Do you know? The voluntariness of release agreements

The facts that led to the severance agreement in Gascho v. Scheurer Hosp. (6th Cir. 11/19/10) [pdf] are what make employment law an interesting way to make a living. The legal issues surrounding the enforceability of a severance agreement, however, are what make this post worth reading.

Mary Ann Gascho, the plaintiff, was a 35-year employee of Scheurer Hospital. For the last 18 years of her employment, she was also married to the hospital’s President and CEO, Dwight Gascho. Dwight, it turns out, was having an affair with one of the hospital’s Vice Presidents. Around the time Mary Ann began to suspect her husband’s infidelities, he began physically abusing her. After Dwight admitted the affair and demanded a divorce, Mary Ann confronted the VP, calling her, among other things, “the whore next door.” That confrontation led to Dwight firing his wife. Cooler heads prevailed, however, when the hospital’s HR Director, Greg Foy, converted the termination into a three-day suspension. That suspension dovetailed into an FMLA leave.

Following the leave, the hospital offered Mary Ann a separation package. Foy presented her the agreement, explained and summarizing its key provisions, recommended that she hire a labor-law attorney to review the document, and told her that she would have 21 days to sign the agreement and seven days to change her mind if she did sign it. There was no physical harm or threats of physical harm between the day she was fired and the day she signed the agreement. Her husband, though, did use various methods of persuasion to try to convince her to sign, including lashing out and yelling at her. After consulting with her children, Mary Ann ultimately signed the agreement.

When she sued the hospital a year later for discrimination, the district court dismissed her claims as barred by the separation agreement. The 6th Circuit agreed, examining the following five factors to determine whether the release was “knowing and voluntary”:

1. Plaintiff’s experience, background, and education.
2. The amount of time the plaintiff had to consider whether to sign the waiver, including whether the employee had an opportunity to consult with a lawyer.
3. Clarity.
4. Consideration.
5. The totality of the circumstances.

1. Mary Ann’s experience, background and education. The court concluded that a nurse—with more than three decades of experience and who rose to a management position—could comprehend the meaning and effect of a settlement agreement.

2. Time to consider the waiver and opportunity to consult an attorney. The hospital gave Mary Ann 21 days to review the agreement and seven days to change her mind after signing it. While Title VII does not have a statutory requirement for waivers, the 21 days mirrors the OWBPA’s requirements for waivers of federal age discrimination claims. “This congressional policy in a related civil rights statute bolsters the conclusion that a 21-day consideration period and a seven-day reconsideration period suffices to establish a legitimate waiver.” That timeline gave Mary Ann ample opportunity to consider the agreement and consult with an attorney.

3. The clarity of the waiver. The waiver “releases and forever discharges [Scheurer] Hospital … from any and all claims of any nature … based on any fact, circumstance or event occurring or existing at or before [Mary Ann’s] execution of this Agreement. [It] includes all claims whatsoever … including … claims under …Title VII of the Civil Rights Act of 1964.” According to the Court, “One does not need a law degree to grasp the import of these terms.”

4. Consideration for the waiver. In exchange for the waiver, the hospital offered Mary Ann a year’s salary plus other benefits, which was more than sufficient consideration.

5. Other relevant circumstances. Mary Ann claimed that she was under duress to sign the agreement. The court disagreed:

All bargaining, whether to buy a house, to take a job or to settle a dispute, comes with implicit economic and psychological pressures—that if the one party does not take the offer, it may go to someone else…. The better the offer, indeed, the greater the implied fiscal threat, creating the possibility that a claim of duress grows stronger the more generous the offer. 

That Gascho worried about having to file a lawsuit (and winning it) if she opted not to accept the settlement offer is precisely the kind of pressure anyone (not independently wealthy) would face in this context…. “No legal system can accept an assertion that ‘this contract was signed under duress because my only alternative was a lawsuit.’ That would eliminate settlement—and to a substantial degree the institution of contract itself.” …

Over one month had passed since the last act of physical violence…. Gascho had plenty of time to consider the agreement, plenty of time to rescind the agreement after signature and plenty of time to consult a labor attorney, as one hospital executive (Greg Foy) recommended she do. She spoke with several people before she signed the agreement, including friends and trusted family members (e.g., her children), and none of them advised her not to sign it. It is difficult to square these circumstances with the notion that Gascho’s husband coerced her to sign the agreement.

Like Mary Ann Gascho, anyone is free to challenge the knowing and voluntary nature of a release. As this case shows, however, it is very hard for employees to win these challenges.Courts treat settlement agreements as sacrosanct. If you resolve a case with an employee and obtain a signed agreement with a release that meets these criteria, you can ordinarily rest comfortably that you are free from future lawsuits brought by that employee.

EEOC poised to explore plight of older workers in current economy

Last Wednesday, the EEOC heard testimony that age discrimination is causing older workers to have a difficult time maintaining and finding new employment. The EEOC believes that the current economic climate is exacerbating this problem. At a minimum, it is increasing the number of employees who claim to be victims of age discrimination. Last year, the EEOC received 22,778 charges of age discrimination, which represented 24.4% of all charges filed, up from 16,548 charges and 21.8% in 2006.

The EEOC heard the following testimony:

• William E. Spriggs, Ph.D., Assistant Secretary for Policy, U.S. Department of Labor: “[D]uring a deep and long recession, the lengths of time that people remain unemployed increases. Older workers have been overwhelmed in this current recession and their numbers are high among the worst indicators. They are the slowest to be reintegrated from unemployment to employment, which indicates that their job search is longer and more challenging. This comes at the cost of human capital depreciation for older workers.”

• Mary Anne Sedey, plaintiff-side employment lawyer: She claimed that older workers rarely litigate discriminatory hiring claims, and urged the EEOC to investigate age discrimination in hiring. She cited three reasons: applicants lack information about why they were turned down, they are reluctant to file a claim based on a hunch, and they cannot find lawyers willing to take their claims.

• Michael Foreman, Director, Civil Rights Appellate Clinic, Pennsylvania State University Dickinson School of Law: He discussed the impact of Gross v. FBL Financial Services, Inc., which held that the ADEA requires a plaintiff to show that his or her age was the “but-for” cause of the employment decision. He argued that Gross applies an unreasonably high burden for plaintiffs in age cases, “preventing potentially legitimate claims of discrimination from ever reaching a jury.”

• Deborah Russell, Director of Workforce Issues in AARP’s Education and Outreach Department: She discussed some proactive steps employers in the healthcare industry have taken to meet the needs of the over-50 demographic.

• Cornelia Gamlem, Society for Human Resource Management: She discussed some suggested best practices for recruiting, retaining, and managing mature workers, including workplace flexibility, retention programs, targeted recruitment, and reductions in force management.

EEOC Commissioner Stuart J. Ishimaru said, “The treatment of older workers is a matter of grave concern for the Commission. We must be vigilant that employers do not use the current economy as an excuse for discrimination against older workers.” Going forward, it is clear that the EEOC will target age discrimination as an enforcement priority. Any company that is either reducing ranks via layoffs, or hiring to re-staff as the economy rebounds, should pay extra attention to age discrimination issues in light of this administrative enforcement.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

WIRTW #153 (the redux edition)

Except for two huge stories (the failure of the Paycheck Fairness Act and on-going coverage of the NLRB’s complaint challenging a Connecticut company’s social media policy), it’s been a pretty quiet week.

For more on the Senatorial sinking of Paycheck Fairness, see Maryland Employment Law Developments, The Proactive Employer, Washington Labor & Employment Wire, Connecticut Employment Law Blog, Washington D.C. Employment Law Update, HR HQ, Colorado Employer's Law Blog, and the DOL’s Work in Progress blog (for a pro-employee viewpoint).

For more on the future legality of workplace social media policies, see The ChamberPost, Philip Miles’s Lawffice Space, HR Observations, New York Labor and Employment Law Report, The Labor and Employment Law Blog, Nolo’s Employment Law Blog, Delaware Employment Law Blog, Joe’s HR and Benefits Blog, Minnesota Labor & Employment Law Blog, TLNT, and Today's Workplace (for a pro-employee viewpoint).

Also this week, the EEOC issued a Q&A for small businesses on its GINA regulations, in addition to some background information on the regulations.

Here’s the rest of what I read this week:

Social Networking

• Facebook Unfriending as Workplace Retaliation? – from Molly DiBianca at the Delaware Employment Law Blog

• Paula Berg: Turning Lemons into Lemonade: 11 Components of a Social Media Crisis Plan – from Huffington Post

• What You Can and Can’t Say - Room for Debate – from the New York Times

• IndustryWeek : Has Email Become a Dinosaur? Workforce Prefers Twittering – from industryweek.com

• Facebook account protected from disclosure in discovery, for now – from Internet Cases

Discrimination

• Is It Sexual Harassment to Require Employees to Submit to Pat-Down Searches that Involve Inappropriate Touching? – from Workplace Prof Blog

• Stray Remarks May Bolster Discrimination Claims In California – from Hunton Employment & Labor Law Perspectives™

• The Gender Wage Gap: If Employment Discrimination Isn’t the Reason, What Is? – from Daniel Schwartz’s Connecticut Employment Law Blog

• Stupid Manager Tricks: Sexual Harassment Edition – from Stephen Meyer’s HR Cafe

• Do you need insurance against employee lawsuits? – from dailyherald.com

• Ergonomics and Reasonable Accommodations – Part 1 – from Kiernan’s Corner: Preventive Law for Employers

Trade Secrets and Non-Compete Agreements

• How Non-Competes for Execs and Lebron James Are Linked – from Kris Dunn, The HR Capitalist

• Who Should Investigate Leaks of Proprietary Information? – from Trade Secret / Noncompete Blog

• Litigation Budgets in Non-Compete Cases – from Trade Secrets & Non-Compete Blog

Labor Relations

• Board to Revisit Dana Corp., Voluntary Recognition Bar – from Seth Borden’s Labor Relations Today

• New NLRB General Counsel Nips at Employers’ Heels Without EFCA – from EFCA & Labor Law Reform Blog

Employee Relations and HR

• Is it time for retailers to adopt a crowd management plan before Black Friday? from Business, Employment and Real Estate Law in Ohio

• Things Not to Say at Work – from Tom Crane’s San Antonio Employment Law Blog

• Expecting the unexpected – from Michigan Employment Law Connection

Wage & Hour

• FMLA FAQ - How do I calculate FMLA leave around the holidays? – from FMLA Insights

• Happy Thanksgiving! Turkey Processing Plant Workers Sue For Overtime – from Wage & Hour - Development & Highlights

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

The failure of the Paycheck Fairness Act ends the golden age of employment law

The Democrats swept into office in January 2009 with promises of paradigm-shifting labor and employment law reforms: card check union recognition, Title VII coverage for sexual orientation and gender identity, expanded FMLA coverage, the end of arbitration agreements, and paid sick leave are but a few of the campaign issues on which the Democrats won the the White House and substantial majorities in both halves of Congress.

Yesterday, the Senate failed to vote to close debate on the Paycheck Fairness Act. That vote, coupled with the incoming Republican majority in the House, means that we likely have seen the end of any significant employment law reforms by the Obama administration’s first (only?) term. The scorecard is stunning. The lone significant employment law legislation to become law under Obama’s watch is the Lilly Ledbetter Fair Pay Act, which, in and of itself, is not all that significant. It affects the timeliness of discrimination claims, and potentially exposes businesses to more lawsuits. Yet, if you ranked the various pieces of legislation discussed and debated over the last two years, Ledbetter would rank pretty low in terms of societal impact.

In comparison, President Bush passed three key pieces of employment legislation during his last year in office: the FMLA military leave amendments, the ADA amendments, and the Genetic Information Nondiscrimination Act. The significance of these three laws will be felt for years to come.

In early 2009, I joined the chorus of employment lawyers who believed that President Obama would change the landscape of labor and employment law. No one ever likes to be wrong. For the sake of American businesses, many of which are still trying to climb out of the worse recession in 80 years, I have never been so happy to have been off the mark.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Three steps to avoid a discriminatory hiring claim

Bartlett v. Gates (6th Cir. 11/16/10) [pdf] involved a plaintiff who claimed that he was passed over for a promotion because of his age and sex. The 6th Circuit Court of Appeals reversed a district court’s dismissal of the discrimination claims for the following three reasons:

1. The plaintiff was objectively as qualified as, if not more qualified than, the successful candidate. He had 24 years of experience as compared to eight. In addition, he possessed superior educational credentials, including a bachelor’s degree, whereas the successful candidate had not graduated from college. There was also some evidence of superior communication skills and job-specific work experience.

2. The hiring manager had not conducted any job interviews and lacked basic knowledge about the successful candidate. Despite the employer’s explanation that it had hired the best-qualified candidate for the position, the hiring manager was unable to describe her credentials. The hiring manager testified that she was able to making a hiring decision without holding any interviews because of her personal knowledge and familiarity with the job applicants’ experience, backgrounds, and competency. Yet, she did not know whether the successful candidate even had a prior experience related to the core functions of the job.

3. There was some direct evidence of discriminatory animus. The plaintiff’s supervisor and hiring manager made comments to and about the plaintiff such as informing him that his 34 years on the job were “enough,” joking about whether he had taken up “antiquing or traveling or something like that,” and suggesting that the plaintiff should retire.

What lessons can employers take away from this case to avoid a discriminatory hiring claim? Here’s three:

1. If you are not going to hire the most qualified person, at least know what you are getting yourself into. Perform a comparison of candidates, including their qualifications, relevant experience, and key demographics. Have objectively supportable reasons why you chose the 29-year-old over the 53-year-old.

2. Meet the candidates. When you whittle the field down to the final few, meet and interview them. Do not rely solely on paper. If you know the candidates, do not rely solely on past experience. Talk to them, avoid illegal questions, and form reasoned, objectively supportable pros and cons for each.

3. Finally, if you feel the need to make racial, sexist, or ageist comments in the months before and after a hiring decision, wait until you get home, make sure all your doors and windows are closed, and yell them into a pillow.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus. For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Post-employment retaliation

The typical retaliation scenario involves an employer firing an employee who complained about discrimination or engaged in some other protected activity. What happens, however, if the employer retaliates after the end of the employment relationship? Do the anti-retaliation laws reach these allegations of post-employment misconduct? The short answer is yes.

The logical place to start in deciphering this “yes” is with the statues themselves. Ohio’s anti-retaliation provision, O.R.C. 4112.02(I), makes it illegal

for any person to discriminate in any manner against any other person because that person has opposed any unlawful discriminatory practice defined in this section or because that person has made a charge, testified, assisted, or participated in any manner in any investigation, proceeding, or hearing under sections 4112.01 to 4112.07 of the Revised Code.

All of the federal anti-discrimination laws (Title VII, the ADEA, the ADA, and GINA) contain similar prohibitions. In Robinson v. Shell Oil Co. (1997), the U.S. Supreme Court concluded that the term “employees” in Title VII’s retaliation provision “includes former employees,” allowing an employee to “bring suit against his former employer for postemployment actions allegedly taken in retaliation.” Because of the similarity in language across the federal and state statutes, it’s safe to assume this result applies across the board.

What does this mean for employers? It means that retaliation does not stop on the last day of employment. It means that employers must treat ex-employees who have engaged in protected activity with the same kid gloves as current employees. And, it means that ex-employees can sue you for post-employment adverse actions such as:

• A negative job reference
• The filing of a lawsuit or counterclaim (with a large caveat)
• The denial of pension credits or other benefits to which the employee was entitled
• The filing of a law enforcement complaint
• Threats and ostracism

Just one more concept to build into your EEO training for your managers and supervisors.

What dryer drums have to do with unpaid wages (or, a scathing judicial indictment of class action lawsuits as extortion)

Thorogood v. Sears, Roebuck & Company (7th Cir. 11/2/10) [pdf] involves the attempted litigation of multiple class action lawsuits in different states over the issue of whether the advertising of a stainless steel dryer drum was deceptive. In brief, after a district court dismissed a class action lawsuit brought by Thorogood against Sears in Tennessee, the same lawyers filed a similar claim in California on behalf of a different plaintiff, Murray. The case caught my attention because of judge’s scathing indictment of class action lawsuits (I apologize for the long quote, but it is worth reading):

The class action is a worthwhile device for economizing on the expense of litigation and enabling small claims, illustrated by Thorogood’s claim, capped at $3,000, to be litigated at all (though when the claim is deceptive advertising, a proceeding before the Federal Trade Commission is a more economical alternative to a class action suit). But the device also lends itself to abuse. [C]lass members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily (and in the present case or cases) too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own…. Defendants, wanting to minimize the sum of the damages they pay the class and the fees they pay the class counsel, are willing to trade small damages for high attorneys’ fees…. These convergent incentives forge a community of interest between class counsel, who control the plaintiff’s side of the case, and the defendants, but may leave the class members out in the cold….

An additional asymmetry, also adverse to defendants, involves the cost of pretrial discovery in class actions. One purpose of discovery—improper and rarely acknowledged but pervasive—is: “it makes one’s opponent spend money.” … In most class action suits, including this one, there is far more evidence that plaintiffs may be able to discover in defendants’ records (including emails, the vast and ever-expanding volume of which has made the cost of discovery soar) than vice versa. For usually the defendants’ conduct is the focus of the litigation and it is in their records, generally much more extensive than the plaintiffs’ (especially when as in a consumer class action the plaintiffs are individuals rather than corporations or other institutions), that the plaintiffs will want to rummage in quest for smoking guns.

The merit of Murray’s case, like Thorogood’s, of which it is a close copy, is slight. But the pressure on Sears to settle on terms advantageous to its opponent will mount up if class counsel’s ambitious program of discovery is allowed to continue. A letter from Mark Boling, Murray’s co-counsel, to Sears’s counsel, printed at the end of this opinion, illustrates the point. The letter reminds Sears that discovery is proceeding and “will involve Plaintiff’s counsel delving into the full extent of Defendants’ alleged wrongdoing” in order to justify not only equitable relief but also punitive damages—which are potentially very large given the size of the class and the possible preclusive use of any judgments favorable to the plaintiffs in suits brought in other states. The letter continues: “as we progress through the various stages of this litigation, the cost of settlement will necessarily increase…. At this point, we may want to consider whether an appropriate olive branch for resolution can be mutually created on a class wide basis commensurate with the status of the case. If interested, please pick up the telephone and call me. In the meantime, Plaintiff will continue to diligently and timely prosecute this case to an appropriate result.” In other words, unless Sears settles now (implicitly for modest relief for the class and an agreement with class counsel to recommend to the judge generous fees for Krislov and Boling), it will incur the considerable cost of responding to class counsel’s distended project of “delving” and assume the risk of a very large adverse judgment. And as Boling’s letter also points out, “if plaintiff is successful on a motion for class certification, the court as the gate keeper will demand a more significant recovery for resolution.”

This scenario is not all that much more different than the standard wage and hour class action.

• Like the Sears example, employers in wage and hour class actions bear a disproportionately large share of time and expense in discovery. Employers have most, if not all, of the wage and hour records, many of which are archived and expensive to recover. Discovery of email exponentially adds to the discovery expense. These high costs bear heavily on an employer’s decision whether to settle or litigate a case.

• Like Sears, employers feel an inordinate pressure to settle these claims. The exposure in wage and hour lawsuits can be large (sometimes, even “bet the company” like exposure). The risk of high attorneys’ fees award only serves to exacerbate that pressure to settle. It is not a secret that claimants use that exposure to their advantage to leverage early resolutions.

• And, like the Federal Trade Commission in a consumer case, there exists a federal agency that can economically litigate a meritorious claim, the Department of Labor.

Now that we all know what dryer drums have in common with wages and hours, we can get back to defending class action lawsuits.

[Hat tip: PointofLaw.com]