Fitzpatrick on Employment Law

Observations Regarding the Latest Supreme Court Decisions

2012-01-13T10:45:00.002-05:00

There has been a spate of opinion activity from the Court since the holidays. There follows some observations regarding some of these opinions and a case the Court will consider at its conference today.

1. The “Ministerial Exception” Case

Hosanna-Tabor Lutheran Church and Sch. v. EEOC, No. 10-553, 2012 U.S. LEXIS 578 (S.Ct. Jan. 11, 2012) is the much-discussed unanimous opinion adopting a “ministerial exception” to the anti-discrimination laws. Rather than repeat here what has been said in many other blogs about the opinion, I note that the Chief Justice, in the final footnote of his opinion states: “District Courts have power to consider [discrimination] claims in cases of this sort, and to decide whether the claim can proceed or is instead barred by the ministerial exception.” Id. at *40-*41 n.4.

2. Is the Court Fixated on Causation?

In a non-employment case issued Wednesday, January 11, 2012, the Court, in Pac. Operators Offshore v. Valladolid, No. 10-507, 2012 U.S. LEXIS 577 (S.Ct. Jan. 11, 2012), , interpreting a section of the Outer Continental Shelf Lands Act, Justices Scalia and Thomas resumed their debate over the appropriate articulation of “but-for” causation. As this blog has noted in the past, Justice Thomas appears to have a more “liberal” view on the subject; whereas Justice Scalia seems steeped in the mire of traditional tort law debates about proximate cause and cause-in-fact. In the Court’s RICO causation jurisprudence, this debate between the two Justices first reared its head. See ANZA v. Ideal Steel Supply Corp., 547 U.S. 451 (2006).

In Pac. Operators Offshore v. Valladolid, the Court was addressing the statutory phrase “resulting from”. Justice Thomas rejected an interpretation from the Third Circuit in Curtis v. Schlumberger Offshore Serv., Inc., 849 F.2d 805 (3d Cir. 1988), which had adopted a version of “but-for” causation. Rather than embracing “but-for” causation, Justice Thomas articulated a “substantial nexus” test. Justice Scalia, in a concurring opinion, criticized Justice Thomas’ test and stated that the standard used in negligence cases for proximate cause was the “substantial factor” test.

One can but wonder whether this rather dry debate will someday be of meaningful significance to practitioners. Nonetheless, it provides some insights into the Court’s thinking on causation issues, and such issues abound in employment cases, particularly after Gross.

3. When is Jurisdiction Jurisdictional?

In another non-employment case, the Court’s majority provided practitioners with some assistance in determining which requirements are jurisdictional in the sense that if one fails to fulfill the requirement, the case may be dismissed at any time. And, the Court provided some significant guidance as to what are not jurisdictional requirements in that sense, but rather “non-jurisdictional claim-processing rules”. In Gonzalez v. Thaler, No. 10-895, 2012 U.S. LEXIS 574 (S.Ct. Jan. 10, 2012) an Anti-Terrorism and Effective Death Penalty Act case, Justice Sotomayor, writing for the majority, stated that the “Court has endeavored in recent years to bring some discipline to the use of the term jurisdictional” and to make a “stricter distinction between truly jurisdictional rules” and “non-jurisdictional claim-processing rules.” Justice Sotomayor proceeded to paint a “clear statement” from the legislature rule as a potential bright line in such disputes.

Justice Scalia, in a dissent worth reading if only for his colorful rhetoric, mocks the majority’s assertion that the Court has sought to “bring some discipline to the use of the term jurisdictional,” stating that “[i]f that is true, discipline has become a code word for eliminating inconvenient statutory limits on our jurisdiction.” Justice Scalia goes on to state: “[w]hat began as an effort to bring some discipline to the use of the term jurisdictional…shows signs of becoming a libertine, liberating romp through our established jurisprudence.” And then, in a quite obvious swipe at Justice Breyer, whose new book Making Democracy Work, a Judge’s View, advocates a purposivist theory of statutory interpretation, Justice Scalia, in a footnote, states that “[t]he Court’s free-wheeling purposivism defies textual analysis.”

4. Arbitration Redux

On Tuesday, the Supreme Court handed down its opinion in CompuCredit Corp. v. Greenwood, No. 10-948, 2012 U.S. LEXIS 575 (S.Ct. Jan. 10, 2012), in which Justice Scalia wrote the opinion for an 8 Justice majority. In CompuCredit, the Court reversed, yet again, the Ninth Circuit in yet another pre-dispute arbitration agreement case. Here, the case involved arbitration of claims under the Credit Repair Organization Act, an act which contains a provision barring waiver of the cause of action. That provision is probably the only difference between the statute at issue in this case and the statutes at issue in Gilmer (ADEA), McMahon (RICO), or Mitsubishi Motors (Clayton Act). The majority, speaking through Justice Scalia, had no difficulty, despite the provision barring a waiver, in finding that claims under this statute may be subject to a pre-dispute arbitration agreement. Justice Scalia’s answer to the waiver bar was stated as follows: “[I]f a cause-of-action provision mentioning judicial enforcement does not create a right to initial judicial enforcement, the waiver of initial judicial enforcement is not the waiver of a ‘right of the consumer’” sentences like the foregoing can only give all of us lawyers a bad name. I think it is nothing but circular logic, which I would have thought was anathema to Justice Scalia.

Justice Ginsburg wrote a dissent, in which she recognizes that the Federal Arbitration Act, “standing alone,” favors the enforcement of arbitration agreements, but argued that no “unmistakably clear” statement by the legislature is necessary to proscribe the arbitration clause that CompuCredit sought to enforce.

Justice Sotomayor, joined by Justice Kagan, wrote a concurring opinion in which the two found that the statutory debate between the Justice Scalia majority and Justice Ginsburg in dissent was a draw, articulated as being “in equipoise.” As the arguments were equally compelling, Justice Sotomayor justified joining the majority on the ground that “opponents of arbitration…bear the burden of showing that Congress disallowed arbitration.”

5. No Bivens Remedy Implied Where State Tort Law Authorizes Adequate Alternative Damages

In Minneci v. Pollard, No. 10-1104, 2012 U.S. LEXIS 573 (S.Ct. Jan. 10, 2012), on Tuesday, the Supreme Court, Justice Breyer writing for an 8 Justice majority, held that there was no need to extend Bivens v. Six Unknown Federal Narcotics Agents, 403 U.S. 388 (1971) to an Eighth Amendment-based damages action against employees of a privately operated federal prison as state tort law authorizes adequate alternative damages actions that will provide both significant deterrence and compensation. The Court refrained from providing a new and free-standing remedy in damages, even though state tort law may sometimes prove less generous than would a Bivens action, holding that the state remedy “need not be perfectly congruent.” The Court further noted that “Bivens actions, even if more generous to plaintiffs in some respects, may be less generous in others.” In general, the Court found that state tort law remedies provide “roughly similar incentives for potential defendants to comply with the Eighth Amendment while also providing roughly similar compensation to victims of violations.” Finally, the Court stated that “we can decide whether to imply a Bivens action in a case where the Eighth Amendment claim or state law differs significantly from those at issue here when and if such a case arises. The possibility of such a different future case does not provide sufficient grounds for reaching a different conclusion here.”

Justice Scalia, joined by Justice Thomas, wrote a separate, concurring, opinion in which they stated that the Court had abandoned the power to create implied claims in the statutory field, citing Alexander v. Sandoval, 532 U.S. 275, 287 (2001), and then stating that the Court should do the same in the constitutional field, “where (presumably) an imagined ‘implication’ cannot even be repudiated by Congress.” Justice Scalia refers to Bivens, as he did in Corr. Servs. Corp. v. Melsko, 534 U.S. 61, 75 (2001) (Scalia, J., Concurring), as “a relic of the heady days in which this Court assumed common-law powers to create causes of action”.

Justice Ginsburg wrote a dissenting opinion.

6. FLSA Tip-Credit May Go To The Supreme Court

Today, the Court has its first Friday the 13th conference of 2012 (there are three Friday the 13th’s this year – April 13 and July 13), and one of the petitions which it may take certiorari on is Applebee’s Int’l, Inc. v. Fast, Doc. No. 11-425, petition for cert. pending from 638 F.3d 872 (8th Cir. 2011). The dispute in the case revolves around the tip credit rule set forth in 29 U.S.C. § § 203(m),(t) which permit employers to take a “tip-credit” towards their minimum-wage obligation for “tipped employees” engaged in an “occupation” in which they customarily and regularly receive more than $30/month in tips. The U.S. Department of Labor has internal guidance that an employer loses the benefit of the tip credit if a tipped employee performs duties that, while related to such employee’s occupation, are not by themselves purportedly directed towards producing tips if such time exceeds more than 20% of the employee’s total work time.

Here, the Eighth Circuit deferred to the DOL’s informal interpretation. In contrast, the Eleventh Circuit in Pellon v. Bus. Representation Int’l, Inc., 291 Fed. Appx. 310 (11th Cir. 2008) (per curiam) rejected the 20% rule.

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Robert Fitzpatrick Quoted by the ABA Journal

2012-01-09T10:31:00.001-05:00

Robert B. Fitzpatrick has been quoted in the January 2012 edition of the ABA Journal. In an article by Brian Sullivan entitled “The Last Word”, Mr. Fitzpatrick discusses the potentially game-changing effect that a simple apology can have on the course of litigation. The Article ends with a clarion call towards civility as a positive-sum strategy for both sides of a litigation, both monetarily and emotionally. The article may be found on Robert B. Fitzpatrick, PLLC at http://www.robertbfitzpatrick.com/papers/ABA-Journal-1-2012-The-Last-Word-Article.pdf

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When Evaluating a Matter With a Potential Claim of Discrimination Under New York City Law, Be Sure to Be Aware of the Implications of the Local Civil Rights Restoration Act of 2005

2011-11-21T16:10:00.003-05:00

We are so used to evaluating an employer’s actions in discrimination cases as to whether they constitute an adverse action, that we forget that the adversity requirement does not necessarily pertain under all local anti-discrimination laws. For example, in 2005, the New York City Human Rights Law was amended by the Local Civil Rights Restoration Act of 2005 N.Y.C. Local Law No. 85 (2005), which provides, now, that discrimination in “any manner” is prohibited by the City human rights law, and thus an adverse employment action is not an element of a prima facie case under the local law. See N.Y. City Admin. Code § 8-107 (2009); Williams v. N.Y.C. Housing Auth., 61 Ad.3d 62, 70, 2009 N.Y. App. Div. LEXIS 433 (1st Dep’t 2009); See also Joseph v. N.Y. City Dep’t of Corrs., 2011 U.S. Dist. LEXIS 51690, 2011 WL 1843162, at *9 (E.D.N.Y. May 13, 2011); and Margherita v. Fed. Express, 2011 U.S. Dist. LEXIS 121249 (E.D.N.Y. Oct. 20, 2011); Prof. Craig Gurian, A Return to Eyes on the Prize: Litigating under the Restored New York City Human Rights Law, 33 Fordham Urb. L. J. 255, 288 (2006).

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Federal Express’ Six-Month Limitation on Statutes of Limitations in Employment Disputes Approved

2011-11-18T15:54:00.001-05:00

In Wilkerson v. Federal Express, 2011 U.S. Dist. LEXIS 59708 (D. Md. June 2, 2011), Judge Alexander Williams approved a contractual limitation clause which provided that any claim against Federal Express had to be brought within the earlier of the time prescribed by law or six months. The Court found, as previously the Maryland Court of Special Appeals had in Coll. of Notre Dame of Md., Inc. v. Morabito Consultants, Inc., 752 A.2d 265 (2000), that “there is nothing in the policy or object of such statutes which forbids the parties to an agreement to provide a shorter period, provided the time is not unreasonably short.” The Wilkerson Court adopted the criteria used by the Maryland Court of Special Appeals in assessing the reasonableness of a provision shortening statutes of limitations. The three criteria being:

There is no controlling statute to the contrary
It is reasonable; and
It is not subject to other defenses such as fraud, duress, or misrepresentation.

Morabito, 752 A.2d at 174. The Court found that, were it not for the contractual limitation, the statute of limitations would be three years in the case before it. Nonetheless, the Court found the six-month time period to be reasonable, indicating that the clause was written in bold, capitalized letters; was not hidden in any way; and that there were no apparent statutes preventing such a shortening of the statute of limitations.

The Wilkinson opinion appears to be consistent with the line of authorities about which we previously blogged.

Court Enforces Arbitration of FLSA Claims Where Arbitration Agreement is Contained Within 51-Page Employee Handbook

2011-11-17T15:12:00.001-05:00

In Brown v. Luxottica Retail N. Am., Inc., 2010 US. Dist. LEXIS 104642 (N.D. Ill. September 29, 2010), Judge Gottschall granted the defense motion to compel FLSA claims. Defendants had a 51-page employee handbook, which contained within it, commencing on page 27 and consisting of five pages, a Dispute Resolution Agreement. That Agreement, among other terms, provided as follows:

That the employee would not file, join, participate or intervene in a class action;
That arbitration of any claim on a class or collective basis was prohibited;
That all legal disputes, including claims under the FLSA, had to be submitted to binding arbitration before the AAA;
That the employee would be required to pay a filing fee to the AAA only up to the amount required to file a lawsuit and that the employer would pay any difference;
That the employer would pay all of the arbitration fees and costs;
That, to the extent authorized by applicable law, either the employee or the employer could seek an award of attorney’s fees from the other; and
That the Dispute Resolution Agreement was not offered on a take-it-or-leave-it basis, but rather the employee could opt out of the Agreement within 30 days of receipt of the Agreement, by completing an opt-out form attached to the Agreement.

The court found the Agreement to be neither procedurally or substantively unconscionable. The court rejected plaintiff’s argument that the dispute resolution agreement was “buried” in the handbook and that its language and format was confusing such that a reasonable worker could not understand it. The court found the Agreement to begin in a large, bold font; the text to be in a regular font; that there was “a dearth of legalese”; and, while single-spaced, was easily readable. The court stated that “[t]here is nothing hidden or buried about this Agreement, as long as an employee reads the Handbook”. The court further found that it was “written in easily readable type and about as plain as a legal agreement can be.” The court went on to state that “the law does not protect persons who choose not to read documents given to them.” Finally, the court stated unequivocally as follows:

“Nothing in the FLSA precludes an agreement to arbitrate a FLSA claim, even when the arbitration agreement is part of an employee handbook and whether or not the employee signs the agreement or the handbook.”

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Second Circuit, Like the First Circuit, Finds an Expired Restrictive Covenant to be Unenforceable

2011-11-16T15:34:00.001-05:00

On September 19, 2011, we reported about a First Circuit opinion, authored by retired justice Souter, in EMC Corp. v. Arturi, No. 11-1001, 2011 U.S. App. LEXIS 17834 (1st Cir. Aug. 26, 2011), in which the Court found the non-compete to no longer be enforceable because more than a year had elapsed since plaintiff’s departure from the company and the non-compete was for one year’s duration. In that case, Justice Souter noted that the non-compete could have been more carefully drafted to account for the delays in obtaining enforcement attendant to litigation. Recently, the Second Circuit addressed the same drafting problem in Aladdin Capital Holdings, LLC v. Donoyan, 2011 U.S. App. LEXIS, 19083, 2011 Westlaw 4063012 (2d Cir. Sept. 14, 2011). In Aladdin, the Court stated that the expiration of a restrictive employment covenant renders an employer’s request for injunctive relief moot, as the employer did not include language in the non-compete that provides for an extension of the restrictive covenant during the period of breach, the court was unable to enforce what otherwise might have been an enforceable restrictive covenant. See also the District Court’s opinion authored by Judge Kravitz at 2011 U.S. Dist. LEXIS 61095 (D. Conn. June 8, 2011) and Van Dyck Printing Co. v. DiNicola, 648 A.2d 877 (Conn. 1994) (finding claim for injunctive relief to be moot).

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Single Racial Slur Found to be Sufficiently Severe for Purposes of a Racial Harassment Claim

2011-11-16T15:31:00.001-05:00

In Muldrow v. Schmidt Baking Co., Inc., 2011 U.S. Dist. LEXIS 70576 (D. Md. June 30, 2011), the Court, in denying the employer’s motion to dismiss, found that the use of the “n” word on one occasion is “extremely serious” and may be sufficient to state a claim of a hostile work environment based on race. The Court relyied on cases such as Ferris v. Delta Air Lines, Inc., 277 F.3d 128, 136 (2d Cir. 2001) (“…a single instance can suffice when it is sufficiently egregious”); Ezell v. Potter, 400 F.3d 1041, 1048 (7th Cir. 2005) (“[I]n the case of racial and ethnic slurs, some words are so outrageous that a single incident might qualify for a hostile environment claim.”); Cerros v. Steel Techs., Inc., 398 F.3d 944, 950-51 (7th Cir. 2005) (“we have recognized before that an unambiguously racial epithet falls on the ‘more severe’ end of the spectrum.”).

In addition, the Court was dealing with conduct by non-employees. Plaintiff was a general helper for the bakery, and thereafter was promoted to route salesman. While at a store, which was a customer of the bakery, the store’s white, female, manager referred to plaintiff, an African American, using the “n” word. The Court found that the employer’s response to harassing conduct of non-employees is evaluated using a negligence standard, finding that an employer can be liable if it took no steps to protect its employees and if it had actual or constructive knowledge of the situation. See EEOC v. Cromer Food Servs., Inc., 2011 U.S. App. LEXIS 4279 (4th Cir. Mar. 3, 2011); See also Galdamez v. Potter, 415 F.3d 1015, 1022 (9th Cir. 2005) (employer can be liable for third parties if it ratifies their actions by failing to act); Quinn v. Green Tree Credit Corp., 159 F.3d 759, 767 (2d Cir. 1998) (employer is generally not liable for non-employee conduct unless employer provided no reasonable avenue for complaint or knew of the harassment but failed to address it).

For more on this subject, see our prior post on the topic here.

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Rule 11 Sanctions: Know When to Drop Your Sails

2011-11-16T15:28:00.001-05:00

In Moody v. Arc of Howard Cnty., Inc., 2011 U.S. Dist. LEXIS 73540 (D. Md. July 7, 2011), Judge Bredar sanctioned counsel for the plaintiff under Rule 11 where counsel persisted in contending that individuals are suable under Title VII. In concluding his opinion, the judge had the following to say, all of which should guide all of us during the heat of litigation:

“A license to practice law brings with it substantial responsibilities, and one of those is an obligation of prudence when bringing and pressing a claim. Attorneys are entitled, and sometimes even obligated, to sail into shallow waters as investigation and discovery reveal weaknesses in the factual and legal theories of a case. However, once the ship has not just bumped a shoal or two, but instead has collided with rocks and begun taking water, the voyage is over and counsel is required to drop his sails. A reasonable and prudent attorney would have known and accepted that his claims were finished — that his voyage had ended — upon reading and reflecting upon the Rule 11 notice filed on February 22, 2011. It was clear then that the plaintiffs had no case, legally or factually. Under generous rules of procedure, safe harbor remained available to Mr. Ostendorf even after this grounding, see Fed. R. Civ. P. 11(c)(2), and had he elected that course and dismissed his claims before March 15, 2011, he would have avoided the wreck that has now ensued.” Moody, 2011 U.S. Dist. LEXIS 73540 at *27-*28.

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Fifth Circuit's Decision Finding USERRA Harassment Claims Not Cognizable Mmay Be Overruled by the Congress

2011-11-15T17:53:00.002-05:00

In Carder v. Continental Airlines, 636 F.3d 172 (5th Cir. 2011), petition for cert. denied 181 L. Ed. 2d 235 (Oct. 3, 2011), the Fifth Circuit held that USERRA does not create a cause of action for hostile work environment. The Court’s decision, authored by Circuit Judge W. Eugene Davis, relied on the current language of USERRA, which does not contain the phrase “the terms, conditions, or privileges of employment” found in Title VII, which the Supreme Court heavily relied upon to find a cause of action for harassment. Meritor Sav. Bank FSB v. Vinson, 477 U.S. 57, 63-66 (1986). In contrast, USERRA, in current § 4311(a) states that a protected person “shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment by an employer on the basis of that [protected status].” (emphasis supplied).

Presumably, both houses will agree shortly on legislation containing a Carder-override. Given that it is characterized as a clarification, and thus potentially retroactive, employers should proceed henceforth, if they have not already, to conduct their business as though the law prohibits harassment of those protected by the Uniformed Services Employment and Reemployment Rights Act.

On October 12, 2011, the U.S. House of Representatives passed H.R. 2433, the “Veteran Opportunity to Work Act”, which contains § 401, which would effectively overrule the Carder decision. H.R. 2433, 112th Cong. (2011). Section 251 states as follows:

“Section 4303(2) of title 38, United States Code, is amended by inserting ‘the terms, conditions, or privileges of employment, including’ after ‘means’.”

The House indicated that the legislation is intended to “clarify” USERRA. Thus, it is already being argued that the amendment would be retroactive. See H.R. 2433, Section 1 “Short Title; Table of Contents”.

On November 11, 2011, the Senate passed similar legislation in the form of section 251 of the VOW to Hire Heroes Act, S. 951, which was combined with H.R. 2433 and inserted as an amendment replacing the entirety of H.R. 674. See S. Res. 951, 112th Cong. (2011); H.R. 674, 112th Cong. (2011).

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Sternly, and In Writing, Warn Clients Not to Mess With Facebook

2011-11-14T16:48:00.000-05:00

Sternly, and In Writing, Warn Clients Not to Mess With Facebook

In Lester v. Allied Concrete Co., Nos. CL08-150, CL09-223 (Va. Cir. Ct. Oct. 21, 2011), Judge Edward Hogshire of the Circuit Court for the City of Charlottesville, Virginia issued an order which reduced by fifty-percent a $10.6 million jury verdict and imposed $722,000 in sanctions. $542,000 of the sanctions were imposed on counsel for plaintiff-Lester, and the remaining $180,000 on plaintiff Lester himself. The basis for the court’s sanction was an “extensive pattern of deceptive and obstructionist conduct of Murray and Lester…” In March of 2009 plaintiff’s counsel received a discovery request for the contents of plaintiff’s Facebook account. At that time, plaintiff’s Facebook account contained a photo of plaintiff wearing a “I [heart] Hot Moms” t-shirt and holding a beer can with other young adults. According to later deposition testimony, plaintiff’s counsel instructed a paralegal to tell plaintiff to “clean up” his Facebook page because “we don’t want blowups of this stuff at trial.” Thereafter, plaintiff’s counsel allegedly came up with a scheme to take down or deactivate plaintiff’s Facebook account so that he could respond to defendant’s discovery request by stating that plaintiff had no Facebook page on the date the discovery was signed. Allegedly, when defense counsel filed a motion to compel, plaintiff’s counsel instructed plaintiff to reactivate the account. Plaintiff denied deactivating the account during a later deposition. Plaintiff’s counsel was also accused of withholding an e-mail from the paralegal instructing plaintiff to “clean up” his Facebook page. Finally, plaintiff’s counsel allegedly claimed, falsely, after the trial, that the failure to produce the e-mail was the paralegal’s mistake.

In addition to the $542,000 sanction imposed on plaintiff’s counsel, the judge referred the matter to the Virginia state bar.

Tip of the hat to Christopher Danzig, writing for Above the Law, whose post called this to our attention.

See also

Lisa Provence, Sanctions: Allied Concrete Attorneys Want $900K in Legal Fees, The Hook, (Sept. 24, 2011) (cite online: http://www.readthehook.com/100997/sanctions-allied-concrete-attorneys-wants-900k-legal-fees accessed: November 14, 2011).
Lisa Provence, Unusual Outcome: $722K in Sanctions, Juror Judges Judge, The Hook, (Nov. 4, 2011) (cite online: http://www.readthehook.com/101759/final-order-plaintiffs-sanctioned-722k-juror-judges-judge accessed: November 14, 2011).
Lester v. Allied Concrete Co., 80 Va. Cir. 454 (Va. Cir. Ct. 2010) (Court held that plaintiff’s counsel violated Rule 3:3(a) of the Virginia Rules of Professional Conduct by when he alleged that defendant had “hacked into” plaintiff’s Facebook account based on no inquiry into the relevant facts “beyond the bare, unsubstantiated assertions of his client.”)

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Circuits Split as to Whether Public Officials Can be Sued Individually Under the FMLA

2011-11-11T13:54:00.002-05:00

The Fifth and Eighth Circuits have concluded that public officials can be sued in their individual capacities under the FMLA. See Modica v. Taylor, 465 F.3d 174, 184-87 (5th Cir. 2006); Darby v. Bratch, 287 F.3d 673, 681 (8th Cir. 2002). In contrast, the Sixth and Eleventh Circuits have held that FMLA suits against individual public officers are not cognizable. See Mitchell v. Chapman, 343 F.3d 811, 825-33 (6th Cir. 2003); Wascura v. Carver, 169 F.3d 683, 685-87 (11th Cir. 1999). The Fourth Circuit has not addressed this issue, and the district courts within the Fourth Circuit have reached contrary conclusions on the subject, with, for example, one judge on the Maryland federal district court bench allowing such claims (Knussman v. Maryland, 935 F. Supp. 659, 664 (D. Md. 1996) (Black, J.), and another judge on the same bench rejecting such a claim (Sadowski v. U.S. Postal Serv., 643 F. Supp. .2d 749, 753 (D. Md. 2009) (Bennett, J.) (recognizing the opinion in Sadowski is “at variance” with the decision in Knussman)). Recently, Judge Brinkema of the Eastern District of Virginia held, in Weth v. O’Leary, 2011 U.S. Dist. LEXIS 74432 (E.D. Va. July 11, 2011) held that public officials who acted directly or indirectly in the interests of the employer can be personally liable in FMLA cases.

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Affidavits of Defendant’s Current Employees May Be Subject to Bias

2011-11-11T13:51:00.001-05:00

In Lopez v. Asmar’s Mediterranean Food, Inc., 2011 U.S. Dist. LEXIS 2262 (E.D. Va. Jan. 10, 2011), Judge Cacheris in a FLSA case where defendant had interviewed all of the employees whom plaintiff had identified as “similarly situated”, and had submitted affidavits from each of those employees contradicting plaintiff’s assertion that she worked overtime, denied summary judgment to the employer, stating that “because these affidavits are of Defendant’s current employees, they may be subject to bias.” Lopez, 2011 U.S. Dist. LEXIS 2262 at *6. The court stated that such current employee affidavits must be discounted, as discovery is not yet complete, and plaintiff has not had the opportunity to depose these witnesses. See, e.g., Francis v. A & E Stores, Inc., No. 06 Civ. 1638, 2008 U.S. Dist. LEXIS 83369, 2008 WL 4619858, at *3 (S.D.N.Y. Oct. 16, 2008) (discounting affidavits of defendant's employees); Vaughan v. Mrtg. Source LLC, No. CV 08-4737, 2010 U.S. Dist. LEXIS 36615, 2010 WL 1528521, at *7 (E.D.N.Y. April 14, 2010) (“[C]ourts may assign the weight they think appropriate to affidavits from current employees because of the risk of bias and coercion.”)(citation and internal quotation marks omitted); Damassia v. Duane Reade, Inc., No. 04 Civ. 8819, 2006 U.S. Dist. LEXIS 73090, 2006 WL 2853971, at *4 (S.D.N.Y. Oct. 5, 2006) (declining to consider affidavits where plaintiffs had not yet had the opportunity to depose affiants); Morden v. T-Mobile USA, Inc., No. C05-2112, 2006 U.S. Dist. LEXIS 68696, 2006 WL 2620320, at *3 (W.D. Wash. Sept. 12, 2006) (discounting current employees’ declarations “because of the risk of bias and coercion inherent in that testimony”)

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UNCERTAINTY REMAINS AS TO THE PROPER TEST FOR INDIRECT SEX DISCRIMINATION UNDER THE U.K. EQUAL PAY ACT

2011-11-07T15:25:00.002-05:00

I. Legal Background

The U.K. Equal Pay Act of 1970 required equal pay for work of equal value unless “the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor… must be a material difference between the woman’s case and the man’s…” Equal Pay Act, 1970, c. 41, § 1(2)-(3). The EPA was repealed, and largely restated, by the Equality Act of 2010, and while section 69 effectively overrules Armstrong (discussed below), by requiring objective justification in all cases of indirect discrimination in pay, the issues discussed herein are very relevant to the many cases still governed by the historical Equal Pay Act.

The European Court of Justice, in Case C-127/92, Enderby v. Frenchay Health Auth., 1993 E.C.R. I-05535, held that the Equal Pay provision of the Treaty of Rome’s^{^[1]} Article 141 (formerly Article 119) and the Equal Pay Directive,^{^[2]} prohibited disparities in pay between equivalent-value jobs where one job is performed primarily by women and the other by men. Significantly, this prohibition applies even when those differences are arrived at by collective bargaining processes which are, in themselves, non-discriminatory. Enderby also suggested that when statistics showed that predominantly female groups were paid less than predominantly male groups for same-value work, the employer must provide objective justification for the difference in order to escape liability.

The Enderby decision led to a flurry of activity in the U.K. as courts attempted to determine how it affected the Equal Pay Act. The most notable of the decisions during this period was Armstrong v. Newcastle Upon Tyne NHS Hosp. Trust, [2006] IRLR 124, [2005] EWCA (Civ) 1608. In Armstrong, Buston LJ added a “sophistication” to the holding in Enderby, stating: “if the employer proves the absence of sex discrimination [it] is not obliged to justify the pay disparity.”

Recently, it appeared that the U.K.’s new Supreme Court would have an opportunity to resolve some of the troubling questions regarding indirect discrimination in the case of Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63. However, Gibson settled shortly before a three-day hearing was scheduled before the Supreme Court. In light of this development, it appears that questions regarding indirect discrimination will have to wait for another opportunity to gain much-needed clarity. This article summarizes Gibson, and the questions which it raised.

II. Facts of Gibson

Sheffield City Council employs individuals as “carers”, cleaners, and gardeners. Carers and cleaners are predominantly female, while gardeners and street cleaners are predominantly male. In the hearings before Judge Trayler of the Employment Tribunal in 2007 and 2008 the parties stipulated that individuals in these jobs do work of equal value. Crosby & Ors. v. Sheffield City Council, No. 2800460/07 & others, Appx. B. (the “Gibson Tribunal”). Prior to Gibson, street cleaners and gardeners were paid 33.3% and 38% respectively more than carers and predominantly female cleaners, despite the fact that all positions afforded the same “base pay.” This disparity resulted from a “productivity bonus” that street cleaners and gardeners received in addition to their base pay, but which was not available to carers or predominantly female cleaners. The predominantly female cleaners, led by Ms. Crosby, prevailed in Judge Trayler’s decision in Crosby & Ors. v. Sheffield City Council in 2008, and the case was subsequently re-captioned Gibson & Ors. v. Sheffield City Council. The following discussion will accordingly focus on matters related to the pay of carers.

III. Decisions of the Employment Tribunal

As an initial matter, Judge Trayler found that there was no evidence that bonuses were denied to carers on account of sex, stating:

“…we believe the reason why the male comparators received a bonus is in return for productivity in relation to outcomes which are measurable. This productivity is achieved by more flexible efficient working which has been kept up to date by the various pressures on the part of the respondent employing the comparators. It is a genuine scheme. It is material in that it is there to provide efficiency of production. It is unrelated to the gender of the recipients.”^{^[3]}

Relying on the reasoning of the Court of Appeal in Armstrong, Judge Trayler then found that this conclusion ended the inquiry, holding:

[t]he reason [for the pay differential] is the need to provide payments for increased productivity which [respondent] cannot and does not need to make to these claimants.

This is a reason which is not the gender of the recipients of the bonus or the claimants. In our view, the respondent has proved that the reason is not the reason of the sex of the group of workers.^{^[4]}

The carers appealed Judge Trayler’s decision to the Employment Appeals Tribunal, which dismissed their appeal. The Employment Appeals Tribunal agreed with Judge Trayler that, since the Sheffield City Council had “negatived” the taint of sex discrimination, it was not required to objectively justify the pay differential between carers on the one hand, and street cleaners and gardeners on the other.^{^[5]}

IV. Decision of the Court of Appeal

The carers were granted leave to appeal to the Court of Appeal, where they raised three issues:

1. Where jobs performed predominantly by women are equivalent to jobs performed predominantly by men, but the predominantly female jobs are compensated at a lower level, does this, of itself, amount to prima facie sex discrimination which requires the employer to objectively justify the pay differential to avoid liability, or may the employer also avoid liability by proving that the difference in pay is not sexually discriminatory?

2. If the employer is entitled to prove the absence of discrimination, is it enough to establish a gender neutral explanation for the higher payments to the male employees or is something more required?

3. On either analysis, on the ET’s findings, had the Council proved sufficient to avoid the requirement to provide objective justification?

The parties’ arguments on appeal centered largely on the validity and applicability of Armstrong, both as a general matter and with regard to the specific facts of the case. Appellants argued that the Armstrong “sophistication” which allowed an employer to prevail upon showing the absence of sex discrimination ran contrary to Enderby and several other decisions of the Court of Appeal. Appellee contended that Armstrong was rightly decided and binding on the Court of Appeal.

On February 10, 2010, The Court of Appeal attempted to split the baby by declaring that Armstrong was consistent with Enderby but refusing to apply it on the specific facts presented in Gibson. The Court of Appeal unanimously concluded that the Employment Tribunal and Employment Appeals Tribunal had erred in finding that the reason for the differential treatment between claimants and comparators was free from sex discrimination and remanded the case to the Employment Tribunal to determine whether the difference in pay could be objectively justified. In so doing, the majority held that Armstrong had been correctly decided and that it was open to an employer to establish that a difference in pay was not discriminatory, notwithstanding statistics which show an adverse gender impact. Lord Judge Pill, however, noted that it was difficult to reconcile Armstrong with Enderby as well as the second paragraph of Directive 97/80/EC,^{^[6]} though he concluded only that Armstrong was inapplicable “given the clear and compelling statistics.”

The City Council was granted permission to appeal to the Supreme Court of the United Kingdom, and a three day hearing was scheduled before the Supreme Court on both the council’s appeal and the workers’ cross-appeal.

V. Unresolved Questions

The central issue that remains for future resolution is whether, once so-called “indirect” sex discrimination is established by showing that a group predominantly composed of women is placed at a disadvantage as compared to a group predominantly composed of men, the employer can escape liability by showing that the pay difference resulted from an ostensibly gender-neutral policy, or whether the employer must show that the pay difference is “objectively justified” as serving a legitimate purpose.

The decision in Gibson also did little to reconcile the inherent tension between Enderby and Armstrong. With little to guide lower courts as to when Armstrong ought to be applied, clarity in the many cases based on the historical Equal Pay Act must await future pronouncements by the Courts.

* Mr. Fitzpatrick would like to acknowledge and thank Mr. Ben Patrick, in-house Solicitor with the trade union UNISON, who represented the carers in Gibson and who provided assistance and insight in the drafting of this article
[1] Treaty Establishing the European Economic Community, 25 March 1957, 298 U.N.T.S. 3.

[2] Council Directive 75/117, art. 1, 1975 O.J. (L045) 1 (EC).

[3] Gibson Tribunal, Paragraph 5.26.

[4] Gibson Tribunal, Paragraphs 5.8, 5.9.

[5] Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63, Paragraph 34.

[6] Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63, Paragraph 49 (Lord Justice Pill); Paragraph 57 (Lady Justice Smith); Paragraph 74 (Lord Justice Kay).

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Fourth Circuit: NLRB ALJs May Rule on Claims of Privilege, but Only an Article III Court Can Require Production

2011-10-07T15:19:00.000-04:00

In a recent Fourth Circuit opinion written by Judge Niemeyer, NLRB v. Interbake Foods, LLC, 637 F.3d 492 (4th Cir. 2011), the Court held that an administrative law judge (“ALJ”) had authority to receive and evaluate evidence under the Federal Rules of Evidence and to rule on claims of privilege made with respect to that evidence. In so ruling, the Court overruled the District Court’s holding by Judge Bennett that “only an Article III court may determine whether subpoenaed documents are protected by the attorney-client or attorney work-product privileges…” NLRB v. Interbake Foods, LLC, No. RDB 09-2081, 2009 U.S. Dist. LEXIS 86826, 2009 WL 3103819 at *4 (D. Md. Sept. 22, 2009).

The dispute revolved around an order requested by the NLRB directing Interbake to produce three subpoenaed documents to the ALJ in order for the ALJ to determine whether the documents were protected by a privilege.

As a preliminary matter, it is worth noting that the Fourth Circuit upheld the the District Court’s decision not to conduct an in camera inspection of the documents at issue because “‘Interbake ha[d] met its burden of establishing that the documents [were] privileged… and the NLRB ha[d] not articulated a good faith basis for doubting Interbake’s claim of privilege.’” NLRB v. Interbake Foods, LLC, 637 F.3d at 494 (quoting NLRB v. Interbake Foods, LLC, No. RDB 09-2081, 2009 U.S. Dist. LEXIS 86826, 2009 WL 3103819 at *4 n.1.) The Fourth Circuit explained that, once a prima facie showing of privilege is made, the opposing party must have a “factual basis sufficient to support a reasonable, good faith belief that in camera inspection may reveal evidence that information in the materials is not privileged” before becoming entitled to such review. Interbake Foods, 637 F.3d at 494 (quoting In re Grand Jury Investigation, 974 F.2d 1068, 1074 (9th Cir. 1992)). Other courts have reached similar conclusions, holding, for example, that challenges to privilege must have a “cogent basis” to justify in camera review. See G.D. v. Monarch Plastic Surgery, 239 F.R.D. 641, 650 (D. Kan. 2007).

Returning to the Fourth Circuit’s discussion of the authority of the ALJ, although the Court held that the ALJ could decide matters of privilege, it also held that an ALJ’s order ruling on evidence could only be enforced by an Article III court. Interbake Foods, 637 F.3d at 499 (“[T]he ALJ has no power to require the production of documents for in camera review or for admission into evidence when a person or party refuses to produce them. That would require Article III power, which the ALJ does not have.”) (emphasis in original). The Court noted the “line of division” between administrative bodies and Article III courts, quoting Interstate Commerce Comm’n v. Brimson, 154 U.S. 447, 485 (1984) (abrogated on other grounds by Bloom v. Illinois, 391 U.S. 194, 198-200 (1968)) as follows:

The inquiry whether a witness before [an agency] is bound to answer a particular question propounded to him, or to produce books, papers, etc., in his possession and called for by that body, is one that cannot be committed to a subordinate administrative or executive tribunal for final determination. Such a body could not, under our system of government, and consistently with due process of law, be invested with authority to compel obedience to its orders by a judgment of fine or imprisonment.

The Fourth Circuit noted that this limitation on the NLRB’s authority emanated from “the Constitution’s separation of powers and due process requirements.” Interbake Foods, 637 F.3d at 497-98. Further, the Fourth Circuit explained that a district court could not “delegate its task of conducting an in camera review to an ALJ.” Id. at 498. The district court can rule on the basis of the privilege log, but “what it cannot do is order production of documents to the ALJ to conduct an in camera review. Rather, the district court must satisfy itself whether, under appropriate legal standards, it should enforce the subpoena and thus overrule [the] claim of privilege.” Id. at 500 (emphasis in original).

This limitation of power is intended to protect against abuse of the subpoena power, in part by guaranteeing a party an opportunity to present defenses against a subpoena. Where an administrative agency seeks enforcement of a subpoena in court, “the respondent is guaranteed an opportunity to contest the subpoena’s validity through any appropriate defense.” Id. at 499 (citing Penfield CO. v. SEC, 330 U.S. 585, 604 (1947) (“‘[a]n administrative subpoena may be contested’”); NLRB v. Cable Car Advertisers, Inc., 319 F. Supp. 2d 991, 996 (N.D. Cal. 2004) (“‘[A] party [to]… a subpoena enforcement proceeding may raise appropriate defenses once in district court.’”)). Further, the right to raise defenses before a district court “includes the right to vindicate claims that a subpoena improperly calls for records protected by the attorney-client or work-product privileges.” Interbake Foods, 637 F.3d at 499. Along those lines, the Fourth Circuit cited NLRB v. Int’l Medication Sys., Ltd., 640 F.2d 1110, 1115-16 (9th Cir. 1981), in which “the district court was required to conduct ‘a full evidentiary hearing’ before enforcing a Board subpoena challenged on privilege grounds.”

As noted by the Fourth Circuit, privilege rulings by an ALJ typically are not enforced by district courts because the parties either comply voluntarily (see e.g. Patrick Cudahy, Inc., 288 N.L.R.B. 968, 968-69 (1988); see also Horizon Corp. v. FTC, No. 76-2031, 1976 U.S. Dist. LEXIS 12222, *2-7 (D.D.C. Nov. 18, 1976)) or because “the ALJ’s rulings are made without the need for inspection of the underlying documents.” Interbake Foods, 637 F.3d at 498 (citing Taylor Lumber and Treating, Inc., 326 N.L.R.B. 1298, 1299-1300 (1998)). However, if enforcement becomes necessary, only the district court can do so. Id.

Finally the Fourth Circuit noted that federal courts would not rubber stamp the enforcement of subpoenas, quoting Justice Frankfurter’s dissent in Penfield, supra:

Instead of authorizing agencies to enforce their subpoenas, Congress has required them to resort to the courts for enforcement. In the discharge of that duty courts act as courts and not as administrative adjuncts. The power of Congress to impose on courts the duty of enforcing obedience to an administrative subpoena was sustained precisely because courts were not to be automata in carrying out the wishes of the administrative. They were discharging judicial power with all of the implications of the judicial function in our constitutional scheme.

Penfield, 330 U.S. at 604.

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Title VII Damages Cap Is Based On the Number Of Employees at the Time of the Alleged Violation

2011-10-06T17:52:00.000-04:00

In Hernandez-Miranda v. Empresas Diaz Masso, Inc., No. 10-1639, 2011 U.S. App. LEXIS 13259 (1st Cir. June 29, 2011), the First Circuit held that, for the purposes of counting the employer’s number of employees to establish the damages bracket under Title VII, 42 U.S.C. § 1981a(b)(3), Congress intended the relevant time period to be the time during which the alleged discrimination occurred. The Fourth, Fifth, and Seventh Circuits concur. See DePaoli v. Vacation Sales Assocs., L.L.C., 489 F.3d 615 (4th Cir. 2007); Vance v. Planters Corp., 209 F.3d 438 (5th Cir. 2000); Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995).

The relevant portion of § 1981a(b)(3) provides:

The sum of the amount of compensatory damages awarded under this section for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded under this section, shall not exceed, for each complaining party --

(A) in the case of a respondent who has more than 14 and fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 50,000;

(B) in the case of a respondent who has more than 100 and fewer than 201 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 100,000; and

(C) in the case of a respondent who has more than 200 and fewer than 501 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 200,000 . . . .

42 U.S.C. § 1981a(b)(3) (emphasis added).

In Depaoli v. Vacation Sales Associates, LLC, supra, Judge Niemeyer, writing for a panel of the Fourth Circuit, held that current year is not the year in which the damages are awarded, but rather to the year in which the Title VII violation occurred. The Fourth Circuit, like other courts that have addressed this question, focused on the fact that the word “current” also appears in § 2000e(b) of Title VII which defines an “employer” as “a person… who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year…” (emphasis supplied). As § 2000e(b) has been interpreted to refer to the year of the discrimination (Walters v. Metro. Educ. Enter. Inc., 519 U.S. 202, 205 & n.*(1997)), the Court applied the rule of statutory construction that “identical words used in different parts of the same act are intended to have the same meaning.” Dept. of Revenue of Or. v. ACF Indus., 510 U.S. 332, 342 (1994).

Several circuit courts have interpreted § 2000e(b) to define “current year” as being the year of the discrimination. See e.g. Komorowski v. Townline Mini-Mart and Rest., 162 F.3d 962 (7th Cir. 1998); Vera-Lozano v. Int’l Broad., 50 F.3d 67, 69 (1st Cir. 1995); Rogers v. Sugar Tree Prods., Inc., 7 F.3d 577, 579 (7th Cir. 1993); McGraw v. Warren Cnty. Oil Co., 707 F.2d 990, 991 (8^th Cir. 1983) (per curiam); Dumas v. Town of Mt. Vernon, Ala., 612 F.2d 974, 979 n.4 (5^th Cir. 1980); Slack v. Havens, 522 F.2d 1091, 1093 (9th Cir. 1975).

While a bright-line rule defining the year in which one counts employees for the purpose of determining the cap on certain damages would certainly be preferable, I am struck by the fact that, apparently, none of the circuit courts that have addressed this question have spoken to the fact that the statutory language is not simply “the current year”, but rather the current year or the preceding year. Assume, hypothetically, that in the year of the discrimination the defendant has more than 100 but less than 201 employees, and in the preceding year had more than 200 and less than 501 employees. Is the cap $100,000.00 or is it $200,000.00? I am confident that there is some simple response to my contrariness, but at first neither the statute nor the case law address this conundrum.

Another wrinkle that occurs to me is harassment cases which, under the Supreme Court’s holding in Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002), that a hostile work environment claim is a cumulative claim and that the continuing violation doctrine applies to such a claim. In harassment cases, after Morgan, so long as the plaintiff alleges that a single act of harassment occurred within 300 days of the EEOC charge-filing, the plaintiff can go back in time beyond the 300^th day as far as the cumulative chain of events leads, so long as the defense cannot establish a “break” in the chain, typically a discrete act. So, in such a case, is the plaintiff permitted to “cherry pick” the best year in that chain for purposes of maximizing damages. Again, a hypothetical—assume a chain of events over 3 years that cumulates into an actionable hostile work environment, and assume that in year 1 of that chain, the employer has more than 200 employees and less than 200 in the ensuing 2 years. Can plaintiff go to the maximum damages permissible under the statute or is plaintiff limited to a lower capped amount?

Another oddity that I note is § 1981a(b)(3)(c), which refers to employers of more than 200 and fewer than 501 employees. Does that mean that, for employers of 501 or more employees, there is no cap? A textual analysis would seem to suggest that there is no cap.

The “takeaways” on these issues would seem to be the following:

Plaintiff should take discovery to establish the number of employees during the year or years of the alleged discrimination.
In light of Judge Evans’ unwillingness in Hennessy v. Penril Datacomm Networks, Inc., supra, to take judicial notice of the SEC 10-K form under Rule 201 of the Federal Rules of Evidence, plaintiff should be scrupulous to have admissible evidence regarding the number of employees.
If plaintiff is within touching distance of a higher damage cap, plaintiff should be scrupulous in discovery regarding how the defense has classified certain individuals. See e.g. Thurber v. Jack Reilly’s Inc., 717 F.2d 633, 634 (1st Cir. 1983) (court concluded that defendant was an employer under § 2000e(b), finding that the relevant employees were not only those who were physically present at work each day, but all those who had an ongoing employment relationship with the employer during the requisite 20 weeks during the relevant calendar year). A unanimous Supreme Court, Justice Scalia writing, in Walters v. Metropolitan Educational Enterprises, Inc., supra, adopted the payroll method of counting employees, citing Thurber with approval.
Counsel should be familiar with the case law on independent contractors (Zimmerman v. N. Am. Signal Co., 704 F.2d 347, 352 n.4 (7th Cir. 1983) (disapproved of in Walters v. Metro. Educ. Enters., 519 U.S. 202 (1977) on other grounds) (“We caution that employers cannot avoid having employees counted toward the jurisdictional threshold by denominating them as directors, independent contractors, or other designations besides ‘employee.’ The issue is whether an employer-employee relationship exists, not what title a worker holds.”)), part time employees (Hornick v. Borough of Duryea, 507 F. Supp. 1091, 1098 (M.D. Pa. 1980) (a number of courts have held that “part-time workers are to be counted in ascertaining whether a ‘person’ is an ‘employer’ and therefore subject to… Title VII”)), volunteers (Hall v. Del. Council on Crime & Justice, 780 F. Supp. 241, 244 (D. Del. 1992) (reimbursement for work-related expenses is not sufficient to cause volunteers to be counted as employees), aff’d mem., 975 F.2d 1549 (3d Cir. 1992); City of Ft. Calhoun v. Collins, 500 N.W.2d 822, 826 (Neb. 1993) (a volunteer fire department is not an employer within the meaning of the state fair employment practices act); but see Haavistola v. Cmty. Fire Co., 6 F.3d 211, 222 (4th Cir. 1993) (volunteer firefighters may sue under Title VII)), shareholders (EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984) (abrogated on other grounds in Clackamas Gastroenterology Assoc., P.C. v. Wells, 538 U.S. 440 (2003) as noted in Ruiz v. Trustees of Purdue Univ., 2008 U.S. Dist. LEXIS 118835 (N.D. Ind. Feb. 20, 2008)) (law firm “shareholders” are not counted)), directors and officers (EEOC v. First Catholic Slovak Ladies Ass’n, 694 F.2d 1068, 1070 (6th Cir. 1982) (corporate directors who drew salaries as employees and who had duties as employees in addition to those of directors are counted as employees); but see Zimmerman, supra at 352 (“We do not believe Congress intended the term ‘employee’ to include persons who are no more than directors of a corporation or unpaid, inactive officers.”); McGraw v. Warren County Oil Co., 707 F.2d 990, 991 (8th Cir. 1983) (per curiam) (affirming dismissal on the ground that corporate directors should not be counted as employees); Schoenbaum v. Orang County Ctr. For the Performing Arts, 677 F. Supp. 1036, 1038 (C.D. Cal. 1987) (“Congress did not intend the term ‘employee’ in the ADEA to include the defendant trustees and directors by virtue of the functions they performed for the Orange County Center.”) (quoting Zimmerman, supra)).
Counsel may want to explore whether the employees of one entity can be aggregated with another under the “single employer”/single enterprise (e.g. EEOC v. McLemore Food Stores, Inc., 25 FEP 1356, 1358, 1977 U.S. Dist. LEXIS 13741 (W.D. Tenn. Sept. 29, 1977) (since three defendants might be held to constitute a single enterprise, a charge against one might meet the jurisdictional prerequisite of a timely charge with respect to all three); Eskridge v. Coates, 57 FEP 589, 591, 1991 U.S. Dist. LEXIS 19914 (N.D. Ind. 1991) (the defendant corporations had interrelated operations, common ownership, and common management, with one specific individual in charge of hiring and firing for all of the corporate defendants); compare McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 933-34 (11th Cir. 1987) (demonstration of common ownership, management, personnel, and administrative functions raised a genuine issue of material fact) and EEOC v. Christie Lodge Assocs., 51 FEP 916, 920, 1989 U.S. Dist. LEXIS 14469 (N.D. Ill. 1989) (no summary judgment for parent company where disputed issues existed regarding centralized control of labor relations and other issues) with Morgan v. Safeway Stores, 884 F.2d 1211, 1213-14 (9th Cir. 1989) (no genuine issue of material fact raised where common management, control of labor relations, and ownership were not shown between employer and credit union)) or “joint employer” theories (e.g. EEOC v. Sage Realty Corp., 87 F.R.D. 365, 368-69, 1980 U.S. Dist. LEXIS 12404 (S.D.N.Y. 1980) (denying the defendant’s summary judgment motion; the contractor, who paid the plaintiff, and the building management company, which hired the contractor, may be joint employers; evidence showed that the latter hired, trained, and supervised the plaintiff, then ordered her fired when she refused to wear a revealing costume); Compare Evans v. McDonald’s Corp., EEOC Dec. 71-708, 3 FEP 141, 141 (1970) (franchisor and franchisee were joint employers where franchisor controlled the hours of work, work assignments, and products used, and was a named insured on policies covering store property) and Guerra v. Tishman E. Realty, 52 FEP 286, 288, 1989 U.S. Dis. LEXIS 6744 (S.D.N.Y. 1989) (summary judgment is inappropriate where the business relationship between the building owner and those who managed its buildings might be considered to be that of joint employers)).

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Severance Payments To Which an Employee Becomes Entitled Within 180 Days of Bankruptcy Filing Receive Priority Treatment

2011-10-06T17:38:00.000-04:00

In Matson v. Alarcon, No. 10-2352, 2011U.S. App. LEXIS 13729 (4th Cir. July 6, 2011), the Fourth Circuit addressed the treatment of an employer’s liability under a severance benefits plan in bankruptcy. The employer had established a severance benefits plan which entitled employees who were terminated without cause to compensation calculated based on the terminated employee’s length of service. Simply stated, employees became “participants” in the plan, and thus entitled to compensation under it, upon being terminated without cause, and signing a severance agreement and release. Id. at *2-*3. The size of the benefit to which a participant was entitled depended on the duration of his service to the employer. Id.

The employer terminated approximately 125 employees within 180 days of filing its bankruptcy petition. Id. at *4. In the subsequent bankruptcy proceedings, the terminated employees asserted that their claims for severance were entitled to priority treatment up to the maximum amount provided under 11 U.S.C. § 507(a)(4). Id. at *5. The trustee argued that the former employees “earned” an entitlement to severance pay throughout the course of their employment, and were therefore only entitled to priority treatment for that portion of the severance that was “earned” within the 180 day pre-petition time period. Id. The Bankruptcy Court overruled the trustee’s objections to priority treatment, and the trustee’s appeal was certified to the Court of Appeals. Id. at *6.

The Fourth Circuit affirmed the Bankruptcy Court, holding that the former employees “earned” the full amount of their severance within the meaning of § 507(a)(4)(A) on the date they became entitled to receive such compensation. Id. at *13-*14. Although the amounts of compensation were based on length of service, the Court found that the employees did not “earn” severance compensation over the entire course of their employment. Id. at *11-*12. Rather, the Court, examining the “plain and ordinary meaning” of the terms in § 507(a)(4), found that employees do not “earn” severance pay as compensation for services rendered, but instead “earn” severance pay when they become entitled to receive it. Id. at *9-*10. Since the employees became entitled to receive severance pay only upon their termination, which was within the 180 day statutory window, priority treatment of the claims up to the statutory maximum was appropriate. Id. at *10.

In so holding, the Fourth Circuit recognized the existence of potentially inconsistent decisions in the Third, First, and Ninth Circuits. Id. at *12-*13, (citing In re Roth Am., Inc., 975 F.2d 949 (3d Cir. 1992); In re Mammoth Mart, Inc., 536 F.2d 950 (1st Cir. 1976); In re Health Main. Found., 680 F.2d 619 (9th Cir. 1982)). Those Courts had held that severance compensation calculated based on length of employment has priority as an administrative expense of the bankruptcy estate “only to the extent that the compensation is based on services provided to the bankruptcy estate after the debtor files for bankruptcy.” Matson, 2011 U.S. App. LEXIS 13729 at *12-*13. The Fourth Circuit distinguished the decisions of the First, Third, and Ninth Circuits, explaining that those decisions interpreted 11 U.S.C. § 503(b)(1)(A), which was materially different from 11 U.S.C. § 507(a)(4). Id. at *13. Specifically, § 503(b)(1)(A) does not use the word “earned”, does not specifically include “severance pay” as a form of wages, and requires a calculation of the value of the “services rendered” during the relevant time period. Id.

State Courts Split Over Adoption of Twombly/Iqbal Pleading Standards

2011-10-04T17:23:00.000-04:00

On July 21, 2011, the Tennessee Supreme Court, sitting en banc in Webb v. Nashville Area Habitat for Humanity, 2011 Tenn. LEXIS 623 (Tenn. July 21, 2011), unanimously declined to embrace the Supreme Court’s new Rule 8 pleading standards articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). Judge Sharon Lee, writing for the court, stated:

“In summary, it must be remembered that we are addressing the standard in assessing the sufficiency of a single document filed at the very beginning of a case – the complaint. Our motion-to-dismiss jurisprudence reflects the principle that this stage of the proceeding is particularly ill-suited for an evaluation of the likelihood of success on the merits or of the weight of the facts pleaded, or as a docket-clearing mechanism… We decline to reinterpret Rule 8 to require a pleader demonstrate ‘plausibility’ and continue to adhere to the well established standards [set forth in Tennessee jurisprudence which follows a liberal notice pleading standard].”

2011 Tenn. LEXIS 623 at *40-41. In rejecting the Supreme Court’s new pleading standards, the Tennessee Supreme Court relied upon a similar decision from the Washington State Supreme Court in McCurry v. Chevy Chase Bank, FSB, 169 Wn.2d 96, 233 P.3d 861 (Wash. 2010) (en banc) where that court also rejected the Supreme Court’s plausibility standard. In McCurry, the court stated as follows:

“The Supreme Court's plausibility standard is predicated on policy determinations specific to the federal trial courts. The Twombly Court concluded: federal trial courts are incapable of adequately preventing discovery abuses, weak claims cannot be effectively weeded out early in the discovery process, and this makes discovery expensive and encourages defendants to settle ‘largely groundless’ claims. See 550 U.S. at 557-58, 559, 127 S. Ct. 1955. Neither party has shown these policy determinations hold sufficiently true in the Washington trial courts to warrant such a drastic change in court procedure.

Nor has either party here addressed countervailing policy considerations. For example, do current discovery expenses justify plaintiffs' loss of access to that discovery and general access to the courts, particularly in cases where evidence is almost exclusively in the possession of defendants? Could runaway discovery expenses be addressed by better means — perhaps involving more court oversight of the discovery process or a change in the discovery rules?”

Id. at 102-103. The Supreme Court of Delaware in Cent. Mrtg. Co. v. Morgan Stanley Mortgage Capital Holdings LLC, 2011 Del. LEXIS 439 (Del. Sup. Ct. August 18, 2011) (en banc), “decline[d] to use this case as the vehicle to address whether the Twombly-Iqbal holdings affect our governing standard… Instead, we emphasize that, until this Court decides otherwise or a change is duly effected through the Civil Rules process, the governing pleading standard in Delaware to survive a motion to dismiss is reasonable ‘conceivability.’” The Delaware “conceivability” standard is “more akin to ‘possibility,’ while the federal ‘plausibility’ standard falls somewhere between mere ‘possibility’ but short of ‘probability.’” Id. at *14-15, n.13.

In contrast to the outright rejections of Twombly/Iqbal pleading standards by the Tennessee and Washington Supreme Courts, several state supreme courts have embraced the new standards. See, e.g. Doe v. Bd. Of Regents of Univ. of Neb., 280 Neb. 492, 788 N.W.2d 264, 274-78 (Neb. 2010) (adopting the Twombly/Iqbal standard); Iannacchino v. Ford Motor Co., 451 Mass. 623, 888 N.E.2d 879, 890 (Mass. 2008) (adopting the Twombly standard in a pre-Iqbal decision); Sisney v. Best Inc., 2008 SD 70, 754 N.W.2d 804, 807-09 (S.D. 2008) (adopting the Twombly standard in a pre-Iqbal decision).

Most recently, on September 15, 2011, the District of Columbia Court of Appeals in Potomac Development Corp. v. District of Columbia, No. 10-CV-632, 2011 D.C. App. LEXIS 552 (D.C. September 15, 2011), reinstated the court’s earlier adoption of the plausibility standard. In Mazza v. House Craft, LLC, 18 A.3d 786 (D.C. 2011), vacated as moot, 22 A.3d 820 (D.C. 2011) (per curiam), the court, Judge Blackburne-Rigsby writing for the panel, adopted the standard, but that opinion was subsequently vacated as moot and thus not of precedential value. See also Grayson v. AT&T Corp., 15 A.3d 219, 229 n.16 (D.C. 2011) (en banc); Oh v. National Capital Revitalization Corp., 7 A.3d 997, 1005 n.10 (D.C. 2010); Solers, Inc. v. Doe, 977 A.2d 941, 948 n.5 (D.C. 2009).

As mentioned in a recent note by a law student at UC Berkley, the rejections of the new federal plausibility pleading standards raise some interesting Erie issues. For example, if a state claim under the state law of Tennessee or Washington were litigated in federal district court under that court’s diversity jurisdiction, the federal court would not be required to adopt state pleading standards. See Hanna v. Plumer, 380 U.S. 460 (1965). Under reverse-Erie analysis, the state courts hearing federal subject-matter claims normally use state procedures unless federal procedural rights are a “basic and fundamental” part of the federal right at issue. Felder v. Casey, 487 U.S. 131, 151 (1988) (“[f]ederal law takes state courts as it finds them only insofar as those courts employ rules that do not impose unnecessary burdens upon rights of recovery authorized by federal laws”). In Brown v. W. Ry. of Ala., 338 U.S. 294 (1949), the Court held that pleading standards can be integral to the enforcement of federal rights, holding that states may not apply more stringent pleading standards than would be applied to the case had it been brought in federal court. Id. at 296. The Supreme Court has never addressed whether states may apply less stringent pleading standards to federal claims. The author of the note suggests that Western Railway was predicated on the protection of federal rights in state courts, and argues that less stringent pleading standards do not threaten the enforcement of federal rights and thus may pass muster under currently existing reverse-Erie jurisprudence. See Roger M. Michalski, Tremors of Things to Come: The Great Split Between Federal and State Pleading Standards, 120 Yale L. J. 109 (2010).

So, the practice tips would seem to be the following:

Counsel should be aware of the latest articulation of pleading standards from the applicable state supreme court or the intermediate courts if the issue has not yet filtered up to the supreme court.
Where a pleading standard less stringent than Twombly/Iqbal has been adopted like in Tennessee, Washington and Delaware, counsel for plaintiff should consider whether the case is more appropriately filed in state court.
If the pleading standard remains uncertain in the applicable state, counsel might consider filing in state court and arguing for a rejection of the new federal standard.
Where plaintiff has filed in state court, the defense should consider the argument that under Western Railway, the new federal standard should be applied to any federal claim asserted in state court.
The defense, where state claims are brought in federal court, should emphasize to the district judge that whatever the state standard might be, the new federal plausibility standard must be applied.

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Section 1981 Retaliation Claims Governed By Federal Catch-All 4-Year Statute of Limitations

2011-10-03T18:33:00.000-04:00

Three Circuits, most recently the Ninth in Johnson v. Lucent Techs., Inc., No. 09-55203, 2011 U.S. App. LEXIS 16100 (9th Cir. Aug. 4, 2011), have held that retaliation claims under 42 U.S.C. § 1981 are subject to the 4-year statute of limitations set forth in 28 U.S.C. § 1658. In Johnson, the Ninth Circuit recognized that retaliation claims were no longer viable under § 1981 after the Supreme Court’s 1989 decision in Patterson v. McLean Credit Union, 491 U.S. 164 (1989) until they were resuscitated by the enactment of the Civil Rights Act of 1991. The Ninth Circuit held: “Because they arise under a post-December 1, 1990 act of Congress, section 1981 retaliation claims are governed” by section 1658. Previously, the Eleventh and Seventh Circuits had so held. See Baker v. Birmingham Bd. of Educ., 531 F.3d 1336 (11th Cir. 2008); Dandy v. United Parcel Serv., Inc., 388 F.3d 263 (7th Cir. 2004).

To understand this issue, one needs to be familiar with some employment law history. Prior to the Supreme Court’s 1989 decision in Patterson, some courts had held that § 1981 encompassed retaliation claims. See, e.g. Sherpell v. Humnoke Sch. Dist. No. 5, 874 F.2d 530, 536 (8th Cir. 1989); Goff v. Continental Oil Co., 678 F.2d 593, 597-98 (5th Cir. 1982). Then, with Justice Kennedy writing for a five Justice majority, the Supreme Court issued its decision in Patterson which held that § 1981 only covered claims regarding the “formation” of a contract.[1] In the wake of Patterson, most courts held that § 1981 did not cover retaliation claims. Williams v. First Union Nat’l Bank, 920 F.2d 232, 234 (4th Cir. 1990) (collecting cases); McCarthy v. Kemper Life Ins. Co., 924 F.2d 683, 688 (7th Cir. 1991); but see McKnight v. Gen. Motors Corp., 908 F.2d 104-112 (7th Cir. 1990) (Judge Posner, with Senior Circuit Judge Fairchild dissenting, suggests that maybe retaliation remained actionable under § 1981, provided that the retaliation had a racial motivation. In Dandy v. United Parcel Svcs., supra, the panel seemingly put this issue to rest, without any reference to Judge Posner’s opinion in McKnight). Indeed, the courts held that so called “post-formation” claims were no longer encompassed by § 1981. However, those “formation” claims that Patterson recognized as cognizable under § 1981 continued to be filed, and the courts continued to be asked to determine the statute of limitations applicable to such claims. As the courts had done before Patterson, the post-Patterson courts held that, as § 1981 contains no statute of limitations, the federal district courts must determine the most appropriate state statute of limitations and apply that to a “formation” claim. See e.g. McKnight v. Gen. Motors Corp., 908 F.2d 104-112 (7th Cir. 1990). As a result, the statute of limitations on a “formation” claim varied from jurisdiction to jurisdiction.

When Congress enacted the 1991 Civil Rights Act, it “overruled” the Supreme Court’s holding in Patterson, and rewrote § 1981 by adding § 1981a which defines the term “make and enforce contracts” to include the “making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” Thereafter, the courts again began to hold that retaliation claims, in light of this amendment, were encompassed by the revised § 1981. The statute of limitations problem remained, however, and federal district courts continued to apply the most analogous state statue of limitations.

On December 1, 1990, the Congress had enacted 28 U.S.C. § 1658, a catchall 4-year statute of limitations for actions “arising under an Act of Congress enacted after the date of the enactment of this section” where Congress had not included a statute of limitations. 28 U.S.C. § 1658(a). In 2004, the Supreme Court in Jones v. R.R. Donnelley’ & Sons Co., 541 U.S. 369 (2004), rev’g 305 F.3d 717 (7th Cir. 2002) was presented with the question of whether § 1981 hostile work environment, wrongful termination, and failure-to-transfer claims were governed by Congress’ 4-year catchall statute of limitations (28 U.S.C. § 1658), or by the most analogous state statute of limitations. The Court, in an opinion authored by Justice Stevens, held that § 1658 applies to any claim “arising under” an act of Congress which was enacted after December 1, 1990, and that “a cause of action ‘aris[es] under an Act of Congress enacted’ after December 1, 1990 – and therefore is governed by § 1658’s 4-year statute of limitations – if the plaintiff’s claim against the defendant was made possible by a post-1999 enactment.” Id. at 382.

In light of this history, the Ninth Circuit, with Judge Betty Fletcher writing for the panel in Johnson v. Lucent Technologies held that § 1658’s 4-year statute of limitations now applies to a § 1981 retaliation claim.

In 2008, Judge Dubina writing for a panel of the Eleventh Circuit in Baker v. Birmingham Bd. of Educ., supra, held that plaintiff’s claims were made possible by the 1991 amendments to § 1981 and that, accordingly, those claims arise under a post-1991 enactment, bringing the 4-year catchall statute of limitations into play. Interestingly, in Baker, the court was confronted with a § 1983 claim (a 2-year Alabama limitations period would apply to a § 1983 claim) against a state actor, and one question before the court was whether the state statute applicable to § 1983 claims applied (Wilson v. Garcia 471 U.S. 261, 275-76 (1985) (Court held that the statute of limitations for a § 1983 claim is generally the applicable state-law statute of limitations for personal-injury torts)) or whether it should be the § 1981 statute of limitations. Section 1983 does not provide a cause of action against state actors, and claims against state actors of § 1981 violations must be brought pursuant to § 1983 (Jett v. Dallas Indep. Sch. Dist. 491 U.S. 701, 735 (1989) (holding that § 1983 “provides the exclusive federal damages remedy for the violation of the rights guaranteed by § 1981 when the claim is pressed against a state actor.”)), hence, the question as to whether the § 1983 or § 1981 statute of limitations applied. In light of the holding in Jones, the Eleventh Circuit concluded that plaintiff’s claim was made possible by the 1991 Civil Rights Act, a post-1990 enactment, and that, therefore, the four-year catchall statute of limitations applied. See also City of Rancho Palos Verdes, Cal. v. Abrams, 544 U.S. 113, 123 n.5 (2005) (Justice Scalia writing for the Court in a case brought under the Federal Telecommunications Act, states that while the statute of limitations for a § 1983 claim is generally the applicable state-law period for personal injury torts, here, since the claim rests upon violation of a post-1990 congressional enactment, § 1658 would seem to apply). Other courts have decided this issue differently, and held that the plaintiff’s cause of action arises under § 1983, not § 1981, since § 1983 is the exclusive remedy against state actors for violations of § 1981, and thus have applied the most analogous state personal injury statute of limitations. See AUI, LLC v. DeKalb Cnty., 2006 U.S. Dist. LEXIS 89828 (N.D. Ga. August 28, 2006); Marshall v. Daleville City Bd. Of Educ., 2006 U.S. Dist. LEXIS 50543 (M.D. Al. July 24, 2006).

In 2004, in Dandy v. United Parcel Service, supra, the Seventh Circuit, Judge Williams writing for the panel, held that plaintiff’s claims, including (1) hostile work environment; (2) failure to promote; (3) disparate treatment in terms of compensation; and (4) retaliation were subject to § 1658’s catchall statute of limitations because they were made possible by the 1991 Civil Rights Act. Judge Williams wrote for the panel in that case. See also White v. BFI Waste Servs., 375 F.3d 288, 291-92 (4th Cir. 2004) (finding disparate treatment in compensation claims stated under §1981 are covered by § 1658).

To summarize the practice pointers:

1. A failure to hire claim under § 1981 is governed by the most analogous state statute of limitations.

2. In a failure to promote claim where the promotion would create a new and distinct employment relationship, the most analogous state statute of limitations applies. Otherwise, the 4-year § 1658 statute of limitations applies.

3. In § 1983 claims for violations of § 1981, there is a significant debate as to whether the most analogous state personal injury statute of limitations applies or the 4-year catchall.

4. All circuits that have addressed the issue have held that retaliation claims under § 1981 are governed by the § 1658 4-year catchall.

5. Compensation claims under § 1981 would appear to be governed by the 4-year catchall. In perusing such claims, take into account the Lilly Ledbetter Fair Pay Act provisions.

6. Racial harassment and hostile work environment claims under § 1981 appear to be governed by the 4-year catchall statute of limitations.

[1] Subsequent to Patterson, some courts found, after a fact specific inquiry, that a promotion claim constituted a “formation” claim where the promotion would create “a qualitatively different relation between the employer and the employee, for example, a move from factory worker to foreman, foreman to foreman supervisor, or manager to officer, likely would create a new and distinct relation giving rise to a § 1981 action under Patterson.” Butts v. City of NY Dept. of Housing, 990 F.2d 1397, 1412 (2d Cir. 1993). However, some cases held that the denied promotion would not have satisfied the Patterson “new and distinct relationship” test. See e.g. Revis v. Slocomb Indus., Inc., 814 F. Supp. 1209 (D. Del. 1993); Johnson v. Indopco, Inc., 834 F. Supp. 1039 (N.D. Ill. 1993)

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A Canadian Perspective on Social Media and Concerted Activity

2011-09-30T16:17:00.002-04:00

The British Columbia Labour Relations Board recently issued a decision permitting the termination of two employees for Facebook comments during and immediately following a unionization drive, though the comments were substantially more inflammatory and threatening than those described above. On October 22, 2010, in Lougheed Imports, Ltd. d/b/a West Coast Mazda v. United Food and Comm’l Workers Int’l Union, 2010 CanLII 62482 (B.C. L.R.B. 2010), the British Columbia Labour Relations Board upheld the termination of two employees for comments that they posted on Facebook about their employer. During and immediately after the drive to establish a union, the two employees involved in the unionization effort posted offensive, and potentially threatening, comments on their Facebook pages. In one post, one of the terminated employees wrote “If somebody mentally attacks you, and you stab him in the face 14 or 16 times… that constitutes self defence [sic], doesn’t it????” Lougheed Imports, 2010 CanLII 62482 at par. 17 (ellipses in original). The employer began building a file on one of these employees, the most active union supporter in the shop, on the same day that the union applied for certification, and, despite the provocative nature of his posts, kept its concern secret from the employee until the date of his termination on October 7. Despite largely agreeing with the union that the employer’s behavior was “puzzling” and “suspicious,” the Board sided with the employer, relying primarily on the egregious nature of the postings and the employer’s alleged uncertainty as to how to address misconduct on Facebook.

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Canadian Perspective on Defamation on Anonymous Internet Message Board

2011-09-29T18:08:00.001-04:00

In Warman v. Wilkins-Fournier, 2010 ONSC 2126 (CanLII May 30, 2011), the Plaintiff-Respondent commenced an action against the operators of an internet message board, and eight anonymous posters, for defamation in connection with comments made by those posters. The Divisional court had heard an earlier appeal in this matter on May 3, 2010, when it held that the motions judge erred by not considering the anonymous posters’ right of freedom of expression, noting that the commenters’ decision to remain anonymous gave rise to a reasonable expectation of privacy. The court also expressed concern with the potential “chilling effect on freedom of expression” resulting from disclosure. The court remitted the case to a different motion judge for reconsideration.

Upon remittance, the new motions judge applied a four-part test developed by the Divisional court:

1) whether the unknown alleged wrongdoer could have a reasonable expectation of anonymity in the particular circumstances; 2) whether the respondent has established a prima facie case against the unknown alleged wrongdoer and is acting in good faith; 3) whether the Respondent has taken reasonable steps to identify the anonymous party and has been unable to do so; and 4) whether the public interests favouring disclosure outweigh the legitimate interests of freedom and right to privacy of the persons sought to be identified if the disclosure is ordered. Warman v. Wilkins-Fournier, 2010 O.J. No. 1846 (CanLII May 3, 2010).

Relying on the terms of membership to the website to which the anonymous posters posted allegedly defamatory material, the motions judge on remittance found that the mere use of pseudonyms did not create a reasonable expectation of privacy. The terms of membership stated, in pertinent part, that “[i]f you post libelous or defamatory material, you are on your own” and that “[y]our FC alias is no protection.” The motions judge went on to find that a prima facie case of defamation had been established and that any remaining privacy interests were outweighed by the need to address potential defamatory postings, noting that the privacy intrusion in providing e-mail addresses, registration information, and IP addresses was for the “limited purpose” of effecting service.

The Warman court’s decision to require a prima facie showing of the underlying claim before allowing a plaintiff to discover the identity of an anonymous online speaker comports with the tact taken by several courts in the United States, including the 9th Circuit. In In re Anonymous Online Speakers, 2011 U.S. App. LEXIS 487 (9th Cir. Jan. 7, 2011), the 9th Circuit opined that “[a] number of courts have required plaintiffs to make at least a prima facie showing of the claim for which the plaintiff seeks the disclosure off the anonymous speaker’s identity.” The Court also noted that, in each case it reviewed, the initial burden rested on the party seeking discovery. While U.S. courts have applied varying levels of showing, the lowest being “good faith,” the bar that must be cleared is tied to the nature of the speech at issue, and is unaffected by the fact that it occurs online. Id. at *15 - *18. The dispute before the 9th Circuit, much like the dispute in Warman was over the propriety of using a particular standard on the facts presented. In Warman, the original motions judge used a “good faith” standard, which is the lowest possible, and was reversed by the Divisional court. Examining the unsettled nature of the law, 9th Circuit declined to find “clear error” in the District Court’s use of the highest standard, which requires plaintiff to survive a hypothetical motion for summary judgment before becoming entitled to information revealing the speaker’s identity, though the 9th Circuit did note that such a standard was not appropriate in the instant case.

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A Canadian Perspective on Social Media Discovery

2011-09-28T18:35:00.002-04:00

In Sparks v. Dube, 2011 NBQB 40 (CanLII Feb. 4, 2011), a personal injury lawsuit tried to the Court of Queen’s Bench of New Brunswick, the defendant retained an investigator to find and review plaintiff’s personal websites. The investigator discovered photographs on the public portions of plaintiff’s Facebook website that were potentially inconsistent with plaintiff’s claimed injuries. Defendant requested an ex-parte order to compel plaintiff to download and preserve the contents of all social network sites. The defendant further requested that the downloading be accomplished without prior notice to the plaintiff. The court granted defendant’s request, and ordered plaintiff’s lawyer to set a meeting with plaintiff to accomplish the downloading, without informing plaintiff of the purpose of the meeting until plaintiff arrived. The downloading was to be performed under the supervision of a second lawyer to certify that the order was strictly complied with. The contents of the download were then sealed pending defendant’s motion for production of information with a “semblance of relevance.”

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The European Union: The Right to be Forgotten

2011-09-27T16:38:00.001-04:00

The European Union is considering adding a “right to be forgotten” as part of a planned update to bring the 1995 Data Protection Directive in line with new technologies. The controversial right would give individuals the right to withdraw their consent to data processing. This means that, for example, an individual could withdraw their consent to Facebook retaining or sharing a photograph of themselves. According to a spokesman for Viviane Reding, the EU Justice Commissioner, “after you have withdrawn your consent, there shouldn’t even be a ghost of your data left in some server somewhere. It’s your data and it should be gone for good.” Leigh Phillips, “EU to Force Social Network Sites to Enhance Privacy”, The Guardian (March 16, 2011).

The precise shape of this right remains unclear. It seems likely that it will contain a requirement that individuals “opt-in” to allow data processing, as opposed to the current “opt-out” regime. Matt Warman, “EU Proposes Online Right “To Be Forgotten”, The Telegraph (Nov. 5, 2010). It is also probable that data processors will face additional restrictions on the type of data which they can process and the length of time for which they can maintain it. While it may be that the right will do little more than heighten already-extant consent requirements in the 1995 Data Protection Directive, a recent request by the Spanish government to Google illustrates that such a right could have wide-reaching implications. John Hendel, “In Europe, a Right to Be Forgotten Trumps the Memory of the Internet”, New York Times (Feb. 3, 2011). On January 19, 2011, Google refused a request from Spain to remove 90 links. Id. Most of the links were to newspaper articles and other public information which portrayed individual Spanish citizen plaintiffs in an unfavorable manner. Id. For example, one request came from a domestic violence victim whose address can be found on the search engine. Another is from a woman, reports about whose criminal activity as a teenager are available online. Ravi Mandalia, “Google Receives Data Deletion Request from Spanish Government” ITProPortal, (August 12, 2011). Google argued that Spain’s request could do serious harm to freedom of speech and that responsibility for removing content rested with the publishers linked to, not Google. Google is currently fighting several lawsuits related to the removal of these links under the “right to be forgotten” in Spain’s National Court. The publications which maintain the data, primarily newspapers and other media sources, were not asked by Spain to remove the information Google linked to from their websites – presumably due to concerns about censorship or freedom of the press.

The outcome of the battle over this case has potentially wide-reaching implications for the shape of social media websites throughout the world. Ms. Reding has explicitly stated that “[p]rivacy standards for European citizens should apply independently of the area of the world in which their data is being processed,” and that “[t]o enforce the EU law, national privacy watchdogs shall be endowed with powers to investigate and engage in legal proceedings against non-EU data controllers whose services target EU consumers.” Ben Rooney, “Non-EU Websites Must Operate Under EU Privacy Laws”, The Wall Street Journal TechEurope Blog (March 16, 2011). If investigations into the procedures used by social media websites in handling personal data become common, providers could be faced with the choice of conforming their entire operation to comply with EU privacy regulations or somehow segregating accounts used by European citizens for different treatment – potentially a daunting task.

Civil rights organizations have taken a mixed view of any potential right to be forgotten. The American Civil Liberties Union (“ACLU”) has, in the past, advocated a potentially more limited “right to delete” which would “generally encompass the deletion only of any association with a given record, not necessarily the entire record itself,” except when such disassociation is impossible as for example, when a person’s face is captured by a security camera. Chris Conley, “The Right to Delete” AAAI Spring Symposium Series (March 23, 2010). This is a more limited right than that which appears to be under consideration in Europe. The ACLU also proposes safeguards to balance this right against rights of free speech and press by providing various exceptions, including exceptions for “newsworthy” content, but the ACLU acknowledges that the “right to delete” presents difficult issues in this regard. In the United Kingdom – already facing criticism for not complying fully with the 1995 Data Protection Directive – Mr. Kenneth Clarke, Secretary of State for Justice, has criticized the notion of a broad “right to be forgotten.” “Kenneth Clarke Warns on EU Data Protection Rules”, May 26, 2011.

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The NLRB and "Facebook Firings"

2011-09-26T11:20:00.002-04:00

Since President Obama’s appointees to the National Labor Relations Board constitute a majority, the NLRB has taken an aggressive approach to employer work rules and policies which, in the NLRB’s view, restrict employees in the exercise of protected concerted activity on social media sites. In tandem with this aggressive approach to enforcement, the NLRB has advanced a very broad view of when employees’ social media activity constitutes “protected concerted activity.”

On August 18, 2011, the NLRB published a Report of the Acting General Counsel Concerning Social Media Cases. Anne Purcell, “Report of the Acting General Counsel Concerning Social Media Cases”, Office of the General Counsel, Division of Operations-Management, Mem. OM 11-74 (August 18, 2011). This report described selected NLRB actions related to social media. Among the common features of the actions were that the employee conversations, however offensive, occurred in a broader context of a discussion relating to working conditions. Id. Another common feature was that the posts all involved discussions between multiple employees, either online or offline, even if the online post did not result in a discussion. Id. A third common element was the lack of a social media policy, or the perceived over breadth of an existing social media policy. Id.

In the NLRB’s view, an employee’s social media activity is protected as “concerted action” so long as it touches on a term or condition of employment, and falls short of making a physical threat. This view was largely endorsed recently by the recent decision in Hispanics United of Buffalo, Inc. v. Ortiz, No. 3-CA-27872 (NLRB Sept. 2, 2011). Hispanics United dealt with the termination of five employees for postings to one of the terminated employee’s Facebook pages. That employee had posted a comment naming a co-worker who believed that her department did not do enough to serve their clients and soliciting input from her co-workers. The employee added that she had “about had it!” Id. at 4. The employees who participated in this discussion were terminated three days later, purportedly for violating the employer’s anti-harassment policies. In Hispanics United, Administrative Law Judge Arthur Amchan concluded that the employees’ Facebook discussions were protected because they represented the “first step towards taking group action.” Id. at 8. The ruling was based on the employees’ right “to discuss matters affecting their employment amongst themselves.” Hispanics United, No. No. 3-CA-27872 at 9.

Neither did the sometimes-vulgar nature of the discussion make it so “opprobrious” as to take it outside the protections of the National Labor Relations Act. While some posts lapsed into profanity – “what the f. .. Try doing my job I have 5 programs” or “Tell her to come do [my] fucking job n c [and see] if I don’t do enough, this is just dum [sic.]” – the NLRB characterized it as “objectively quite innocuous” in a Memorandum dated August 18, 2011. Anne Purcell, “Report of the Acting General Counsel Concerning Social Media Cases”, supra. ALJ Amchan appeared to substantially agree with the NLRB’s assessment, finding that simply mentioning an employee’s name together with these comments did not transform the conversation into harassment. ALJ Amchan accordingly found that the employer’s anti-harassment policy was not violated and that the employer had no rational basis for concluding that it had been.

This discussion of employer policies is typical of the NLRB’s focus in other social-media related actions that it has initiated. One of the NLRB’s primary concerns has been with what it views as “overbroad” restrictions by employers contained in their social media policies. The NLRB repeatedly targeted policies which might be interpreted to restrict employees’ ability to engage in protected concerted activity through the use of social media. While it would be premature at this time, based on the dearth of decisions on this subject, for employers to undertake a wholesale restructuring of their social media policies, it is certainly advisable that employers ensure that their social media policies are tailored to target only social media usage that implicates legitimate business interests. Employers may also want to consider including a clause carving social media activities that qualify as concerted activity out of any restrictions they place on social media usage. Preferably, these steps would be taken together – a truly overbroad policy is unlikely to be saved by a limited carve out, and a narrow policy which nonetheless restricts concerted activity may still attract attention.

This focus on social media policies may portend an attempt by the NLRB to effect wider-reaching changes to employers’ ability to control the use of their electronic resources. In late April, 2011, the NLRB’s Hartford Regional Director participated in a panel discussion for the Connecticut Bar Association. During that discussion, the Regional Director revealed that the NLRB is preparing to set the stage to reverse the NLRB’s December 2007 decision in Register Guard. In that case, the NLRB held that an employer can ban employee use of corporate e-mail systems for non-business reasons as long as the policy is enforced in a non-discriminatory manner. The Guard Publishing Co. d/b/a The Register-Guard, 351 NLRB No. 70 (2007). If reversed, employers’ ability to limit the use of social media by employees on employer electronic resources could be severely undermined.

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Monday, September 26th, is the Supreme Court’s “Long Conference”

2011-09-23T12:33:00.000-04:00

While I have my eyes on a number of cert. petitions pending before the Court, today, let me call readers’ attention to Magner v. Gallagher, No. 10-1032, petition for cert. pending from 619 F.3d 823 (8th Cir. 2010), reh’g denied, No. 09-1209, No. 09-1528, No. 09-1579, 2010 U.S. App. LEXIS 27066 (8th Cir. Nov. 15, 2010) (Colloton, J. dissenting from denial of reh’g en banc), rev’g 595 F. Supp. 2d 987 (D. Minn 2008) (Ericksen, J.). Magner is not an employment case, but rather a Fair Housing Act (FHA) case. The questions presented in the city of St. Paul’s petition are:

1. Are disparate-impact claims cognizable under the FHA?

2. If disparate-impact claims are cognizable, should they be analyzed under:

a. The burden-shifting approach used by the Fourth, Sixth, and Tenth Circuits, Smith v. Town of Clarkton, N.C., 682 F.2d 1055, 1065 (4th Cir. 1982); Betsy v. Turtle Creek Assocs., 736 F.2d 983, 989 n.5 (4th Cir. 1984); Arthur v. City of Toledo, Ohio, 782 F.2d 565, 574-75 (6th Cir. 1986); Mountainside Mobile Estates P’ship v. Sec’s of Hous. & Urban Dev., 56 F.3d 1243, 1252 (10th Cir. 1995); Buckeye Cmty. Hope Found. v. City of Kuyahoga Falls, 263 F.3d 627, 640 (6th Cir. 2001), rev’d in part and vacated in part, 538 U.S. 188 (2003); Reinhart v. Lincoln Cnty., 482 F.3d 1225, 1229 (10th Cir. 2007);

b. The modified burden-shifting framework adopted by the Eighth and Ninth Circuits, Harris v. Itzhaki, 183 F.3d 1043, 1051 (9th Cir. 1999); Darst v. Webbe Tenant Ass’n Bd. v. St. Louis Hous. Auth., 417 F.3d 898, 902-03 (8th Cir. 2005); or

c. The hybrid burden-shifting and balancing test adopted by the First and Second Circuits, Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 934 (2d Cir. 1988); Langlois v. Abbington Hous. Auth., 207 F.3d 43, 49 (1st Cir. 2000)?

The city’s petition approaches the cognizability of disparate-impact claims under the FHA using a textualist’s approach. The petition notes that, when the Supreme Court recognized disparate-impact claims under the Age Discrimination in Employment Act (ADEA) in Smith v. City of Jackson, Miss., 544 U.S. 228 (2005), the Smith Court explained that the text of Title VII and the text of the ADEA justified disparate-impact treatment. Section 703(a)(2) of Title VII and Section 4(a)(2) of the ADEA have identical language proscribing activities that would “adversely affect” a person because of a protected characteristic. By contrast, the Fair Housing Act has no such language. Rather, the text of 42 U.S.C. § 3604(a) makes it unlawful to “… make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” The petition notes that the aforesaid language is similar to the language in Section 4(a)(1) of the ADEA, which the Supreme Court in Smith noted would not support a claim of disparate-impact liability. 544 U.S. at 236 n.6. (plurality opinion). Finally, in Alexander v. Sandoval, 532 U.S. 275, 280-81 (2001) the Court refused to find disparate-impact liability because Title XI of the Civil Rights Act forbids only intentional discrimination and does not prohibit actions taken with a non-discriminatory motive that has a disparate impact. See 42 U.S.C. § 2000(d).

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Fifth Circuit Holds that a Hostile Work Environment Claim May Be Brought Under the ADEA

2011-09-23T11:40:00.002-04:00

Hostile work environment claims are typically brought under Title VII, which is to say that such claims typically arise out of the plaintiff’s membership in one or more of Title VII’s protected classes – race or color, national origin, gender (including pregnancy), and/or religion. However, the question is not entirely settled as to whether hostile work environment claims may be brought under the ADEA – that is, where the alleged hostile work environment is based on the fact that the plaintiff is 40 or older. The Fifth Circuit, considering this issue as a matter of first impression, recently answered the question in the affirmative in Dediol v. Best Chevrolet, Inc., No. 10-30767, 2011 U.S. App. LEXIS 18819 (5th Cir. Sept. 12, 2011) (Stewart, J, decided by quorum before Judges Stewart and Smith, due to the death of Judge Garwood in July of 2011).

In Dediol, the Court noted that, while it had never before held that Title VII can be extended to address a claim for hostile work environment based on age, on at least two prior occasions, it had heard cases involving hostile work environment claims brought under the ADEA. See Mitchell v. Snow, 326 Fed. Appx. 852, 854 (5th Cir. 2009); McNealy v. Emerson Elec. Co., 121 Fed. Appx. 29, 34 n.1 (5th Cir. 2005). However, in both Mitchell and McNealy, the Court affirmed the district courts’ grant of summary judgment in favor of the employer, and did not reach the question of whether hostile work environment claims could be brought under the ADEA. The Mitchell and McNealy Courts simply held that, even assuming such claims were available, the plaintiffs had nevertheless failed to satisfy their burdens of production. The Dediol Court further noted that both the Seventh and Ninth Circuits had considered such cases, but that those cases had also not expressly ruled upon the issue in question. See Sischo-Nownejad v. Merced Cmty Coll. Dis., 934 F.2d 1104, 1109 (9th Cir. 1991); Young v. Will Cty. Dep’t of Pub. Aid, 882 F.2d 290, 294 (7th Cir. 1989).

In holding that there is indeed such a claim – that plaintiffs can bring a hostile work environment claim based on age discrimination under the ADEA – the Fifth Circuit in Dediol adopted the reasoning of the Sixth Circuit in Crawford v. Medina General Hosp., 96 F.3d 830, 834-35 (6th Cir. 1996):

In Crawford, the Sixth Circuit held that a claim for hostile work environment is cognizable under the ADEA. 96 F.3d at 835. The Crawford Court reasoned that the ADEA and Title VII share common substantive features and also a common purpose: “the elimination of discrimination in the workplace.” Id. at 834. The Sixth Circuit explained its decision this way: “the broad application of the hostile-environment doctrine in the Title VII context; the general similarity of purpose shared by Title VII and the ADEA; and the fact that the Title VII rationale for the doctrine is of equal force, all counsel” the result that a claim for hostile work environment based on age is recognized under Title VII. Id. We adopt the Sixth Circuit's reasoning here.

We now hold that a plaintiff’s hostile work environment claim based on age discrimination under the ADEA may be advanced in this court. A plaintiff advances such a claim by establishing that (1) he was over the age of 40; (2) the employee was subjected to harassment, either through words or actions, based on age; (3) the nature of the harassment was such that it created an objectively intimidating, hostile, or offensive work environment; and (4) there exists some basis for liability on the part of the employer. Id. at 834-35.

In addition to the Fifth and Sixth Circuits, at least one other Circuit (the First) has also held that hostile work environment claims can be brought under the ADEA. See Collazo v. Nicholson, 535 F.3d 41, 44 (1st Cir. 2008); Rivera-Rodriguez v. Frito Lay Snacks Caribbean, 265 F.3d 15, 24 (1st Cir. 2001). But, there is still an important distinction between hostile work environment claims which are brought under the ADEA as opposed to Title VII – the damages which are available under the two statutes are not completely identical. As the First Circuit noted in Collazo:

Although we have recognized hostile work environment claims under the ADEA, see Rivera-Rodriguez v. Frito Lay Snacks Caribbean, 265 F.3d 15, 24 (1st Cir. 2001), it is well-established that the statute does not allow compensatory damages for pain and suffering, Vazquez v. E. Air Lines, Inc., 579 F.2d 107, 109 (1st Cir. 1978); see also Comm’r of Internal Revenue v. Schleier, 515 U.S. 323, 326, 115 S. Ct. 2159, 132 L. Ed. 2d 294 (1995) (noting unanimity among the circuits on this principle). Modeled after the Fair Labor Standards Act of 1938, the remedy provisions of the ADEA allow awards for “only those pecuniary benefits connected to the job relation,” including unpaid wages or overtime compensation. Kolb v. Goldring, Inc., 694 F.2d 869, 872 (1st Cir. 1982) (internal quotation marks omitted); see also 29 U.S.C. § 626(b); McKennon, 513 U.S. at 357. Aside from monetary relief, federal courts may also grant “such legal or equitable relief as may be appropriate to effectuate the purposes of the Act,” including reinstatement or promotion, if warranted. 29 U.S.C. § 626(b).

535 F. 3d at 44-45 (footnotes omitted). By contrast, the Collazo Court noted that:

Title VII permits claims for compensatory damages for emotional distress and pain and suffering arising from a discriminatorily hostile or abusive work environment. 42 U.S.C. § 1981a(a)-(b); see Villescas v. Abraham, 311 F.3d 1253, 1260 (10th Cir. 2002) (“Congress had another opportunity to enlarge the remedies available under the federal employee ADEA when it amended Title VII and other Acts in the Civil Rights Act of 1991 to permit compensatory damages, subject to caps, and it conspicuously chose not to do so for ADEA claims.”).

535 F. 3d at 44 n.3.

This distinction in the availability of pain and suffering and emotional distress damages begs an important question –what is there to gain from bringing a hostile work environment claim under the ADEA? It is typically difficult to demonstrate that a plaintiff suffered any significant amount of economic damages (for example, lost wages) as a result of being subjected to a hostile work environment. The primary harm which arises from such claims is typically of the non-economic sort (pain and suffering, emotional distress, and the like). In Dediol, the plaintiff was able to get around this hurdle by claiming that he had been constructively discharged (a claim which would entitle him to lost wages), and the Fifth Circuit specifically held that he had presented a triable issue of fact as to whether he had been constructively discharged.

It will be interesting to see what the outer limits will be in terms of the other contexts in which hostile work environment claims will be allowed. It appears that the main issue which will be relevant to the resolution of that question will be the level of similarity between Title VII and the other statutes which plaintiffs attempt to use as a basis for bringing hostile work environment claims. As noted above, the Crawford and Dediol opinions were based primarily on the observation that Title VII and the ADEA “share common substantive features and also a common purpose.”

Similarly, in holding that the ADA creates a cause of action for hostile work environment harassment, the Fourth Circuit based its reasoning primarily on similarities between the language and purposes of Title VII and the ADA. Fox v. Gen. Motors Corp., 247 F.3d 169, 175-176 (4th Cir. 2001). In terms of the similarities in language, the Fox Court noted in particular that both Title VII and the ADA prohibit discrimination as to the “terms, conditions, [and/or] privileges of employment,” and that “[t]he Supreme Court has expressly held that [this] language creates a cause of action for hostile work environment under Title VII.” 247 F.3d at 175. Note also that the same language is contained in the ADEA.

By contrast, in Carder v. Continental Airlines, 636 F.3d 172 (5th Cir. 2011), the Court held that the statutory language of USERRA did not cover hostile work environment claims, noting differences between the language of USERRA prohibiting the denial of “benefits of employment,” versus Title VII’s prohibition of discrimination with respect to “terms, conditions, and privileges of employment.” The Carder Court concluded that the USERRA language would not permit a hostile work environment claim absent a denial of a tangible benefit.

So, in determining whether any given statute will allow for a cause of action for hostile work environment, it appears that the language and purpose of the relevant statute will be of paramount importance.

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