Delaware Employment Law Blog

Restrictive covenants include agreements by an employee not to compete, not to disclose confidential information, and not to solicit an employer’s clients. Based on a recent decision from Delaware’s Court of Chancery, these agreements are more valuable than ever. Deciding a novel issue in Delaware, the Court held that, absent a provision to the contrary, restrictive are assignable from one employer to another, so long as both employers are engaged in the same business. This means that when businesses merge, employees who are already subject to restrictive covenants with the acquired business do not have to execute new agreements with the acquiring business. In addition, the Court reminds us that contracts defining the employer-employee relationship, are the only way to prevent a competitor from poaching employees in an at-will employment state, like Delaware.

Facts

The background in Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC, is one that will be familiar to many employers. Three businesses were competing in the surprisingly cut-throat world of third-party fundraising (selling fundraising materials to non-profit organizations such as schools and churches, who then sell the materials to their communities to raise money). Two of the businesses, Great American Opportunities, Inc. (GAO) and Kathryn Beich, Inc. (KB) merged, leaving GAO as the surviving business. At the same time, the third business, Cherrydale Fundraising, saw an opportunity to expand its market presence by hiring away several of KB’s sales representatives. GAO discovered what was going on shortly after the merger.

To KB’s credit, it had been a careful employer and almost all of its employees were subject to the trifecta of restrictive covenants: non-competition, non-disclosure, and non-solicitation contracts. However, GAO was not a party to any of these contracts. Faced with a complicated situation, GAO filed a lawsuit alleging that Cherrydale tortiously interfered with the contractual relationship between GAO and its employees, leaving the Court to sort out the details.

Discussion

Before it could address Cherrydale’s activities in poaching KB’s employees, the Court had to decide if there was any formal relationship between GAO and KB’s employees as a result of their merger. Cherrydale argued that Delaware’s doctrine of at-will employment prohibits a claim of tortious interference with a contractual relationship. But KB’s employees were subject to a contract, as they had signed non-competition, non-disclosure, and non-solicitation contracts. Thus, Cherrydale’s first argument was unsuccessful.

The Court next had to determine whether KB could lawfully assign its rights under the employees’ restrictive covenants to GAO, in conjunction with the sale of a business. Surprisingly, this was an issue that had not been thoroughly analyzed under Delaware law. Adapting the general rule that contract rights may be assigned absent a provision prohibiting assignment, the Court held that an employer’s rights under a restrictive covenant may be assigned, in conjunction with the sale of a business, so long as the former employer and the current employer engage in the same type business.

Bottom Line

For employers who have workers with specialized skills, restrictive covenants, including non-competition, non-disclosure, and non-solicitation contracts, are as important as ever. In Delaware and other at-will states, such contracts are the only thing preventing your competitors from poaching your employees and their valuable know-how. But restrictive covenants are now more valuable because they can be assigned from one employer to another in a merger or asset sale. So if your employees are not subject to restrictive covenants, now is a better time than ever to consider whether they may be right for your business’s circumstances.

Great American Opportunities, Inc. v. Cherrydale Fundraising, LLC, C.A. No. 3718-VCP (Del. Ch. Ct. Jan. 29, 2010)

Below are summaries of three recent employment-discrimination cases involving multi-million-dollar awards for the plaintiff-employee. Don’t shoot the messenger.

Marcus v. PQ Corp. $6.2 million

Two scientists were awarded a total of $6.2 million (not including attorney’s fees, motions for which are now pending), by a federal jury in Pennsylvania. The plaintiffs alleged that they were laid off due to their ages, instead of other, non-discriminatory criteria.

The total is so staggering for a few reasons. First, the plaintiffs were awarded approximately $667,000 and $190,000 in back pay. The layoffs occurred in 2005, so the plaintiffs were able to recover for back pay lost as a result of finding other work for less pay or for not finding work at all. These amounts were doubled because the jury found that the discrimination was willful.

The plaintiffs also received front pay damages in the amounts of $670,000 and $375,000, presumptively as compensation for the time they would have worked past the date of the verdict had they not been wrongfully discharged. Add to that amount emotional-distress damages of $1.5 and $2 million each to get to a total award of $6.2 million. (via Law.com)

Susel v. Dix & Eaton $1.03 million

The plaintiff alleged that she was fired at age 59 for complaining about age discrimination. She claimed that she went to the HR manager and reported her suspicions that she was being set up to be terminated because of her age. She filed suit after she was fired five months later. In all, she took 5 counts to an Ohio state-court jury, which ruled in her favor on only the retaliation claim, ordering the defendant to pay $1.03 million.

Blount v. Stroud $3.08 million (1.18 million fees)

The Illinois Appellate Court affirmed a verdict returned in favor of the plaintiff and awarding damages in the amount of $3.08 million, plus an award of attorney’s fees and costs in the amount of $1.18 million. The jury found that the plaintiff had witnessed racial discrimination and sexual harassment of another employee and had agreed to testify on the coworker’s behalf. The plaintiff claimed that she was terminated in retaliation for agreeing to testify.

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Mikula v. Allegheny County of Pennsylvania is a new decision from the Third Circuit Court of Appeals, interpreting the Lilly Ledbetter Fair Pay Act (“the Act”).

Facts of the Case

Plaintiff Mary Lou Mikula was hired by Allegheny County Police Department as its grants coordinator in 2001. In September 2004, Mikula wrote a memo to the Police Superintendent asking him to change her title to “Grants and Project Manager” and make her salary equal to or greater than that of a male colleague whose title was “Fiscal Manager.” The fiscal manager was making $7,000 a year more than Mikula at that time. The county did not respond to Mikula’s request. In October 2005, Mikula renewed her request for a raise. The county again did not respond.

In March 2006, Mikula filed an internal complaint alleging gender and age discrimination, stating that she was paid $7,000 a year less than a comparable male colleague and that the pay discrimination had started when she was hired. She also filed a lawsuit in federal district court alleging that her rights under the Equal Pay Act had been violated. In August 2006, the County’s Human Resources department notified Mikula that it had completed its investigation of her complaint and did not agree with her allegations of discrimination.

The Timeliness Argument

In April 2007, Mikula filed a discrimination charge with the U.S. Equal Employment Opportunity Commission alleging pay discrimination based on sex under Title VII of the Civil Rights Act of 1964 (“Title VII”). When she received a right-to-sue letter, she added the claim to her federal court case. In response, the County filed a motion arguing that the Title VII claim should be dismissed because Mikula had waited too long to assert the claim.

Under Title VII, claimants in most states must file their discrimination charges within 300 days of the allegedly discriminatory act. The County argued that the pay decision had been made in 2001 when Mikula was hired, and that even if the court allowed an extension of time until 2004, when Mikula found out about the difference between her pay and the fiscal manager’s pay, she had still waited more than 300 days before filing a charge. Mikula argued that the Human Resources department’s decision in August 2006 on her internal complaint of discrimination was itself a pay decision and that she had filed a charge within 300 days after receiving the decision.

Continue reading "3d Circuit Revives Claim of Pennsylvania Worker With Lilly Ledbetter Fair Pay Act" »

In July, Delaware Governor Jack Markell signed into law an amendment to Delaware’s employment-discrimination statute. The amendment prohibits discrimination based on sexual orientation. Not surprisingly, many employers are concerned about the potential for increased litigation in light of the new law. Some employers may be surprised to learn that current federal law has been used to achieve a similar level of protection. A recent decision from the federal appeals court demonstrates the extent that such protection is provided under Title VII of the Civil Rights Act (Title VII).

The U.S. Court of Appeals for the Third Circuit, which has jurisdiction over the federal courts of Delaware, Pennsylvania, New Jersey, and the Virgin Islands, ruled in late August that a homosexual employee could proceed with his claim that he was harassed and fired because of his “effeminate behaviors.” The unanimous decision of a three-judge panel in Prowel v. Wise Business Forms, Inc., has made headlines across the country as an extension of Title VII’s sex-based discrimination provisions. Brian D. Prowel brought the claim after he was terminated by his employer after 13 years with the company. He alleges that Wise told him that he was being terminated for lack of work as part of a workforce reduction. 

According to Prowel, his termination actually was a result of “gender stereotyping.” Unlawful gender stereotyping in the workplace occurs when an employer discriminates against an individual because the individual fails to conform to a certain perception about how the gender should look and act.

Prowel claims that his coworkers called him “Rosebud” and “Princess” because he was well dressed and well groomed and did not engage in rowdy and distasteful behavior like his male colleagues. Coworkers, Prowel claims, left items such as a pink, feathered tiara and anti-gay religious pamphlets on his desk. In other words, Prowel claims that he was harassed and eventually terminated because he didn’t act “manly enough.”

Although the Prowel Rule May Be New, A Much Older Rule Still Applies

Organizations with employees in Delaware, Pennsylvania, and New Jersey should be mindful of the court’s ruling in Prowel, not because it stands for an expansion of the anti-discrimination laws, but because it strongly supports a principle that is much older than Title VII: Do unto others as you would have them do unto you. If an individual is being harassed, he will likely be able to characterize the harassment as being based on some protected characteristic. If no harassment occurs in the first place, there will be no need to split hairs over the true reason that he harassment occurred. Thus, to avoid being faced with a claim of unlawful harassment, the best practice is to strictly prohibit any kind of taunting, mockery, or from occurring in your organization’s workplace.

Pregnancy discrimination took center stage at the country's highest court earlier this week, when the U.S. Supreme Court issued its decision in AT&T v. Hulteen.   (See my previous post about the case when the Supreme Court first granted certiorari last summer).   On May 19, 2009, the Court reversed the Ninth Circuit’s decision and held that AT&T did not violate the Pregnancy Discrimination Act of 1978 (PDA) by calculating the accrual of pension benefits in a way that gives less retirement credit to employees who took pregnancy leave before enactment of the PDA than to employees who took other kinds of medical leave.

The Court rejected the plaintiffs’ argument based on the Lily Ledbetter amendments to Title VII. The Court held that the Lily Ledbetter Fair Pay Act, which made it “an unlawful employment practice … when an individual is affected by application of a discriminatory compensation decision or other practice, including each time … benefits [are] paid, resulting … from such a decision”…. [did] not help Hulteen. AT&T’s pre-PDA decision not to award Hulteen service credit for pregnancy leave was not discriminatory, with the consequence that Hulteen has not been ‘affected by application of a discriminatory compensation decision or other practice.’”

The bottom line is that there are few employers likely to be implementing retirement plans whose accrual policies pre-dated enactment of the PDA in 1978. Obviously, over time, the number of employers facing this situation will only get smaller.

Should an employer be in this situation, however, they can rest easy knowing that as long as any continuing effect of a pre-PDA retirement compensation system is pursuant to a bona fide seniority system, and not the result of an intentional employer to apply different standards of compensation, they will not be in violation of the PDA.

For those who wish to learn more, the Workplace Prof Blog and SCOTUS Blog have excellent posts covering the decision.  For more general information on the ins and outs of the Pregnancy Discrimination Act, see these previous posts or take the Pregnancy Discrimination Quiz at H.R. Hero:

New Study on Trends in Pregnancy-Discrimination Lawsuits

Pregnancy Discrimination Act Includes Infertility Treatments

Case Alert: Pregnancy Discrimination Act Extends to Abortion

Despite the holiday week, Wal-Mart probably is not feeling much like fireworks. A $6.5 million judgment is nothing to celebrate.  Earlier in the week, a class of more than 56,000 Wal-Mart employees was awarded $6.5m in back pay for wage and hour violations.  And it gets worse.  The penalties phase, scheduled for October, could bring another $2 billion in damages.

The alleged violations included unpaid training time and failure to comply with state law for meal and rest breaks.

Wal-Mart's own internal audits were used as damning evidence against the retail giant.  The company had performed a series of audits that supported the employees' claim about missing meal and rest breaks. 

So is this strong support for never conducting an internal audit?  Well no, not really.  If your wage and hour practices are not in compliance with the law, that won't change by whether or not you perform an audit.  Nor will an audit change the likelihood that an employee with some knowledge of the wage and hour laws will file a claim with the Department of Labor.  Whether you chose to ignore it or chose to address it, a violation is a violation.

Ok, so why did Wal-Mart's audits end so badly?  The audits did not end badly.  The unlawful practices did.  Audits don't serve much purpose unless the employer acts to correct any problems that the audit reveals.  If you don't actually act on the information, the audit is nothing more than evidence--against yourself. 

Another question, though, that is raised by this case is why the audits came into evidence in the first place.  Performing an internal audit must be done with great care to ensure that the information cannot be later used against the company.  Some believe that involving legal counsel in an internal audit is the best way to achieve this. If the audits are generated for counsel, attorney-client privilege may attach and serve to protect the results.  Undoubtedly, though, how the audit is conducted is just as important as what is done with the results . 

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!

A disgruntled airplane pilot sued the Federal Aviation Agency (FAA) seeking to have his pilot’s license reinstated. The FAA terminated his license after the pilot failed a drug test. The pilot claimed that there was insufficient evidence to support his termination. The suit made its way to a federal appeals court after an administrative hearing and the National Transportation Safety Board affirmed the FAA’s decision.  The federal court, I'm glad to say, upheld the termination decision, marking a sad day for crack-smoking employees in highly safety-sensitive jobs.

 

Mark Toth of the Manpower Employment Blog has a great summary of the case in his post, Court Upholds Termination of Crack-Smoking Pilot:

• February 15:  Pilot Charles Gabbard smoked crack cocaine.
• February 16:  Gabbard submitted to a random drug test.
• February 17:  Gabbard piloted a chartered jet.
• February 21: Gabbard’s test results show a cocaine metabolite level seven times higher than the regulatory limit. (Cocaine takes 24-48 hours to clear the system.)

In April 2007, the FAA terminated Gabbard’s pilot’s license based on the positive drug test and the agency’s conclusion that he had piloted the February 17 flight “while having a prohibited drug, cocaine in [his] system.”

Drug-Free Friendly Skies: Too Much to Ask?

The Sixth Circuit concluded that there was sufficient evidence to find that Gabbard indeed had taken drugs prior to flying.  Given the window of time for the drug test to show a positive result, he had smoked crack no more than 42-44 hours before takeoff. 

Mark Toth points out Gabbard's creative (i.e., ludicrous) arguments:

(1) he may have smoked a cigarette that, unbeknownst to him, was laced with crack;

(2)  the cocaine may have gotten into his system due to plastic surgery; or

(3) perhaps he inhaled the fumes of crack cocaine that just happened to waft by.

But the Sixth Circuit didn't buy it.  What mattered was that, regardless of how he intentionally or accidentally ingested the drug, he should have notified his employer immediately, rather than preparing for takeoff as usual.

One final note about the case.  Gabbard also tried to argue that he'd been a victim of incompetent representation by his lawyer at the administrative hearing.  Needless to say, the court disregarded the contention, holding that adequate representation is an issue for the criminal courts.  Since that's the case, given the circumstances, Mr. Gabbard may be able to reuse that argument sometime in the not-so-distant future when he likely finds himself before a criminal court.  And, hopefully for him, his lawyer will not have "accidentally" ingested an illegal narcotic prior before representing Gabbard in any legal proceedings, criminal or otherwise.

Other Recent Cases Involving Terminations for Illegal Conduct and Drug Testing

EEOC Sues Pittsburgh Drug Clinic for Terminating Recovering-Addict Employee for Failing Random Drug Test

One More Reason Every Employee Should Be Required to Complete a Job Application: School Is Ordered to Reinstate Convicted Killer to Teaching Position

 

The Equal Employment Opportunity Commission (EEOC) has filed suit under the ADA against a Pittsburgh drug-treatment center.  The suit, which is brought on behalf of a former clinic employee under the Americans With Disabilities Act, alleges disability-based discrimination.  The employee, a recovering drug addict, worked full-time as a counselor at the clinic when was terminated when she tested positive for methadone in a random drug test.  

The Greenbriar Treatment Center in New Kensington, is alleged to have fired the employee despite her claim that she had a legal prescription for the methadone, which she'd been receiving through a treatment program since 2002.  She was later berated by her former boss, who told her that she "should be ashamed of herself."  The EEOC contends that the termination was unlawful discrimination against a person with a disability. 

 

The Americans With Disabilities Act & Illegal Drug Use

The Americans With Disabilities Act (ADA) does not protect current drug users.  But it does protect those who are in recovery for drug or alcohol abuse. 

The EEOC's Technical Assistance Manual for the ADA has the following to say about the use of illegal drugs as a disability:

Regarding Persons Currently In Recovery:

Persons addicted to drugs, but who are no longer using drugs illegally and are receiving treatment for drug addiction or who have been rehabilitated successfully, are protected by the ADA from discrimination on the basis of past drug addiction.

For example

An addict who is currently in a drug rehabilitation program and has not used drugs illegally for some time is not excluded from the protection of the ADA. This person will be protected by the ADA because s/he has a history of addiction, or if s/he is "regarded as" being addicted. Similarly, an addict who is rehabilitated or who has successfully completed a supervised rehabilitation program and is no longer illegally using drugs is not excluded from the ADA.

Regarding Persons Currently Using:

However, a person who casually used drugs illegally in the past, but did not become addicted is not an individual with a disability based on the past drug use. In order for a person to be "substantially limited" because of drug use, s/he must be addicted to the drug.

To ensure that drug use is not recurring, an employer may request evidence that an individual is participating in a drug rehabilitation program or may request the results of a drug test.

Not having seen the complaint, I'm at a bit of a loss as to what type of facts may be alleged to support the EEOC's claim.  To present a viable claim, the EEOC has to allege that the employee (1) is disabled, presumably because of her drug addiction; and (2) she suffered some adverse action, presumably the termination; and (3) Number 1 was the reason for Number 2; i.e., that she was fired because of her drug addiction. 

My initial reactions to this scenario:  What was the clinic's drug policy? I'd think it would be more comprehensive than most.  Did it address methadone?  What was the clinic's position, if any, on methadone programs as a recovery treatment?  And, of course, wasn't there a pre-employment drug test?  If so, did she test positive for methadone?  If she did, well, it seems like clinic could be in a bad spot.  If she didn't, was she still using illegal drugs?  Would that have been a piece of after-acquired evidence (i.e., falsifying drug test results, etc.) upon which the employer could have terminated her?  That would be a reason other than a "disability."

The merits of the case may also depend on how the court defines a "recovery program" as that term is used in the EEOC's Guidance, above.  It isn't clear from the EEOC's own definition whether the methadone program would qualify.

A "rehabilitation program" may include in-patient, out-patient, or employee assistance programs, or recognized self-help programs such as Narcotics Anonymous.

Source:  Post Gazette at http://www.post-gazette.com/pg/08166/889903-56.stm

Employers often bemoan the Americans With Disabilities Act (ADA), citing the law's difficult-to-understand compliance requirements. And most employment lawyers and discrimination attorneys would agree that the ADA can be more challenging in its application than, for example, Title VII, which prohibits discrimination based on race, religion, gender, national origin, or other protected characteristics. 

Whereas an employer is in "compliance" with Title VII so long as it does not take adverse employment actions against employees because of a protected characteristic, the ADA requires that employers take affirmative steps towards assisting employees who are able to perform the functions of the job but who may need a reasonable accommodation to do the job as well as other employees without a disability.

But today, most savvy employers understand the tremendous value that the ADA provides to society as a whole and are able to appreciate the law, despite what can seem like a daunting set of requirements and prohibitions that the law entails.

Wal-Mart pharmacist, Glenda Allen, was shot during a robbery at her second job. Doctors estimated her chance of survival as very poor.  But survive she did.  Doctors concluded she may never walk again.  But walk she did.  In the end, she suffered permanent injury to her spinal cord and required the use of a cane as a result of an abnormal gait caused by the shooting.

When she sought to return to work, Wal-Mart fired her.

Wal-Mart's position was that Allen could no longer do her job--with or without reasonable accommodations.  Allen was not paraplegic, though, she had at least limited mobility.

The litigation was unusually protracted--she initially filed suit in 1994.  After losing on summary judgment, Allen persisted until settling with the retail giant yesterday for $250,000. 

This case is a difficult one for me understand, at least strategically.  Granted, in 1994, the Americans With Disabilities Act (ADA), which governs accommodations employers must make for employees with disabilities, was hardly the piece of legislation that it is today. Barely 4 years old at the time, the ADA was not understood by many and feared by most. 

But today, some 14 years later, the amount of the settlement seems a pittance when compared to the legal fees that surely must have been incurred for more than a decade of litigation.  Additionally, Wal-Mart is sophisticated enough to appreciate the true value that the ADA provides to the business world by being able to offer equal employment to the disabled.  It strikes me as odd that the global mega-store would not have settled long ago, even if only to "save face" with the disabled community. 

[H/T Coral & Opal: Wal-Mart Coughs Up $250k in Pharmacy Discrimination Case]

The Third Circuit, which covers Delaware, has ruled that the Pregnancy Discrimination Act provides a cause of action to an employee fired for having an abortion.  Although the case involves an unusual set of facts, it serves as an important reminder that compassion provides rewards beyond good karma – it can keep you out of court.

 

Doe v.  C.A.R.S. Protection Plus, Inc.

After learning that there might be problems with her pregnancy, the plaintiff, “Doe,” shared the information with her employer. Tests showed severe deformities and, at her doctor's recommendation, she had an abortion. On the day of the funeral ceremony, three days after the abortion, Doe was terminated.

The employer asserted that Doe failed to follow company policies with regard to her absence from work during her medical procedure and in the days following.   Doe presented evidence that her husband had called in to arrange the time off.

The employer had what the court called a “somewhat less than compassionate leave policy.” Employees were given no personal or sick leave. After one year on the job, employees were given five days’ paid vacation. Any time taken off during a work day was to be deducted from the employee’s vacation time or be unpaid. When employees were out sick, the employee or spouse had to call in on a daily basis.  But evidence was presented that showed not all employees were treated the same with respect to the daily call-in rule.

An Abortion Is a Protected Activity Under the Pregnancy Discrimination Act

The Pregnancy Discrimination Act (“PDA”) is an amendment to Title VII of the Civil Rights Act of 1964 and states that discrimination on the basis of “sex” includes discrimination “because of or on the basis of pregnancy, childbirth, or related medical conditions.” The PDA does not require preferential treatment for pregnant employees but mandates that employers treat pregnant employees the same as non-pregnant employees who are similarly situated with respect to their ability to work.

Doe's allegations did not make for a typical pregnancy-discrimination claim. She did not claim, for instance, that she was discriminated against because she was pregnancy or that she had been fired while on maternity leave. Instead, she argued that she was discharged because she underwent a surgical abortion. Whether or not protections generally afforded pregnant women under the PDA also extend to women who elect to terminate their pregnancies was an issue that had not been decided in the Third Circuit.

The EEOC has taken the position that it is an unlawful employment practice to fire a woman because she had an abortion.  This was also the position taken in an early decision in Delaware's federal court.  Referencing both sources, the Third Circuit held that abortion is protected conduct under the PDA.

Evidence of Discriminatory Intent

The Court found enough evidence to refute the employer’s stated non-discriminatory reason for termination and permitted Doe’s claim to proceed to trial.  The evidence persuasive to the Court included: (1) daily call-in rule was not enforced with other employees; (2) another employee stated that Doe’s supervisor (who fired her) stated that Doe “didn’t want to take responsibility,” possibly in reference to her abortion; and (3) Doe was fired only three working days after the abortion.

Lessons for All Employers

Abortion does not often arise as part of a discrimination (or any other) claim against an employer because such a procedure is often kept private by the employee.  An employer cannot discriminate on the basis of conduct that it knows nothing about.  Also, the facts in this case, where the baby was wanted, and the employee had abortion for medical reasons, may be somewhat rare.

Nevertheless, the lessons from this case are applicable to many types of discrimination claims and provide a good reminder for employers. Simple changes to the employer’s policies and decision-making procedure would have resulted in a dramatically different outcome.

1. Make your leave policies reasonable. If humanity is not enough to persuade you on this point, then the risk of litigation should. It is clear that this employer’s draconian leave policy won no favors with the court, and certainly would not have won any points with a jury. Moreover, where leave policies  are so unreasonable that practically no one can abide by them, exceptions will be made routinely. When exceptions are made, subjectivity comes into play and it can be very difficult to defend why exceptions were made in some cases and not others.

2. Disseminate your policies, and enforce them consistently. Inconsistent treatment gets the employee past the first hurdle of any discrimination claim.

3. Never forget to take timing into account with any serious employment action. If you are considering taking an adverse employment action directly following some protected activity, which, in Delaware, now includes an abortion, think twice. Consider giving the employee a second chance and let some time elapse before taking action. Again, if benevolence does not lead you in the right direction here, know that many a discrimination case was moved onto trial because of suggestive timing.

 

Doe v.  C.A.R.S. Protection Plus, Inc., Nos. 06-3625, 06-4508 (3d Cir. May 20, 2008).

NASCAR has been sued for race discrimination, gender discrimination, and sexual harassment.  The plaintiff, a black female former official, seeks $225 million in damages.

The plaintiff, Mauricia Grant, worked as a technical inspector in NASCAR's second-tier Nationwide Series until she was fired in October 2007. She'd been with the organization since 2005, when she alleges the harassment and discrimination began. 

Her complaint, filed in federal court in New York, lists 23 specific instances of alleged sexual harassment and 34 specific instances of alleged gender and racial discrimination.

Despite an increasingly female fan base, NASCAR has long been a "man's sport" with women's involvement traditionally limited. 

Grant claims that she was harassed based on her race and her gender, as well as subject to a sexually hostile work environment.  In support of her racial discrimination claim, she alleges that she was referred to as "Nappy Headed Mo" and "Queen Sheba" and was told that she worked on "colored people time. 

One official, Grant alleges, routinely made references to the KKK.  And, while riding with coworkers at Talladega Speedway, she was told to duck as they passed by race fans because, one said, "I don't want to start a riot when these fans see a black woman in my car."

As for the sexual harassment, she says that she was accused of being gay when she ignored advances of co-workers.  She also claims that those same co-workers exposed themselves to her and made graphic and lewd jokes.

Grant also alleges that she routinely complained about the conduct to multiple supervisors, who responded that she should just "deal with it," and dismissed the conduct as attributable to "former military guys" with a rough sense of humor.

Source:   ESPN: Ex-NASCAR worker alleges racial discrimination in lawsuit

The Equal Employment Opportunity Commission (EEOC) can add another major victory to the scorebooks.   Earlier this week, the Commission settled a discrimination lawsuit for $2.2 million.  The actions at issue are said to trace back to a supervisor who is no longer with the restaurant.  This should be a wake-up call for employers who don't provide employment-law training to supervisors, helping to prevent and eliminate discrimination and harassment in the workplace. 

Tavern on the Green

The hottest headline for EEOC settlements right now is the agreement reached with the legendary N.Y.C. landmark restaurant, Tavern on the Green. Earlier this week, the New York Times reported that the restaurant, located in Central Park, had agreed to pay $2.2 million to settle a sexual-harassment claim filed by the EEOC last September.

Tavern on the Green is a destination for many Big Apple visitors with discriminating tastes, as well as a regular dinner spot for the who's who of New York's social scene.  The restaurant opened in 1934 and, in the 50+ years since, has become the "highest-grossing independently owned restaurant in the United States with annual revenues in excess of $34 million and over half a million visitors a year."

The Allegations Were Many

The suit alleged a whole host of claims including discrimination, harassment, and retaliation.  The alleged harassment was said to include groping female staff members, the regular use of graphic sexual comments, and demands for sexual favors.

The discrimination allegations involved Hispanic employees, who were allegedly ridiculed and name-calling.  Black employees were alleged to have received similarly hostile treatment. 

As could be expected, the iconic restaurant denied any wrongdoing as part of the settlement. Representatives also claimed that the target of the suit, the managers accused of engaging in severe and pervasive harassment, separated from the restaurant several years ago.

The conduct is said to have stemmed primarily from one long-time manager who has since left the restaurant's employment. 

Take Away

What can employers learn from this case?

Well, for one, even the giant can fall.  The Tavern is legendary--a Goliath in a city of Goliaths.  After nearly 75 very successful years in operation, even the Tavern was not immune from the EEOC's watchful eyes. 

But there's another lesson to be learned here.  The idea that just one supervisor, if left unchecked, can cost your business a lot--a lot of money, a lot of time, and a lot of bad publicity.  Had this supervisor been trained in employment laws, would he have chosen not to engage in such conduct?  Likely not.  But perhaps others would have recognized the serious repercussions of his conduct and put a stop to it before it turned into major liability.

This case is a very good advertisement for harassment and discrimination training for managers.  By setting ground rules for managers to enforce and to follow, employers can take action in preventing this type of detrimental lawsuit.

N.Y. Times: Tavern on the Green to Pay $2.2 Million to Settle Harassment Claim

The Third Circuit has ruled that attorney-parents cannot recover fees for legal services performed on behalf of their children in administrative hearings or judicial proceedings under the Individuals with Disabilities Education Act ("IDEA") .  Although the IDEA contains a fee-shifting provision for parents who are "prevailing parties," it does not apply to fees for parents representing their children in legal proceedings.  Previously, in Woodside v. School Dist. of Philadelphia Bd. of Educ., 248 F.3d 129 (3d Cir. 2001), the Third Circuit had held that parents serving as an attorney cannot recover fees for administrative proceedings under the IDEA.  The Pardini decision clarifies that the bar to fee recovery is equally applicable in judicial proceedings.

Overtime lawsuits are the hottest employment lawsuit trend.  Nevada lawyer Mark R. Thierman is a demigod in this corner of the legal world.  Thierman has won hundreds of millions of dollars from companies in unpaid wages.   Beginning in the mid-1990's, Thierman filed the first in a series of lawsuits against California employer after having spent most of his career as a management-side employment attorney. 

The federal Fair Labor Standards Act (FLSA) requires the payment of overtime and minimum wage for most workers. About 115 million employees—86% of the workforce—are covered by federal overtime rules, according to the U.S. Department of Labor (DOL). Plenty of wage and hour lawsuits are filed on behalf of the traditional working class, be they truckers, construction laborers, poultry processors, or restaurant workers. In fact, some would say that wage and hour suits have generated a cottage industry for plaintiffs' lawyers.  But no one has been more successful than Thierman in collecting overtime for employees who are far from the factory floor or fast-food kitchen.

His biggest settlements over the last two years have been on behalf of stockbrokers, many of whom earn well into the six figures. Thierman has teamed up with other lawyers to extract settlements totaling about a half-billion dollars from brokerage firms, including $98 million from Citigroup's Smith Barney and $87 million from UBS Financial Services Inc. (As is typical in settlements, the companies do not admit liability.) With those cases drawing to a close, he and other attorneys already are pursuing new claims on behalf of computer workers, pharmaceutical sales reps, and accounting firm staff.

BusinessWeek.com has a great article titled, "Wage Wars," detailing Thierman's Robin-Hood style ventures and the wave of overtime litigation sweeping major corporations across the country.  Since 2000, overtime litigation has exploded nationwide. The U.S. Chamber of Commerce decried the "FLSA litigation explosion" and its having become the "claim du jour" for plaintiffs' attorneys.

Thierman shrugs at such concerns. The alternative, in his view, would be to have the laws enforced by a government bureaucracy.  Thierman professes to be helping the little guy: "I'm interested in the middle class—those are my folks."

 

[H/T to George's Employment Blawg and the Ohio Employment Law Blog]

The Third Circuit, which governs Delaware, New Jersey, and Pennsylvania, applied a strict interpretation of Rule 23(f) and affirmed dismissal of a class action against Johnson & Johnson. The case, Gutierrez v. Johnson & Johnson, was filed by African-American and Hispanic former J&J employees alleging race discrimination--8,600 employees in all.

The federal District Court in New Jersey declined to certify the group as a class. Notably, the court found that the group had failed to identify any J&J policy that was discriminatory. The court also cited the diversity and size of the group as factors weighing against class certification.

Now, hang in there, this is where it starts to get complicated.

The potential class could have filed an appeal with the Third Circuit after the District Court issued its decision denying certification. But, instead, they wanted to file a motion for reconsideration. J&J agreed to an extension of time for the employee to file their motion. The court granted the requested extension but eventually denied the motion for reconsideration, upholding its denial of class status.

The employee-petitioners sought permission tofile an interlocutory appeal with the Third Circuit. The petition was filed within ten days of the District Court’s denial of their motion for reconsideration but 125 days after the original decision denying class certification.

A petition to appeal must be filed within 10 days. When a motion for reconsideration is timely filed, though, the 10 day-clock stops running until the motion is decided. Here, the employee-petitioners filed their motion within the deadline set by the District Court's scheduling order. That was not enough for the Third Circuit. Instead, the court found that the 10-day requirement was mandatory--within 10 days of the decision denying class certification, the party has 10, and only 10, days within which to file an appeal.

The fact that the motion for reconsideration was timely for purposes of the District Court’s scheduling order did not matter. According to the Third Circuit, much to Johnson & Johnson's relief, Rule 23(f) of the Federal Rules of Civil Procedure is strict and mandatory.

Now that President Bush has signed into law the National Defense Authorization Act (NDAA), which amends the Family and Medical Leave Act (FMLA), employers must update their FMLA postings.

Under the FMLA, all covered employers are required to display and keep displayed a poster prepared by the Department of Labor summarizing the major provisions of The Family and Medical Leave Act (FMLA) and telling employees how to file a complaint. The poster must be displayed in a conspicuous place where employees and applicants for employment can see it. A poster must be displayed at all locations even if there are no eligible employees.

A copy of the standard FMLA poster prepared by the Department (WH 1420) is available for posting in the workplace at the DOL's website. The poster is also available in Spanish.

The DOL has also published a single-page insert poster, which includes the NDAA amendment. The insert is also available at the DOL's website. It's available here for download and use.

On Wednesday, the US Supreme Court decided the question, "When Is a Charge a Charge?" According to the Supreme Court's decision in Federal Express v. Holowecki, the answer may leave some employers wanting for more.

Current and former FedEx employees filed an "intake questionnaire" withthe Equal Employment Opportunity Commission (EEOC), alleging that they had been subject to unlawful discrimination based on their ages. The Age Discrimination in Employment Act (ADEA), requires an employee to exhaust her remedies at the administrative level, either with the EEOC or the local state agency, before she can proceed with a civil lawsuit.

The administrative process begins with the complainant going to the EEOC or state agency and completing a Charge of Discrimination. A "Charge" form is a simple, one-page form designed to capture only the most basic information about the allegations; i.e., employer's name and address, number of employees, protected class asserted, adverse action, and a brief narrative.

Here, the plaintiffs filed an "intake questionnaire," instead of a Charge. The former is a "fill-in-the-blank" question and answer form that the complainant would normally fill out after her initial intake interview and Charge are completed.

The EEOC says that a filing will be considered a Charge, "so long as it reasonably be construed to request agency action and appropriate relief on the employee's behalf." The EEOC failed to notify FedEx about the allegations--meaning that FedEx had no opportunity to respond to the claims before being sued. The Court held that the plaintiff should not be penalized for the EEOC's mistake:

The Federal Government interacts with individual citizens through all but countless forms, schedules, manuals, and worksheets. Congress, in most cases, delegates the format and design of these instruments to the agencies that administer the relevant laws and processes. An assumption underlying the congressional decision to delegate rulemaking and enforcement authority to the agency, and the consequent judicial rule of deference to the agency's determinations, is that the agency will take all efforts to ensure that affected parties will receive the full benefits and protections of the law. Here, because the agency failed to treat respondent's filing as a charge in the first instance, both sides lost the benefits of the ADEA's informal dispute resolution process.

The employer's interests, in particular, were given short shrift, for it was not notified of respondent's complaint until she filed suit. The court that hears the merits of this litigation can attempt to remedy this deficiency by staying the proceedings to allow an opportunity for conciliation and settlement. True, that remedy would be imperfect. Once the adversary process has begun a dispute may be in a more rigid cast than if conciliation had been attempted at the outset.

This result is unfortunate, but, at least in this case, unavoidable. While courts will use their powers to fashion the best relief possible in situations like this one, the ultimate responsibility for establishing a clearer, more consistent process lies with the agency. The agency already has made some changes to the charge-filing process. ... To reduce the risk of further misunderstandings by those who seek its assistance, the agency should determine, in the first instance, what additional revisions in its forms and processes are necessary or appropriate.

This decision is disappointing, though not necessarily surprising. The courts are always hesitant to dismiss a plaintiff's claim because of a procedural defect--especially when that defect was not caused by the plaintiff. Despite the sense of unfairness to the employer that results from this case, the Court's decision did contain one small trinket of employer victory. In it's opinion, the Court scolded the Commission to get its act together by evaluating its internal processes in an effort to avoid this sort of beaurocratic oversight again in the future. A small victory for sure. Read the full text of the Court's decision here.