Jottings By An Employer's Lawyer

Wednesday, September 22, 2010

McDonnell Douglas Bites the Dust in Tennessee

Yesterday I wrote about Texas' own little corner of the workers' comp world, today it is the Volunteer State's turn to take the spotlight for its unique view of an element of employment law. In Gossett v. Tractor Supply Co. (Tenn. 9/20/10) a sharply divided Supreme Court dumped one of the long time stalwart's of employment discrimination and retaliation, the McDonnell Douglas shifting burden of proof for evaluating a plaintiff's claim.

The Cour rather unceremoniously concluded,
we hold that the McDonnell Douglas framework is inapplicable at the summary judgment stage because it is incompatible with Tennessee summary judgment jurisprudence.
Actually the headline to this post is technically inaccurate, since the Court went on to say
 Furthermore, when applied at the summary judgment stage, the shifting burdens of the McDonnell Douglas framework obfuscate the trial court's summary judgment analysis. The McDonnell Douglas framework "is intended to progressively sharpen the inquiry into the elusive factual question of intentional discrimination" or retaliation. Burdine, 450 U.S. at 254 n.8. Although such inquiry is particularly appropriate at trial, it is ill-suited for the purpose of determining whether "there is no genuine issue as to any material fact."
Most employment law practitioners outside Tennessee state court will be somewhat surprised with that view, since most of the jurisprudence is that once a case actually gets to trial, the McDonnell Douglass framework is particularly inappropriate.

Although it might be found on a closer reading of the opinion, what seems to be missing from the majority's opinion is a basic understanding of what the McDonnell Douglas framework was intended to do. The United States Supreme Court that created it was faced with how does an employee prove intentional discrimination based on a protective category, when it is highly unlikely that employers will admit to such.

One way they concluded was to set up a prima facie case of factors that do not conclusively prove discrimination, but if totally unrebutted, would be sufficient to permit an inference of discrimination to be drawn. They placed the burden of establishing the prima facie case on the plaintiff, allowing them to create an inference of discrimination.  However, when the employer articulates a legitimate business reason that would explain the facts that were used to establish the prima facie case.  When that happens the burden then reverts to plaintiff to show that the real reason for the discrimination was their membership in a protected class.

Now clearly the formulation has gotten a little more complicated and some well known federal judges, most notably Judge Posner of the 7th Circuit, are clearly not fans, but to merely toss it out without even making it clear that they understood how it came to be, seems somewhat odd.

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I wonder if the Tennessee Supreme Court's opinion goes far enough to cost the state agency its status as a FEPA. While this opinion does not change the text of the state law, it seems to diminish rather than enhance the protections of the Tennessee state anti-discrimination laws.
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Tuesday, September 21, 2010

Good News for Texas Non-subscribers, Bad News for Excess Carrier

Texas has its own little corner of the workers' compensation world, as I think it is now the only state that permits employers to opt out of the workers compensation system. It does not come without a penalty, because a non-subscriber employer loses the bar against being sued by its employees for negligence, and when it is sued, loses a number of its common law defenses to negligence such as assumption of the risk, contributory negligence etc.

Still, given the costs of workers compensation, particularly before the system underwent some radical changes a decade or more ago, many major employers opted out, and have come up with fairly sophisticated programs that give them more flexibility and that are backed at least in some respect by insurance.

One of those disputes played out in a case that was decided today by the 5th Circuit, which was required to make an "Erie guess" as to what the Texas Supreme Court would do. American International Specialty Lines Ins. Co., v. Rentech Steel LLC et al  (5th Cir. 9/21/10) [pdf].

The question is what would the Texas Supreme Court do  in interpreting an insurance policy  in this situation which excluded coverage:
under any workers’ compensation, disability benefits or unemployment compensation law, or any similar law.
The excess carrier which was looking at a $10,000,000 judgment against for a negligence claim if it was unsuccessful, argued that since the Texas Workers Comp Law penalized the non-subscriber employer and insured by stripping it of some defenses, it should be excluded as being under a "workers' compensation" or at least "any similar law."  

Unfortunately for the insurer, the Court found not only did it believe that the statute does no more than modify the common law claim, and thus as it framed the question, the exclusion was not applicable; more importantly it found that is what the Texas Supreme Court would say as well.
Although the insurance carrier is on the short end of the stick of this opinion (and at $10 million it is a pretty big stick) it is not as if the employer fared all that well. The day before the initial trial was scheduled, the employer/insured tossed it wholly into the insurance company's lap by filing Chapter 7 bankruptcy.

Only in Texas. Literally.

That is great news for Texas Nonsubscribers. I am going to link to page on my blog,
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Wednesday, September 01, 2010

Latest DOL Opinion On Donning and Doffing, Not So Fast - 6th Circuit Says

Although it may no longer be true, donning and doffing cases at one time were clearly the big ticket FLSA collective action. And for those still fighting those fights who have been concerned about the thumb that the DOL put on the scale with their June 16 Administrator's Interpretation (No. 2010-2), which reversed course from two earlier opinion letters issued this decade (yes, Obama administration vs. Bush administration), you now have some very favorable authority from yeseterday's decision by the 6th Circuit in Franklin v. Kellogg Co. (6th Cir. 8/31/10) [pdf].

Looking to determine the meaning of the phrase "changing clothes" in § 203(o) of the FLSA, the Court surveyed the DOL's view of that portion of the FLSA and found the following:
  • 1997 Opinion Letter - "clothes" in section 3(o) does not encompass protective equipment and section 3(o) is an exemption to the FLSA that should be read narrowly;
  • 2001 Opinion Letter - reiterated the position taken in the 1997 Letter;
  • 2002 Opinion Letter -  "changing clothes" in section 3(o) refers to the putting on and taking off the protective safety equipment typically worn in the meatpacking industry;
  • 2007 Opinion Letter - reiterated the position of the 2002 Letter;
  • June 16, 2010 Administrator's Opinion - section 3(o) exemption does not extend to protective equipment worn by employees, that is required by law, by the employer, or due to the nature of the job.
Looking at this revolving door of opinions, the Court gave them what seems to me to be the appropriate amount of deference ---none:
First, "an agency interpretation of a relevant provision which conflicts with the agency's earlier interpretation is entitled to considerably less deference than a consistently held agency view. [cite omitted] The DOL's position on this issue has changed repeatedly in the last twelve years, indicating that we should not defer to its interpretation. Additionally, we find its interpretation to be inconsistent with the language of the statute.
For the fans of burden of proof (the most important vestige of employment at will), the Court addressed the question of whether section 3(o) is an exemption to the FLSA where the employer has the burden or a definition, where the employee has the burden. Although it does so, the Court really did not have to look much further than which section of the FLSA section 3(o) appears, is it § 203, Definitions or § 213, Exemptions?

As it appears in §203 not §213 the Court placed the burden on the employee, siding with the 5th and all other circuits which have decided the question, except for the 9th Circuit.

Up to this point the opinion is very employer friendly, but at this point it diverges for some other holdings:
  • in determining whether changing clothes can be a "principal activity" which thus launches the "workday," the Court held that whether or not the time was compensable does not impact the determination;
  • here, changing clothes was a "principal activity".
Although there was a dissent, it did not seem to be over either of these principal issues. Still given the circuit split, it is not inconceivable that it could take the next step up.

If it does, given the somewhat limited nature of section 3(o) which requires a collective bargaining agreement to be applicable, the most important point could well be the deference given to agency interpretations. While it may always have been the case, it is now more clear than ever, particularly in the field of labor and employment law, regulatory agencies are much more bound to an Administration's viewpoint than stare decisis.

My own view is that is not a very good way to run a railroad, but no one has asked my opinion, nor are likely to give it much weight.  It is however a fact of life, and if we are going to deal with it, we might as well know exactly what view the courts are going to give such changing views. My guess hope is that it is the same as the 6th Circuit here.

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The problem with giving no deference to agency flip-flops is that it gets us no closer to a consistent application of law. It trades agency flip-flopping every 4-to-8 years for a fragmented approach in which federal agency law differs by federal judicial circuit. Neither is good. See my post over at Workplace Prof Blog,
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