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For the Week of September 21, 2009

Key Cases | State Law Cases | Agency Developments | Legislation

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3rdCir: Contractor could bring Section 1981 claim; Gross impact unresolved

In a case of first impression, the Third Circuit has joined the 1st, 7th, and 11th Circuits in holding that an independent contractor may bring a racial discrimination claim under Sec. 1981 against the entity with which she contracted to work. After two days of training, the plaintiff, an African-American woman, contracted to be a sales rep for a distributor of adjustable beds. Following an incident on the final day of training, in which the contractor alleged that a recruiting manager called her "the n-word," the distributor decided not to use her as a sales rep. The appeals court affirmed summary judgment on the plaintiff's Title VII and state-law racial discrimination claims because she was an independent contractor, rather than an employee, and thus not covered under either statute. However, the appeals court held the plaintiff could sustain a claim under Sec. 1981, reversing the district court. The text of Sec. 1981, which provides that "all persons... shall have the same right... to make and enforce contracts... as is enjoyed by white citizens," embraces all contracts, not just employment contracts, the Third Circuit concluded. Addressing the merits, the court explained (in accordance with the long-standing and widely-accepted application of Sec. 1981) that the substantive elements of a Sec. 1981 claim are generally the same as those of a Title VII claim. Yet, when Congress amended Title VII, via the Civil Right Act of 1991, to alter the standards applicable to mixed-motives cases, it did not make those amendments applicable to Sec. 1981. Consequently, the court applied the mixed-motives analysis under Price Waterhouse to determine that factual issues existed as to whether the distributor would have terminated her contract absent consideration of her race (Brown v J. Kaz, Inc, September 11, 2009).

    Effect of Gross. In a footnote, the Third Circuit majority wrote that it "need not decide the impact, if any, of Gross" on Sec. 1981 claims because the parties agreed that the Supreme Court's June ruling in Gross v FBL Fin Servs, Inc had no impact. The majority did go on to imply, however, that Gross did not impact Sec. 1981, noting that the High Court focused on the statutory text of the ADEA, which differs from that of Sec. 1981. In a concurrence, Judge Jordan wrote that the majority's approach "ignores the textual distinctions between Title VII and § 1981" and "the fundamental instruction in Gross that analytical constructs are not to be simply transposed from one statute to another without a thorough and thoughtful analysis." Jordan continued, "[e]ven when there has been such analysis, later arising Supreme Court precedent may require reevaluation."

5thCir: Employee's tort claims arising from alleged rape are non-arbitrable

A Halliburton employee was not required to arbitrate personal tort claims in a suit stemming from a vicious gang-rape that occurred while she was working in Iraq, the Fifth Circuit ruled, even though she signed a contract prior to beginning work in which she agreed to arbitrate any and all disputes relating to her employment. Despite requesting private quarters, the plaintiff was assigned to barracks with male co-workers where she was gang-raped following a party at which alcohol was served. When she reported the crime, her employer mishandled the rape kit, locked her in a room and subjected her to interrogation. The district court found the employee's claims of assault and battery, intentional infliction of emotional distress, negligent hiring and false imprisonment were not sufficiently related to her employment and denied the defendant's motion to compel arbitration of those claims. The Fifth Circuit affirmed, applying the Federal Arbitration Act to its analysis of whether the plaintiff's claims were related to her employment. Stressing that employment arbitration clauses have a broad, but not "unbounded" reach, and noting the split in case law regarding the arbitrability of claims premised on sexual assault, the appeals court approvingly cited the district court's finding that while the perpetrators may have violated company policies, "their conduct… does not explain how [the plaintiff] was acting in any way related to her employment by being the alleged victim of a sexual assault." Although the plaintiff's rape-related injuries occurred in the course and scope of employment, the court refused to find that the fact that she lived in employer-supplied housing, where the rape occurred, created a "special zone of danger out of which the injury arose," as the incident was not a risk "distinctly associated" with the plaintiff's living conditions. The court also rejected the employer's argument that the claims were arbitrable because the alleged injuries were incurred in the workplace; the plaintiff's bedroom could not be considered the workplace and the barracks were far from where the plaintiff worked (Jones v Halliburton, September 15, 2009).

6thCir: Companies were alter egos; intent not an essential element

Citing a "virtual mountain of evidence" establishing the intermingling of a general contractor and a construction employee leasing company, the Sixth Circuit held the companies were alter egos and thus, under the terms of the applicable bargaining agreement, the contract's benefit-fund contributions provision applied to the work performed by the leasing company's employees. A lower court erroneously concluded the alter ego doctrine was inapplicable here since there was no evidence the leasing company had been set up with the intent to evade preexisting obligations under a bargaining agreement. "A finding of employer intent is not essential or prerequisite to imposition of alter ego status," the appeals court wrote, citing precedent, "[but] is merely one of the relevant factors which the [courts] can consider." The appeals court found the lower court erred in granting summary judgment to the employer[s] in a suit filed by trustees of an association of benefits funds (Trustees, Detroit Carpenters Fringe Benefit Fund v Industrial Contracting, LLC and LaSalle Group, Inc, September 17, 2009).

8thCir: Evidence showed desire to displace older workers

A discharged 53-year-old employee presented enough evidence of age-based discriminatory animus to get her ADEA and state law claims to a jury, ruled the Eighth Circuit, reversing a district court's grant of summary judgment to her employer for lack of sufficient direct evidence of bias under the pre-Gross v FBL Fin Servs, Inc, standard. Under any test, the employee raised a genuine issue for trial on the ultimate question of age bias vel non. Most significant were statements showing preference for younger workers made by the employee's supervisor and the CEO: the management team was "missing the boat by not hiring more younger, vibrant people"; they "should start looking over applications better and try to consider hiring younger people"; and instructions that the employee fire certain workers in their 50s and 60s so that "younger workers" could be hired who would be "better workers, have more energy, be more enthusiastic and stimulate the residents." The clearly reflected age-based bias in these statements infected other remarks that might otherwise be subject to interpretation. There was also ample evidence of pretext given the employee was placed on probation for reasons the evidence suggested were false and known to be false, and she was asked twice during her probation if she intended to resign, suggesting a quest to end her employment. Add to that the shifting and expanding explanations for her discharge, and a jury could find that management "harbored a discriminatory attitude toward older employees and desired to displace them in favor of a younger workforce," wrote the appeals court. One wonders how the district court could have missed that (Baker v Silver Oak Senior Living Mgmt Co, LC, September 14, 2009).

9thCir: Employee's computer use was authorized, no CFAA violation

An employee did not access his employer's computer "without authorization" in violation of the Computer Fraud and Abuse Act when he emailed documents, including his employer's financial statement and marketing budget, to his and his wife's personal email accounts, the Ninth Circuit ruled. The employee was assigned a computer to use after he was hired to oversee parts of his employer's business. He emailed the documents to himself during negotiations to purchase an interest in the company. When the talks broke down, the employee resigned. However, access to the employer's website continued under the employee's user name and password. Claiming the employee's access that occurred both while he was employed and when he left the company was "without authorization," the employer sued under the CFAA. Addressing the employee's computer usage while employed, the court noted there was no dispute that the employee had permission to access the computer and that his job required him to do so. Thus, the employee had authorization to use his employer's computer. The court rejected the argument that the employer's authorization ended when the employee decided to use the computer contrary to his employer's interest, holding " … that a person uses a computer ‘without authorization' under sections 1030(a)(2) and (4) when the person has not received permission to use the computer for any purpose (such as when a hacker accesses someone's computer without any permission), or when the employer has rescinded permission to access the computer and the defendant uses the computer anyway." Regarding the claim that the employee's computer use after he left was without authorization, the court found the employer failed to present sufficient evidence to show that it was actually the employee who accessed the website. Thus, the employer could not proceed with its claims under the CFAA (LVRC Holdings LLC v Brekka, September 15, 2009).

SDNY: Outside pay does not count in "highly compensated" analysis

The earnings that a law firm paralegal received through her independent process-serving and court-filing business could not be combined with her paralegal salary to satisfy the FLSA's "highly compensated employee" exemption from overtime pay, a federal district court in New York held. The law firm argued the paralegal was an exempt employee because her paralegal salary, combined with her earnings as an independent contractor, amounted to total annual compensation in excess of $100,000 per year and as such, she was an exempt employee. However, since the paralegal's process-serving and court-filing services were not rendered in her capacity as an employee of the law firm (as the firm conceded), any compensation she received in performing those functions was not part of her total annual compensation as a firm employee. "It would be antithetical to the spirit of the FLSA to consider payment received as an independent contractor to constitute `employee' compensation," wrote the court, "particularly given the mandate that exemptions should be narrowly construed against employers." The paralegal thus was not a highly compensated employee under the FLSA, ruled the court, denying the law firm's motion to dismiss her claim for unpaid overtime (Magnoni v Smith & LaQuercia, LLP, September 11, 2009).


OK: Photocopying patient's medication record was not misappropriation

A certified nurse's aide who photocopied a resident's medication record for the purpose of providing evidence in her own EEOC discrimination case was not guilty of misappropriating a resident's property, the Oklahoma supreme court ruled. The aide, an employee at an Oklahoma nursing home, found a patient's medication record on a copier, which she believed indicated that Caucasian nurses had made errors for which they were not disciplined although she had been disciplined for similar errors. She photocopied two pages of the medication record and forwarded them directly to the EEOC to support her claim of discrimination. After her action was discovered during the EEOC proceeding, she was terminated by her supervisor; a subsequent administrative proceeding resulted in an ALJ order that the Nurse Aide Registry shall reflect in its official record and registry that the aide was found to have committed the act of misappropriation of property of a resident. A state court affirmed the ALJ's decision without reason or analysis. The state high court reversed, concluding that photocopying medical records and providing the photocopies to the EEOC was not a transfer of a resident's property. Thus, the ALJ erred in finding the aide guilty of misappropriation of a resident's property and ordering its finding placed on the registry. The case was remanded to the lower court with instructions to reverse and vacate the ALJ's order (Oklahoma Dept of Health v Vaughn, OklaSupCt, September 15, 2009).

VA: "Reasonable notice" of termination does not mean advance notice

Virginia law requires an employer to provide an at-will employee with "reasonable notice" of termination, but this requirement does not mean an employee must be given advance notice of termination, a federal district court in Virginia ruled. The requirement governs only the content, not the timing of notice, the court held, after surveying relevant case law in the absence of a state supreme court ruling on the issue and finding conflicting holdings. "`Reasonable notice' requires that the manner and quality of the notice of termination must effectively communicate the fact of the termination to the at-will employee, but [it] does not impose a requirement that the employer provide advance notice of the termination," wrote the court. "A contrary finding would impose restrictions on at-will employment that contradict the very nature of the at-will doctrine." Thus, the court dismissed a claim brought by a former employee who alleged he was discharged without proper advance notice (Calquin v Doodycalls Fairfax Va LLC, EDVa, September 11, 2009).

WI: Security company not liable to clients' employees for guard's misconduct

A security services contractor was not liable for the conduct of one of its security guards who, while assigned as a security manager for a client employer, downloaded the ID photos of thirty of its female employees, ejaculated on them, and posted the defaced photos on adult websites. The security contractor was not negligent as a matter of law because the circumstances "did not present a foreseeable, unreasonable risk of harm," a state appeals court concluded. Moreover, public policy precluded recovery against the contractor for the employees' emotional distress because their injuries were too remote from the negligence alleged—in this instance, negligent training and supervision—the court reasoned, noting that "allowing recovery would have no sensible or just stopping point." The appeals court reversed a lower court's judgment against the security company and directed the court to dismiss the claims against this defendant (Maypark v Securitas Security, WiscCtApp, September 11, 2009).

WY: Proper standard used in grant of preliminary injunction in noncompete suit

A state trial court properly applied Wyoming law when it granted an employer's preliminary injunction prohibiting former employees from competing against it pending litigation on the merits, the Wyoming supreme court determined. The employer filed suit to enforce the defendants' covenants not to compete after they left to start a competing business. The trial court issued a preliminary injunction barring the employees from competing pursuant to the noncompete agreements. The defendants argued the court applied the incorrect legal standard when issuing the injunction; they contended the court used the federal standard ("some showing of likelihood of success on the merits") rather than the Wyoming standard. The supreme court rejected this assertion. Although the trial court stated "there was a substantial likelihood that [the employer] will prevail…on the merits," it never mentioned nor quoted any federal standard, the state high court reasoned. In addition, the "likelihood of success on the merits" must be considered under Wyoming law as well, the high court noted. As such, the lower court correctly applied Wyoming law in issuing the preliminary injunction, the high court held. Moreover, the trial court did not abuse its discretion when it found, based on the evidence before it, that the employer was entitled to an injunction pending full development of the facts and a final determination on the merits (CBM Geosolutions, Inc v Gas Sensing Technology Corp, WyoSupCt, September 14, 2009).


EEOC approves proposed ADAAA regulations

The EEOC has approved a Notice of Proposed Rulemaking revising its regulations to provide that an individual seeking protection under the ADA establish that he or she has a disability consistent with the original, expansive intent of Congress when it enacted the ADA in 1990. The proposed rule, approved by the Commission last week by a 2-1 vote, makes several significant changes to the definition of the term "disability" necessitated by enactment of the ADA Amendments Act of 2008. The proposed rule is expected to be published in the Federal Register this week.

   Q&A issued. The EEOC has issued a question-and-answer document on its proposed rule implementing the ADA Amendments Act of 2008. Questions and Answers on the Notice of Proposed Rulemaking for the ADA Amendments Act of 2008 provides answers to a series of ADAAA-related questions and, in some cases, citations to specific sections of the proposed regulations, the corresponding section of the proposed Appendix, or portions of the current ADA rules that were unchanged by the ADAAA.

Obama to nominate Georgetown law professor as EEOC commissioner

President Obama announced his intention last week to nominate Chai R. Feldblum as EEOC commissioner. Feldblum is a professor of law at Georgetown University, where she founded the Federal Legislation and Administrative Clinic, a program designed to train students to become legislative lawyers. She previously served as legislative counsel to the ACLU's AIDS Project. In this role, she developed legislation, analyzed policy on various AIDS-related issues, and played a leading role in drafting the ADA. Later, as a law professor, Feldblum was instrumental in the passage of the ADA Amendments Act of 2008. Feldblum also has worked on advancing lesbian, gay, bisexual and transgender rights and has been a leading expert on the Employment Nondiscrimination Act (ENDA). Feldblum received her J.D. from Harvard Law School and B.A. from Barnard College. She clerked for Judge Frank Coffin and for Supreme Court Justice Harry A. Blackmun.

Auto parts company sued over drug-testing policy and medical inquires

An auto parts company violated the ADA when it conducted blanket drug tests of all of its production employees at a Tennessee manufacturing facility, including testing for lawfully prescribed drugs, the EEOC contends in a recently filed suit. Dura Automotive, Inc, tested all of its production employees for 12 different classes of drugs. Five of the drugs tested for were controlled substances, but the other seven medications were legal so long as they are lawfully prescribed for the individuals taking them. The EEOC alleges the company required those who tested positive to disclose the medical conditions for which they were taking prescription medications and made it a condition of employment that they stop taking the medications, without any evidence that the medications were affecting their job performance. Dura suspended employees until they stopped taking their prescription medications and fired those who were unable to perform their job duties without their medication, the EEOC alleges. Further, Dura conducted the drug tests in such a manner as to disclose to its entire work force the identities of those who tested positive. "The ADA allows employers to test employees for controlled substances, but testing for legally prescribed medications and forcing employees to disclose their medical reasons for taking them clearly exceeds what the ADA allows an employer to do," said Katharine W. Kores, director of the EEOC's Memphis district office.

EEOC sues grocery chain for discriminatory leave and disability rules

A grocery chain's leave and disability policies violate the ADA, the EEOC claims in a recently filed suit—the second ADA suit filed by the agency of late against Jewel-Osco, an operating unit of national grocery giant Supervalu, Inc. Jewel-Osco refused to allow qualified employees with disabilities who are on authorized disability leave or are eligible for disability leave to return to work if they have any work restrictions and terminated the employees if they reach the one-year mark on leave, the EEOC alleges. In addition, the company refused to allow qualified employees with disabilities to be assigned to temporary light duty jobs unless they were injured on the job. Jewel-Osco also failed to stop the harassment of a warehouse employee who was disabled by a seizure disorder, the agency claims.

DOL "back in the enforcement business," Solis tells AFL-CIO

"The Department of Labor is once again back in the enforcement business," labor secretary Hilda Solis told attendees at the AFL-CIO convention in Pittsburgh last week. Solis said the agency is adding nearly 670 additional investigators, inspectors, and other program staff, "returning our worker protection efforts to a level not seen since 2001." But "it's not enough to have fair wages and a safe workplace," she added: "Workers also need a voice on the job!" She went on to reaffirm her commitment, along with President Obama, "to make the strongest case possible for the Employee Free Choice Act," and reiterated the administration's staunch support for project labor agreements.


Specter unveils EFCA revisions

Sen. Arlen Specter, long the most closely-watched man in America when it comes to labor law reform, embraced his latest role last week: as a passionate Democrat declaring that a rejiggered Employee Free Choice Act will pass this year. The Washington Post reports that card-check is out, mandatory arbitration is still in, albeit amended, and a host of changes are in store for union election proceedings.

"Say on pay" gains momentum

In the wake of the unprecedented global financial crisis, there has been a public outcry for greater accountability for executive compensation. This year, shareholders from more than 100 companies requested the right to vote on compensation paid to those companies' executives. These "say on pay" votes have gained more momentum as the year has progressed. Attorney Marjorie M. Glover, in Law.com, examines the requirements of "say on pay" legislation and how it will impact companies and their executives.



The Obama NLRB

Fasten your seatbelts. Big changes are coming to the National Labor Relations Board, according to a new US Chamber of Commerce report. The Obama administration will usher in a new Democratic, pro-union majority set to reverse Bush Board decisions and much more, the business group predicts. Here's the Chamber's overview of how the law administered by the NLRB is likely to change during the Obama administration.

Employment Law Tracker


AFL-CIO hosts Obama, elects Trumka

The AFL-CIO held its annual convention in Pittsburgh last week, with President Obama and labor secretary Hilda Solis among the featured guests. The talk of the convention was the retirement of long-time president John Sweeney and the elevation of secretary-treasurer Richard Trumka to the helm.

AFL-CIO's Trumka a "bulldog"

A lawyer, former coal miner, and "bulldog," according to a recent Washington Post profile, new AFL-CIO chief Richard Trumka is expected to bring a more combative, impassioned presence to the House of Labor at a critical time for the labor movement.


UNITE HERE, the 265,000-member textile and hotel workers' union, rejoined the AFL-CIO at its convention last week, returning to the fold after having departed the federation as a founding member of rival organization Change to Win. UNITE HERE was fractured itself earlier this year when co-president Bruce Raynor left the group to form Workers United, taking along a corps of leaders and members, and merging with the SEIU. The two unions have been engaged in all-out warfare ever since. UNITE HERE president John Wilhelm framed last week's return to the AFL-CIO as a win for labor solidarity, but it was also a noisy withdrawal from Change to Win; as such, it served to highlight the ongoing discord within the labor movement, in which UNITE HERE is perhaps most intensely embroiled.


Concerns arise over costs of obese workers' injuries

Two recent court rulings have employers on edge about employees with serious weight problems because one minor accident may force them to pay thousands to get the weight off, according to the National Law Journal. That's what's happened to an Indiana pizza shop, which on September 14 filed a petition for a rehearing after an appellate court ordered it to pay for a 340-pound employee's weight-loss surgery to ensure the success of a separate operation for a work-related back injury. The Indiana ruling mirrors a similar case in Oregon, where the state supreme court ruled August 27 that state workers' compensation insurance must pay for gastric bypass surgery to ensure the effectiveness of knee replacement surgery. Sara Begley, a partner at the Philadelphia office of Reed Smith, warned that the rulings "open up the door to the question of whether employers take a second look at hiring people with weight issues."


Ex-GC sues former employer for making him "scapegoat"

Beware the angry general counsel. Last week the ex-general counsel of McAfee sued his former employer for defamation, invasion of privacy and malicious prosecution. The lawyer, who was acquitted of fraud in a three-week trial last year, is accusing McAfee of making him the scapegoat in the company's stock option backdating scandal. What's more, he accuses the company's outside lawyers of helping to frame him, according to The American Lawyer (via Law.com).

Company-approved lawyers for employees in probe draws scrutiny

When Laidlaw learned it was being investigated by a state grand jury, it quickly lawyered up. The Illinois company's in-house counsel told employees who were potential witnesses and targets that they would be provided with counsel on the company's dime—provided they selected lawyers from a preapproved list. If they chose anyone else, it would be at their own expense. Not surprisingly, the employees opted for the former. But according to the New Jersey Law Journal, the Division of Criminal Justice is asking the state supreme court to void those retainers on the ground that they create an unavoidable and unwaivable conflict of interest.

Discrimination case ends in $4.5 mil malpractice award

Waiting more than a year to inform a client about the outcome of her case was a costly mistake for a Florida law firm. A jury awarded the firm's former client $4.5 million because her attorney waited 13 months to tell her that her race discrimination case against her employer, BellSouth, had been dismissed due to mistakes in the original complaint, the National Law Journal (via Law.com) reported.

Law firm allows full-time parenting at the office

A Des Moines, Iowa, plaintiffs firm is one of only a handful of law firms in the country that allows parents to bring their babies to the office, according to The American Lawyer (via Law.com). This is not on-site day care; it is full-time parenting in the workplace. In boss Roxanne B. Conlin's experience, parents are so happy to keep their kids nearby that they are motivated to perform at the top of their game. And because they aren't constantly worrying whether their child is being fed or changed, they are better able to focus.


LA port program is key to truckers' organizing battle

The Port of Los Angeles' "clean trucks program," which requires trucking companies to use employee drivers rather than contractors, has been described by one trucking company lawyer as a "mini-Employee Free Choice Act," a legislative effort to restore the Teamsters to dominance at the port, according to the Contra Costa Times. Trucking giant Swift Transportation says pro-union drivers "swaggered," thinking it was inevitable that the port—and Swift—would be unionized, and that the drivers were bulletproof. The Ninth Circuit changed all that when it enjoined the employee-driver provision in a March ruling. The Teamsters acknowledge the setback but say the campaign is not over. The union is hoping the employee requirement will be upheld at a federal trial in December.

Pharmacy tech sues over mock holdup

A New Jersey pharmacy technician who says she was traumatized when a masked gunman burst into her store demanding OxyContin is suing her employer—for arranging the mock holdup, Findlaw reported.

GM rescinds white-collar pay cuts

GM has rescinded the white-collar pay cuts it made last spring as it tried to conserve cash and avoid bankruptcy protection, according to USA Today. The pay cuts ranged from 3 percent for many lower-level workers to 10 percent for executives and saved the company about $50 million. The pay restoration, which began this month, will be funded primarily with government dollars, at least for now.

Citing "financial ruin," judge tosses jury award against hospital

Concluding the jury was inflamed more by "passion than reason," a Queens judge tossed out a record $15 million jury award against a Flushing hospital by a nurse who endured years of sexual harassment by a doctor and an attack in 2001. The nonprofit hospital was "teetering on financial ruin," said the Queens supreme court justice, and given the hospital's crumbling finances, the verdict would "further imperil the very survival of the institution." The judge gave the plaintiff the option of retrying the case if she doesn't choose to accept a $750,000 settlement. Her lawyer said the nurse will appeal.

Mercury Marine not out of water yet

On the heels of particularly stormy union negotiations in which the company was thisclose to relocating its operations, Mercury Marine is now facing mutiny in the form of a lawsuit filed by managers who say they are owed bonuses for their cost-cutting efforts, according to TradeOnlyToday, a marine industry publication.

Bernanke says recession's over

Federal Reserve chief Ben Bernanke pronounced that the recession "is very likely over" last week. While there are still plenty who are skeptical that the downturn has ended, the Christian Science Monitor cites five positive trends that support a more optimistic view.

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Lisa Milam-Perez, JD

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