Documentation is key to dismissal of discrimination cases

While the laws under which employees can bring lawsuits are expanding, employees’ successes continue to retract, at least in federal court. Consider the following statistics, culled from an article in today’s Wall Street Journal on employers’ degree of success in federal court cases.

• From 1979 through 2006, federal plaintiffs won 15% of employment discrimination cases, as compared to a 51% success rate in all other civil cases.

• 12.5% of federal employment discrimination cases are terminated via summary judgment, with employers filing 90% of those motions. By comparison, only 3% of contract cases and 1.7% of personal-injury and property damages cases were summarily dismissed.

The explanation of U.S. District Court Judge David Hittner as to why employers enjoy this level of success in employment cases is very insightful: “Companies often have an extensive record that this [employee] was not doing their job well and that is the reason for the termination.”

Employers should heed Judge Hittner’s words. Success in discrimination cases is related to the employer’s ability to prove that it had a legitimate reason for the employment action taken. That reason will be much more believable, and much less likely to be criticized, if it is well-documented. Courts often remind us that they do not sit as super-personnel departments and will not second-guess employers’ reasoned business decisions. By having a historical paper trail to support all employment decisions, employers have taken the crucial first step toward the dismissal of any later challenges.

Five action points when your company is sued

Over the course of the past years, I’ve written a lot about best practices to prevent employee lawsuits. The fact remains, though, that no matter how good a company’s HR practices are, and no matter how proactive a company is with its legal compliance, a certain percentage of terminations and other employment decisions will turn into lawsuits. It is the simple the cost of doing business in 2009, especially as the economy worsens and more employees look to judges and juries for assistance.

The following are five things a company should be actively thinking about when it receives the inevitable lawsuit:

1. Relevant documents should be identified and preserved. Employment lawsuits are not as document intensive and some other disputes in which businesses are involved. Nonetheless, the documents are crucial. They provide a roadmap to the justification for the termination or other employment action, and the reasonableness of the employer’s actions. Key documents (personnel files, handbooks, other policies, investigative reports, emails, and other communications) should be gathered and set aside. Also, a litigation hold should be put in place to ensure that no relevant documents are accidentally destroyed.

2. Under Ohio’s discrimination law, managers and supervisors can be personally liable for their own individual acts of discrimination. Often, they are sued in their individual capacity along with the company. Potential conflicts of interest among any individual defendants and the company must be evaluated very early in the case to ensure that conflicts of interest do no exist. If they do, one attorney cannot represent all defendants. If conflicts are not identified until well into the case, the lawyer may have to withdraw, which could irreparably damage the defense.

3. Fight the urge to take it personally. When an ex-employee claims discrimination, companies can lose sight of the fact that lawsuits are part of doing business. Employer often shift into attack mode because they are accused of being bigots. There is a huge difference between aggressively defending a case and attacking for the sake of attacking. The former is smart strategy; the latter often leads to greater costs by losing focus. It also risks taking action that could be viewed as retaliatory and bring further claims. Extra care must be taken when the plaintiff is current employee, as opposed to an ex-employee.

4. If your company has Employment Practices Liability Insurance, timely file a claim with the insurer. If you have purchased a rider that permits you to select counsel, make sure you enforce that right. If you have not purchased that protection, consider having a candid conversation with the insurance company about the counsel they will choose for you.

5. Hire experienced employment counsel to defend the claim. Employment law is highly specialized. Retaining counsel that knows that ins and outs of this area of law is the best way to keep costs down as much as possible, while at the same time doing everything possible to aggressively defend the company.

Do you know? Agreements cannot waive future claims

Do you know? One of the mistakes that I see made over and over again in agreements I review is waivers of future claims. Take, for example, Hamilton v. General Electric Co. (6th Cir. 2/12/09), in which an employee had signed a “last chance agreement.” In exchange for reinstatement following an earlier termination, the employee agreed that he would not file legal action over any future termination. The 6th Circuit found that promise unenforceable because it amounted to a release of future claims.

For a waiver and release of claims to be valid, it only can release claims based on past conduct, and not future claims: As explained by the 6th Circuit in Adams v. Philip Morris, Inc.:

An employer cannot purchase a license to discriminate. An employment agreement that attempts to settle prospective claims of discrimination for job applicants or current employees may violate public policy … unless there were continuing or future effects of past discrimination, or unless the parties contemplated an unequivocal, complete and final dissolution.

If you are using any agreements for employees (such as severance agreements in connection with layoffs), be careful to ensure that they are not seeking to waiver any claims based on future conduct.

Stimulus Bill to provide for subsidized COBRA coverage for laid-off employees

COBRA provides workers and their families who lose health benefits the right to choose to continue group health benefits provided by their group health plan for up to 18 months. Historically, the cost of COBRA continuation coverage is borne 100% by the employee. Tomorrow in Denver, President Obama will sign into law the American Recovery and Reinvestment Bill of 2009, commonly known as the economic stimulus bill. This law will alter employers’ COBRA obligations by providing for subsidized COBRA premiums by employers.

The law will provide for a 65% subsidy of certain employees’ COBRA premiums for nine months. The subsidy will be available to any employee involuntarily terminated (except those severed because of gross misconduct, to whom COBRA does not apply) from employment between September 1, 2008, and December 31, 2009. The employer will pay 65% of the COBRA coverage premium, which would then be applied as a credit against payroll taxes. The employee would remain responsible for the other 35% of the COBRA premiums. Employers will have to amend their COBRA notices to include information about the availability of this subsidy.

Importantly, this subsidy is to be applied retroactively. Employees who were involuntarily terminated on or after September 1, 2008, but before the enactment of the stimulus bill, and who did not previously elect COBRA coverage, must be given an additional 60-day window to elect COBRA and benefit from the subsidy. If an employee elects COBRA after receiving the new notice, coverage would begin on February 17, not on the date of the actual termination.

Companies with 20 or more employees (COBRA’s coverage limit) must heed these changes. COBRA notices need to be amended for the remainder of 2009, and any employee involuntarily severed between September 1, 2008, and February 17, 2009, will have to be re-noticed to advise of the subsidy.

WIRTW #66

Overlawyered brings us the story of the week. File this one under what goes around comes around. A California attorney settled a consumer class action via the payment of gift cards for the class members. Since the class was being paid by gift cards, the court thought it was only fair that the lawyer be paid his fees the same way, 12,500 ten-dollar gift cards.

Gruntled Employees ticks off eight ways for a company to lose a non-compete case. Number 8 is the best tip, and its lesson translates to any employment case, not just non-compete cases:

Focus on the law instead of on the story. This is the most important lesson. Lawyers often fall in love with their legal arguments. But noncompete cases are equity cases, not law cases. To be sure, that distinction means less than it did a hundred years ago. But if you have a brilliant, clever, technical legal argument and an unsympathetic story, you are way more likely to lose.

Did you know that part of the Economic Stimulus Package will require employers to pay at least half of the COBRA premiums for involuntarily terminated employees? Me neither, until I read this article from HR Observations.

The Connecticut Employment Law Blog issue-spots the legal risks for employers using Google Map’s new locator service.

George’s Employment Blawg summarizes the FMLA’s new notice rules.

World of Work lists words to avoid in describing employees over 40.

The Delaware Employment Law Blog asks if the recession is going to put work-life balance initiatives at risk.

Trading Secrets correlates mass layoffs with the risk for mass theft of intellectual property.

Work Matters discusses the “one free dog bite” rule in retaliation cases.

Courts open Pandora’s Box in applying the Ledbetter Fair Pay Act

Today I am going to get technical and talk about statutory interpretation. Bear with me, though, because how some courts are incorrectly interpreting the Ledbetter Fair Pay Act has crucial implications for businesses

Michael Fox at Jottings by an Employer’s Lawyer highlights the following key passage in the Ledbetter Act:

For purposes of this section, an unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

Plaintiffs are arguing that the phrase “or other practice” covers the full panoply of employment decisions, such as promotions and demotions, and not just pay-setting decisions or policies. At least two courts have bought this argument:

• Bush v. Orange County Corrections Dept., (M.D. Fla. 2/2/09), which held that plaintiffs could timely challenge demotions, which resulted in reductions in pay, that occurred 16 years before earlier than their EEOC charges.

• Gilmore v. Macy’s Retail Holdings, (D.N.J. 2/4/09), which held that the Ledbetter Act applies to a discriminatory promotion that would have been to a higher paying job.

Applying the Ledbetter Act to cases such as Bush and Gilmore, which  involved long-ago promotions and demotions, is misplaced. For “or other practice” to have the expansive meaning given by the Bush and Gilmore courts, a comma is missing. Because there is no comma between “decision” and “or other practice,” “or other practice” modifies “compensation.” Thus, the more reasoned interpretation of this provision of the Ledbetter Act is that the Act covers a discriminatory compensation decision or other discriminatory compensation practice. A promotions or demotion is a personnel decision, not a compensation decision or practice.

The overly broad interpretation applied by the Bush and Gilmore courts goes well beyond the issue in the Ledbetter decision that the Ledbetter Act intended to overturn. Every employment decision, whether a hiring, promotion, demotion, or termination, has some effect on compensation. The Ledbetter Act cannot be so broad as to cover any and every personnel decision. This broad of a reading of the statute will eliminate virtually every statute of limitations in federal discrimination claims, providing employees with an unlimited amount of time to file any discrimination claim. If the Ledbetter Act means what Bush and Gilmore say it means, the Ledbetter Act could prove to be devastating for employers.

No Ohio court has yet to apply the Ledbetter Act. Ultimately, the meaning of “or other practice” will be up to the courts of appeals and the Supreme Court. Nevertheless, it is important for employers to realize that only two weeks into its life, at least two courts have broadly applied the Ledbetter Act to cover much more than the Ledbetter decision it overturned.

A primer on employee polygraph testing

As I’ve previously reported, as the recession deepens, incidents of employee theft are on the rise. It should go without saying that just about any employee who steals should be fired. How can companies confirm that the theft actually occurred to support the termination? One available tool is a polygraph test. Employers who use polygraphs, however, must tread carefully to avoid running afoul of the specific requirements of the federal law that regulates their use in the workplace, the Employee Polygraph Protection Act of 1988.

The EPPA applies to the use of any device used to render a diagnostic opinion as to the honesty or dishonesty of an individual, such as polygraphs, deceptographs, voice stress analyzers, or psychological stress evaluators. It applies to private employers, but not federal, state, or local governments.

It prohibits employers from:

• Requiring, requesting, suggesting, or causing an employee or prospective employee to take or submit to any lie detector test.

• Using, accepting, referring to, or inquiring about the results of any lie detector test of an employee or prospective employee.

• Discharging, disciplining, discriminating against, denying employment or promotion, or threatening to take any such action against an employee or prospective employee for refusing to take a test, on the basis of the results of a test, for filing a complaint, for testifying in any proceeding, or for exercising any rights afforded by the EPPA.

Despite these strict prohibitions, there are limited exceptions when an employer can administer a polygraph test, but not other forms of lie detector tests. One exception covers prospective employees of armored car and other similar security companies. Another covers prospective employees of companies that manufacture controlled substances.

Of more general application to most employers, the third exception covers employees who are reasonably suspected of involvement in a workplace incident that results in economic loss to the employer and who had access to the property that is the subject of an investigation. Thus, the employer who reasonably believes that an employee has stolen is able to administer a polygraph to confirm the employee’s culpability.

Even if this exception applies, employers cannot use polygraphs carte blanche. There are certain key limits on their administration:

• The employee must be provided a written notice explaining the employee’s rights and the limitations imposed, such as prohibited areas of questioning and restriction on the use of test results.

• Prior to the polygraph test, the employee also must be provided a notice explaining the specific incident or activity being investigated and the basis for the employer’s reasonable suspicion of the employee’s involvement.

• The employee can refuse to take a test, terminate a test at any time, or decline to take a test because of a medical condition.

• The results of a test alone cannot be disclosed to anyone other than the employer or employee without their consent.

• The polygraph examiner must be licensed, and bonded or insured. Also, the examination is subject to strict conduct standards.

Polygraph examinations provide employers a powerful tool to confirm and confront employee theft. Employers must carefully follow the EPPA’s requirements so that a slam dunk termination does not turn into a sure-fire lawsuit for the employee.