Firing of Food Network host illustrates resume fraud

Cleveland restaurateur and Iron Chef Michael Symon is set to take over as the new host of the Food Network's Dinner: Impossible series this fall. Great news for Chef Symon and Cleveland in general, but what does this have to do with employment law? According to the Cleveland Plain Dealer, the Food Network fired the show's prior host for resume fraud:

Symon is stepping in at "Dinner: Impossible" after the St. Petersburg Times revealed in early February that original host Robert Irvine exaggerated a wee bit on his resume. Like that bit about cooking for England's royal family. And being a White House chef, among other things.

Resume fraud is a big problem for employers that largely goes undetected. Some surveys show that perhaps as many as 30-40% of resumes contain intentional inaccuracies, such as lies and exaggeration about education, prior jobs, experience, and qualifications. The issues for businesses are two-fold:

1. How does one guard against hiring a candidate with exaggerated or flat-out false credentials?
2. What does one do upon finding out that an employee lied to get the job?

1. Background checks
The best way to guard against resume fraud is to thoroughly screen all job candidates' credentials. Myriad companies offer services for checking the veracity of job applicants' background information. Do your homework, though, as some companies are much better than others. Also, check with your attorney, because the Fair Credit Reporting Act has certain mandatory notice and consent requirements that could subject you to unnecessary liability if they are not followed.
Reference checks should also be part of any screening process. Ohio business should not fear accurately responding to inquiries from other business about past employees. Ohio has a statute, R.C. 4113.71, that gives employers a qualified immunity to provide job reference information. An employer can give a prospective employer information about an employee's job performance without fear of liability, unless the former employer knows the information is false, or makes the disclosure with the intent to mislead, in bad faith, or with a malicious purpose. The statute also has an exception for violations of the employment discrimination laws, so, for example, you can't give good references to white employees and bad references to black employees and safely hide behind 4113.71.
2. Post-hiring detection
What happens, however, if you find out that an employee lied about his or her background after that employee has already started working? Viewing this situation as "no harm, no foul" (i.e, the employee is doing a good job, so I'll overlook the resume fraud) is short-sighted. Unless a company consistently terminates employees who have been found to have lied or embellished their credentials, it likely risks a discrimination claim if and when it chooses to fire an employee within a protected class for resume fraud.
Also, a failure to consistently enforce a policy against resume fraud will limit a business's ability to use an after-acquired evidence defense. Often times, resume fraud is not uncovered until after a terminated employee sues the company and the employee's background is dissected during the discovery process. The after-acquired evidence defense permits an employer to cut-off its liability for back pay to a terminated employee at the point in time it would have fired the employee based on something learned after the employee was terminated. Thus, if it is uncovered during litigation that an employee lied about his or her background, the after-acquired evidence defense allows for the termination of back pay liability as of the date of that discovery. Unless, however, a company has a consistent policy of terminating those who lie on their resumes, it will have an uphill battle convincing a court that it would have terminated this plaintiff upon the discovery.
As with most issues in employment relations, it is best to temper expectations. Employment applications should contain clear disclosures that the employee signs off on, which states the all of the information is true and accurate to the best of the employee's ability, and that false information will disqualify the candidate from employment and subject the employee to termination. Employee handbooks should contain similar language that resume fraud discovered during employment is grounds for immediate termination. Of course, policies are only as good as their consistent enforcement.

EEOC settles landmark "cat's paw" discrimination case

When an adverse employment decision is made by a person who lacks impermissible bias, but was influenced by another individual who was motivated by such bias, is the employer liable for this rubber-stamped decision? While courts have not conclusively answered this question, the majority answer is yes. The leading case recognizing this theory of liability is EEOC v. BCI Coca-Cola Bottling Co. It famously describes this type of discrimination as "cat's paw" liability. "Cat's paw" derives from a fable in which a monkey tricks a cat into scooping chestnuts out of a fire so that the monkey can eagerly gobble them up, leaving none left for the cat. It generally describes a situation where one is unwittingly manipulated to do another's bidding.

Last week, the EEOC reported that it settled with BCI on behalf of Stephen Peters, the African-American employee on whose behalf it sued, for $250,000. BCI fired Peters back in 2001. The district court had found that the managers who actually fired Peters did not even know that he was black. The appellate court, however, concluded that a jury could reasonably conclude that the termination was based on Peters' race: "In making the decision to terminate ... the human resources official relied exclusively on information provided by Mr. Peters' immediate supervisor, who not only knew Mr. Peter's race but allegedly had a history of treating black employees unfavorably and making disparaging racial remarks in the workplace."

The "cat’s paw" theory of liability highlights the importance of employers conducting independent and thorough investigations prior to making any employment decision. Most courts that have adopted this theory of liability will not protect a decision maker's paper review of the decision without an independent investigation. Thus, instead of relying upon the recommendation of another, the actual decision maker should take such steps as interviewing the affected employee, independently interviewing other key witnesses, and personally reviewing relevant documents.

What else I'm reading this week #27

I thought it only appropriate to start this week's review with a picture from the balcony where I did a lot of this week's reading.

Anyhow, back to reality.

Wayne Schiess's legal-writing blog reports that Congress has passed something called the Plain Language in Government Communications Act of 2008. If laws start being written in plain English, what am I going to do for a living?

The Labor and Employment Law Blog provides 13 factors to consider in conducting a proper workplace investigation.

SCOTUS Blog tells us that the Supreme Court is considering taking up the scope of Title VII's religious exemption.

Law.com discusses the intersection between family-friendly workplaces and family responsibility discrimination.

Finally, BLR's HR Daily Advisor enlightens employers as to the pitfalls that await those who misclassify non-exempt employees as exempt.

Fired for not smoking

Hopefully everyone is aware that Ohio is a smoke-free state. With limited exceptions, it is illegal to smoke in any workplace within the state. Just this week, the City of North Royalton has gone one step further by banning smoking in city parks and recreation areas. For those who are interested, Wikipedia has a current list of all smoking bans around the country.

Life at Work, an excellent blog written by New Zealand employment lawyer Andrew Scott-Howman, has a story that illustrates the dramatic differences on this issue between the U.S. and parts of Europe:

The owner of a small company in Germany fired three workers because they were not smokers. It seems that their boss (evidently a smoker himself) felt that they were "disturbing the peace" in the workplace by being vocal about their smoking colleagues. "I can't be bothered with trouble-makers," said the boss. "We're on the phone all the time and it's just easier to work while smoking. Everyone picks on smokers these days. It's time for revenge. I'm only going to hire smokers from now on."

Under Ohio's SmokeFree Workplace Act, the German employer would almost certainly be liable for the terminations. The SmokeFree Workplace Act, makes it illegal for any employer to "discharge, refuse to hire, or in any manner retaliate against an individual for exercising any right, including reporting a violation, or performing any obligation under this chapter." One such right employees enjoy is the right to demand that a co-worker stop smoking.

As an aside, it's generally a bad idea to justify any workplace action as "revenge."

Companies should consider putting these anti-retaliation guarantees into their smoke-free workplace policies. If you don't have such a policy in place, give serious thought to having one drafted for you.

[Hat tip: Workplace Prof Blog]

Employment of teenagers brings new harassment headaches for employers

[A]n employer can avoid liability under Title VII for harassment (on a ground, such as sex, that constitutes a form of discrimination that the statute forbids) of one of his employees by another by creating a reasonable mechanism by which the victim of the harassment can complain to the company and get relief but which the victim failed to activate....

The mechanism must be reasonable and what is reasonable depends on "the employment circumstances," ... and therefore, among other things, on the capabilities of the class of employees in question. If they cannot speak English, explaining the complaint procedure to them only in English would not be reasonable. In this case the employees who needed to be able to activate the complaint procedure were teenage girls working in a small retail outlet....

An employer is not required to tailor its complaint procedures to the competence of each individual employee. But it is part of V & J’s business plan to employ teenagers, part-time workers often working for the first time. Knowing that it has many teenage employees, the company was obligated to suit its procedures to the understanding of the average teenager.

Such was the guidance given by the Court in EEOC v. V & J Foods, a case that involved allegations of sexual harassment by a teenage fast food employee. The key takeaway from this case is that there is no one-size-fits-all harassment policy. Policies must be tailored to the workforce, and differences in English proficiency, education level, and age could make for different policies, not in content but in language. The policy must be written so that the lowest common denominator in your workforce understands it and can use it.

The latter category, age, is especially important this time of year as we enter the summer hiring season. The ABA Journal points out that teen EEOC sexual harassment charges have risen 8%, while overall sexual harassment charges have actually fallen 15%.

Whether or not a company employees teenagers, these issues illustrate the importance of reviewing current sexual harassment policies for clarity and understanding. It is not enough to assume that all of your workers will understand the mechanisms that you have put in place for employees to make harassment complaints. The problem, however, is that a company might not know that its mechanisms have failed until it is sued. To combat these problems, companies should consider the following:

1. Including provisions in harassment policies that require employees to contact a supervisor, manager, HR, or someone else in a position of authority at the company if they don't understand the policy.
2. Creating multiple avenues for employees to make complaints - such as a phone number, email address, and more than one specific person within the company.
3. Placing the onus on the employee to keep complaining if they don't get a response from the company.

Taken together, these suggestions will make it harder for an employee to claim she did not understand the policy, she did not know who to complaint to, she did not feel comfortable with the person designated to receive the complaint, or that her complaint was ignored.

Why I'm a management-side lawyer

In responding to my piece from yesterday on Colorado's just cause initiative, Professor Paul Secunda at the Workplace Prof Blog had this to say:

I don't believe that employers only fire employees usually for good reasons. I guess that is why Jon is still a management attorney and I no longer am.

Paul's comment got me thinking -- why am I a management attorney? Let me try to answer it this way.

I'm not so naive to think that businesses only fire people for good reasons. Companies fire people for lots of reasons -- good, indifferent, and unlawful. In a perfect world, discrimination, retaliation, and harassment wouldn't exist. But they do, and companies, even those with the best of intentions, run afoul of the complexities of our myriad employment laws. Every lawsuit, administrative charge, and internal complaint is an opportunity for a company to learn from a mistake, whether legal or inter-personal. It's an opportunity to train employers how to handle an employee relations problem better the next time.

I say that mistakes can be legal or interpersonal because lawsuits don't necessarily happen because an employee was discriminated against. Lawsuits happen because people feel disrespected, unappreciated, or that they were just plain treated unfairly. It's my job to make sure that employers understand this dynamic. When that dynamic fails, it's my job to help employers get it right the next time.

In a perfect world, I'd never get a call that a client has been sued. In a perfect world, companies would call me once a year to give their HR practices a full review for compliance with the latest and greatest laws and court decisions. In a perfect world, companies would budget for proactive help, and understand that a small amount of legal fees spent upfront would save a mess of headaches and a huge legal bill later. Life, however, is far from perfect, and often I am only called when the summons arrives. While I love the thrill of the battle that litigation presents, it's the satisfaction I get from helping clients fix their problems so that they get it right the next time that motivates me to do my job everyday.

Protecting employment at-will

At-will employment is one of the hallmarks of American employment law. "Under the employment at will doctrine, either party to an employment relationship may terminate the employment at any time, with or without cause, for any legal reason or for no reason at all." Craddock v. Flood Co. One notable exception to this general rule are terminations that violate the discrimination laws. Others include terminations that breach express or implied contracts, or terminations that violate public policy. The touchstone of at-will employment is that an employer does not need just cause to terminate an employee.

In Colorado, labor unions are trying to change the rules. The Rocky Mountain News reports that a coalition backed by labor organizations is trying to get a constitutional amendment on the November ballot that would eliminate Colorado's at-will employment system and require just cause for all terminations. Under this "just cause" initiative, employers would be restricted from firing or suspending an employee unless the employer can prove incompetence, policy violations, willful misconduct, conviction of a crime involving "moral turpitude," employer bankruptcy, or economic circumstances that provide for layoffs of 10% of the workforce.

This measure is exactly the type that could gain popular support, and would alter the landscape of employer/employee relations in this country if it catches hold. It's not so much that it will restrict reasons for termination, although that would be a problem. Most businesses (or at least those that want to retain good employees) do not terminate arbitrarily, but only for a good reason. This law would put a premium on having well-defined employment policies on which employers could hang a "for cause" termination. The more troubling aspect of this proposal is that it places the burden on employers to prove just cause, as opposed to employees to prove that a termination was not justified. In the typical employment case, proving unlawfulness (such as discrimination) falls on the employee. If this law passes, terminations will be presumed unlawful unless the employer can prove otherwise. For the sake of businesses everywhere, let's hope that this proposal dies a quick legislative death, and does not catch on and begin to spread. [Hat tip: Point of Law]

What else I'm reading this week #26

As you're reading this, I'm hopefully sitting poolside with my family in Vero Beach, Florida. Until I'm back next week, probably more burned than tanned, but nevertheless rested, enjoy the latest and greatest from around the blogosphere.

John Phillips of The Word on Employment Law brings us an important tip on over-documentation. Artificially creating a paper trail to trap an employee could be just as dangerous to a company as failing to document legitimate performance problems.

Lou Michaels from Suits in the Workplace reports that the EEOC is telling people it will start treating "no rehire" clauses in settlement agreements as retaliatory. This treatment will put employers in the precarious position of accepting the former employee back or facing a claim that the failure to hire was the result of the prior discrimination charge. As Lou astutely points out: "The fact that the employee is willing to return to the workforce notwithstanding her earlier claim that it was a hostile environment, managed by racists, sexists, or discriminates against the elderly, casts more than a little doubt on the veracity of the original charge, but the Commission seems to ignore this."

Mark Toth, at the Manpower Employment Blawg, provides some insight into a recent large settlement between the EEOC and Dillard's Department Store over the propriety of transferring an alleged sexual harasser to a different store in response to a complaint at the prior store.

BLR's HR Daily Advisor gives some tips on how to best handle the dirty job of terminating an employee.

Finally, Law.com has a bit on a topic I've covered a lot lately, bullying bosses.

Deconstructing race, ethnicity, and national origin

Even though this blog is called the Ohio Employer's Law Blog, I often write about issues that come up outside of Ohio because I think they will be of interest to Ohio businesses. Abdullahi v. Prada, decided recently by the 7th Circuit, is one such issue. It discusses the similarities and differences between race, nationality, and ethnicity, how they are often intertwined in employment discrimination issues, and the linguistic tightrope we often walk in trying to distinguish among them.

Race, nationality, and ethnicity are sometimes correlated, but they are not synonyms. A racial group as the term is generally used in the United States today is a group having a common ancestry and distinct physical traits. The largest groups are whites, blacks, and East Asians. Iran is a country, not a race, and an "Iranian" is simply a native of Iran. Iranians and other Central Asians are generally regarded as "white," whatever their actual skin color; many Indians, for example, are dark. Some Central Asians are indistinguishable in appearance from Europeans, or from Americans whose ancestors came from Europe, while others (besides Indians), for example Saudi Arabians, would rarely be mistaken for Europeans. Some Iranians, especially if they speak English with an Iranian accent, might, though not dark-skinned, strike some Americans as sufficiently different looking and sounding from the average American of European ancestry to provoke the kind of hostility associated with racism. Yet hostility to an Iranian might instead be based on the fact that Iran is regarded as an enemy of the United States, though most immigrants to the United States from Iran are not friends of the current regime.

Because of the intrinsic similarities between these three concepts, the plaintiff was not precluded from suing her employer for "race" discrimination, even though in her administrative charge she had only checked the boxes for "national origin" and "religion".

[Hat tip: Workplace Prof Blog]

Butt painter settles wrongful discharge lawsuit

In the update that I know everyone's been waiting for, Stephen Murmer, the Virginia high school art teacher terminated after school officials learned he moonlighted by creating paintings using his bare buttocks as a brush, has settled his wrongful discharge lawsuit on the eve of trial. [See Butt painter's lawsuit to go to trial].

You may be asking yourself, what was his claim worth? $65,000. Unreal. We can all sleep easier knowing justice has been served.

[Hat tip: Lowering the Bar]

Employment lessons from The Office

NBC's The Office should be required viewing for any HR professional or employment lawyer. In honor of its return tomorrow night, US News & World Report brings us 7 Career Lessons From The Office. I'll share with everyone #2 - "Boss" shouldn't be confused with "friend":

When Michael said he wants his employees to think of him as "a friend first and a boss second, and probably an entertainer third," these were not the musings of a great manager. It sounds nice but it doesn't work -- try firing a friend or telling your friends that you've slashed their employment benefits. Yes, Michael has had a few heart-to-hearts that may have temporarily helped his employees, but it's unlikely to have increased their performance or their loyalty to the company.

So there are no doubts, I bring you the original boss of The Office, David Brent, and his philosophy on management:

Indiana Supreme Court permits expert testimony on "workplace bullying"

In what could be considered the first major judicial opinion on workplace bullying, the Indiana Supreme Court, in Raess v. Doescher, permits an expert witness to opine on "workplace bullying."

Joseph Doescher, a hospital operating room perfusionist (the person who operates the heart/lung machine during open heart surgeries), sued Dr. Daniel Raess, a cardiovascular surgeon, for an alleged assault in the operating room. The testimony at trial was that Dr. Raess was angry at Doescher about reports to the hospital administration over the doctor's treatment of other perfusionists. Dr. Raess aggressively and rapidly came at Doescher "with clenched fists, piercing eyes, beet-red face, popping veins, and screaming and swearing at him." Doescher backed up against a wall to defend himself, believing that Dr. Raess "was going to smack the s**t out of" him. Dr. Raess then suddenly stopped, turned, and stormed out of room yelling to Doescher, "you're finished, you're history." For this conduct, a jury awarded Doescher $325,000.

Among the testimony that the jury heard what that of Doescher's expert witness, Dr. Gary Namie, one of the co-founders of the Workplace Bullying Institute. The Workplace Bullying Institute is the organization that is on the forefront of trying to get anti-bullying legislation passed. Dr. Namie testified as to the nature of Dr. Raess's behavior:

In my opinion it's an episode of workplace bullying.... I concluded that based on what I heard and what I read that [the defendant] is a workplace abuser, a person who subjected [the plaintiff] to an abusive work environment. It was a horrific day, it was [a] particularly aggregous [sic], outrageous ... episode.

The Indiana Supreme Court found no error in the trial court's ruling that allowed Dr. Namie's "expert" testimony. According to the court, the term "workplace bullying" can be used because the phrase is "like other general terms used to characterize a person's behavior...." It also found that the trial court did not err in refusing to instruct the jury that workplace bullying, in and of itself, is not illegal.

It should be frightening to any business owner that a court has legitimized Dr. Namie's theory of workplace bullying as some great societal wrong that needs to be fixed. My fear is that this opinion will embolden the workplace bullying movement, a movement that readers of this blog know I feel should die a quick death.

New Jersey to adopt paid sick leave - is Ohio next?

While the Ohio Healthy Families Act stalls in the legislature, and Sick Days Ohio, the group lobbying for this bill, gathers signatures to place in on November's ballot, New Jersey will join California and Washington to become the 3rd state (plus the District of Columbia and San Francisco) to require paid sick leave for employees. The New Jersey plan, however, differs from Ohio's Healthy Families Act in three key regards:

1. New Jersey's employees will partially fund their own paid leave through a payroll deduction. According to today's Philadelphia Inquirer, each worker will pay about $33 per year, while each is entitled to collect up to two-thirds of their salary, capped at $524 per week.
2. Employers will be able to require their employees to use accrued vacation days and other paid time off before using their allotment of statutory paid sick leave.
3. Businesses with fewer than 50 employees would not be required to keep jobs open to workers who take the leave.

These differences are a step in the right direction of protecting the interests of small business owners. A payroll deduction and benefit cap will alleviate some of the concerns over cost, although I doubt that $33 per year per employee will be enough to fully cover all employees. Requiring employees to use other paid leave before the statutory leave will prevent potential abuses by employees. Finally, not guaranteeing continued employment for employees of small businesses will allow those businesses to meet their staffing needs without fear of a retaliation lawsuit.

The OHFA has other deficiencies that still need to be addressed, particularly its anti-retaliation provision: "No employer shall discharge or in any manner discriminate against any employee for opposing any practice made unlawful by this Act, including ... using paid sick leave taken pursuant to this Act as a negative factor in an employment action, such as hiring, promotion, or a disciplinary action." "Negative factor" is much too forgiving of a standard, and likely will hamstring employers from taking action against any employee who is out for even a day with an illness.

The Ohio legislature should consider the OHFA, if only to keep it from appearing on the November ballot in its current form. Such debate should include consideration of these provisions from the New Jersey law, each of which addresses an important concern to Ohio's small business owners.

Court reminds us that harassment must be because of a protected class to be actionable

Williams v. Spitzer Auto World, Inc., decided this week by the Lorain County, Ohio, Court of Appeals, is a great illustration of the dangers the will befall corporate America if workplace bullying legislation becomes the law.

Michael Williams, an African-American, quit his job at Spitzer (it's been a busy couple of weeks for Spitzer) and alleged, among other things, racial discrimination, racial harassment, and constructive discharge. The jury found in favor of Spitzer on the harassment claim, but nevertheless awarded Williams damages on his constructive discharge claim. A constructive discharge is where "the employer's actions made working conditions so intolerable that a reasonable person under the circumstances would have felt compelled to resign." The intolerable working conditions, however, must be tied to some unlawful conduct by the employer for an employee to claim a constructive discharge. Because Williams had not proved his harassment claim, the appellate court ruled that his constructive discharge claim must therefore also fail.

This case is a perfect illustration of what's wrong with the anti-bullying movement. If groups like the Workplace Bullying Institute get their way and generalized workplace bullying becomes illegal, every employee who quits a job because of an alleged abusive boss will have a colorable constructive discharge claim. The violation of the anti-bullying law would provide the unlawful conduct necessary to support the constructive discharge claim. It is for this very reason that anti-bullying legislation would spell the end of employment at-will, as every employee who resigns because they don't like their boss would be able to claim a constructive discharge.

10 reasons why I love my job

The National Law Journal has published its 15th annual list of bizarre employment law cases. My favorite is actually number 10: "Maternity Wear, Pregnancy Suit":

Philadelphia-based maternity clothes retailer Mothers Work Inc. agreed to pay $375,000 to settle a suit alleging that it refused to hire qualified female applicants because they were pregnant. LaShonda Burns alleged the company would not hire applicants for sales positions who were "visibly pregnant" or who it learned were pregnant through interviews. Company president Rebecca Matthias denied any discrimination, but said the settlement was reached to avoid "huge" costs and "distractions" of protracted litigation. She added, "It's important to make sure our culture and policy are lived at every one of our stores."

What's next, the NAACP being sued for race discrimination?

What else I'm reading this week #25

It's a constant struggle to decide which is the hotter topic in employment law -- wage and hour lawsuits or retaliation claims. I've been focusing a lot of attention lately to the latter, so let's start this week's review with a pair of articles on the former. BLR's Daily HR Advisor asks the question, FLSA Class Action Overtime Suits—Are You Next? To help answer that question, Law.com gives everyone a lesson in Overtime 101. Workplace Horizons provides a timely update on an attempt to revitalize new regulations for SSA No-Match letters. For an explanation of what these new rules would mean, see New rules require termination of illegal immigrants

Mark Toth at the Manpower Employment Blawg asks if obesity discrimination is more prevalent than even race discrimination. I gave my thoughts on this issue last June: Supersized lawsuits - obesity-related claims expected to rise

The Workplace Prof Blog gives an academic perspective on a case in which Wal-Mart fired a manager for engaging in an improper affair with a coworker after it hired an investigator to follow the couple down to Central America to catch them in the act.

Monster.com's HR Guru gives some pointers on dealing with workplace violence.

Finally, my friend Donna Seale at Human Rights in the Workplace gives us a Canadian perspective on employers' responsibility for harassment by non-employees.

Failure to hire "because of litigation" may constitute retaliation

Another day, another retaliation case out of the 6th Circuit. In Cline v. BWXT Y-12, LLC, the company declined to hire Cline, a former employee, for an open position because the company was "in litigation with Mr. Cline and that he may not be the best person ... because of the litigation factor." That litigation involved a claim of age discrimination. The decision makers testified that while they knew of the litigation, they did not know that it involved allegations of age discrimination. The district court threw out the retaliation claim on summary judgment, finding that because the decision makers did not have "any knowledge of the substance of Cline's present suit," they could not have known that he had engaged in protected activity.

The appellate court disagreed, and found that because the decision makers "knew that Cline was involved in litigation with the company ... the evidence permits the inference that the decision makers were unwilling to hire someone in litigation with the company." That inference "creates a triable issue of fact over whether the decision makers knew of Cline's protected activity."

"Wait a second," you might say, "There can be all kinds of litigation Cline could have been involved in. Just because he sued the company doesn't mean that he was engaged in statutorily protected activity. And, even if he was, can't a company have a neutral policy against hiring anyone who has sued the company, regardless of the cause." The Court hears your protests:

Something more is required, the company says, because Cline’s evidence still does not show that the decision makers knew that the litigation involved an age-discrimination claim.... In one sense the company has a point. Cline’s evidence permits the inference that Mack and Zava would not hire someone—anyone—“in litigation” with the company, and that view might suggest unbiased neutrality. It thus might have made no difference to Mack and Zava whether the litigation involved age discrimination if they preferred not to hire anyone in litigation with the company without regard to the subject matter of the lawsuit—whether it was a tort action, a contract dispute or a civil rights complaint. But such an across-the-board explanation—that any litigation with the company precludes any individual from being hired (or for that matter being retained as a current employee)—would necessarily sweep up protected civil rights claims and non-protected claims. And if such an explanation suffices for one hiring decision, why couldn’t an employer adopt a company-wide policy against hiring or retaining anyone in litigation with the company? As long as the policy were consistently followed, the employer would rarely have reason to obtain knowledge about the substance of the litigation, and at any rate it could always fairly say that it was the ruthlessly neutral policy, not the protected activity, that caused the adverse action.

Thus, to prove his retaliation claim, Cline will have to prove two facts:

1. That the company knew about the content of his claim; and
2. That the company did not have a policy against hiring (or retaining) individuals with litigation against the company.

This case poses the age-old question, "What does 'because of' mean in an employment lawsuit?" The answer, as with most things, is, "It depends." Cline presents a rational and common sense understanding that not all employment decisions that look retaliatory are retaliatory. I would never counsel someone to provide "engaged in litigation" as a reason for termination, because of the negative inferences that one can draw. But, if the decision maker does not know of the reason for the litigation, and the company can prove that it has a policy (written or unwritten) against hiring (or for firing) anyone who is in litigation against it, then the company genuinely has not engaged in retaliation.

Wal-Mart relents on reimbursement of medical costs

Last week I reported on Wal-Mart's lawsuit against a brain damaged ex-employee for the reimbursement of her health care costs. As of this morning, Wal-Mart has relented and will not pursue the collection of its costs. CNN.com quotes the letter Wal-Mart sent to the family: "We wanted you to know that Wal-Mart will not seek any reimbursement for the money already spent on Ms. Shank's care, and we will work with you to ensure the remaining amounts in the trust can be used for her ongoing care." Wal-Mart will also be modifying its health care plan to allow "more discretion" in individual cases.

Companies make decisions for any number of reasons. There are legal reasons (which guided Wal-Mart's original decision), business reasons, public relations reasons, moral reasons, and sometimes no reason at all. Just because something is permitted by law, however, does not mean that there are not better justifications not to take that action. In making any decision, employment related or otherwise, companies would be wise not to just consider whether a course of action is legal, but also what effect that action will have on its business, its relationship with its employees, and its public persona. Only thoughtful consideration of all of these factors will allow for fully informed corporate decision making.

Ohio court finds no public policy for opposing corporate accounting irregularities

One would think that in our post-Enron corporate environment, employees, even in non-public companies, would be free to oppose corporate accounting irregularities without fear of termination. Yet, in Schwenke v. Wayne-Dalton Corp., the Lorain County (Ohio) Court of Appeals ruled that an employee claiming he was terminated for that very reason had no claim.

Ronald Schwenke was the controller for Wayne-Dalton Corp., a privately held manufacturer of garage doors headquartered in Mt. Hope, Ohio. During Schwenke's employment he complained about certain inappropriate accounting procedures engaged in by Wayne-Dalton's President and its CFO, in addition to what he perceived as the misappropriation of corporate assets. His complaints fells on deaf ears, and he was simply told to "make it work," perform his duties as controller, and not question how the business was operated. When he refused to "make it work" he was fired. Schwenke claimed that his termination was in retaliation for his complaints, and that it violated Ohio's public policy against firing employees in retaliation for reporting inappropriate accounting procedures or misappropriation of corporate assets.

Schwenke did not claim protection under Ohio's whistleblower statute because he failed to follow the statute's very specific reporting requirements that one must follow to qualify as a protected whistleblower. Instead, he claimed there is "a public policy in support of not firing an employee, such as appellee, in retaliation for reporting inappropriate accounting procedures or misappropriation of corporate assets." The court of appeals disagreed:

[W]e find that appellee has failed to identify any source of public policy as the basis for his claims. Appellee ... did not identify any constitution, statute or regulation that might provide a basis for his claims. Nor did appellee cite or present the trial court with any legal authority in support of his argument that his termination violated public policy.

In other words, Schwenke lost not because a public policy does not exist, but because he failed to articulate one. I wonder if the result would have been different if Schwenke simply articulated the Sarbanes-Oxley Act, which establishes accountability standards for publicly traded companies, as the public policy supporting his claim.

The concurring opinion, however, goes further, and suggests that there is no public policy sufficient for protection:

Appellee has failed to identify any source of public policy as the basis for his claims. I believe Appellee's best argument is the fiduciary duty which exists between a corporation and its directors and its shareholders warrants recognition as a public policy exception to the at-will employment doctrine. I know of no case law, nor has Appellee identified any, which has recognized the breach of that fiduciary duty rises to the level of a matter of public policy. The fact no such case law exists does not preclude this Court from recognizing, and thereby creating, new common law. While the facts of this case suggest doing so may be equitable, I join my colleagues in refusing to do so....

While I agree the corporate management practices found to exist by the jury in this case demonstrate a breach of the fiduciary duty to the corporation's shareholders ... I do not feel such rises to the level of a great societal wrong. This case brought to mind the Enron scandal. Unlike Enron, no corporate officer or board of directors' member of Wayne-Dalton has been alleged, much less shown, to have committed a criminal offense. Unlike Enron, Wayne-Dalton is not involved in the supply of public utilities. Unlike Enron, Wayne-Dalton's corporate management practices cannot be said to have any impact on the general public health and safety. Wayne-Dalton "wrongs" as found by the jury are not "societal" in nature.

The Enron analogy is fallacious. Enron was a publicly traded company. If Wayne-Dalton was a public company, Schwenke could have had a statutory whistleblower claim under Sarbanes-Oxley. The existence of that statutory remedy, however, would most likely nullify his public policy wrongful discharge claim, under the holding of Leininger v. Pioneer National Latex.

Nevertheless, the Schwenke case sends the wrong message to Ohio's privately held companies -- that they can terminate corporate watchdogs without fear of retaliation liability. Employees have to be free to oppose corporate accounting irregularities, even in non-public companies. Sarbanes-Oxley should provide a sufficient public policy to support these claims against non-public companies. I hope it does in the next case of this ilk.

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