Ohio Supreme Court upholds constitutionality of tort reform legislation

Arbino v. Johnson & Johnson, decided today by the Ohio Supreme Court, upheld the constitutionality of legislation that caps the amount of non-economic and punitive damages available in Ohio tort actions. The at-issue legislation applies to all "tort" claims except medical, dental, optometric, and chiropractic claims, and civil actions for damages for a breach of contract or another agreement. There is no exception for employment-related claims, such as intentional infliction of emotional distress, defamation, or wrongful discharge public policy claims.

The tort reform statute caps non-economic damages at the greater of $250,000, or 3 times the economic loss, to a maximum of $350,000 for each plaintiff or $500,000 for each occurrence that is the basis for the claim. There is no statutory cap for economic losses. Punitive damages are capped at 2 times the total amount of compensatory damages. However, for small employers (5o0 or less employees for manufacturing companies, and 100 or less employees for all others) and individuals, punitive damages are capped at the lesser of 2 times the total compensatory damages, or 10% of the small employer's or individual's net worth measured at the time the tort was committed, up to a maximum of $350,000.

No court has yet to rule whether this tort reform legislation specifically applies to statutory employment discrimination claims. While there is a clear distinction between common law tort claim, and statutory claims, one could certainly argue that discrimination claims, which are claims for harm to the person, are tort claims covered by the statute. Most likely, however, these claims are not covered by this tort reform because of their statutory nature. Regardless, this case marks another milestone in what has become a very business-friendly Supreme Court.

EEOC allows employers to reduce retiree health benefits at age 65

Pursuant to a new Rule published yesterday by the EEOC, employers can take Medicare into account when structuring retiree health benefit packages without violating the age discrimination laws. The rule clarifies the long standing practice of most companies that provide retiree health benefits, by which they reduce their health insurance expenses for retired workers once they turn 65 and qualify for Medicare. In other words, employers can lawfully spend more on retirees under the age of 65 years than those over 65 without running afoul of age discrimination laws. Practically, though, retirees in both age groups will most likely receive essentially the same benefits, just at a lower costs to employers.

A copy of the EEOC's new Rule on Retiree Health Benefits is available here, along with a Q&A explaining the Rule here.

7th Circuit holds that hostile environment is not defined by statutory limitations period

The facts of Bright v. Hill's Pet Nutrition explain that Elizabeth Bright was subject to pervasive harassment because of her sex during the her employment for the pet food company:

Elizabeth Bright was hired at the Richmond plant during February 2000, ... and quit in November 2002.... Bright was assigned to a Processing Team, where she worked for about 10 months before being transferred to a Stretchwrap Team. Between October 2001 and November 2002, ... and Bright [was] assigned to a Stretchwrap Team. Bright filed her charge of discrimination early in 2003 and filed suit later that year.

Bright presented evidence that the men routinely vexed the women in an effort to make them quit. The tactics included unwelcome sexual overtures and sex-related chatter, streams of misogynistic invective, refusal to train (team leaders tried to get women to view pornographic images on the men's computers, and, when women declined, the men would declare that they had no time for training), assigning women to the dirtiest jobs (which team leaders called "women’s work"), and threats of violence, some of which were fulfilled (for example, Bright's dog was shot, supposedly as a warning to her). According to one of Bright's witnesses, on being told that men referred to female workers as "whores," "c**ts," and "bitches," Vanderpool replied: "a hostile work environment is a productive work environment." ...

Hill's Pet Nutrition contended that none of this testimony should be believed. It did, however, concede having, a problem with pornography in the workplace, and it suspended 11 men for two weeks in March 2002 in response to their accumulation and viewing of inappropriate materials on the firm's computers. The employer maintains that this step solved the only problem that women had encountered at work.

The trial judge instructed the jury that it could not consider anything that happened to Bright before March 29, 2002, 300 days before she filed her EEOC charge, and could not consider any of the incidents related to the pornographic images. With that instruction, the jury returned a verdict against Bright.

According to the 7th Circuit, the trial court's instruction to the jury about which evidence it could not consider was in error. The evidence that predated the statutory filing period was relevant to the totality of the hostile environment in which Bright worked:

[A] hostile working environment must be treated as one unlawful practice even if the employee moves from one team to another.... [A] hostile environment in a single posting is one practice. Bright was part of a Stretchwrap Team for 22 months, from the beginning of 2001 until she quit in November 2002, but the judge allowed the jury to consider only the events of the final eight months, from April through November.... [T]he judge should have allowed the jury to consider the working conditions that Bright encountered for her entire employment at the Richmond plant.... [I]t is inappropriate to draw lines by time.

Moreover, to the extent that the employer remedied some or all of the harassment, the proper evidentiary ruling would not be to exclude the pre-remedy harassment, but instead to permit the jury to consider such evidence as part of parcel of its decision as to the employer's liability (i.e., was the employer negligent in responding to complaints of harassment or remedying the harassment):

When an employer takes steps such as the suspensions and purge of objectionable material from the computers' hard drives, these acts matter not to the duration of the unlawful practice or the evidence a plaintiff may offer, but to the question whether the employer is responsible. "[A]n employer can be liable ... where its own negligence is a cause of the harassment. An employer is negligent with respect to sexual harassment if it knew or should have known about the conduct and failed to stop it. Negligence sets a minimum standard for employer liability under Title VII".

Hill's Pet Nutrition may be able to show that its handling of the sexual images solved part of the problem and prevents attribution. Similarly it may be able to show that it neither knew nor should have known about some of the events that Bright encountered. If an employee unreasonably fails to take advantage of preventive or corrective opportunities, and the employer consequently does not know about the problem, then it cannot be held liable. The fact that an employer has raised these contentions, however, does not curtail the scope of the employee's proofs.... Unless the evidence is so lopsided that the employer is entitled to judgment as a matter of law, both the plaintiff and the employer must be allowed to present their full evidentiary cases at trial, and the district judge should instruct on all of these issues.

This case illustrates the important role that companies play in remedying and correcting harassment in the workplace, and how those efforts, or lack thereof, come into play in a sexual harassment trial. Employers will not be able to escape or minimize liability simply by relying upon Title VII's 300-day statute of limitations as a point in time by which to compare working conditions, and argue that because conditions were better during the 300 day period as compared to prior, the judge or jury should not consider the totality of the employee's work environment.

Court treats bias against transsexual job applicant as gender discrimination

Since the Supreme Court decided Price Waterhouse v. Hopkins 18 years ago, it has been well established that Title VII's protections against gender discrimination also encompass sexual stereotypes. An employer violates Title VII by punishing employees for failing to conform to sex stereotypes, including stereotypes regarding dress and appearance. For example, it is illegal for an employer to take action against an male employee for having feminine mannerisms, or against a female employee who is too macho or aggressive.

Recently, in Schroer v. Billington (as reported here by CCH), the federal district court for the District of Columbia permitted a male-to-female transsexual job applicant to continue her Title VII sex discrimination case against the Library of Congress. The Library withdrew is job offer for a research position after Schroer disclosed that he was under a doctor's care for gender dysphoria, and that consistent with the treatment, he would present at work as a woman, change his name, and dress in traditionally female clothing. Schroer claimed discrimination based on a failure to comply with the Library's sex stereotypical notions about women's appearance and behavior, and not on her status as a transsexual. Because the claim was grounded on a failure to conform to sexual stereotypes, it fell under Title VII.

In so ruling, the D.C. Court followed the lead of the Sixth Circuit in Smith v. Salem, which, as far as a I know, the only other case to recognize such a cause of action. Smith v. Salem not only protected the transsexual plaintiff because of sexual stereotyping, but also based on a rationale that Title VII's reference to "sex" encompasses biological differences between men and women. The Court in Schroer, though, differentiated between Smith v. Salem's two different legal theories. Based upon the recent legislative wrangling over the Employment Non-Discrimination Act of 2007, it rejected the latter. It relied upon the ENDA's legislative history, which took out protections for gender identity (i.e., transsexual and transgender individuals) (see House approves law to protect gay workers).

The difference is not merely one of semantics. Schroer concerned a motion to dismiss - that is, did the complaint state a legally recognized cause of action? The case will now continue to discovery and a likely Motion for Summary Judgment. The key issue in the case will be whether the Library rescinded the job offer because of her transsexual status, or because of sexual stereotypes. Only the latter will be permitted to go to a jury under Title VII. As the ENDA's Congressional debates illustrate, Title VII does not protect the former, nor will it, at least in the foreseeable future.

Merry Christmas

To all of my readers who have made the first 7 months of the Ohio Employer's Law Blog such a success, and to those who have simply stumbled upon me by happy accident or random Google search, happy holidays and merry Christmas. Now put the mouse down, stop thinking about employment law, and enjoy your holiday. I'll be back on Boxing Day.

NLRB rewrites employee solicitation rules

It is no secret that employers often use non-solicitation policies as a lawful means to limit union activities on company time and property. Last week, the NLRB delivered an early Christmas gift to employers. Register-Guard, decided 3-2 by the Board, signaled a strong victory for an employer's right to control its computer and e-mail system, and at the same time severely restricted an employee's ability to solicit using company property.

Register-Guard is a unionized newspaper publisher. In 1996, it began installing a new computer system. Around the same time it also implemented a new Communications Systems Policy ("CSM"), which governed employees' use of its communications systems, including e-mail. The policy stated, in relevant part:

Company communication systems and the equipment used to operate the communication system are owned and provided by the Company to assist in conducting the business of The Register-Guard. Communications systems are not to be used to solicit or proselytize for commercial ventures, religious or political causes, outside organizations, or other non-job-related solicitations (emphasis added).

Despite the policy, the company allowed its employees to send and receive personal e-mails, such as such as baby announcements, party invitations, and the occasional offer of sports tickets or request for services such as dog walking. However, it never allowed solicitations regarding any outside agency other than the United Way. The employer gave two warnings to an employee who sent three union-related e-mails, which lead to the charge that the employer was discriminatorily enforcing the policy.

In ruling that the policy, on its face, did not violate the NLRA, the Board relied upon an employer's legitimate business interest in its "basic property right to regulate and restrict employee use of company property," including its computer system. The Board saw no distinction between a traditionally bulletin board and an e-mail system:

[T]he Respondent's CSP does not regulate traditional, face-to-face solicitation. Indeed, employees at the Respondent's workplace have the full panoply of rights to engage in oral solicitation on nonworking time and also to distribute literature on nonworking time in nonwork areas.... What the employees seek here is use of the Respondent's communications equipment to engage in additional forms of communication.... "Section 7 of the Act protects organizational rights ... rather than particular means by which employees may seek to communicate."

A solicitation or other communication policy can lawfully bar employees' non-work related use of an employer-owned e-mail system or other property, unless, on its face, it discriminated against employees' exercise of Section 7 rights. Thus, a policy that prohibits employee use of an e-mail system for "non-job-related solicitations" does not violate the NLRA.

Along the same lines, the Board found that "discrimination" in the context of rules limiting employee solicitations means drawing a specific distinction along Section 7 lines. In the Board's words:

Thus, in order to be unlawful, discrimination must be along Section 7 lines. In other words, unlawful discrimination consists of disparate treatment of activities or communications of a similar character because of their union or other Section 7-protected status. For example, an employer clearly would violate the Act if it permitted employees to use e-mail to solicit for one union but not another, or if it permitted solicitation by antiunion employees but not by prounion employees.

This case concerned two different sets of e-mails. In the first, an employee called employees to take action in support of the union (such as wearing certain clothing and participating in a parade). While the employer tolerated personal employee e-mails (baby announcements, etc.), there was no evidence that the employer permitted employees to use e-mail to solicit for specific groups or causes. Thus, disciplining the employee for this set of e-mails did not discriminate along Section 7 lines, because the CSP did not permit any group or cause related solicitations. The second set of e-mails, however, presented a different problem. Those were not a solicitation or some call for collection action. Instead, they merely clarified the facts surrounding a union rally. Because the CSP only prohibited non-work-related "solicitations," and because the company permitted a wide range of non-work-related e-mails, disciplining the employee for an e-mail that disseminated information about the Union (as opposed to soliciting some action on its behalf) did discrimination along Section 7 lines and therefore violated the NLRA.

For employers, non-solicitation policies are always tricky. Now, the Board has given employers broad latitude to draft and enforce such policies, even as to e-mail communications, to bar all non-work-related solicitations. Further, enforcement is only a problem if it draws a clear line between Section 7 activities. While future Board and Court decisions will further flush out these standards, for now it is safe to say that non-solicitation and computer use policies will have to be reviewed, rewritten, and most likely broadened in light of this case and its new discrimination standards.

(Hat tip to the Pennsylvania Employment Law Blog).

Department of Labor investigations highlight important wage and hour compliance issues

Today's Cleveland Plain Dealer reports that the U.S. Department of Labor has found that housekeepers working in Ohio hotels are routinely underpaid. Indeed, in wage and hour audits conducted in 2007, the DOL reports that only 28% were in full compliance with federal wage and hour laws. As a result, it has promised "a 'significant' number of hotel investigations in 2008 and reinvestigations of some of the employers it already found in violation of wage requirements," according to the PD.

Speaking from experience, the DOL audits companies in one of three instances: randomly (which seldom happens), after receiving a complaint, or as part of a targeted initiative against a particular industry or class of businesses. These hotel investigations fall into the latter category.

If you find yourself being audited, the DOL will examine your wage and hour records for the past two years to ensure that all non-exempt employees have been paid at least minimum wage and overtime for all hours worked in excess of 40. It will also look at child labor issues if you employ any minors. The DOL may examine whether salaried employees are properly classified as exempt. Finally, it may interview employees to gather additional information. It will then make recommendations for changes, and try to reach a resolution as to any back overtime and wages. If the employer fails to cooperate, or is a repeat offender, it may request that the Solicitor General's office file an enforcement action in federal district court.

There is no way to prevent an audit from occurring, but you should self-audit your company's wage and hour practices to help get a clean bill of health if the DOL calls. Look at your personnel, payroll, and time records to make sure your are retaining everything the FLSA requires. Reevaluate positions and job descriptions for proper exemption classifications. It should go without saying that if you are not paying minimum wage, or overtime to non-exempt employees, start doing so immediately. With the new year quickly approaching, I'd like to see all businesses make a resolution to get their wage and hour practices in order during 2008.