Fitzpatrick on Employment Law

Courts Continue to Expand What Single Events May Constitute Hostile Work Environment

2016-04-15T17:54:00.001-04:00

We have written two blogs (here and here) over the past several years on the subject of single-incident acts constituting the basis for a hostile work environment (HWE) claim.

A host of courts have held in recent years that a single racial slur may well be sufficient to plead a HWE claim. See Boyer-Liberto v. Fontainebleau Corp., 786 F.3d 264 (4th Cir. 2015) (en banc); Ayissi-Etoh v. Fannie Mae, 712 F.3d 572 (D.C. Cir. 2013); Smith v. D.C. Office of Human Rights, 77 A.3d 980 (D.C. 2013) (the “b-word”).

A series of articles, set forth below, contain citations to scores of other appellate and trial court decisions that have addressed the issue. See Eugene Volokh, What Speech Does “Hostile Work Environment” Harassment Law Restrict?, 85 Geo. L.J. 627 (1997) (available at: http://www2.law.ucla.edu/volokh/harass/breadth.htm); Karen M. Buesing, Shayla Waldon, Workplace Harassment: When Will a Court Say That Your Employees Have Had Enough?, ABA Section of Labor and Employment Law, Ninth Annual Conference (Nov. 4-7, 2015) (available at: http://www.americanbar.org/content/dam/aba/events/labor_law/2015/november/annual/papers/15.authcheckdam.pdf); Debra D. Burke, Workplace Harassment: A Proposal for a Bright Line Test Consistent With the First Amendment (Available Online at: http://www.hofstra.edu/pdf/law_labor_burke_vol21no2.pdf).

Two recent decisions from Maryland and the District of Columbia underscore the dramatic expansion of HWE claims in the wake of the Fourth-Circuit’s Boyer-Liberto decision and the D.C. Circuit’s decision in Ayissi-Etoh. In the wake of Boyer-Liberto, Judge James K. Bredar, in Tiffany Jones v. Family Health Ctr. of Balt., Inc., No. JKB-14-762, 2015 U.S. Dist. LEXIS 130818 (D. Md. Sept. 29, 2015) denied summary judgment to the defense, stating that Boyer-Liberto had “changed the landscape” such that a single instance of physical touching was held to be sufficient to overcome a Rule 56 summary judgment motion. Judge Bredar relied upon the following facts to deny summary judgment:

[Plaintiff] stepped outside [the room]...[o]n her way back, as she walked through the lunchroom and toward a door that opened into the clinic’s waiting room, Plaintiff felt [her supervisor] behind her: he “got up on [her] so close, [she] felt his private parts on…[her] buttocks.” Plaintiff also felt [supervisor’s] hand on her waist…Plaintiff reported the incident to [another supervisor] who allowed her to “go home” and “get [her]self together.

Judge Emmet G. Sullivan of the federal district court in the District of Columbia, in Kruger v. Cogent Commc’ns, Inc., No. 14-1744, 2016 U.S. Dist. LEXIS 41822, (D.D.C. March 30, 2016) found that the CEO’s alleged reference to Mr. Kruger as a “Nazi” may be severe enough in itself to state a hostile work environment claim. Based on that finding, relying upon Ayissi-Etoh, the Court denied the defense’s motion to dismiss. Judge Sullivan further found that an alleged intentional “public display of hostility towards Mr. Kruger” was a factor to consider in determining whether Mr. Kruger had pled a plausible HWE claim. The public display of hostility was the allegation that the CEO acknowledged other employees with “at least an appropriately cordial greeting” but would “consistently ignore Mr. Kruger and refused to engage in any type of normal workplace pleasantry.” Judge Sullivan found that the allegation that Mr. Kruger’s “supervisor refused to engage in work place pleasantries added further strength to his hostile work environment claims.” Possibly, in contrast, see Satterwhite v. City of Houston, 602 Fed. Appx. 585 (5th Cir. 2015) (a single reference to an employee as “Hitler” was found to be insufficient.).

Based on the continuing expansion of the circumstances that may be sufficient to plead an HWE claim, employers would be wise to have an aggressive zero-tolerance policy; well communicated internal complaint mechanisms; a requirement that co-workers report any inappropriate conduct or comments observed by them; prompt investigations of any such reports; training on a periodic basis to remind employees of their policies in this regard; and discipline, where appropriate, that sends a message to all concerned that the company’s policies are being aggressively enforced and not are merely window dressing.

Please be sure to visit our website at http://RobertBFitzpatrick.com

The Fourth Circuit Loves Plaintiff's Lawyers

2016-02-12T19:12:00.001-05:00

Valentine, Valentine, Valentine

O’ won’t you please be mine

You’re such a sweetheart

With love full of sweet tarts

This Valentine’s day is particularly sweet for the plaintiff-employee bar, as the Fourth Circuit repeatedly, in recent times, has been issuing opinions that are quite favorable to employees. We review a dozen such opinions, maybe better described as a dozen “red roses” or a dozen chocolate coated strawberries:

Our first case is Cruz v. Maypa, 773 F.3d 138 (4th Cir. 2014) in which Judge Gregory, writing for the panel, held that the failure to post the DoL-issued notice of FLSA rights in a conspicuous place in the workplace can result in the tolling of the FLSA statute of limitations. In doing so, the Court was reaffirming its holding in Vance v. Whirlpool Corp., 716 F.2d 1010 (4th Cir. 1983), in which a panel of that Court had found the 180-day filing requirement of ADEA was tolled by reason of the employer’s failure to post the statutory notice of rights under ADEA. In addition to the foregoing holding, the panel also held that when a statute of limitations is extended by the legislature, unless the legislature explicitly states otherwise, the extension applies retroactively to any claim under the statute at issue that had not expired under the old limitations statute at the time the legislation extending the statute was enacted.

Our second case is Lorenzo v. Prime Commc’ns, L.P., 806 F.3d 777 (4th Cir. 2015), in which Judge Niemeyer, writing for the panel, held that an arbitration clause contained in an employee handbook that also contained a contractual disclaimer was unenforceable under North Carolina law. In addition, the Court held that a class-action certification order is appealable under Federal Civil Rule 23(f) only if the interlocutory appeal is filed within fourteen calendar days of the entry of the class certification order. In Lorenzo, counsel mistakenly filed seventeen days after the entry of the order, apparently thinking that the client got three extra days for “service”. The Court emphasized that the language of Rule 23(f) does not permit the three additional days, as time runs from the entry of the order, not from any form of service. Of course, the appeal is ultimately permissive, as the Court of Appeals must grant permission to review if an interlocutory appeal request is timely made.

Earlier, in 2013, the Court, Judge Davis writing for the panel, in Noohi v. Toll Bros., 708 F.3d 599 (4th Cir. 2013), applied Maryland law to hold that a one-sided arbitration agreement lacked mutuality of consideration. There, in a non-employment case, the purchaser was required to arbitrate disputes, but the seller was not. In so doing, the Court relied on Cheek v. United Healthcare of Mid-Atl., Inc., 378 Md. 139, 835 A.2d 656 (2003) (holding that an “employer’s unfettered discretion to change the arbitration agreement rendered its promise to arbitrate illusory.”)

Our third case is Pryor v. United Airlines, Inc., 791 F.3d 488 (4th Cir. 2015). In Pryor, the Fourth Circuit, with Judge Gregory writing for the panel, held that the employer could be held liable for a hostile work environment created by an anonymous harasser. Here, an African-American flight attendant received a racist death threat anonymously left in her company mailbox. She alleged that United failed to adequately respond. The panel reversed Judge Brinkema, of the Eastern District of Virginia, who had granted summary judgment, and remanded to the lower court for further proceedings. Earlier, in 2014, in Freeman v. Dal-Tile Corp., 750 F.3d 413 (4th Cir. 2014), Judge Shedd, writing for the panel with Judge Niemeyer concurring in part and dissenting in part, the Court denied the employer’s motion for summary judgment in a Title VII and Section 1981 race and gender hostile work environment case, holding that there was a triable issue of fact as to whether the employee was repeatedly subjected to unwelcome statements and conduct by a customer, which created an abusive atmosphere, of which the employer should have known and to which the employer failed to adequately respond.

Our fourth case is Jacobs v. N.C. Admin. Office of the Cts., 780 F.3d 562 (4th Cir. 2015). In Jacobs, Judge Floyd, writing for the panel, held that the employer had not properly accommodated the plaintiff’s disability, social anxiety disorder. In doing so, the Court made a number of important holdings, including:

“Interacting with others” is a major life activity;
The amended ADA rejected, as imposing “too high a standard” the old rule that to prove a disability, one needed to show that the plaintiff was “significantly restricted” in a major life activity. Here, the Court held: “A person need not live as a hermit in order to be ‘substantially limited’ in interacting with others”;
Temporal proximity of three weeks, alone, can establish causation;
Piling on can be proof of pretext where, as here, the defense stated multiple reasons for termination at the time of termination, and then added more before EEOC, and yet more before the district court;
The failure to document may be evidence of pretext. As the Court noted here: “Even more striking is that no one at the [employer] documented any of the justifications (including those raised at the time of termination) in any way”;
The Court permitted surreptitious tape recordings into evidence, and heavily relied upon them in finding genuine factual disputes;
A reasonable accommodation may require job restructuring; and
A failure to discuss Plaintiff’s accommodation request could be found to be an act of bad faith.

Our fifth case is Reyazuddin v. Montgomery Cnty., Md., 789 F.3d 407 (4th Cir. 2015), in which Judge Diaz wrote for the panel. In this Rehabilitation Act case, under Section 504 thereof, a blind employee challenged the manner in which the County utilized software in a new call center, software that was not accessible to blind employees. Summary judgment having been entered below, the panel found that the lower court, on remand, should further explore the undue hardship defense put forth by the County. In addition, there is one subsidiary holding favorable to the defense in which the Court held that public employers are not subject to suit for disability employment discrimination under Title II of the ADA.

Our sixth case is Butler v. Drive Automotive Indus. of Am., Inc., 793 F.3d 404 (4th Cir. 2015), Judge Floyd writing for the panel. In Butler the Court held that Title VII provides for joint employer liability. In so holding, the Court articulated the so-called “hybrid” test for joint employment.

Our seventh case is Brown v. Nucor Corp., 576 F.3d 149 (4th Cir. 2015), Judge Gregory writing a sixty-three page opinion for the majority, and Judge Agee writing a ninety-page dissent. The majority, Judges Gregory and Keenan, vacated the lower court’s decertification of a discriminatory job promotion class action and remanded to the District Court with instructions to certify the class.

Earlier, the Court, in 2013, in Scott v. Family Dollar Stores, Inc., 733 F.3d 105 (4th Cir. 2013), with Judge Gregory writing for the majority and Judge Wilkinson dissenting, the majority distinguished Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), finding that the district court erred in holding that Wal-Mart precluded allegations of “general policy” discrimination.

Our eighth case is Foster v. Univ. of Md.-E. Shore, 787 F.3d 243 (4th Cir. 2015), Judge Floyd writing for the panel, in which the Court held that the 2013 Supreme Court decision in Univ. of Tex. Sw. Med. Ctr. v. Nassar, 133 S. Ct. 2517 (2013) did not alter the McDonnell-Douglas analysis for retaliation claims.

Our ninth case is DeMasters v. Carilion Clinic, 796 F.3d 409 (4th Cir. 2015), a highly unusual case in which all members of the Fourth Circuit recused themselves and a panel composed entirely of judges from the Third Circuit heard the case. Judge Krause, writing for that panel, rejected the so-called “Manager Rule”, a rule invoked by management to prevent an employee whose job responsibilities include reporting discrimination claims from seeking protection under Title VII’s anti-retaliation clause.

Our tenth case is Bland v. Roberts, 730 F.3d 368 (4th Cir. 2013) in which Chief Judge Traxler, wrote for the majority (Judge Hollander concurred in part and dissented in part) and held that, where a sheriff refused to reappoint one of his deputies because the deputy had “liked” his opponent on Facebook, the Facebook “like” constituted “pure speech” and a form of “symbolic expression” which was protected under the First Amendment.

Our eleventh case is Summers v. Altarum Inst., Corp., 740 F.3d 325 (4th Cir. 2014), Judge Motz writing for the panel, held that the Congress, amending the ADA, intended to cover temporary disabilities, thus permitting the plaintiff, who had been injured while exiting a commuter train on the way to work, to proceed with his ADA case.

Our twelfth case is Boyer-Liberto v. Fontainebleau, 752 F.3d 350 (4th Cir. 2014), reh’g en banc 786 F.3d 264 (4th Cir. 2015). Judge King writing for twelve judges, with Judge Niemeyer dissenting writing for three judges, held that a co-worker’s use of the epithet “porch monkey”, standing alone, was sufficiently severe such that a reasonable jury could find there to be a racially hostile work environment.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Never Darken My Door Clause Stricken by Federal Court

2016-01-15T16:58:00.006-05:00

On January 6, 2016, U.S. District Court Judge Lorna G. Schofield of the Southern District of New York rejected a proposed FLSA settlement agreement which contained a no-rehire clause. Reyes v. HIP at Murray Street, LLC, S.D.N.Y. Jan. 6, 2016 (unreported online; copy attached tothis blog).

The Court found that the clause precluding future employment was “a highly restrictive provision in strong tension with the remedial purposes of the Fair Labor Standards Act (‘FLSA’)…” In so holding, the Court relied on Cheeks v. Freeport Pancake House, Inc., 796 F.3d 199 (2d Cir. 2015), cert. denied No. 15-605, 2016 U.S. LEXIS 356 (Jan. 11, 2016). See Jessica Perry, Kathryn Mantoan, and Clayton Flaherty, “Please Pass the Settlement”, Employment Law and Litigation Blog (Dec. 7, 2015) (available at: http://blogs.orrick.com/employment/2015/12/07/please-pass-the-settlement-second-circuit-widens-split-over-stipulated-flsa-dismissals/).

Cheeks described various other cases that had found various clauses of proposed FLSA settlements to be offensive. For example, in Lopez v. Nights of Cabiria, LLC, a proposed FLSA settlement included a confidentiality provision, a global release, and a clause establishing that the plaintiff’s attorney would receive between 40% and 43.6% of the total settlement payment without adequate documentation to support such a fee award. 96 F. Supp. 3d 170 (S.D.N.Y. March 30, 2015) (Kaplan, J.). In Lopez, Judge Lewis A. Kaplan disapproved the settlement. The Court similarly found that the “highly restrictive confidentiality provisions…are in strong tension with the remedial purposes of the FLSA.” Id. at 177. While criticizing many aspects of the confidentiality provisions, the Court took particular aim at those provisions which would “bar plaintiffs from openly discussing their experiences litigating this wage-and-hour case.” Id. While recognizing the parties’ interest in confidentiality to encourage settlement, the Court nonetheless concluded “the congressional purposes underlying the FLSA change the calculus in cases like these. The FLSA evinces ‘Congress’ intent…both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA[.]’” Id. at 179-180.

The Court in Nights of Cabiria further held that global releases were inappropriate in the context of FLSA settlements, remonstrating that “[t]he Court will not countenance employers using FLSA settlements to erase all liability whatsoever in exchange for partial payment of wages allegedly required by statute.” Id. at 181. As to the attorneys’ fees, Judge Kaplan explained that “[i]t may be that counsel’s fee request is entirely commensurate with the amount of time that the lawyers spent on this case. But such determinations require evidence, and plaintiff’s counsel has provided none. The fee request therefore cannot be approved.” Id. at 182.

In Guareno v. Vincent Perito, Inc., Judge William H. Pauley of the United States District Court for the Southern District of New York also rejected a proposed FLSA settlement. No. 14-cv-01635, 2014 U.S. Dist. LEXIS 144038 (S.D.N.Y. Sept. 26, 2014). In Guareno, the Court listed numerous concerns with the proposed settlement agreement, but appeared particularly concerned about the presence of an unethical agreement that the plaintiff’s attorney would not represent, in the future, any person bringing similar claims against the defendant. Id. at *3-*4. Finding that such a restriction “contravenes the FLSA’s intent to permit plaintiffs to bring suit on behalf of themselves and ‘other employees similarly situated[,]’” the Court noted that “[s]uch a provision raises the specter of defendants settling FLSA claims with plaintiffs, perhaps at a premium, in order to avoid a collective action….from other employees whose rights have been similarly violated.” Id. at *4.

In Nall v. Mal-Motels, Inc., the Court first determined that the principle in Lynn’s Food applied to settlements involving former employees, in addition to those involving current employees. 723 F.3d 1304, 1306-07 (11th Cir. 2013). The Court went on to reject the settlement, focusing on concerns regarding inequalities in bargaining power between current or former employees and employers. Id. In Nall the settlement was reached between the defendant and the plaintiff, apparently without the “knowledge or participation” of plaintiff’s counsel. Id. at 1308. In rejecting the settlement, the Court reasoned that the FLSA’s protections were “mandatory” and “not subject to negotiation or bargaining between employers and employees.” Id. at 1307 quoting Lynn’s Food, 679 F.2d at 1352. Finally, the Court reasoned that “[a]llowing the employer to escape liquidated damages by simply giving an employee the wages she was entitled to earn in the first place – or in some cases, less than that – would undermine the deterrent effect of the statutory provisions.” Id.

In Walker v. Vital Recovery Servs., the Court declined to accept offers of judgment because “the record [was] presently insufficient to perform the judicial review required by Lynn’s Food. 300 F.R.D. 599 at 604 (M.D. Ga. 2014). The Court also noted that the offers of judgment were, for the most part, of $100.00, compensated plaintiffs for only one of several of their theories of recovery, and that many of the accepting plaintiffs “are unemployed and desperate for any money they can find.” Id.

In most cases, the Plaintiff is free to voluntarily dismiss his suit, without court order, by “entering a stipulation of dismissal signed by all parties who have appeared.” Fed. R. Civ. P. 41(a)(1)(A)(ii). This avenue has long been unavailable to FLSA plaintiffs. See Lynn’s Food, 679 F.2d at 1353 (citing D.A. Schulte, Inc. v. Gangi, 328 U.S. 108 n.8 (1944)). The issue in Cheeks was whether, and when, the courts or the U.S. Department of Labor must review and approve FLSA settlements and attendant stipulated dismissals of FLSA claims. In Cheeks, the parties attempted to settle their FLSA claims by filing a stipulation of dismissal with prejudice pursuant to Rule 41(a)(1)(A)(ii). In so doing, they argued that FLSA actions may be settled by stipulation without court review. The Rule provides that actions may be dismissed without a court order “[s]ubject to…any applicable federal statute”. In other words, Rule 41 recognizes that some actions (those subject to an “applicable federal statute”) may not be dismissed by stipulation without a court order. The Court in Cheeks solicited the view of the Department of Labor and it opined that the Fair Labor Standards Act falls within the “applicable federal statute” exception. In Cheeks, Judge Pooler joined by Judges Parker and Wesley, found that the FLSA is an “applicable federal statute” within the meaning of Rule 41, and that, therefore, the settlement needed to be reviewed and approved by the district court. Other courts have similarly so held. Lynn’s Food Stores, Inc. v. United States Dept. of Labor, 679 F.2d 1350, 1354-55 (11th Cir. 1982); Copeland v. ABB, Inc., 521 F.3d 1010, 1014 (8th Cir. 2008); Taylor v. Progress Energy, Inc., 415 F.3d 364, 374 (4th Cir. 2005) aff’d 493 F.3d 454, 460 (4th Cir. 2007) superceded by regulation on other grounds as stated in Whiting v. Johns Hopkins Hosp., 416 Fed. Appx. 312 (4th Cir. 2011); Walton v. United Consumers Club, Inc., 786 F.2d 303, 306 (7th Cir. 1986).

This area has remained unaddressed by the Supreme Court for decades. The Court has noted, for example, that:

Our decision of the issues raised [in liquidated damages waiver cases] has not necessitated a determination of what limitation, if any Section 216(b) of the Act places on the validity of agreements between an employer and employee to settle claims arising under the Act if the settlement is made as the result of a bona fide dispute between the two parties, in consideration of a bona fide compromise and settlement.

Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 714 (1945). See also D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 113 n.8, 116 (1946) (holding that “neither wages nor the damages for withholding them are capable of reduction by compromise of controversies over coverage,” but drawing a distinction in dicta between a settlement agreement and a stipulated judgment entered in the adversarial context of an employee’s suit for FLSA wages).

Although courts are generally agreed that settlement is permissible when there is a bona fide dispute over liability, there is disagreement over whether, and when, the settlement must be reviewed by a court to make that determination. See, e.g., Jarrard v. Se. Shipbuilding Corp., 163 F.2d 960, 961 (5th Cir. 1947) (holding that the Supreme Court’s decisions in O’Neil and Schulte regarding settlements did not prohibit approval of a “solemn and binding stipulated judgment entered upon disputed issues of both law and fact” in an FLSA suit brought by employees); Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982) (“When employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.”) (citing Schulte, 328 U.S. at 113 n.8; Jarrard, 163 F.2d at 961).

The Fifth Circuit stands in conflict on this issue with most other courts to have considered this question. In Martin v. Spring Break ’83 Prods., LLC, the Fifth Circuit held that private settlement of FLSA claims is permissible when either the settlement “gave employees everything to which they are entitled under the FLSA at the time the agreement is reached[,]” or, more significantly, when “there exists a bona fide dispute as to liability.” 688 F.3d 247, 255 (5th Cir. 2012) quoting Martinez v. Bohls Equip. Co., 361 F. Supp. 2d 608, 633-34 (W.D. Tex. 2005) (bona fide dispute) and Thomas v. Louisiana, 534 F.2d 613, 615 (5th Cir. 1976) (full relief). In Martin, the Court approved a private settlement agreement containing a release of FLSA claims which had not been submitted for review and approval by the district court or the Department of Labor, and found that the employees had effectively waived their rights. Martin, 688 F.3d at 255.

Furthermore, even in cases where courts have required court review and approval of FLSA settlements, it is not entirely clear what standard should be followed in conducting such a review. Some courts have held that District Courts may enter a stipulated judgment approving the settlement of FLSA claims only after the court has scrutinized the settlement for fairness and reasonableness, and has expressly approved the settlement as fair and reasonable. See, e.g., Lynn’s Food Stores, 679 F.2d at 1353-55 (“When employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.”) (citing Schulte, 328 U.S. at 113 n.8; Jarrard, 163 F.2d at 961). See also Mosquera v. Masada Auto Sales, Ltd., No. 09-CV-4925 (NGG), 2011 U.S. Dist. LEXIS 7476, at *2-*3 (E.D.N.Y. Jan 25, 2011) (requiring an evaluation of FLSA settlements for fairness and reasonableness); Lee v. Timberland Co., No. C 07-2367 JF, 2008 U.S. Dist. LEXIS 108098, at *4-*5 (N.D. Cal. June 19, 2008) (same); Boone v. City of Suffolk, 79 F. Supp. 2d 603, 605 n.2 (E.D. Va. 1999) (“Because the FLSA was enacted to protect workers from sub-standard wages or oppressive working conditions, employees cannot waive their right to overtime wages unless such a settlement is overseen by the Department of Labor or approved for fairness and reasonableness by a district court.”) (citing Lynn’s Food Stores, 679 F.2d at 1355).

Some courts have further defined this fairness test by setting forth a list of factors that courts should consider. For example, the United States District Court for the Eastern District of Virginia has held that:

To determine whether a proposed settlement is fair and reasonable under the FLSA, courts should consider: “(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; . . . and ([5]) the probability of plaintiffs’ success on the merits and the amount of the settlement in relation to the potential recovery.”

Belcher v. CHA Cos., Inc., No. 3:10cv420, 2011 U.S. Dist. LEXIS 39063, at *2 (E.D. Va. Mar. 16, 2011) (quoting Lomascolo v. Parsons Brinckerhoff, Inc., No. I:08cv1310 (AJT/JFA), 2009 U.S. Dist. LEXIS 89129, at *10 (E.D. Va. Sept. 28, 2009)).

Until the Supreme Court might rule otherwise – unless you are in the Fifth Circuit – counsel should assume the following:

· A private FLSA settlement agreement must be approved by a district court or the Department of Labor.

· After Reyes, assume that a no-rehire clause, colloquially known as a “do not darken my door again” clause, will be increasingly subject to attack.

· Attorneys’ fees in any such settlement must be justified. In the District of Columbia, after the Circuit’s recent opinion in Eley v. District of Columbia, the District’s bench is increasingly requiring substantial justification of hourly rates. See 793 F.3d 97 (D.C. Cir. 2015) (Laffey matrix and affidavit that counsel’s rates charged clients were within the Laffey matrix found to be insufficient evidence to demonstrate that the requested rates were the rates prevailing in the community for similar services); see also Collins v. District of Columbia, No. 15-cv-00136, 2015 U.S. Dist. LEXIS 159890 (D.D.C. Nov. 30, 2015) (Judge Jackson adopts MJ Kay’s report and recommendations regarding Fee Award in the wake of Eley); Devore on behalf of A.M. v. District of Columbia, 89 F. Supp. 3d 113 (D.D.C. 2015) (plaintiff could have done more to meet her burden to establish the reasonableness of rates); Briggs v. District of Columbia, 73 F. Supp. 3d 59 (D.D.C. 2014) (Laffey rates are presumptive maximum rates for complex federal litigation); Robinson v. District of Columbia, 61 F. Supp. 3d 54 (D.D.C. 2014) (Laffey-matrix is appropriate starting point for the “case by case analysis”); Brighthaupt v. District of Columbia, 36 F. Supp. 3d 1 (D.D.C. 2014) (Laffey rate can be used as “an appropriate starting point for determining rates of reimbursement for attorneys…” but Court declines to award Laffey rates because plaintiff failed to demonstrate that such rates are the prevailing market rate); McAllister v. District of Columbia, 21 F. Supp. 3d 94 (D.D.C. 2014) (affidavits did not provide sufficient information for the Court to determine whether the Laffey rates represented the market rate).

· Confidentiality clauses may well be stricken. See Weismantle v. Jali, No. 2:13-cv-01187, 2015 U.S. Dist. LEXIS 53435 (W.D. Pa. April 23, 2015) (“What can be gleaned from this prevailing, if not overwhelming, caselaw trend is that, absent something very special in a very specific case which generates a very good reason above and beyond the desire of the parties to keep the terms of an FLSA settlement out of the public’s view, if the parties want the Court to approve the substance of an FLSA settlement agreement, it cannot be filed under seal”); Baker v. Dolgencorp, Inc., 818 F. Supp. 2d 940 (E.D. Va. 2011) (Judge Henry Coke Morgan, Jr.).

· Certainly, not only FLSA settlements, but no settlement, should ever have a restriction on counsel’s availability to represent future clients against the defendant. See, e.g., D.C. R. Prof. C. 5.6(b) (A lawyer shall not participate in offering or making…[a]n agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a controversy between parties.”)

Court Recognizes Claim of National Origin Discrimination Based on Non-Hispanic Status and Rejects Heightened Proof Standard for Non-Minority Discrimination Claims

2015-12-11T16:59:00.002-05:00

Among Title VII’s less-used provisions is its prohibition of discrimination on the basis of “national origin”, but the New Mexico Court of Appeals’ recent decision in Garcia v. Hatch Valley Pub. Schs. may breathe new life into the hoary prohibition. No. 33,310, 2015 N.M. App. LEXIS 120 (N.M. Ct. App. Nov. 16, 2015). In Garcia, the New Mexico Court of Appeals addressed two questions under the New Mexico Human Rights Act which the Court held “tracks Title VII”. Id. The questions were: 1) is “non-Hispanic” a protected category; and 2) are plaintiffs in “reverse discrimination” cases subject to a heightened standard for making out a prima facie case of discrimination? Id. The Court held “non-Hispanic” to be a protected category and rejected the contention that “reverse discrimination” cases, in terms of burdens of proof, should be treated differently than cases brought by African-Americans and Hispanics.

In addressing the first question, the Court examined the history of the use of “national origin” in discrimination claims. The Court noted that the Supreme Court originally defined the term as the “country where a person was born, or…from which his or her ancestors came.” Id. quoting Espinoza v. Farah Mfg. Co., 414 U.S. 86, 88 (1973). Despite this relatively narrow definition, the Court noted that the Espinoza Court noted that refusing to hire individuals of a “Spanish-speaking background” constituted national origin discrimination. Garcia, 2015 N.M. App. LEXIS 120 at *7, quoting Espinoza, 414 U.S. at 92, n5, 95. Examining subsequent caselaw from around the nation, the Court explained that “the concept of national origin…embrace[s] a broader class of people” and is “better understood by reference to certain traits or characteristics that can be linked to one’s place of origin, as opposed to a specific country or nation.” Garcia, 2015 N.M. App. LEXIS 120 at *8, quoting Kanaji v. Children’s Hosp. of Phila., 276 F. Supp. 2d 399, 401-02 (E.D. Pa. 2003); see also Pejic v. Hughes Helicopters, Inc., 840 F.2d 667, 672-73 (9th Cir. 1988) (holding that national origin discrimination could include discrimination based on membership in ethnic groups); Beltran v. Univ. of Tex. Health Sci. Ctr., 837 F. Supp. 2d 635, 641 (S.D. Tex. 2011) (stating that "Title VII prohibits employment discrimination against any national origin group, including larger ethnic groups, such as Hispanics" (emphasis, internal quotation marks, and citation omitted).

In Garcia, the plaintiff had accused the defendant of discriminating against him on the basis of his national origin, alleging that he was German-descended and non-Hispanic. Garcia, 2015 N.M. App. LEXIS 120 at *1. The lower court found that the employer had no knowledge of the plaintiff’s German descent – and so could not have discriminated against him on that basis – but failed to consider whether he had been discriminated against based on being “non-Hispanic”. Id. In reversing the lower court’s decision, the Court recognized that “[c]lassifications such as Caucasian, white, and non-Hispanic have been widely accepted as protected in cases involving national origin discrimination claims.” Id. at *8, citing Turney v. Hyundai Constr. Equip. USA Inc., 482 F. App'x. 259, 260 (9th Cir. 2012) (holding that the plaintiff who identified as Caucasian "belongs to a protected class for purposes of his national origin discrimination claim because Title VII applies to any racial group, whether minority or majority" (internal quotation marks and citation omitted)); Hawn v. Exec. Jet Mgmt., Inc., 546 F. Supp. 2d 703, 711, 717 (D. Ariz. 2008) (holding that the plaintiff who identified his national origin as "Caucasian American of European descent" was a member of a protected class); Mohr v. Dustrol, Inc., 306 F.3d 636, 639-40 (8th Cir. 2002) (treating non-Hispanic as a protected class and reversing summary judgment on the plaintiff's race and national origin discrimination claims), abrogated on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90, 123 S. Ct. 2148, 156 L. Ed. 2d 84 (2003); Stern v. Trustees of Columbia Univ., 131 F.3d 305, 306, 312 (2d Cir. 1997) (finding that a "white American male of Eastern European origin" satisfied a prima facie case for national origin discrimination); Cameron v. St. Francis Hosp. & Med. Ctr., 56 F. Supp. 2d 235, 238-39 (D. Conn. 1999) (memo.) (accepting classification of "white, non-Hispanic male of Scottish/European origin" as protected class for national origin discrimination claim (internal quotation marks omitted)).

Finding that the plaintiff’s contention that he was “non-Hispanic” fell within the meaning of a “national origin” under Title VII, the Court addressed whether the plaintiff had satisfied the elements of a prima facie case. In so doing, the Court noted that, as a technical matter, the standard set forth by the Supreme Court in McDonnell Douglas Corp. v. Green, that a plaintiff demonstrate that “he belongs to a racial minority” would foreclose a claim of discrimination brought by a non-minority. Garcia, 2015 N.M. App. LEXIS 120 at *11 to *12. Relying on McDonald v. Santa Fe Trail Transp. Co., 427 U.S. 273 (1976) the Court found that Title VII should not be interpreted to foreclose claims of “reverse discrimination” and moved instead to the more difficult question of whether such claims were subject to a heightened standard. In so doing, the Court identified essentially two different approaches to this question.

a. The Heightened Standard Approach

The Court noted that some courts have held that, in cases of “reverse discrimination” the plaintiff can make out a prima facie case only if she can show “background circumstances that support the suspicion that the defendant is the unusual employer who discriminates against the majority.” Garcia, 2015 N.M. App. LEXIS 120 at *13 quoting Parker v. Baltimore & Ohio R.R. Co., 652 F.2d 1012, 1017-18 (D.C. Cir. 1981). This approach, with minor differences, is followed by the United States Court of Appeals for the District of Columbia, the Sixth Circuit, and the Eighth Circuit, as well as the states of New Jersey and Ohio. Woods v. Perry, 375 F.3d 671, 673 (8th Cir. 2004); Murray v. Thistledown Racing Club, Inc., 770 F.2d 63, 67 (6th Cir. 1985); Parker, 652 F.2d at 1017 (D.C. Cir. 1981); Erickson v. Marsh & McLennan Co., 117 N.J. 539, 569 A.2d 793, 799 (N.J. 1990); Jones v. MTD Consumer Group, Inc., 32 N.E.3d 1030 (Ohio 2015).

Although following the heightened standard approach, the Tenth Circuit has created a “modified” background and circumstances test. This test permits the plaintiff to make a prima facie case either through the “background circumstances” described above or by showing that there is “indirect evidence sufficient to support a reasonable probability, that but for the plaintiff’s status [as a member of the majority] the challenged [action] would have favored the plaintiff.” Garcia, 2015 N.M. App. LEXIS 120 at *15, quoting Notari v. Denver Water Dep’t, 971 F.2d 585, 589 (10th Cir. 1992).

The Garcia Court criticized the heightened standard approach for imposing a higher standard on majority plaintiffs than minority plaintiffs, and would require the Court to “determine which groups are socially favored andd which are socially disfavored.” Garcia, 2015 N.M. App. LEXIS at *17, quoting Collins v. Sch. Dist. of Kansas City, 727 F. Supp. 1318, 1321 (W.D. Mo. 1990). In so holding, the Court noted that this fact was “difficult to reconcile” with the decision of the United States Supreme Court, which had adopted a broad, holistic interpretation of Title VII. See Furnco Const. Corp. v. Waters, 438 U.S. 567, 577, 98 S. Ct. 2943, 57 L. Ed. 2d 957 (1978) (stating that the prima facie case, as stated in McDonnell Douglas, "was never intended to be rigid, mechanized, or ritualistic" and that the "central focus of the inquiry in a [discrimination] case . . . is always whether the employer is treating some people less favorably than others because of their race, color, religion, sex, or national origin" (internal quotation marks and citation omitted)); see also McDonald, 427 U.S. at 279 n.6, 280 n.8 (1976) (holding that "Title VII prohibits racial discrimination against the white petitioners in this case upon the same standards as would be applicable were they [members of a racial minority]" and noting that the specification of the prima facie proof required under McDonnell Douglas “is not necessarily applicable in every respect to differing factual situations" (emphasis added) (internal quotation marks and citation omitted)).

b. Rejection of the Heightened Standard

The Court noted that many courts, including the Second, Third, Fourth, Fifth, and Eleventh Circuits, have rejected the heigtened standard approach. McGuinness v. Lincoln Hall, 263 F.3d 49, 53 (2d Cir. 2001); Bass v. Bd. of Cnty. Comm’rs, 256 F.3d 1095, 1103 (11th Cir. 2001); Byers v. Dallas Morning News, Inc., 209 F.3d 419, 426 (5th Cir. 2000); Iadimarco v. Runyon, 190 F.3d 151 (3d Cir. 1999); Lucas v. Dole, 835 F.2d 532, 533 (4th Cir. 1987). The Third Circuit requires only that the plaintiff provide sufficient evidence “to allow a fact finder to conclude that the employer is treating her less favorably than others based upon a [protected] trait” while the Second, Fourth, Fifth, and Eleventh Circuits merely require that the plaintiff demonstrate that they belong to a protected group, whether or not they are in a “minority class”. Garcia, 2015 N.M. App. LEXIS 120 at *20.

c. The Holding

The Garcia court rejected the heightened standard, and joined the Second, Third, Fourth, Fifth, and Eleventh Circuits in requiring only that the plaintiff demonstrate that he belongs to a “protected group”. Garcia, 2015 N.M. App. LEXIS 120 at *25. In doing so, the New Mexico Court of Appeals stated that plaintiff is not required to meet a heightened standard, as the purpose and philosophy behind Title VII holds discrimination and reverse discrimination plaintiffs to the same standards, citing Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 273 (1986) (O'Connor, J., plurality opinion) (stating that "[r]acial and ethnic distinctions of any sort are inherently suspect and thus call for the most exacting judicial examination" and "the level of scrutiny does not change merely because the challenged classification operates against a group that historically has not been subject to governmental discrimination"); see also Bass, 256 F.3d at 1103 ("`Our constitution is color-blind, and neither knows nor tolerates classes among citizens. In respect of civil rights, all citizens are equal before the law.'") (citing Plessy v. Ferguson, 163 U.S. 537, 559 (1896) (Harlan, J., dissenting); Adarand Constructors, Inc. v. Pena, 515 U.S. 200, 239 (1995) (Scalia, J., concurring in part) ("In the eyes of government, we are just one race here. It is American."); Regents of Univ. of Cal. v. Bakke, 438 U.S. 265, 289-90 (1978) (plurality opinion) ("The guarantee of equal protection cannot mean one thing when applied to one individual and something else when applied to a person of another color.").

The Court went on to apply this standard. It found that the plaintiff’s claim of discrimination based on being “non-Hispanic” was a cognizable claim of national origin discrimination, and that the evidence adduced satisfied the elements of a prima facie case. Id. at *28 to *29.

d. Take-Aways

As the New Mexico decision is but one decision from an intermediate appellate court from one of our fifty states, it, in essence, only underscores, the plethora of open issues in national origin discrimination cases, including:

1) What is the standard of proof for Caucasians and/or non-Hispanics, sometimes referred to as majority litigants?

2) What deference, if any, ought the courts give to the EEOC’s Guidelines on Discrimination Because of National Origin, 29 C.F.R. § 1606.1?

3) When can national origin preferential treatment be treated as a bfoq?

4) Is so-called “ethnic discrimination” national origin discrimination under the Act?

5) After the Supreme Court’s decision in Espinoza, can alienage discrimination be successfully challenged, under Title VII or otherwise?

6) When is “accent” discrimination recognized as national origin discrimination?

7) When, if ever, is bi-lingual or multi-lingual discrimination or preferential treatment found to be national origin discrimination?

The New Mexico decision is welcome in that it rekindles the ongoing debate regarding the breadth of the prohibition against national origin discrimination. Clearly, it is not the last word, and clearly many, many issues remain unresolved.

Please be sure to visit our website at http://RobertBFitzpatrick.com

The Cat's Paw Takes A Swipe at But-For Causation

2015-11-13T17:16:00.000-05:00

After the Supreme Court’s decision in University of Tex. Southwestern Med. Ctr. v. Nassar, 133 S. Ct. 2517 (2013), holding that but-for causation is the standard for proving retaliation in a Title VII case, many thought that there was an open question as to whether the holding in Staub v. Proctor Hosp., 562 U.S. 411 (2011), the so-called “Cat’s Paw” case, would apply in a but-for causation context. In Staub the Court held that, if the discriminating employee proximately caused the ultimate decisionmaker’s adverse action, then the “Cat’s” discriminatory intent would be imputed to the ultimate decisionmaker even though the decisionmaker was not consciously discriminating.

So far, four circuits have weighed in on this question, unanimously concluding that even after Nassar, plaintiffs may use a “Cat’s Paw” theory even in Title VII retaliation cases. See Zamora v. City of Houston, 798 F.3d 326 (5th Cir. 2015); EEOC v. New Breed Logistics, 783 F.3d 1057, 1070 (6th Cir. 2015); Ward v. Jewell, 772 F.3d 1199, 1203, 1205 (10th Cir. 2014); Bennett v. Riceland Foods, Inc., 721 F.3d 546, 551 (8th Cir. 2013); see also Godwin v. WellStar Health Sys., Inc., 615 Fed. Appx. 518 (11th Cir. 2015) (using Cat’s Paw analysis in an ADEA case that required but-for causation).

Judge Clement, writing for the Fifth Circuit panel in Zamora, stated the holding as follows: “…the applicable standard of causation is relevant only to the latter portion of this Staub test – instead of being a proximate cause, the supervisor’s act must be a ‘[but-for] cause of the ultimate employment action.’” (citation omitted) Zamora v. City of Houston, at 332. In doing so, Judge Clemente references Seoane-Vazquez v. Ohio State Univ., 577 F.App’x 418, 427-29 (6th Cir. 2014), where the Sixth Circuit substituted but-for causation for motivating factor causation in applying "Cat’s Paw" analysis in a post-Nassar case. With decisions like Zamora and the Fourth Circuit’s blockbuster holding in Foster v. Univ. of Md. – E. Shore, 787 F.3d 243 (4th Cir. 2015), which held that Nassar’s but-for analysis only applies to direct-evidence cases, and not to McDonald-Douglas cases, the bar and the courts are confronted with the herculean task of drafting jury instructions that the jury can comprehend and that will pass muster in the appellate courts. Undoubtedly, some of these issues regarding causation will filter back up to the Supreme Court, and, hopefully, we will get more clarity on what causation scheme applies to the alphabet soup of statutory employment claims.

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Non-Competition "In Any Capacity": Broad Scope Can Sink Your Non-Compete

2015-10-16T17:47:00.001-04:00

A recent opinion from the Calvert County Circuit Court in Maryland highlights a common drafting error which can undermine the enforceability of non-compete agreements. In Electronic Security Servs., Inc. v. Higgs, Judge Chandlee ruled that a non-compete which precluded the former employee from working for a competitor “in any capacity” was overly broad and thus unenforceable. See Case No. 04-C-15-304 (Calvert Cnty. Cir. Ct. Md. Sept. 2, 2015) (hereafter “Higgs”).

In Higgs, a company sued a former employee and the former employee’s new employer, alleging that the employee breached a non-compete agreement and the employee’s employment with the new employer was prohibited by a confidentiality agreement. The non-compete agreement forbade Mr. Higgs from “compet[ing] directly or indirectly with the company by serving as an officer, partner, director, agent, employee, or consultant with any firm or entities substantially engaged in a business similar to or competitive to the business of the company or an active client of the company in the last 2 years with the company.” It “extend[ed] to the geographic area for the entire states of Maryland and Virginia, The District of Columbia, and any other area that falls within a 150 mile radius of Upper Marlboro.” Notwithstanding these restrictions, the employee went to work for a competitor in a neighboring county.

The court found the agreement overbroad and unenforceable as a matter of law, noting that it “effectively restricts [the former employee] from obtaining employment from a competitor . . . in any role conceivable.” The court further held that, even if such a broad restriction were somehow necessary to protect the company’s legitimate business interests, the “need [was] not remotely demonstrated in the complaint.” As a result, the court severed the clause from the non-compete agreement, which “render[ed] the entirety of the agreement void.”

The decision in Higgs reflects a trend in non-compete litigation in favor of scrutinizing the scope of the restrictions to which employees are subject. Several other states have held that language similar to that present in Higgs is overly broad and therefore unenforceable – though some courts have applied blue-penciling rules to save the agreement in a less restrictive form.

In CopyPro, Inc. v. Musgrove, the North Carolina Court of Appeals held that a non-compete agreement that prohibited a former sales representative from working at a competitor in any capacity, “even as a custodian,” was overly broad and unenforceable. 754 S.E.2d 188 (N.C. App. 2014). In CopyPro the defendant, former employee, Mr. Musgrove, had signed a non-compete agreement that precluded affiliation with a competitor of CopyPro, a purveyor of office equipment systems, for three years following the termination of his employment. The substantive scope of the agreement was limited to “any business of the type and character of the business engaged in by the Employer at the time of such termination.” Id. at 192.

During his employment with CopyPro, Mr. Musgrove primarily worked in Pender and Onslow County. After he resigned, Mr. Musgrove joined a competitor to work in a different county, and he refrained from contacting CopyPro’s customers in the two counties he had covered for CopyPro. Further, his new employer forbade him from contacting CopyPro’s customers in said counties.

CopyPro nevertheless brought suit against Mr. Musgrove seeking, among other things, a permanent injunction to enforce the terms of the non-compete agreement that he had signed. CopyPro prevailed in the Superior Court and obtained an injunction preventing Mr. Musgrove, in pertinent part, from working for the allegedly competitive entity. The Court of Appeals reversed, explaining that “[a]s our decisions reflect, we have held on numerous occasions that covenants restricting an employee from working in a capacity unrelated to that in which he or she worked for the employer are generally overbroad and unenforceable.” CopyPro, 754 S.E.2d at 192 (citing VisionAIR, Inc. v. James, 167 N.C. App. 504, 508-09, 606 S.E.2d 359, 362-63 (2004) (holding that a covenant that prohibited an employee from “own[ing], manag[ing], be[ing] employed by or otherwise participat[ing] in, directly or indirectly, any business similar to” the employer’s business was overly broad and unenforceable)). The Court went on to hold that “such overly broad restrictions are generally not enforceable in the employer-employee context on the grounds that the scope of the restrictions contained in such agreements far exceeds those necessary to protect an employer’s legitimate business interests.” CopyPro, 754 S.E.2d at 193.

The Court noted that its decision here was distinguishable from prior holdings:

Aside from the fact that the restriction at issue in Precision Walls was to remain in effect for only one year while the noncompetition agreement at issue here will remain in effect for three years, the present record contains no indication that Defendant ever had either the same level of responsibility or the same level of access to competitively sensitive information as the defendant whose conduct was at issue in Precision Walls. Simply put, the record developed in this case, unlike the record developed in Precision Walls, contains no evidence that Defendant had the responsibility for developing client-specific pricing proposals or adjusting prices for competitive reasons or that Defendant was involved in the development and operation of his employer’s bidding or pricing strategies. Although Plaintiff contended in the court below that Defendant might share vital information even if he were hired by a competing business as a custodian, nothing in the present record indicates that Defendant actually possessed sufficiently important information to render him a competitive threat regardless of the position he held with a subsequent employer.”

See Precision Walls, Inc. v. Servie, 568 S.E.2d 267 (N.C. App. 2002).

Of course, it is well established that non-competes such as those described above are unenforceable in Virginia under the so-called “Janitor Rule.” In Home Paramount Pest Control Cos., Inc. v. Shaffer, the Supreme Court of Virginia found a non-compete provision in an employment agreement overbroad on its face and therefore unenforceable. 718 S.E.2d 762 (Va. 2011). Mr. Shaffer, the Plaintiff, was an employee of Home Paramount Pest Control Companies, Inc. In January 2009, he signed an employment agreement containing the following provision:

The Employee will not engage directly or indirectly or concern himself/herself in any manner whatsoever in the carrying on or conducting the business of exterminating, pest control, termite control and/or fumigation services as an owner, agent, servant, representative, or employee, and/or as a member of a partnership and/or as an officer, director or stockholder of any corporation, or in any manner whatsoever, in any city, cities, county or counties in the state(s) in which the Employee works and/or in which the Employee was assigned during the two (2) years next preceding the termination of the Employment Agreement and for a period of two (2) years from and after the date upon which he/she shall cease for any reason whatsoever to be an employee of [Home Paramount].

Id. at 414-415.

The Court explained that, in Virginia, a provision that restricts competition “is enforceable if it is narrowly drawn to protect the employer’s legitimate business interest, is not unduly burdensome on the employee’s ability to earn a living, and is not against public policy.” Id. at 415. The burden of proving each factor rests with the employer seeking court enforcement of the restriction. Id. “When evaluating whether the employer has met that burden, we consider the function, geographic scope, and duration elements of the restriction. These elements are considered together rather than as three separate and distinct issues.” Id. In Home Paramount, the Court held that the provision was unenforceable, noting that “[o]n its face, it prohibits Shaffer from working for Connor's or any other business in the pest control industry in any capacity. It bars him from engaging even indirectly, or concerning himself in any manner whatsoever, in the pest control business, even as a passive stockholder of a publicly traded international conglomerate with a pest control subsidiary. The circuit court therefore did not err in requiring Home Paramount to prove it had a legitimate business interest in such a sweeping prohibition.” Id. at 418.

In NanoMech, Inc. v. Suresh, U.S. Court of Appeals for the Eighth Circuit, applying Arkansas law, affirmed the district court’s decision that a non-compete agreement which prevented the employee from performing any work for any competitor anywhere in the world was overbroad and unenforceable under Arkansas law. 777 F.3d 1020 (8th Cir. 2015) (Colloton, J.). In NanoMech, defendant, former employee Ms. Suresh, had signed a non-compete agreement before being hired at NanoMech, a company involved in the research and development of nanotechnology. The non-compete agreement prohibited her from “directly or indirectly” entering into, being employed by or consulting “in any business which competes with the Company” for two years after her departure. The covenant contained no geographic limitation and did not define “any business which competes with” NanoMech. Ms. Suresh eventually left NanoMech and joined a competitor as a chemist within the two-year departure term. NanoMech sued to enjoin her from working there for the remainder of the term of the non-compete and to prevent her from disclosing any of NanoMech’s confidential information.

Generally, a non-compete agreement is enforceable under Arkansas law if the employer has a valid interest to protect, the geographical restriction is not overly broad and a reasonable time limit is imposed. The covenant’s plain language prohibited the employee from working for any competitor of NanoMech, in any capacity, worldwide. The Court rejected NanoMech’s argument that the covenant was reasonable due to the global nature of the business and the employee’s broad access to trade secrets, and refused to enforce the covenant, finding it was overbroad. The Court held that global non-compete agreements may be permissible if the prohibitions on employee activities are narrowly drawn.

Finally, in Clark’s Sales and Service, Inc. v. Smith and Ferguson Enterprises, Mr. Smith, Defendant, was required to sign a non-compete agreement by employer Clark's Sales & Service, Inc. after several years of employment as a salesman. 4 N.E.3d 772 (Ind. Ct. App. 2014)

The key provisions of the agreement stated that for two years after the employee’s termination from employment, he was prohibited from, in any capacity:

[S]oliciting or providing services competitive to those offered by his employer to any business account or customer who was a business account or customer at any point in time during his employment;” and “working in a competitive capacity with a named competitor of the employer in the state of Indiana, in any city or state in which the competitor conducts business, or to work for any business that provides services similar or competitive to those offered by the employer during the term of his employment, including but not limited to within the state of Indiana, Marion County, the counties surrounding Marion County, or within a 50 mile radius of his principal office with the employer.

Id. at 780. After the employee resigned and went to go work for one a competitor, the employer filed suit to enforce the non-compete and sought injunctive relief. The Court noted that its Supreme Court has “long held that noncompetition covenants in employment contracts are disfavored in the law, and we will construe these covenants strictly against the employer and will not enforce an unreasonable restriction.” Id.

The Court of Appeals took issue with several parts of the agreement. First, the Court found that the restriction on contacting or serving customers was overbroad and unreasonable because it prohibited the employee from servicing anyone who had been a customer at any point in time during his employment. Id. at 782. Second, the Court viewed the scope of prohibited activities as too broad because it went beyond the sales job he had with his prior employer and prohibited him from engaging in any service that offered but which he personally never performed during his employment-- i.e., drafted so as to prohibit “seemingly harmless conduct.” Id. Third, the Court viewed the geographic restriction as “unquestionabl[ly] unreasonable as written”, and stated that the 50-mile restriction alone might have been acceptable, as “it is reasonable for individuals in the community to travel up to 50 miles to visit Clark's.” Id.

If you’re considering having your employees sign a non-compete, you should ensure that the restrictions are narrowly drawn to address legitimate business needs. In other words, the primary inquiry should be what relationships and knowledge the employee gained while employed by your organization and what legitimate business concerns about the use of the knowledge and relationships you hope to address. The more you can tailor your non-compete so that it addresses your concerns but isn’t overly broad, the greater the chances that it will be enforceable in most jurisdictions.

While much could be said about the appropriate duration and scope of a restrictive covenant, those are subjects for another day. What the decisions above make clear is that, in drafting the substantive restrictions in a non-compete agreement – or any other restrictive covenant – you should focus on areas of actual concern. These might include preventing an employee from working for a specific list of competitors, preventing an employee from performing a specific job or function for entities in similar line(s) of business, and soliciting current customers, vendors, or employees. As demonstrated above, courts are skeptical of sweeping language which prevents an individual from working for a competitor “in any capacity.” Including such language, especially in states which do not blue-pencil agreements, raises the very real possibility that the entire clause or agreement will be stricken. Regardless of a state’s blue-penciling rules, it is never advisable to gamble on how a court might re-write your agreement. Instead, you should use language such as “in any position or performing any function substantially similar to any position held or function performed by the employee during the twelve-month period prior to the termination of her employment.”

Please be sure to visit our website at http://RobertBFitzpatrick.com

Appealing Appellate Advocacy: Twenty-Five Rules

2015-09-11T20:57:00.002-04:00

I will be speaking next week on appellate advocacy in employment cases to the Metropolitan Washington Employment Lawyers Association. In preparation for this speech, I have spent some time speaking confidentially with federal appellate court judges about their views on what makes an effective appellate advocate. This blog reflects their thoughts, as well as my own experiences.

1. Know When to Shut Up

Do not try to speak over the judges. Do not interrupt the judges. Never start talking until you are sure that the judge has finished. This is the first rule for two very good reasons, one obvious, and one less obvious. The obvious reason is that, while simple decorum will not win you your case, rudeness is the surest way to turn an otherwise sympathetic judge against your case. The less obvious reason for this rule is that you want to be sure that you answer the judge’s question (Rule 4) and that the judge may be trying to help you (Rule 6 “Know Your Friends”). If you don’t follow this rule, then you cannot follow those.

2. Moot Your Briefs And Argument

Many attorneys moot their arguments, but relatively few seek input on their briefs from colleagues with no dog in the fight to moot the draft brief. One judge with whom I spoke was firm in his conviction that best practices demand that you allow briefs to be reviewed by other experienced colleagues.

3. Moot Your Briefs and Argument AGAIN

Having participated in scores of moots of colleagues preparing to argue their cases, there invariably is more than one moot. The first moot is usually an intense affair and often identifies substantial additional issues and approaches. The second (and sometimes third) moot is useful to further refine those points. In most cases, I am later told that the moots were substantially more difficult than the oral argument itself – which is the goal.

4. Standard of Review

The proper standard of review is outcome determinative in many cases. The judges know this, and you can expect the standard of review to play a significant role in many oral arguments, even if it is only “behind the scenes”.

5. Civility

Like Rule 1 “Know When to Shut Up”, above, this one emphasizes the need to maintain a proper level of decorum in the courtroom. More specifically, you should show respect not just for the Court, but also for your opponent. Do not engage in name calling, sniping, cheap shots, or other personal attacks. You are here to argue the merits of your case, and you should not allow anything to distract the Judges from those arguments. If you begin to fling mud, most of it will land on your own arguments.

6. Answer the Questions

This means that, first, you should listen carefully to the questions (see Rule 1 “Know When to Shut Up”). If the question is susceptible to a “yes” or “no” response then, in most situations, the first word out of your mouth should be either “yes” or “no”, followed immediately by an explanation. While you should make sure to return, at the end of your answer, to your planned “talking points”, NEVER do so until you have fully answered the Judge’s question. When answering, answer directly – do not try to prevaricate or, like a politician, change the subject. The questions are a window into the judge’s thinking, and if you do not answer them, you can be sure that your opponent will. If you do not know the answer, do not “wing it.” Simply state that you don’t know and that you will address the matter in rebuttal.

7. Know the Record

The record is the beginning and – often – end of every case on appeal. Live it, learn it, love it – do not play games with it. While you should, of course, present the record in the light most favorable to your position (see Rule 4 “Standard of Review”), you should not distort or exaggerate it. Your credibility as an advocate is far more powerful than any temporary advantage you might gain through even well-meaning shading of the facts. You can be sure that your opponent will seize on any errors or untenable positions as a means of undermining your stronger points, which might otherwise be unassailable.

8. Know Your Audience

Prior to oral argument, you should observe each judge in action. In some courts, you will know your assigned panel far enough in advance to view each of the assigned judges in action. In other courts, you will not receive such advance notice and will have to be content observing a representative sample. Knowing how each judge thinks will help you tailor your arguments to your audience. You should research the judges before whom you might appear thoroughly. This involves reviewing their decisions on the subject (of course) but also reviewing transcripts of prior oral arguments in which they participated.

9. Know Your Friends

Successful appellate advocates often spend a great deal of time anticipating hard questions (see Rules 2 and 3), sometimes so much so that they fail to recognize a “softball” when they see one. Oftentimes oral argument is used by the judges not as a means of questioning you, but as a means of previewing their own arguments to their colleagues. When a friendly judge hands you an easy question, be prepared to knock it out of the park.

10. You Are Not Funny

Yes, I mean you. Unless you are a successful stand-up comedian (in which case, why are you still practicing law?), do not attempt to have a sense of humor in oral argument. Even if a judge makes a humorous comment or joke, do not be tempted to join in. Most likely any attempt at humor will fall flat and, even if it does not, it inevitably cheapens the points you are trying to make. You want the judges to view your performance as one of studious logic, not rhetoric (see Rule 19).

11. Review of Jury Verdicts

Increasingly, the appellate courts are called on to review jury verdicts. In such a case, you should learn your jurisdiction’s law on the scope of review in such cases (see Rule 4).

12. Review of Jury Instructions

Jury instructions can sink your boat. To reverse the lower court, you will need to create a clear record in the jury charge session. That session can often be intense and fast paced. Thorough preparation is necessary if you are to have any hope of creating a clear record for appeal. To the extent possible, you should try to anticipate the language which your opponent will request, and your objections thereto.

13. The First Sixty Seconds

First impressions matter. We often form snap judgments about the effectiveness of professionals in an astoundingly short period of time (perhaps even as little as sixty seconds). You should make sure that your first impression is a good one. The first sixty seconds of you argument should be carefully rehearsed to provide the judges with a good impression, as well as a clear, concise, and persuasive statement of your case, as well as a roadmap to the key points you will address. This will help the judges understand the points you make later in the argument, and will also allow them to ask more effective questions, which will, in turn, allow you to use your time more effectively (see Rule 6 “Answer the Questions”). A final reason to carefully plan the first sixty seconds of your argument is that it is the one portion of the argument over which you have the most control. Once the questions start coming, it can be difficult for even a seasoned advocate to control the direction of the dialogue.

14. Win the Battle – But Don’t Lose the War

While we, as advocates, are bound to zealously seek the best interests of our clients, you will nevertheless need to keep at least half an eye on the implications of your position for future cases. There are two principal reasons for this. First, especially if your client is a “repeat player” in litigation, how they win can sometimes be just as – if not more – important than whether they win. A victory which results in a precedent that might haunt your client for decades to come is not a victory. Second, the judges will certainly be interested in implications of your position for future cases – and so you must be prepared to explain what those implications are.

There are several common issues which arise when discussing the future implications of a ruling, some of which are addressed below.

a. The “Sluice Gate” Argument

The ruling will open the “sluice gates” of litigation, bogging the courts down in an endless quagmire of meaningless, and purportedly unresolveable, legal issues.

As the plaintiff-appellant, or as plaintiff-appellee, you will need to be prepared to respond to this argument thoroughly with relevant facts. Particularly useful in this regard can be examples of similar changes made by past precedent, or rules similar to the one which you are propose, which did not lead to a flood of litigation.

b. Burden on Taxpayers

The ruling will so increase the costs of administering some governmental function that it would noticeably burden the taxpayers.

Again, you should be prepared with law and facts to respond to this argument. In this area, particularly, it may be that journals and other relevant literature might be used in your brief and argument to bolster your position. As always, when using such sources (and especially statistics), you should be thoroughly familiar with the opinions of your court regarding the relevance and usage of such evidence in an appellate context.

c. The “Anti-Business Climate” Argument

The ruling will so offend the business community that they will pack up shop and move somewhere else.

One retort to this argument can be the simple fact that the District of Columbia is a vibrant business community.

15. Do Not Exaggerate (It Would Be The End of the World)

The most persuasive aspect of your presentation is not your arguments – it is your credibility. The moment that you are caught exaggerating the record (which you should know cold – see Rule 7) or the law, you will lose that credibility with the panel.

16. Counsel’s Table

This is one rule where there was some disagreement. My own experience, and those of some individuals with whom I have spoken, is that having anyone sit with you at the counsel’s table is, at best, a distraction. Others, however, have indicated that an assistant who can pass brief notes is not a meaningful distraction, and that judges understand that few advocates possess the level of recall needed to effectively “go it alone”.

That said, there was one point of agreement – leave your client at home. Lawyers whose clients are in attendance may feel the need to grandstand to impress their clients – which can only detract from the quality of their arguments. Your client is free to review the transcript later or even listen to the argument contemporaneously in jurisdictions where that option is available.

17. Framing the Appeal

Returning to the suggestion that you moot your briefs (Rules 2 and 3), you should also moot the nature of your appeal. What are the issues in the lower court which you can win on, what if done wrong, can be a basis for reversal?

18. Follow the Rules

Details matter. You should know the rules of the Court and follow them scrupulously. This applies not only to crucial procedural issues, but also to the minutiae of font size, pagination, and required disclosures. Disregard the rules at your peril.

It is worth emphasizing that your briefs should be letter-perfect – no typos. Not only will typos distract the judges from your argument, but they also demonstrate a lack of care that may make the judge question the amount of attention paid to the substance of your argument.

19. No Rhetoric

You should rely on facts and law in your argument. Leave the bloviating at home. The judges are neither your client nor a jury, and they are unlikely to be swayed by rhetoric. As with other rules here, the simple fact is that rhetoric is a distraction from, and cheapens, your argument.

20. Have a Conversation

Look the judges in the eye when you are speaking. Do not be captive to your notes, and instead focus on paying attention to the judges, identifying their concerns, and addressing them. If you must take notes to the podium, keep them brief, and general – a reminder of your roadmap, not a straightjacket.

21. Dress to Blend In

Sometimes the squeaky wheel gets the grease – but in Court, the nail that sticks up gets pounded down. You should dress professionally and in a manner that does not draw attention to yourself. Anything that draws attention to you distracts from your argument.

22. Listen to What is Troubling the Judges

This is part and parcel with knowing when to shut up (Rule 1) and having a conversation (Rule 20). The most important information you get during oral argument comes from the judges themselves. The questions will tell you what they view as important – or irrelevant – to your matter. They may also provide clues into internal disagreements on the panel. A wise advocate listens carefully and is familiar enough with her arguments to tailor them on the fly to address what is on the judges’ minds.

23. Tell a Compelling Story

Those first moments are your chance to encapsulate what this case is all about. Tell that story in just a few sentences – and make it compelling!

24. Think Like a Defense Lawyer

As an employee-side lawyer, you can become a victim of the syndrome of talking to yourself. Instead, you must think like the other side – management. You actually can be a better advocate for management because you are intimately familiar with all of your weaknesses – especially after mooting your briefs and arguments twice (see rules 2 and 3). Ask yourself the hard questions, and prepare the answers.

25. Know the Defense Cases Better than They Do

Read their cases and be prepared to address them. If possible, explain how they support your own position.

Please be sure to visit our website at http://RobertBFitzpatrick.com

A Sham or Just Self-Serving? Either Way, Affidavits Are Admissible

2015-07-10T18:25:00.002-04:00

Defense counsel, during the course of taking plaintiff’s deposition in an employment case, extracts damning admissions. The defense, relying on those admissions. In opposition, Plaintiff submits his/her own affidavit addressing and attempting to moderate, qualify, or deny the damning admissions. Defense asserts that Plaintiff’s affidavit is a so-called “sham” affidavit. Plaintiff’s counsel argues that it merely “clarifies” the plaintiff’s deposition testimony and should thus be considered.

Sound familiar?

Or, Defendant moves for summary judgment, and Plaintiff files an affidavit attempting to establish disputed material facts. Defendant says that plaintiff’s affidavit is self-serving. Plaintiff asserts that all testimony by parties is self-serving, and that her/his self-serving affidavit is no different, and should be considered.

Sound familiar?

How do the courts approach these issues?

1. Sham Affidavits

The first example above demonstrates what is sometimes called a “sham” affidavit. The Fourth Circuit, in Barwick v. Celotex Corp., described the “sham affidavit” rule as follows: [a] genuine issue of material fact is not created where the only issue of fact is to determine which of the two conflicting versions of plaintiff’s testimony is correct.” 736 F.2d 946, 960 (4th Cir. 1984). Rather than submit such an issue to the factfinder for determination, the Fourth Circuit held that it was appropriate to strike the affidavit. Id. Similarly, in Perma Research & Dev. Co. v. The Singer Co., the Second Circuit held that a party cannot create “sham issues of fact” to defeat summary judgment by contradicting earlier deposition testimony in a subsequent affidavit. 410 F.2d 572, 578 (1969); see also Radobenko v. Automated Equip. Co., 520 F.2d 540 (9th Cir. 1975) (“sham issues…should not subject the defendants to the burden of a trial”).

More recently, however, courts have limited the “sham affidavit” rule to situations where an affidavit seeks to flatly contradict earlier deposition testimony. In Strickland v. Norfolk S. Ry. Co., the Eleventh Circuit held that it is only appropriate to disregard an affidavit as a sham when “there [is] no way” that conflicting statements could be read together but that “[w]here a fact-finder is required to weigh a deponent’s credibility, summary judgment is simply improper.” 692 F.3d 1151, 1161-62 (11th Cir. 2012). Similarly, in Kennett-Murray Corp. v. Bone, the Fifth Circuit explained that “a district court must consider all the evidence before it and cannot disregard a party’s affidavit merely because it conflicts to some degree with an earlier deposition.” 622 F.2d 887, 893-94 (5th Cir. 1980).

In other words, counsel trying to explain her client’s deposition testimony should be careful not to outright contradict that testimony, at the risk of having the affidavit labeled a “sham”, and vulnerable to a motion to strike. Absent such a flat contradiction, however, many courts are inclined to permit any issues of credibility proceed to the factfinder.

2. Self-Serving Affidavits

More commonly defense counsel will object to a plaintiff’s affidavit as “self-serving” in an attempt to persuade the trial court to exclude it from consideration on summary judgment. The appellate courts have soundly rejected this approach with increasing finality. The Seventh Circuit has been particularly vocal on this issue. For example, in Widmar v. Sun Chemicals Corp., the Seventh Circuit reprimanded recalcitrant lower courts, stating “[w]e remind district courts of our attempts to rid our circuit’s opinions of language critical of the ‘self-serving’ affidavit.” 772 F.3d 457 (7th Cir. 2014). The court went on to state:

We hope this discussion lays to rest the misconception that evidence presented in a 'self-serving' affidavit is never sufficient to thwart a summary judgment motion. Provided that the evidence meets the usual requirements for evidence presented on summary judgment including the requirements that it be based on personal knowledge and that it set forth specific facts showing that there is a genuine issue for trial a self-serving affidavit is an acceptable method for a non-moving party to present evidence of disputed material facts."

Id. at 460, n.1. The prior year the Seventh Circuit, in Hill v. Tangherlini, expressly overruled some fifteen of its precedents “to the extent that they suggest a plaintiff may not rely on ‘self-serving’ evidence to create a material factual dispute[.]” 724 F.3d 965, 967 n.1 (7th Cir. 2013). In recent years, the Seventh Circuit has repeated its rule regarding “sham” affidavits on many occasions. See Berry v. Chicago Transit Auth., 618 F.3d 688, 691 (7th Cir. 2010), quoted in Navejar v. Iyiola, 718 F.3d 692, 69798 (7th Cir. 2013) (reversing summary judgment based on error discounting partys affidavit as self-serving); accord, Darchak v. City of Chicago Bd. of Educ., 580 F.3d 622, 63132 (7th Cir. 2009); Kaba v. Stepp, 458 F.3d 678, 681 (7th Cir. 2006).

Other circuits have reached a similar conclusion to that of the Seventh Circuit. See Kenney v. Swift Transp., Inc., 347 F.3d 1041, 1046 (8th Cir. 2003) (Holding that “[Plaintiff’s] testimony [at deposition] is sufficient for a jury to find that [Defendant’s] proffered nondiscriminatory reason for not hiring him is pretextual.”); U.S. One Parcel of Real Property, 904 F.2d 487, 492 (9th Cir. 1990) (self-serving declaration can be used to survive summary judgment if it is not conclusory); Lupyan v. Corinthian Colleges Inc., 761 F.3d 314, 32021 (3d Cir. 2014). In Price v. Time Inc., the Eleventh Circuit succinctly stated that: “Courts routinely and properly deny summary judgment on the basis of a party's sworn testimony even though it is self-serving[.]” 416 F.3d 1327, 45 (11th Cir. 2005). In Feliciana v. City of Miami Beach, a criminal case, the Court elaborated that:

[Defendant’s] sworn statements are no more conclusory, self-serving, or unsubstantiated by objective evidence than the [police] officers’ assertions…as a general principle, a plaintiff's testimony cannot be discounted on summary judgment unless it is blatantly contradicted by the record, blatantly inconsistent, or incredible as a matter of law, meaning that it relates to facts that could not have possible been observed or events that are contrary to the laws of nature.

707 F.3d 1244, 1252-53 (11th Cir. 2013).

Despite the trend towards recognition that “self-serving” affidavits are perfectly admissible, and indeed capable of defeating a motion for summary judgment evening standing alone, many courts continue, without analysis, to strike such affidavits from the record. Hopefully, armed with the arguments and cases herein, practitioners will have better luck in the future in those courts.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Derivative Sovereign Immunity: Next Supreme Court Term’s Bombshell?

2015-06-14T15:15:00.000-04:00

On May 18, 2015, the Supreme Court granted certiorari in Campbell-Ewald Co. v. Gomez, 14-857, 191 L. Ed. 2d 977 (2015). This case, to be decided next term, has been much ballyhooed because of the first two issues which it presents, which are:

Whether a case becomes moot, and thus beyond the judicial power of Article III, when the plaintiff receives an offer of complete relief on his claim?
Whether the answer to the first question is any different when the plaintiff has asserted a class claim under Federal Rule of Civil Procedure 23, but receives an offer of complete relief before any class is certified?

As readers will recall, the Court, in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013), did not resolve these very important issues for not only wage and hour litigation, but all class action litigation.

Lost in the hype of this case is the third issue which the Court took, which is:

Whether the doctrine of derivative sovereign immunity, recognized in Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18 (1940) for government contractors is restricted to claims arising out of property damage caused by public works projects?

The Yearsley derivative sovereign immunity doctrine has been little-used since 1940. And, it appears, never in employment cases. But, could the Court’s decision next term expand the doctrine such that it might have application in employment cases? Obviously, we shall see.

Here is some quick history. Campbell-Ewald is a Telephone Consumer Protection Act case. See 47 U.S.C § 227 et seq. The Federal Courts are swamped with these cases see, e.g. James G. Snell, Carlos P. Mino, “Telephone Consumer Protection Act Cases Are on the Rise”, Bloomberg BNA (Feb. 14, 2013) (available at: http://www.bna.com/telephone-consumer-protection-act-cases-are-on-the-rise/); David N. Anthony, et al., “Flood of TCPA Claims Expected in Federal Courts” Troutman Sanders (Jan. 24, 2012) (available at: http://www.troutmansanders.com/flood-of-tcpa-claims-expected-in-federal-courts-01-24-2012/).

In Campbell-Ewald, that company (hereinafter C-E) issued a request for proposal to execute a wireless advertising program for its client, the United States Navy’s recruitment arm. C-E’s goal was to recruit some 38,000 sailors. MindMatics, LLC, responded to C-E’s proposal request. Thereafter, C-E made a PowerPoint presentation to the Navy Recruiting Command (NRC), which included a text message proposal from MindMatics to deliver a “Navy-branded SMS text direct mobile ‘push’ program to the cell phones of 150,000 Adults aged 18-24 from an opt-in list of over 3 million.” 2013 U.S. Dist. LEXIS 34346 at *6. C-E was required to obtain NRC’s approval to proceed. The Navy approved the text message proposal, and MindMatics sent the text messages to potential Naval recruits.

Plaintiff Gomez received a text message, and filed a putative nationwide class action under the TCPA against C-E. The TCPA provides for small statutory damages - $500 per violation, which can be trebled for willful and knowing violations – for unauthorized messages. 47 U.S.C. § 227(b)(3). Gomez sought damages for the alleged TCPA violation on an individual and class-wide basis, seeking hundreds of millions of dollars on behalf of the class. In the district court, C-E argued that Gomez’s claim failed as a matter of law because, insofar as the Navy is immune from liability under the TCPA, C-E is also immune as a result of derivative sovereign immunity. Gomez v. Campbell-Ewald Co., 2013 U.S. Dist. LEXIS 34346, 2013 WL 655237 (C.D. Cal. Feb. 22, 2013). In short, because the Navy cannot be sued, C-E cannot be sued.

Relying on Yearsley, C-E argued that, inasmuch as it acted on behalf of the Navy, it is immune under the Yearsley doctrine. In Yearsley, the Supreme Court held that if “[t]he authority to carry out the project was validly conferred…there is no liability on the part of the contractor for executing [the Government’s] will.” Yearsley, 309 U.S. at 20-21. An agent is liable under Yearsley only if “he exceeded his authority, or that [the authority] was not validly conferred.” Id. at 21; see also Butters v. Vance Int’l, Inc., 225 F.3d 462, 466 (4^th Cir. 2000) (it is “well-settled law that contractors and common-law agents acting within the scope of their employment for the United States have derivative sovereign immunity”).

The lower court granted C-E’s motion for summary judgment based on the Yearsley argument, holding C-E, acting as a Navy contractor, is immune from liability under the doctrine. On appeal, the Ninth Circuit reversed, 768 F.3d 871 (9th Cir. 2014). In an opinion written by Judge Benavides, a senior Fifth Circuit Judge sitting by designation, the Court held that Yearsley is not applicable to the facts of this case, holding that Yearsley established a narrow rule regarding claims arising out of property damage caused by public works projects. The Ninth Circuit distinguished Campbell-Ewald’s facts from Yearsley on the ground that in Yearsley, the contractor’s work was in accordance with an express congressional directive that resulted in an unconstitutional taking of property and that “the Government has impliedly promised to compensate the plaintiffs, and has afforded a remedy for its recovery by a suit in the Court of Claims.” 309 U.S. at 21-22.

The Ninth Circuit noted that in the seventy-year history of the Yearsley doctrine, it had apparently never been invoked to preclude litigation of a dispute like the one before the Court. Indeed, the Court noted that the defense had rarely been allowed in the Ninth Circuit, and only in the context of property damage resulting from public works projects.

The petition for certiorari, which was granted, argues that the Ninth Circuit’s decision fundamentally misconstrues and unduly limits the doctrine of Sovereign Immunity. Petitioner argued that Yearsley establishes a general rule that government contractors are immune from liability for performing duties which are within the scope of their lawfully delegated authority. In short, what matters is whether the contractor is acting within the scope of validly conferred authority in undertaking the project.

So, the Supreme Court will now presumably decide how narrow or expansive the derivative sovereign immunity doctrine may be. If the Court adopts the district court’s expansive interpretation, one can contemplate circumstances in the employment arena where federal, and possibly also state, contractors in employment cases can assert the defense. Some examples which spring to mind include disparate impact claims based on an employment test administered by a contractor at the behest of the Government; claims arising from the payment by a contractor of wages pursuant to the Government’s command which run afoul of federal wage and hour laws; and discrimination claims arising from hiring quotas arguably imposed by the government. The federal contractor bar will be watching this case and ready to advise their clients on how, in the proposal process and in the issuance of task orders, contractors might create a paper trail of government approval and hence, depending on the outcome of C-E, immunity for their contractor clients.

By about this time next year, we should have answers to some of these questions.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Fourth Circuit Overturns Decade of Precedent in Blockbuster En Banc Hostile Work Environment Decision

2015-05-15T19:40:00.001-04:00

On May 7, 2015, the Fourth Circuit issued an en banc decision in Boyer-Liberto v. Fontainebleau Corp., No. 13-1473, 2015 U.S. App. LEXIS 7557 (4th Cir. May 7, 2015), the latest decision in a battle which has enveloped the Fourth Circuit and the District of Maryland for over ten years. The story is long and complex, and may not yet be over, as, presumably, Fontainebleau Corp. will file a petition for certiorari with the Supreme Court.

Here are the basic facts in Boyer-Liberto:

The plaintiff, Ms. Reya C. Boyer-Liberto, an African-American woman, worked as a cocktail waitress at the Clarion Resort Fontainebleau Hotel in Ocean City, Maryland.
Plaintiff alleged that within a single twenty-four hour period she was called a “porch monkey” twice, and threatened with termination.
Although it is unclear whether the harasser, Ms. Clubb, had supervisory authority, she did have the “ear” of Defendant’s owner, and indicated that she could cause him to terminate Plaintiff.
When she reported these incidents of racial harassment, she was terminated by the owner of Defendant.

In the United States District Court for the District of Maryland, Judge James K. Bredar granted Defendant’s motion for summary judgment on all counts. In so doing, Judge Bredar relied heavily on the Fourth Circuit’s opinion in Jordan v. Alternative Resources Corp., 458 F.3d 332 (4th Cir. 2006). As to Plaintiff’s claim of hostile work environment discrimination, Judge Bredar explained that: “the two incidents of use of a racial epithet…simply do not comprise either pervasive or severe conduct, however unacceptable they are[,]” refusing to “engage in speculation about what might have occurred if [Plaintiff] had had a substantially longer tenure [at Defendant].” See Boyer-Liberto v. Fontainebleau Corp., No. JKB-12-212, 2013 U.S. Dist. LEXIS 49398, 2013 WL 1413031 at *11 (D. Md. April 5, 2013). Similarly, Judge Bredar dismissed Plaintiff’s claim for retaliation, reasoning that “no objectively reasonable person could have believed that [Plaintiff’s work environment] was, or was soon going to be, infected by severe or pervasive racist, threatening, or humiliating harassment” and that, as a result, “[Plaintiff] lacked an objectively reasonable belief that she was actually being subjected to unlawful harassment…[and that] the absence of an objectively reasonable belief…defeats the first element of the prima facie case[.]” Id. at *15 (internal quotations omitted).

On appeal, a panel of the Fourth Circuit affirmed Judge Bredar’s decision, with Chief Judge Traxler dissenting in part. The panel’s opinion was authored by Judge Niemeyer, the author of the opinion in Jordan v. Alternative Resources Corp., on which Judge Bredar heavily relied, but both Judge Shedd and Chief Judge Traxler wrote separately. In his opinion, Judge Niemeyer held that

Viewing the facts of the summary judgment record, we conclude that Liberto has not presented evidence such that a reasonable juror could find that her workplace was permeated with discriminatory intimidation, ridicule, and insult that [was] sufficiently severe or pervasive to alter the conditions of [her] employment and create an abusive working environment. Particularly important is the fact that Liberto points to only two conversations, on consecutive days, in which Clubb called her a "porch monkey," both of which arose from a single incident at the Clarion. Our cases have made it clear that [u]nlike other, more direct and discrete unlawful employment practices, hostile work environments generally result only after an accumulation of discrete instances of harassment.

…

Finally, the analysis of the hostile work environment claim that we conducted earlier in this opinion tends to confirm the absence of an objectively reasonable belief that a violation had occurred. In the circumstances of this case, if no objectively reasonable juror could have found the presence of a hostile work environment, as we today hold, it stands to reason that Liberto also could not have had an objectively reasonable belief that a hostile work environment existed.

…

Just as in Jordan, we conclude here that while in the abstract, continued repetition of racial comments of the kind [Clubb] made might have led to a hostile work environment, no allegation in the [record] suggests that a plan was in motion to create such an environment, let alone that such an environment was even likely to occur.

Boyer-Liberto v. Fontainebleau Corp., 752 F.3d 350, 356-360 (4th Cir. 2014). While concurring in the affirmance, Judge Shedd wrote separately to state the following: “under our precedent, as a matter of law the facts of this case do not demonstrate a hostile work environment. Based on this Court’s decision in Jordan v. Alternative Resources Corp., 458 F.3d 332 (4th Cir. 2006), I agree…that summary judgment should also be affirmed on the retaliation claim.” Id. at 360-61 (Shedd, J., concurring).

Although Chief Judge Traxler concurred that Plaintiff had “not demonstrated a hostile environment”, he dissented as to the Court’s affirmance of Judge Bredar’s grant of summary judgment on Plaintiff’s retaliation claims, stating:

I agree with the majority that, under our existing precedent, particularly Jordan v. Alternative Resources Corp., 458 F.3d 332 (4th Cir. 2006), the conduct Liberto complained of as a matter of law did not rise to the level of actionable harassment. However, I part ways with the majority on the question of whether that determination necessarily resolves the retaliation claim as well.

…

In determining whether that standard is met here, I believe it is important to recognize that even "[a] single, sufficiently severe incident . . . may suffice to create a hostile work environment." Ayissi-Etoh v. Fannie Mae, 712 F.3d 572, 579, 404 U.S. App. D.C. 291 (D.C. Cir. 2013) (Kavanaugh, J., concurring) (concluding that supervisor's statement to African-American employee, "Get out of my office nigger," was sufficient by itself to constitute an actionable hostile work environment).

…

Here, in contrast [to the facts of Jordan], Clubb called Liberto herself a porch monkey and did so in the context of angrily threatening to speak with her friend, the hotel owner, to get Liberto fired. Also in contrast to Jordan, Clubb's use of the epithet was not a single, isolated occurrence, as she called Liberto the very same name in the very same threatening context the very next day. Particularly in light of these significant differences, I believe that Liberto could have reasonably believed that Clubb's conduct was actionable.

…

I share in the sentiment Judge King expressed so well in his dissent in Jordan…[and] [l]ike Judge King, I cannot accept that an employee in circumstances like these can be forced to choose between her job and her dignity. See id. at 356. For these reasons, I respectfully dissent from the affirmance of the summary judgment against Liberto on her retaliation claims.

Boyer-Liberto v. Fontainebleau Corp., 752 F.3d 350, 356-360 (4th Cir. 2014) (Traxler, C.J., concurring in part, dissenting in part).

Thereafter, a petition for rehearing en banc was filed. The petition was granted on July 1, 2014, at which time the panel opinion was vacated. See Boyer-Liberto v. Fontainebleau Corp., No. 13-1473, 2014 U.S. App. LEXIS 12711 (4th Cir. July 1, 2014). The full court heard argument on the case on September 18, 2014 (Available at: http://coop.ca4.uscourts.gov/OAarchive/mp3/13-1473-20140918.mp3). On May 7, 2015, Judge King, writing for twelve colleagues, reversed the panel opinion, and reversed Jordan insofar as Boyer-Liberto is inconsistent with Jordan. See Boyer-Liberto v. Fontainebleau Corp., No. 13-1473, 2015 U.S. App. LEXIS 7557 (4th Cir. May 7, 2015).

Judge King’s opinion contains three principal holdings: 1) “an isolated incident of harassment, if extremely serious, can create a hostile work environment”; 2) “an employee is protected from retaliation when she reports an isolated incident of harassment that is physically threatening or humiliating, even if a hostile work environment is not engendered by that incident alone”; and 3) to the extent today's decision is in conflict with Jordan v. Alternative Resources Corp., 458 F.3d 332 (4th Cir. 2006), Jordan is hereby overruled.” See Id. at *3. In holding that Plaintiff was entitled to take the issue of whether a hostile work environment existed to the jury, Judge King reasoned that:

[A]n isolated incident of harassment can amount to discriminatory changes in the terms and conditions of employment, if that incident is extremely serious.

…

In measuring the severity of harassing conduct, the status of the harasser may be a significant factor — e.g., a supervisor's use of [a racial epithet] impacts the work environment far more severely than use by co-equals. Simply put, a supervisor's power and authority invests his or her harassing conduct with a particular threatening character.

…

To resolve [the issue of whether Clubb’s conduct was sufficiently severe to create a hostile work environment] we need not — and, in any event, on this record cannot — determine whether Clubb was actually Liberto’s supervisor or simply her co-worker, a fact relevant to the separate question of the Clarion's vicarious liability. Nevertheless, we are obliged to consider how Clubb portrayed her authority and what Liberto thus reasonably believed Clubb's power to be.

…

Properly considering that evidence, we must accept that Liberto believed — and reasonably so — that Clubb could make a discharge decision or recommendation that would be rubber-stamped by Dr. Berger. Thus, in gauging the severity of Clubb's conduct, we deem Clubb to have been Liberto’s supervisor…[and] [t]hat perspective is especially appropriate here, where Clubb employed racial epithets to cap explicit, angry threats that she was on the verge of utilizing her supervisory powers to terminate Liberto’s employment.

…

[A] reasonable jury could find that Clubb's two uses of the "porch monkey" epithet — whether viewed as a single incident or as a pair of discrete instances of harassment — were severe enough to engender a hostile work environment.

…

In thus vacating the summary judgment award on Liberto’s hostile work environment claims, we identify this as the type of case contemplated in Faragher where the harassment, though perhaps "isolated," can properly be deemed to be "extremely serious." We also acknowledge that this is a first for our Court. We reject, however, any notion that our prior decisions, including Jordan v. Alternative Resources Corp., were meant to require more than a single incident of harassment in every viable hostile work environment case.

Id. at *28-*37 (internal citations and quotations omitted). Similarly, Judge King held that Plaintiff presented a triable issue of fact as to whether she suffered illegal retaliation, explaining:

[T]he Jordan standard "imagines a fanciful world where bigots announce their intentions to repeatedly belittle racial minorities at the outset, and it ignores the possibility that a hostile work environment could evolve without some specific intention to alter the working conditions of African-Americans through racial harassment." See Jordan, 458 F.3d at 353-54 (King, J., dissenting). Tellingly, intent to create a hostile work environment is not an element of a hostile environment claim.

…

[R]ather than encourage the early reporting vital to achieving Title VII's goal of avoiding harm, the Jordan standard deters harassment victims from speaking up by depriving them of their statutory entitlement to protection from retaliation. Such a lack of protection is no inconsequential matter, for "fear of retaliation is the leading reason why people stay silent instead of voicing their concerns about bias and discrimination."

…

The question, then, becomes this: What is the proper standard for determining whether an employee who reports an isolated incident of harassment has a reasonable belief that she is opposing a hostile work environment in progress? We conclude that, when assessing the reasonableness of an employee's belief that a hostile environment is occurring based on an isolated incident, the focus should be on the severity of the harassment.

…

[A]n employee will have a reasonable belief that a hostile work environment is occurring based on an isolated incident if that harassment is physically threatening or humiliating. This standard is consistent not only with Clark County, but also with other Supreme Court precedent, including Crawford and Burlington Northern. That is so because it protects an employee like Jordan who promptly speaks up "to attack the racist cancer in his workplace," rather than "remain[ing] silent" and "thereby allowing [discriminatory] conduct to continue unchallenged," while "forfeiting any judicial remedy he might have."

One of the most interesting dicta in Judge King’s opinion is contained in Footnote Six. After holding that an employee will be held to have a reasonable belief that a hostile work environment is occurring if the isolated incident is “physically threatening or humiliating”, Judge King addressed how future courts should handle the eventuality where the isolated incident is merely “offensive”, but might be repeated sufficiently enough in the future to meet either the “severity” or “pervasiveness” test. In Footnote Six, Judge King states that the Supreme Court’s decision in Clark County v. Breeden, 532 U.S. 268 (2001) does not necessarily preclude an argument that a complaint regarding an isolated incident which is “merely offensive” in all circumstances is not protected activity. Instead, Judge King suggests that a plaintiff can reasonably believe that a single incident which is “merely offensive” created a hostile environment. Judge King states: “The Court [in Clark County] did not consider whether the plaintiff could have reasonably believed that a hostile work environment, even though not fully formed, was in progress.” Unfortunately for those laboring in the employment litigation vineyards, Judge King and his colleagues did not articulate how one is to determine whether or not a complaint in such circumstances is protected activity. There does not appear to be a hint in the opinion as to how and where the lower courts are to draw the line between protected activity and non-protected activity where an individual is retaliated against because they complained about an isolated incident which is merely offensive, but one that they assert was “in progress” towards ultimately culminating in a hostile work environment.

Judge Wilkinson, joined by Judge Agee, concurs and dissents, adding two more votes to reversal as to the retaliation count, but agreeing with the lower court, and the panel’s, determination that there was no hostile work environment. Judge Wilkinson, with his trademark eloquence, summarizes his thinking as follows:

The remarks alleged in this Title VII action are ones that Americans of every race and all walks of life would find so wounding that the word offensive does not begin to describe them. It is incidents such as these, small as they may appear, that prevent our larger society from becoming the place of welcome it needs to be.

The good done by the civil rights laws has been enormous and one aim of those laws, as I understand it, is to make the workplace an environment where Americans of every race, religion, sex, or national origin would actually want to work. 42 U.S.C. § 2000e-2 and 2000e-3.

To say that a good workplace environment is poisoned by the kind of remarks alleged here is an understatement. Who would wish to get up and come to work each morning fearful of encountering this sort of slur during the course of the working day?

There is a countervailing danger at play in these cases, however, namely that we not imbue the workplace with such stringent hostile work environment requirements that employers become speech police, that employees are estranged from one another, and that companies become private sector analogues of the surveillance state.

Boyer-Liberto, 2015 U.S. App. LEXIS 7557 at *59-60 (Wilkinson, J., dissenting).

Judge Niemeyer, very much alone, dissents. None of his colleagues join in his dissent. Thus, after writing the opinion in Jordan, the later opinion in Jordan, attempting to justify a 5-5 denial of rehearing in Jordan, and the panel’s opinion in Boyer-Liberto, Judge Niemeyer was relegated to being a lone dissenter. In that dissent, Judge Niemeyer repeatedly assaults the majority’s reading of the law. Judge Niemeyer begins by accusing the majority of misreading a key passage in Faragher v. City of Boca Raton, 524 U.S. 775 (1998), in which the Supreme Court held that “simple teasing, offhand comments, and isolated incidents (unless extremely serious) will not amount to discriminatory changes in the terms and conditions of employment.” Judge Niemeyer reasons that:

Faragher, however, does not support the majority's reading of it, and the majority's conclusions are otherwise without precedent. First, in the very quotation relied on by the majority, the Faragher Court noted that "isolated incidents" -- using the plural -- might, if "extremely serious," satisfy the severity requirement for racial harassment. 524 U.S. at 788. To rationalize its holding, the majority thus reads the plural "incidents" in Faragher to refer only to a "single incident."

Judge King, writing for the majority, responds that:

Clearly, it is the dissent's interpretation of Faragher — not ours — that is untenable. To illustrate, the dissent elsewhere observes that a hostile environment claim "must be 'based on the cumulative effect of individual acts,'"…[s]trikingly, the dissent does not — and surely cannot — explain what differentiates "isolated incidents" that must be "extremely serious," from "individual acts" that may be "severe or pervasive." The dissent also quotes from Morgan that "'a single act of harassment may not be actionable on its own,'" without acknowledging the obvious import of Morgan's use of "may not" rather than "cannot." And, the dissent itself allows that a single, isolated incident of physical violence may be actionable, without even attempting to reconcile that proposition with its reading of Faragher.

Judge Niemeyer further asserts that:

the majority fails to note that the portions of Faragher to which it cites were part of the Supreme Court's much lengthier discussion -- and substantively different message -- describing the type of conduct that would not violate Title VII. In that discussion, the Court drew on several opinions from the courts of appeals and noted, for instance, that the "'mere utterance of an ethnic or racial epithet which engenders offensive feelings in an employee' would not sufficiently alter terms and conditions of employment to violate Title VII

Judge King responds that:

[T]he dissent overemphasizes the first part of that sentence, at one point quoting the entire sentence while underscoring only "[m]ere utterance of an ethnic or racial epithet," and at another point actually omitting the phrase "which engenders offensive feelings in an employee[.]" Of course, the phrase "which engenders offensive feelings in an employee" is a critical qualifier, signifying "a mere offensive utterance" rather than a more egregious slur that is "physically threatening or humiliating."

The long and tortured history of this argument started over a decade ago in another Maryland Federal District Judge’s courtroom in Jordan v. Alternative Resources Corp., 458 F.3d 332 (4th Cir. 2006). The facts in Jordan can be summarized as follows:

Plaintiff was an African-American man employed by Defendant.
During a broadcast regarding the arrest of two African-American men accused of being snipers and killing ten individuals in Maryland, Virginia, and the District of Columbia, an individual watching the report with Plaintiff stated “They should put those two black monkeys in a cage with a bunch of black apes and let the apes f—k them.”
Jordan complained about this statement, and was fired one month later.

The lower court held that “Plaintiff has not, as a matter of law, alleged that his complaint opposed a discriminatory practice in the workplace. Accordingly, the retaliation claims in his original complaint are insufficient, and will be dismissed.” See Jordan v. Alternative Resources Corp., No. DKC 2004-1091, 2005 U.S. Dist. LEXIS 5279 (March 30, 2005).

A divided panel of the Fourth Circuit affirmed this decision on May 12, 2006. Judge Niemeyer, writing for the majority was by Judge Widener, who later died on September 17, 2007, and held as follows:

While Farjah's comment to the television on October 23, 2002 (or October 24) was unacceptably crude and racist, it was an isolated emotional response directed at the snipers through the television set when Farjah heard the report that they had been arrested. Because the remark was rhetorical insofar as its object was beyond the workplace, it was not directed at any fellow employee. Moreover, it was a singular and isolated exclamation, having not been repeated before or after October 23, 2002. Jordan does not and cannot allege in his complaint that Farjah's comment altered the terms and conditions of his employment. Based on all that Jordan knew, Jordan reasonably concluded that the remark was inappropriate and should not have been made. And while we agree with Jordan's sentiment, we conclude that such an allegation is a far cry from alleging an environment of crude and racist conditions so severe or pervasive that they altered the conditions of Jordan's employment with IBM or ARC.

And, Judge King dissented, stating in dissent:

[A]s a matter of law, I do not subscribe to the majority's view that, pursuant to Navy Federal, an employee lacks Title VII protection for reporting racially charged conduct, unless he has "a reasonably objective belief that it will continue or will be repeated." See ante at 10. On this point, the majority implies that the employee cannot meet that burden without allegations that "a plan was in motion to create [a hostile work] environment." Id. This position is simply incorrect, for at least two reasons. First, requiring an employee to show that a hostile work environment was being planned imagines a fanciful world where bigots announce their intentions to repeatedly belittle racial minorities at the outset, and it ignores the possibility that a hostile work environment could evolve without some specific intention to alter the working conditions of African-Americans through racial harassment. Second,Navy Federal concerned an employee who had opposed a discrete act that itself contravened Title VII, and we had no reason to consider the circumstances under which an employee might reasonably believe that Title VII was being violated by a cumulative unlawful practice, such as a hostile work environment.

A petition for rehearing en banc was filed and, most interestingly, the judges eligible to vote split five to five. There being no majority in favor of reconsideration en banc, after a petition for certiorari was denied, the litigation in Jordan ended. Interestingly, when the Court split five to five on the question of reconsideration en banc, Judge Niemeyer felt compelled to write an opinion attempting to justify, yet again, his panel opinion. See Jordan v. Alternative Res. Corp., 467 F.3d 378 (4th Cir. 2006). Even though four other judges (Judges Widener, Shedd, Duncan, and Wilkinson) had joined Judge Niemeyer in voting against rehearing en banc, none of them joined in his opinion. Of course, two of them would go on to vote with the majority in Boyer-Liberto. Judge King, joined by four colleagues (Chief Judge Wilkins, and Judges Traxler, Michael, and Gregory) dissented. In dissent, Judge King stated:

the panel majority has concluded that, when an employee complies with Ellerth and Faragher in promptly reporting racially charged conduct, he is stripped of his protection from retaliation under Title VII. Such a construction of Title VII, which penalizes an employee for complying with the controlling mandate of Ellerth and Faragher, is inconsistent with the Court's view of Title VII. In its recent White decision, the Court instructed that we must construe Title VII's anti-retaliation provision broadly, so as to further "the . . . provision's primary purpose" of "maintaining unfettered access to statutory remedial mechanisms." Nevertheless, the panel majority, without addressing White's holding, has construed Title VII's anti-retaliation provision so narrowly that most employees who seek its protection will have their access to statutory remedial mechanisms either fettered or barred altogether. Our Court has thereby created an untenable Catch-22 situation for such employees.

Id.; see also Indraneel Sur, “How Far do Voices Carry: Dissents From Denial of Rehearing En Banc”, 2006 Wisc. L. Rev. 1315 (2006) (available at: http://hosted.law.wisc.edu/lawreview/issues/2006-5/sur.pdf)

The petition for certiorari was denied on April 16, 2007. Since being handed down Jordan has been cited in over three hundred decisions, and nearly as many journals, law reviews, and other secondary sources..

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Marijuana: District of Columbia Law & Causes of Action

2015-04-15T16:30:00.001-04:00

I. Pertinent Legislation

The District of Columbia has taken the significant step of legalizing limited possession and cultivation of marijuana outright. On November 1, 2014, D.C. voters approved Initiative 71, which arguably became law on February 26, 2015. However, the United States Congress included a provision in the last spending bill prohibiting D.C. from spending funds to “enact” the law. Further complicating matters, D.C. has taken the position that the law was actually “enacted” when Initiative 71 passed, and no further money needs to be spent for the decriminalization to take effect. While there remains some controversy over whether Initiative 71 can be “enacted” by the D.C. Council, Mayor Muriel Bowser has strongly indicated that she will enforce the will of the voters. See Mike DeBonis, Aaron C. Davis, “Bowser: Legal Pot Possession to Take Effect at Midnight in the District”, Washington Post (Feb. 25, 2015) (available here). The District of Columbia also permits physicians to prescribe medical marijuana for any debilitating condition which they think would respond favorably to it. Dept. of Health Notice of Proposed Rulemaking Vol. 60 No. 14 (March 29, 2013) (available here).

II. So Is Marijuana Legal?

The possession, cultivation, and use of small amounts of marijuana is legal under District of Columbia law. More particularly, the following activities are legal in the District of Columbia for adults over the age of 21:

· Possessing two ounces or less of marijuana;

· Giving one ounce or less of marijuana to another person over the age of 21 as long as there is no exchange of goods or services;

· Growing up to six marijuana plants in their home, no more than three of which may be mature;

· Possessing marijuana paraphernalia (e.g., “bongs”); and

· Using marijuana on private property.

The District of Columbia has interpreted these laws strictly – for example, plants must be grown “inside” the home and may not be grown in an outdoor garden or on the roof. Furthermore, the sale of any amount of marijuana by a private resident remains illegal. Only licensed medical marijuana distributors may sell marijuana legally in the District of Columbia. Finally, marijuana may not be used “[a]ny place to which the public is invited”. This means that it may not be used, for example, in nightclubs, bars, or other businesses which are “open to the public.” It is not clear, at this point, whether marijuana may be used in private, “members only” clubs.

However, it is important to remember that marijuana remains illegal under federal law. The United States government has listed marijuana on “Schedule I” of the Controlled Substances Act, 21 U.S.C. § 801 et seq. Drugs listed on Schedule I are those which are considered to have “a high potential for abuse,” “no currently accepted medical use,” and “lack accepted safety.” Other Schedule I substances include Opioids and Opium derivatives, such as Heroin, as well as other drugs with severe hallucinogenic, stimulant, or depressant properties. Cannabimimetic agents, such as marijuana, are a separate category of drugs and are listed separately on Schedule I.

One consequence of the fact that marijuana remains illegal on the federal level is that it falls within the scope of the Drug Free Workplace Act, 41 U.S.C. § 81. The Drug Free Workplace Act applies to employers who: 1) have contracts valued at $150,000.00 or more with the federal government; or 2) receive any amount of grant money. Covered employers are required to publish policies which prohibit the use of illegal drugs, discipline those who violate its policy, and report drug-related crimes in the workplace. Sanctions for non-compliance include the termination of federal contracts or grant moneys, giving employers a strong incentive to avoid any appearance of tolerating drug use.

III. Potential Causes of Action

There are two primary claims which may arise when an individual is terminated for the use of marijuana in the District of Columbia. Recreational users may have a claim for wrongful termination in violation of public policy under Adams v. George W. Cochran & Co., 597 A.2d 28 (D.C. 1991) and Carl v. Children’s Hospital, 702 A.2d 159 (D.C. 1997) (en banc). Adams and Carl arguably stand for the proposition that employers may not terminate employees for reasons which violate public policy, including exercising a statutory right. See Carl, 702 A.2d at 160. While citizens in D.C. now have a circumscribed “right” to make recreational use of marijuana by virtue of the fact that it is no longer illegal to do so, it is not clear that this “right” can support a cause of action for wrongful termination. D.C. courts, like other courts, have narrowly interpreted the tort of wrongful termination, and may not be willing to extend it to cover the use of marijuana, as will be discussed below.

Medical marijuana users, meanwhile, may have a claim under the D.C. Human Rights Act, which prohibits discrimination against, among other protected categories, individuals with disabilities. See D.C. Code § 2-1401.11(a). This obligation extends to reasonably accommodating the disabilities of employees. See Grant v. May Dep’t Stores Co., 786 A.2d 580, 583 (D.C. 2001). Many medical conditions treatable with marijuana, such as glaucoma and epilepsy, qualify as “disabilities” under the D.C. Human Rights Act. The determinative issue in such cases is likely to be whether marijuana use is a “reasonable” accommodation to an individual’s disability.

The District of Columbia has not yet addressed this, and many other, issues surrounding the implications of its medical marijuana laws. That said, an employer faced with the loss of federal grants or contracts for permitting the use of medical marijuana could likely argue that the requested accommodation constituted an “undue burden”. This is especially true if other medications are capable of treating the individual’s condition. In the absence of such contracts or grants, and assuming that an employee was not “under the influence” at work, it would undoubtedly be argued that a medical marijuana employee discharged for use of medical marijuana can maintain a claim for failure to accommodate a disability in the event that they were terminated or disciplined for off-duty marijuana use.

D.C. courts have not yet had the opportunity to pass on whether such claims are permissible. However, most courts to address the issue have concluded that, absent a statutory command to the contrary, employers remain free to set their own drug policies and to discipline or terminate employees who violate those policies. See, Coats v. Dish Network, 2013 COA 62 (Colo. Ct. App. 2013), cert. granted (Court held that medical marijuana is not a “lawful activity” under CO statute because activity must be legal under both state and federal law); Casias v. Wal-Mart, Inc. 695 F. 3d 248 (2012) (Court held that the Michigan Medical Marijuana Act does not regulate private employment); Roe v.Teletech Customer Care Management LLC, 171 Wash 2d 736(Wash. Sup. Ct. 2011) (Court held that Washington’s Medical Use of Marijuana Act did not regulate private employer’s conduct and employee who used medical marijuana had no claim for wrongful discharge); Beinor v. Industrial Claim Appeals Office, 262 P.3d 970 (Colo. Ct. App. 2011), (Court found that Colorado’s medical marijuana amendment provided an affirmative defense to criminal prosecution but did not preclude denial from unemployment benefits after plaintiff was terminated for violating employer’s zero tolerance drug policy); Emerald Steel Fabricators, Inc. v. Bureau of Labor and Industries, 224 P.3d 518 (Ore. 2010) (Court found that under Oregon's employment discrimination laws, employer was not required to accommodate employee's use of medical marijuana); Ross v. RagingWire Telecommunications, Inc., 174 P.3d (Cal. 2008)(Court held that state law cannot completely legalize marijuana for medical use because it is illegal under federal law); but see Arizona Revised Statutes 36-2801, 2813 (2104) (“An employer may not discriminate against a person in hiring, termination or imposing any term or condition of employment….for a registered qualifying patient's positive drug test for marijuana components or metabolites, unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during the hours of employment.”).

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Marijuana: Maryland Law & Causes of Action

2015-04-15T16:16:00.002-04:00

I. Pertinent Legislation

Maryland has several pieces of legislation which govern the possession and use of Marijuana for both medical and non-medical purposes. The first piece of legislation is Maryland’s 2003 Compassionate Use Act HB 702 (2003)/SB 502 (2003), which was amended in 2011 by SB 308 (2011)/HB 291 (2011). The Compassionate Use Act provided a “medical necessity defense” which could be used to limit criminal sentences for marijuana possession. This act, however, was limited, and Maryland courts noted that it “clearly contemplates a conviction of use or possession of marijuana.” Jefferson v. State, 883 A.2d 251, 254 (Md. Ct. Spec. App. 2004). In other words, “the General Assembly did not put its imprimatur on the medical use of marijuana.” Id. (internal quotation omitted). The 2011 amendment expanded these protections, indicating that individuals who can provide “clear and convincing evidence” that they need marijuana for medical reasons are “not guilty” of any crime. See SB 308 (2011)/HB 291 (2011).

The second statute, enacted with the passage of HB 1101 in 2013, is Md. Code Ann. Health-General § 13-3301 et seq., which established the Natalie M. LaPrade Medical Marijuana Commission. The Commission was established effective October 1, 2013 to regulate the distribution of medical marijuana in Maryland and to study the medical efficacy of marijuana. However, the statute, as originally enacted, limited distribution to teaching hospitals. Due to the federal prohibition on marijuana, no teaching hospital participated in the program. Accordingly, the legislation was amended in 2014 by the passage of SB 923/HB 881 to permit an expanded list of entities to prescribe and distribute marijuana. The amendments also authorize the Commission to issue fifteen growing licenses.

Finally, and most significantly, Maryland Governor Martin O’Malley signed SB 364 on April 14, 2014 which removed criminal penalties for possession of small amounts of marijuana. This act, which became effective on October 1, 2014, replaced criminal penalties with civil fines.

II. So Is Marijuana Legal?

In Maryland, the law distinguishes between “medical” marijuana and marijuana used for many other purposes. Like other prescription drugs, marijuana is only legal if the an individual possesses a valid prescription. Possession of marijuana without a prescription – for example, recreational marijuana – remains prohibited by Maryland law. The bill signed by Governor O’Malley did not “legalize” marijuana – it merely removed criminal penalties for possession of small amounts of marijuana and replaced those penalties with civil fines. Possession of larger amounts of marijuana can still lead to criminal penalties, and, even for possession of smaller amounts, repeat offenses can lead to increased fines and mandatory drug treatment.

Perhaps more importantly, Marijuana remains illegal under federal law. The United States government has listed marijuana on “Schedule I” of the Controlled Substances Act, 21 U.S.C. § 801 et seq. Drugs listed on Schedule I are those which are considered to have “a high potential for abuse,” “no currently accepted medical use,” and “lack accepted safety.” Other Schedule I substances include Opioids and Opium derivatives, such as Heroin, as well as other drugs with severe hallucinogenic, stimulant, or depressant properties. Cannabimimetic agents, such as marijuana, are a separate category of drugs and are listed separately on Schedule I.

III. Potential Causes of Action

a. Recreational Use

Although it has been decriminalized, the Maryland legislature has chosen, at least for the time being, to leave in place certain penalties for the possession of “small” amounts of marijuana for non-medical use. The situation which now obtains with regard to non-medical marijuana is thus analogous to that which existed in 2004 with regard to medical marijuana – that is, the legislature has substantially reduced the penalties associated with the drug, but has not give its “imprimatur on the…use of marijuana.” Jefferson, 883 A.2d at 254. As such, and especially given that marijuana remains illegal on the federal level, it is unlikely that an employee who uses recreational marijuana, and is subsequently disciplined or terminated by her employer, will be able to bring a successful lawsuit challenging the employer’s action.

b. Medical Marijuana

Unlike non-medical marijuana, marijuana which is prescribed by a doctor for a qualifying medical condition has been largely legalized, at least under Maryland state law. In Maryland, an employer may not discriminate against any individual because of that individual’s disability, and may also not fail or refuse to make a reasonable accommodation for the known disability of an otherwise qualified employee. See Md. Code Ann. State Gov’t. § 20-606(a)(1), (4). Many medical conditions treatable with marijuana, such as glaucoma and epilepsy, qualify as “disabilities” under the Maryland statute. The determinative issue in such cases is likely to be whether marijuana use is a “reasonable” accommodation to an individual’s disability.

Maryland has not yet addressed this, and many other, issues surrounding the implications of its medical marijuana laws. That said, an employer faced with the loss of federal grants or contracts for permitting the use of medical marijuana could likely argue that the requested accommodation constituted an “undue burden”. This is especially true if other medications are capable of treating the individual’s condition.

In the absence of such contracts or grants, and assuming that an employee was not “under the influence” (i.e. impaired) at work, they will undoubtedly attempt to maintain a claim for failure to accommodate a disability in the event that they were terminated or disciplined for off-duty marijuana use. Md. Code Ann. State Gov’t § 20-606(a)(4).

Maryland courts have not yet had the opportunity to pass on whether such a claim is permissible. However, most courts to address the issue have concluded that, absent a statutory command to the contrary, employers remain free to set their own drug policies, and may discipline or terminate employees who violate those policies. See, Coats v. Dish Network, 2013 COA 62 (Colo. Ct. App. 2013), cert. granted (Court held that medical marijuana is not a “lawful activity” under CO statute because activity must be legal under both state and federal law); Casias v. Wal-Mart, Inc. 695 F. 3d 248 (2012) (Court held that the Michigan Medical Marijuana Act does not regulate private employment); Roe v.Teletech Customer Care Management LLC, 171 Wash 2d 736(Wash. Sup. Ct. 2011) (Court held that Washington’s Medical Use of Marijuana Act did not regulate private employer’s conduct and employee who used medical marijuana had no claim for wrongful discharge); Beinor v. Industrial Claim Appeals Office, 262 P.3d 970 (Colo. Ct. App. 2011), (Court found that Colorado’s medical marijuana amendment provided an affirmative defense to criminal prosecution but did not preclude denial from unemployment benefits after plaintiff was terminated for violating employer’s zero tolerance drug policy); Emerald Steel Fabricators, Inc. v. Bureau of Labor and Industries, 224 P.3d 518 (Ore. 2010) (Court found that under Oregon's employment discrimination laws, employer was not required to accommodate employee's use of medical marijuana); Ross v. RagingWire Telecommunications, Inc., 174 P.3d (Cal. 2008)(Court held that state law cannot completely legalize marijuana for medical use because it is illegal under federal law); but see Arizona Revised Statutes 36-2801, 2813 (2104) (“An employer may not discriminate against a person in hiring, termination or imposing any term or condition of employment….for a registered qualifying patient's positive drug test for marijuana components or metabolites, unless the patient used, possessed or was impaired by marijuana on the premises of the place of employment or during the hours of employment.”).

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Sweeping ADA Ruling By The Fourth Circuit Should Make Employers Anxious

2015-03-13T22:48:00.002-04:00

Yesterday, March 12, 2015, a panel of the 4th Circuit, in Jacobs v. N.C. Admin. Office of the Courts, reversed district court Judge Terrence Boyle of the Eastern District of North Carolina. No. 13-2212, 2015 U.S. App. LEXIS 3878 (4th Cir. March 12, 2015) Several disability rights organizations filed as amici in support of the plaintiff. The Court, with Judge Floyd writing for the panel, found that a reasonable jury could have concluded that the plaintiff had been discriminated against on the basis of her disability (social anxiety disorder), and so overturned the district court’s grant of summary judgment.

The plaintiff in Jacobs was a deputy clerk of the court who allegedly suffered from social anxiety disorder. As an initial matter, the Court took judicial notice of the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders. Quoting from that source, the Court noted that social anxiety disorder is characterized by a “marked and persistent fear of…social or performance situations in which [a] person is exposed to unfamiliar people or to possible scrutiny by others.” Am. Psychiatric Ass'n, Diagnostic and Statistical Manual of Mental Disorders, 456 (4th ed. 2000).

As a deputy clerk, Plaintiff had been assigned to provide customer service at the courthouse’s front counter. This job required social interaction with the court’s “customers”. Plaintiff asserted that her mental illness, social anxiety disorder, hindered her ability to perform this job. Plaintiff requested that her disability by accommodated by reassigning her to a role with less direct interpersonal interaction. The courthouse never responded to Plaintiff’s request for an accommodation. Instead, the courthouse terminated Plaintiff’s employment three weeks after she made her request for an accommodation. Plaintiff brought suit in the United States District Court for the Eastern District of North Carolina, arguing that her termination violated the Americans with Disabilities Act, as amended, 42 U.S.C. § 12101 et seq. On September 3, 2013, Judge Boyle granted summary judgment on Plaintiff’s claim for disability discrimination in favor of the courthouse.

The Fourth Circuit reversed the lower court’s grant of summary judgment. While the primary thrust of the opinion deals with the Court’s construction of the ADA, its holdings on the summary judgment standard are equally consequential, and bear careful analysis. As an initial matter the Court, relying on the Supreme Court’s per curiam opinion in Tolan v. Cotton, held that Judge Boyle had erred by “failing to consider all the evidence in the record” when assessing the defendant’s motion for summary judgment. 134 S. Ct., 1861, 1866 (2014). The Court discusses summary judgment at length before emphatically concluding that Judge Boyle went astray. The Court found that Judge Boyle repeatedly drew inferences contrary to the evidence and misapplied the summary judgment standard. For example, the Court, quoting Tolan, held that the District Court “neglected to adhere to the fundamental principle that at the summary judgment stage, reasonable inferences should be drawn in favor of the non-moving party.” Jacobs, 2015 U.S. App. LEXIS 3878 at *17. At another point in its opinion, the Court found that the record, taken in the light most favorable to the plaintiff, demonstrates just the opposite of what Judge Boyle had found. Id. One can anticipate that the Jacobs opinion will be heavily relied upon, within the Fourth Circuit, in opposing future summary judgment motions from the defense in employment cases. And, most certainly, the Jacobs opinion is a strong and clear message to the District bench in the Fourth Circuit that the standards for summary judgment must be scrupulously followed.

The Court’s substantive holdings are manifold, and some of the more striking are discussed below. That said, the Court’s holding in Jacobs is a thoroughgoing exegesis on the Americans with Disabilities Act, and does not lend itself well to summary. Any practitioner in this area would be well advised to carefully review the opinion in its entirety.

1. “Interacting With Others” is a Major Life Activity

One of Plaintiff’s central contentions was that her social anxiety disorder substantially limited her ability to interact with others and therefore was a disability under the ADA AA. The defense argued that “interacting with others” is not a major life activity. As an initial matter, the Court noted that the EEOC had interpreted “interacting with others” as a major life activity. See 29 C.F.R. § 1630.2(i)(1)(i). A such, the Court determined that the defense’s argument constituted a challenge to the EEOC’s interpretation of the ADA. Jacobs, 2015 U.S. App. LEXIS 3878 at *22. Applying Chevron deference, the Fourth Circuit held that the Congress had deliberately left an interpretive gap for EEOC to fill and found that EEOC’s interpretation was reasonable. Id. at *23. The Court went on to note that “[f]ew activities are more central to the human condition than interacting with others” and that “it is certainly reasonable for the EEOC to conclude that interacting with others [is a major life activity.” Id. As such, while the Court’s holding is couched as deference to an agency interpretation of the ADA, it comes near to an express holding, in its own right, that interacting with others is a major life activity.

2. The Court Explains the Amended ADA’s Definition of “Substantially Limits”

The defense argued that plaintiff’s social anxiety disorder had not substantially limited her ability to interact with others. The Court first noted that the amended ADA had expressly rejected the need to show that the plaintiff was “significantly restricted” in a major life activity. The Court assumed that the EEOC’s regulations, which define a substantially limiting impairment as one that “substantially limits the ability of an individual to perform a major life activity as compared to most people in the general population” were reasonable. Jacobs, 2015 U.S. App. LEXIS 3878 at *24 citing 29 C.F.R. § 1630.2(j)(1)(ii). In a footnote, the Court noted that some three percent to thirteen percent of individuals will experience social anxiety disorder at some point in their life. Jacobs, 2015 U.S. App. LEXIS 3878 at *26 n.14. The Court relied upon this data to establish that social anxiety disorder limits those so diagnosed “as compared to most people in the general population.” Id.

The Court then moved to the evidence the defense had proffered to establish that plaintiff had not met the “substantially limits” standard established by the EEOC. For example, the defense asserted that the plaintiff’s social interaction on Facebook demonstrated that she was not substantially limited in interacting with others. The Court responded that “[a] person need not live as a hermit in order to be ‘substantially limited’ in interacting with others.” Jacobs, 2015 U.S. App. LEXIS 3878 at *24. The Court went on to note that the plaintiff’s Facebook activity may constitute a “mitigating measure” in that it could be construed as “a form of exposure therapy by which plaintiff attempted to overcome her anxiety through social interaction that was not face-to-face and not in real time”. Id. at *25. The Court found that, under the ADA as amended, it was not permitted to consider such mitigating measure in determining whether Plaintiff was substantially limited in her ability to interact with others. Similarly, in a footnote, the Court indicated that if the plaintiff, took longer than necessary to complete her microfilming work and procrastinated in returning to the front desk, as the defense had alleged, “this may constitute avoidant behavior consistent with a diagnosis of social anxiety disorder.” Jacobs, 2015 U.S. App. LEXIS 3878 at *26 n.13.

3. A Temporal Proximity of Three Weeks Alone Can Establish Causation

Three weeks had elapsed between plaintiff’s request for an accommodation and her termination. The Court found that “[s]uch close temporal proximity weighs heavily in favor of finding a genuine dispute as to causation.” Id. at *30. In so holding, the Court relied on Haulbrook v. Michelin N. Am., Inc., which held that a twenty-one day period between request for accommodation and the plaintiff’s termination created a genuine dispute as to causation. 252 F.3d 696, 706 (4th Cir. 2001).

4. Piling On is Proof of Pretext

The defense told the plaintiff at the time of her termination that she was being fired for several reasons. Thereafter, in response plaintiff’s EEOC complaint, the defense listed yet more reasons for her termination. And, then, before Judge Boyle, the defense came forward with, as the Court phrased it, “still more reasons.” The Court, in the face of this piling on, stated: “Although this constellation of justifications is not internally inconsistent, many of the purported justifications were not raised at the time of termination,” and thus proof of pretext. Id. at *32.

5. The Failure to Document is Evidence of Pretext

After its remarkable finding that multiple, consistent reasons for termination, albeit offered at different times, could provide evidence of pretext, the Court went on to state: “Even more striking is that no one at the [employer] documented any of the justifications (including those raised at the time of termination) in any way.” Id. at *32 (emphasis in original). The Court concluded that the undocumented and uncorroborated justifications are pretextual.

6. Don’t Lie to the Court

While the Court stops short of accusing Defendant of lying, it does recount that the “constellation” of reasons for Plaintiff’s termination were allegedly reported to Plaintiff’s supervisors by one Ms. English. Tellingly, the Court notes that Ms. English testified that she had never discussed the plaintiff’s performance with the supervisors. Id. at *32 n.16. The Court blandly states that Ms. English’s testimony “creates a genuine dispute of fact.” Id.

7. Those Tape Recordings Can be Devastating

Somehow, four supervisors met with plaintiff to terminate her, and it never occurred to any of them that the plaintiff might be recording the conversation. Indeed, she was. And, the Court relied heavily on the actual recordings in finding that there were numerous genuine factual disputes. Id. at *18 to *19. Fortunately for Plaintiff, North Carolina, the state in which the conversation was recorded, is a so-called “one-party” state, in which a conversation may legally be recorded so long as at least one party to the conversation consents to the recording.

8. The Court’s Articulation of an Essential Function of the Job is Quite Helpful to Plaintiffs

The defense argued that being able to work at the front counter was an essential function of the deputy clerk position. The Court disagreed. In so holding, the Court relied on the fact that many other employees were available to work at the front counter, and that Plaintiff’s inability to do so would not negatively impact the office.

9. A Reasonable Accommodation May Require Job Restructuring

The Court found that restructuring plaintiff’s job so that she worked fewer days at the front counter was reasonable, pointing out that this proposed accommodation did not require the employer to increase the workload of plaintiff’s coworkers.

10. The Court Finds the Failure To Discuss Plaintiff’s Accommodation Request Could be Found to be an Act of Bad Faith

The Court noted the Fifth and Sixth Circuits have both held that terminating an employee without discussing a reasonable accommodation is evidence of bad faith. Id. at *46 citing Rorrer v. City of Stow, 743 F.3d 1025, 1040 (6th Cir. 2014); EEOC v. Chevron Phillips Chem. Co., 570 F.3d 606, 622 (5th Cir. 2009)). Here, three weeks after submitting her request for an accommodation, and with no discussion of that request in the interim, plaintiff was terminated without any discussion of her accommodation request.

11. Conclusion

Jacobs is a remarkable, and potentially far-reaching decision. While only time will tell if it will create a lasting impact on jurisprudence under the ADA, it will surely be often-cited by plaintiff’s counsel in any ADA case. Indeed, the breadth of the opinion will likely fuel many substantial disputes for years to come. For those who, back in the day, referred to the Fourth Circuit as the most conservative Court in the country, the Jacobs decision resoundingly acclaims that it is a new day in Richmond.

Plenty of Cents But Little Sense - Courts Struggle With the Fair Labor Standards Act

2015-02-13T19:09:00.002-05:00

Despite its swiftly-approaching eightieth birthday the Fair Labor Standards Act is as relevant today as it was when passed in 1938. Despite its vintage, the last year has seen D.C.-area courts struggle with a number of complex and consequential questions of interpretation under the FLSA which have the potential to inform litigation nationwide. A smorgasboard of the most important and most interesting issues addressed by D.C.-area courts in the last year is provided below.

I. Equitable Tolling

In Cruz v. Maypa , 773 F.3d 138 (4th Cir. 2014), the Court, Judge Gregory writing for the panel, held that that the failure to post the required FLSA notice in the employer’s home could equitably toll the statute of limitations, and remanded for discovery. The panel’s decision was consistent with the Fourth Circuit’s 1983 decision in Vance v. Whirlpool Corp., 716 F.2d 1010 (4th Cir. 1983) where the Court held that the EEOC filing requirement under the Age Discrimination in Employment Act could be equitably tolled by the employer’s failure to post an ADEA notice of rights. The plaintiff was a domestic servant from the Philippines and spoke Tagalog. The defense argued that posting of the notice would have been futile because the poster provided by the Wage and Hour division is not available in Tagalog. In response, the Court stated "Besides being offensive, this argument turned on a factual issue which must be construed in Cruz's favor...Cruz has not alleged that she speaks no English, only that her English is limited. Furthermore, this argument would lead to the absurd result of affording fewer protections to non-English speaking employees."

II. Individual Liability

In Martin v. Wood , 772 F.3d 192 (4th Cir. 2014), the Fourth Circuit, Judge Niemeyer writing for the panel, dismissed on Eleventh Amendment grounds, an FLSA suit brought by an employee against supervisors in their individual capacities of a state-operated hospital for allegedly improperly refusing to authorize overtime for hours worked in excess of a forty-hour week. The Court seemingly indicated that if the supervisors were alleged to have been acting in an ultra vires manner or if they had acted to serve a personal interest, the FLSA action could proceed against them in their individual capacities. Based on the pleadings before the Court here, the Court concluded that the plaintiff was simply attempting to circumvent Eleventh Amendment immunity.

III. Preemption

In Barton v. House of Raeford Farms , 745 F.3d 95 (4th Cir. 2014), Judge Niemeyer writing for the panel, the Court held that the plaintiff’s claims under a state wage law were preempted by the Labor Management Relations Act, because their disputes about pay were essentially a disagreement as to how to calculate their “hours worked” under a collective bargaining agreement. Here, the collective bargaining agreement was silent as to how compensable time was to be calculated in a donning and doffing circumstance. The custom and practice had been to compensate only for “line” time and not for “clock” time. As a result, the panel, repeatedly noting that the CBA stated that it was the “exclusive” agreement, even though the employer allegedly had represented at the time of hire that it would pay “clock” time, the Court held that such claim was preempted.

IV. Timely Payment of Wages

In Martin v. U.S., 117 Fed. Cl. 611 (2014), the Court of Federal Claims (Chief Judge Campbell-Smith) addressed the Federal Government's partial shutdown which lasted from October 1 through October 16, 2013, resulting in a five-day delay in paying some federal workers. The issue before the Court was whether such a short delay in the payment of wages could nonetheless give rise to an FLSA claim for failure to timely pay non-exempt employees. The Court, applying the Supreme Court's "On Time" mandate found in Brooklyn Savings Bank v. O'Neil, 324 U.S. 697, 707 (1945) declined to adopt the government's proposed "totality of the circumstances" test and instead held that "timely payment was the usual rule." Given that the federal employees had all been paid, albeit a few days late, the claim here is a claim for liquidated damages. The Court did not address that issue except to note the good faith test.

V. The Tucker Act

In Abbey v. United States , 745 F.3d 1363 (Fed. Cir. 2014), the plaintiffs pursued an FLSA claim in the Court of Federal Claims, invoking the Court's jurisdiction under the Tucker Act. The Government, in a reversal of what has been its position for three decades, argued that the Supreme Court’s decision in U.S. v. Bormes, 133 S. Ct. 12 (2012) requires the overturning of the longstanding holding that the Tucker and Little Tucker Acts apply to damages cases against the federal government under the FLSA. The Court, Judge Taranto writing for the panel, rejected this argument.

VI. Full Payment

In Marshall v. Safeway, Inc., 88 A.3d 735 (Md. 2014), the Maryland Court of Appeals held that where an employer made an unauthorized deduction of $29.64 from an employee’s pay in response to two writs of garnishment, it was not paying all the compensation that was due to the employees, which constituted a violation of the Maryland Wage Payment and Collection Law.

VII. Overtime and Wage Theft

In Peters v. Early Healthcare Giver, Inc., 97 A.3d 621 (Md. 2014), the Maryland Court of Appeals (Judge Adkins writing for the Court) addressed enhanced damages where the Employer failed to pay overtime, which the Court characterized as “Wage Theft.” First, the Court rejected the employee's argument that there should be a presumption in favor of granting enhanced damages. Next, the Court addressed whether there was a basis for a legitimate, bona fide, dispute, stating that an incorrect legal belief may form the basis for a legitimate, bona fide, dispute. When asked to establish guiding principals that the trial courts should follow when exercising their discretion as to whether, and in what amount, to award enhanced damages, the court's solution was to simply say that "the trial courts are encouraged to consider the remedial purpose of the MWPCL when deciding whether to award enhanced damages to employees.” Finally, the Court affirmed that the WPCL contemplates a maximum award of three times the unpaid wage, not three times the unpaid wage in addition to recovery the unpaid wages.

VIII. Misclassification

In Mock v. Fed. Home Loan Mortg . Corp., No. 1:13-cv-01292, 2014 U.S. Dist. LEXIS 97259 (E.D. Va. July 15, 2014), aff’d, No. 14-1782, 2014 U.S. App. LEXIS 24569 (4^th Cir. Dec. 30, 2014), the plaintiff, an Engineering Senior and Engineering Tech Lead, claimed that he had been improperly and willfully classified as exempt under the FLSA. The Court granted the employer’s motion for summary judgment, on the bases that the plaintiff is a highly compensated employee who performs non-manual work, and that he also qualified for the administrative employee and computer professional exemptions under the FLSA.

IX. Rounding

In Hughes-Smith v. Crown Linen Serv., Inc., No. 1:13-cv-1048, 2014 U.S. Dist. LEXIS 28415 (E.D. Va. March 5, 2014), the Court (Judge Cacheris) approved the employer's policy whereby it rounded down employee time from one to seven minutes and rounded up employee time from eight to fourteen minutes. The employer tracked hours in fifteen minute intervals.

X. Collective Action Certification/Decertification

In Lafleur v. Dollar Tree Stores, Inc., No. 2:12-cv-00363, 2014 U.S. Dist. LEXIS 69886 (E.D. Va. May 20, 2014), the Court (Judge Jackson) reaffirmed its denial of defendant’s motion to decertify the collective action which it had certified under the FLSA. Among other reasons, the Court indicated that the decision of the Fourth Circuit in Monahan v. Cnty. of Chesterfield, 95 F.3d 1263 (4th Cir. 1996) was distinguishable because Monahan does not deal with the similarly situated standard for collective action certification.

XI. State Legislation

On September 19, 2014 the Mayor signed the D.C. Wage Theft Prevention Act, B20-0671, which is projected to go into effect, following Congressional review, on February 26, 2015. Among its provisions, the Act requires employer notices (and allows for tolling of the SoL in their absence), permits class actions, amends the D.C. Wage Payment & Collection law to cover white collar, executive, and professional employees previously excluded, and provides that fee awards “shall” be made using adjusted Laffey rates.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Do You Hear What I Hear? Accent Discrimination in the Workplace.

2014-12-12T17:27:00.001-05:00

Robert B. Fitzpatrick, Esq.

Justin P. Sacks, Esq.

Workplace discrimination on the basis of national origin, of which accent discrimination is often a component, rose by 76% between 1997 and 2011. See Associated Press, “Discrimination Against Foreign Accents: A Growing Problem”, AOL Jobs (Nov. 30, 2012) (available here). In Wilkie v. Geisinger Sys. Servs., the plaintiff, a native of Germany who spoke fluent English with a German accent, brought a claim for national origin discrimination against her employer following her termination. No. 3:12-cv-580, 2014 U.S. Dist. LEXIS 132162 (M.D. Penn. Sept. 18, 2014). Plaintiff argued that the employer terminated her on the basis of her German origin. Plaintiff claimed that her supervisors had told her that they were “not fond of Germans”, made at least ten jokes about Adolf Hitler, sometimes referred to Plaintiff as “Little Hitler”, ordered her not to speak German in the workplace even on personal calls, and mocked her accent. In one written exchange, one of Plaintiff’s supervisors mocked a conversation he had with Plaintiff by stating that it was just “yada, yada…stutter, stutter”.

In analyzing the significance of the remarks from her supervisor about disliking Germans and comments regarding Adolf Hitler, the Court invoked the “stray remarks” doctrine. This doctrine provides that “stray remarks by non-decisionmakers or by decisionmakers unrelated to the decision process are rarely given great weight, particularly if they were made temporally remote from the date of decision.” Ezold v. Wolf, Block, Schorr & Solis-Cohen, 983 F.2d 509, 514 (3d Cir. 1992). In the Third Circuit, such statements are evaluated based on their temporal proximity to the adverse action, the relationship of the speaker to the plaintiff, and the context in which the remarks were made. Id. The Court found that some of the remarks, which – viewing the facts in the most favorable light to Plaintiff – may have been made only several months prior to her termination were potentially relevant, but that others more remote in time were not relevant. The Court strongly implied that these “stray remarks” comparing Plaintiff to Hitler and establishing that the supervisors who terminated Plaintiff were “not fond of Germans” would have been insufficient, by themselves, to overcome summary judgment.

More relevant to the Court was the fact that Plaintiff was prohibited from speaking her native language in the workplace for any purpose. As an initial matter, numerous courts and commentators, have recognized that “language may be used as a covert basis for national origin discrimination.” Wilkie, 2014 U.S. Dist. LEXIS 132162 at *24 (citing Abbasi v. SmithKline Beecham Corp., 2010 WL 1246316 (E.D. Pa. 2010)); see also Raad v. Fairbanks N. Star Borough Sch. Dist., 323 F.3d 1185, 1195 (9th Cir. 2003) (“Accent and national origin are obviously inextricably intertwined in many cases.”); Wesley v. Palace Rehab. & Care Ctr., L.L.C., 2014 WL 956016, at *5 (D.N.J. 2014) (discussing when accent-based discrimination constitutes national origin versus racial discrimination in the context of a 42 U.S.C. § 1981 claim); Le v. City of Wilmington, 736 F. Supp, 2d 842, 855 (D. Del. 2010) aff'd, 480 F. App'x 678 (3d Cir. 2012) (differentiating “disparaging remarks about one's language skills and national origin” from situations where “an employee's heavy accent or difficulty with spoken English can be a legitimate basis for adverse employment action where effective communication skills are reasonably related to job performance”) (quoting Yili Tseng v. Florida A & M Univ., 380 Fed. App'x. 908, 908-10 (11th Cir. 2010)). Patreese D. Ingram, “Are Accents One of the Last Acceptable Areas for Discrimination”, Journal of Extension, Vol. 49, No. 1 (Feb. 2009) (available here) (describing the incidence of accent discrimination, and citing studies showing that an individual’s perceived race impacts the perception of their accent); Russell, A. “Thou shalt not speak: Accent discrimination in the American workplace” (2002) (available here) (noting that “accent discrimination” is “one of the final acceptable forms of racism”).

Indeed, the Ninth Circuit has held that courts must take a “very searching look” at adverse employment decisions allegedly based on an individual’s accent interfering with their ability to communicate. See Fragante v. City & Cy. Of Honolulu, 888 F.2d 591, 595 (9th Cir. 1989). In Fragante, the Ninth Circuit acknowledged that an accent could constitute a legitimate reason for an adverse action if it interfered “materially” with communication. Id. at 596-97 (“There is nothing improper about an employer making an honest assessment of the oral communications skills of a candidate for a job when such skills are reasonably related to job performance”) (emphasis in original). However, in so doing, the Court cautioned that alleged poor communication skills would appear to be an “easy refuge” for an employer whose actual motive was national origin. Id. at 596. In Fragante, the Ninth Circuit affirmed the lower court’s determination that the defendant had legitimate concerns about Plaintiff’s ability to communicate. Defendant established this through the contemporaneous written evaluation of Plaintiff by two interviews, each of whom indicated that Plaintiff was likely to be difficult to understand over the phone. Id. at 598. This, the Court held, was sufficient factual basis to constitute a legitimate, non-discriminatory, reason for his non-selection.

While it remains unclear how an employer is to determine at what point difficulties communicating become “material”, at least one court has suggested that this standard should be objective, rather than subjective. In Xieng v. Peoples Nat’l Bank, the Defendant suggested that an adverse action should be deemed non-discriminatory if the ability to speak English is a job requirement and the employer had a “good faith belief that…lack of communication skills would materially interfere with job performance.” 821 P.2d 520, 579 (Wash. Ct. App. 1991). The Court rejected this view, noting that the “‘good faith belief’ standard is inconsistent with the heavy burden Fragante places on employers in accent discrimination cases.” Id. at 580. Instead, the Court found that “[g]ood faith alone is not enough”, explaining that “the employer’s honest assessment must have a factual basis” to qualify as a legitimate, non-discriminatory reason. Id. at 580 n.4.

Returning to Wilkie, the Court, after recognizing the connection between accent and national origin discrimination, turned to the guidelines promulgated by the EEOC regarding “English-only” policies in the workplace. See 29 C.F.R. 1606.7. Noting that the EEOC’s guidance distinguishes between policies which require that employees speak English “at all times” or “only at certain times”. Wilkie, 2014 U.S. Dist. LEXIS 132162 at *25-*26, quoting Reyes v. Pharma Chemie, Inc., 890 F. Supp. 2d 1147, 1163 (D. Neb. 2012). In brief, the EEOC guidance provides that English-only policies are permissible “at certain times” when justified by business necessity. 29 C.F.R. 1606.7(b) (“Policies applied only at certain times are permitted, but only where the employer can show the rule is justified by business necessity.”) (internal quotations omitted); see also Roman v. Cornell Univ., 53 F. Supp. 2d 223, 237 (N.D.N.Y. 1999) (“Several courts have held that an English-only policy designed to reduce intra-office tensions is a legitimate business reason.”) (collecting cases).

While Defendants apparently conceded that the guidelines applied, the Court noted that this issue was not settled. In Garcia v. Spun Steak, the Ninth Circuit rejected the validity of Section 1606.7, finding that the EEOC’s interpretation was contrary to the text of Title VII. 998 F.2d 14801, 1489-90 (9th Cir. 1993). In Garcia, the Ninth Circuit held, contrary to the EEOC’s guidance, that the implementation of an English-only policy “does not inexorably lead to an abusive environment for those whose primary language is not English[.]” Id. Emphasizing that “[w]hether a working environment is infused with discrimination is a factual question” the court refused to create a per-se rule regarding English-only policies. In so doing, the court rejected 29 C.F.R. 1606.7, explaining that “[n]othing in the plain language of section 703(a)(1) supports EEOC’s English-only rule Guideline.”

By contrast, the Tenth Circuit found that “the very fact that the City would forbid Hispanics from using their preferred language could reasonably be construed as an expression of hostility to Hispanics. At least that could be a reasonable inference if there was no apparent legitimate purpose for the restrictions.” Maldonado v. City of Altus, 433 F.3d 1294, 1305 (10th Cir. 2006). Interestingly, in Maldonado, the Tenth Circuit noted, in dicta, that “hostility would be a reasonable inference to draw from a requirement that an employee calling home during a work break speak only English.” Id. In other words, “[t]he less apparent justification for speaking English, the more reasonable it is to infer hostility”. Id.

In Wilkie, the Court noted that there was no need to determine the weight afforded to section 1606.7 because Defendants did not have a blanket policy – only Plaintiff was prohibited from speaking German on personal calls. Wilkie, 2014 U.S. Dist. LEXIS 132162 at *28. The Court found that, if true, such an individual restriction would be “indicative of discrimination.” Id. Noting the record was unclear as to the particulars of this restriction, the court found that it constituted an issue of material fact which was in genuine dispute.

Following this conclusion, the court addressed several additional arguments raised by Defendant in support of its motion for summary judgment, including Defendant’s claim that supervisors who terminated Plaintiff “are of German descent.” Id. at *34. As an initial matter, the Court reiterated the basic principle, put forth by the plaintiff, that “being a member of a class does not preclude one from discriminating against that class.” Id.; see also Castaneda v. Partida, 430 U.S. 482, 499 (1977) (“Because of the many facets of human motivation, it would be unwise to presume as a matter of law that human beings of one definable group will not discriminate against other members of their group.”). Although the Court did not explore this line of reasoning, it is worth noting that the plaintiff argued that there is a difference between an individual who has some “ancestry” of a particular sort, and an individual who is a foreign national. Wilkie, 2014 U.S. Dist. LEXIS 132162 at *34.

Ultimately, the Court held that the “stray remarks” submitted by plaintiff, coupled with the other evidence of discrimination was sufficient, “though barely”, to defeat summary judgment. In so doing, the Court opined that although Defendants may argue at trial that Plaintiff was disciplined and terminated in accordance with policy, that Plaintiff need not argue that point here. Plaintiff’s burden at summary judgment, which she met, was to show that “the factors discussed above combine to create a reasonable inference that an invidious discriminatory reason was more likely than not a motivating or determinative cause of Defendants decision to fire Plaintiff.” Wilkie, 2014 U.S. Dist. LEXIS 132162 at *35 (internal quotations omitted).

Other courts which have addressed the problem of language-based national origin discrimination in the workplace have taken a similar approach. In Architect of the Capitol v. Iyoha, the Board of Directors of the Office of Compliance of the United States Congress affirmed the Hearing Officer’s determination that Complainant, a Nigerian man with a Bachelor’s degree in English and Associate Degrees in Mass Communication and Journalism, had been discriminated against on the basis of his national origin. Nos. 11-AC-138, 11-AC-129 (Bd. of Dirs. Dec. 11, 2014) (available here) (accessed Dec. 12, 2014). In Iyoha, the evidence demonstrating that Complainant had been discriminated against came primarily in terms of comments about his proficiency in English and his accent.

In Iyoha, the Complainant, the Help Desk Manager for Respondent’s Production Management Branch, was transferred from his customer-service related position into a project-management position, allegedly due to poor performance. In fact, much as in Wilkie, Complainant had consistently received favorable performance reviews until he came under the management of an individual who disliked his accent. Iyoha’s new manager made comments such as “[t]hank goodness [Complainant] sent me an e-mail because I can never understand him when he talks to me” and “We have a Branch Chief from Iran, engineers from Taiwan and Germany who do not speak English as their first languages. What can you expect?” Following Complainant’s reassignment, he was replaced by an individual who spoke English as his first language. The Hearing Officer found, and the Board agreed, that the circumstances of Iyoha’s reassignment gave rise to an inference of discrimination.

Please be sure to visit our website at http://RobertBFitzpatrick.com

Out of Bounds: Second Circuit “Blows the Whistle” On Extraterritorial Application of Anti-Retaliation Provisions of Dodd-Frank Act

2014-10-07T11:49:00.000-04:00

In Liu v. Siemens, AG, No. 13-4385, 2014 U.S. App. LEXIS 15637, 2014 WL 3953672 (2d Cir. Aug. 14, 2014) the Second Circuit, with Judge Lynch writing for a unanimous panel, held that the whistleblower provisions of the Dodd-Frank Act, 15 U.S.C. § 78u-6(h)(1)(A), did not apply where the plaintiff, his employer, and the other entities involved were all “foreigners based abroad,” and where the whistleblowing, the purported activity which allegedly violated the Foreign Corrupt Practices Act, and the alleged retaliation occurred abroad, and where the plaintiff’s complaint stated “essentially no contact with the United States regarding either the wrongdoing or the protected activity.”

The Court also held that the plaintiff’s argument that Siemens’ voluntary election to publicly list a class of its securities with the New York Stock Exchange was the type of “fleeting connection” that the Supreme Court in Morrison v. Nat’l Australia Bank, Ltd., 130 S. Ct. 2869 (2010) held could not overcome the presumption against a statute’s extraterritoriality. See Celia Joseph, “Court Denies Extraterritorial Application of the Dodd-Frank Act’s Whistleblowing Provisions”, Cross Border Employer Blog, Fisher & Phillips, LLP (Sept. 8, 2014) (available at: http://www.crossborderemployer.com/post/2014/09/08/Court-Denies-Extraterritorial-Application-of-the-Dodd-Frank-Acts-Whistleblowing-Provisions.aspx); Rebekah Mintzer, A Low Note for Whistleblowers at the Second Circuit, American Lawyer Blog (Aug. 19, 2014) (available at: http://www.americanlawyer.com/id=1202667161707).

The Court explained that, to survive a motion to dismiss, a plaintiff must demonstrate:

[E]ither (1) that the facts alleged in his complaint state a domestic application of the antiretaliation provision of the Dodd-Frank Act, or (2) that the antiretaliation provision is intended to apply extraterritorially. As an initial matter, the Court noted that “this case is extraterritorial by any reasonable definition”. Having thus disposed of the first prong, Court devoted the bulk of its analysis to addressing the second prong of the test. Perhaps significantly, the plaintiff in Liu did not report the alleged conduct to the Securities Exchange Commission until after being terminated, thus forfeiting any argument that the termination was on account of a filing with the SEC. After, as explained above, determining that the “fleeting” contact of registering on a domestic exchange did not, under Morrison, bring Siemens within the application of the Dodd-Frank Act, the Court addressed whether the Dodd-Frank Act applied to extraterritorial conduct.

The Court framed its analysis on this point by noting that “there is absolutely nothing in the text of the provision…or in the legislative history of the Dodd-Frank Act, that suggests that Congress intended the [A]nti-[R]etaliation [P]rovision to regulate the relationships between foreign employers and their foreign employees working outside the United States.” Although conceding that the plaintiff “offers several arguments that the statutory language or context” of the Dodd-Frank Act was intended to have extraterritorial reach, the Court founds that the plaintiff failed to provide a “clear and affirmative indication” of legislative intent sufficient to overcome the presumption against extraterritoriality.

One of the plaintiff’s more interesting arguments was based on the SEC’s interpretation of the Dodd-Frank Act’s whistleblower bounty provision, 15 U.S.C. § 78u-6(b). The implementing regulations adopted by the agency provide that “you are not eligible [for an award] if:…You are…a member, officer, or employee of a foreign government, any political subdivision, department, agency, or instrumentality of a foreign government, or any other foreign financial regulatory authority.” 17 C.F.R. § 240.21F-8(c)(2). Elsewhere, the agency discusses the tax filing procedures for an award payment to a foreign national. See 76 Fed. Reg. 34300-01, 34348 n.370, 34320 (June 13, 2011). Liu argued that these regulations indicated that the SEC interpreted the Dodd-Frank Act to apply to conduct outside the United States.

Although noting that “Courts generally defer to reasonable agency interpretations of statutes that” they administer, the Court questioned whether “regulations should be accorded weight…with respect to [determining] the extraterritorial application of a statute.” Liu, 2014 U.S. App. LEXIS 15637 at *17. The Court went on to note that the presumption against extraterritoriality was a “canon of construction” which was capable of resolving Congressional intent without resort to agency regulations. Id. at *18. The Court also held that, in any event, extraterritorial application of the bounty program did not necessarily imply extraterritorial application of the Anti-Retaliation Provision. Id. at *18. Interestingly, the Second Circuit decision came after at least one lower court’s pre-Morrison decision that a similar provision of the Sarbanes-Oxley Act of 2002, Section 806, did have extraterritorial application. See O’Mahoney v. Accenture Ltd., 537 F. Supp. 2d 506 (S.D.N.Y. 2008). It is unclear whether the Second Circuit’s decision in Liu overruled this interpretation, or whether SOX will continue to receive extraterritorial application – at least in the Southern District of New York – while Dodd-Frank Act does not.

In light of the Second Circuit’s holding it is worth considering whether Liu similarly cuts off extraterritorial application of the whistleblower bounty provisions. See Liu, 2014 U.S. App. LEXIS 15637 at *18 (“even if we assume that the regulations clearly apply the bounty program to whistleblowers located abroad…”). Of course, there is some reason to believe that the two regimes would be treated differently – as the Second Circuit explained “[p]roviding rewards to persons, foreign or domestic, who supply information about lawbreaking is far less intrusive into other countries’ sovereignty than seeking to regulate the employment practices of foreign companies with respect to the foreign nationals they employe in foreign countries.” Id. at *19.

Indeed, the Securities and Exchange Commission has relied on this argument to distinguish Liu. In Whistleblower Award Proceeding, the SEC awarded Claimant, a foreign resident, a payment in excess of $30 million under 15 U.S.C. § 78u-6(b)(1) and 17 C.F.R. § 240.21F-3(a), the “bounty” provisions of the Dodd-Frank Act. File No. 2014-10, Release No. 73174 (Sept. 22, 2014) (available at: http://www.sec.gov/rules/other/2014/34-73174.pdf). In so doing, the SEC found that “an award payment is appropriate here notwithstanding the existence of certain extraterritorial aspects of Cclaimant’s application.” Id. at n.2. The SEC reasoned that “there is a sufficient U.S. territorial nexus whenever a claimant’s information leads to the successful enforcement of a covered action brought in the United States, concerning violations of the U.S. securities laws, by the Commission. Id. In such instances, the location of the claimant’s employment, citizenship, and the location where the fraud occurred is irrelevant. Id. The SEC distinguished Liu on the ground that “the whistleblower award provisions have a different Congressional focus than the [A]nti-[R]etaliation [P]rovisions[.]” Id. It is worth noting that nearly twelve percent of the whistleblower tips received by the SEC during FY 2013 came from employees working outside the United States. See U.S. Securities & Exchange Comm’n, 2013 Annual Report to Congress on the Dodd-Frank Whistleblower Program at p. 22 (available at: http://www.sec.gov/about/offices/owb/annual-report-2013.pdf).

The Second Circuit is not the first court to find that the Anti-Retaliation Provision of the Dodd-Frank Act did not apply to primarily extraterritorial events. In Asadi v. G.E. Energy (USA), LLC, Judge Nancy F. Atlas faced a similar set of facts. No. 4:12-345, 2012 U.S. Dist. LEXIS 89746, 2012 WL 2522599 (S.D. Te. June 28, 2012), aff’d on other grounds, Asadi v. G.E. Energy United States, L.L.C., 720 F.3d 620 (5th Cir. 2013). In Asadi, the plaintiff alleged that the defendant had terminated him in retaliation for reporting a violation of the anti-bribery provisions of the Foreign Corrupt Practices Act. Id. Judge Atlas first examined the language of the Anti-Retaliation Provision and, finding that it was “silent regarding whether it applies extraterritorially”, proceeded to “consider the Provision’s ‘context.’” Id. at *15 to *16; citing Morrison v. Nat’l Australia Bank, Ltd., 130 S. Ct. 2869 (2010). In considering the Anti-Retaliation Provision’s “context”, the Asadi Court gave substantial weight to the fact that the Dodd-Frank Act “explicitly addresses extraterritorial scope of the statute in a limited context” in Section 929P(b)[1]. Asadi, 2012 U.S. Dist. LEXIS 89746 at *17. The Court recognized that Section 929P(b) contained explicit language regarding extraterritoriality, and that “when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its ters.” Id. at *18 (internal quotations omitted). Quoting the Supreme Court’s holding in Morrison v. National Australia Bank, Ltd., the Court found that “when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its terms” and that, accordingly, the language in Section 929P(b) “strengthens the conclusion that the Anti-Retaliation Provision does not apply extraterritorially.” Id. at *18; quoting Morrison, 130 S. Ct. at 2883.

Similarly, while analyzing a similar provision of the Sarbanes-Oxley Act of 2002, the Administrative Review Board in Villaneuva v. Core Labs. NV, noted that the Anti-Retaliation Provision of the Dodd-Frank Act does not apply to wholly extraterritorial conduct. ARB Case No. 09-108, ALJ Case No. 2009-SOX-006, 2011 DOLSOX LEXIS 82, 2011 WL 6981989 (ARB Dec. 22, 2011) (en banc) (interpreting 18 U.S.C. § 1514A). In Villaneuva, the plaintiff, a non-U.S. citizen, complained of conduct by the defendant, a Columbian company which does not list securities under Section 12, or file reports under Section 15(d), of the Securities Exchange Act of 1934. Id. at *2 to *3. The ARB found that the Employee Protection Provisions of Section 806 of the Sarbanes-Oxley Act of 2002 did not apply to the concededly wholly-extraterritorial conduct of which the plaintiff complained. Id. at *3. In so holding, the ARB drew a parallel to the Dodd-Frank Act, in which it endorsed the same reasoning later used by Judge Atlas in Asadi: that because Section 929P of the Dodd-Frank Act expressly provides for extraterritorial application, that other portions of the Dodd-Frank Act should not be extended by judicial interpretation into extraterritorial application. Id. at *27 to *29; see also Carnero v. Boston Sci. Corp., 433 F.3d 1 (1st Cir. 2006) (In a pre-Morrison case, the First Circuit found that Section 806 of SOX does not apply to extraterritorial conduct); but see Penesso v. LCC Int’l, Inc., 2005 SOX 00016, 2005 DOLSOX LEXIS 95, 2005 WL 4889018 (U.S. Dept. of Labor March 4, 2005) (Denying motion for summary judgment because Complainant was a U.S. Citizen, much of the protected activity occurred in the U.S. and at least one of the retaliatory acts occurred in the U.S.). Interestingly, although the ARB based its holding in Villaneuva entirely on Section 806’s lack of extraterritorial application, on appeal the Fifth Circuit again ducked this issue, instead finding against Villaneuva on the grounds that he had not engaged in protected activity. Villaneuva v. United States Dept. of Labor, 743 F.3d 103 (5th Cir. 2014).

Although they have yet to find purchase, it is worth taking a moment to unpack the sophisticated arguments deployed to argue that the Anti-Retaliation Provisions should have extraterritorial effect. On appeal to the Fifth Circuit, the plaintiff in Asadi attempted to distinguish Morrison on the basis that “the whistleblower protections under Dodd-Frank rely entirely on the securities laws incorporated by the statute to establish liability.” Brief of Plaintiff-Appellant at 27, Asadi v. G.E. Energy (USA), L.L.C., No. 12-20522 (5th Cir. Oct. 22, 2012). Plaintiff went on to note that the laws incorporated by 15 U.S.C. § 78u-6(h)(1)(A)(iii) include those with “explicit extraterritorial applicability”, such as the Foreign Corrupt Practices Act and Section 302 of the Sarbanes-Oxley Act of 2002. Id. at 27, 29; 15 U.S.C.S. § 7241(a)(4)-(5). Asadi argued that by incorporating those statutes, the Anti-Retaliation Provision explicitly provided for its extraterritorial application. The Fifth Circuit did not address these arguments, opting instead to affirm the lower court’s holding on the alternative rationale that Asadi was not a “whistleblower” within the meaning of the Anti-Retaliation Provision. See Asadi, 720 F.3d at 630.

Although both Liu and Asadi determined that the Anti-Retaliation Provision of the Dodd-Frank Act did not apply to extraterritorial conduct, in neither case did the facts have more than a “fleeting” connection to the United States. In Liu, the Second Circuit found that the plaintiff had “essentially no contact with the United States”, while in Asadi the plaintiff conceded that “the majority of events giving rise to the suit occurred in a foreign country” and the only alleged connection with the United States was that the plaintiff was a dual U.S. and Iraqi citizen and that the plaintiff’s termination was governed by U.S. law. In neither case did the plaintiff allege that any deceptive conduct had occurred within the United States. So, although “clearly” extraterritorial conduct is not within the reach of the Anti-Retaliation Provision, it remains to be seen what level of domestic connection is required to sustain a successful claim.

Robert B. Fitzpatrick is the principal of the law firm of Robert B. Fitzpatrick, PLLC in Washington, D.C., where he has practiced employment law for over forty years.

[1] Section 929P(b) is ably described by Judge Atlas in footnote 40 of her opinion in Asadi, which is quoted here in its entirety: Dodd-Frank, § 929P(b), 124 Stat. 1376. Section 929P(b) amended three statutory sections (15 U.S.C. § 77v(a), 15 U.S.C. § 78aa, and 15 U.S.C. § 80b-14) by adding a new subsection entitled “Extraterritorial Jurisdiction.” Each of the three provisions granted jurisdiction to the federal courts over an “action or proceeding brought or instituted by the Commission or the United States” that alleged a statutory violation involving either (1) “conduct within the United States that constitutes significant steps in furtherance of the violation,” even if the relevant transaction or violation occurred outside the United States and involved only foreign investors; or (2) “conduct occurring outside the United States that has a foreseeable substantial effect within the United States.” Id.

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FLSA Pleading – Your Way, My Way, and the “Middle” Way

2014-09-12T18:09:00.003-04:00

In Davis v. Abington Mem’l Hosp., the Third Circuit, with Judge Chagares writing for the unanimous panel in an FLSA overtime case, affirmed the district court’s dismissal on the ground that plaintiffs’ third amended complaint did not state a plausible claim of an overtime violation. Nos. 12-3514, 3515, 3521, and 3522, 2014 U.S. App. LEXIS 16472 (3d Cir. Aug. 26, 2014). This question has “divided courts around the country.” Nakahata v. N.Y.-Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 200 (2d Cir. 2013).

At the outset of its analysis, the Third Circuit identifies both the most “lenient” and most “stringent” approaches to pleading standards. The most stringent, in the Court’s view, is exemplified by Jones v. Casey’s Gen. Stores, 538 F. Supp. 2d 1094, 1102-03 (S.D. Iowa 2008). There, the Judge held that a complaint alleging that the plaintiffs “regularly worked regular time and overtime each week but were not paid regular and overtime wages” was “implausible on its face.” (internal quotation marks omitted). See also Villegas v. J.P. Morgan Chase & Co., 2009 U.S. Dist. LEXIS 19265, 2009 WL 605833 at *5 (N.D. Cal. Mar. 9, 2009) (granting motion to dismiss where the plaintiff “attempt[ed] to state a claim by reciting that she did not receive properly computed overtime wages . . . . because it is not much more informative than an allegation that she was not paid for overtime work in general"); Bailey v. Border Foods, Inc., 2009 U.S. Dist. LEXIS 93378, 2009 WL 3248305 at *2 (D. Minn. Oct. 6, 2009) (granting motion to dismiss where the plaintiff "failed to identify their hourly pay rates, the amount of their per-delivery reimbursements, the amounts generally expended in delivering pizzas, or any fact that would permit the Court to infer that [plaintiffs] actually received less than minimum wage”).

The most lenient, by contrast, is characterized by the approach of the federal district court for the District of Maryland in Butler v. DirectSat USA, LLC, 800 F. Supp. 2d 662, 668 (D. Md. 2011). In Butler, Judge Deborah K. Chasanow held that “[w]hile defendants might appreciate having Plaintiffs’ estimate of the overtime hours worked at [the pleading stage],” an FLSA complaint will survive dismissal so long as it alleges that the employee worked more than forty hours in a week and did not receive overtime compensation. See also Uribe v. Mainland Nursery, Inc., 2007 U.S. Dist. LEXIS 90984, 2007 WL 4356609 at *3 (E.D.Cal. Dec. 11, 2007) (denying motion to dismiss where plaintiffs alleged they were "non-exempt employees for a wholesaler of plants who have not been paid the applicable overtime wages under the FLSA"); Xavier v. Belfor, USA Group, Inc., 2009 U.S. Dist. LEXIS 11751, 2009 WL 411559 at *5 (E.D.La. Feb. 13, 2009) (denying motion to dismiss where the plaintiff alleged that "they were paid on an hourly basis, that they routinely worked in excess of 40 hours per week, and that they were not paid an overtime premium").

Rather than adopt either the Jones or Butler approaches, the panel stated that it agreed with “the middle-ground approach” adopted by the Second Circuit in Lundy v. Catholic Health Sys. of Long Island, Inc., 711 F.3d 106 (2d Cir. 2013). In that case, Chief Judge Dennis Jacobs, writing for the unanimous panel, stated: “[I]n order to state a plausible FLSA overtime claim, a plaintiff must sufficiently allege [forty] hours of work in a given workweek, as well as some uncompensated time in excess of the [forty] hours.” Id. at 114.

Having adopted the Lundy approach, the Third Circuit held that the plaintiffs’ allegations in Davis, the case at issue, failed to satisfy the Lundy test. In Davis, the named plaintiffs alleged that they “typically” worked 37.5 hours per week and “occasionally” worked an additional 12.5 hour shift or “slightly longer”. Plaintiff also indicated that she “typically” worked during thirty-minute meal breaks, and was not compensated for this work. Plaintiff argued that these allegations were sufficient to plausibly plead that at least some uncompensated work was performed during weeks when the plaintiffs’ total work time was more than forty hours.

The Third Circuit disagreed. While noting that the determination whether a plausible claim has been pled is context-specific, the Court found that none of the named plaintiffs had alleged a single workweek in which they worked at least forty hours and also worked uncompensated time in excess of forty hours. Accordingly, the court found the allegations to be insufficient and declined to provide plaintiffs with an opportunity to file a fourth amended complaint. In rejecting plaintiffs’ pleadings, the Court cited and quoted at length from Lundy and an earlier Second Circuit decision, Nakahata v. N.Y. Presbyterian Healthcare Sys., Inc., 723 F.3d 192, 200 (2d Cir. 2013). In Nakahata the Court held that “[p]laintiffs must prove sufficient detail about the length and frequency of their unpaid work to support a reasonable inference that they worked more than forty hours in a given week”.

The Court then went on to state that it was not holding that a plaintiff must identify the exact date(s) and time(s) that s/he worked overtime. The Court stated: “for instance, a plaintiff’s claim that she ‘typically’ worked forty hours per week, worked extra hours during such a forty-hour week, and was not compensated for extra hours beyond forty hours he or she worked during one of those forty hour weeks would suffice.” (footnote omitted). Finally, on the pleading issue, the Court emphasized that it read Lundy to hold only that “a plaintiff must connect the dots between bare allegations of a ‘typical’ ‘forty-hour workweek’ and bare allegations of work completed outside of regularly scheduled shifts, so that the allegations concerning a typical forty-hour week include an assertion that the employee worked additional hours during such a week, and we believe that this middle-ground approach is the correct one.”

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Ward & Solomon – The D.C. Circuit Can Be Quite Accommodating

2014-09-12T18:04:00.000-04:00

In Ward v. McDonald, the D.C. Circuit addressed the case of an individual who had requested that she be permitted to work from home on a full-time basis as a reasonable accommodation for her medical condition. No. 12-5374, 2014 U.S. App. LEXIS 15402 at *1-*2 (D.C. Cir. Aug. 12, 2014). In Ward plaintiff had been diagnosed with a medical condition which rendered her unable to sit for long periods of time. Id. In addition, plaintiff required “routine daily care at home”. Id. at *5. These daily treatments required 1 to 3 hours, and sometimes required that plaintiff disrobe. Id. *4 to *5. Plaintiffs job was “the quintessential desk job”, and required little or no physical exertion – indeed, the by far the bulk of plaintiff’s work was performed sitting at her desk. Id. at *4, *8.

Although plaintiff “struggled at times” to perform her job, she nevertheless was rated “[f]ully [s]uccessful or better” on her performance reviews. Id. at *5. Nevertheless, the long periods of sitting exacerbated plaintiff’s condition, and she applied for a reasonable accommodation to be permitted to work at home. Id. at *5 to *6. There followed a series of conversations between plaintiff and her supervisors regarding her requested accommodation, during which time period plaintiff provided additional documentation regarding her medical condition, the basis for her requested accommodation, and how it would enable her to perform her job duties. Id. at *6 to *9. During these conversations, plaintiff’s employer indicated that it could allow her to work from home on a part-time schedule. Plaintiff’s supervisors indicated that, as she would need to sit for long periods of time regardless of her work location, and due to the substantial time needed for her treatments, they were concerned about her ability to maintain a full-time work schedule. Id. at *7. In that communication, defendant requested additional information regarding plaintiff’s ability to work a full time schedule. Id. Plaintiff failed to respond, instead tendering her resignation. Id. at *9.

Although plaintiff tendered her resignation, she indicated that consideration of her resignation be delayed. Id. In response to plaintiff’s resignation, defendant indicated that it had not denied any requested accommodation. Id. at *9 to *10. Defendant also indicated that it would consider allowing plaintiff to “try work-from-home on a full-time basis.” Id. at *10. Plaintiff never responded to that communication. The district court granted summary judgment for defendant. In so doing, the district court found that the defendant had participated in the interactive process and had offered plaintiff the very accommodation which she sought while, on the other hand, plaintiff had failed to participate in the interactive process and had not demonstrated that she could perform the essential functions of her job.

On appeal, the D.C. Circuit issued a split decision. The dispute centered primarily around the employer’s requests for additional information regarding plaintiff’s medical condition. The majority found that plaintiff’s failure to respond to the employer’s request for medical information constituted a failure to participate in the interactive process. Affirming the district court’s grant of summary judgment, the majority explained that “[plaintiff] did not provide the requested information. Instead, she resigned. No reasonable juror could have found that the [defendant] denied [plaintiff’s] request for an accommodation, then, because [plaintiff] abandoned the interactive process before the [defendant] had the information it needed to determine the appropriate accommodation.” Id. at *22.

By contrast, the dissent emphasized that the employer did not need any of the information which it requested to reasonably accommodate plaintiff, nor did the information requested relate to any essential function of plaintiff’s job. Id. at *30. Indeed, the employer had admitted that this was the case. In the dissent’s view the employer had discriminated against plaintiff by “needlessly prolonging” the process of applying for defendant’s flexi-place program, and emphasized that “[plaintiff’s] increasing inability to properly treat her [condition] in the office was literally endangering her life, making the delay caused by her supervisors’ unjustified factual detours acutely harmful.”

The plaintiff in Solomon v. Vilsack had been denied her requested accommodation of a flexible work schedule (a “maxiflex” schedule) despite apparently similarly situated employees being permitted to make use of such a schedule. No. 12-5123, 2014 U.S. App. LEXIS 15671 (D.C. Cir. 2014). The court’s decision focuses primarily on whether such flexible work schedules can be, as a matter of law, “reasonable” accommodations under the Rehabilitation Act. Id. at *16 to *17. The Court found that such schedules can, as a matter of law, be reasonable accommodations. Id.

As an initial matter, it is worth noting that plaintiff’s medical expert provided evidence that “to a reasonable degree of medical certainty [defendant’s actions] substantially worsened [plaintiff’s] condition” to the point that she was eventually rendered unable to work. Id. at *10. Although plaintiff took a disability-related retirement, the Court held that she was not precluded from pursuing a disability discrimination claim because her retirement application “never stated that she would have been unable to work if she had been afforded the accommodations she sought”. Id. at *13. However, the Court appears to have limited her claim to “spring and summer of 2004” – in other words, prior to the worsening of her condition due to the employer’s actions. Id. at *13.

As noted above, the Court seems to have cut off liability at the time after which plaintiff’s conditions worsened to the point that she could no longer work. Id. at *13, *38. This is true even though plaintiff’s medical expert proffered evidence that plaintiff’s worsened condition was due, at least in part, to the employer’s actions. Id. While the Court devotes little time or analysis to this issue, a paragraph at the end is telling:

Finally, Solomon points to her requests in late May to telecommute or to work part-time. But for that period of time, correspondence from Solomon herself and Dr. Cozzens led Solomon's supervisors to believe that her condition had deteriorated to the point that she was medically unable to work in any capacity. Even if the supervisors incorrectly assessed Solomon's condition, and the Department was thus obligated to provide reasonable accommodation, Solomon must still present evidence casting doubt on the sincerity of the Department's proffered non-retaliatory justification for its action.

Id. at *38 to *39.

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Check Your Privilege – Does Judicial Privilege Apply to Cease & Desist Letters?

2014-09-12T18:02:00.000-04:00

Your client signs a non-compete agreement and later leaves to go work for another employer. Your client’s former employer sends a “cease and desist” letter to the new employer, resulting in your client being terminated or suffering other damages. Does your client have a claim? This basic, and increasingly common, scenario, has played out in numerous courts across the country to widely disparate outcomes.

In Murphy v. LivingSocial, Inc., 931 F. Supp. 2d 21 (D.D.C. 2013), Judge Sullivan held that the defendant’s letter to plaintiff and plaintiff’s new employer, which asserted that plaintiff had violated her non-compete agreement with defendant, was insulated from plaintiff’s libel claim on the ground that the letter was protected by the judicial proceedings privilege because it was clear that defendant was seriously considering litigation. The court stated that “the Travelzoo [the new employer] Letter was written by LivingSocial’s attorney, to advise Travelzoo of plaintiff’s contractual obligations, explained that plaintiff’s actions appeared to have been taken in violation of the contract, stated that LivingSocial reserved its rights to take all legal and equitable action to protect its business interests, and demanded that Travelzoo immediately cease and desist from any further solicitation of LivingSocial employees, customers, or prospective customers.” In dismissing the case, the Court noted that the non-compete agreement provided that LivingSocial was permitted to communicate the terms of the non-compete agreement to a perspective or current employer of plaintiff.

By contrast, in SCI Funeral Servs. of Fla., Inc. v. Henry, the District Court of Appeal for the Third District of Florida found that the “litigation privilege” did not extend to a cease and desist letter seeking to enforce a non-compete agreement. 839 So. 2d 702 (Fla. App. 2002). In SCI Funeral, defendant moved to dismiss plaintiff’s claims, arguing that its demand letter was absolutely privileged under the “litigation privilege”. This privilege “bars causes of action in tort for statements made in connection with a judicial proceeding.” The court, however, found that defendant’s conduct was not protected by the litigation privilege, reasoning that “an employer cannot threaten an employee with litigation over a non-compete agreement which has expired. If the employer wrongly does so, thus causing the employee to lose his or her job, there must necessarily be a judicial remedy for such conduct.”

This position finds indirect support in the treatment of such claims by other courts. For example, in Hidy Motors, Inc. v. Sheaffer, the Court of Appeals of Ohio focused on the enforceability of the non-compete agreement in addressing plaintiff’s claims based on the transmission of a Cease & Desist letter to plaintiff’s new employer. 916 N.E.2d 1122 (Ohio App. 2009). Although it does not appear that the employer raised a “litigation privilege” defense, the employer did contend that it was “privileged to protect [its] legitimate business interest[s]”. Id. at 1131. The Court, however, noted because “[t]he trial court did not address whether the covenant not to compete…was enforceable” that “[it] erred in assuming that the covenant not to compete could be relied on as the basis for [defendant’s] privilege defense[.]” Id. at 1132. Other courts have also endorsed such analysis on similar facts. See Gentile v. Olan, No. 12-cv-3664, 2013 U.S. Dist. LEXIS 64472, 2013 WL 1880771 (S.D.N.Y. 2013) (finding that cease and desist letter may constitute actionable tortious interference when defendant’s letter was “unwarranted” by plaintiff’s conduct and when “a material question of fact exists as to whether Plaintiff ever signed [the] agreement”);Voorhees v. Guyan Machinery Co., 446 S.E.2d 672 (W. Va. 1994) (no privilege where the plaintiff’s alleged “competition” was “so insignificant as to render [defendant’s] claim that it was protecting its business interests by enforcing the noncompetition agreement [with plaintiff] absurd.”); Carter v. Aramark Sports & Entm’t Servs, Inc., 835 A.2d 262 (Md. Ct. Spec. App. 2003) (tortious interference claim can be based on at-will relationship); but see Bonds v. Philips Electronic N.A., No. 2:12-cv-10371, 2014 U.S. Dist. LEXIS 6845, 2014 WL 222730 (E.D. Mich. Jan. 21, 2014) (“Defendant’s actions cannot be improper because they were motivated by legitimate business reasons”).

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Statute of Limitations Starts Running Before Constructive Discharge

2014-09-12T18:00:00.003-04:00

In Green v. Donahoe, No. 13-1096, 2014 U.S. App. LEXIS 14290, 2014 WL 3703823 (10th Cir. July 28, 2014), a panel of the 10th circuit, Judge Hartz writing, held that a claim for constructive discharge does not accrue at the time when plaintiff resigns. Instead, the claim accrues on the date of the employer’s last misconduct. In Green the plaintiff, a postal employee, agreed to resign his employment on December 16, 2009, but was permitted to use accrued annual and sick leave until March 31, 2010, at which point he could choose either to retire or accept a significantly lower position at a facility some 300 miles distant. Plaintiff filed an informal charge of retaliation with an EEO counselor on January 7, 2010, but did not file a formal charge until February 17, 2010. On February 9, 2010, plaintiff notified his employer that he planned to retire, pursuant to their earlier agreement, effective March 31, 2010. Plaintiff initiated EEO counseling on March 22, and filed another formal charge of retaliation on April 23, alleging constructive discharge for his forced retirement. Plaintiff’s eventual lawsuit was dismissed when the district court held that it was untimely because plaintiff had not contacted an EEO counselor about it within 45 days.

In reviewing the lower court’s decision, the Tenth Circuit first examined the nature of a constructive discharge claim. The Court explained that “c]onstructive discharge occurs when an employer unlawfully creates working conditions so intolerable that a reasonable person in the employee’s position would feel forced to resign.” Green, 2014 U.S. App. LEXIS 14290 at *19, quoting Lockheed Martin Corp. v. Admin. Review Bd., 717 F.3d 1121, 1133 (10th Cir. 2013). The key issue before the court was when the constructive discharge claim accrued. The Court framed its analysis by noting that “[f]or most federal limitations periods, the clock starts running when the plaintiff first knew or should have known of his injury.” Green, 2014 U.S. App. LEXIS 14290 at *22 (internal quotations omitted). In the employment context, this generally means that the claim accrues when the “disputed employment practice” occurs. Id. (internal quotations omitted).

However, the Tenth Circuit found this general rule to be inappropriate in the context of constructive discharge claims. The Tenth Circuit distinguished constructive discharges from other adverse actions, stating “[a] constructive discharge involves both an employee’s decision to leave and [the employer’s] precipitating conduct.” Id. (emphasis in original) (alterations in original) (quotations omitted).

The Tenth Circuit went on to identify the core question for resolution – whether the date of the accrual of plaintiff’s constructive discharge claim “can be postponed from the date of the employer’s misconduct until the employee quits or announces his future departure.” Id. at *22. The Court framed this question as a choice between accrual at the time when the “employee quits or announces his future departure” and when the last “discriminatory act” occurs. As an initial matter, the Court noted that most courts to consider this issue had “no occasion” to choose between these approaches. See, e.g., Jeffery v. City of Nashua, 163 N.H. 683, 48 A.3d 931, 936 (N.H. 2012) (plaintiff unsuccessfully argued that claim accrued on effective date of resignation, not when she gave notice of resignation); Patterson v. Idaho Dept. of Health & Welfare, 151 Idaho 310, 256 P.3d 718, 725 (Idaho 2011) (same); Whye v. City Council, 278 Kan. 458, 102 P.3d 384, 387 (Kan. 2004) (same); Hancock v. Bureau of Nat'l Affairs, Inc., 645 A.2d 588, 590 (D.C. 1994) (same) However, the Court did identify “several” decisions holding that the claim accrued on the date of the resignation, on the rationale that the resignation was a “distinct discriminatory act”. See Flaherty v. Metromail Corp., 235 F.3d 133, 138 (2d Cir. 2000); Draper v. Coeur Rochester, Inc., 147 F.3d 1104, 1111 (9th Cir. 1998); Young v. Nat'l Center for Health Servs. Research, 828 F.2d 235, 237-38 (4th Cir. 1987).

The Court rejected that approach. Declaring that “we cannot endorse the legal fiction that the employee's resignation, or notice of resignation, is a ‘discriminatory act’ of the employer”, the Court sided with the Seventh and D.C. Circuits in holding that a claim for constructive discharge must be filed such that there is at least one “discriminatory act” by the employer within the statutory limitations period. See Mayers v. Laborers' Health & Safety Fund, 478 F.3d 364, 367, 370, 375 U.S. App. D.C. 134 (D.C. Cir. 2007) (notice of resignation was within limitations period but no discriminatory act of employer was); Davidson v. Ind.-Am. Water Works, 953 F.2d 1058, 1059-60 (7th Cir. 1992) (same). In so holding, the Court reasoned that “delaying accrual past the date of the last discriminatory act and setting it at the date of notice of resignation would run counter to an essential feature of limitations periods by allowing the employee to extend the date of accrual indefinitely.” Green, 2014 U.S. App. LEXIS 14290 at *25 to *26.

This leaves us with three distinct approaches to the accrual of constructive discharge claims for limitations purposes:

1) The limitations period runs from the date on which the employee provides notice of her resignation. This is the approach adopted by the Second, Fourth, and Ninth Circuits.

2) The limitations period runs from the date of the final discriminatory act, which cannot be the employee’s resignation. This is the approach adopted by the Seventh, Tenth, and D.C. Circuits.

3) The limitations period runs from the date on which the employee actually ceases to work for the employer. This appears to be a minority position, but has been endorsed, for example, by the Court of Appeals for Oregon. See Hernandez-Nolt v. Wash. Cnty., 315 P.3d 428 (Ore. App. 2013).

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Cy Pres on the Supreme Court’s Radar

2014-07-25T17:44:00.000-04:00

Cy pres is a legal doctrine under which courts, when unable to effectuate a direct monetary payment to plaintiffs, undertake to distribute moneys to provide an indirect benefit to plaintiffs. The term cy pres originally comes from French. Literally, the phrase means “so near/close” though a more figurative translation would be “as near as possible” or “as near as may be”. Black’s Law Dictionary, p. 349 (5th Ed. 1979). Cy pres remedies are important to plaintiffs both because they may be in the position of negotiating such remedies in appropriate cases, and because certain charitable or legal organizations which serve low-income populations may find themselves eligible to receive cy pres moneys. E.g. Public Justice, “Cy Pres Donations: Serving the Class and the Public Interest” (available at: http://publicjustice.net/support-us/cy-pres-donations-serving-class-public-interest). The ALI’s Principles of the Law of Aggregate Litigation, which are discussed in more detail below, provide that cy pres awards should be made to organizations “whose interests reasonably approximate those being pursued by the class.” § 3.07(c); See also In re Pharm. Indus. Average Wholesale Price Litig., 588 F.3d 24 (1st Cir. 2009) (cy pres distribution to cancer or patient related charities was appropriate where defendant was accused of price inflation for a cancer drug).

The Supreme Court recently declined to review the class action settlement in Marek v. Lane, 134 S. Ct. 8 (Nov. 4, 2013) (denying petition for certiorari). However, the Chief Justice issued a statement, concurring in the denial of certiorari indicating that cy pres provisions of settlements raise “fundamental concerns.” The Chief Justice also noted that cy pres remedies are a “growing feature of class action settlements.”

The original complaint, which originated as a challenge to a Facebook program known as “Beacon”, which automatically shared purchase and other personal information with both Facebook and the users’ friends lists, sought both monetary and injunctive relief. Marek, 134 S. Ct. at 8. The settlement eventually agreed to between the parties, and which gave rise to the challenge which is the subject of Marek, provided the vast majority of class members with neither remedy. Id. The underlying settlement at issue in Marek provided no monetary damages to the class at large. Id. The named plaintiffs received “modest incentive payments”, and class counsel received approximately $2.5 million. See Marek, 134 S. Ct. at 8-9. Instead of providing monetary relief to the class, the settlement created a grant-making organization, the Digital Trust Foundation (the “DTF”), the mission of which would be to educate the public about online privacy. Id. at 9; see also Mike Keefe-Feldman, “The Digital Trust Foundation: Facebook’s Unwanted Child”, Nonprofit Quarterly (June 2, 2014) (available at: https://nonprofitquarterly.org/policysocial-context/21895-the-digital-trust-foundation-facebook-s-unwanted-child.html). The Foundation would be run by a three-member board, including Facebook’s public policy director. Marek, 134 S. Ct. at 9. In addition, the settlement provided for the creation of a “Board of Legal Advisors”, consisting of counsel for the plaintiff class and Facebook, to “advise and monitor the DTF”. See Lane v. Facebook, 696 F.3d 811, 818 (9th Cir. 2012). Further complicating the settlement, the class of those barred from future litigation included not just individuals injured by the specific program during the time period cited in the original complaint, but also all individuals injured by subsequent iterations of the program at time periods not covered by the original complaint. Id. As the Chief Justice notes, “Facebook thus insulated itself from all class claims arising from the Beacon episode by paying plaintiffs’ counsel and the named plaintiffs some $3 million and spending $6.5 million to set up a foundation in which it would play a major role.” Id.

The Chief Justice notes dryly that, when this settlement was challenged by class members, the District Court, Judge Richard Seeborg, found it to be “fair, reasonable, and adequate.” Id., citing Fed. R. Civ. P. 23(e)(2); Lane v. Facebook, Inc., Civ. No. C 08-3845, 2010 U.S. Dist. LEXIS 24762, 2010 WL 9013059 (N.D. Cal. Mar. 17, 2010). On appeal, a panel of the Ninth Circuit affirmed the District Court’s determination by a vote of 2-1.

In that decision, authored by Circuit Judge Hug, with a dissent by Judge Kleinfeld, the Ninth Circuit indicated that its responsibility was to “evaluate the fairness of a settlement as a whole, rather than assessing its individual components.” Lane, 696 F.3d at 818. As to the adequacy of cy pres remedies, the Ninth Circuit indicated that the Court must ensure that the remedy “account[s] for the nature of the plaintiffs’ lawsuit, the objectives of the underlying statutes, and the interests of the silent class members.” Id. at 819-20 (internal quotations omitted). Plaintiffs raised two principal challenges to the settlement – the amount and the use of a cy pres remedy. Id. at 820. Here, we focus only on the latter, which the Ninth Circuit characterized as the strongest objection to the settlement. Id.

First, the Court turned to plaintiff’s argument that the cy pres remedy was inappropriate because the presence of Facebook executives on DTF’s board would “create[] an unacceptable conflict of interest that will prevent DTF from acting in the interests of the class.” Id. Finding that the cy pres remedy here was proper, the court explained that “we do not require…that settling parties select a cy pres recipient that the court or class members would find ideal.” Id. at 820-21. The only requirement was that the cy pres remedy should account for the interests of the lawsuit, the statute, and silent plaintiffs. Id. Finding the notion “[t]hat Facebook retained and will use its say in how cy pres funds will be distributed so as to ensure that the funds will not be used in a way that harms Facebook is…unremarkable” and declining to “undermine those negotiations by second-guessing the parties’ decision”, the Court upheld the arrangement. Id. at 822.

The dissent, noting the potential for embarrassment created by the “Beacon” program, also pointed out that mediation and settlement occurred prior to any class certification. The class was only certified for settlement purposes. Id. at 828. Other details contained in the dissent cast further doubt on the utility, if not the validity, of the settlement. For instance, while Facebook agreed never to relaunch the “Beacon Program”, this term was defined to include only programs “bearing the ‘Beacon’ name” – in other words, the same program under a different name would not be a “Beacon Program”. Judge Kleinfeld’s dissenting opinion notes that “[t]he injunctive relief the class received was no relief at all, not even a restriction on future identical conduct.” Id. Regarding the monetary relief, Judge Kleinfeld explained “Facebook users…got no money, not a nickel, from the defendants. Even those who…were arguably entitled to statutory damages…got nothing. Class counsel, on the other ha[n]d, got millions.” As to the “incentive payments”, only $39,000.00 of the $9 million settlement was allocated to those payments. Id. at 829.

Judge Kleinfeld’s spirited dissent is worth reading in its entirety for its detailed exposition of the numerous conflicts to which class actions are susceptible – and which arose in this case. A flavor, however, can be gleaned from this excerpt:

Defendant and class counsel, in any class action, have incentives to collude in an agreement to bar victims' claims for little or no compensation to the victims, in exchange for a big enough attorneys' fee to induce betrayal of the interests of the purported "clients." The defendant's agreement not to oppose some amount for the fee creates the same incentive as a payment to a prizefighter to throw a fight. A real client may refuse a settlement that is bad for him but benefits his lawyer, but a large class of unknown individuals lacks the knowledge or authority to say no. It is hard to imagine a real client saying to his lawyer, "I have no objection to the defendant paying you a lot of money in exchange for agreement to seek nothing for me." "The absence of individual clients controlling the litigation for their own benefit creates opportunities for collusive arrangements in which defendants can pay the attorneys for the plaintiff class enough money to induce them to settle the class action for too little benefit to the class (or too much benefit to the attorneys, if the claim is weak but the risks to the defendants high).

Over a dissent written by Judge Milan D. Smith, and joined by five of her colleagues, including Chief Judge Kozinski, the Ninth Circuit denied rehearing en banc. The dissent focused what, in its view, constituted several major departures from the Ninth Circuit’s prior case law on the subject of cy pres remedies. Among the problems identified by the dissenters are the lack of any track record on the part of the DTF, and the divorce between the DTF’s goals and the objectives of the underlying statutes. Lane, 709 F.3d at 793-794. As to the former, the dissenters explained that the DTF “has no record of service” and that, given this lack, there is simply no way of knowing how the settlement funds will be used in the level of detail required by the Court’s prior cy pres precedent. Id. at 793. The dissenters argue that there is no assurance that the class members will “actually benefit” from DTF’s activities, and that DTF’s mission statement amounts to little more than promising that “DTF will do some ‘stuff’ regarding some more ‘critical stuff.’” Id. at 794. Regarding the latter, the dissenters explain that the statutes cited by the original plaintiffs all, with one exception, have the goal of preventing “unauthorized access or disclosure of private information.” Id. (emphasis in original) (citing the Electronic Communications Privacy Act, 18 U.S.C. § 2510; the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; the Video Privacy Protection Act, 18 U.S.C. § 2710; the California Legal Remedies Act, Cal. Civ. Code § 1750, and the California Computer Crime Law, Cal. Penal Code § 502). The dissenters note that DTF’s stated goals focus on educating users on controlling their private information, but not in the issue central to this case – controlling the unauthorized use of personal information which even educated users cannot anticipate, prevent, or direct. Id. at 794.

Returning to Chief Justice Roberts’ statement concerning the denial of certiorari, we can glean several insights into the concerns about cy pres settlements. Although the Chief Justice joined the Court’s decision to deny certiorari, his rationale is telling:

Marek’s challenge is focused on the particular features of the specific cy pres settlement at issue. Granting review of this case might not have afforded the Court an opportunity to address more fundamental concerns surrounding the use of such remedies in class action litigation[.]

Marek, 134 S. Ct. at 9. Among the Chief Justice’s concerns are: 1) When, if ever, cy pres remedies should be considered; 2) How to assess the fairness of cy pres remedies; 3) Whether new entities may be established as part of cy pres relief; 4) How existing entities should be selected; 5) What role is to be played by both the Judge and the parties in shaping a cy pres remedy; and 6) How closely the goals of any organization selected must correspond to the interests of the class. Id. It may be of note that the Chief Justice referenced Redish, Julian, & Zyontz’s article in the Florida Law Review, entitled “Cy Pres Relief and the Pathologies of the Modern Class Action: A Normative and Empirical Analysis”. 62 Fla. L. Rev. 617, 653-56 (2010) (available at: http://www.floridalawreview.com/wp-content/uploads/2010/01/Redish_BOOK.pdf). The Chief Justice concluded with an open invitation to further challenges, noting that “[i]n a suitable case, this Court may need to clarify the limits on the use of such remedies.” Id.

Another vivid example of the potential problems in using cy pres remedies in the class action context is provided by In re Baby Prods. Antitrust Litig., 708 F.3d 163 (3d Cir. 2013). See Wasserman, Rhonda, Cy Pres in Class Action Settlements (March 24, 2014). Southern California Law Review, Vol. 88, 2014, Forthcoming; U. of Pittsburgh Legal Studies Research Paper No. 2014-14. Available at SSRN:http://ssrn.com/abstract=2413951 (“Wasserman”). In Baby Products, the plaintiffs alleged that defendants had conspired to set a “floor price” on select products. Wasserman at 32. Unlike in Lane, the district court certified a class of purchasers, and various subclasses, well in advance of settlement. Id. While the formula for distributing the funds was somewhat complex, assuming adequate moneys were available, plaintiffs would be eligible to receive up to treble damages, with any remainder to be donated to a charitable organization selected by the Court from among those proposed by the parties. Baby Products, 708 F.3d at 171. However, because most class members were unable to provide proof that they purchased a qualifying product, only roughly ten percent of the $35.5 million settlement fund was used to compensate class members.

As an initial matter, the court held that “[w]e join other courts of appeals in holding that a district court does not abuse its discretion by approving a class action settlement agreement that includes a cy pres component.” Id. at 173. However, the Court immediately cautioned that “direct distributions to the class are preferred over cy pres” remedies. Id. The Court noted that the ALI has published recommendations limiting the use of cy pres awards:

If the settlement involves individual distributions to class members and funds remain after distributions (because some class members could not be identified or chose not to participate), the settlement should presumptively provide for further distributions to participating class members unless the amounts involved are too small to make individual distributions economically viable or other specific reasons exist that would make such further distributions impossible or unfair.

American Law Institute Principles of the Law of Aggregate Litig. § 3.07, comment b (2010) (the “Principles”). The Principles provide that the cy pres doctrine should be used as a last resort only when other methods of distribution are not practicable, whether due to the unknown composition of the plaintiff class or due to the impracticability of cost-effectively distributing numerous small awards. See Karen Shanley, The Institute in the Courts: Principles of the Law of Aggregate Litigation, The ALI Reporter (available at: http://www.ali.org/_news/reporter/summer2012/07-institute-courts-aggregate-litigation.html). The Principles indicate that cy pres is an inappropriate remedy where there was still a possibility of compensating plaintiffs. Id.; see also Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468 (5th Cir. 2011) (use of cy pres remedy denied. Court, citing section 3.07 of the Principles, reasoned that “a cy pres distribution to a third party…is permissible ‘only when it is not feasible to make further distributions to class members.”). The Principles provide guidance as to when distribution of settlement proceeds to class members is viable. Principles § 3.07(a); Shanley at 1. Factors courts should consider include whether class members can be “identified through reasonable effort” and whether “the amounts involved are too small to make individual distributions economically viable” as well as “other specific reasons that would make such further distributions impossible or unfair.” Principles at § 3.07(b); Shanley at 2.

To assess whether a settlement containing a cy pres provision is “fair, reasonable, and adequate” the Third Circuit indicated that courts should consider “the number of individual awards compared to both the number of claims and the estimated number of class members, the size of the individual awards compared to claimants’ estimated damages, and the claims process used to determine individual awards.” Baby Products, 708 F.3d at 174. More particularly, the Court advised that, in general, “cy pres awards should generally represent a small percentage of total settlement funds.” Finally, the Court opined that if Defendants refused to alter the claims process to result in a higher payout to the class, “the Court will need to determine whether the class received sufficient direct benefit to justify the settlement as fair, reasonable, and adequate.” Id. at 176. As part of its order remanding the matter, the Court vacated the $14 million attorneys’ fee award, as the settlement was no longer in effect. Id.

The Baby Products opinion is part of a line of cases that have expressed concern about the implications of the cy pres doctrine. Joshua Dunlap, Closer Scrutiny for Cy Pres Distributions?, FirstClassDefense Blog (March 8, 2013) (available at: http://pierceatwood.typepad.com/first_class_defense/2013/03/closer-scrutiny-for-cy-pres-distributions.html). In In re Compact Disc Minimum Advertised Price Litig., the district court for the Federal District of Maine expressed skepticism of the benefit of a cy pres award to the class plaintiffs. No. 2:00-MD-1361, 2005 U.S. Dist. LEXIS 11332 (D. Me. June 10, 2005). In Compact Disc, the Court actually reduced the fee award to class counsel “in light of the modest benefit” received as a result of the cy pres award. Id.

Of course, despite criticism, courts continued to employ cy pres awards out of a belief that they are superior to the alternatives. In general, if a cy pres award is not available, then the settlement funds would revert to either the Defendant or the government. Wasserman at 10-12. In the former case, courts have expressed concern that that such a remedy would risk “undermining the deterrent effect of class actions by rewarding defendants for the failure of class members to collect their share of the settlement.” Baby Products, 708 F.3d at 172. This is especially true where statutory objectives include deterrence or disgorgement. Wasserman at 11; Six Mexican Workers v. Ariz. Citrus Growers, 904 F.2d 1301, 1308 (9th Cir. 1990). Of course, where compete distribution is impossible, the preference is to increase the award to class members before engaging in cy pres distribution. See In re Lupron Mktg. & Sales Practices Litig., 677 F.3d 21 (3d Cir. 2012). Commentators have long complained of the use of cy pres awards for numerous reasons, including the due process and First Amendment rights of class members. See Ilya Shapiro, “Curbing Class Action Settlement Abuses”, Cato at Liberty Blog (Aug. 28, 2013) (available at: http://www.cato.org/blog/curbing-class-action-settlement-abuses). Chief Justice Roberts’ concurrence to the denial of certiorari in Marek raises the possibility that these arguments may soon receive a hearing before the Court.

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Front Pay and Non-Economic Damages Under the Sarbanes-Oxley Act

2014-07-11T18:04:00.001-04:00

There continues to be substantial disputes over remedies in SOX retaliation cases. Today, we will explore two of these issues: (1) whether one can obtain front pay under SOX; and (2) whether one can obtain non-economic damages under SOX, such as damages for emotional distress and/or damage to one’s reputation.

I. Front Pay Damages Under the Sarbanes-Oxley Act

The remedies section of SOX provides as follows:

Remedies.

(1) In general. An employee prevailing in any action under subsection (b)(1) [discharge or discrimination for engaging in protected activity under SOX] shall be entitled to all relief necessary to make the employee whole.

(2) Compensatory damages. Relief for any action under paragraph (1) shall include--

(A) reinstatement with the same seniority status that the employee would have had, but for the discrimination;

(B) the amount of back pay, with interest; and

(C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.

18 U.S.C.S. § 1514A (emphasis added).

As to front pay awards, the revised OSHA regulations regarding SOX, 76 Fed. Reg. 68084-68097, further provide as follows:

In appropriate circumstances, in lieu of preliminary reinstatement, OSHA may order that the complainant receive the same pay and benefits that he received prior to his termination, but not actually return to work. Such ‘economic reinstatement’ is akin to an order of front pay and is frequently employed in cases arising under Section 105(c) of the Federal Mine Safety and Health Act of 1977. See, e.g., Sec’y of Labor on behalf of York v. BR&D Enters., Inc., 23 FMSHRC 697, 2001 WL 1806020, at *1 (June 26, 2001). Front pay has been recognized as a possible remedy in cases under Sarbanes-Oxley and other whistleblower statutes enforced by OSHA in circumstances where reinstatement would not be appropriate. Hagman v. Washington Mutual Bank, Inc., 2005-SOX-73, 2006 WL 6105301, *32 (Dec. 19, 2006) (noting that while reinstatement is the ‘preferred and presumptive remedy’ under Sarbanes-Oxley, ‘[f]ront pay may be awarded as a substitute when reinstatement is inappropriate due to: (1) An employee’s medical condition that is causally related to her employer’s retaliatory action * * *; (2) manifest hostility between the parties * * *; (3) the fact that claimant’s former position no longer exists * * *; or (4) the fact that employer is no longer in business at the time of the decision’); see, e.g., Hobby v. Georgia Power Co., ARB No. 98-166, ALJ No. 1990-ERA-30 (ARB Feb. 9, 2001), aff’d sub nom. Hobby v. U.S. Dept. of Labor, No. 01-10916 (11th Cir. Sept. 30, 2002) (unpublished) (noting circumstances where front pay may be available in lieu of reinstatement but ordering reinstatement); Brown v. Lockheed Martin Corp., 2008-SOX-49, 2010 WL 2054426, at *55-56 (Jan. 15, 2010) (same).

Id. at 68088.

The United States District Court for the Eastern District of Virginia has similarly held in connection with front pay awards. In Jones v. SouthPeak Interactive Corp., No. 3:12cv443, 2013 U.S. Dist LEXIS 164578 (E.D. Va. Nov. 19, 2013), after citing the regulations discussed above (76 Fed. Reg. 68084-68097), and the administrative SOX decisions discussed therein, all of which support an award of front pay under SOX, the Court held as follows:

Those administrative decisions are consistent with the controlling decisions of the United States Court of Appeals for the Fourth Circuit respecting front pay under other statutes with similar remedial provisions. For example, the Fourth Circuit, while affirming a general preference for reinstatement as a forward-looking remedy to a wrongful termination in an action under the Age Discrimination in Employment Act (‘ADEA’), has recognized that reinstatement may not be appropriate in cases where: (1) the parties have become inextricably mired in hostility; (2) there is no comparable position available with the plaintiff’s former employer; (3) the plaintiff’s former employer is no longer operating; or (4) the anticipated period of reinstatement is relatively short. See Duke v. Uniroyal, Inc., 928 F.2d 1413, 1423-24 (4th Cir. 1991).

‘The infinite variety of factual circumstances that can be anticipated do not render any remedy of front pay susceptible to legal standards for awarding damages. Its award, as an adjunct or alternative to reinstatement, must rest in the discretion of the court in shaping the appropriate remedy.’ Id. at 1424. At the same time, the Fourth Circuit makes clear that the potential for a windfall to the plaintiff should temper a court’s enthusiasm for any award of front pay. Id.

The Fourth Circuit has demonstrated a willingness to extend Duke beyond the context of the ADEA. In Cline v. Wal-Mart Stores, Inc., 144 F.3d 294 (4th Cir. 1998), a case involving the Federal Medical Leave Act (‘FMLA’), the Fourth Circuit affirmed that front pay was an equitable remedy that could be ordered by a trial court. See id. at 307; see also Nichols v. Ashland Hosp. Corp., 251 F.3d 496, 504 (4th Cir. 2001) (citing Cline in conjunction with Duke’s admonition about possible windfalls).

As a matter of first impression, the Court agrees with the Department of Labor regulations and previous administrative decisions that have offered the possibility of front pay in lieu of reinstatement. The views expressed therein are in accord with the express purpose of the remedial provisions of Sarbanes-Oxley and the views of our Court of Appeals, as thoroughly explained in Duke.

18 U.S.C. § 1514A(c)(1) states that ‘an employee prevailing in any [retaliation] action shall be entitled to all relief necessary to make the employee whole.’ § 1514A(c)(2)(A) specifically includes reinstatement as one type of available relief. SouthPeak has argued that, because front pay is not specifically mentioned in § 1514A(c)(2)(A), front pay should not be available to plaintiffs who have successfully sued under SOX for retaliation claims. Response at 2. If the Court were to adopt the SouthPeak’s construction of § 1514A(c) and bar any remedy that was not specifically listed in § (c)(2)(A), the general mandate of § (c)(1) to make the employee whole would be rendered void and superfluous. Such a construction would violate the well-known interpretative presumption against surplussage, see In re Total Realty Management, LLC, 706 F.3d 245, 251 (4th Cir. 2013); therefore this Court will not embrace it.

Furthermore, although Duke was a case involving the ADEA rather than SOX, the Fourth Circuit’s broad discussion of reinstatement and front pay seems equally applicable in a SOX retaliation context. Duke held that ‘front pay is an available remedy to complete the panoply of remedies available to avoid the potential of future loss.’ Front pay was seen as a complement to the remedy of reinstatement, which was expressly authorized by the ADEA, and another tool for effectuating the purposes of the ADEA. See 29 U.S.C. § 626(b) (‘In any action brought to enforce this chapter the court shall have jurisdiction to grant such legal or equitable relief as may be appropriate to effectuate the purposes of this chapter, including . . . reinstatement or promotion’). The same complementary role can be ascribed to front pay in a SOX action such as this one, where reinstatement is impossible and the prevailing plaintiff is entitled to be made whole. Here, as in Duke and Cline v. Wal-Mart Stores, Inc., the remedial provision of the applicable statute did not expressly authorize front pay as an equitable remedy. See Cline v. Wal-Mart Stores, Inc., 144 F.3d 294, 307 (4th Cir. 1998); 29 U.S.C. § 2617(a)(1)(B) (FMLA provision authorizing ‘such equitable relief as may be appropriate, including employment, reinstatement, and promotion’).

Given the paucity of support for SouthPeak’s argument on this issue, the presumption against superfluity, and the willingness of the Fourth Circuit to allow district courts to consider front pay as a complementary remedy for statutes that have a broad remedial purpose and explicit authorization for reinstatement, the Court concludes that front pay is a potential remedy for plaintiffs who prevail under a claim for retaliation in violation of Sarbanes-Oxley.

Jones, 2013 U.S. Dist LEXIS 164578 at *7-12 (footnote omitted). While the Court went on to conclude that an award of front pay was not appropriate in that particular case (the company had since gone out of business, and no longer employed someone in the complainant’s prior position, strongly suggesting that the complainant would have been terminated in any event), Id. at *12-20, the Court’s finding that front pay awards are available in SOX cases is clear.

Moreover, front pay awards under SOX, under the appropriate circumstances, can be quite substantial. For example, in the Hagman case discussed in the SOX regulations cited above, Hagman v. Washington Mutual Bank, Inc., 2005-SOX-73, 2006 WL 6105301 (Dec. 19, 2006), the administrative law judge (“ALJ”) at OSHA awarded the complainant $642,941 in front pay damages, based on evidence that it would take the complainant approximately 10 years to recover the damages that the respondent had caused to her career track and earning potential.

Further, given the above discussion in Jones, which makes it clear that a court’s analysis of front pay damages under SOX is very similar (if not identical) to an analysis of front pay damages under other causes of action, it is also worthwhile to note that front pay awards of 5 years or greater are not at all uncommon in litigation in general. See, e.g., Howard Univ. v. Roberts-Williams, 37 A.3d 896 (D.C. 2012) (upholding 8 year front pay jury award); Luca v. County of Nassau, 344 Fed. Appx. 637, 641 (2d Cir. 2009) (affirming a front pay award in a Title VII claim, calculating front pay through plaintiff’s retirement, which was at least 25 years into the future, holding “We have repeatedly upheld awards of front pay through retirement where the record contained evidence sufficient to find that a plaintiff had ‘no reasonable prospect of obtaining comparable alternative employment’ and to calculate the resulting salary disparity); Howell v. New Haven Bd. of Educ., No. 3:02-cv-736, 2005 U.S. Dist. LEXIS 19897 (D. Conn. Sept. 8, 2005) (concluding that five-year front pay award was reasonable for plaintiff-teacher, given difficulties in job market); Mathieu v. Gopher News Co., 273 F.3d 769, 778 (8th Cir. 2001) (affirming front pay award of eight years); United Mine Workers of America v. Moore, 717 A.2d 332, 339-40 (D.C. 1998) (upholding a front pay award to the plaintiff projected out to age 62 based on expert testimony as to her worklife expectancy); Nelson v. Boatmen’s Bancshares, 26 F.3d 796, 802 (8th Cir. 1994) (affirming four-year front pay award in ADEA claim); Tyler v. Bethlehem Steel Corp., 958 F.2d 1176, 1188-20 (2d. Cir. 1992), cert denied, 506 U.S. 826 (1992) (upholding a 17 year front pay jury award); see also Lander v. Lujan, 888 F.2d 153, 159 (D.C. Cir. 1989) (Ginsburg, J., concurring) (describing a front pay award as a “more appropriate remedy” than “bumping” an innocent incumbent employee).

II. Non-Economic Damages Under the Sarbanes-Oxley Act

As the opinion in Jones notes, SOX, in its statutory language, clearly provides that aggrieved complainants “shall be entitled to all relief necessary to make the employee whole.” As Jones holds, given that language, and the use of other language such as “including”, which suggests that the listed damages were not intended to be exhaustive, the damages available under SOX go beyond the categories of damages which are specifically listed in the in the statute itself (back pay with interest, reasonable attorneys’ fees, experts’ fees, and so on). In addition to awards of front pay, other categories of damages have been found to be available under SOX as well.

Some courts have held that mental and emotional distress, and other awards for non-economic damages, were not available under SOX. See, e.g., Hemphill v. Celanese Corp., No. 3:08-CV-2131-B, 2009 U.S. Dist. LEXIS 84049 (N.D. Tex. Sept. 14, 2009) (dismissing plaintiff’s claims for mental anguish damages); Walton v. Nova Info. Sys., 514 F. Supp. 2d 1031, 1035 (E.D. Tenn. 2007) (holding that non-pecuniary damages, such as injury to reputation, and mental and physical distress, were not available under SOX); Murray v. TXU Corp., No. 3:03-CV-0888-P, 2005 U.S. Dist. LEXIS 10945 (N.D. Tex. June 7, 2005) (noting that the original draft of the remedies provision of Section 1514A of SOX provided explicitly for punitive damages, but that subsequent drafts removed the language, suggesting that punitive damages were not available). See also Schmidt v. Levi Strauss & Co., 621 F. Supp. 796, 805 (N.D. Cal. 2008) (approvingly citing Murray’s finding that SOX makes “no mention… of any type of damage that might be considered non-pecuniary”).

However, even in the cases which previously ruled that non-economic damages are not available under SOX as a general matter (a ruling which, as demonstrated below, goes against the recent weight of authority on this issue), some of those opinions did nevertheless hold that such damages, such as reputational injury damages, may be available where they are specifically for injuries caused by a decrease in the plaintiff’s future earning capacity, as granting such relief would be consistent with SOX’s goal of making the plaintiff whole. See, e.g., Jones v. Home Fed. Bank, No. CV09-336-CWD, 2010 U.S. Dist. LEXIS 3579 (D. Idaho Jan. 14, 2010) (so holding with regard to reputational injury damages); Hanna v. WCI Communities, Inc., 348 F. Supp. 2d 1332, 1334 (S.D. Fla. 2004) (same).

Contrary to the view of the Hemphill line of cases, OSHA’s Administrative Review Board (ARB) has recently held that non-economic damages are available under SOX. See, e.g., Kalkunte v. DVI Fin. Servs., Inc., ARB Nos. 05-139 & 05-140, ALJ No. 2004-SOX-056 (ARB Feb. 27, 2009) (opinion available here) (awarding complainant $22,000 for “pain, suffering, mental anguish, the effect on her credit [because of her loss of employment] and the humiliation that she suffered.”); Brown v. Lockheed Martin Corp., ALJ No. 2008-SOX-00049 (ALJ Jan. 15, 2010), affirmed, ARB No. 10-050 (ARB Feb. 28, 2011) (opinion available here) (affirming award to complainant of $75,000 for emotional pain and suffering, mental anguish, embarrassment, and humiliation). Of note, the ARB’s opinion in Brown was recently affirmed by the Tenth Circuit, in Lockheed Martin Corp. v. Admin. Review Bd., 717 F.3d 1121 (10th Cir. 2013). In upholding the ARB’s award of non-economic compensatory damages in particular, the Tenth Circuit noted:

Finally, Lockheed argues the Board’s award of $75,000 to Brown as non-economic compensatory damages for her emotional pain and suffering, mental anguish, embarrassment, and humiliation was not authorized by 18 U.S.C. § 1514A(c)(2) and that the Board’s damage award was otherwise unsupported by substantial evidence. 18 U.S.C. § 1514A(c)(2), however, provides that relief ‘shall include’ the relief specifically enumerated in that subsection, indicating it was not meant as an exhaustive list of all of the relief available to a successful claimant. Moreover, § 1514A(c)(1), provides that a prevailing employee ‘shall be entitled to all relief necessary to make the employee whole.’

Id. at 1138. The Tenth Circuit’s decision was bolstered by the fact that, under the Administrative Procedure Act, the ARB’s interpretation of SOX is entitled to deference by the courts, so long as its construction of the Act is reasonable. Id. at 1129. As the Tenth Circuit further noted: “The [relevant review] standard does not allow a court to displace the agency’s choice between two fairly conflicting views, even though the court would justifiably have made a different choice had the matter been before it de novo.” Id. (internal citation and quotation omitted).

Just last year, the ARB once again affirmed that non-pecuniary damages are available under SOX, in Menendez v. Halliburton, Inc., ARB No. 12-026, ALJ No. 2007-SOX-005 (ARB Mar. 20, 2013) (opinion available here). In upholding an award of $30,000 in compensatory damages for emotional distress and professional harm, the Board stated as follows:

[W]e reject Halliburton’s argument that non-pecuniary compensatory damages are unavailable under SOX. As the ALJ recognized, the ARB has awarded non-pecuniary compensatory damages in SOX cases. Department of Labor precedent has countenanced damage awards for emotional distress and reputational injury under the SOX whistleblower statute. In Kalkunte v. DVI Fin. Servs., Inc., ARB No. 05-139, ALJ No. 2004-SOX-056, slip op. at 15 (ARB Feb. 27, 2009), we affirmed the ALJ’s award of $22,000 in damages for mental anguish and humiliation suffered by the complainant as a consequence of retaliation. Recently, in Brown v. Lockheed Martin Corp., ARB No. 10-050, ALJ No. 2008-SOX-049 (ARB Feb. 28, 2011), we affirmed without comment the ALJ’s award of $75,000.00 in compensatory damages for emotional pain and suffering.

Additionally, this Board has upheld countless compensatory damage awards under the whistleblower provisions of ERA and AIR 21, upon which Section 806 was modeled. In a 2002 unpublished opinion, the Eleventh Circuit upheld the Board's decision affirming an award of $250,000 in compensatory damages for emotional distress and reputational injury to a prevailing ERA complainant. In Evans, ARB Nos. 07-118, -121, slip op. at 20, we affirmed the ALJ's award of $100,000.00 in non-economic compensatory damages for emotional harm and reputational injury.

The judicial backdrop of the passage of Section 806 reflects decades of Department of Labor precedent awarding non-pecuniary compensatory damages to prevailing employees under comparable whistleblower statutes. These statutes share similar statutory language, legislative intent, and broad remedial purpose. They should therefore be interpreted consistently. Furthermore, Congress acts with knowledge of existing law and expects its statutes to be read in conformity with established precedent. We find that Section 806 should be interpreted to allow awards of non-pecuniary compensatory damages.

Id. at pages 19-20 (endnotes omitted).

In addition to the above ARB opinions and the Tenth Circuit’s opinion in Lockheed, numerous courts have similarly held that non-economic damages are available under SOX. For example, in Mahony v. KeySpan Corp., No. 04 CV 554 (SJ), 2007 U.S. Dist. LEXIS 22042 (E.D.N.Y. Mar. 12, 2007), the Court held as follows with regard to the plaintiff’s claim for damages to his reputation:

Defendant contends that Plaintiff's request for reputational damages must be stricken because ‘special damages’ do not include reputational damages. In Murray v. TXU Corp., 03 CV 0888, 2005 U.S. Dist. LEXIS 10945 *8 (N.D. Tex. 2005), the court held that ‘special damages’ were limited to ‘litigation costs, expert witness fees, and reasonable attorney fees.’ This Court disagrees with that interpretation and finds that § 1514A(c)(2)(C) comprises an illustrative list of the types of special damages that may be recovered rather than an exhaustive list.

In Hanna v. WCI Communities, Inc., 348 F. Supp. 2d 1332 (S.D.Fla. 2004), the court held that the SOX’s language stating that ‘[a]n employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole’ should be read to include damages for loss of reputation. 18 U.S.C. § 1514A(c)(1) (emphasis added). The court reasoned that ‘[w]hen reputational injury caused by an employer’s unlawful discrimination diminishes a plaintiff’s future earnings capacity, [he] cannot be made whole without compensation for the lost future earnings [he] would have received absent the employer’s unlawful activity.’ 348 F. Supp. 2d at 1334 (quoting Williams v. Pharmacia, Inc., 137 F.3d 944, 953 (7th Cir. 1998)). Therefore, the court held that a successful SOX plaintiff cannot be made whole without being compensated for damages for reputational injury that diminished plaintiff’s future earning capacity. This Court adopts the reasoning in Hanna and denies Defendant’s request to strike Plaintiff’s demand for damages to his reputation.

Id. at *20-21.

Similarly, in Rutherford v. Jones Lang LaSalle Am., Inc., No. 12-14422, 2013 U.S. Dist LEXIS 116872 (E.D. Mich. Jan. 29, 2013), the Court held that that court opinions which had previously denied the availability of non-economic damages under SOX “reject a plain reading of SOX’s relief provision”, indicated that the Court would thus “decline to follow” those cases, and held that SOX allowed for recovery for damages for emotional distress, humilitation, and injury to reputation. Id. at *8-13. In so holding, the Court looked to, among other authorities, the Kalkunte and Lockheed ARB decisions cited above, “given the dearth of federal court decisions addressing the issue.” Id. at *12 (internal quotation and citation omitted). And, like the ARB’s decision above in Mahony, the Court in Rutherford also looked to court interpretations of statutory language similar to that in SOX:

SOX is more analogous to the whistleblower provision of the False Claims Act (‘FCA’), 31 U.S.C. § 3730(h), which does not limit damages to ‘equitable relief’:

(1) In general. – Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.

(2) Relief. – Relief under paragraph (1) shall include reinstatement with the same seniority status that employee, contractor, or agent would have had but for the discrimination, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination, including litigation costs and reasonable attorneys’ fees.

(emphasis added). Other circuit and district courts allow recovery of damages for emotional distress, mental anguish, humiliation and injury to reputation under § 3730(h). The reasoning in these cases is persuasive. See Nguyen v. City of Cleveland, 2006 U.S. Dist. LEXIS 83282, 2006 WL 3333055 at *2 (N.D. Ohio Nov. 15, 2006) (‘The FCA provides for an award of ‘special damages’ sustained, which can include emotional distress damages [if] [t]he emotional distress [is] caused by the defendant’s actions’); Hammond v. Northland Counseling Center, Inc., 218 F.3d 886, 892-893 (8th Cir. 2000):

[t]he FCA Whistleblower provision explicitly mandates ‘compensation for any special damages sustained as a result of the discrimination.’ Damages for emotional distress caused by an employer’s retaliatory conduct plainly fall within this category of ‘special damage.’ Providing compensation for such harms comports with the statute’s requirement that a whistleblowing employee ‘be entitled to all relief necessary to make the employee whole.’

(citations omitted); Neal v. Honeywell, Inc., 191 F.3d 827, 832 (7th Cir. 1999) (damages for emotional distress are compensable as special damages); Brooks v. United States, 276 F.Supp.2d 653, 660 (E.D. Ky. 2003) (damages under § 3730(h) are intended to make the aggrieved employee whole by compensating her for any injuries caused by the employer's retaliatory conduct, such as harassment and discharge); and Brandon v. Anesthesia & Pain Mgmt. Associates, Ltd., 277 F.3d 936, 944 (7th Cir. 2002) (recovery for emotional distress is permitted under § 3730(h)).

Rutherford, 2013 U.S. Dist LEXIS 116872 at *10-12.

Likewise, in the Jones case cited above from the Eastern District of Virginia, in a separate opinion from the one cited above, the Court relied on the ARB’s decision in Lockheed to conclude that compensatory damages for mental distress were permitted under SOX, and to award $100,000 for such damages. Jones v. SouthPeak Interactive Corp., No. 3:12cv443, 2013 U.S. Dist. LEXIS 155169 (E.D. Va. Oct. 29, 2013). As the Court noted:

As to the availability of emotional damages under Sarbanes Oxley, the Court ruled on the record during a July 12, 2013 conference call that 18 U.S.C. § 1514A(c)(2) does not preclude an award of emotional damages for a retaliation claim under Sarbanes Oxley, and that an award of emotional damages in consistent with 18 U.S.C. § 1514A(c)(1)’s language stating that a prevailing employee ‘shall be entitled to all relief necessary to make the employee whole.’ Conf. Call Tr., Docket No. 168, at 21:9-22:19. See also 18 U.S.C. 1514A(c). In making that ruling, this Court embraced the same interpretive position as the Tenth Circuit in Lockheed Martin Corp. v. Admin. Rev. Bd., U.S. Dep't of Labor, 717 F.3d 1121, 1138-39 (10th Cir. 2013). The Defendants has offered no new arguments on this matter. The previous ruling will stand.

Id. at *32.

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Settlement and the Older Workers Benefit Protection Act

2014-06-13T16:01:00.002-04:00

When completing employment settlement or separation agreements for employees over 40 years old, an employment attorney might feel tempted to simply recycle the language which the attorney has used in prior settlement agreements, in order to ensure that the agreement complies with the provisions of the Older Workers Benefit Protection Act (“OWBPA”). However, a recent United States District Court decision out of the District of Colorado discusses several different ways in which employees can challenge the legal sufficiency of such language, and therefore the binding effect of the underlying agreement, and its waiver of claims. Indeed, as the plaintiff-employee’s challenges, in that case, to an employer’s OWBPA language was successful in at least some regards, the case serves as a useful lesson, for employees’ and employers’ counsel alike, about the importance of making sure that OWBPA language is worded correctly, so as to ensure enforceability of the underlying agreement.

I. Attorney Consultation

In Foster v. Mountain Coal Co., LLC, No. 12-CV-03341-LTB-MJW, 2014 U.S. Dist. LEXIS 67637 (D. Colo. May 16, 2014), the Court held that a severance agreement did not comply with the OWBPA, because it did not state that the employee-plaintiff should consult an attorney before signing the severance agreement. As the severance agreement merely stated that the employee “may” consult with a lawyer, rather than stating that the employee “should” or “ought” to do so, the release was held not to be enforceable, and the Court held that the plaintiff-employee could proceed with a claim under the Age Discrimination in Employment Act (“ADEA”), as well as claims under state law.

The Court noted that the OWBPA “provides that a waiver is not valid unless the individual executing the release is ‘advised in writing to consult with an attorney prior to executing the agreement.’” Foster, 2014 U.S. Dist. LEXIS 67637 at *18 (quoting 29 U.S.C. § 626(f)(1)(E) (emphasis added in Court’s opinion; emphasis is not in statute). In holding that the language of the separation agreement at hand did not meet that requirement, the Court noted as follows:

The language does not advise Plaintiff Fisk to consult with an attorney prior to signing the Agreement, or even that he ‘should’ or ‘ought to’ consult with an attorney before signing the Agreement. Instead it provides in passive language and in past tense that Plaintiff Fisk had the ‘opportunity for consideration and consultation with attorney,’ and that Plaintiff Fisk ‘may discuss the Agreement with his[] attorney.’

I read the statutory language as requiring the waiver to affirmatively advise the employee to consult with an attorney, or that the employee is affirmatively advised that he ‘should’ or ‘ought’ to consult with an attorney. See Am. Airlines, 133 F.3d at 118. This is so because the provisions of the OWBPA are precise, ‘strict, unqualified’ requirements for employers imposed by Congress, and courts cannot relax requirements that Congress lawfully imposes. Oubre, 522 U.S. at 427. The word ‘advise’ means ‘to give advice to,’ ‘caution,’ ‘warn,’ ‘recommend,’ or ‘inform.’ Merriam-Webster’s Collegiate Dictionary 19 (11th ed. 2004); see also Cole v. Gaming Entm't, LLC, 199 F. Supp. 2d 208, 214 (D. Del. 2002). The language in the Agreement is passive and does not ‘advise’ Plaintiff Fisk to do anything. Additionally, portions of it are in the past tense, and past directives are also insufficient. The language does not ‘give advice to,’ ‘caution,’ ‘warn,’ ‘recommend,’ or ‘inform’ Plaintiff Fisk to consult with an attorney; it only makes Plaintiff Fisk aware of a right that he has, but does not ‘advise,’ him to take advantage of, act on, or take any action regarding that right. Am. Airlines, 133 F.3d at 118. An employee, such as Plaintiff Fisk, is not required to infer the right to consult an attorney from language such as ‘may’ or ‘has had.’ See Cole, 199 F. Supp. 2d at 214. Additionally, Defendants argue that the fact that Plaintiff Fisk saw a workers' compensation attorney satisfies this requirement. However, the language mandates strict compliance, which the Agreement did not satisfy.

As the Agreement fails to advise Plaintiff Fisk to consult with an attorney prior to signing it, as explicitly required by the statute, the release is invalid and cannot be enforced against Plaintiff Fisk. Accordingly, Defendants are not entitled to summary judgment on Plaintiff Fisk’s ADEA claim.

Foster, 2014 U.S. Dist. LEXIS 67637 at *18-20.

II. Decisional Unit

In Foster, since the plaintiff-employee had been fired as a part of a group termination, the Court also considered the provisions of the OWBPA (29 U.S.C. § 626(f)(1)(H)) which require that the employer provide the employee with detailed information concerning a group termination program. Foster, 2014 U.S. Dist. LEXIS 67637 at *20-21. The plaintiff claimed that he either did not receive, or did not recall receiving, the required information at the time of his termination and receipt of the Agreement – rather, he claimed that he received that information at a later time. Id. at 21. The employer, in rebuttal, pointed to the testimony of plaintiff’s supervisor, who claimed that each employee was given an envelope containing both the agreement and the required disclosures. Id. at 22. Since the plaintiff testified that he did not remember whether he received the document at the time in question, as compared to the supervisor’s testimony which was couched in certain terms, the Court held that no reasonable jury could find for the plaintiff-employee on this point, and that the Court could not conclude that there was a genuine issue of material fact on this point. Id. at 23-24.

The Plaintiff-employee also challenged whether the notice in question adequately described the relevant decisional unit. Id. at *31. As the Court noted, the OWBPA and its regulations provide that “flexible, manipulable, subjective criteria – even criteria couched in purportedly quantified terms, such as ‘performance’ rankings – are impermissible means of creating a decisional unit”, and “given the concerns regarding an employer’s incentive to manipulate statistics and the relevant decisional pool, the regulations understandably prohibit an employer from arguing, tautologically, that its ‘decisional unit’ is simply ‘the employees it decided were eligible.’” Id. at 30. Here, on the other hand, the Court noted that the decisional unit which the employer used, the “Production Group”, could be objectively defined, and was not based upon a “subjective criteria based on flexible or manipulable terms,” and that “basing a decision on a group, such as the Production Group, does not pose the risks the regulations are designed to prevent.” Id. at *31-32.

III. Eligibility Factors

Ms. Foster also challenged whether the employer’s notice had adequately described the relevant factors. As the Court briefly discussed:

Section 626(f)(1)(H) requires employers to provide employees who are terminated as part of a termination program, such as a RIF, with information about the program. In particular, employers must supply the terminated employee with the criteria for eligibility for the program and with lists of the ages and positions of both, employees who were terminated through the program, and those who were retained. Id. § 626(f)(1)(H)(i, ii). An ‘employment termination program’ takes place when a group or class of employees are involuntarily terminated and ‘offered additional consideration for their decision to sign a waiver.’ 29 C.F.R. § 1625.22(f)(1)(iii)(A). ‘Typically, an involuntary termination program is a standardized formula or package of benefits that is available to two or more employees.’ Id. § 1625.22(f)(1)(iii)(B).

Foster, 2014 U.S. Dist. LEXIS 67637 at *32-33. The Court concluded that the employer had satisfied both provisions, as the disclosure in question “clearly state[d] its eligibility criteria”, and it also “included the required list which provided the job titles and ages of the employees terminated with the decisional units, as well as the job titles and ages of all retained employees within the decisional units.” Id. at *33. Similarly, the Court rejected the employee’s argument that the employer was required to provide the criteria for selection in the RIF program. As the court noted, with citation to case law:

Instead, the OWBPA requires only the disclosure of the eligibility factors for a Severance Plan. See id. § 1625.22(f)(1)(iii)(A, B) (defining ‘program’ as the package of benefits offered, not the involuntary termination program); see also Recchia v. Kellogg Co., 951 F. Supp. 2d 676 (D. N.J. 2013); Rupert v. PPG Indus., Inc., Nos. 07-0705, 08-0616, 2009 U.S. Dist. LEXIS 16639, 2009 WL 596014, at *56-57 (W.D.Pa. Feb. 26, 2009) (following the EEOC regulations and finding that ‘program’ refers to the benefits plan); Ricciardi v. Elec. Data Sys. Corp., No. 03-5285, 2007 U.S. Dist. LEXIS 11758, 2007 WL 576323, at *4 (E.D. Pa. Feb. 20, 2007) (holding that a release needed to include only the criteria for eligibility in the severance plan, not the criteria for termination).

Foster, 2014 U.S. Dist. LEXIS 67637 at *33-34.

IV. State Anti-Discrimination Claims: Failure to Tender Back Consideration

In Foster, the employer argued that the plaintiff’s claims under state law had to be dismissed under Colorado’s “ tender back” doctrine, because he had retained the $8,800 severance payment which had been paid to him to release those claims, and that the plaintiff had to tender that amount back to the employer before he could challenge his waiver of those claims. Id. at 35. While the employer cited case law from the Tenth Circuit to support its position, Bennett v. Coors Brewing Co., 189 F.3d 1221, 1228 (10th Cir. 1999), the Court in Foster found the citation to that case to be “misplaced”, as that opinion had dealt with state common law claims, and not, as here, with claims of discrimination under the Colorado Anti-Discrimination Act. Foster, 2014 U.S. Dist. LEXIS 67637 at *35-36. The Court looked to a Supreme Court opinion, Oubre v. Energy Ops., Inc., 522 U.S. 422, 427, 118 S. Ct. 838, 139 L. Ed. 2d 849 (1998), which had rejected an employer’s argument that claims under the ADEA could be barred by the tender back doctrine. As the Court in Foster noted:

There, as here, the employer moved for summary judgment, contending that the employee had ratified a release of all claims against the employer by failing to return the monies she had received. [Oubre, 522, U.S. at 422]. The Court held that the release signed by the plaintiff did not comply with the OWBPA’s specific requirements regarding releases covering ADEA claims. Id.; see also 29 U.S.C. §§ 626(f)(1)(B), (F), (G). The Supreme Court concluded that because it failed to comply with the OWBPA, the release should not bar the plaintiff’s ADEA claim, even if the employee retained the monies she received in exchange for the release. Id. at 842.

In so holding, the Court reasoned that enforcement of the tender back and ratification rules ‘would frustrate the statute's practical operation,’ and explained that:

In many instances a discharged employee likely will have spent the monies received and will lack the means to tender their return. These realities might tempt employers to risk noncompliance with the OWBPA’s waiver provisions, knowing it will be difficult to repay the monies and relying on ratification. We ought not to open the door to an evasion of the statute by this device.

Id.

Foster, 2014 U.S. Dist. LEXIS 67637 at *36-37. Noting that Colorado courts had an “expressed desire and intention to look to federal cases for guidance in applying the Colorado Anti-Discrimination Act”, the Court in Foster extended the reasoning of Oubre to this case, and held that the plaintiff’s state law claims were not barred by the tender back doctrine. Id. at 37-38. Thus, the Court also denied the employer’s motion for summary judgment as to the plaintiff’s state law claims. Id. at *39.

V. Conclusion: Importance of Strict Compliance with OWBPA

While most of Mr. Foster’s arguments discussed above were rejected by the Court, the fact that he won at least one of those arguments with regard to his ADEA claims was enough for those claims to survive summary judgment. The relevant paragraph of the Court’s opinion makes this point very clearly and succinctly:

[B]ecause I concluded that Defendants failed to show that all the strict statutory requirements of the OWBPA were met, summary judgment on Plaintiff Fisk’s ADEA claims is denied. See Butcher v. Gerber Prods. Co., 8 F. Supp. 2d 307, 314 (S.D. N.Y. 1998) (‘The absence of even one of the OWBPA’s requirements invalidates a waiver.’) Furthermore, because the release is invalid, discussion of its validity under the totality of the circumstances approach is not warranted.

Foster, 2014 U.S. Dist. LEXIS 67637 at *34-35. Further, as the above discussion demonstrates, it was that same shortcoming (failure to follow the OWBPA’s requirements strictly), which ultimately led to the plaintiff’s state law claims surviving as well, notwithstanding the fact that the employee did not pay back to the employer the underlying settlement monies, which he had been paid following his execution of the underlying settlement agreement. Thus, to repeat the admonition at the opening of this post, the importance of strict compliance with the OWBPA’s provisions, and the consequences for failure to do so, simply cannot be overstated.

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Watch Your Mouth: Virginia Supreme Court Increasingly Receptive to Defamation Claims

2014-05-16T19:26:00.003-04:00

Claims of defamation for comments made by co-workers and supervisors regarding an employee’s performance on the job are increasingly common. One significant barrier to such claims is a qualified privilege, often called the “common interest” privilege. This privilege attaches to communications between persons on a subject in which the persons each have an interest or duty. In Cashion v. Smith, a splintered Virginia Supreme Court voted 4-3 to expand the ability of plaintiffs to successfully bring defamation suits, and to limit the qualified privilege enjoyed by some defendants. 749 S.E.2d 526, 286 Va. 327 (2013). In Cashion, Justice Mims wrote the majority opinion, while Justice McClanahan dissented. Justices Powell and Goodwyn concurred in part and dissented in part.

In Cashion, an anesthesiologist brought suit for defamation against a surgeon for comments made following the death of a patient which they had both been treating. Id. at 331. During the incident in question, both Dr. Cashion, the anesthesiologist, and Dr. Smith, a trauma surgeon, were providing care to a critically injured patient. Id. The patient died during surgery. Id. In the operating room following the patient’s death Dr. Smith made the following critical comments about Dr. Cashion in front of several members of the operating team:

“He could have made it with better resuscitation.”
“This was a very poor effort."
“You didn’t really try.”
“You gave up on him.”
“You determined from the beginning that he wasn’t going to make it and purposefully didn’t resuscitate him.”

Id. at 332. In the hallway outside the operating room, Dr. Smith further stated that “You just euthanized my patient.” Id
.

The anesthesiologist brought a defamation claim against the surgeon. Following discovery, the surgeon moved for summary judgment, arguing that his comments were protected by both the rhetorical hyperbole and the qualified privilege. The circuit court granted summary judgment, based primarily on its determination that the statements were, as a matter of law, statements of opinion, subject to the qualified privilege, and, in some cases, mere rhetorical hyperbole. In so holding, the circuit court found that there was no evidence of common law malice which would bring the statements outside the scope of the qualified privilege.

On appeal, the Supreme Court turned first to the question of whether the statements were statements of “opinion”. First, the Court determined that whether a statement is “opinion” is a question of law. A statement is one of “opinion” when it is “relative in nature and depends largely on a speaker’s viewpoint[.]” Id. at 336, quoting Hyland v. Raytheon Tech. Servs. Co., 277 Va. 40, 47, 670 S.E.2d 746, 750 (2009). By contrast, a statement is one of fact when it is “capable of being proven true or false.” Fuste v. Riverside Healthcare Ass’n, 265 Va. 127, 676 S.E.2d 858, 861-62 (2003).

Applying this standard, the Court found that 2, 3, and 4, above, were opinion because they were ‘subjective” and wholly dependent upon the speaker’s viewpoint and, accordingly, affirmed the circuit court’s determination to that effect. However, the Court held that statements 1 and 5, above, were statements of fact. As to the first statement, the Court explained that it implied that plaintiff had either failed to assist, or actively prevented, the patient’s resuscitation. As to the fifth statement, the Court explained that it amounted to an accusation that plaintiff had purposefully caused the patient’s death by withholding treatment.

Next, the Court addressed the circuit court’s determination that the “euthanasia” statement was protected by the qualified privilege. First noting that “[w]hether a communication is privileged is a question of law”, the Court reiterated that the “qualified privilege attaches to ‘[c]ommunications between persons on a subject in which the persons have an interest or duty.’” Id. at 337 (quoting Larimore v. Blaylock, 259 Va. 568, 528 S.E.2d 119, 121 (2000)). Applying this standard, the Supreme Court found that the circuit court had correctly determined that the “euthanasia” statement was privileged as a matter of law.

The Supreme Court’s inquiry did not end there, however. The Court went on to address plaintiff’s argument that the privilege did not apply because the statements were not made in good faith. Recognizing that, in the past, it had included the presence or absence of “good faith” as a factor in determining whether a qualified privilege exists, the Court in Cashion expressly overruled that formulation of the privilege. Id. at 338. Having so held, the Court found that “the question of whether a statement was made in good faith is a question of fact for the jury to decide when determining whether a qualified privilege has been lost or abused.” Id. Once the qualified privilege has attached, it is the plaintiff’s burden to establish, by clear and convincing evidence, that the privilege has been “lost or abused.” Id.

The Court went on to explain that a plaintiff can show that the privilege has been “lost or abused” by establishing that the statement was made with common law malice. Id. at 338. The Court provided a non-exhaustive list of ways in which a plaintiff might establish common law malice:

1) The statements were made with knowledge that they were false or with reckless disregard for their truth, Raytheon Technical Servs. Co. v. Hyland, 273 Va. 292, 301, 641 S.E.2d 84, 89-90 (2007);

2) The “statements [we]re communicated to third parties who have no duty or interest in the subject matter,” Larimore, 259 Va. at 575, 528 S.E.2d at 122;

3) The statements were motivated by personal spite or ill will, Preston v. Land, 220 Va. 118, 255 S.E.2d 509, 511 (1979);

4) The statements included “strong or violent language disproportionate to the occasion,” Story v. Norfolk-Portsmouth Newspapers, Inc., 202 Va. 588, 591, 118 S.E.2d 668, 670 (1961); or

5) The statements were not made in good faith, Chalkley v. Atlantic Coast Line R.R. Co., 150 Va. 301, 325, 143 S.E. 631, 637-38 (1928).

Cashion, 286 Va. at 339.

Although the question of whether the a statement is privileged is one of law, the Court determined that the question of whether the privilege has been “lost or abused” is one of fact, and therefore reserved for the jury. Id. As such, the Court reversed the circuit court’s grant of summary judgment in favor of defendant on the issue of qualified privilege, and remanded the case for further proceedings.

Finally, the Court addressed whether the statements were mere “rhetorical hyperbole”, which are not defamatory under Virginia law. Yeagle v. Collegiate Times, 255 Va. 293, 295-96, 497 S.E.2d 136, 137 (1998). Statements are “rhetorical hyperbole” when “no reasonable inference could be drawn that the individual identified in the statements, as a matter of fact, engaged in the conduct described.” After reviewing the facts of the case, the Court concluded that “[c]onsidering the context in which the statements were made, a listener could believe that [plaintiff] engaged in the conduct [defendant] attributed to him, i.e. euthanizing the patient or causing or contributing to the patient’s death by providing deficient care.” Thus, the Court affirmed the circuit court’s determination that the statements were not rhetorical hyperbole.

The holding of the Virginia Supreme Court in Cashion is of a piece with its other recent jurisprudence in the area of defamation which, taken together, have substantially liberalized the pleading standards for defamation plaintiffs. For example, in Tharpe v. Saunders, the plaintiff’s claim of defamation hinged on the defendant’s statement that “[plaintiff] told me that [plaintiff] was going to screw the Authority like he did at Fort Pickett.” 737 S.E.2d 890 (Va. 2013). The circuit court found that this statement was non-defamatory opinion.

The Virginia Supreme Court reversed, explaining that the statement was not opinion because it was capable of being proved true or false. Interestingly, Justice McClanahan, who would go on to dissent in Cashion, wrote for the Court in Tharpe. The Court noted that the statement could be proven to be true or false by adducing evidence that plaintiff either did, or did not, make the statement to defendant which defendant claimed plaintiff made. In so holding, the Court expressly rejected the circuit court’s determination that, to be capable of supporting a claim for defamation, the statement attributed to plaintiff by defendant must also contain a provably false connotation. I doing so, the Court relied on caselaw from other jurisdictions addressing fabricated quotations, and finding that quotations falsely attributed to a plaintiff are actionable as defamation regardless of the truth or falsity of the substance of the quotation, so long as the quotation injures the plaintiff’s reputation.

Finally, in Webb v. Virginian-Pilot Media Cos., LLC, the Justice Mims, writing for the Virginia Supreme Court was faced with a situation in which the plaintiff alleged that he had been defamed “not by statements of fact that are literally true but by an implication arising from them[.]” No. 122024 (Va. Jan. 10, 2014) (available at: http://scholar.google.com/scholar_case?case=18279223694508766601&hl=en&as_sdt=6&as_vis=1&oi=scholarr). The Court found that the plaintiff could nonetheless make out a claim if “the alleged implication [can] be reasonably drawn from the words actually used.” Id. Although holding that it was possible to make out such a claim, the Court found that plaintiff had not successfully done so on the facts before it.

Thus, it is now possible, in Virginia, to make out a claim of defamation if a statement of opinion is fabricated, and falsely attributed to the plaintiff, or if a true statement gives rise to defamatory meaning. While the qualified privilege may offer some protection to defendants, its application is now, for all intents and purposes, to be decided by the jury.

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April Employment Law Blog Carnival

2014-04-24T09:32:00.000-04:00

Attorney Tim Eavenson is hosting this month's edition of the Employment Law Blog Carnival on his blog, "Current Employment". We contribute almost every month, and it is always a good resource on breaking developments in employment law.

Please be sure to visit our website at http://RobertBFitzpatrick.com