see his stories of April 7, April 6, April 5, and April 4.

Even from the little information that can be gleaned from the newspaper reporting, this case is a good reminder that when you enter a court room literally anything, and I do mean anything, can happen.


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From S&M to Harassment Victim - A Most Unusal Twist of a Tale

Imagine your feelings at your new job when a supervisor is familiar -- because he was a client at your former job as a professional dominatrix. Thank goodness, at least you are in San Francisco. Former client becomes pushy, seeking "sessions" and other harassing behavior. Ex-domme strikes back, ultimately with sexual harassment suit that eventually settles for $35,000, $25,000 in attorneys' fees, reinstatement of 800 hours of leave time, a job transfer and the ability to work home one day a week. The employer -- the United States Treasury Department. You can check out all the details in the San Francisco Chronicle story of Mistress Celeste, nee Susan Peacher.

The former client is now retired and Peacher is now a leader in the local chapter of the National Treasury Employees Union. You really can't make this stuff up.

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Saturday, April 09, 2005

What Makes Work Meaningful? Answer That and I May Be Out of Work

If most employees found their jobs and work meaningful there would be a lot less need for those of us who toil in the field of dispute resolution between employers and employees. Nevertheless, I heartily encourage the efforts, so was intrigued by a post in Worthwhile, What makes work meaningful?, linking to Tom Terez' site, Better Work Place Now. Terez has divined 22 concepts from his study over the last two years of employees and what makes their work, work for them. Not inlcuded in the 22 per se is 'dignity', although 'respect' is, (two other concepts for lessening the need for me and my kind of lawyer) and just from perusing the others, no doubt the general concept of dignity is included as well. In any event worth checking out, thinking about and acting on.

Worthwhile is both an interesting blog and also a new magazine, although my not too diligent efforts to find a copy at a bookstore have not been fruitful. I am frequently impressed by posts which make me look at things a little differently than before, always a good thing.

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Friday, April 08, 2005

Employer Using Temporary Help Agency - Who Is Protected by Workers Compensation Bar?

If you are an employer operating in Texas and you have workers in your work force that you obtain through a temporary employment agency, you need to make sure that you check out today's decision from the Texas Supreme Court. Garza v. Exel Logic, Inc. (TX 4/8/05). The question is whether under the following contract, the primary employer was entitled to the workers compensation bar in a suit brought by an injured employee. The contract between Exel and Interim Services provided as follows:

In consideration for [Interim’s] performance of the Services, [Interim] shall receive as sole payment, the hourly rates negotiated with Exel Logistics Operations in the respective market plus the markups reflected for the appropriate classification of temporary labor for the respective market as set forth in Exhibit A1 (Rate Schedule). The markups in Exhibit A1 include all costs, overhead and burden associated with providing temporary labor to Exel Logistics, including but not limited to costs associated with testing, background investigations, training, workers compensation, insurance, etc. No fees may be billed other than the markup on the hourly rate. [emphasis added]

Garza was a worker provided by Interim to Exel who was injured on the job following the instruction of an Exel supervisor. In his lawsuit both Exel and Interim raise the workers compensation bar. Garza did in fact collect workers compensation benefits.

Both Exel and Interim were successful at the trial and intermediate appellate level. Today, the Supreme Court agrees that the temporary employment agency is protected by the bar and affirms their dismissal. However, after a detailed anaylsis of the provisions of the Texas Labor Code, the Court sends Exel, the primary employer, back to the trial court for further proceedings to show that it has coverage itself. As the Court noted:

Nothing in the contract between Interim and Exel indicates that Interim was required to obtain a workers’ compensation policy that named both parties as insureds, or that Interim was required to obtain a separate policy for Exel. The contract indicates the opposite.

If the workers compensation policy actually issued had named both as insureds, or if there were a separate policy for Exel, then it appears both would have been protected, but nothing in this record shows that is what happened.

Often the "details" of insurance, including workers compensation, are not scrutinized until after an injury occurs. Today's decision is an important reminder that every employer in this situation should check now to be sure that it has the protection it believes it does.

Today's decision is also worth noting for a couple of other points. First, it goes against the standard view that the Court is an "anti-employee" court, since it actually reversed a pro-employer ruling. Secondly the author of the opinion is the much beleagured Judge Priscilla Owen, one of the infamous "Filibustered 10" whose nomination to the federal appellate bench has been caught in the malestrom of political posturing.

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Thursday, April 07, 2005

SARBOX Trap for the Unwary - Appeal Within 10 Days, Or Else

Sarbanes Oxley is still a relatively new statute and so practitioners (as well as the judiciary, both administrative and legal) are just now beginning to work our way through various issues. While one would always hope for a civil tone and treatment between the bench and bar, it would seem especially called for when approaching new and unanswered questions. Be warned, the following is a rant.

Take the following situation: A whistleblower complaint goes to trial before an ALJ with three contested issues: was there protected activity, was the employer aware of it, and was there a causal connection to the adverse employment action (in this case a termination). ALJ finds plaintiff engaged in protected activity, company had at least constructive knowledge of the activity, but there was no causal connection between the protected activity and the termination. Bottom line, plaintiff loses, case thrown out, employer and its counsel happy, employee and his counsel not so happy. That is the scenario so far in Heinrich v. Ecolab, Inc. 2004 Sox 51 (ALJ) (2004) [pdf].

Next scenario. Unhappy employee files an appeal with the Administrative Review Board on the 10th business day after the ruling, the last day for an appeal under the rules. Within 8 business days, employer's counsel files cross-appeal. (Although the purpose of the cross-appeal is not clear, I am assuming the employer wanted to ensure it would be able to advance its arguments that the ALJ was wrong on the issue of protected activity, which included an argument that SARBOX should have a materiality provision, and on the issue of knowledge.) The ARB issues an Order to show why the employer's cross-appeal should not be barred as untimely for not being filed within 10 business days of the decision by the ALJ.

Employer's counsel, quite reasonably argues that it seems unlikely Congress intended every successful litigant should of necessity file a "defensive appeal" when it would have been quite happy to let the case slide into oblivion unless the losing party tries to keep it alive. It makes sense to me, although it is clear that there is no explicit procedure for cross-appeals in the final SARBOX rules. Employer's counsel, also reasonably it seems to me, argues that Federal Rule of Appellate Procedure FRAP(4)(a)(3) and "on information and belief” every state court's rules of procedure offer a reasonable period of time for a winning party to submit a cross-appeal if the opposing party chooses to initiate an appeal.

Then comes the ruling. Appeal dismissed. Henrich v. Ecolab, Inc.. ARB CASE NO. 05-036 (3/31/05) [pdf]. The Administrative Review Board first notes there is no procedure under the SARBOX rules for a cross-appeal, but goes on to say that is not jurisdictional and thus subject to equitable modification. However, it finds none of the traditional reasons for equitable extensions applicable here. While I would not necessarily agree that ruling is absolutely required under the circumstances, nor that it makes sense, that is not my main issue with it. Instead it is the treatment of counsel's argument, outlined above, by the ARB that I find, to put it mildly, less than charitable.

First, the Board notes that courts 'have generally been much less forgiving in receiving late filings where the claimant failed to exercise due diligence in preserving his legal rights." Under the circumstances, that seems an unduly harsh characterization of what happened here, particularly when the ARB concedes that there is no evidence that the other party has in any way been disadvantaged. But then the Board goes on the offensive (or so it seems to me from the opinion). Characterizing the employer's argument to be that it did not know it needed to file an appeal within 10 days, the Board wrote:

If Ecolab’s counsel was unsure whether the ten-day limitation applied to Ecolab’s appeal, it could have simply contacted the Board to inquire as to the applicable limitations period. Counsel did not do so.

Of course that misses the whole point of Ecolab's argument that it did not know till after the 10 business days had passed (at least based on the record recited in the opinion) that there was going to be an appeal by the other side. I can only imagine how the suggested conversation would have gone (assuming of course that the employer could talk with someone at the Administrative Review Board in a position to give a definitive answer that would not be prohibited ex parte contact):

Counsel for winning employer: I have a question. I don't know if the other side is going to appeal. I don't want to since I won and am happy. But if they do file an appeal, I am concerned whether I need to file an appeal to preserve my right to argue that the ALJ got a couple of points wrong, even though I won on the merits. Can you tell me -- do I need to appeal to preserve those rights? And if so, do I have to do it within 10 business days of the ruling?

Definitive Voice of the Board: Of course you do, my friend.

Yeah, right.

Then to add insult to injury, the ARB jumps on the employer's argument "based on information and belief" about the state appellate rules with the following footnote:

On information and belief” appears to be legalese for “Counsel didn’t actually research the question in all fifty states – this is my best guess.” Such statements reflect a lack of substantiation for the position argued and we give such arguments the insubstantial weight that they merit.

Sure, it makes sense for the employer's counsel to spend $10,000 or whatever it would take to make a definitive research of all state appellate laws, on a point that would clearly not be dispositive. I might be more inclined to disregard the sarcastic footnote of the ARB if they had bothered to point out any state appellate rules that do not permit cross-appeals after the other side has initiated an appeal.

And in a final snippy (but not particularly well reasoned point), the Board says that the employer's counsel cited them to FRAP 4(a)(3) which does give a period of time to cross-appeal after the opposing party, but that rule applies to appeals of right, not permissive appeals like ones before the ARB. Instead, the Board said the more appropriate rule would have been FRAP 5(b) which is related to permissive appeals:

FRAP 5(b), applicable to appeals by permission, provides that any party may file an answer in opposition to a petition or a cross-petition within seven days after the initial petition is served. But the initial petition is not submitted for approval until after the time has run for the cross-petition. Accordingly under the FRAP, a party may have to file a “potentially unnecessary and wasteful appeal in order to ensure the preservation of its own appellate rights.”

The italicized quote is taken from Ecolab's response and the Board cites it as if they have clearly vanquished Ecolab with its own language. Of course, the ARB missed the main point. Even under FRAP 5(b), at least as the opinion recites what happens, the winning party does not have to make a decision as to whether to file an appeal until the other side has done so. The fact that it is a request for a permissive appeal rather than one of right, in no way diminishes Ecolab's argument.

The way I see it, the ARB will now reap what it has sown, and will soon get a rash of "defensive appeals" by any winning party that did not prevail on every possible point. That of course will cost all litigants more time and money and the ARB will now be forced to file, docket, review and ultimately dismiss a large number of appeals which will ultimately not be necessary. (And the last thing I want to hear is about an overworked ARB that needs more resources.)

It may well be that the decision reached by the ARB is required by the rules which did not conceive of every possible situation, or even that it is what the rule makers intended. Still I do not think it likely that a system which requires such a waste of resources will ultimately survive. If it does not go away by judicial construction, then surely a rule change is in order. But whether it goes away quickly, or never, is really irrelevant to my main complaint -- the tone of the Order, which in my view reflects neither sound judicial reasoning, nor more importantly, appropriate judicial temperament.

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Wednesday, April 06, 2005

Things Are Bigger On Wall Street, Including the MDV's

Something must be in the water lately as more juries seem to be returning million dollar verdicts, but today's decision reported in the NYT, UBS Ordered to Pay $29 Million in Sex Bias Lawsuit, has to be the largest for a single plaintiff discrimination case in some time, if not ever. Although Wall Streeter's make a lot of money, which means a lot of back pay, it's pretty clear that its treatment of employees can engender some pretty heated feelings, in this case enough to award $20.1 million in punitive damages.

The plaintiff, Laura Zubulake, a former Asian bond salesman claimed she was passed over for a manager's job in favor of a male. When she filed a complaint with the EEOC, she was fired within three months. The jury ruled for her on both her gender discrimination and retaliation claims.

According to the Newsday story on the trial, Zubulake's lawyers argued that she should be awarded between $9.7 to 10.2 million. Why was the jury willing to award almost 3 times as that?

The Times article has some interesting possibilities. Perhaps the jury didn't like the "he was bad to everyone" defense:

UBS argued, unsuccessfully, that Mr. Chapin's conduct was not discriminatory because he treated everyone badly, and that male employees had also complained about him.

Or maybe from an earlier Newsday story, it was her testimony that she was excluded from some client gatherings, including more than one baseball game and two golf outings. Or that a male superior invited her to a Boston bottomless strip club, or that another male colleague expensed a trip with a client to Scores, a Manhattan strip club. Perhaps that didn't sit well with the 6 woman, 2 man jury.

This case had gained prominence even before it went to trial as the Court had addressed a number of electronic discovery issues. See Judge Scheindlin's May, 2003 decision, one of the first opinions to set out a procedure for dealing with the whole issue of electronic discovery including the costs. And that was not the only time the Court had to address the discovery issues, as Seyfarth & Shaw noted in a client bulletin.

And what were the discovery fights all about? Well perhaps it might have been another reason why the jury felt as it did. One of Zubulake's lawyer's was quoted in Newsday's trial story as suggesting:

The case was also notable for the number of e-mails and other evidence that were destroyed along the way. The verdict [will] send the message, "Don't try to hide the truth."

And to add insult to injury, even before the verdict, the case was already being used as an example about the costs of discovery in an electronic world. Ziplip, a company that describes itself as the 'technology leader in email archiving for compliance, had used the case as an example of the costs of email discovery in a press release about a new product:

An employee discrimination suit like Zubulake vs. UBS Warburg is a case in point. UBS Warburg only archived outgoing and incoming email for their registered traders on optical disk. The Zubulake discovery request sought internal mails which were stored on backup tapes. Recovery costs for a sample set of email on five initial backup tapes cost $19,003.43, or about $4,000 per tape. A second round of discovery requests resulted in additional costs of more than $100,000, before related litigation fees.

This has the appearance of one of those cases that, at least from the defendant's perspective, was just snake bit. And the truth is, once that becomes apparent, they rarely get better.


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Tuesday, April 05, 2005

Litigation on Steroids - $1.2 MDV in San Diego

The Escondido Union High School District probably could not have gone to trial at a worse time given the recent drumbeat of news story on steroids in major league baseball. The facts pitted two coaches, one who blew the whistle on the other, claiming that the first coach recommended to a high school football player that he take a "weight gaining" substance if he wanted to get a Division I scholarship. It probably didn't help that one of the whistleblowing coach's witness was the athlete who testified that he was hospitalized after taking the substance. The jury found the coach reported the conduct and that the report resulted in him losing his job two years later. The result, Ex-Orange Glen teacher-coach awarded $1.2 million in job dispute .

But in reality it was not the drug angle that seemed to be the big issue with the jury. Two members were quoted as saying they "didn't see any intent to suggest illegal drugs." And another that "as a coach, he didn't tell the [hospitalized player] to do anything wrong."

So what was it that got to the jury? Maybe it was that the principal who decided not to renew the whistleblower's probationary contract was none other than the wife of the coach who had recommended the drink. It is not clear from the article what the defense argument was, but from another comment by a juror it appears it might have been that the wife/principal was unaware of the incident.

If so that didn't sit well, as the juror put it: "I found it hard to believe that a husband and wife would not communicate on that issue."

In hindsight, I bet that seems pretty obvious to the employer as well.


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Discrimination On the Basis of Looks

No doubt. Happens all the time -- but it is it illegal? Not yet, at least not directly, although the thrust of the article in yesterday's Atlanta Journal Constitution, At Work Looks Breed Success, is that there are ways to bascially make that argument while dressing it up as an act that is prohibited. Examples given include the recent Abercrombie & Fitch class action settlement, which was based on hiring mostly whites and putting black, Hispanic and Asian workers in less-visible jobs. Although cast as a race discrimination case, appearance was at least involved. Other examples given include the Costco case involving piercings, although the article fails to note that it was decided in Costco's favor at the 2nd Circuit, see my earlier post here. They could also have mentioned the make up case out of the 9th Circuit, discussed here, in which a bartender lost her job for failing to comply with the company's appearance policy.

One of their most recent examples, a federal lawsuit brought by a Harvard University librarian who alleges she has repeatedly been passed over for promotions because she is seen as "just a pretty girl" in "sexy" attire, which went to trial last week, was decided yesterday with the plaintiff losing. Although the publicity buzz came from the "pretty girl" tag line, the legal hook was a race and gender discrimination claim. The New York Lawyer headline, "Pretty Girl" Librarian Loses Suit Against Harvard, pretty well sums it up.

While I agree that discrimination on the basis of looks happens and that creative lawyers will try to stretch existing laws to cover that behavior given half a chance, I don't know that I would go as far as the Atlanta employment lawyer quoted in the AJC article who opined, "These kinds of things are going to gain more attention. This is potentially the next area of significant claims explosions against employers." Well maybe, but not something I am going to lose a lot of sleep over.


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Top Hat Plan = Zilch for Executives In Bankruptcy Scenario

Ever since I first came across the phrase "top-hat plan" I have had a curious image of what this benefit plan must mean. Couple it with a rabbi trust and I envision a cross between a British aristocrat in tails and an orthodox religious figure -- quite a vision. And so a story in today's Daily Labor Report about a top-hat pension plan (and ultimately a rabbi trust), caught my eye. I now know whatever else it means, according to the Bankruptcy Court of Delaware and now the District Court as well, it can mean very bad news for those executives who had hoped to have some of their compensation deferred. In re: the IT Group, Inc. (D.Del. 3/31/05). When their employer filed for bankruptcy, the executives were left with only an unsecured claim, which depending on the results of the bankruptcy often means -- not much.

I will leave it to the true benfefits lawyers for a more complete explanation, but the decision was clear enough to me to know that if I were the hopeful beneficiary of deferred compensation in a shaky company (and in today's world who really knows?) I would be remembering the old adage about the benefits of the bird in the hand.

Yup. I've seen this plenty of times before. What's even worse is when long term execs join a company that many years later becomes "less than stable." They've got their life savings tied up in a company that is going down the tubes. Another definition for nonqualified deferred comp plans.... "no protection."
Diane Pfadenhauer,
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Monday, April 04, 2005

An MDV Close to Home - San Antonio Jury Awards $4.6 Million

Not quite sure how I missed the story of an MDV just 80 miles down I-35, Lowe's ordered to pay $4.6M. That's from the Kerrville Daily Times which appears to be the only link about the case that still shows up on a Google News search and ran the story since the plaintiff, Jana Smith worked at the Kerrville Lowe's.

According to a statement by a spokesman for Jana Smith's counsel, "After wrongfully terminating Ms. Smith, Lowe's management defamed her by telling co-workers and third parties that she was terminated for theft, stealing or other unlawful conduct." Lowe's post-trial statement, besides expressing the usual disappointment, said Smith "admitted violating company policy by using her employee discount to buy a ride-on lawnmower for her husband's employer, and also violated policy by handling a return of the equipment after it was used." Not hard to tell which side of the story this particular jury identified with.

I missed the original reports of the trial which lasted for four days the last week of February. The case was tried before Judge Xavier Rodriguez, who may be the only Board certified labor and employment lawyer sitting on a bench in Texas. According to the news story, four hours of the trial was consumed by the jury deliberations. That works out to about a $1.15 million per hour of deliberation.

The way I caught the story was a tombstone ad in the April Texas Lawyer, by the plaintiff's firm congratulating themselves -- make that, announcing the verdict. Maybe I am still old school, but somehow the announcements of such things by the lawyers involved makes me a little squeamish. Of course I have never gotten a $4.6 million verdict either, and not that likely to on this side of the docket. Although the press can't make Lowe's all that happy, the truth is that at least as of today according to the Pacer docket sheet, Judge Rodriguez still has not entered judgment, which is of substantially more economic significance than the jury verdict. I will wait for the tombstone on that one.


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Converting the Uninsured - A New Reason for Challenging Independent Contractors

The economic benefits to an employer of classifying an individual as an independent contractor rather than an employee are so strong that employers are often willing to test what is at best a murky boundary. More and more they are finding government agencies willing to take them to task. The state of Hawaii has undertaken a new initiative to make sure that such classifications are legitimate, with a unique reason -- to decrease the number of individuals without health insurance. According to the Pacific News story, State looks hard at 'independent contractors', a study by the Hawaii Institute of Public Affairs estimated 1 out of 4 of the uninsured are actually eligible for insurance if they were not misclassified by their employers.

Although the numbers strike someone with no knowledge of the actual facts as somewhat suspect, it has motivated the Labor Department of Hawaii to initiate the crackdown. One big step was a ruling against Manawa Lea Health Services Inc. of Honolulu, which is one of about 50 companies that provide services for the elderly and disabled using primarily part-time and on call workers.

The issue is interesting enough that a number of my professional colleagues, members of the Management Labor and Employment Roundtable, will be convening in Hawaii later this week to study the matter in depth. Well, maybe there are other reasons!

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Friday, April 01, 2005

Major Law Firms Reduce Rates

One need not look at the date of posting to know what this is, Major Law Firms Reduce Rates, courtesy of The Wired GC. But check it out for a good laugh.

For a somewhat more serious review of the very related subject, the future of the billable hour, check out this discussion at Adam Smith, Esquire. As one who has been bemoaning the billable hour for most of my 30 years of recording them, I still see all the reasons why it does not seem to make sense, but am now resigned to the fact that the tide will not turn until long after I have turned in my last timesheet.

The real prank is perpetuating the notion (1) that the problem is the hourly billing system, rather than the abuse of hourly billing; and (2) that clients will be more satisfied with their fees and lawyers more satisfied with their lifestyles, with a switch from hourly billing, even if it is not accompanied by a reduction in law firm income and profit targets. My piece chronomentrophobia explores these issues.
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Not Quite Man Bites Dog

But it is along that same line when a Union, in this case the Maryland State Teachers Association, is called to task for violating the National Labor Relations Act in dealing with its own employees. According to the story in today's Washington Times, Teachers union ripped by panel, two union organizers brought unfair labor practice charges charging the union with retaliating against them when they tried to obtain company benefits and membership in the union. The NLRB did not agree with the retaliation claim, but did find the union obstructed the men's bid for benefits and better work assignments.

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