Jottings By An Employer's Lawyer

Friday, June 29, 2007

Ageism Suit Results in Houston MDV

I have been lagging in posting MDV's lately, with a slew of reports sitting in "draft stage", but one close to home always gets my attention, like today's headline in the Houston Chronicle, Ex-manufacturing manager wins ageism lawsuit. Actually, the story doesn't give the exact amount of the verdict but says it was "nearly $1 million" and with legal fees expected to push close to $1.5 million.

Some of the evidence was the kind that frequently crops up in age cases:
  • termination of what the plaintifff Gaines Watkins referred to as "older and experienced workers" (although as the company pointed out over 50% of the company's workforce was laid off in a two to three year period);
  • Watkins also recalled comments he heard from top company officials that seemed to indicate they preferred younger workers; and
  • the jury also saw company documents describing executives as wanting "good young leadership" and detailing ways to attract employees who can "grow and change.

Having recently been involved in a couple of cases where two separate magistrates commented on the state of disarray in the 5th Circuit jurisprudence on "stray remarks, it strikes me that this is a potential candidate to provide some clarification. Although nothing mandates that the doctrine be limited to age cases, it seems that is where it comes up most frequently.

One other item mentioned in the article was the fact that plaintiff had been offered a severance package with a release. If a jury relied on that as evidence of wrong doing, then many employers could be in for rough sledding in future trials, as that is a staple in almost any reduction in force.


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Thursday, June 28, 2007

FMLA Feedback, Not Regulations — And Another Prediction

Information, but no proposed regulations — that seems to be the result of the DOL's request for feedback on how the FMLA is working. See the full report at Family and Medical Leave Act; information request; report.

According to the DOL the main areas of response were about three primary topics:
  1. gratitude from employees who have used family and medical leave and descriptions of how it allowed them to balance their work and family care responsibilities, particularly when they had their own serious health condition or were needed to care for a family
  2. a desire for expanded benefits--e.g., to provide more time off, to provide paid benefits, and to cover additional family members;
  3. frustration by employers about difficulties in maintaining necessary staffing levels and controlling attendance problems in their workplaces as a result of one particular issue--
    unscheduled intermittent leave used by employees who have chronic health conditions.

The AP story as printed on the Seattle Post-Intelligencer website summarizes the report as Medical leave program generally popular, which I don't think really reflects the view of most major employers.

Senator Chris Dodd one of the original authors of FMLA is teaming with Senator Ted Stevens from Alaska to offer a proposal that would create an insurance fund to allow 8 weeks of FMLA leave to be paid. Anyone who says that paid FMLA leave would not result in considerable more use and a multiplication of current employer problems, is either not being realistic or honest, or both.

Still, the political reality is that there is not going to be any "fix" for the foreseeable future that is not accompanied by some sort of expansion in benefits — be it paid leave, more employers covered or longer unpaid leave. And to make matters even worse for employers — if I had to choose which was more likely, expansion of benefits with or without a fix for employers, I would place my money on the latter.


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Wednesday, June 27, 2007

Danger for the Small Employer: 'Estopping' yourself into coverage

Most statutes which provide rights for employees have some numerical limitation, e.g. Title VII, 15 employees, ADEA and COBRA, 20 employees. So with less than 20 employees an employer should be home free on a COBRA claim, right?

Well, not necessarily as the 6th Circuit points out this morning in Thomas v. Miller (6th Cir. 6/27/07) [pdf]. Because of last years' decision by the Supreme Court in Arbaugh v. Y & H Corp, the Court holds it is clear that numerical limits are no longer jurisdictional, and thus an employer's conduct under certain circumstances can cause it to be covered, even though it falls below the statutory threshold.

Here, plaintiff argued that because she overheard a conversation in the office about COBRA benefits being offered to a white male employee, that the employer was estopped to deny that she, a black, female was not entitled to COBRA benefits because of race and sex discrimination. The 6th Circuit held that the basic premise that the employer could have to provide benefits under the doctrine of collateral estoppel was correct, but not in these circumstances.

To prove collateral estoppel, she would have had to show:
  • the employer must have used “conduct or language amounting to a representation of material fact;”
  • the employer must have been aware of the true facts;
  • the employer must have had an intention that the representation be acted on, or have
    conducted itself in such a way that the employee had a right to believe that the employer's conduct was so intended;
  • the employee must have been unaware of the true facts; and
  • the employee must have detrimentally and justifiably relied on the representation.

A pretty steep burden in any case, and not met here, but clearly a word to the wise for the small employer.


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Direct Evidence of Accent Comments Scuttles MSJ

Although it might have made the employer feel a little better when the 6th Circuit admitted that its precedents were "admittedly not perfectly clear," probably not enough to not be disappointed when summary judgment on a failure to promote claim was reversed. Instead the Court found comments allegedly made by a manager that an employee should not be promoted because of his accent and the "way he talked" was direct evidence of national origin discrimination and so the lower court's use of the McDonnell Douglas test was inappropriate. In re: Rodriguez (6th Cir. 6/27/07) [pdf]. The case contains a pretty good summary of other "accent and language" cases.

All was not totally lost for the employer as the case was remanded for the district court to apply the proper standard: when there is direct evidence, the employer has the burden of proof to show it would have taken the same action even absent a discriminatory motive. Also summary judgment on the other two claims was upheld.

The case is a good reminder that for summary judgment purposes the question of whether there is direct evidence may well be outcome determinative.


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Wednesday, June 20, 2007

Flawed Legislation Faces Cloture Vote on Thursday

It would be unrealistic for me to expect anyone reading this blog not to be suspicious of any claim I might make to objectivity on labor and employment issues — but the Employee Free Choice Act, really is a bad piece of legislation. Fortunately, appearances at today's rallies in support of it and tomorrow's vote in the Senate is a free ride for Democrats, particularly those seeking their party's presidential nomination. They can vote for the legislation and not have to endure the consequences if conventional wisdom holds and the cloture vote fails, effectively marking its legislative end in this Congress.

Even John J. Sweeney, the AFL-CIO's president is sounding like a Cubs fan: “This is really about 2009,” Mr. Sweeney said. “But it’s important that we show the country that we have majority support.” See the NYT's story, Clash Nears in the Senate on Legislation Helping Unions Organize. Just a small comment on how poorly named the legislation is can be found in the NYT's story, which uses the name only in connection with Senator McConnell's description of it as "Orwellian." Instead, the NYT just refers to it as "organized labor’s top legislative priority."

For an explanation of just a few of the faults see my earlier posts, Deceptive Advertising - The Employee Free Choice Act and Hypocrisy - and the Employee Free Choice Act.

As I have said, I won't try to make the case that the current system is without flaw. But this Act is not the fix, not now, not ever.

Updated, June 27, 2007: The vote actually slipped almost a week, but at least I had the outcome correct. See Senate Republicans Block Bill on Unionizing in today's NYT. Note how both parties are now using this to generate campaign contributions, which means that there is little chance of a bipartisan effort to come up with a good bill until after the next election cycle. And probably very little chance, even then.


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Wednesday, June 06, 2007

Not With a Bang, But A Whimper - 1st SOX "Reinstated" Employee Loses on Merits

What turned into an extended procedural battle over the power under Sarbanes Oxley to re-instate whistleblowers based on an interim determination took on another dimension last week when the Administrative Review Board reversed the ALJ determination which reinstated former CFO David Welch and held against him on the merits. Welch v. Cardinal Bankshares Corp., ARB No. 05-064, ALJ No. 2003-SOX-15 (ARB 5/31/07).

The ARB's determination were based on the ALJ's finding of three acts of protected activity — overstatement of income by $195,000, that the outside auditors preferred to deal with the CEO rather than Welch, and the CEO refused to take Welsh's advice on accounting issues. The ARB concluded:

We reverse the ALJ's conclusion that Cardinal violated the SOX because, as a matter of law, he erred in concluding that Welch engaged in SOX-protected activity. Welch's concerns that Cardinal misclassified the loan recoveries and consequently misled investors do not constitute protected activity because Welch could not have reasonably believed that Cardinal misstated its financial condition. Likewise, Welch's complaints about access to Larrowe & Co. and about Cardinal's internal accounting controls are not SOX-protected activity because they do not relate to the federal securities laws. Therefore, since Welch has not demonstrated that he engaged in protected activity, an essential element of his case, we DENY his complaint.

Although not over, as there is still the possibility of an appeal by Welch to the 4th Circuit, it certainly does not present the best case for SOX's procedural remedy that (at least theoretically) empowers reinstatement of whistleblowers based on an interim determination either by the DOL or as in this case, the ALJ. It also leaves unresolved the question of whether that enforcement scheme is viable.

For earlier discussions of the procedural wrangling over reinstatement see my earlier posts, Whistleblower Still Whistling in the Dark, 1st Test of SOX Preliminary Reinstatement Saga Continues , and Latest Step in First SOX Reinstatement Case.

How long has it been going? Welch was terminated in October 2002. Although one can understand the thought that leads to interim remedies, this case clearly shows the dangers. Here if Cardinal Bankshares had taken the frequent path of employers under similar statutes, they would have economically reinstated Welch and continued his pay for the duration of this fight. In fact, the ARB had itself suggested such an action in one of its earlier rulings during the procedural battle over reinstatement. If Cardinal had done so, but prevails following Welch's expected appeal, what realistic remedy would it have of recovering those sums, which my guess is would be in excess of $500,000?


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Tuesday, June 05, 2007

A Little Less Salt in the Wound, NLRB Changes Presumption on Salt Backpay

"Salting" is a practice where union organizers apply for job with dual motives — both to work for the employer and to advance the union's organizing efforts. If not hired because of their union support the Supreme Court held in National Labor Relations Board v. Town & Country Electric, Inc. it is a violation of the National Labor Relations Act.

Usually the remedy in refusal to hire cases is backpay. In determining the amount of back pay the Board noted its general policy is to apply a rebuttable presumption that backpay should continue indefinitely from the date of the discrimination until a valid offer of reinstatement has been made. In a decision issued May 31st, the Board faced the issue of "whether that presumption should apply in the case of a union salt."

Here's the Board's explanation of why the presumption makes sense in non-salting cases:

This procedure is appropriate as a matter of fact and policy in a refusal-to-hire case that does not involve salts because job applicants normally seek employment for an indefinite duration, the respondent employer is in the best position to demonstrate that a given job would have ended or a given employee would have been terminated at some date certain for nondiscriminatory reasons, and any uncertainty as to how long an applicant, if hired, would have worked for a respondent employer is primarily a product of the respondent’s unlawful conduct.

But in a 3-2 decision, the Board majority explained why the presumption does not work when salts are involved:

Unlike other applicants for employment, however, salts often do not seek employment for an indefinite duration; rather, experience demonstrates that many salts remain or intend to remain with the targeted employer only until the union’s defined objectives are achieved or abandoned. For this reason, much of the uncertainty as to the duration of the backpay period is attributable to the union and salt/discriminatee rather than to the wrongdoing respondent employer, and they are in the best position to prove the reasonableness of the claimed backpay period by presenting, through the General Counsel, evidence readily available to them.

In sum, the traditional presumption that the backpay period should run from the date of discrimination until the respondent extends a valid offer of reinstatement loses force both as a matter of fact and as a matter of policy in the context of a salting campaign. Indeed, as discussed below, rote application of the presumption has resulted in backpay awards that bear no rational relationship to the period of time a salt would have remained employed with a targeted nonunion employer. In this context, the presumption has no validity and creates undue tension with well-established precepts that a backpay remedy must be sufficiently tailored to expunge only actual, not speculative, consequences of an unfair labor practice, and that the Board’s authority to command affirmative action is remedial, not punitive.

Oil Capitol Sheet Metal, Inc. (NLRB 5/31/07) [pdf].

Members Liebman and Walsh vigorously dissented:

In reversing the burden of proof with respect to remedial issues involving salts, the majority overturns Board precedent endorsed by two appellate courts and rejected by none. Today’s change in the law is made without any party having raised the issue, without the benefit of briefing, and without a sound legal or empirical basis. Indeed, the majority concedes that the Board’s prior rule—which required the employer to show that the backpay period should be reduced for salts, as for other victims of unlawful discrimination—was “within the Board’s discretion.” The majority’s new approach, in contrast, not only violates the well-established principle of resolving remedial uncertainties against the wrongdoer, but also treats salts as a uniquely disfavored class of discriminatees, notwithstanding the Supreme Court’s ruling that salts are protected employees under the National Labor Relations Act. NLRB v. Town & Country Electric, Inc., 516 U.S. 85 (1995).

Two points —
  1. Expect a large hue and cry from the world of organized labor;

  2. The decision is indicative of another major problem that really needs a systemic fix, the time it takes such decisions to occur. Here the termination in question was 1999, the ALJ's decision was in 2000. The reasons for the delay are complex, but are basically a result of a system that needs reworking.

Unfortunately, the chances of that happening are even less than organized labor applauding this as a well reasoned decision.


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When the Workers Comp Bar, Doesn't

One of the great legal compromises in the workplace has been the trade off between protection against unlimited liability for the emplyer and no fault protection for workers injured on the job, through the mechanism of workers compensation. In return for agreeing to the no-fault insurance so the employee does not have to show the employer was negligent, the employer receives the protection of limited liability. Except when they don't.

Today's report of a Mississippi trial court verdict of an initial $9.5 million dollars against Franklin Corp., Furniture firm's damages cut (reduced by the trial judge to $3.8 million), is a reminder of the exceptions to the workers compensation limitation of liability. Here the four workers alleged that their injuries were caused by exposure to propyl bromide which was contained in Soft Seam Adhesive used by the company from 1999 to 2004.

The plaintiffs' lawyer explained the exception:

Workers Comp covers accidental injury. It does not provide coverage for intentional injury where the employer knew of the hazardous condition and knew its employees were being harmed. That's what made this case different.

Of course Franklin begs to differ that it intended to cause the injury and whether that was proved will ultimately be determined upon appeal, but the general premise — that there is an intentional tort exception to the workers compensation bar — is accurate.

In Texas, which is also the only state that does not force employers to participate in the workers compensation system, there is also an exception in the case of the death of an employee if it can be shown that death was caused by gross negligence.


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Monday, June 04, 2007

EEOC 2, Old Folks 1 - 3rd Circuit Upholds Medicare Coordination Rule

A hotly contested EEOC regulation which authorizes “the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or a State-sponsored retiree health benefits program," which has had an up and down judicial ride, ends the day on an up note as the 3rd Circuit holds that it is within the agency's power. AARP v. EEOC(3rd Cir. 6/4/07) [pdf].

Although AARP had initially won summary judgment, the lower court reversed itself following an intervening Supreme Court decision dealing with an agency's powers. See my earlier posts here and here. The 3rd Circuit affirmed the victory for the EEOC, although on different grounds.

The decision lifts the injunction and allows the EEOC to go forward with implementing the regulation. The final rule is on the EEOC's web site here.


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