David Nosal, Employee Data Theft, and Why Employment Lawyers Should Understand Their Clients' IT Infrastructure

Earlier this month, a federal judge in San Francisco sentenced David Nosal to a year in prison, three years’ supervised release, 400 hours of community service, and $60,000 in fines. His crime? Nosal violated the Computer Fraud and Abuse Act (“CFAA”), among other federal statutes, when he departed from his former employer with a stash of its most sensitive business data.

Employment law doesn’t normally develop in criminal courtrooms, but Nosal’s case is an important exception. The outcome of his pending appeal to the 9th Circuit will almost certainly offer important guidance for employers on how best to prevent and, where necessary, remedy employee data theft. It’ll likely reinforce a familiar lesson: employers should craft their employee technology policies with an eye toward the law of data security. A well-developed IT infrastructure can give an employer substantial legal advantages and lead to better outcomes when employee data theft occurs.

What Is The CFAA?

To understand the practical importance of Nosal’s case, employers should first understand how the CFAA can apply to departing employees who steal company data. Congress passed the CFAA in 1986 – before the advent of most modern information technology – to combat computer hacking. The CFAA makes it a federal offense to obtain information or perpetrate a fraud either by (a) accessing a computer “without authorization,” or (b) by “exceed[ing] authorized access” on any such computer. In addition to its criminal penalties, the CFAA creates a parallel civil cause of action for hacking victims.

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Chasm Continues To Widen, For Now, Between NLRB and Federal Courts On Enforceability Of Class Action Waivers In Employment Agreements

Just last week, in the case GameStop Corp., a National Labor Relations Board (NLRB) administrative law judge applied recent Board precedent and ignored contrary cases from federal courts to find an employer’s arbitration agreement was unenforceable because it waived the right of employees to bring class or collective actions.  While the decision has yet to be approved by the NLRB itself (parties can appeal ALJ decisions to the NLRB), it illustrates the continuing tension in this area between the NLRB (which disfavors class action waivers in employee arbitration agreements) and the federal courts (which favor them). 

As we have reported, U.S. federal courts continue to hold that employees may enter into arbitration agreements in which they waive the right to file class or collective action claims.  The U.S. Supreme Court put its stamp of approval on such waivers in 2011 in the blockbuster case AT&T v. Concepcion, holding that the enforceability of arbitration agreements was governed by the Federal Arbitration Act (FAA), which preempted any state law purporting to regulate arbitration agreements, including arbitration agreements with class action waivers.  Building on a decades-long line of cases steadily increasing support for the concept of arbitration and similar alternative dispute resolution (“ADR”) methods for resolving litigation, Concepcion also held decisively that arbitration agreements could include waivers by the parties of the right to bring lawsuits as class actions.  The U.S. Supreme Court has re-affirmed Concepcion in subsequent decisions.

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Washington Court Affirms That Anti-Retaliation Laws Protect HR Employees

The Washington Court of Appeals recently determined that state anti-discrimination laws prohibit retaliation against human resources and legal professionals who oppose discrimination as part of their normal job duties. The court also declined to extend the same actor inference, a defense against discrimination claims, to retaliation claims.

Lodis worked at Corbis Holdings as a vice president of human resources. As part of his normal job duties, he warned Corbis’s CEO, Shenk, that Shenk’s age-related comments could give rise to liability for age discrimination. Around the same time, Shenk promoted Lodis but almost immediately gave him a negative performance review, placed him on probation, and then ultimately fired him. 

Lodis sued under the Washington Law Against Discrimination (WLAD), claiming that Corbis retaliated against him for opposing Shenk’s comments. The trial court concluded that Lodis was not engaged in protected activity “because he was simply performing his job duties by warning Shenk” about potential discrimination. The court of appeals disagreed.

Step Outside Rule

Corbis urged the court to adopt the “step outside” rule, which governs federal cases under the Fair Labor Standards Act (FLSA). The rule requires an employee to step outside her normal job duties before receiving the FLSA’s protection against retaliation.  

The court declined to adopt the rule for two reasons. First, the court believed that the language of the WLAD could not support a step outside rule. Second, the court concluded that policy considerations favored rejecting the rule. “[A]dopting the step outside rule,” the court said, “would strip human resources, management, and legal employees of WLAD protection.” The court noted the importance of protecting these employees because they are often the most able to oppose workplace discrimination. 

Same Actor Inference

Corbis also argued that the court should apply the same actor inference to dismiss Lodis's retaliation claim.  The same actor inference arises when an employee is both hired and fired by the same decision-makers in a short period of time.  Courts may then infer that the employee was not fired for any attribute that the decision-makers were aware of when they hired her.  Corbis contended that Shenk promoting Lodis despite the warning about potential discrimination proved that he did not retaliate when he later fired Lodis.

The court, however, refused to extend the same actor inference to retaliation claims.  The court was concerned that extending the defense would allow employers to simply promote employees before terminating them to avoid valid retaliation claims.

Thus, Lodis v. Corbis Holdings, Inc. limits the same actor defense to traditional discrimination cases. And perhaps more importantly, the case reaffirms that the WLAD protects all employees from retaliation.

Washington Law Against Sexual Orientation Discrimination Not Retroactive

On September 13, the Washington Supreme Court held that a 2006 amendment to the Washington Law Against Discrimination, which makes it illegal for employers to discriminate on the basis of sexual orientation, does not apply retroactively. But the Court also held that evidence of pre-amendment harassment is admissible to show why post-amendment conduct is discriminatory.

Loeffelholz, a lesbian, sued the University of Washington in 2009, alleging that Lukehart, her supervisor, harassed her from 2003 to 2006 because of her sexual orientation.  She claimed that Lukehart’s conduct had created a hostile work environment.  She alleged only one incident, however, that occurred after the effective date of the 2006 amendment, and that incident was not explicitly related to her sexual orientation.  The trial court dismissed her claim, stating that Lukehart’s post-amendment conduct was insufficient to support a hostile work environment claim.  The court of appeals reversed, and the Supreme Court affirmed in part.

The Supreme Court first determined that the 2006 amendment applies only prospectively.  Thus, Loeffelholz was not entitled to recover for Lukehart’s actions before the amendment’s effective date.  The Supreme Court held, however, that evidence of Lukehart’s pre-amendment conduct was admissible as context to prove that his post-amendment behavior was discriminatory.  The only explicit comments Lukehart made regarding Loeffelholz’s sexual orientation, asking if she was gay and telling her not to “flaunt it,” occurred when she started working in 2003.  The Court further held that if Loeffelholz prevailed in her post-amendment hostile work environment claim, she would be entitled to damages from the effective date of the amendment, not just from the date of Lukehart’s post-amendment conduct.

Thus, while Loeffelholz v. University of Washington precludes recovery for sexual orientation discrimination occurring before the amendment, it does allow employees to bolster sexual orientation discrimination claims with evidence of pre-amendment conduct.

NLRB's Court Woes Continue: New Election Rules Struck Down

The Obama NLRB’s regulatory agenda continues to fare poorly in the federal courts.  On the heels of court decisions staying the NLRB’s new “notice” requirement, see previous posts here, the United States District Court for the District of Columbia Circuit has just struck down the NLRB’s new rules designed to speed up union representation elections.

Employers and their representatives have been concerned about the Board’s new election rules since they were issued in September.  See our previous posting here.  Employers’ concerns were heightened when the Board’s Acting General Counsel issued a “Guidance Memorandum” directing the Board’s Regional Offices on how to implement the new rules.  That Guidance Memorandum is available here.  That Guidance Memorandum articulated several “best practices” that would further accelerate the election process.

 

In response to the new rules, the US Chamber of Commerce and other groups sued the Board, citing a number of substantive and procedural objections to the new rules.  Judge James Boasberg (an Obama appointee) struck down the Board’s decision solely on procedural reasons: the absence of a quorum.  Just two years ago, the United States Supreme Court had emphasized the importance of the Board having a minimum of three members to act.  The court had emphasized in New Process Steel that the quorum requirement is not, under the Taft-Hartley Act, a mere “technical obstacle.”  Ironically, concern about the then-impending loss of a quorum in December, 2011, caused the Board to rush its normal internal processes.  Member Hayes had previously expressed his opposition to the proposed rules.  When the final proposed rules were circulated among the three Board members, member Hayes did not participate – but the two member majority adopted the rules anyway.  The District Court concluded that the Board thus acted without a quorum:

 

“According to Woody Allen, 80% of life is just showing up.  When it comes to satisfying a quorum requirement, though, showing up is even more important than that.”

 

In the absence of a lawful quorum, the rules were not properly adopted, and therefore must be struck down.  The judge expressly did not reach any of the substantive objections to the rules.

 

This will likely raise substantial uncertainty in the near term.  The Board could attempt to readopt the rules with its current membership – but doing so would only be more controversial: any quorum relying on the President’s “recess” appointments to the Board (made at a time when the Senate was not in recess!) will be subject to further attack.  It is also not clear what course Regional Offices will take as to elections that were being handled under the now-stricken rules or what effect will be given to the Acting General Counsel’s “Guidance Memorandum.”

 

Employers should stay tuned for further developments – and if you receive a union election petition you should call your Stoel Rives labor lawyer immediately!

UPDATE: NLRB Postpones Posting Rule Indefinitely

In response to two federal court cases we previously blogged about here and here, the NLRB has indefinitely postponed implementation of its notice posting rule pending appeals in both of those cases.  The bottom line is that no employer needs to post the notice for the time being.

The U.S. Court of Appeals for the D.C. Circuit will hear the NLRB’s appeal of an emergency injunction that court issued against the rule, but the hearing will not occur before September 2012.  In the trial court ruling in that case, the judge found the NLRB's posting rule valid, but its enforcement provisions invalid.  The NLRB is also appealing the South Carolina federal trial court decision we previously blogged about, in which a judge deemed the NLRB's entire posting rule invalid.  No schedule has yet been set for the South Carolina appeal.

See the NLRB’s statement about this issue here.

California Supreme Court Clarifies Meal and Rest Break Requirements Under State Law

In its long-anticipated decision in Brinker v. Superior Court, a unanimous California Supreme Court has clarified the scope of an employer’s obligation to provide meal and rest breaks to non-exempt employees in California.  The Court's full opinion is available here.

Meal Breaks

California law requires employers to provide employees with a meal period of not less than 30 minutes for workdays lasting more than five hours, and to provide two meal periods for workdays in excess of ten hours, subject to waiver in certain circumstances.  At issue in Brinker was whether an employer must ensure that an employee’s work stops for the required 30 minutes, or whether an employer is only obligated to make meal periods available, with no responsibility for whether they are taken.  The Court concluded that an employer’s obligation is to relieve its employee of all duty, with the employee thereafter at liberty to use the meal period for whatever purpose he or she desires.  The employer must relinquish control over its employee’s activities and give the employee a reasonable opportunity to take an uninterrupted 30 minute break, and the employer may not impede or discourage the employee from doing so.  However, the employer is not obligated to police meal breaks and ensure no work is performed. 

Timing of Meal Breaks

The Court held that an employer must provide a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s tenth hour of work.  The Court found that there are no additional timing requirements, such as rolling five hour meal periods. 

Rest Periods

Under California law, employers must authorize and permit employees to take rest periods based on the total hours worked daily, at the rate of ten minutes net rest time per four hours worked or major fraction thereof.  A rest period need not be authorized for employees whose total daily work time is less than three and one-half hours.  The Court summarized the rest period obligation as follows: employees are entitled to ten minutes’ rest for shifts from three and one-half hours to six hours in length, 20 minutes for shifts of more than six hours up to ten hours, 30 minutes for shifts of more than ten hours up to 14 hours, and so on.  The 10-minute breaks must fall within the middle of a four hour period of work, to the extent practicable.

Timing of Rest Periods

The Court held that employers do not have a duty to permit their employees a rest period before any meal period.

What Brinker Means For Employers

Brinker is generally regarded as a favorable ruling for employers, and the decision provides a roadmap for employers to reduce the risk of claims arising from alleged meal and rest period violations.  Post-Brinker, it is essential that California employers carefully review and, if necessary, revise policies to state that meal periods are duty-free, 30 minutes in length and are to be taken before the end of the fifth hour of work.  Rest period policies should now detail that rest periods are authorized and permitted in accordance with the specific standards set forth above.

Employers should continue to require employees to clock out and in for meal breaks, and to carefully monitor and manage whether employees are working through their meal periods.  Employers are liable for straight time or overtime pay if they know or should have known employees have worked through meal breaks. If an employee is not clocking out for meals, an employer would likely be found to be on notice that the employee continued to work and thus should be paid for that time.  Additionally, if there is a pattern of employees not taking meal periods, or taking meal periods of less than 30 minutes in length or after the end of the fifth hour of work, management should look into whether the employees are really being given the opportunity to take timely 30-minute off-duty meal periods.

Finally, supervisors and managers should be trained on the importance of allowing employees to take meal and rest periods as prescribed in Brinker.  While the outcome in Brinker is good news for employers, managers who discourage or prevent employees from taking meal or rest breaks will expose the company to substantial liability.

UPDATE: DC Court of Appeals Delays Implementation of NLRB Posting Requirement

The NLRB’s new posting rule, which would apply to virtually all private sector employers, was scheduled to go in effect on April 30, 2012.  Yesterday, we blogged about a South Carolina federal trial court decision striking down the posting rule.  More good news for employers arrived today, as the United States Court of Appeals for the District of Columbia issued an emergency injunction preserving the “status quo” and delaying implementation of the NLRB’s posting rule until that Court of Appeals determines its validity.  The D.C. trial court had previously determined the posting rule was valid (contrary to the South Carolina case) but that its remedies were invalid.  Oral argument in the D.C. appellate case is currently estimated to occur in September 2012.  A copy of the D.C. Court of Appeals injunction decision is here.

 

We now have two courts that have stymied the NLRB posting rule.  It is still unknown whether the NLRB will appeal the South Carolina and D.C. Court of Appeals decisions.  But for now, absent an emergency appeal, it appears that the NLRB’s posting rule will, at a minimum, be delayed for several months.  We will keep you “posted” as developments occur.

South Carolina Federal Court Holds NLRB's Notice Posting is Unlawful

As previously blogged here, a federal court located in the District of Columbia upheld the National Labor Relations Board's (“NLRB”) rule requiring nearly all private sector employers, whether unionized or not, to post a notice to their employees about certain employee rights under the National Labor Relations Act.  While upholding the rule, that federal court did at least strike down the rule’s main enforcement provisions.  A copy of that federal court decision is here.  As we blogged then, another legal challenge to the NLRB’s rule was also pending in a South Carolina federal court.  That decision is now here, and it is a good one for employers.

The U.S. Chamber of Commerce and the South Carolina Chamber of Commerce challenged the NLRB’s rule.  On April 13, 2012 (perhaps Friday the 13th from the NLRB’s perspective), the federal judge in that South Carolina case ruled that the NLRB’s entire posting rule is invalid, finding the NLRB exceeded its authority when it required employers to post notices explaining workers’ rights to form a union. In his ruling, the South Carolina federal judge said the NLRB lacked the legal authority to issue the notice and thus the rule was not lawful.  “Based on the statutory scheme, legislative history, history of evolving congressional regulation in the area, and a consideration of other federal labor statutes, the court finds that Congress did not intend to impose a notice-posting obligation on employers, nor did it explicitly or implicitly delegate authority to the Board to regulate employers in this manner,” the court ruled.

Many labor law professionals feel that the NLRB has become overly aggressive in supporting and expanding union rights during the Obama administration.  This sentiment is especially strong in a conservative state like South Carolina, which also was at the center of a now-settled dispute between the NLRB and Boeing over Boeing’s decision to move production of its 787 Dreamliner airplane from Washington State to South Carolina.  The South Carolina federal judge appears to agree that the NLRB is becoming overly aggressive, stating, “The Board also went seventy-five years without promulgating a notice-posting rule, but it has now decided to flex its newly-discovered rulemaking muscles.”  A copy of the South Carolina decision is here. Its authority is technically legally limited to that particular court, but because of its import we expect it to have an effect nationally as the NLRB seeks to regroup and rethink what it will do.  If the NLRB does not appeal the South Carolina court’s decision, the ruling will stand and, from a practical perspective the posting requirement will be invalidated nationally.  But most pundits anticipate that the NLRB will file an appeal over the South Carolina decision.

The bottom line is that we now have two conflicting federal court rulings on the issue, and await the NLRB’s decision on whether it will appeal the South Carolina ruling, and/or delay implementation of its previously stated April 30, 2012 posting deadline.  Stay tuned.

When Does Alcohol or a Controlled Substance Preclude Workers' Compensation Benefits?

Like most states, Utah’s Worker’s Compensation statute prohibits an employee from recovering disability compensation when “the major contributing cause of the employee’s injury” is the employee’s unauthorized use of alcohol or a controlled substance. See Utah Code Ann. § 34A-2-302(3)(b). If any amount of a controlled substance or its metabolites is found in an injured employee’s system at the time of the injury, the Worker’s Compensation statute presumes that drug use was the major contributing cause of the injury. 

An employee can rebut this presumption by:

  • challenging the accuracy of the drug test;
  • demonstrating that he or she did not actually use a controlled substance;
  • providing expert medical opinion suggesting that the level of controlled substance in the employee’s system does not support a finding that drug use was the major contributing cause of the injury; or
  • otherwise demonstrating that drug use was not the major contributing cause of the injury.

 

A Utah appellate court recently weighed in on this issue when it reversed the Utah Labor Commission’s denial of disability compensation to James Barron in Barron v. Labor Commission.

Mr. Barron was severely injured while at work when he stepped backward off the edge of temporary metal decking at a construction site and fell fourteen feet to a concrete floor below. A urine sample taken at the hospital on the day of the accident tested positive for cocaine metabolites. Mr. Barron admitted to sharing a quarter of a gram of cocaine with a friend two days before the accident but presented evidence tending to demonstrate he was not impaired at the time of the accident, including testimony from co-workers and medical personnel who observed Mr. Baron’s conduct on the day of the accident.

Applying the statutory presumption, the Commission ignored Mr. Barron’s evidence of non-impairment and found that drug use was the major contributing cause of his injury. Specifically, the Commission determined that Mr. Baron must demonstrate that “some other force” apart from his own actions caused his injury to overcome the presumption. Following case law from a number of other states with similar statutory schemes, the Utah Court of Appeals reversed the decision of the Commission and, for the first time, clarified that employees are not required to show that their injury was the result of an outside force to overcome the statutory presumption. Rather, evidence of non-impairment at the time of the accident may be used to rebut the presumption and to demonstrate that drug use was not the major contributing cause of injury. 

So, when does the use of alcohol or a controlled substance preclude workers' compensation benefits?  The answer: almost always, but not when employees can demonstrate that they are not impaired, despite the presence of controlled substances within their systems.

Why Should Employers be Fair?

Martha walks into your office and says she wants to fire her assistant, Roy, because he keeps sending emails with typos and it is embarrassing. Martha says, “We are at-will and I want him gone by the end of the day.”  Like most others, Alaska is an “employment-at-will” state, which means that the employee and employer are free to end the employment relationship at any time and for almost any reason. But is there more to consider in terminating Roy?

Every employment relationship in Alaska contains an implied covenant of good faith and fair dealing. An employer can violate the covenant by acting with an improper motive, like firing an employee two weeks before he is tenured. The covenant also requires employers to treat employees in a way that a reasonable person would consider fair.

Violation of the covenant of good faith requires a very fact intensive inquiry, which often requires going through a trial with witnesses rather than resolving issues through a motion for summary judgment. Trial is incredibly expensive for employers, not only in court costs but also in terms of stress on staff and distraction from business. However, two Alaska Supreme Court cases issued in early July of this year, that you can see here and here, show that summary judgment is alive and well if an employer can adequately demonstrate it acted fairly and without improper motives in its termination process. The application of the implied covenant of good faith and fair dealing to the employment context varies from state to state, and clearly does not apply in some states, like Washington. Nonetheless these recent cases are a good reminder that fair and equitable treatment in discharging employees can help employers avoid costly and disruptive claims.

So what do we do about Roy? Here are five suggestions to help ensure compliance with the implied covenant of good faith and fair dealing:

  • Follow a process. Require supervisors to provide good faith, fair reasons for discipline. Provide the employee an opportunity to respond to any allegations. Hear facts from Roy now, rather than for the first time in an EEOC proceeding or in court.
  • Be fair.  Enforce personnel policies in a way that a reasonable person would regard as fair. Follow personnel policies when disciplining employees. What policy is Roy violating? Is termination an appropriate response to Roy’s violations?
  • Be consistent. Treat like employee alike, and justify any reasons for inconsistency in treatment. What type of conduct has resulted in other terminations? Have other employees received progressive discipline under similar circumstances, instead of termination? Treat Roy like other employees in similar situations.
  • Act in good faith. Do not manufacture reasons to justify a termination. Is Martha frustrated with Roy for some other reason? Better to learn about it now.
  • Document your process, fairness, consistency, and good faith.

Meghan M. Kelly also contributed to this post.

Idaho Supreme Court Rejects Lawsuit over Intra-Office Romance

On June 29, 2011, the Idaho Supreme Court unanimously upheld a district court ruling that a state worker could not maintain an action against her employer for wrongful discharge based on allegations that her supervisor’s intra-office romance and consequent favoritism toward his paramour created a hostile work environment. See Patterson v. State of Idaho Dep’t of Health & Welfare. In the first Idaho case of its kind, the Court found that paramour favoritism did not violate Title VII and therefore opposition to such activity is not “protected activity” under the Idaho Human Rights Act (“IHRA”).

The longtime Idaho Health & Welfare employee who initiated the action, Lynette Patterson, asserted that her boss’s affair with another worker resulted in favoritism toward the other worker and created a hostile work environment for her and others in her unit. Following Patterson’s initial complaints of her supervisor’s misconduct, the department launched an investigation into her allegations and found that although Patterson’s supervisor did in fact have an inappropriate relationship with another employee in violation of the department’s internal policy, there was no evidence to support preferential treatment. Thereafter, Patterson claims she was the victim of retaliation. Upon receiving a performance evaluation stating that she had failed to achieve performance standards, she quit her job, alleging that she was constructively discharged.  

Patterson’s complaint against the department asserted constructive discharge under the IHRA and violation of the Idaho Protection of Public Employees Act. Following an unfavorable summary judgment ruling, she appealed both issues to the Supreme Court.

 

In its analysis of Patterson’s retaliation claim under the IHRA, the Court used the Ninth Circuit’s three-prong test for a retaliation claim, which requires a plaintiff to demonstrate: 1) that she engaged in protected activity; 2) that she suffered an adverse employment action; and 3) there was a causal link between her activity and the adverse employment action. See EEOC v. Luce, Forward, Hamilton & Scripps. Courts have found the first prong satisfied when an employee demonstrates he or she subjectively and reasonably believed that he or she was opposing activity that violates Title VII. See Little v. United Technologies, Carrier Transicold Division.

 

The Court found that Patterson subjectively believed she engaged in protected activity when she opposed the paramour relationship allegedly resulting in favoritism, but it concluded that such a belief was not objectively reasonable. The Court noted that a critical element of the inquiry regarding objective reasonableness of an employee’s belief that he or she is engaging in protected activity is the existing case law at the time of the incident. The case law at the time of Patterson’s resignation did not support her position. Moreover, the Court found that the favoritism, even if true, affected all concerned on a gender-neutral basis.

 

This decision aligns Idaho with other jurisdictions that have confronted the specific issue of paramour favoritism and ruled that paramour favoritism does not constitute gender discrimination because it affects both men and women equally. The Court’s ruling is useful to Idaho employers to the extent that it requires employees to demonstrate the reasonableness of their belief that they are engaging in protected activity under the IHRA. Notwithstanding these holdings, employers must continue to be careful about the prospect of retaliation claims, which constituted 25% of all complaints filed with the Idaho Human Rights Commission in 2010.

Why Employers Should Exercise Restraint and Objectivity

Retaliation claims are increasing at an alarming pace. Not only have these claims tripled in number within the last two decades, they now exceed race discrimination as the leading claim filed with the U.S. Equal Employment Opportunity Commission.  Click here to see EEOC statistics.

Why the startling trend? First, Congress has gone to great lengths to protect employees’ rights to speak out against unlawful employment practices. Protections are regularly included in new laws, such as the American Recovery and Reinvestment Act of 2009, the Patient Protection and Affordable Health Care Act of 2010, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Second, courts have adopted a broad definition of what constitutes retaliation and who should be protected. An employee must prove she engaged in a protected activity (like reporting harassment) and suffered an adverse employment action as a result (like being passed over for a promotion). An employer may ultimately defeat the harassment claim, but still face liability for retaliation. Third parties also may be protected from retaliation. For instance, in a recent United States Supreme Court decision the court found that the fiance of an employee who files a discrimination complaint is protected from retaliation under Title VII.

Third, jurors understand retaliation claims because they involve natural reactions to being accused of something awful, like sexual harassment. Jurors know how natural it is for the accused to have negative feelings after such an accusation, and at the same time jurors will sympathize with an employee who allegedly suffers for rocking the boat by making a complaint.

So what’s an employer to do?

  • Start with a clear anti-retaliation policy and train employees on it. Include an outlet for employees to raise retaliation concerns.
  • Counsel supervisors to be vigilant in their efforts to be objective, to exercise restraint, and to avoid knee-jerk reactions, and educate supervisors on how to spot situations where retaliation among co-workers is a risk.
  • Limit retaliatory behavior between employees by limiting the number of people who know about employee complaints.
  • Establish consistent processes that will catch subtle or unintended retaliation, so that employment decisions are based on legitimate business-related factors.
  • Timely investigate and address any appearance or allegation of retaliation.

Victory For Employers in Washington Medical Marijuana Case

In a victory for employers, the Washington Supreme Court has ruled that Washington’s Medical Use of Marijuana Act (“MUMA”) does not protect medical marijuana users from adverse hiring or disciplinary decisions based on an employer’s drug test policy. Click here to download a copy of the decision in Roe v. Teletech Customer Care Management. The lawsuit and all appeals were handled for the employer by Stoel Rives attorneys Jim Shore and Molly Daily.

Jane Roe (who did not use her real name because medical marijuana use is illegal under federal law) sued Teletech for terminating her employment after she failed a drug test required by Teletech’s substance abuse policy. She alleged that she had been wrongfully terminated in violation of public policy and MUMA since her marijuana use was “protected” by MUMA. The trial court granted summary judgment in favor of Teletech, and Roe appealed. As discussed in a previous blog, the Washington Court of Appeals, Division II affirmed the trial court’s dismissal of Roe’s case. Roe then appealed to the Washington Supreme Court.

The Supreme Court ruled 8-1 in favor of in Teletech, holding that MUMA provides an affirmative defense to state criminal prosecutions of qualified medical marijuana users, but “does not provide a private cause of action for discharge of an employee who uses medical marijuana, either expressly or impliedly, nor does MUMA create a clear public policy that would support a claim for wrongful discharge in violation of such a policy.” The Court’s holding applies regardless of whether the employee’s marijuana use was while working or while off-site during non-work time. Adding to a significant victory for employers, the Court’s decision extends to the current version of MUMA as amended by the Legislature in 2007, and not just the original version passed by the voters in 1998 in effect when the facts of the case arose.

The plaintiff in the Teletech case did not raise a disability discrimination or reasonable accommodation claim under Washington’s Law Against Discrimination, and the Supreme Court therefore did not expressly reach that particular issue. But the Court did point out that marijuana remains illegal under federal law regardless of what the State of Washington does, and that it would be incongruous “to allow an employee to engage in illegal activity” in the process of finding a public policy exception to the at-will-employment doctrine. Moreover, the Court noted that the Washington State Human Rights Commission itself acknowledges that “it would not be a reasonable accommodation of a disability for an employer to violate federal law, or allow an employee to violate federal law, by employing a person who uses medical marijuana.”

The workplace implications of medical marijuana continue to be a developing area in many states. California’s Supreme Court has ruled in a manner consistent with Washington. Also previously covered in World of Employment, in Emerald Steel Fabricators, Inc. v. Bureau of Labor & Industries, the Oregon Supreme Court ruled that because federal criminal law preempts Oregon’s medical marijuana law, employers in Oregon do not have to accommodate employees' use of medical marijuana. But some states are more protective of an employee’s medical marijuana use. Given the continued efforts by marijuana advocates and civil rights groups to “push the envelope” of medical marijuana laws into the workplace, it is important for employers to continue to closely monitor legislative and legal developments. A recent effort to include workplace protections for medical marijuana users via amendments to Washington’s medical marijuana laws was defeated, but we anticipate similar efforts may be made in other states in the coming years.

There are many sound reasons why employers have zero tolerance policies and engage in drug testing of applicants and/or employees, including customer requirements, government contracting requirements (e.g.,the federal Drug Free Workplace Act), federal or state laws (including DOT requirements for transportation workers), workplace safety, productivity, health and absenteeism, and liability. To best protect themselves, employers should review their policies to make sure that illegal drug use under both state and federal law is prohibited, and that their policies prohibit any detectable amount of illegal drugs as opposed to an “under the influence” standard. Employers should also ensure that all levels of their human resources personnel know how to handle medical marijuana issues as they arise.

Ninth Circuit Holds Shareholder Hire Preference Not Facially Discriminatory

Meghan M. Kelly also contributed to this post.

In an unpublished opinion in Conitz v. Teck Alaska Inc. the Ninth Circuit held that an Alaska Native corporation’s shareholder employment preference was not facially discriminatory because it was based on shareholder status, not racial status.

 

Teck employee Gregg Conitz works at the Red Dog Mine, which Teck operates and NANA Regional Corporation, an Alaska Native corporation, owns. Conitz alleged that he was passed over for promotions as a result of Teck’s policy favoring NANA shareholders in hiring – a preference Conitz argued was racially discriminatory because the majority of NANA shareholders are Alaska Native. The district court found that Teck’s employment preference for NANA shareholders was not a racial distinction and therefore did not violate either the Civil Rights Act or any other provisions of federal or state law. Given this, the district court declined to address Teck’s argument that as a joint venture between NANA and Teck, the Red Dog Mine is exempt from Title VII under a provision of the Alaska Native Claims Settlement Act. The district court also found that Conitz failed to show he was qualified for the promotion, and therefore failed to make out a case of discrimination under Title VII.

 

The Ninth Circuit affirmed, holding that a shareholder preference is not facially discriminatory because it favors candidates based on shareholder status, not race. The court also found that Conitz failed to show the elements of a prima facie case of discrimination under McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). Conitz did not demonstrate he was qualified for the supervisory position and was, in fact, not promoted because he was not qualified. The court declined to decide whether the shareholder preference policy constitutes racial discrimination since the policy did not affect Conitz.

Medical Marijuana and Zero Tolerance Drug Testing Policies Remain An Issue For Employers

Employers and the courts continue to wrestle with issues involving “zero tolerance” drug testing policies and whether employers must accommodate medical marijuana use by their employees. Marijuana use is illegal under the federal Controlled Substances Act, and therefore does not need to be accommodated under the federal Americans with Disabilities Act (“ADA”). However, 15 states currently have legalized some form or another of medical marijuana use: Alaska, Arizona, California, Colorado, Hawaii, Maine, Michigan, Montana, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Washington as well as the District of Columbia. The language of each state’s law can differ, and the courts therefore interpret these state law issues on a case-by-case basis.

 

Most recently, in Casias v. Wal-Mart Stores, Inc., a Michigan federal district court ruled that an employee who was terminated by Wal-Mart after testing positive for validly obtained medical marijuana stated no legal claims for wrongful discharge. The court accepted Wal-Mart’s argument that Michigan’s medical marijuana law does not regulate private employment; rather, it merely provides a potential affirmative defense to criminal prosecution or other adverse action by the state. The court rejected the plaintiff’s argument that the law created a new protected employee class, which “would mark a radical departure from the general rule of at-will employment in Michigan.” The Casias decision is currently being appealed.

A similar ruling is under review by the Washington State Supreme Court. I argued the case for the employer on January 18, 2011. As I previously blogged, the Washington Court of Appeals in Roe v. Teletech Customer Care Management affirmed a trial court’s ruling and held that Washington’s Medical Use of Marijuana Act (“MUMA”) does not protect medical marijuana users from adverse hiring or disciplinary decisions based on an employer’s drug test policy. In so doing, the Court of Appeals stated, “MUMA neither grants employment rights for qualifying users nor creates civil remedies for alleged violations of the Act.” Rather, the Court held that MUMA merely protects qualified patients and their physicians from state criminal prosecution related to the authorized use of medical marijuana. The Court further held that when Washington’s voters passed MUMA through the initiative process, they did not intend to impose a duty on employers to accommodate employee use of medical marijuana. A decision from the Washington Supreme Court is anticipated later this year.

Three other state Supreme Courts have already issued rulings on workplace medical marijuana issues, and all have found in the employer’s favor. In Ross v. RagingWire, the California Supreme Court ruled that it is not discrimination to fire an employee for using medical marijuana. The court held that employers in California do not need to accommodate the use of medical marijuana, even when users only ingest or smoke marijuana away from the workplace.

In Johnson v. Columbia Falls Aluminum Company, the Montana Supreme Court ruled, in an unpublished decision, that an employer is not required to accommodate an employee's use of medical marijuana under the federal ADA or the Montana Human Rights Act.

Also previously covered on World of Employment, in Emerald Steel Fabricators, Inc. v. Bureau of Labor & Industries, the Oregon Supreme Court ruled that because federal criminal law takes precedence over Oregon’s medical marijuana law, employers in Oregon do not have to accommodate employees' use of medical marijuana. Stoel Rives filed a “friend of the court” brief on behalf of the employer in that case.

There are many sound reasons why employers have zero tolerance policies and engage in drug testing of applicants and/or employees, including, without limitation, customer requirements, government contracting requirements (including the federal Drug Free Workplace Act), federal or state laws (including DOT requirements for transportation workers), workplace safety, productivity, health and absenteeism, and liability. To best protect themselves, employers should review their policies to make sure that illegal drug use under both state and federal law are prohibited, and that their policies prohibit any detectable amount of illegal drugs in an applicant’s or employee’s system as opposed to using an “under the influence” standard. Employers should also ensure that all levels of their human resources personnel know how to handle medical marijuana issues as they arise. Finally, given the continued efforts by marijuana advocates and civil rights groups to “push the envelope” of medical marijuana laws into the workplace, it is important for employers to continue to closely monitor legislative and legal developments. A recent effort to include workplace protections for medical marijuana users via amendments to Washington’s medical marijuana laws was defeated, but we anticipate similar efforts will be made in Washington and other states in the coming years.

Supreme Court Upholds "Cat's Paw" Theory In Employment Discrimination Cases

Today the Supreme Court issued its opinion in Staub v. Proctor Hospital, upholding the "cat's paw" theory of employer liability, under which employers are liable for discrimination where lower-level supervisors with discriminatory motives influence, but do not make, adverse employment decisions made by higher-level managers.  The near unanimous opinion, authored by Justice Scalia, is likely to greatly increase employer accountability for the actions and recommendations of lower-level supervisors.

Vincent Staub worked for Procter Hospital as an angiography technician; he was also a member of the Army Reserves.  His immediate supervisors resented his absences, which required coworkers to “bend over backwards” to pick up the slack. In January 2004 Staub was placed on Corrective Action for failing to be at his desk as required, and in April 2004 his supervisor informed HR that Staub was again away from his desk without notifying a supervisor as required.  Staub disputed the original Corrective Action, and also said he left a voice mail for his supervisor before leaving his desk in April.  The HR Manager largely relied on the supervisor’s accusation, reviewed Staub’s personnel file, consulted with another HR employee, and decided to terminate Staub’s employment. 

Staub sued under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”), which prohibits discrimination based on military service.  Under the so-called “cat’s paw” theory, Staub claimed that Procter Hospital was liable for discrimination, because the neutral decision-maker (the HR Manager) relied on information provided by lower-level supervisors who had discriminatory motives and were out to get him fired.  After winning in a jury trial, the district court granted Proctor Hospital’s motion to dismiss.  In affirming, the 7th Circuit had held that the employer should not be liable under the cat’s paw theory, because the lower-level supervisors’ input was not the “singular influence” on the decision, and because the HR Manager conducted “her own investigation into the facts relevant to the decision” and therefore was not “wholly dependent” on the discriminatory input.

Staub begins with an analysis of the text of USERRA, which expressly defines causation to include situations where discriminatory animus is "a motivating factor" in an adverse employment decision.  Drawing also on tort and agency principles, Justice Scalia concluded that the cat’s paw theory applies in cases where 1) a supervisor acts with discriminatory motive, 2) the discriminatory supervisor intends to cause the adverse action, and 3) the discriminatory act is a “proximate cause” of the adverse action.  Scalia rejected the argument that the decision-maker’s independent investigation should purge the decision of discriminatory motive, noting that the hostile supervisors’ recommendations remained a motivating factor in the decision.  He also noted, in contrast to the 7th Circuit, that the HR Manager largely relied on the supervisors’ account of the facts underlying the termination, and did not independently determine whether the supervisors’ recommendations were justified. 

 

What Employers Can Do:  Don’t Be A Cat’s Paw

While Staub opens the door wider to discrimination cases under the cat’s paw theory, the case offers some guidance on what employers can do to minimize exposure from these claims.  Most obviously, ultimate decision makers cannot simply rely on recommendations from subordinates, but should conduct a thorough and independent investigation into the facts underlying the employment action.  The subtext of Staub suggests the HR Manager’s investigation was far from adequate—she merely reviewed the personnel file and consulted another HR employee, but largely relied on the (hostile) supervisor’s accusation that Staub had, in fact, violated a workplace rule.  The better the independent investigation, especially into the underlying facts, the more likely it is to break the “proximate cause” nexus between coworkers’ discriminatory motive and the employer’s ultimate decision. 

In addition, and perhaps just as obvious, employers should do everything possible to detect and immediately end discriminatory animus brewing among lower level employees. The plaintiff inStaub easily satisfied the other two prongs of the Court’s test—that the supervisor acted with a discriminatory motive and intended to cause Staub’s firing—because the trial record was full of choice remarks by coworkers disparaging his military duty and complaining about his absences. His supervisors described his Reserve military duty as a “bunch of smoking and joking and a waste of taxpayers’ money,” and scheduled him additional shifts “to pay back the department for everyone else having to bend over backwards to cover his schedule for the Reserves.”

The Reach of the Cat’s Paw

Staub makes clear that its reasoning applies to more than just USERRA cases.  The opinion expressly noted that Title VII also uses the “a motivating factor” causation standard.  What is less clear is whether it applies to just discriminatory supervisors, or also to non-supervisory coworkers. For the moment, however, the Supreme Court has given a green light to cat’s paw cases, and employers should assume it could apply broadly and to any discrimination claim.

 

Supreme Court Holds Title VII Can Cover Third Party Retaliation Claims

The United States Supreme Court issued a unanimous opinion today in Thompson v. North American Stainless, LP., 562 U.S. ___ (2011), that confirms the expansive scope of persons protected by Title VII. The Court held that it is unlawful for an employer to intentionally harm one employee in order to retaliate against another employee who engaged in protected activity.

Plaintiff Thompson and his fiancée Regalado were engaged to be married and both worked for North American Stainless (NAS). The EEOC notified NAS that Regalado had filed a charge of sex discrimination. Thompson was fired three weeks later. The issue was whether Thompson could state a claim for retaliation, even though he had not engaged in any protected activity. The Court confirmed that “Title VII’s antiretaliation provision must be construed to cover a broad range of employer conduct.” It “prohibits any employer action that well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” The Court found that it was “obvious” that Regalado would have been dissuaded from making her complaint if she knew that Thompson would lose his job as a result. 

The employer argued that to permit a third party retaliation claim in this case would lead to a dangerous slippery slope – would firing an employee’s boyfriend count? How about just a friend? Anytime the employer fired a person who happened to have a connection to someone else who had filed an EEOC charge, the employer would have potential liability. The Court responded: “Although we acknowledge the force of this point, we do not think it justifies a categorical rule that third-party reprisals do not violate Title VII. . . . Given the broad statutory test and the variety of workplace contexts in which retaliation may occur, Title VII’s antiretaliation provision is simply not reducible to a comprehensive set of clear rules.” In other words, there is no bright line test for who is protected from retaliation. 

After concluding that the antiretaliation provision of Title VII was broad enough to encompass the activity in this case, the Court tackled the question of whether Thompson could sue NAS. Here the Court took a more narrow approach. It declined to follow the Court’s prior view that, to be “an aggrieved person” under Title VII, all that was required was that the person have “minimal Article III standing, which consists of injury in fact caused by the defendant and remediable by the court.” That minimalist approach would lead to “absurd consequences.” For example, if the minimalist approach was applied, a shareholder who could show that his stock value declined because of the company’s unlawful termination of a valuable employee could sue under Title VII. Instead, the test, the Court said, is as follows: “[A] plaintiff may not sue unless he falls within the zone of interests sought to be protected by the statutory provision whose violation forms the legal basis for his complaint.” Thompson, it said, fell within the “zone of interests” protected by Title VII because he was a NAS employee and NAS intended to injure him in order to punish Regalado. 

What This Case Means for Employers

Employers probably didn’t need another reminder that the potential claims they face are only limited by the imagination of plaintiffs’ attorneys. Before an employer takes any disciplinary action against anyone, it must ensure that it has legitimate business reasons for doing so and that an improper reason – such as a desire to exact revenge on another employee – hasn’t infected the decision. 

Ninth Circuit Issues Split Decisions on Compensation for Travel Time and "Off-the-Clock" Work

 

Employees who drive company vehicles between home and work will find little to cheer about in a recent Ninth Circuit decision . . . unless they live in California.  In Rutti v. Lojack Corporation, a three-judge panel refused to relax the rule that commuting time is non-compensable under the Fair Labor Standards Act (FLSA).  

The employee, who installed vehicle recovery systems, contended that his travel time between home and worksites was compensable under the FLSA and California law because his employer required him to drive company vehicles and significantly restricted his activities while doing so.  For example, the employer prohibited the employee from transporting passengers and engaging in personal pursuits, and required him to drive directly to and from the worksite with his cell phone turned on.  

All three judges rejected that argument under the FLSA, holding that use of an employer's vehicle to commute is non-compensable even if it is a condition of employment and that the restrictions placed on the employee's activities were incidental to his principal job activities.  The unanimous panel also rejected the employee's argument that his commuting time was compensable under the "continuous workday doctrine," under which an employee's workday generally lasts until he has completed all of his principal activities during the day. 

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9th Circuit: No Compensatory or Punitive Damages in ADA Retaliation Cases

The Ninth Circuit Court of Appeals recently limited the remedies available to employees who sue for retaliation under the Americans with Disabilities Act (ADA), ruling that the statute does not provide for punitive damages, compensatory damages or a jury trial in ADA retaliation cases.  Click here to read the decision in Alvarado v. Cajun Operating Co. 

Mr. Alvarado worked as a cook in defendant’s restaurant. He complained after his supervisor made allegedly discriminatory remarks related to his age and disability, and shortly afterward he received several disciplinary write-ups for poor performance.  After Mr. Alvarado was ultimately terminated, he sued his former employer for, among other things, retaliation under the ADA.  Prior to trial, the federal district court granted defendant’s motion in limine, barring plaintiff from seeking punitive and compensatory damages, and a jury trial, on his ADA retaliation claim on the grounds that the statute provided only equitable relief for such claims.

The Ninth Circuit affirmed the district court’s ruling by holding that the plain, unambiguous language of the ADA remedy provisions specifically enumerate only those sections of the act for which compensatory and punitive damages (and a jury trial) are available, and that the ADA anti-retaliation provision is not included in that list.  Somewhat surprisingly considering the laws at issue have been on the books since 1991, the Ninth Circuit appears to be only the third Circuit Court of Appeals to have been presented with the issue, after the Seventh and Fourth Circuits (which reached similar conclusions).  The court also noted that several district courts in other circuits had reached the opposite conclusion (perhaps most surprising of all), by ignoring the text of the remedy provision and instead emphasizing the overall structure of the ADA and the “expansive” intent of the 1991 amendments. 

For now, the law in the Ninth Circuit on this question is clear:  while still entitled to compensatory or punitive damages in disability discrimination or failure to accommodate claims under the ADA, employees may not receive those damages for ADA retaliation claims.

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Oregon Court of Appeals Upholds Claim of Negligent Failure to Investigate

In Steele v. Mayoral et al., the Oregon Court of Appeals ruled that a plaintiff could take to the jury her claim that her employer had failed to prevent sexual harassment by her supervisor by not investigating earlier incidents about the supervisor’s relationships with other employees.

The plaintiff, a high school guidance counselor, was dating her supervisor, the principal. She complained that the supervisor had sexually assaulted her during a date. The school district investigated the complaint and recommended the supervisor be terminated. The plaintiff sued. In addition to alleging sexual harassment and retaliation, she also alleged that the school district had been negligent by not terminating her supervisor before the incident had even occurred. She based that allegation on three earlier incidents involving the principal’s relationships with other school district employees. The juicy allegations involve (1) the principal’s affair with the wife of another principal in the same school district, (2) the principal’s complaint that another district employee was “stalking” him after he “rebuffed her advances,” and (3) yet another employee’s allegation that she was dating the principal when he slept with yet another employee. The plaintiff alleged that the school district should have investigated those incidents – and that if it had, it would have terminated her supervisor years before.

The trial court dismissed the plaintiff’s negligence claim, but the Court of Appeals reversed, ruling that a jury should be able to decide whether or not the school district’s failure to investigate had caused the sexual harassment. We don’t know what a jury would say about liability in this case, but it is a sobering reminder to employers to investigate all incidents of potential misconduct involving the workplace.
 

Washington Court of Appeals Upholds Termination Where Medical Marijuana Use Caused Drug Test Failure

Note:  On April 1, 2010, the Washington Supreme Court granted review of the Court of Appeals decision discussed in this entry.  A final ruling on the case will be issued by the Washington Supreme Court at a later date.

 

A Washington Court of Appeals has ruled that Washington’s Medical Use of Marijuana Act (“MUMA”) does not protect medical marijuana users from adverse hiring or disciplinary decisions based on an employer’s drug test policy. Click here to download a copy of the Court of Appeals Decision in Roe v. Teletech Customer Care Management

 

Jane Roe (who did not use her real name because medical marijuana use remains illegal under federal law) sued Teletech for rescinding its employment offer after she failed a drug test required by Teletech’s substance abuse policy. She sought reinstatement and damages, alleging that she had been wrongfully terminated in violation of public policy since her marijuana use was legal under MUMA. The trial court granted summary judgment in favor of Teletech, and Roe appealed.

 

The Washington Court of Appeals, Division II affirmed the trial court’s dismissal of Roe’s case, stating, “MUMA neither grants employment rights for qualifying users nor creates civil remedies for alleged violations of the Act."  Rather, the Court held that MUMA merely protects qualified patients and their physicians from state (not federal) criminal prosecution related to the prescribed use of medical marijuana.  The Court further held that when Washington’s voters passed MUMA through the initiative process, they did not intend to impose a duty on employers to accommodate employee use of medical marijuana. The lawsuit and appeal, handled for the employer by Stoel Rives attorneys Jim Shore and Molly Daily, is likely to be further appealed by Roe to the Washington Supreme Court. 

 

The workplace implications of medical marijuana continues to be a developing area. If your company has employees in any state allowing the use of medical marijuana under certain circumstances (including Washington, Oregon and California), you should review your substance abuse policies and make certain that all local human resources personnel and drug test administrators know whether the company will consider an exception for medical marijuana usage. Currently, Washington employers do not need to accommodate medical marijuana usage by making an exception to an otherwise valid substance abuse policy. However, because of court rulings in other states interpreting their states’ disability laws and advocacy groups’ continued attempts to expand medical marijuana rights, employers should continue to exercise caution when dealing with requests for disability accommodation involving medical marijuana. If such an issue arises, consider consulting with legal counsel.

The First Monday in October: Supreme Court Roundup

The first Monday in October traditionally marks the beginning of the United States Supreme Court's yearly term - and it provides an excellent opportunity to look at the cases the Court will be hearing this year.  In an earlier post, the World of Work brought you detailed discussion of the Court's only Title VII case this term:  Lewis v. City of Chicago.  Here's a sampling of other labor and employment-related cases to watch for throughout the term:

This morning, in Mohawk Industries, Inc. v. Carpenter, the Court will consider whether an employer's attorney's investigation of an internal complaint is protected by the attorney-client privilege.  The internal complaint alleged that the company was conspiring to hire individuals who were not authorized to work in the United States.  The case involves a former employee's claim for witness tampering; a separate lawsuit involving the alleged conspiracy is proceeding on a separate track.

On October 7, the Court will hear a case involving the Railway Labor Act.  The issue in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers is whether the Seventh Circuit Court of Appeals had the power to overturn, on due process grounds, an arbitration award in the railroad's favor.  

On October 14, in Perdue v. Kenny A., the Court will consider whether attorney fee awards under 42 USC 1988 can be enhanced when the lawyer does a particularly good job.  Section 1988 is a common basis for fees in employment-related lawsuits.

On December 9, the Court will hear Stolt-Nielsen SA v. AnimalFeeds International.  This case asks the Court to decide whether an employee bringing a claim under an arbitration agreement may sue, not only on his own behalf, but on behalf of a class of similarly situated employees.  In this case, the arbitration agreement did not specifically allow class claims, but the arbitrators allowed those claims anyway.

Finally, on a date to be announced, the Court will hear Granite Rock Co. v. International Brotherhood of Teamsters.  This case again involves questions about arbitration.  Here, the issue is whether an arbitrator (not a court) may decide whether a valid collective bargaining agreement exists.

Oregon Court Of Appeals Holds Non-Disabled Employees Are Protected When Requesting Accommodations

On Thursday, in Herbert v. Altimeter, the Oregon Court of Appeals held that an employee does not need to actually be disabled in order to be protected from retaliation for requesting an accommodation under Oregon’s disability anti-discrimination law.  The case serves as a useful reminder that anti-retaliation protections, like those in the Oregon disability law, can be very broadly applied and protect many types of employee requests or complaints. Employers should be careful when disciplining or terminating any employee who has recently made some kind of arguably protected request or complaint.

Sherrie Herbert was terminated from her truck-driving job with Altimeter shortly after she became ill, allegedly from exhaust fumes in the cab of her truck, and she reported those problems to her boss. She sued under various retaliation theories, including that she was terminated in retaliation for her having requested an accommodation for a disability (i.e., requesting to be reassigned to a different truck). The trial court granted a directed verdict for Altimeter at the close of Herbert’s case at trial and dismissed all claims.

The Court of Appeals reversed.  Altimeter argued that it couldn’t have retaliated against plaintiff for requesting an accommodation as a matter of law, because she was not disabled and therefore not protected under the Oregon disability law's anti-retaliation provisions.  The court rejected that argument, noting that while the law requires Oregon employers to provide a reasonable accommodation to a “person with a disability,” the anti-retaliation provision, ORS 659A.109, protects any “worker” who requests an accommodation.  So, the court reasoned, by its plain terms the statute protects a broader class of employees (all of them) who make protected requests for accommodations, even though those employees may not be entitled to an actual accommodation. 

The opinion also contained an illustrative reminder about the importance of well-drafted written responses filed with the Equal Employment Opportunity Commission (“EEOC”), the Oregon Bureau of Labor and Industries (“BOLI”), and similar agencies. Those written position statements are admissible later; if they’re not carefully drafted they could come back to bite the complainant. In Herbert, Altimeter’s BOLI position statement included several damaging admissions, the worst of which essentially stated that she was terminated because she insisted she be reassigned to another truck, i.e., requested an accommodation.  Despite a general lack of other evidence of retaliation presented by Herbert at trial, the Court held that Altimeter's admission in the BOLI statement alone was enough to allow that claim to go to a jury. 

Oops!  While there are no easy, hard-and-fast rules about how to draft effective BOLI or EEOC position statements, generally you want to say as little as possible while still making your case, and above all, you don't want to provide the only evidence a plaintiff will need to take his or her case all the way to a jury!!  Those kinds of careless statements early on can make litigating employment discrimination lawsuits very expensive for employers, because they become much harder to get dismissed before trial.

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Oregon Supreme Court Allows Workers' Comp Coverage for Gastric Bypass

This morning, in SAIF Corp. v. Sprague, the Oregon Supreme Court upheld the workers' compensation claim of an employee who sought coverage for gastric bypass surgery, on the grounds that the surgery was necessary to treat a decades-old on-the-job knee injury. 

Sprague injured his knee on the job in 1976, filed a workers' comp claim, and sought treatment.  In 1999, he reinjured his knee and filed a new workers' comp claim with a new employer.  He also was successful in expanding his original claim to include a new condition, consequential arthritis in the knee.  In 2000, his knee had deteriorated and his doctor recommended a knee replacement.  However, plaintiff (who weighed over 300 pounds) needed to lose weight to be eligible for the knee surgery and to relieve pressure on the injured knee.  His doctor recommended gastric bypass surgery, but both workers' comp insurers (for his new and old employers) refused to pay for it.  The insurers argued that the gastric bypass was not covered because it was directed at Sprague's obesity, which had existed before the original 1976 injury. 

The Oregon Supreme Court disagreed.  The insurers did not dispute that the current knee problems were compensable, because they were related to the original on the job injuries.  The only relevant issue was whether the gastric bypass surgery was "directed to" the knee injury.  The court ruled that it was, because the medical evidence was undisputed that the weight loss was necessary to the success of the surgery.  It was irrelevant that the Sprague would also obtain free surgery that had substantial cosmetic benefits (as Al Roker, John Popper, Roseanne Barr, Star Jones, Randy Jackson, and others can attest).

As Stoel Rives World of Employment pointed out earlier, this doesn't mean that all gastric bypasses will now be covered by workers' comp.  However, the statute that mandated this decision just doesn't strike the balance that the workers' comp system promised.  The system was created as a compromise between employers and employees.  Employees received a defined benefit for any on-the-job injury regardless of fault.  Employers received protection from high punitive damage awards and the knowledge that their costs would be controlled.  While the system often works well, decisions like this show that it doesn't always.  According to some experts, gastric bypass surgery costs between $20,000-and $25,000.  That's a cost that these employers might not have had to pay absent the workers' comp system.

Oregon Supreme Court Denies Employee's Wrongful Discharge Claim for Reporting Unlawful Trade Practices

The Oregon Supreme Court has denied a car salesman's wrongful discharge claim. In Lamson v. Crater Lake Motors, Inc., the salesman, Kevin Lamson, claimed he was terminated for complaining to his employer that an outside entity managing sales on his employer's car lot was engaging in unlawful trade practices.  Lamson refused to participate in special promotional events run by the outside company,  because he believed company was engaging in sales tactics that were unethical and unlawful.

As the Stoel Rives World of Employment has discussed earlier, wrongful discharge is a common law remedy.  One way a plaintiff may assert the claim is by arguing that the employer terminated him for fulfilling an "important societal obligation."  Oregon courts determine what obligations qualify by reviewing state statutes and the state constitution. 

In this case, the Oregon Supreme Court ruled that plaintiff would have had a wrongful discharge claim if he had been terminated for refusing to engage in illegal practices prohibited by Oregon's Uniform Trade Practices Act..  However, the court determined that plaintiff's evidence did not meet that burden.  Plaintiff had not complained that he was being forced to act illegally; he had complained only that the outside company was acting illegally and urged his employer not to do business with that company.  The court also held that plaintiff would have had a viable claim if he had been terminated for reporting the outside company's illegal practices to a government agency that could have taken legal action about the outside company.  Reporting the allegedly illegal practices to his employer, the court ruled, was insufficient to trigger the common-law remedy.

Lamson does not signal an entirely new direction in the law of wrongful discharge; employers have known for some time that they may be held liable for terminating employees for performing public duties such as jury service or even arresting lawbreakers.  However, Lamson is a valuable precedent for employers because it shows that Oregon courts are not willing to extend a wrongful discharge remedy for every act that a discharged employee can relate (however tangentially) to an Oregon statute.  Plaintiffs asserting wrongful discharge must show how their complaint directly relates to the furtherance of a public policy

 

Oregon Court of Appeals Rejects Wrongful Discharge Claims for Health and Safety Retaliation

This morning the Oregon Court of Appeals rejected a plaintiff's common-law wrongful discharge claim that she was terminated for reporting a health and safety violation.  The Court ruled that the state and federal statutory remedies were adequate, and that she should have filed a statutory claim instead. 

Plaintiff Andrea Deatherage was an employee of Super 8 Inn when she filed a health and safety complaint against her employer with Oregon OSHA.  Deatherage was terminated the next day.  She sued for the common-law tort of wrongful discharge, claiming she was terminated in retaliation for filing the complaint. 

In Oregon, wrongful discharge is a "gap filling" remedy that is available only when there is no adequate remedy by statute.  In Walsh v. Consolidated Freightways, 278 Or 347, 563 P2d 1205 (1977), the Oregon Supreme Court ruled that the state and federal statutory remedies for health and safety complaint retaliation were sufficient to preclude a common-law remedy.  Citing Walsh, the trial court dismissed plaintiff's claim.

So why the fuss at the Court of Appeals?  Plaintiff claimed that a federal case issued since Walsh had cast doubt on whether the statutory remedies were actually adequate.  The Court of Appeals rejected the invitation to ignore an Oregon Supreme Court case, and adhered to Walsh, agreeing with the trial court.  (Oddly, the court declined to fill a gap in Oregon law by explaining exactly what remedies are available for an Oregon statutory health and safety reporting claim under ORS 654.062.)

So why is this case important?  At this point, it creates a difference in how these kinds of wrongful discharge cases will be treated in state courts as opposed to federal courts. The Stoel Rives World of Employment will be watching future developments, as the Oregon Supreme Court may have an opportunity to weigh in on this issue.

Another Circuit Court Agrees: ADA Amendments Act is Not Retroactive

Congress did not intend for the ADA Amendments Act (ADAAA) to be retroactive, the Court of Appeals for the District of Columbia ruled yesterday, and applied pre-ADAAA law to dismiss an employment discrimination claim.  Click here to read the court's decision in Lytes v. DC Water and Sewer Authority

Congress passed the ADAAA in 2008 and the new law became effective January 1, 2009.  The ADAAA significantly expanded the definition of "disabled" under the Americans with Disabilities Act (ADA).  The Lytes court reviewed the legislative history of the ADAAA, and could not find in that history any indication that Congress intended the law to apply retroactively.  The court also noted that Congress signaled its intend that the law not apply retroactively when it gave the ADAAA a specific effective date. 

The DC Circuit joins the Fifth Circuit Court of Appeals, which also ruled in EEOC v. Agro Distribution, LLC that the ADAAA is not retroactive.  Notably, the Department of Labor has also taken the position that the law should not apply retroactively.  And, at least for now, it appears that the Equal Employment Opportunity Commission agrees

Lytes and Agro Distribution are important cases for employers defending ADA claims; they make clear that for claims arising before January 1, 2009, pre-ADAAA standards of what constitutes a "disability" are likely to apply.  For more information on the ADAAA, click here for the Stoel Rives World of Employment's ADAAA coverage

Oregon Court of Appeals Upholds Employer's Right to Ask Potentially Disabled Employees to Take Medical Exams

Today in Heipel v. Henderson et al.,  the Oregon Court of Appeals affirmed summary judgment on an Oregon disability discrimination claim in favor of an employer who asked an employee to take an independent medical exam (IME) as part of an investigation into the employee's disturbing work-related behavior.  The court confirmed that such exams must be "job related and consistent with business necessity," and that the exam in this case met those criteria.

Plaintiff Barbara Heipel worked for the Oregon Employment Department.  Her supervisors received an escalating string of complaints about her job performance and erratic behavior.  Her actions included:

  • standing in the bathroom in a "trance" pulling out paper towels into an overflowing trash can;
  • leaning against a bathroom stall in a "despondent state";
  • total loss of emotional control with supervisors and coworkers;
  • accusing her coworkers of stealing shredded documents from a trash can and pasting them together for personal use; and
  • false and contradictory complaints to customers about her employer and coworkers.

Heipel's employer asked her to take an IME to determine whether she posed a threat to herself and others and whether she could perform the essential functions of her position.  Plaintiff refused, and the Employment Department terminated her for refusing.  Plaintiff filed a lawsuit claiming, among other things, that her employer had unlawfully discriminated against her under Oregon employment statutes for having a disability.

ORS 659A.136(1) provides that such examinations are appropriate only where they are "job related and consistent with business necessity."  The Oregon Court of Appeals, relying on federal cases in the Sixth and Eighth Circuits, ruled that, under these circumstances, the requested exam met both requirements.

This decision should not be seen as a blanket endorsement of all IMEs in the workplace.  Although this exam was ruled appropriate, the Court of Appeals' inquiry was fact-specific -- and the facts here were unusual.  Employers should understand the risk of requesting such exams and should carefully evaluate the individual circumstances before forging ahead.

Bus Driver's "Shy Bladder Syndrome" a Disability

A school bus driver who was demoted after his "shy bladder syndrome" left him unable to comply with his employer's drug testing procedures may proceed with claims under the Americans with Disabilites Act (ADA) according to a recent ruling from a Tennessee federal court.  Click here to read the full opinion in Melman v. Metropolitan Government of Nashville.

In Melman, the plaintiff was required to submit to random drug tests.  During two tests he could not provide an "adequate" urine sample, and explained that he could not because of a "shy bladder."  A urologist diagnosed the plaintiff with paruresis (aka shy bladder syndrome) and offered to perform the urine sampling via catheterization.  The employer  declined that offer.  Instead, it placed the plaintiff on unpaid leave, required him to attend a drug rehabilitation program at his own expense, and demoted him to a position as a bus monitor.  (Notably, the plaintiff ultimately did provide a negative sample obtained via catheter.)  The court denied the employer's motion to dismiss, holding that shy bladder syndrome substantially limited the plantiff's major life function of eliminating bodily waste.

Employers with drug testing programs should take note:  employees who are unable to comply with standard drug testing procedures may have a qualifying disability, especially given the more liberal standards under the ADA Amendments Act.  Employers should not shy away (okay, bad pun) from engaging in the interactive process with the employee to find ways that the employee can comply with the procedures - such as providing a sample through catheterization.  The International Paruresis Association also provides suggestions for accommodating shy bladder syndrome. 

9th Circuit Orders Damages, but Not Reinstatement for Unauthorized Alien Workers

What's an employer to do when it is ordered to reinstate former employees, but those employees are not legally authorized to work in the United States?  Pay liquidated damages instead, according to the Ninth Circuit's recent decision in NLRB v. C&C Roofing Supply Inc

In C&C, the National Labor Relations Board (NLRB) alleged that the employer unlawfully fired 20 workers for engaging in union activity.  The parties reached a formal settlement that called for reinstatement of the illegally fired workers and payment of specific amounts of liquidated damages to each.  However, the employer then refused to reinstate the employees because many of them were unauthorized aliens and rehiring them would violate the Immigration Reform and Control Act (IRCA) and the Legal Arizona Workers Act, which both prohibit hiring unauthorized aliens. 

The Ninth Circuit solved the dilemma by ordering the employer to pay the agreed-upon liquidated damages, but did not require the employer to reinstate the unauthorized employees.  But how does this case square with Hoffman Plastic Compounds Inc. v. NLRB?  There, the U.S. Supreme Court held 5-4 that the board may not order back pay for unauthorized aliens, despite their firing in violation of federal labor law, because doing so would violate immigration policy expressed in IRCA.  In C&C, the Ninth Circuit dodged that issue by ruling that agreed-upon liquidated damages as part of a settlement do not raise the same issues as back pay ordered by the court, as the employees need not be "available to work" in order to receive liquidated damages.  Don't be surprised if this one gets appealed up to the Supreme Court for a determination if it really does square with Hoffman

Driving Not a "Major Life Activity" Under ADA

Is driving a car a major life activity under the Americans with Disabilities Act (ADA)No, the Tenth Circuit Court of Appeals recently concluded, joining two other federal circuit courts that have held that just because a person cannot drive does not mean that person meets the legal definition of "disabled."  Kellogg v. Energy Safety Services, Inc.

Kellogg, who has epilepsy, sued her employer alleging disability discrimination.  Kellogg asserted that because she is not allowed to drive due to the risk of seizure, she is substantially limited in the major life activity of "driving."   After Kellogg prevailed on her claim at a jury trial, The Tenth Circuit reversed.   (The Tenth Circuit covers Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah.)

The court held that driving is merely a "means to an end," and not a major life activity in and of itself.  For some plaintiffs, an inability to drive may prevent them from engaging in other major life activities (such as working), but because Kellogg presented no evidence that she was substantially impaired in any activity except driving, she failed to prove she was "disabled."  The Tenth Circuit thus joins both the Second and Eleventh Circuits in holding that driving is not a major life activity. 

Don't expect Kellogg to set precedent for long:  this case almost certainly would have been decided differently under the ADA Amendments Act (ADAAA), which goes into effect January 1, 2009.  Under the much broader definition of "disability" under the ADAAA, Kellogg's epilepsy alone almost certainly would have qualified her for the protections of the ADA.  For more on the ADAAA, check out the Stoel Rives World of Employment's coverage, here

Ninth Circuit Upholds Legal Arizona Workers' Act

This week the Ninth Circuit Court of Appeals ruled that the Legal Arizona Workers Act (LAWA) is not preempted by the federal (IRCA).  Rather, the court held, LAWA falls within the scope of the “savings clause” of IRCA’s express preemption provision as a “licensing law” and is therefore enforceable.  A coalition of human rights and employers' groups challenged the law on several grounds, all of which were rejected by the Ninth Circuit.  To read the court's opinion, click here:  Chicanos Por La Causa v. Napolitano

LAWA allows Arizona state courts to suspend or revoke business licenses of employers who intentionally employ "unauthorized aliens," and also required Arizona employers to use the E-Verify System to check applicants' eligibility for employment.  Arizona employers should review this Notice to Employers from the Arizona State Legislature for more information.

Now that the Arizona law has been upheld (and assuming the U.S. Supreme Court does not hear further challenges), the Stoel Rives World of Employment expects anti-immigration groups to push for similar laws in other states. 

Failure to Accommodate Disabled Employee May Result in Constructive Discharge

According to a recent Americans with Disabilities Act case from the U.S. Sixth Circuit Court of Appeals, a failure to accommodate an employee's disability may result in a constructive discharge and expose the employer to the same kind of liability it would face had it terminated an employee because of a disability.

In Talley v. Family Dollar Stores of Ohio Inc., Talley, a former store cashier with severe arthritis, could not stand more than 15 minutes without extreme pain.  She requested a stool to sit on while working, but the employer refused the request because employees complained of "favoritism" and wanted stools of their own.  After the employer refused her request for an accommodation, Talley quit her job and sued for disability discrimination under the ADA, claiming that her employer's refusal to accommodate her forced her to quit.

The Sixth Circuit agreed that Talley proved a claim for constructive discharge--in other words, the employer made her working conditions so intolerable that a reasonable person would feel compelled to resign.  If Talley proves her case to a jury, her former employer can be liable for several years' of backpay damages, as well as attorney's fees and possibly even punitive damages.  

This case underscores employers' obligation to provide reasonable accommodations for disabled employees.  While most anti-discrimination laws do not allow "favoritism," the ADA is different:  an employer does have an obligation to provide disabled employees with accommodations (such as giving a disabled cashier a stool) that non-disabled employees do not receive.  Perceived favoritism is simply not a defense.  For technical assistance in complying with the ADA, check out the U.S. Department of Justice's ADA Page

Calling Store Manager "Grandma" Evidence of Age Bias

Here's a shocker out of Illinois:  a federal district court held that a retail chain's store manager calling a department head "Grandma" was evidence of age discrimination.  In McDonald v. Best Buy Co., the plaintiff alleged she was demoted and forced out of her job because of her age in violation of the Age Discrimination in Employment Act (ADEA).  The defendant argued she was demoted because of her inability to effectively manage her subordinates. 

The case hinged to a large degree on the fact that the plaintiff's supervisor often referred to her as "Grandma," which the plaintiff argued was evidence of age discrimination.  The defendant countered that because it is technically possible for a person under age 40 (and not protected by the ADEA) to be a grandmother, "Grandma" is not an age-related nickname.  The court noted that while calling someone "Grandma" does not by itself violate the ADEA, it is certainly an age-related comment and does provide evidence of an ageist motive.

Here's the lesson for employers:  be careful of "cute" nicknames that could be discriminatory.  There are endless cases where nicknames like "Grandma," "Honey," "Baby" and the like supported claims of discrimination.  Calling an employee "Grandma" might sound endearing at the time, but in the context of a lawsuit, it will likely sound discriminatory. 

Ninth Circuit Affirms "Emotional Distress Damages" Caused by Denial of FMLA Leave

Plaintiffs suing their employers under the Family and Medical Leave Act ("FMLA") may recover lost wages, but they may not recover emotional distress damages.  What if an employee misses work because of emotional distress that is caused by a wrongful denial of FMLA leave?  The Ninth Circuit Court of Appeals recently ruled that such damages are a form of lost wages and therefore may be recovered under FMLA.  Continue Reading...

Oregon Court of Appeals Upholds Employment Discrimination Statute

Oregon's anti-discrimination statute allows an employee alleging employment discrimination to file either a lawsuit (which results in a jury trial) or an administrative complaint with the Oregon Bureau of Labor and Industries (which results in an administrative hearing with no jury). In Emerald v. Bureau of Labor, the employer argued that allowing an employee to arbitrarily choose whether or not there will be a jury trial violates the employer's right to a jury trial under the Oregon Constitution.  Not so, ruled the Oregon Court of Appeals earlier this week. 

Continue Reading...

Supreme Court: No "Class of One" Claims

This morning the U.S. Supreme Court struck a blow for public employers, ruling that the "class of one" theory does not apply in public employment cases. 

In Engquist v. Oregon Department of Agriculture, the plaintiff alleged that she was fired not because she was a member of a protected class (such as race, sex, age, disability, national origin, etc), but simply for "arbitrary, vindictive, and malicious reasons."  In other words, she was a "class of one" and her employer fired her because it simply didn't like her, and she claimed that termination violated her constitutional due process rights.

While other Supreme Court decisions had upheld the "class of one" theory outside of the employment context, in this case the Court concluded that extending the class-of-one theory to public employees would lead to undue judicial interference in state employment practices and invalidate public at-will employment. 

For public employers, this is good news:  had the court upheld the "class of one" theory, it would have effectively provided for lifetime employment for public employees (of course, it seems like they have that already). 

For private employers, this case is purely academic and a reminder of how good you have it:  there has never been a "class of one" theory in the private workplace (no matter how much some employees seem to think there is).

Supreme Court Expands Plaintiffs' Relief in Race and Age Discrimination Cases

On May 27, the Supreme Court held that two civil rights laws prohibitretaliation against employees who complain about discrimination, even though neither law actually mentions retaliation. In CBOCS West, Inc. v. Humphries, the Court held that a restaurant employee could sue his employer for retaliation under Section 1981 of the Civil Rights Act of 1866 -- a law that prohibits race discrimination in employment, but does not mention retaliation. In Gomez-Perez v. Potter, the Court similarly held that the federal-sector provisions of the Age Discrimination in Employment Act prohibit retaliation, even though they also are silent on retaliation. The Court reasoned that retaliation is simply another form of discrimination made unlawful by the two laws.

While Gomez-Perez applies only to federal employees, Humphries will impact private-sector employers in two ways: first, unlike Title VII, Section 1981 has no damage caps and for a plaintiff, the sky is the limit; second, while Title VII does not apply to employers with under 15 employees, Section 1981 applies to all employers regardless of size.

Oregon Employees Have No Wage Claim for Missed Rest and Meal Breaks

The Oregon Supreme Court ruled that employees could not sue their employer for back pay over missed rest and meal breaks. Want to know more?  You can either read the court’s opinion, or read a more concise yet equally informative summary of Garfur v. Legacy written by yours truly.  Note to employers:  don't start making your employees skip their breaks just yet.  BOLI can fine you up to $1,000 per violation or, if you're really eggregious, throw you in jail!
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Howard Stern + Work = Hostile Work Environment

The Eleventh Circuit (which covers Alabama, Florida and Georgia) held late last month that a female employee was subjected to an unlawful hostile work environment on the basis of her sex in part because of "vulgar radio programming" that was played daily in her workplace. Reeves v. C.H. Robinson Worldwide Inc., No. 07-10270, April 28, 2008. Continue Reading...