Jottings By An Employer's Lawyer

Wednesday, January 30, 2008

Hurting by Helping? The Law of Unintended Consequences

If the Democratic party gains control of the federal government -- the White House, the House and a veto proof Senate (60 votes), many in the employment and labor law community anticipate a bevy of new laws. For a preview as reported by the good professors at the Workplace Prof Blog, check out House Discusses ADA Restoration Act and the Civil Rights Act of 2008.

Clearly the intent of the authors of those and similar bills is to help either employees in general or at least certain groups of employees. But good intentions don't always mean good results. That's the point of the article in the Freakonomics column in last week's NYT, Red-Cockaded Woodpecker - Endangered Species.

The employment law example was the Americans with Disabilities Act:
The economists Daron Acemoglu and Joshua Angrist once asked a similar question: How did the A.D.A. affect employment among the disabled?

Acemoglu and Angrist found that when the A.D.A. was enacted in 1992, it led to a sharp drop in the employment of disabled workers.

Clearly not what was intended. The reason -- "employers, concerned that they wouldn’t be able to discipline or fire disabled workers who happened to be incompetent, apparently avoided hiring them in the first place. " For more you can check out their paper, Consequences of Employment Protection? the case of the Americans with Disabilities Act.

Obviously, you can argue that such actions were also illegal, but it doesn't change the impact.

Rarely are things as simple as they seem.

A hat tip to Will Schendel at the Alaska Employment Law Blog.

Update (12.27.08): For a new article suggesting that the above problem may be a result of the statistics themselves see, The Employment Rate of People With Disabilities at BeSpacific.

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There are a few problems with the economists' conclusions:

(1) They assume that the passage of the ADA was the CAUSE of the drop in employment of disabled workers. They further provide an assumed RATIONALE for that assumed cause-- let's wait a minute here. There are myriad other (substantial) factors, other than the passage of the ADA, that could be the cause of decreased employment of employees with disabilities.

(2) The "impact" of legislation is more likely due to its ENFORCEMENT, than to its mere passage. In the case of the ADA, enforcement by the federal courts has been largely adverse to disabled employees. The courts have narrowed the meaning of "disability" to the point that persons with serious medical problems (e.g. persons fired because of early stage diabetes), or persons who control their medical problems too well (e.g. persons with late stage diabetes who responsibly regulate their insulin) fall outside the protections of the law. Further diminishing enforcements of rights, the Administration has cut funding to the EEOC.

The answer is to increase legislation targeted to fix dilutions of individual rights (e.g. pass the ADARA), AND to increase enforcement of that legislation (e.g. increase funding to EEOC).

The implicit solutions, from the authors cited in this post, are that (1) we should do nothing; or (2) we should leave it to the private sector or the "market" to enforce individual rights. These solutions are unacceptable, given the crisis of corporate abuse of disabled employees. A large percentage of disabled persons who ARE hired are later treated horrifically when their conditions present financial barriers (e.g. scheduled surgery) or perceived financial barriers (e.g. perceived lack of productivity) to employers.
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Sunday, January 27, 2008

NLRB Back to Full Strength? By No Means a Sure Thing

President Bush has indicated his intention to submit nominees to fill the three vacancies on the five member National Labor Relations Board. Two are members whose terms recently expired, former Chairman Robert Battista (R) and former member Dennis Walsh (D). The third, Jerry Morales (R), is currently a management side labor lawyer from Phoenix. See the Personnel Announcement from the White House for more biographical information.

Whether or not these appointees make it through the confirmation process or at least make it to Board via the possibility of a recess appointment remains to be seen. Getting members confirmed to the Board has not been easy during non-election years, usually requiring a negotiated "package".

In an election year, those kind of deals are even harder to come by even though the Board currently is operating without a quorum. A couple of possibilities would be recess appointments which would expire at the end of the Congressional term, or a deal involving 2 new members which would get the Board back to 4.

Or perhaps the recent surge of bipartisan action that seems to have overcome at least some parts of Congress with respect to a stimulus package might carry over to these appointments.

Maybe, but I wouldn't put much money on it.


We welcome the President’s decision to nominate individuals so that the NLRB can resume its duties. We remain hopeful that the Senate will consider these nominees and their records in a measured and reasoned way. However, given the Chairman’s early sentiments, we are not holding our breath.
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Saturday, January 26, 2008

MDV in the Aloha State

An unusually long newspaper story outlines the facts behind an MDV from a whistleblower case. Honolulu jury awards $3M to city ex-official.

Among the challenges for the defendant city were a witness who took the 5th Amendment and another witness, who appeared to be the main decision maker that led to the case, who had pled guilty to an unrelated misdemeanor charge of misusing city funds.

One quote stands out:
[Plaintiff's attorney] said in the weeks before the trial, he offered to settle the case for $75,000, but Corporation Counsel" never offered more than $5,000.


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Wednesday, January 23, 2008

5th Cir. Upholds SOX Decision of No Protected Activity

There are two ways a claimant's Sarbanes Oxley whistleblowing case can make it to the 5th Circuit. One is an appeal from a district court if a claimant had foregone the administrative route and chosen to file directly in federal court (permitted if the administrative proceedings are not concluded within 180 days).

The other is an appeal of a ruling from the Administrative Review Board. That is what led to yesterday's decision in Allen v. Administrative Review Board (5th Cir. 1/22/08) [pdf]. The plaintiffs alleged that their complaints about their employer's failure to report problems with its software that calculated payoff amounts was protected activity under SOX.

Unfortunately for the plaintiffs, both the ALJ and the ARB had disagreed. And on appeal, the 5th Circuit noted the deferential standard of review -- whether the ARB's decision was “arbitrary, capricious, an abuse of discretion, or otherwise contrary to law.” Here the Court found it was not.

Given the relative paucity of circuit level decisions under SOX, the Court did provide some helpful guidance for construing protected activity under SOX:

  • an employee’s complaint must “definitively and specifically relate” to one of the six enumerated categories found in § 1514A: mail, wire, bank or securities fraud, any rule or regulation of the SEC, or any provision of federal law relating to fraud against shareholders;
  • an employee’s reasonable belief must be scrutinized under both a subjective and objective standard;
  • an employee’s reasonable but mistaken belief that an employer engaged in conduct that constitutes a violation of one of the six enumerated categories is protected;
  • the “objective reasonableness” standard applicable to SOX whistleblower claims is similar to the “objective reasonableness” standard applicable to Title VII retaliation claims;
  • while that can sometimes be decided as a matter of law, if there is a genuine issue of material fact it cannot be;
  • perhaps most importantly, in the catch all provision (federal law relating to fraud against shareholders) the employee must reasonably believe that his or her employer acted with a mental state embracing intent to deceive, manipulate, or defraud its shareholders.

The Court did not decide about the requirement for scienter on the first 5 categories since the "issue [was] not before [them]" but perhaps tellingly noted that several ALJ's had made such a finding.

The Court also held that since one of the plaintiffs was a CPA, an "expert standard" had to be applied in reviewing the "objective standard."

An important opinion for those handling SOX claims, not to mention continued good news for Stewart Enterprises, the employer.


This seems to mark a trend in bringing cases that suggest the Plaintiff's lawyer may not grasp the law involved. How on earth could the "Spankee-lawyer" hope to hang on to a illusory victory-where the jury was not instructed on the core issue-the harassment was sexually motivated?

Another odd case: Estrada v. Delhi in Orange County: thrown out on January 11, '08 for refusing to produce tape recorded telephone calls and before that her emotional distress claim had been precluded after Plaintiff had her home computer's hard-drive erased after it had been formally requested! How could that lawyer think Plaintiff was entitled to with hold that information?
Something not mentioned was the fact the Court held that the Burlington decision applies to SOX claims. Furthermore, it is not clear that there was a belief that the CPA had to be an "expert" in any defined sense. In this case, they ruled against the plaintiff because 1. he/she should have known that SAB 101 only applied to financial statements submitted to the SEC (the plaintiff only complained about violation of SAB 101 to internal financials) and 2. the plaintiff did not make an effort to determine if SAB 101 was being applied correctly to the financial statements submitted otthe SEC.

If the prevailing interpretation is that any plaintiff that is a CPA must be held to an expert standard, the SOX protections just got even weaker (if that is even possible).
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Thursday, January 17, 2008

A Spanking On Appeal as $1.5 MDV Goes Down

One of the more novel MDV's that I have reported on took a course that happens not infrequently to large verdicts as, Appeals court overturns $1.5M verdict to woman spanked at work. See my initial report here. It marks a second bleak turn of events for the spankee as she had originally settled for $1.4, but the insurance company refused to pay. Now the appeals court has thrown the verdict out because the jury instruction was faulty, failing to require that the harassment (including the spanking) had to occur "because of her gender."

Although her attorney optimistically hoped that on retrial the verdict might be even larger, according to the lawyer who defended the case the company has since gone into bankruptcy and its insurance has been exhausted battling Orlando's claim and settling with three other co-workers, so there may be little left to recover.

Yet another reminder that MDV's are not the end of the world, although they no doubt feel like it at the time.


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Friday, January 04, 2008

'Maternal Profiling' Enters the Lexicon

I used to get a feel for developments in labor and employment law by the seminar brochures I regularly receive, but of course in the world of the Internet that is now passe and it is my fellow bloggers who are most likely to tip me off. Family responsibility discrimination is certainly a much written about topic and so I am becoming increasingly sensitized to its mention as a new variant of discrimination claim.

But even I was caught off guard over a development picked up by my Canadian friend and counter-part, Michael Fitzgibbon in his blog, Thoughts from a Management Lawyer, who links to an article Maternal Profiling - a Buzzword with a Serious Meaning which also alerted me to an organization, Mom'sRising which is dedicated to a number of causes of interest to mothers, including it seems maternal profiling. For e.g. as of a few minutes ago, checking out their website would get you the following pop quiz:
Pop Quiz: What's Maternal Profiling?
a. The practice of selling stiff undergarments that promise a return to one's pre-pregnancy profile.
b. How the Oprah Show executives determine their prime demographic.
c. Employment discrimination against a woman who has, or will have, children.
Michael kindly reminds us that this development may well be of more importance to American readers than Canadian, although he does provide links to some of the latest governmental developments north of the border. For the take on this side, here's the latest from the EEOC in their Enforcement Guidance on Unlawful Disparate Treatment of Workers With Caregiving Responsibilities.

When we get new words for "bad" conduct, new lawsuits can't be far behind.


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Wednesday, January 02, 2008

Wage and Hour - The Story of the Year for 2007

And my guess for 2008 as well.

Although clearly the biggest aspect of wage and hour law has been the explosion of collective action cases brought by private plaintiffs' counsel, even the DOL's enforcement activities and recoveries are at an all time level. One of its last press releases of 2007 was headlined: U.S. Department of Labor’s Wage and Hour Division announces record wage recovery for FY 2007.

The bottom line:
For FY 2007, the 341,624 workers receiving recovered back wages is the second largest number since 1993, and the amount of those wages, $220,613,703, is the highest ever. That amount also constitutes a 67 percent increase over the 2001figure.
Nothing makes me think that this will be anything but a continuing story for 2008 and probably beyond.


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