Cost cutting does not necessarily equate to age discrimination

Layoffs have become all the rage. Just yesterday, one of Cleveland’s larger employers, National City Bank, announced that it will be cutting 4,000 employees nationwide. Often, when companies look to cut costs, they will shed more senior employees in favor of hiring less costly employees, who are often, but not necessarily, younger. This strategy is exactly what Highlands Hospital Corp. employed that resulted in an age discrimination claim by two terminated employees. In Allen v. Highlands Hosp. (6th Cir. 10/21/08), the 6th Circuit reaffirmed that a plaintiff cannot support an age discrimination disparate impact claim by simply relying upon a general policy or practice, but must isolate and identify a specific employment practice that disproportionately impacts employees who are at least 40 years old.

Jo Ann Allen (age 63) and Debra Slone (age 53) were both employees of Highlands Hospital. The hospital’s CEO, Harold Warman, decided to terminate both of them for violating its patient privacy policy. Specifically, Allen and Slone removed the x-rays of Allen’s granddaughter without the patient’s written permission and signed a backdated documents to try to cover their tracks.

Allen and Slone sued the hospital for age discrimination. Among other claims, they alleged that Warman’s cost-cutting measures had a disparate impact on their age. Warman had been systematically terminating employees based on seniority to facilitate the hiring of new, less costly employees.

Contrary to the disparate impact claim, the statistics showed that Warman’s program did not necessarily disproportionately affect older employees at the hospital:

Date	Total # of Employees	Employees Age 40 and Older	Employees Younger than Age 40
July 1998	672	273	399
Dec. 2002	488	253	235
Dec. 2004	530	267	263

 

In July 1998, 40% of the hospital’s total employees, including Allen and Slone, were age 40 or older. By December 2002, that ratio increased to 52%, which also included Allen and Slone. Two years later, that number had slightly decreased to just over 50%.

A disparate impact claim involves employment practices that are neutral on their face but in application fall more harshly on one group over another. Plaintiffs that allege disparate impact discrimination under the ADEA must isolate and identify a specific employment practice that is allegedly responsible for the statistical disparities. it is not sufficient for a plaintiff to simply point to a generalized policy that leads to a perceived impact.

Allen and Slone argued on that the effect of the policy demanding the termination of the highest paid employees had a illegal impact based on age. The Court found, however, that the plaintiffs failed to isolate and identify “a specific employment practice that disproportionately impacts employees who are at least 40 years old”:

As we have already explained, the plaintiffs have at best alleged that HHC desired to reduce costs associated with its highly paid workforce, including those costs associated with employees with greater seniority. But the plaintiffs have not established that this corporate desire evolved into an identifiable practice that disproportionately harms workers who are at least 40 years old. Because Allen and Slone have simply “point[ed] to a generalized policy,” as opposed to specific practice, they have therefore failed to raise a genuine question of material fact with respect to their disparate impact claim.

Coupled with the compelling statistical evidence, the appellate court affirmed the district court’s dismissal of the age discrimination claim.

Disparate impact claims are much more seldom litigated than disparate treatment claims. Because it is likely that mass layoffs will increase as the health of the economy decreases, it is also likely that these types of claims will pick up in frequency. Because of the possibility of a disparate impact claim with a mass layoff, companies should consider conducting pre and post-layoff statistical analyses to ensure that otherwise neutral selection criteria do not unfair impact one group over another. A little planning can go a long way to preventing the type of lawsuit that plagued Highlands Hospital in this case.

[Thanks to Steve Sutton for sending this decision to me]

A labor & employment civics lesson

Today brings us two interesting posts detailing employment law issues to consider on election day. Michael Moore at the Pennsylvania Labor & Employment Blog and Dan Schwartz at the Connecticut Employment Law Blog both nicely summarize some of the key employment law issues that the next president might face.

If you are interested in a decidedly pro-business take on some of these issues, you should also take a look at website of the U.S. Chamber of Commerce, which has detailed information on a variety of workplace issues, including:

• Equal Employment Opportunity
• Absence Abuse and Medical Leave
• Paid Family and Medical Leave
• The Employee Free Choice Act

As we consider some of the more controversial of these initiatives (such as the Employee Free Choice Act), it’s important to remember that a President is but one piece in a complex governmental puzzle. Currently, if you count the two Independent Senators that caucus with the Democrats, the Dems hold a slim 51-49 lead in the Senate. Assuming that Senators Lieberman and Sanders continue to caucus on the left, nine current seats would have to change from red to blue for the Dems to reach the magic number of 60. Recent polling data suggest that the Democrats will certainly get closer to 60 than they are now, but it should prove very difficult to get over that hump.

Why is 60 such an important number? Because that is number needed to make the Democratic majority filibuster-proof. A filibuster is where a senator, or a series of senators, speak for as long as they want and on any topic they choose on the Senate floor. By way of example, Strom Thurmond once spoke for more than 24 straight hours to try to block passage of the Civil Rights Act of 1957. Practically, a filibuster permits one or more senators to derail a vote indefinitely, unless a supermajority (that magic number, 60) invokes cloture, which brings the filibuster to an end.

Because a filibuster poses such a huge risk, its threat is usually enough to derail controversial legislation without the support of at least 60 senators. Thus, if the Democrats don’t reach 60 (or even 58, depending on the inclinations of the two Independents), a Republican minority should be able to block controversial issues such as the Employee Free Choice Act.

On election night, while we watch the states change to red or blue on the electoral college map, it is equally important to follow some of the close Senate races. Without understanding both, one cannot truly decipher what the employment law landscape will look like after January 20, 2009.

Do you know? Ohio’s wage payment statute

Do you know? Ohio has a specific law that details how companies are to pay their employees. O.R.C. 4113.15 provides, in relevant part:

(A) Every individual, firm, partnership, association, or corporation doing business in this state shall, on or before the first day of each month, pay all its employees the wages earned by them during the first half of the preceding month ending with the fifteenth day thereof, and shall, on or before the fifteenth day of each month, pay such employees the wages earned by them during the last half of the preceding calendar month….

(B) Where wages remain unpaid for thirty days beyond the regularly scheduled payday or, in the case where no regularly scheduled payday is applicable, for sixty days beyond the filing by the employee of a claim or for sixty days beyond the date of the agreement, award, or other act making wages payable and no contest court order or dispute of any wage claim including the assertion of a counterclaim exists accounting for nonpayment, the employer, in addition, as liquidated damages, is liable to the employee in an amount equal to six per cent of the amount of the claim still unpaid and not in contest or disputed or two hundred dollars, whichever is greater….

(D) As used in this section:

(1) “Wage” means the net amount of money payable to an employee, including any guaranteed pay or reimbursement for expenses, less any federal, state, or local taxes withheld; any deductions made pursuant to a written agreement for the purpose of providing the employee with any fringe benefits; and any employee authorized deduction.

In plain English, businesses have to pay their employees at least two time a month, at least as frequently on the 1st and 15th of each month. Of course, employers can choose to pay more frequently, but any less often would violate the statute.

If wages go unpaid for 30 days past a regularly scheduled payday, or 60 days if no payday applies (such as a vacation or bonus payout), the employer could be held liable for liquidated damages of the greater of 6% of the unpaid wages or $200, provided that there is not a legitimate dispute over the payment of the wages. For example, if an employee claims that they are owed unused vacation days on termination, or claims that a bonus is owed, and an employer disputes that claim in good faith (based on a policy, for example), the liquidated damages provision would not apply.

This law does specifically speak to the handling of unpaid wages on termination. One reasonable reading of the statute would make them due on the first regularly scheduled payday following the last day of employment. Another reasonable reading would make them due within 60 days after the last date of employment. The more prudent interpretation of the statute would suggest that employers make a habit of including final paychecks with the next regular payroll. However, under 4113.15(B), the employer will not incur any potential liability until 30 days after that next payroll.

Comment about employee’s job security leads to reversal of summary judgment in FMLA retaliation case

A maintenance technician with a history of back problems suffers from unpredictable episodes of back pain that temporarily rendered him unable to perform his job duties. As a result, his employer granted him intermittent FMLA leave. The problem worsened to the point that he needed FMLA leave of more significant duration. Prior to taking the leave, the employee claims that his employer’s HR Director told him “if I took that FMLA for that period of time, there would not be a job waiting for me, when I returned.” Shortly after the FMLA leave began, the company experienced a layoff, which required the company to let go one maintenance technician. The employee on FMLA leave was the least senior maintenance tech and was selected for the layoff.

He sues for FMLA retaliation, but the district court grants the employer’s motion for summary judgment and dismisses the claim. In Daugherty v. Sajar Plastics (6th Cir. 10/16/08), the 6th Circuit reversed the grant of summary judgment on the FMLA retaliation claim, finding that the HR Director’s comment was direct evidence of the company’s retaliatory intent:

Clearly, this unambiguous comment, which we must take as true at the summary judgment stage, constitutes direct evidence that Daugherty’s termination was motivated by unlawful, discriminatory animus. Alexander was Daugherty’s immediate supervisor and a decision maker at Sajar. A fact finder would not be required to draw any inferences to determine that Alexander retaliated against Daugherty when Alexander explicitly threatened such retaliation and the threat – that Daugherty would not have a job waiting for him when he returned from leave – was realized….

For its part, the company had valid reasons to lay-off and not recall Daugherty: he was the least senior employee in a bloated department, and he refused to provide medical certification when Sajar Plastics tried to recall him a few months later. One comment, however, from a person in a position of authority over Daugherty’s job, casts enough doubt on the company’s motive to cloud the legitimacy of its justifications and create an issue for trial. Let this case serve a cautionary story – be very careful in the words you select whenever dealing with anyone remotely engaging in protected activity.

WIRTW #52

Happy 1-year anniversary to my first attempt at a weekly column, What I'm Reading This Week. Thanks to all of my fellow bloggers who have given me ample links to post each and every week. On to this week's batch of links for everyone's betterment.

Work Matters reminds everyone to beware the dreaded "cc:" on company e-mails.

The Non-Compete and Restrictive Covenants Blog gives some practical information of the dangers in trying to enforce a non-compete agreement.

Wage & Hour - Developments & Highlights reports on the spate of class action lawsuits affecting the financial services industry, as if that sector needs another worry.

The steady and reliable Connecticut Employment Law Blog digests the new federal rules on attorney-client privilege.

World of Work discusses pending legislation that could become a reality after January, the Employee Misclassification Prevention Act.

The Pennsylvania Labor & Employment Blog, meanwhile, discusses another employee-friendly piece of legislation, the RESPECT Act.

The FMLA Blog reports on a case that I hope is an anomaly, in which an employer was put on notice of an employee's need for FMLA leave because she was crying.

The HR Lawyer's Blog warns against the dangers of snooping on employees' private e-mails and other electronic information.

The Word points out the distinction between gender differences and gender discrimination.

Old news is bad news for businesses: Labor & Employment cases remain most popular targets

Fulbright & Jaworski has published its annual report on litigation trends, and the news is scary for American businesses. Labor and employment cases remain the most numerous type of case pending in 2008. 47% of U.S. companies surveyed reported being sued in a labor or employment case. When you focus just on the Midwest, the number jumps to 54%.

Other highlights of interest to employers:

• Wage-and-hour lawsuits spiked 19%.
• After wage-and-hour, companies saw big increases in five other areas of workplace litigation: discrimination, employee privacy, ERISA, disability claims, and age discrimination.
• Of all of the different types of employment litigation, U.S. companies singled out race discrimination cases as creating the highest financial exposure, followed by sex discrimination, wage-and-hour violations, age claims, harassment, retaliation, disability, non-compete cases, and FMLA violations.

There are a lot of lessons that businesses can draw from these findings. I'd like to focus on two. First, especially in a down economy, it is naive for employers to think that claims brought by employees will decrease or even flat-line in 2009. If anything, these claims will increase even more.

There is no way to prevent yourself from being sued. But, there is one surefire way to limit the risk, which brings me to my second lesson -- training and preventative measures are key. Has your handbook recently been reviewed and updated? Have you done harassment and EEO training in the past two years? Are you supervisors and managers up to date on how to effectively discipline employees? Will your myriad wage and hour practices pass legal muster? If you answer "no" to even one of these questions, your company is at risk in becoming a stat in Fulbright's 2009 survey.

Think before you e-mail

E-mail is a dangerous thing. It's impulsive, it's hard to get rid of, and when you get rid of it judges use nasty words like spoliation. It's exactly because it's so easy that it has quickly become the preferred mode of business communication. Often, it used for a lot of things it shouldn't be used for, like stealing trade secrets, disparaging the boss, and sexually harassing co-workers. And don't get me started on the dangers of "reply all." A good rule of thumb is before you send any e-mail that might be the least bit controversial or dangerous, save it in a draft folder for 24 hours and revisit the next day when you've cooled off and can decide whether you really want to send it.

Now, Google thinks it has the answer, "Mail Goggles":

Sometimes I send messages I shouldn't send. Like the time I told that girl I had a crush on her over text message. Or the time I sent that late night email to my ex-girlfriend that we should get back together. Gmail can't always prevent you from sending messages you might later regret, but today we're launching a new Labs feature I wrote called Mail Goggles which may help.

When you enable Mail Goggles, it will check that you're really sure you want to send that late night Friday email. And what better way to check than by making you solve a few simple math problems after you click send to verify you're in the right state of mind?

Is this tongue in cheek? I think it's a legitimate tool, but I'm not really sure. But the lesson in a good one to take to heart. E-mail is a powerful tool that I cannot imagine how I lived without (like my DVR and HDTV, but for very different reasons). With great power, though, comes the responsibility. Think before you email, always. Your company's risk manager will thank you for it.

[Hat tip: Lowering the Bar]