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.

Carnival of HR 30 is available

Please take a minute to surf over to Fortify Your Oasis and read this week's compilation of the blogosphere's best HR and employment relations posts.

6th Circuit recognizes claim for associational retaliation

The 6th Circuit continues to broaden the scope of retaliation claims, and in the process make it more and more difficult for employers in Ohio, Michigan, Kentucky, and Tennessee to manage against these claims. In Hawkins v. Anheuser-Busch, the 6th Circuit recognized a claim against an employer for retaliatory acts committed not by a manager or supervisor, but by a co-worker. Yesterday, the Court continued its expansion of retaliation liability and recognized liability for "associational retaliation."
Section 704(a) of Title VII of the Civil Rights Act of 1964 prevents retaliation by employers for two types of activity, opposition and participation:

It shall be an unlawful employment practice for an employer to discriminate against any of his employees ... because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.

On its face, it seems clear that the anti-retaliation provision is limited to an employee who himself or herself opposes an unlawful employment practice, made a charge, or participated in a investigation, proceeding or hearing regarding a charge. Yet, in Thompson v. North American Stainless, decided this week by the 6th Circuit, the Court has held that the same anti-retaliation provision also protects a related or associated third party from retaliation.
Eric Thompson was engaged to Miriam Regalado, another North American Stainless employee. Three weeks after Regalado filed a sex discrimination charge with the EEOC, North American Stainless terminated Thompson for alleged performance reasons. The 6th Circuit reversed the trial court's dismissal of the retaliation claim, holding:

Title VII prohibit[s] employers from taking retaliatory action against employees not directly involved in protected activity, but who are so closely related to or associated with those who are directly involved, that it is clear that the protected activity motivated the employer's action. (emphasis added).

The Court found that even though the plain language of the statute would prohibit such a claim, not allowing the claim would frustrate the statute's purpose -- prohibiting conduct that would dissuade reasonable workers from engaging in protected activity. The Court also defended itself from possible criticism that it was taking too broad a reading of the statute and opening the door to a flood of claims:

Other courts have expressed concerns as to whether this decision will result in a flood of suits from relatives and associates of those who file EEOC charges.... The requirement of a prima facie case in general, and a causal link specifically protect employers from defending against meritless suits. Of greater concern to the court would be the result of a contrary ruling. That is, permitting employers to retaliate with impunity for opposition to unlawful practices, filing EEOC charges or otherwise participating in such efforts, as long as that retaliation is only directed at family members and friends, and not the individual conducting the protected activity.

In becoming the first circuit court to recognize a claim for associational retaliation, the court rewrote Title VII's anti-retaliation for public policy reasons. As the dissent further explained:

It was Congress’s prerogative to create – or refrain from creating – a federal cause of action for civil rights retaliation. Congress likewise was entitled to mold the scope of such legislation, making the boundaries of coverage either expansive or limited in nature. In enacting § 704(a), Congress chose the latter. The text of § 704(a) is plain and unambiguous in its protection of a limited class of persons who are afforded the right to sue for retaliation. To be included in this class, the plaintiff must show that his employer discriminated against him "because he has opposed any practice made an unlawful employment practice by this subchapter, or because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter." 42 U.S.C. § 2000e-3(a) (emphasis added).
By application of the plain language of the statute, plaintiff Eric L. Thompson is clearly not included in the class of persons for whom Congress created a retaliation cause of action because Thompson, himself, did not oppose an unlawful employment practice, or make a charge, testify, assist, or participate in an investigation....
In essence, plaintiff and the EEOC request that we become the first circuit court to hold that Title VII creates a cause of action for third-party retaliation on behalf of friends and family members who have not engaged in protected activity. The majority has accepted this dubious invitation. In doing so, the majority rewrites the law.

Separate and apart from whether one agrees or disagrees with the Court's judicial activism, its holding creates genuine logistical problems for employers. If Title VII protects those "who are so closely related to or associated" with employees who engage in protected activity, it simply begs the question, how close is close enough? In Thompson, the relationship was a fiancee. It is safe to assume liability will also extend to action taken against spouses. What about boyfriends and girlfriends? How long do you have to date to be protected from retaliation?
The same protection also will probably extend to parents and children. What about siblings? Grandparents? Cousins? 3rd cousins twice removed? In-laws? Friends? Carpoolers? The people you share your lunch table with? The person you sat next to in 3rd grade? How close is close enough for an employer to intend for its actions to punish the exercise of protected activity? Do employers now have to ask for family trees and class pictures as part of the orientation process?
These questions, none of which the Thompson court answers, could hamstring employers from making any employment decisions for fear of doing something against someone who has some relationship to someone else who complained about something last October. The implications of this case have the potential to reach that level of silliness. The best course of action is still to make legitimate personnel decisions for bona fide business reasons and let the chips fall where they may. Fear of being sued will freeze your workforce, and bad employees will continue to get a free pass and remain employed. No company wants to get sued, but sometimes you have to take that risk to rid yourself of a bad worker. The Thompson case just makes it that much more likely that if you take action against an employee, you may have to defend that decision in court.

Repeat after me: "I will not pull a cheesy April Fools' Day prank."

I thought I'd share with everyone Mark Toth's (from the Manpower Employment Blawg) excellent thoughts on how not to get sued on April Fools' Day:

Done right, workplace humor can be a great thing for employee morale. Done wrong, it can be a disaster.

The idea is not to prohibit all workplace fun, jokes and pranks but rather to (1) help employees know where the line is and (2) take appropriate action if the line is crossed.

Here's a simple solution: consider adopting a policy prohibiting "potentially unwelcome, offensive or harmful workplace jokes or pranks." Enforcing such a policy should be fairly straightforward. Pranks that involve any of the following should never be allowed:

• race, gender or other protected or physical characteristic
• threats
• physical contact, including ingestion of unwelcome odors or substances
• weapons (even toy ones) or other potentially dangerous objects/substances
• damage to property or a person's reputation
• interference with a person's ability to do his/her job

If a joke/prank crosses the line, strongly consider taking disciplinary action.

Consider this -- what about a prank that involves putting a co-worker's stapler in jello?

Some alternatives to arbitration of employment claims

Last week, the U.S. Supreme Court decided Hall Street v. Mattel, which held that the Federal Arbitration Act is the exclusive grounds for vacating or modifying an arbitration award, and that parties may not contractually agree to expanded grounds of judicial review. Briefly, the parties had entered into an agreement in which they agreed to the de novo review of the arbitration decision of their environmental dispute. The Supreme Court held that such provision was not valid under the FAA. Thus, a court can only overturn an arbitrator's decision are where: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality and/or corruption; (3) the arbitrators were guilty of other misconduct; or (4) the arbitrators exceeded their powers.

While arbitration continues to the favored method used by employers to limit their potential exposure in front of a jury, let me discuss two other possible alternatives.

Contractual Waivers of Jury Trials

First, employers can have employees sign agreements waiving the right to ask for a jury in any subsequent legal disputes. More than 20 years ago, in K.M.C. Co. v. Irving Trust Co., the 6th Circuit stated: "It is clear that the parties to a contract may by prior written agreement waive the right to jury trial.... [T]he constitutional right to jury trial may only be waived if done knowingly, voluntarily and intentionally." The contract should clearly and unambiguously advise the employee that by signing the agreement the employee is giving up any and all rights to have any claims related to his or her employment raised by a jury. The more broadly the waiver is drafted, the more likely it will cover an employment-related claim, provided it is otherwise knowing and voluntary.

In light of Hall Street v. Mattel, jury trial waivers have one key advantage over more traditional arbitration agreements -- you are not giving up any appeal rights, and an appellate court's review of a bench trial will be much wider than a court's review of an arbitration award. Of course, this factor cuts both ways. At the same time, though, a bench trial eliminates the risk of a runaway jury awarding obscenely high damages, so it may be a more simply and preferable option to a traditional arbitration agreement.

Agreements to Shorten the Statute of Limitations

Secondly, employers can attempt to limit the amount of time employees have to assert employment claims. In Thurman v. DaimlerChrysler, Inc., the 6th Circuit held that a clause in an employment application limiting the statutory limitations period for filing a lawsuit against the employer was valid. Thurman's employment application with DaimlerChrysler contained a clause waiving any statute of limitation and agreeing to an abbreviated limitations period in which to file suit against the employer. Specifically, the clause stated:

READ CAREFULLY BEFORE SIGNING I agree that any claim or lawsuit relating to my service with Chrysler Corporation or any of its subsidiaries must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.

The Court held that the abbreviated limitations period contained in the employment application was reasonable, and that all of Thurman's claims against DaimlerChrysler were time barred by the six-month limitations period. The Court paid particular attention to the "read carefully before signing" language, and noted that it was in bold and placed conspicuously directly above Thurman’s signature acknowledging that she read and understood the document. It also found the specific language used was clear and unambiguous.

The advantage of using these types of clauses is that you can limit the duration of potential liabilities. For example, in Ohio employees have 6 years to file discrimination claims (other than age) under R.C. 4112.99. A clause such as the one in Thurman would shorten that time frame from 6 years to 6 months, a dramatic improvement.

I normally don't put disclaimers directly in my posts. But, these ideas are merely something to think about for your business. Please do not try this at home. For example, although not raised in the Thurman case, statute of limitations waivers should not seek to limit the statutory window for filing charges with administrative agencies because of the potential for a retaliation claim. Talk to a lawyer before implementing either of these options.

Employer must pay employee for time spent at the doctor

If an hourly employee is injured on the job, and the employer's workers' compensation carrier subsequently sends the employee to a doctor's appointment to re-evaluate the work-related injury, must the employer pay the employee for the time spent at the doctor? According to the 8th Circuit in Howser v. ABB, the answer is yes.

In the case, ABB offered Howser two choices for her doctor's appointment: it would compensate her for the time missed from work but deduct that time from her accrued paid leave benefits, or she could take an unpaid absence. Because she took the unpaid absence, ABB did not compensate her for the 3.8 hours she spent at the doctor's appointment. The Court held that because ABB's workers' comp administrator, its agent, directed her to attend the appointment, the 3.8 hours were "hours worked" under the FLSA for which she should have been paid:

Under the FLSA, an employer must pay an employee a minimum wage per hour worked.... Department of Labor regulations state that "time spent by an employee in waiting for and receiving medical attention on the premises or at the direction of the employer during the employee's normal working hours on days when he is working constitutes hours worked." 29 C.F.R. § 785.43.

This case is a good reminder that if you require a non-exempt employee to do something, you will probably have to pay for it.