Delaware Employment Law Blog

GOP presidential contender Herman Cain has been in the news for more than his political platform recently. Instead of addressing issues like job creation, Cain has been facing tough questions about on-the-job harassment. Specifically, Cain is having to deal with charges of unlawful harassment leveled against him when he was the head of the National Restaurant Association in the 1990s.

There likely are multiple lessons that can be learned from this story but I'll offer you just one. In short, employers should not dissuade this news story from settling a lawsuit or charge of discrimination brought by a current or former employee.

Contrary to what some of the pundits may claim, lots of people and businesses settle lawsuits even though they know they've done nothing wrong. This is the reality of today's litigious society. There are a multitude of factors that get weighed when deciding whether and when to settle a lawsuit. But the equation is always based on business factors and is, by no means, an indication of "guilt" or "innocence."

In fact, most settlement agreements include a confidentiality provision, whereby one or both sides agree not to disclose the terms of the settlement or to discuss the facts underlying the lawsuit. Sometimes, though, this is not the case, and, for a variety of reasons, the parties may agree in advance to what will be said, thereby ensuring that neither steps over the line and leaving no room for misunderstanding.

Which brings me back to Mr. Cain's story. The individual who is claiming that she was harassed by Mr. Cain apparently entered into a settlement agreement to resolve the matter. It seems that, pursuant to the agreement, she received a settlement payment in exchange for her dropping her claims. Presumably, the agreement also included a confidentiality provision. And, presumably, she violated the provision by releasing information about her claim or the settlement. If that is the case, and she did renege on her promise, those who are following the story should consider how reliable the source really is.

But employers should, in my opinion, disregard the story altogether for the purposes of deciding whether or not to settle a lawsuit or potential lawsuit. Stick to the facts as applied to your particular business at this particular time. Settling a lawsuit is not, contrary to what some of the pundits might have us believe, an indicator of wrongdoing.

The cat’s-paw theory of liability in the context of an employment-discrimination claim was upheld by the Third Circuit last week in McKenna v. City of Philadelphia last week. The case has far-reaching consequences, though—about $9.1 million farther.

At trial, the jury awarded the three plaintiffs a total of $10 million dollars. The trial-court judge reduced the verdict to $300,000 each, for a total of $900,000, in accordance with the compensatory-damage cap prescribed by Title VII. The plaintiffs argued that the damages should not have been reduced because the applicable state law, the Pennsylvania Human Rights Act, does not provide for caps on damage awards. The judge disagreed and found that the time to amend the complaint was before the jury returned the damages award. The Third Circuit affirmed the decision and the plaintiffs’ significantly reduced damages remain in place.

Many employee-plaintiffs allege a claim under federal law, as well as under the applicable state law, when filing a complaint of discrimination against their current or former employer. But, if they don’t, there can be significant consequences—more than $9 million worth in this case.

In McKenna v. City of Philadelphia, No. 09-3567 (3d Cir. Aug.17, 2011), the Third Circuit affirmed a jury award in favor of a fired Caucasian Philadelphia police officer, who claimed he had been retaliated against for complaining to his supervisor about racially discriminatory treatment of minority officers. The City claimed that even if the supervisor’s conduct was retaliatory, the City was insulated from liability because the termination decision was made by an independent Police Board of Inquiry (“PBI”) after a hearing.

In affirming the verdict, the court cited the recent “cat’s-paw” decision, Staub v. Proctor Hospital, 131 S.Ct. 1186 (2011), in which the U.S. Supreme Court held that, if an action by a biased supervisor is the proximate cause of a worker's termination, an employer can be held liable even if the supervisor did not make the ultimate decision. Since the supervisor in McKenna had testified at the PBI hearing, the Third Circuit concluded that the jury could reasonably have decided that the supervisor’s retaliatory animus bore a direct and substantial relation to the termination, and the PBI’s decision was not independent and was foreseeable.

The case has special significance for Delaware employers. Delaware recognizes the implied covenant of good faith and fair dealing, including a subcategory that is markedly similar to the cat’s paw theory. In Delaware, if an employee’s employment record is falsified or manipulated by a supervisor in order to bring about the employee’s termination, the employer can be held liable even if the employer is unaware of the supervisor’s animus.

Under the cat’s-paw theory, the supervisor’s animus is actionable only if related to one of the discrimination laws, as in McKenna, where the supervisor retaliated against complaints of race discrimination, in violation of Title VII. In Delaware, the basis of the supervisor’s animus is not so circumscribed. The action of the Delaware supervisor could arise from personal animosity unrelated to discrimination, but if the result is to create a false record in order to procure a termination, and the employer relies on the supervisor’s statements, the employer may be held liable under the implied covenant.

As more cases are decided under the cat’s paw theory, it seems likely that terminated Delaware employees will draw an analogy to the cat’s paw theory and it will become more difficult for employers to avoid liability under the implied covenant theory.

The Third Circuit Court of Appeals (which covers Delaware) recently issued a reassuring decision for employers. In the case, the Court affirmed dismissal of racial discrimination and retaliation claims where there were no overt racial statements made by supervisors and the employer addressed all allegations promptly and in a manner reasonably calculated to prevent further harassment.

Facts of the Case

Janeka Peace-Wickham, who was African-American, was hired as a manager in the Café at the Delaware Memorial Bridge facility of the Delaware River and Bay Authority (DRBA). Her position was that of a "working supervisor" and she was expected to fill in as needed with cooking, cashiering, and serving. Shortly after she began employment, she got into a heated argument with a Caucasian co-worker, which resulted in both of them filing claims of racial harassment against the other. Peace alleged that some of the Café customers (primarily DRBA employees) made racially inappropriate remarks. She claimed to overhear one customer remark to another when she was not happy the way her meal was prepared, "back in the day, down South, blacks would have been hung for things like this."

Another customer remarked to Peace that the Café had "changed" since Peace's arrival, and Peace took this to be motivated by racial animus because the previous supervisor was caucasian. Peace also alleged that a customer had balled up receipts and thrown them at her. Following the departure of the Café Supervisor, who was also African-American, someone posted a sign at the Café which said "Free At Last , Free At Last, Thank God Almighty, Free at Last," which Peace took to be directed at her because she was the only African-American employed at the Café at that time.

Served up with a healthy dose of complaints

A mere three months into her employment, Peace complained of harassment from the Caucasian co-worker, and things only got worse from there. She routinely complained of understaffing in the Café and about how she was treated by customers as well as fellow employees in the Café. By the time she was done she'd filed numerous internal complaints, two charges of discrimination with the Delaware Department of Labor, and claimed that her rejection for a promotion was the result of her race and the fact she'd filed charges.

The Proof is In the Pudding, or Remedial Measures

The Court ruled that the DRBA was not liable for discrimination or retaliation. It noted that the record was devoid of any overtly discriminatory statements or conduct by her supervisors. While such conduct was not required to show intentional discrimination, the presence or absence of such conduct proves helpful in determining the motives of the decisionmakers. Here, the Court said the fact that Peace could not point to any overtly discriminatory conduct on the part of her supervisors lent further support to the conclusion that supervisors could not be held directly responsible for any hostile environment that may have existed.

Most importantly, however, the Court found that the DRBA took appropriate remedial steps in response to allegations of discrimination once it became aware of them. In response to Peace's complaints that it took to long to investigate and conclude her initial harassment claim, the DRBA revised its investigation procedures. It also posted anti-harassment signs and instituted diversity and harassment training for all employees. While the DRBA did take longer to investigate Peace's complaint than her co-worker's, it addressed the issue immediately by separating the two employees. The Court held that these measures fell "comfortably within the realm of legally adequate legal measures."

The Court further stated that it was "unwilling to step into the shoes of DRBA management, as suggested by Peace-Wickham, and make highly particularized judgments as to whether the DRBA should have docked pay, demoted, or withdrawn certain fringe benefits instead of following the course of action chosen here."

Bottom Line

Employers can take comfort that as long as it takes steps "reasonably calculated to end the harassment" once it becomes aware of allegations, it will not be liable for a hostile work environment. Diversity and harassment training, in particular, were compelling to the Court in this case.

The EEOC announced last week that large grocery store chain Albertsons has agreed to pay $8.9 million to settle three lawsuits in which the EEOC alleged that it had engaged in race, color and national origin discrimination, and retaliation, at a distribution center in Aurora, Colorado.

According to the EEOC lawsuits and a news report, 168 minority employees were subjected to racist and anti-Semitic derogatory epithets, slurs and graffiti. Allegedly, supervisors were aware of and even participated in the harassing conduct. One African-American employee whose leg was broken by a piece of equipment at work was allegedly left lying on the warehouse floor for thirty minutes by a white supervisor who told him that was what he got for being black. Albertsons denied that it had engaged in discrimination or harassment.

The $8.9 million settlement will be divided among the 168 employees who complained about harassment between 1995 and 2008 (an average of about $53,000 per person).

The lesson for employers is clear, according to the EEOC’s press release. “EEOC Acting Chairman Stuart J. Ishimaru said, ‘Employers simply cannot overlook or tolerate this kind of outrageous discrimination and retaliation. The EEOC certainly won’t. We will aggressively pursue employers who violate the laws we enforce. And we’ll insist on substantial and meaningful relief for the victims before settling these cases.’” Albertsons also agreed to four years of court-supervised monitoring and a training program for its managers.

Employers who suspect or know about harassing behaviors in the workplace must act promptly to stop them to avoid liability, and should train all employees regarding compliance with equal employment opportunity laws.

The Delaware Department of Labor (DDOL), is the agency responsible for processing charges of discrimination filed under Delaware’s various discrimination statutes. Because the DDOL has a work-sharing agreement with the U.S. Equal Employment Opportunity Commission (EEOC), the Department has authority to process charges filed under state and federal discrimination laws.

Until now, the charge process, including applicable deadlines and controlling procedures, has not been regulated by state law. How a charge is handled by the DDOL, and the rules governing charging parties and responding employers have been available only in the form of proposed regulations for the past several years. But, last month, the DDOL published its first set of final regulations applicable to the charge process.

In this post, the new regulations are summarized and explained. A second, follow-up post will offer some commentary about these important changes.

The Charge of Discrimination

The regulations set forth what must be included in a charge of discrimination. A charge must identify:

• the basis for the DDOL to assert jurisdiction over the charge;
• the type(s) of discrimination alleged;
• the type(s) of adverse action alleged;
• the facts that support the claim;
• the laws that have allegedly been violated; and
• the reasons that the charging party believes support a finding of discrimination.

For the charge to be valid, the charging party must swear under oath that the allegations are true and correct and must sign the charge before a notary public.

Initial Processing of a Charge

Once a verified charge is filed, the DDOL must send a copy to the employer, by certified mail, within 14 days. The DDOL may also include a request for information with the charge, and, in its discretion, may invite the employer to participate in mediation. Even if the DDOL has not invited the employer to participate in mediation, the regulations permit the employer to request mediation in lieu of filing an answer.

The employer has 20 days to submit an answer, though the Administrator has the discretion to grant an extension of time to respond. The answer must respond “fully and completely” to the allegations asserted in the charge.

Preliminary Findings

The next step is the issuance of a preliminary finding. The Administrator must issue her preliminary finding within 60 days from the date the charge was served to the employer. The DDOL Administrator has three options. She can refer the case to mediation, refer the case for investigation, or recommend dismissal of the case.

The Administrator may dismiss a case in the following circumstances:

• the DDOL does not have jurisdiction over the case (because, for example, the employer has too few employees to be covered by the law or the employment was not located in Delaware);
• the charging party is not cooperating;
• the employer has filed for bankruptcy or relief is otherwise precluded;
• the charge was filed after the statutory deadline, or
• the charge does not allege facts that would, even if true, constitute a violation of the law.

Administrative dismissal is rare. And, even if dismissal is recommended, the charging party will be given the opportunity to provide additional evidence demonstrating that an investigation is warranted.

Mediation

The regulations also address the DDOL mediation process. The Administrator is authorized to refer a case to mediation at any time, after 20 days from service of the charge. The regulations make clear that mediation communications and records are confidential and may not be used against either party. The regulations preclude the mediation director and staff from participating in the investigation of any case that is unsuccessfully mediated. And, if the case is settled, the settlement agreement will be kept confidential unless there is an allegation that one of the parties has breached the agreement.

Investigation

If the parties do not mediate the charge or if the mediation fails, the charge will be referred for investigation. The employer has 20 days from the date it receives notice that the case has been referred for investigation to file its answer, if it has not done so already. If the employer did file an answer, the employer will have 20 days from the date of notice of investigative referral provide a supplemental response or to respond to any pending request for information.

The regulations include a lengthy description of the DDOL’s tools for investigating claims. The DDOL’s powers include obtaining information from the employer through written requests for information and documents, on-site visits and interviews. The DDOL can obtain information from third parties with subpoenas and depositions. The DDOL also has the authority to obtain information at a fact-finding conference.

A DDOL representative advises the parties in advance of the conference to bring specified witnesses and documents. During the fact-finding conference, the DDOL representative will question the witnesses and parties. The regulations state that “the parties shall not be entitled to cross-examine witnesses,” but the representative has the discretion to allow attendees to question the witnesses.

Determination and Findings

When the DDOL concludes its investigation, the Administrator will issue a determination. The determination can state that the Administrator either did or did not find reasonable cause to believe that the employer violated the law by discriminating against the charging party. A “no-cause” finding results in a dismissal of the charge. A finding of “cause,” on the other hand, means that the Administrator has determined that there is reasonable cause to believe that the employer unlawfully discriminated against the charging party.

In the event of a “cause finding,” the employer has 10 days to file a written request for reconsideration of the finding. The Administrator will determine whether the employer will be granted permission to submit additional information in support of its request. The Administrator’s decision will be issued within 10 days of the date the request for reconsideration is made.

Conciliation

If the reasonable-cause finding is not reversed by the Administrator, it is considered final. A final cause finding triggers the conciliation process. Similar to the mediation process, conciliation provides an additional pre-litigation opportunity for the parties to resolve the dispute.

If conciliation fails and the parties do not reach agreement, the DDOL will issue a Right-to-Sue Notice to the employee, which authorizes the employee to file a complaint in state court. At that point, the DDOL’s involvement in the case concludes. The DDOL will retain its file for two years. If litigation ensues, the parties will have the right to obtain copies of the witness statements and factual written data, reports and documents in the DDOL’s file by making a written request and serving a copy of the request on the other party or the other party’s attorney.

From the U.S. Department of Justice (DOJ), comes a new published Guidance relating to the use of E-Verify.  The recent, though short-lived excitement over the use of E-Verify for employment verification has now quieted down. Private-sector employees are back to the voluntary use of the system as a method for confirming that newly hired employees are authorized to work in the country.  

One of the concerns that was raised with the E-Verify program was its potential effect on discrimination in the workplace.  If, as a result of using E-Verify, an employer receives a no-match letter or a “tentative” no-match letter, he cannot terminate the employee without first trying to resolve the mismatch.  Failure to work with the employee to determine the cause of the mismatch could result in a claim for national-origin discrimination.

Anticipating the likelihood that employers would not want to engage in the additional steps of “working with the employee,” the DOJ issued guidelines outlining the step that an employer must take upon receiving information about a potential mismatch.  (See Antidiscrimination Guidance Concerning the DHS No-Match Rule).

See also:  E-Verify Employer Dos & Don'ts

Pregnancy Discrimination is back in the news, courtesy of the U.S. Supreme Court's grant of certiorari in the case of AT&T v. Hulteen, No. 07-543.  Employees who took maternity leave, pursuant to the company's decades-old policy, were not given the same credit towards their pension as employees who took other kinds of disability leave.

The Pregnancy Discrimination Act (PDA) was not enacted until 1979 and, since then, AT&T’s maternity leave has been credited toward retirement, in compliance with the law. At issue is whether AT&T must now give female retirees credit for maternity leave taken from 1968-1976, preceding enactment of the PDA.

The Ninth Circuit held that the benefits system violated the PDA.  AT&T appealed and the Solicitor General recommended that cert be granted.  The SCOTUS Blog covers AT&T v. Hulteen and provides more details as well as links to the previous filings.

A ruling against AT&T would seem to be contrary to the Court’s recent ruling in Ledbetter v. Goodyear, related to the timeliness of discrimination claims whose effects may not be apparent for many years later. Further, it is generally held that statutes are not retroactive absent statutory language otherwise. In light of these precedents, a ruling in favor of the employees in this case may signal a real interest in this type of discrimination. Stay tuned!

Good documentation practices during the hiring process can help employers avoid a failure-to-hire claim.  And that's a good thing, considering that failure-to-hire claims are costly. Just ask Perdue.  The poultry company has agreed to a pay out of more than $800k to settle a claim of disparate impact arising from what the DOL concluded to be systematic discrimination against non-Hispanic job applicants. 

Disparate Impact Claim

A Labor Department news release states an evaluation in 2005 and 2006 by the Office of Federal Contract Compliance Programs (OFCCP) found the Salisbury-based company failed to comply with federal employment laws at its poultry processing plants in Rockingham, N.C., Dillon, S.C., and Monterey, Tenn. (The OFCCP has jurisdiction because Perdue supplies poultry under a federal contract to the U.S. Department of Agriculture.)

The settlement agreement will require Perdue to pay $800,000 in back wages and interest to 750 women and minorities who were not hired during the relevant time period.  The company also will make employment offers to some of those who were not hired but who are still interested in employment with Perdue.  In those cases, the employees will receive retroactive company service dates for purposes of benefits and promotion rights. 

Documentation Regrets

Perdue officials denied the allegations on the basis that many applicants were unqualified for employment or withdrew from consideration for employment.  They stated that the company agreed to a settlement only to avoid protracted litigation, according to the company. The VP of HR said in a company statement:

Perdue is committed to treating all job applicants fairly. We regret we did not more carefully document our hiring process for production associates, which led to these concerns by the OFCCP and, ultimately, to this settlement.

Perdue has implemented new procedures to ensure it retains all relevant documentation of its selection processes and is also conducting training of its human resources staff to assure appropriate implementation of Perdue's hiring and employment practices, according to the company statement.

Interviewing Best Practices

Interviewing is one of the most neglected areas in employment law.  When I teach seminars on lawful interviewing, I will inevitably see faces filled with shock and despair as they realize just how many of the best practices have not been implemented in their organization. 

Documentation is key in hiring.  If you keep notes and records only on the people you hired, you will have nothing to refer to in a failure-to-hire claim.  And let's be honest, the ones you didn't hire are likely the ones who were the least memorable.  Can you remember candidates you interviewed and rejected in 2005 and 2006? 

Without an established and consistent documentation and record-retention policy for the hiring policy, a failure-to-hire claim can be nearly impossible to defend.  Just ask Perdue.

Source:  Delaware News Journal, Gwenn Garland

The City of Philadelphia seems to have had more than its fair share of civil rights lawsuits in the last several weeks. The EEOC has had a number of significant successes against employers in Philadelphia and the surrounding areas.

The month of May started on a difficult note for the city. First, there was the backlash when 15 city officers were videotaped beating a suspect just days after a fellow officer was killed in the line of duty.  4 of the officers were later fired for their involvement.

Moore v. City of Philadelphia

Then came the $10m jury verdict in favor of three former Philadelphia police officers.  The officers alleged that they were subject to unlawful retaliation when they opposed racial discrimination and harassment of African-American police officers in their squad.   

Lawrence vs. City of Philadelphia

Then, on May 29, 2008, The Third Circuit reversed and remanded a class action case brought by more than 250 "fire-service paramedics."  The plaintiffs allege that the city's fire department unlawfully withheld overtime pay by misclassifying them as exempt employees under the "fire-service exemption."  A case of indebtedness at the trial court level of the Appellate Court reversed finding that the exemption did not apply.  This narrow reading of FLSA exemption could have broad implications for the City of Brotherly Love.

EEOC vs. NutriSystem Inc.

Not to be outdone by its urban neighbor, Horsham, Pa. has had its own bit of discrimination news.  On May 21, 2008, the EEOC announced that NutriSystem, Inc., had agreed to settle a lawsuit filed by the Commission on behalf of the woman it allegedly fired because she was pregnant.  The pregnancy discrimination settlement cost NutriSystem $82,500.  The employee with initially hired as the temporary recruiter in the company's human resources department and would need a fulltime employee a year later.  One month after she was placed in a leadership training program and three weeks after she announced that she was pregnant, the employee was fired.

NutriSystem, again

The Horsham company saw more problems last week when a former employee and Philadelphia resident filed suit in Federal Court in a class action suit estimated to include that least 400 current and former employees.  The lawsuit alleges that the company violated The Fair Labor Standards Act by underpaying their call center employees.  The company responded that the employees had been properly classified as exempt.

Of course, the first case in this string of settlements was in early May, when Conectiv agree to pay $1.65m to Black workers after the EEOC filed suit against the energy company and its subcontractors for race discrimination.  (See my earlier post, Delaware-based Conectiv Settles Race Discrimination Suit with Philadelphia EEOC for $1.65m.)

The wise sages at the Workplace Professors Blog, (link to the site here), have posted an excerpt from an article-in progess by Franita Tolson (law clerk to Seventh Circuit Judge Ann Claire Williams).

The theoy of the paper rests on how the courts' involvement is needed to remedy unconscious discrimination. The article, The Boundaries of Litigating Unconscious Discrimination: Firm-Based Remedies in Response to a Hostile Judiciary, is availale on SSSN as an abstract. Here's an excerpt from the abstract:

Unconscious discrimination is actionable under Title VII ..., but scholars [agree] that court regulation of it has failed. Contrary to the alternatives suggested in the literature, placing the burden on the firm to regulate discrimination ex ante is more likely to minimize unconscious, discriminatory behavior, at least more so than tinkering with the ex post remedies available for those few violations that can be proven through Title VII. [T]his article proposes alternative mechanisms for addressing unconscious discrimination that account for its peculiar nature, mainly firm-based remedies that will be more successful than the courts have been in addressing this problem. The difficulty comes in incentivizing the Delaware courts [can incentive] ... firms to address unconscious discrimination ... [via] the duties of care and loyalty, corporate norms, and economic pressure from corporate giants like Wal-Mart.

Hat tip to the Workplace Profs Blog