For the Week of June 29, 2009

SUPREME COURT

City’s rejection of promotion test results was unlawful racial discrimination

By throwing out the results of an examination to determine those firefighters best qualified for a promotion, the City of New Haven, Connecticut, violated Title VII’s prohibition against discriminatory treatment based on race, the Supreme Court ruled in a narrowly divided opinion. The high-profile case over an ever-contentious issue has been even more closely watched because of the role that Judge Sonia Sotomayor, the Obama Administration’s Supreme Court nominee, played in the appeals court decision below upholding the actions of the city, which had feared a race discrimination suit if it were to certify the exam results (Ricci v DeStefano, Dkt 07-1428, June 29, 2009).

In so ruling, a 5-4 majority of the High Court applied a new standard of statutory construction, holding that before an employer can engage in what otherwise would be prohibited discriminatory treatment in order to avoid or remedy an unintentional, disparate impact, the employer must have “a strong basis in evidence” to believe it will be subject to disparate impact liability if it fails to take the race-conscious, discriminatory action.

Now in CCH Workday: Employment law analyst Deborah Hammonds, JD, offers a detailed analysis of today’s ruling in Ricci v DeStefano in our CCH Workday blog.

Punitive damages available to injured seamen in maintenance and cure actions

An injured seaman may recover punitive damages for his employer’s willful failure to pay maintenance (food and lodging) and cure (medical care), a divided Supreme Court held, in a 5-4 decision written by Justice Thomas. Noting that punitive damages have historically been available under general maritime law, the court cited case law dating back to the 1800’s in which punitive damages were awarded for maritime employers’ failure to provide adequate medical care. The plain language of the Jones Act preserves common-law causes of action such as maintenance and cure, and punitive damages continue to remain available in maintenance and cure actions (Atlantic Sounding Co v Townsend, Dkt 08-214, June 25, 2009).

SUPREME COURT WRAP-UP

WorkWeek recaps the previous labor and employment decisions handed down by the Supreme Court during the October 2008 term:

Locke v Karass. A union representing Maine's state employees may charge fee-paying nonmembers for the national, or "extra-local" litigation expenses incurred by its parent union, a unanimous Supreme Court ruled, holding that the First Amendment permits such charges (January 21, 2009).

Crawford v Metro Gov’t of Nashville. Continuing its recent trend of broadening Title VII's anti-retaliation provision, the High Court unanimously ruled that the Act’s retaliation protections extend to employees who speak out about discrimination and harassment not of their own accord, but when answering questions during an employer-ordered internal investigation. Because the employee’s conduct was protected under Title VII’s opposition clause, the Court declined to address whether her conduct was also governed by the anti-retaliation provision’s participation clause (January 26, 2009).

Ysursa v Pocatello Educ Ass’n. An Idaho law banning public employee payroll deductions for union political activities did not violate labor unions’ free speech rights, the Supreme Court ruled, noting the distinction between state suppression of speech and instances in which states decline to promote speech (February 24, 2009).

14 Penn Plaza LLC v Pyett. Affirming its decidedly pro-arbitration policy, the Supreme Court held that courts must enforce collective bargaining agreements that “clearly and unmistakably” require union members to arbitrate their claims arising under the Age Discrimination in Employment Act. Such agreements are enforceable under the ADEA since the Act does not preclude arbitration of claims brought pursuant to the statute (April 1, 2009).

Flores-Figueroa v United States. In a case informing on federal worksite immigration enforcement operations, a unanimous Supreme Court ruled that an undocumented worker who presented false Social Security and Alien Registration numbers to obtain employment may not be convicted of identity theft under the federal “aggravated identity theft” statute unless the federal government shows that the worker had actual knowledge that the means of identification belonged to another person (May 4, 2009).

Arthur Anderson LLP v Carlisle. In an investor suit, the Supreme Court held that a litigant who was not a party to an arbitration agreement may invoke Sec. 3 of the Federal Arbitration Act to compel arbitration if applicable state law would allow enforcement of contracts by (or against) a nonsignatory through assumption or third-party beneficiary theories (May 5, 2009).

AT&T Corp v Hulteen. The Pregnancy Discrimination Act does not require employers to set current pension benefits at a level that will restore service credits to female employees for pregnancy leaves taken prior to the passage of the PDA. In one of the last opinions to be authored by Justice Souter, the High Court held that employers do not necessarily violate the PDA when paying pension benefits calculated in part under an accrual rule – applied prior to the PDA's enactment – that gives fewer service credits for pregnancy leaves than for other medical leaves. Because AT&T’s benefit calculation rule accorded with the terms of a bona fide seniority system under Title VII, the company was insulated from a legal challenge (May 18, 2009).

Ashcroft v Iqbal. “Civil rights plaintiffs will have to be more thoughtful about how they frame their complaints to avoid pleading themselves out of court” following the Supreme Court’s ruling in an antitrust case, notes plaintiff’s lawyer Paul Mollica in his Daily Developments in EEO Law blog. Though not an employment case, the High Court’s ruling makes clear that the heightened pleading standards set forth in its 2007 decision in Bell Atlantic Corp v Twombly applies to all civil actions, not just antitrust cases, and that "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." (May 18, 2009).

Gross v FBL Fin Servs Group. Declining to import the mixed-motives burden-shifting rubric applied under Title VII, the Supreme Court ruled that an employee claiming disparate treatment under the ADEA must establish by a preponderance of evidence that age was the “but-for” cause of the adverse employment action challenged. Even when the employee has produced some evidence that age was one motivating factor in the employer's decision, the burden of persuasion does not shift to the employer to show that it would have taken the same action regardless of age, held the Court (June 18, 2009).

KEY CASES

7thCir: No ADA claim for physician fired for making threats of physical violence

A county hospital did not violate the ADA when it discharged an anesthesiologist who allegedly threatened to kill his supervisor and coworkers, held the Seventh Circuit, concluding the physician failed to present sufficient evidence of pretext for his claim to survive summary judgment. Without deciding whether “interacting with others” qualified as a major life activity — or, if it did, whether he was so substantially limited — the appeals court determined the physician did not present any evidence calling into question the sincerity of the county’s belief that he had threatened to harm his supervisor and coworkers and that the county fired him for that reason. Rather, the undisputed evidence supported the county’s belief that he made the threats. In so holding, the Seventh Circuit did not decide whether the physician presented a direct threat to others because even if the county could establish its burden, summary judgment was nonetheless appropriate on the discharge claim. Moreover, the physician was not entitled to a reasonable accommodation. “There is no legal obligation to ‘accommodate’ conduct, as opposed to a disability,” wrote the court (Bodenstab v Cook County, June 22, 2009).

9thCir: Claim that workers were undocumented did not invalidate judgment

An employer could not avoid complying with the terms of a consent judgment reached with the NLRB by asserting after the fact that the 20 discharged workers it was required to reinstate were unauthorized aliens and that their reinstatement would violate IRCA and state immigration law. The employer voluntarily entered into the settlement agreement, the Ninth Circuit noted. If the employer believed the unlawfully discharged workers were undocumented aliens, it could have admitted liability but contested the backpay award on the grounds that the discriminatees were “unavailable” for work (since they could not lawfully work in the US); however, the employer did not do so. “The Board has a procedure for just this situation,” the appeals court noted: The employer must provide the NLRB with proper proof of a person’s unauthorized status, at which time the Board can absolve the employer from rehiring that worker. “Our decision to enforce this consent judgment does not order any party to violate federal or state immigration laws,” the court wrote. Rather, it serves to place the burden on the employer to provide proof of the workers’ unauthorized status—and also to enforce the liquidated damages provision of the settlement, which is not predicated on the workers’ availability for work (NLRB v C&C Roofing Supply, June 25, 2009).

DCCir: Password protection on union campaign websites did not violate LMRDA

A labor union did not violate the Labor-Management Reporting and Disclosure Act (LMRDA) by adopting a resolution requiring all candidates for local union office and their supporters to include a password-protection function on their websites, the DC Circuit has ruled. The union adopted the resolution over concerns that employers had accessed the sites to gain information on local organizing campaigns and contract negotiations. Although the appeals court found the resolution could have interfered with union members' rights to express their views, it noted the impact was not substantial because members had a variety of other means of expression and access available to them. Moreover, the resolution was reasonably related to the protection of the union “as an institution" and allowed the union to organize and bargain more effectively; therefore, it served a legitimate purpose. Furthermore, the union had a reasonable basis for implementing the resolution — namely, concerns about employer misconduct. The appeals court affirmed a lower court’s denial of a motion by several union members to enjoin the union from enforcing the resolution (Quigley v Gilbin and Operating Engineers, June 23, 2009).

NDIll: Medical evidence barred as it relates to front pay, future benefits

Ruling on a motion in limine in an FMLA case on remand from the Seventh Circuit, a federal magistrate judge granted in part an employer’s motion to bar evidence regarding a former employee’s medical condition, including expert evidence of the same, and evidence of the employee’s medical bills. In addition to backpay and medical expenses, the employee sought front pay and an award of health benefits at least up to retirement age, arguing his employer’s unlawful conduct caused his permanent inability to work by exacerbating his medical condition, thereby justifying the equitable remedy. The employer argued (rightly, it turns out) that the employee’s exacerbation theory is inconsistent with the FMLA and that it was a work-around attempt “to obtain consequential damages not otherwise allowed under the FMLA.” The employee was ineligible for front pay, which is available only in instances where an employee would have been able to work. To the extent the employee contended his inability (and thus unavailability) to work was caused by the employer’s conduct, he was actually seeking consequential and compensatory damages; however, these are not recoverable under the FMLA. (If his employer’s conduct physically harmed the plaintiff, his remedies are available under tort and workers’ compensation laws, the court noted.) Therefore, medical evidence as it relates exclusively to front pay and future damages is not relevant and was barred. Some medical evidence may be admissible to the extent that it is relevant to the calculation of backpay damages, however, the court ruled (Breneisen v Motorola, Inc, June 22, 2009).

STATE LAW CASES

CA: Employees can bring representative claims without meeting class action requirements

Two significant California supreme court rulings were issued today as well in long-awaited companion cases. In Arias v Superior Court, the state high court held an employee who sues an employer on behalf of himself and other employees under the unfair competition law (sec. 17200) for Labor Code violations must satisfy class action requirements; however, those requirements need not be met when an employee‘s representative action against an employer is seeking civil penalties under the state labor code’s Private Attorneys General Act. In Amalgamated Transit Union v Superior Court, the supreme court ruled that a labor union that has not suffered actual injury under the unfair competition law, and that is not an "aggrieved employee" under the Private Attorneys General Act, may not bring a representative action under those laws as the assignee of employees who have suffered an actual injury and who are aggrieved employees, or as an association whose members have suffered actual injury and are aggrieved employees. Second, the court held a representative action under the unfair competition law must be brought as a class action, for the reasons stated in Arias. The UCL Practitioner offers more background on today’s rulings.

IL: Broad “patient safety” assertion won’t justify at-will public policy exception

A respiratory therapist who alleged that he was fired after reporting his employer’s deviation from an electronic patient-charting standard could not proceed with his claim that he was wrongfully discharged in violation of public policy, the Illinois supreme court ruled. Noting that “A broad, general statement of policy is inadequate to justify finding an exception to the general rule of at-will employment,” the court refused the employee’s request to declare definitively that patient safety is a matter of public policy in Illinois and that terminating an employee who speaks out in favor of patient safety violates that policy. According to the court, the employee failed to identify a specific source of public policy for patient safety. Although it acknowledged that providing good medical care is in the public interest, the court stated “It does not follow, however, that all health care employees should be immune from the general at-will employment rule simply because they claim to be reporting on issues that they feel are detrimental to health care.” Thus, the employee’s retaliatory discharge claim failed (Turner v Memorial Medical Center, IllSCt, June 18, 2009).

MN: Absent a belief that conduct was illegal, whistleblower law does not apply

A retail sales manager for a telecommunications company did not believe a sales commission plan was unlawful when she reported her concerns about the plan to her superiors; rather, she merely thought the commission plan might be unethical and confuse customers. As such, the manager could not assert a claim under the state’s whistleblower statute, which requires a reporter to “subjectively believe the conduct is unlawful at the time she makes the report.” The Eighth Circuit affirmed a lower court’s dismissal of the manager’s state whistleblower claim alleging she was unlawfully fired for bringing attention to the fraudulent sales commission plan, noting the manager had not reported the activity for the required purpose of exposing an illegality (Chial v Sprint/United Management Co, 8thCir, June 24, 2009).

MT: Employer must accommodate service dog of worker with a disability

The use of a specially trained service dog by a state employee who required the dog’s assistance for both a physical and mental disability was a reasonable accommodation, the Montana supreme court ruled, reversing a district court. The employee had requested nonskid floor covering on several occasions after her service dog repeatedly suffered injuries when slipping on the tile floor and subsequently had to be retired from service. Although the employer acknowledged that it was required to accommodate the employee, it dragged its heels for 17 months under the apparent belief that it had no legal obligation to accommodate Bess, the service dog. The state high court saw things differently, however, concluding the failure to provide an effective alternative accommodation constituted an adverse employment action (McDonald v Dept of Environmental Quality, MontSCt, June 17, 2009).

NJ: More protective bargaining agreement supersedes individual contract terms

A custodian’s individual employment contract conflicts with and diminishes the rights granted him by the collective bargaining agreement under which he was covered, thus it must yield to the collective agreement, a divided New Jersey supreme court held. Accordingly, the custodian was entitled to an arbitration hearing over his dismissal for workplace misconduct, as provided by the bargaining agreement. Under the individual contract, the Board can terminate the employee on 14 days’ notice. Under the bargaining agreement, however, an employee has the right to remain employed for the full one-year term of his individual contract unless just cause for dismissal exists, and he is also entitled to challenge the basis for dismissal through arbitration. These disparate contractual approaches cannot co-exist, the high court concluded. Since the individual agreement interferes with the custodian’s rights under the collective agreement, the collective agreement prevails; thus, he was entitled to arbitrate his discharge pursuant to its terms (Mt. Holly Township Bd of Educ v Mt. Holly Township Educ Assn, NJSCt, June 24, 2009).

NJ: Employee’s emails to attorney were privileged, not employer property

A company’s workplace email policy did not convert an employee's emails with her attorney — sent through her own personal, password-protected, web-based email account, but via her employer-issued laptop — into the employer's property, a New Jersey appeals court held, rejecting a lower court’s finding to the contrary. The lower court found the policy put the employee on sufficient notice that her emails would be deemed company property, a conclusion the reviewing court rejected. For one, it was disputed whether the policy itself had ever been finalized or formally adopted, since several different versions were circulating. Moreover, assuming it had been adopted, the text of the policy itself was ambiguous as to whether it covered the employee’s emails in this instance. Finally, assuming the policy applied, it was not enforceable here, the appeals court held, citing the “venerable” history of the attorney-client privilege. “[T]he policies undergirding the attorney-client privilege substantially outweigh the employer's interest in enforcement of its unilaterally imposed regulation,” the court wrote, mincing no words. “The moral force of a company regulation loses impetus when based on no good reason other than the employer's desire to rummage among information having no bearing upon its legitimate business interests,” it added. “We reject the employer's claimed right to rummage through and retain the employee's emails to her attorney.” Thus, the lower court remanded for entry of an order requiring the defendant to turn over all copies of the emails in question (Stengart v Loving Care Agency, NJCtApp, June 26, 2009).

AGENCY DEVELOPMENTS

NLRB guides regions on how to proceed during ongoing inter-union dispute

The NLRB is facing challenges in responding to a very public inter-union labor dispute involving constituent parts of UNITE HERE that have disaffiliated from the union. The breakaway group has formed a new organization called Workers United and has affiliated with the SEIU. As a result of the dispute, employers have received letters both from UNITE HERE and from Workers United, or one of its constituent locals or regional councils, claiming to be the entity that represents the employer's employees. In the face of these competing claims, employers have taken a variety of actions: Some have ceased remitting dues to either side until the internal union dispute is resolved. Others have taken actions that are alleged in pending charges as unilateral changes. Some of the employers have filed RM petitions claiming that the conflicting claims raise a "question concerning representation" warranting an election. A recent memorandum by the NLRB associate general counsel advises the Regions on how to respond in the face of this complex situation.

Federal court bars state agency from interfering with EEOC investigation

A federal magistrate judge has issued a court order barring the California Department of Developmental Services (DDS) from interfering with an EEOC investigation of the state agency. The EEOC is investigating workplace discrimination charges alleging that DDS subjected at least three of its employees to discrimination and harassment based on race, sex, disability, and/or retaliation. The EEOC was forced to issue subpoenas for two DDS employees to testify in the investigation after concluding the DDS interfered with, intimidated and even threatened witnesses with criminal prosecution if they cooperated with the investigation. “The EEOC will not allow any employer, whether it is a private or state agency, to interfere with its federal investigations," said EEOC regional attorney Anna Park. The judge also denied the DDS's request for a protective order that would have interfered with EEOC recordkeeping procedures and imposed duties that both Congress and the Supreme Court have deemed unnecessary in EEOC investigations.

EEOC files disability bias suit over medical leave policy

Beverage Solutions, Inc, a Chicago-area beverage distribution company, violated the ADA by refusing to reasonably accommodate the needs of an employee with a heart condition who required medical leave and by firing her because of her disability, the EEOC claims in a lawsuit filed last week. The employee suffered from severely blocked arteries that limited her ability to walk and to breathe, a condition that was life-threatening and required that she undergo open heart surgery. When she requested six to eight weeks of leave in September 2006 for the surgery, the company denied her request and told her that by taking time off, she was effectively resigning. (The employer’s leave policy provides that employees can take leave only between February 15 and May 15 or between July 15 and October 15, the company’s slow periods.) The employee underwent surgery and, upon being released to return to work, the company did not respond to her request to be rehired.

EEOC sues Kmart for disability bias in discharge of worker using a cane

Continuing its recent focus on disability discrimination, the EEOC has filed suit alleging retail giant Kmart Corp violated the ADA by firing an employee who uses an assistive walking device. The employee, who has a debilitating back impairment and uses a cane to assist him in walking and standing, was successfully performing his duties as a greeter when he was observed using his cane and then fired because of the use of his cane, the agency asserts. The EEOC is seeking the employee’s reinstatement, as well as back pay and compensatory and punitive damages. The EEOC also seeks injunctive relief requiring Kmart to institute and carry out policies, practices and training programs that provide equal employment opportunities for persons with disabilities, and a work environment free from disability discrimination.

LEGISLATION

ENDA reintroduced in the House, with gender identity provision restored

The Employment Non-Discrimination Act (ENDA), a bill that would provide employment discrimination protections to individuals based on their sexual orientation or gender identity, was introduced in the House by Rep. Barney Frank (D-Mass). The legislation (H.R. 2981) [previously introduced as H.R. 3017, an identical bill] would extend federal employment laws that currently prevent employment discrimination on the basis of race, religion, gender, national origin, age and disability to cover sexual orientation and gender identity as well. The most recent iteration of ENDA restores the gender identity protections that had been stripped from the bill as passed in the House in the 110th Congress.

“Forewarn Act,” reintroduced in House and Senate, would expand WARN Act

Legislation that would expand employer requirements under the WARN Act and beef up enforcement of the federal plant-closing law was introduced in the House and Senate last week. The bipartisan Federal Oversight, Reform, and Enforcement of the WARN Act (“FOREWARN Act”), introduced on June 25, would give the Labor Department authority to enforce the Act, increase penalties for violations, lower the trigger for coverage, lengthen the required notification period, and expand the list of required notice recipients.

HEALTHCARE REFORM

CBO to weigh impact of health reform proposals

The Senate HELP Committee asked the Congressional Budget Office to score the budget impact of two competing health care proposals: one that would call for employers to help pay for employee health insurance if they are not offered coverage in the workplace; another that would require companies with large numbers of employees covered under Medicaid to pay additional taxes.

House committees unveil draft bill

While two Senate committees were slowed by cost concerns, three House committees unveiled their joint, 850-page health reform draft bill with provisions on employee and employer coverage requirements, a public plan, and certain limits on health insurance medical loss ratios.

Employers concerned about President's health reform plans

By wide margins—and regardless of their political affiliation—the people who are responsible for managing employer-sponsored health plans have serious concerns about many features of health care reform that President Obama and Congressional leaders have embraced. They cite worries about the impact on employees of proposals to tax health benefits, mandates on employers that will raise costs, and a government-run plan that would shift costs to private employers and to families covered by employer plans, according to James A. Klein, president of the American Benefits Council.

Health reform: CCH expert analysis

Following health care reform? At Health Reform Talk, our benefits editors offer daily updates and expert analysis on the ever-changing developments.

IN OTHER NEWS

Industry group seeks High Court review of “play or pay” ordinance

The Golden Gate Restaurant Association, an industry group for the San Francisco restaurant industry, has filed a petition for certiorari with the US Supreme Court seeking review of a Ninth Circuit decision in which the appeals court upheld the municipality's "fair share" health care ordinance. The provision requires employers either to provide a minimum level of healthcare benefits to its employees or pay into a city healthcare fund.

State AGs set sights on FedEx Ground

Attorneys general from eight states have sent a letter notifying Federal Express of their concerns that the courier may be improperly avoiding payroll taxes by classifying its drivers as independent contractors rather than employees. The officials’ action won praise from at least one union.

Insurance giant faces $200 million wage suit

Former employees of Northwestern Mutual Life Insurance Co have filed suit alleging the insurer has bilked its sales and financial representatives by intentionally and repeatedly misclassifying them as independent contractors rather than employees. The plaintiffs claim they were unlawfully denied minimum wage and overtime pay, in violation of federal and state wage and hour laws, as a result. California plaintiffs in the matter request class certification and seek $100 million in unpaid wages and liquidated damages; the federal plaintiffs also request $100 million.

Judge halts wage cuts for California home care workers

A federal district court judge has issued an injunction ordering the state of California to halt a proposed $2 cut in wages for the state's 400,000 home care workers, in response to a lawsuit filed by the SEIU alleging the cuts would violate Medicaid law, the ADA and the Rehab Act.

SEIU borrows business' anti-union tactics to fend off rival

In the David-vs.-Goliath face-off that pits the 2-million member SEIU, its $300-million annual budget and its legions of staffers, lobbyists and lawyers against a band of about 150 insurgents who are either volunteers or being paid from donations, the SEIU has adopted some of the same tactics that employers often use to thwart union drives, according to the Los Angeles Times.

3 acquitted in Ralphs lockout case

A federal jury finds supermarket executives not guilty in a scheme to rehire locked-out workers using false Social Security numbers during a protracted labor dispute, the Los Angeles Times reports. The supermarket chain itself and other managers had previously pleaded guilty.

Affirmative action ban to be on Arizona ballot

A measure that would ban state affirmative action programs in Arizona will be on the state's ballot in November 2010. (Five other states have launched similar ballot initiatives through signature gathering campaigns, but Arizona is the first state to put such a measure on the ballot via legislative action.) The initiative would amend the state constitution to prohibit state universities and all other state entities from discriminating or granting preferential treatment based on race, sex, color, ethnicity or national origin "in the operation of public employment, public education, or public contracting."

Machinists ratify Southwest contract

Members of the International Association of Machinists have ratified a four-year bargaining agreement covering 5,300 customer service and reservation agents at Southwest Airlines. The contract, approved by 54 percent of voters, provides an immediate 3 percent wage increase, retroactive to November 1, 2008, and a 1 percent increase in retirement benefits retroactive to January 1, 2009, with company-paid 401(k) contributions increasing to 8.3 percent, then to 9.3 percent on January 1, 2011.

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Editor

Lisa Milam-Perez, JD

Supreme Court Wrap-Up:
Brett Gorovsky, JD.

About CCH WorkWeek

This weekly newsletter provides corporate counsel and law firm practitioners with need-to-know employment and labor law information in a timely, yet manageable manner. Benefit from news and information in a broader context, with deeper analysis of recent developments and corresponding trends. Delivered to you every Monday, CCH WorkWeek offers timely coverage of breaking legislative developments, regulatory activity, state law changes, key case law and expert commentary by CCH editors.