Supreme Court considers use of age as factor in disability retirement benefits

Yesterday, the Supreme Court heard oral argument in Kentucky Retirement Systems v. EEOC. The issue is whether a benefit plan's use of age as a potential factor in the distribution of retirement benefits to disabled workers establishes a prima facie case of age discrimination. Kentucky’s disability retirement plan at issue awards benefits based in part on how close a disabled worker is to reaching normal retirement. For example, it disqualifies those who have already reached normal retirement age, and otherwise calculates disability retirement benefits so that an eligible older employee receives a lower monthly benefit payment than a younger disabled employee who is similar to in every relevant way other than age. It therefore affects older workers differently than younger workers, even though its goal is to provide workers with the same retirement benefits he or she would achieved by working until eligible for normal retirement.

The EEOC sued on behalf of a 61-year-old disabled employee. Because he was over age 55 and eligible for normal retirement, he received normal retirement benefits based on his years of service. The EEOC claimed that this policy constituted age discrimination because had he been under age 55 and not eligible for retirement, he would have received higher disability retirement benefits based on the 20 years of service he would have been granted under the plan.

The 6th Circuit decision from which the State of Kentucky appealed found that the EEOC established a prima facie case of age discrimination based on the facially discriminatory language of the plan, and further that when a plan is facially discriminatory one need not offer any further proof of discriminatory animus to establish a prima facie case.

The State argued that the plan is not facially discriminatory because it differentiates on the basis of retirement eligibility, and not age. The EEOC has countered that the plan is facially discriminatory because it uses age as a factor to the disadvantage of older workers.

Kentucky also argues that as age is a necessary component of any retirement plan, only plans that use age in an arbitrary manner can be considered discriminatory on the basis of age. The EEOC, on the other hand, counters that the the at-issue plan is arbitrary because its use of age to provide a claimed necessary safety net for younger workers is based on "stereotypical assumptions of the kind the ADEA seeks to eradicate."

Instead of reinventing the wheel on yesterday's oral argument, I'll merely point everyone to Professor Paul Secunda's thorough summary at the Workplace Prof Blog.

It is very difficult to get a read on what the Court is going to do with this case. If I had a vote, I would reject Kentucky's argument that there is a difference between retirement eligibility and age. The former certainly seems like a proxy for the latter, and both are facially discriminatory. Nevertheless, I would reverse the 6th Circuit, because the use of age in this context simply is not arbitrary. One simply cannot design a disability retirement plan without taking age into consideration.

Deconstructing the Ohio Healthy Families Act

Last week a colleague asked me for my opinion on the proposed Ohio Healthy Families Act that is now pending in the state legislature. I figured I'd share it with the world. I think that the OHFA is largely a political agenda that, at the end of the day, will do nothing more than create yet another avenue for employees to sue their employers, while at the same time creating an administrative mess for Ohio businesses. Sick Days Ohio, the group lobbying for this bill, estimates that 2.2 million Ohio employees cannot earn paid sick days. I have no idea where they get their numbers from, but it seems like a gross exaggeration to me. According to the 2000 census, Ohio has approximately 6.7 million people of working age. I find it hard to believe that one-third of all Ohio workers do not have access to paid days off.

Essentially, the OHFA will grant all employees working for companies with 25 or more employees 7 paid days off per year for (1) their own physical or mental illness, injury or medical condition, (2) their own professional medical diagnosis or care, or preventive medical care, and (3) the same for an employee's child, parent, or spouse. Employees who work less than 30 hours per week or 1,560 total hours per year will receive a pro rated amount of paid time off. Sick leave will begin to accumulate immediately, but employees will not be able to use it until they have been employed for 90 days. The paid sick leave must accrue at least monthly, and except for the initial 90 days of employment, employees will be able to use it as it is accrued. Employers will not be able to prohibit employees from carrying over up to 7 days of unused paid time off per year.

Similar to the FMLA, but without the FMLA's level of specificity, the OHFA will also allow for the use of incremental (i.e., less than a full day) time off, certification by a health care professional when an employee is out for more than 3 consecutive work days, an anti-retaliation provision, and a private right of action for aggrieved employees. It also will forbid employers from counting the use of paid sick leave under a no-fault attendance policy. It is unclear if this prohibition applies only to paid leave under this statute, or any paid leave granted by an employer. Finally, it will require employers to keep records documenting hours worked and paid sick leave taken by employees for a period of 3 years.

Proposed O.R.C. 4114.07(B) is what I believe to be the saving grace for most employers, and why I think the OHFA will not result in monumental practical changes for the vast majority of companies that already provide paid time off. That section provides: "An employer with a leave policy providing paid leave options shall not be required to modify such policy, if such policy offers an employee the option at the employee’s discretion to take paid leave that is at least equivalent to the sick leave described in this section." As I read that section, and this is where my colleague and I differ, if a company has a leave policy that already provides for at least 7 paid sick days, it will not have to grant any additional paid leave.

The limited practical effect of this legislation notwithstanding, the cons of the OHFA far outweigh its pros. First and foremost, that last thing that businesses want is another statute under which employees will be able to sue, especially when it provides for treble damages and attorneys fees. Take a look at proposed O.R.C. 4114.10(C)(2): "No employer shall discharge or in any manner discriminate against any employee for opposing any practice made unlawful by this Act, including ... using paid sick leave taken pursuant to this Act as a negative factor in an employment action, such as hiring, promotion, or a disciplinary action." "Negative factor" is far too lenient of a standard, and will hamstring employers from taking action against any employee who is out for even a day with an illness.

There are other serious gaps in the statute. For example, the OHFA states that it covers all employers with 25 or more employees. If a company has 1,000 employees nationwide, but only maintains one Ohio facility with 15 employees, will the OHFA apply to that employer? What does "physical or mental illness, injury or medical condition" mean? What type of certification by a health care professional will support an extended leave? Can an employer dispute such a certification and obtain a second opinion?

The legislature, and if necessary, Ohio's voters, should take a long, hard look at these serious deficiencies in the OHFA, and should not merely knee-jerk vote in its favor because paid time off is viewed by most employees (and most of us are employees) as a "good thing." If this statute becomes law in its current form, it will take a herculean effort by the director of commerce to draft clear and comprehensive rules and regulations that make this law workable for businesses, instead of leaving myriad unanswered questions for the courts to sort out at the expense of those companies who will have to defend their individual interpretations.

Health insurance audits poised as a trend for 2008

Does anyone remember the episode of the Drew Carey Show where Drew's dog needed a hip replacement? Drew couldn't afford it, so he claimed his dog as his gay husband to get coverage under his employer's medical plan. I was reminded of it Saturday morning when reading the front page of the Cleveland Plain Dealer's business section, which had an article on employer audits to verify health insurance dependents. The article reports that to control rising insurance costs, more and more companies are auditing their health plans and requiring employees to prove (via marriage and birth certificates) the status of claimed dependents. It cites Chrysler as an example, which found 20,000 ineligible dependents saving the company millions of dollars.

Maybe I'm missing something here, but isn't this fraud? Do we want employees working for us who willfully steal by claiming false dependents? Today's unqualified dependent could be tomorrow's embezzlement. Isn't this covered by our employee handbooks, which should have a policy that states that theft is grounds for immediate discharge? But, at the same time, can Chrysler continue to build cars if it has to terminate 20,000 employees? Could you survive if you had to immediately terminate a percentage of your workforce? You could pick one or several employees to set an example, but then you run the risk of being scrutinized under the discrimination laws for who you selected and did not select.

Maybe the best way to handle this problem is to write it directly into your employee handbook. Change your termination policy to clearly state that claiming an unqualified dependent for company benefits is considered theft and subject to discipline up to and including termination. That way, expectations are established on the front end, and employees will have less of reason to cry foul if they are terminated for this type of insurance fraud.

Ohio Healthy Families Act up for legislative consideration

As I reported in October, the Ohio legislature will this term consider the Ohio Healthy Families Act. The Act, if passed, will guarantee 7 sick days for all full time Ohio employees who work for companies with 25 or more employees, and a prorated number of days for part time employees. As today's Cleveland Plain Dealer reports, "If the Republican-led House and Senate fail to act within 120 days, the union-led coalition behind the Healthy Families Act will have the right to take the issue to the November ballot." That threat may spur the Republicans to pass the legislation, as having an issue such as this on the ballot in November will certainly draw more Democrats to the polls to vote for it, just as the Minimum Wage amendment did in 2006. This issue bears watching, and I will continue to post updates as this bill weaves it way through the legislature.

Federal court upholds punitive verdict with no compensatory damages

It has long been the law in Ohio that a jury cannot award punitive damages without also making a corresponding award of actual, compensatory damages. Further, since the United States Supreme Court decided State Farm Mut. Automobile Ins. Co. v. Campbell several years ago, it has also been the law that for a punitive verdict to satisfy due process, there cannot be an excessive disparity between the actual harm suffered by the plaintiff and the punitive damages award. The Supreme Court, albeit in dicta, suggested that "few awards exceeding a single-digit ratio between punitive and compensatory damages will satisfy due process."

A case earlier this week out of the 5th Federal Circuit, however, casts serious doubt on both of these long-held principles. In Abner v. The Kansas City So. RR, a racial harassment case, the court of appeals upheld a $125,000 punitive damage jury verdict with a mere grant of $1 in nominal damages by the court. Abner involved allegations of racial graffiti, a noose hanging outside a door, racially derogatory comments, and a company that failed to correct this improper behavior.

In reaching its conclusion, the court relied heavily on the statutory damage caps put in place by the Civil Rights Act of 1991. The court found that under the plain language of Title VII and Section 1981, an award of punitive damages need not be accompanied by any compensatory damages. The statutory damages cap takes care of any potential runaway jury verdicts. Also because of the statutory cap, the court was unconcerned with the 125,000-1 ratio between the punitive and nominal damages. If the plaintiff was not harmed by the alleged harassing conduct, how could he have been sufficiently subjectively offended by the conduct to sustain the harassment claim in the first place? The gap in common sense in allowing this punitive verdict to stand for an uninjured plaintiff is astounding. Civil lawsuits are supposed to compensate for harm suffered, not to punish for the sake of punishment. If there is no harm to remedy, then the law has no role in doling out punishment.

Let me also point out that the conduct that led to a $125,000 verdict in Abner is eerily similar to the same conduct over which the EEOC settled with Lockheed Martin for $2.5 million earlier this week. I can't wait until the next time I'm asked to evaluate a racial harassment case and have to provide a range of $125,000 and $2.5 million as the potential exposure. Does this disparity make any sense at all?

Hat tip to John Phillips at The Word on Employment Law and Ross Runkel's Employment Law Blog.

6th Circuit limits scope of "regarded as" disability claims

The Americans with Disabilities Act not only protects employees who have actual disabilities, but also those who have a record of a disability and those who an employer regards as disabled. Gruener v. The Ohio Casualty Ins. Co., decided yesterday by a unanimous panel of the 6th Circuit, defines the scope of regarded-as-disabled claims.

Sharyn Gruener, an IT technician for Ohio Casualty, suffered from a long history of degenerative joint disease in her knee, which ultimately resulted in a double knee replacement. After the surgery, she returned to work with restrictions on her ability to squat, crawl, kneel, lift more than 20 pounds, or carry more than 10 pounds. When her supervisor learned that had been asking her co-workers to help her perform certain tasks she could not do, such as plugging in computers and lifting heavy monitors, the company terminated her, concluding that she could not perform the essential functions of her position without asking co-workers to live, move, or plug-in computer equipment for her.

Following her termination. Gruener sued Ohio Casualty under two different theories of disability discrimination -- actual disability and regarded-as-disabled disability. The jury found against her on the former, and the trial court refused to instruct the jury on the latter.

The appellate court found that that the trial court did not err in refusing to give a jury instruction on the regarded-as-disabled theory. The ADA's regarded-as-disabled provision protects employees who are perfectly able to perform a job, but are rejected or terminated because of "myths, fears, and stereotypes" that go along with disabilities. The theory requires that the employer "entertain misconceptions about the employee," either by mistakenly believing that the employee has a physical impairment that substantially limits one or more major life activities, or mistakenly believing that an actual non-limiting impairment substantially limits one or more major life activities.

In this case, there was no dispute that Gruener could not perform the essential functions her job without the help of co-workers. Moreover, the only understanding Ohio Casualty has about her impairments, their limits, and her ability to perform her job came directly from her own doctor's valid, permanent work restrictions. Following the specific recommendations of a treating physician does not wrongfully view an employee through a stereotype of disability.

While this case does not set earth shattering precedent in regarded-as-disabled cases, it does provide some added comfort for employers who rely upon an employee's treating doctor's work restrictions in making personnel decisions. It also further illustrates an issue that I wrote about earlier this week - discrimination cases are largely about harbored stereotypes and the impact they have on one's perception of another to perform a job.

What else I'm reading this week #12

Last week I reported on Arbino v. Johnson & Johnson, in which the Ohio Supreme Court upheld the constitutionality of Ohio's tort reform legislation. Teri Rasmussen at the Ohio Practical Business Law Counsel provides a detailed examination of the opinion. She also questions my supposition that tort reform does not apply to discrimination claims. So that my conclusion is clear, in light of the Ohio Supreme Court's recent narrowing of the public policy tort, discrimination claims under Ohio law are now almost certainly purely statutory. Because they present statutory claims, any caps on damages for those claims would have to come from an amendment to the statute. There are a host of non-statutory employment tort claims (defamation, intentional infliction of emotional distress, tortious interference, to name a few) that are impacted by the tort reform caps on damages.

On to other matters.

Kris Dunn, The HR Capitalist, always an excellent resource, writes about the NLRB's Register-Guard decision, and concludes that it stinks to have to say no to girl scout cookies to keep unions out of your workplace.

If a union does come knocking, Guerilla HR gives some helpful advice on what to do and what not to do in response. Most importantly, do not threaten or intimidate employees about their union support.

John Phillips' Word on Employment Law discusses employee privacy rights (or lack thereof) in off-work, personal Internet activity. For my thoughts on this issue, see Can employers base employment decisions on employees' personal Internet activities? As a bonus, John gives us a very thorough crib sheet covering the Presidential candidates' positions on various labor and employment issues.

Finally, Michael Moore at the Pennsylvania Employment Law Blog draws some good lessons from yesterday's reported $2.5 million settlement by the EEOC on behalf of one employee for a racial harassment claim. According to the EEOC's press release, the now wealthy employee was the target of repeated verbal abuse by coworkers and a supervisor, including calling him the "N-word" and saying "we should do to blacks what Hitler did to the Jews." For the company's part, it failed to discipline the harassers and instead allowed the discrimination to continue unabated even though it was aware of the unlawful conduct. I'm as against this type of conduct as anybody, but $2.5 million? Seems awfully excessive for someone who was subjected to words, no matter how offensive they might be.

"Maternal Profiling" listed as buzzword of 2007

With the calender barely having turned to 2008, I'm still catching up reviewing year end lists for 2007. One list, the New York Time's Buzzwords of 2007, should be of particular interest to employment lawyers, employers, and HR personnel. It lists "maternal profiling" as one of the phrases that took its place in the national conversation for 2007. Maternal profiling is defined as:

Employment discrimination against a woman who has, or will have, children. The term has been popularized by members of MomsRising, an advocacy group promoting the rights of mothers in the workplace.

A trip over to MomsRising.org reveals some frightening statistics about the workplace impact of maternal profiling. It cites one study which found that mothers are 79% less likely to be hired than non-mothers with equal resumes and job experiences. It cites another study that women without children make 90% as compared to a comparable man, as compared to 73% for women with children and 60% for single moms. It cites one final study that mothers were offered $11,000 less in starting pay than non-mothers with the same resumes and job experience, while fathers were offered $6,000 more.

I've spent a lot of time this year writing about family responsibility discrimination in light of the EEOC's recent enforcement guidance on the subject, and the $2.1 million verdict against Kohl's Department Stores for repeatedly passing over a qualified mom for promotion. Maternal profiling may have been one of the buzzwords of 2007, but it certainly appears that family responsibility discrimination is going to be a key employment issue in 2008 and beyond. Depending on how the political winds blow after the November elections, FMLA expansion, paid sick and parental leave, and incentives for family-friendly work programs will all be in play in 2009.

I am not suggesting that everyone rewrite their leave policies, but those who can afford to be family-friendly will have an advantage in recruiting and retention of employees for whom it is an important benefit (i.e., most people between the ages of 25 and 50). At a minimum you should be building the concept of maternal profiling into your harassment and EEO/diversity training. Discrimination in largely subconscious, and education is the first step towards prevention.

Hat tip to Carrie Kurzon at the New York Employment Lawyer Blog.

An argument for broader protection of confidential and proprietary information

Nelson Jewellery Arts Co. v. Fein Design Co., out of the 9th District Court of Appeals, involves two companies fighting over what we can only assume is a key employee. As is often the case in such disputes, the old employer claimed that the employee took with him to the new employer certain confidential and proprietary information, such as pricing and customer information. The appellate court, however, rejected the claim because the information did not meet the statutory definition of a "trade secret." It was readily ascertainable by other means such as telephone books and trade publications, and the company did not take reasonable measures to maintain the secrecy of its alleged confidential information. Therefore, the claim was dismissed. In so ruling, the court rejected any common law protection over the information, and limited the law's reach to that narrow category of corporation information that meets the specific statutory definition of a "trade secret" pursuant to O.R.C. 1333.61(D):

(D) "Trade secret" means information, including the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following:

(1) It derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.

(2) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

This case raises the question of what corporate information should the law protect. Is is just information that meets the statutory definition of a trade secret, or is some broader category of information worthy of legal protection? It seems that companies should be able to stop employees from walking out the door with corporate information whether or not such information qualifies as a trade secret. After all, that which a company creates is its property, and it should be able to prevent its disclosure to or use by a competitor. Limiting such protection merely to "trade secrets" is overly restrictive, and ignores the property interest that businesses have in their documents, data, and other information.

How do we help put ourselves in the best position to protect stuff that may not meet the high threshold of a trade secret? Let me make a few suggestions:

1. Put provisions in employee handbooks that define the scope of the company's property - not just as trade secrets, but as all confidential and proprietary information, and everything that is created by or for the company.
2. Separate and apart from the employee handbook, have all employees who will come in contact with any information you might want to protect sign an agreement that defines what belongs to who, and specifically sets forth the company's right to the information at the end of employment.
3. When an employee leaves, have that employee sign a receipt that all company property and information has been returned, and that the employee is not taking anything with him or her. Where the separation is not voluntary, it may not always be easy to have the employee sign something on his or her way out the door. In that case, you can still protect yourself by sending the employee a certified letter reminding him or her of the corporate policy and their agreement to it.
4. If you think the ex-employee is not being forthcoming with you, correspond with the new employer, placing it on notice that you will hold it responsible for any of your information that is in its possession.
5. When all else fails, litigate. Bear in mind, however, that adherence to steps 1 - 4 will put you in a much better light should you have to litigate to seek protection over your information, whether or not it qualifies as a trade secret.

9th Circuit creates new affirmative defense under the ADA

Earlier this month I reported on the EEOC's Fact Sheet on Employment Tests and Selection Procedures. United Parcel Service provides an example of one such screening criteria, and gives some hope to employers who use medical or other criteria to screen out certain disabled employees.

UPS imposes a Department of Transportation hearing standard on all package-car drivers, even though the standard only applies to those who drive vehicles over 10,000 pounds. UPS disqualifies from employment any employee or applicant who cannot meet that standard, whether or not the vehicle that individual will operate is over or under the 10,000 pound threshold. Last week, the 9th Circuit, in Bates v. United Parcel Service, reversed a lower court, which had held that application of the standard to those who do not drive covered vehicles violated the ADA.

Section 12113(a) of the ADA makes it a defense to a disability discrimination claim "that an alleged application of qualification standards, tests, or selection criteria that screen out or tend to screen out or otherwise deny a job or benefit to an individual with a disability has been shown to be job-related and consistent with business necessity, and such performance cannot be accomplished by reasonable accommodation." This defense breaks down into three elements: 1) job-relatedness; 2) consistent with business necessity; and 3) that job performance cannot be accomplished by reasonable accommodation.

As evidence of the lawfulness of its hearing qualification standard, UPS offered up the DOT standard to show that a certain level of hearing is necessary to safely drive even non-DOT-regulated vehicles. The 9th Circuit found the 10,000 pound threshold irrelevant to whether UPS could lawfully rely on the DOT safety standard as a qualification standard for all driver positions:

To be sure, DOT's regulation does not apply to the category of vehicles at issue in this case. However, that circumstance does not mean that the standard has no relevance to the employer's safety argument. UPS is entitled to use as some evidence of its business necessity defense the fact that it relied on a government safety standard, even where the standard is not applicable to the category of conduct at issue.... Thus, while certainly not dispositive of UPS's showing of job-relatedness, business necessity or the reasonableness of potential accommodations, UPS's reliance on the government safety standard with respect to other vehicles in its fleet should be entitled to some consideration as a safety benchmark.

Thus, employers are entitled to rely on objective safety criteria (such as governmental regulations) as a qualification for a position, even if the at-issue regulations are not mandated for the specific position. Such reliance, however, is not dispositive as to the lawfulness of the qualification. Instead, one must examine the congruence between the safety standard and the position to which it is being applied. In other words, is there a bona fide, demonstrable correlation between the standard and performance of the essential functions of the position?

While this decision does not bind companies in Ohio, it should give employers everywhere some solace that objective screening criteria will not necessarily be found to be discriminatory, even if they effectively screen out from consideration for a position all disabled applicants and employees. It also lets employers know that they can employ reasonable selection criteria and safety standards without fear of necessarily being second-guessed by a court.

My New Year's resolutions for everyone

While it may be trite, the approach of a new year causes us to reflect on the past year and make some resolutions on how to better ourselves for the coming year. While we generally think of these resolutions in personal terms, it makes sense also to think of them from an organizational viewpoint. With that in mind, let me suggest some resolutions for your employment practices to make 2008 a better, more compliant year than 2007:

1. Review your employee handbooks and other personnel policies.
2. If it's been longer than 2 years since you did company-wide harassment training, schedule it for 2008.
3. Make sure you are using the new I-9 form for all new hires.
4. Audit your wage and hour practices.
5. Make a concerted effort to document all discipline and performance problems.
6. Do not make promises to your employees that you cannot keep.
7. Make hiring and firing decisions based on performance.
8. Be more understanding of your employees' family responsibilities outside of the office.
9. Employ the golden rule - treat your employees as you would want to be treated.
10. Above all else, try to have some fun at work.

My hope for everyone (except me) is that 2008 brings no lawsuits, no EEO charges, no sexual harassment complaints, no wage and hour audits, and no disgruntled employees. Be happy and be safe, and I'll see everyone in 2008.

President Bush expected to veto FMLA expansion

In what can only be described as a surprising turn of events, and in a lesson that would make any grade school civics teacher proud, President Bush is expected to use a pocket veto to kill the National Defense Authorization Act for Fiscal Year 2008. That bill includes an expansion of FMLA leave rights for the families of wounded service members. A couple of weeks ago, I reported that the President would be hard pressed to veto a bill that authorized $696 billion in military programs. Now, as the New York Times is reporting, the White House has stated that the President will veto the bill. At issue is one specific section over which the Iraqi government is concerned that Iraqi assets in American banks could be vulnerable to claims from victims of Saddam Hussein.

Given the overwhelming majority this bill passed both the House and Senate, one could assume that these issues will be resolved after Congress resumes in the new year. I'm done making predictions about this legislation, however, after my last prediction turned out to be wrong. All I can is to watch this space for further updates about this potential expansion of FMLA rights.

Hat tip to the Connecticut Employment Law Blog.

What else I'm reading this week #11

Given the mid-week holiday, it's still been pretty active in the blogosphere. As always, please take the time to click through these links and support my fellow employment law and HR bloggers.

John Phillips' The Word on Employment Law reports on a story that's had a lot of traction this week, Wikipedia's failure to discover the criminal history of its former COO, and draws some important lessons on the importance of conducting background checks for critical positions.

HR World blogs on how to handle bullying bosses. You can also read my thoughts on this issue here: Sticks and stones may break my bones...

The Manpower Employment Blawg draws some important lessons on FMLA leaves of absence from a case which held that formal notice is not necessary for an employee to be entitled to FMLA leave.

Finally, Texas' HR Lawyer's Blog discusses some employment law pitfalls that await those who carelessly e-mail.

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.

What else I'm reading this week #10

We'll start this week with a couple of posts on issues surrounding the drafting and enforcement of employment agreements:

Jottings by an Employer's Lawyer lists the 8 parts of an executive employment agreement.

Suits In The WorkPlace gives some sage advice on how to draft solid non-compete agreements. The discussion is under Illinois law, but the principles transfer well to Ohio law.

On other topics:

Dan Schwartz at the Connecticut Employment Law Blog draws some lessons from his recent middle school mock trial coaching, and recommends that to avoid employment law issues, HR should keep things simple.

The Evil HR Lady gives some advice on how to handle a job applicant's prior criminal conviction. As long as the policy is neurally applied (i.e., disqualifying anyone with a conviction other than a traffic offense), you should not run into any problem using conviction histories in employment decisions. Arrest records are another story, because arrests may disparately impact one race over another.

Should you fail to hire someone and end up defending an administrative charge, the Pennsylvania Employment Law Blog tells us 5 things every HR generalist should know in responding to EEOC and state agency discrimination charges. Let me add #6 - call your employment counsel.

John Phillips, at The Word on Employment Law, has posted the 2nd half of his excellent 6-part series on the art of firing employees. (Part IV, Part V, and Part VI).

In the wake of the debacle over the proposed maternity leave regulations, the Ohio Practical Business Law Counsel asks, "Where is the Ohio Civil Rights Commission going?"

Finally, the Wall Street Journal's Law Blog asks the self-evident question of whether the jury trial is an endangered species.

Some more shameless promotion

I commend to everyone's reading an article in this week's Business Insurance on the Huber v. Wal-Mart case that the Supreme Court last week decided to hear - High court to hear case on ADA job applicants. I has a collection of quotes from lawyers all over the country predicting how the Court will rule, including me:

Jonathan T. Hyman, an employer attorney with Kohrman, Jackson & Krantz P.L.L. in Cleveland, said he expects the court to rule in Wal-Mart's favor.

"I think it would be a dangerous precedent to write affirmative action into the ADA by saying you don't have to hire the most qualified person for a position," said Mr. Hyman. Hiring the most qualified person is "one of the cornerstones of employment law," he said.

Ohio Supreme Court holds that no wrongful discharge claim exists for employee terminated while on workers' comp leave

Four months ago, I reported on Klopfenstein v. NK Parts Industries, Inc., an Ohio appellate decision which held that Coolidge v. Riverdale Local School Dist. created an independent public policy exception to the employment at-will doctrine. Klopfenstein stood in direct contrast to other Ohio appellate districts, such as Cuyahoga County in Brooks v. Qualchoice, which held that Coolidge does not create a new public policy exception to the employment at-will doctrine, but instead illustrates conduct that is retaliatory under R.C. 4123.90 (the workers' comp anti-retaliation provision). At that time, I predicted that given the conflict, the Ohio Supreme Court would soon be asked to revisit this issue, and that it should reject the Klopfenstein line of cases:

Klopfenstein will not be the last word on this issue. Whether in an appeal from that case, or some future case, the Ohio Supreme Court will be called upon to clarify its Coolidge holding and definitively state the proper statute of limitations. In anticipation of that future battle, let me suggest that Klopfenstein was wrongly decided. R.C. 4123.90 states: "No employer shall discharge ... any employee because the employee filed a claim ... under the workers’ compensation act for an injury ... which occurred in the course of and arising out of his employment with that employer." If an employee is terminated because of workers' comp-related absences, that employee is being terminated because of the claim. Thus, the termination falls squarely within the coverage of R.C. 4123.90. It is the job of the legislature, and not the courts, to expand the statute of limitations for Coolidge claims if it sees fit to do so.

Today, the Ohio Supreme Court has proved me to be both prescient and correct. In Bickers v. W. & S. Life Ins. Co., the Court has held: "An employee who is terminated from employment while receiving workers' compensation has no common-law cause of action for wrongful discharge in violation of the public policy underlying R.C. 4123.90, which provides the exclusive remedy for employees claiming termination in violation of rights conferred by the Workers' Compensation Act." In so ruling, it greatly limited the reach of its 2003 Coolidge decision, limiting Coolidge to considerations of "good and just cause" for termination under R.C. 3319.16 (which involves terminations of contracts by boards of education). The Court explained its rationale for limiting employees to a statutory claim under the workers' comp retaliation provision:

The policy choice between permitting and prohibiting the discharge from employment of an employee who has been injured at work is a difficult one, as it inevitably creates a burden of some degree upon either the employer or the employee.

Should the policy choice be to deny employers the exercise of their employment-at-will prerogative and require them to hold open the jobs of injured employees for indefinite periods of time, then employers will be burdened with employees unable to perform the work for which they were hired and an inability to obtain permanent replacements. This would be particularly onerous on small employers with few employees, who lack the ability to shift the duties of an injured employee to other employees.

Should the policy choice be to permit an employer to terminate a worker who is injured on the job and cannot work as a result, then the worker suffers not only the burden of being injured but also the burden of unemployment at a time when seeking a new position is made more difficult by the injury.

In addressing this difficult policy issue, which lacks wholly satisfactory solutions, the General Assembly chose to proscribe retaliatory discharges only. Employers may not retaliate against employees for pursuing a workers’ compensation claim. R.C. 4123.90. It is within the prerogative and authority of the General Assembly to make this choice when determining policy in the workers' compensation arena and in balancing, in that forum, employers' and employees' competing interests. We may not override this choice and superimpose a common-law, public-policy tort remedy on this wholly statutory system.

In holding the employee to the statutory remedy, the Court continued its string of recent opinions limiting the scope of Ohio's wrongful discharge tort (see Ohio Supreme Court rejects common law wrongful discharge age discrimination claim). What is becoming more and more clear under Ohio law is that if a statute provides a remedy that an aggrieved employee can take advantage of, that employee will not have a valid common law wrongful discharge claim.

The Bickers opinion is also interesting for the debate between the majority and the minority on the actual holding of Coolidge and whether the Court is merely clarifying its prior holding, or outright reversing binding precedent. That debate, while interesting from a jurisprudential standpoint, is ultimately immaterial to the practical impact of Bickers for companies: employers no longer have to hold jobs open in perpetuity for employees who are off work because of a workers' comp injury. The FMLA and the ADA, where applicable, will still have something to say about the duration of a medical leave of absence (see ADA may require leaves of absence beyond FMLA mandates), but at least as to the workers' comp law employees are limited to their statutory remedy and the 180-day statute of limitations that goes along with it.

Offensive comments are not just for proof of direct evidence

Today, we are going to play a little game. The following is an excerpt from Vincent v. Brewer Company, a sex discrimination case decided by the 6th Circuit. So that you can follow along: Brewer Company, the employer, lays natural gas pipes; Jama Vincent, the plaintiff, was demoted from a crew leader position to a laborer position, and was laid-off (even though replaced by a man) 7 months later for lack of work and failure to follow company rules; Ken Parker was Vincent's immediate supervisor and the decisionmaker who laid her off; Sal Dilillo is another supervisor and a peer of Ken Parker; Jay Fetters and Kevin Parker are crew leaders who reported to Ken Parker. After reading the following excerpt, decide whether the employee or the employer won the case:

Vincent and other former Brewer employees testified that members of Brewer’s management team frequently made degrading comments regarding the capabilities of female employees, and expressed a desire to rid the Utility Division of their presence. Among the remarks alleged to have been made by Brewer management are the following:

(1) Ken Parker stated that he believed that women do not belong at Brewer and that he would not hire them.

(2) Kevin Parker told a crew leader, Ronald Ayres, that he did not permit his female laborers to do any work aside from directing traffic and that Ken Parker would fire Ayres if he discovered Ayres allowing female laborers to perform any other task.

(3) Ken Parker told a female employee, Tina Updike, that the only jobs available to women at Brewer were those involving traffic direction.

(4) Kevin Parker told Vincent and another female employee, Tammy Ayres, that Ken Parker instructed him to only permit female laborers to direct traffic.

(5) Kevin Parker told Tammy Ayres that she could not be in charge of a project because women are "not leaders" at Brewer.

(6) Ken Parker told Tammy Ayres that "the problem with you is you're a f***ing woman."

(7) Kevin Parker stated that Dilillo disliked women even more than Ken Parker, and that Dilillo wanted to remove all of the Utility Division’s female employees because they made it look bad.

(8) Fetters frequently referred to Tammy Ayres using nicknames such as "sweetheart" and "cupcake," and often asked female employees graphic sexual questions.

(9) Ken Parker told Updike that if she wanted to earn a man's pay then she would have to work like a man or she would be replaced by a man.

Okay, that wasn't meant to be a trick question, and hopefully its obvious from that litany of offensive comments that Vincent won her appeal. What interesting about this case, though, is that despite all of those offensive comments, many attributable to the decisionmaker, and all attributable to high-level officials with managerial authority over the decision, this case was not treated as a direct evidence case, but decided under the McDonnell Douglas burden shifting analysis. In fact, the actual legal holding of the case is: "To establish a prima facie case of gender discrimination, ... a plaintiff who can prove that she was replaced by a member of the opposite sex need not show that she possesses qualifications similar to those of her replacement." The district court erred by requiring Vincent to show that her replacement was outside of the protected class and similarly qualified as her. The latter is simply not part of the prima facie case.

Many of the offensive comments could be subject to exclusion in a direct evidence case because they may not have a sufficient nexus to the at-issue termination decision. However, in this case they were used as part of the pretext analysis, to show that Brewer's legitimate non-discriminatory reason did not actually motivate the discharge. The lesson to take away from this case is that courts will hold you to your legitimate non-discriminatory explanations, and evidence that might otherwise be excluded as unrelated to the challenged decision will become relevant to show pretext and rebut that explanation.

Groping of mall Santa raises potential sexual harassment issues

The story of the Connecticut woman arrested for inappropriately groping a mall Santa is making the rounds this morning. (Woman accused of groping mall Santa). Harassment is not confined to employees. Just as companies have a responsibility to investigate and remedy harassment of employees by other employees, companies have a similar responsibility when the alleged harasser is a non-employee, such as a customer, a vendor, or a delivery person. For a thorough discussion of these issues, I recommend taking a look at Harassment by Nonemployees: How Should Employers Respond?, from HR Magazine.

Lord of the pants - When is the right time to countersue?

This morning's USA Today is reporting that famed Irish dancer Michael Flatley has won an $11 million judgment against a woman who had accused him of raping her in a Las Vegas hotel room. According to the article, the woman threatened to sue Flatley unless he agreed to a "seven figure" settlement. When he refused, she sued him, but the case was dismissed. Flatley responded with a lawsuit against the woman and her lawyer, alleging extortion, intentional infliction of emotional distress, and defamation.

While the Flatley case does not involve an employer/employee relationship, it is nevertheless interesting to look at in relation to the Ohio Supreme Court's decision last week in Greer-Burger v. Temesi. I cautioned that employers should tread lightly in filing lawsuits against employees who have engaged in protected activity. Flatley illustrates one situation where it might make sense to file a lawsuit against an employee - where the value of one's personal reputation is harmed by the mere filing of the employee's claim. For example, a CEO or celebrity accused of sexual harassment has a lot to lose even by having a meritless claim alleging sexual misconduct filed against him or her. Another example that comes to mind, although not implicated by the Flatley case, is where an employee has stolen trade secrets. In those examples, the individual or the company has something of value to gain other than mere retribution.

The decision of whether to file a claim against an employee or ex-employee is not an easy one, and should not be undertaken without careful thought, a clear strategy of the goals to be achieved, and consideration of whether those goals are worth the risk of defending against a likely retaliation claim or the perception in court that the counter-suit is merely retaliatory. For Michael Flatley, the decision was a no-brainer, as he was being accused of rape and being extorted. For your company, the decision should be of the same degree of certainty before a similar decision is reached.

The Fox who cried wolf: 6th Circuit finds that mere discussions of a pending lawsuit does not amount to protected activity

If an employee files a charge of charge of discrimination, and then openly discusses with others his strong desire to sue the company for discrimination, do those discussions constitute "protected activity" under the anti-retaliation provisions of the employment discrimination statutes. According to the 6th Circuit's ruling late last week in Fox v. Eagle Distributing Co., the answer is no.

After being passed over for a promotion, James Fox filed a charge of discrimination. After filing that charge, he repeatedly told co-workers and customers that the company was out to get him, and that he was going to sue the company for $10 million. Other than his charge of discrimination, however, he never told anyone that he believed he was the victim of age discrimination. When the company found out that he had been complaining to customers, it fired him for a "poor attitude" which impeded the company's ability to develop good customer relations. Fox then claimed that he was being retaliated against. The only protected conduct he alleged was his boasts that the company was out to get him and that he was going to sue the company.

The 6th Circuit affirmed the trial court's dismissal of Fox's retaliation claim. It reasoned that Fox had not engaged in protected activity because he had never complained that he had been discriminated against. According to the 6th Circuit, to qualify as protected activity, the opposition must be tied to a violation of a specific statute, and not merely generalized grievances.

We conclude that Fox’s discussion with Poplin is not protected activity under the ADEA and, therefore, Fox has failed to establish a prima facie claim of retaliation. Specifically, we hold that Fox’s statements to Poplin are not protected because they did not amount to opposition to an unlawful employment practice by Eagle. In order to receive protection under the ADEA, a plaintiff’s expression of opposition must concern a violation of the ADEA.... Here, the record does not contain any evidence that Fox specifically alleged discriminatory employment practices in his discussion with Poplin. In her affidavit, Poplin states that Fox mentioned suing Eagle and "that he had made comments about not getting promoted to a pre-sell position.... Although Fox’s lawsuit against Eagle alleged age discrimination, Poplin did not state – either in her affidavit or as recounted in the personnel memo – that Fox alleged that he was denied the promotion due to age discrimination or that Eagle engaged in any unlawful employment practices."

In other words, a vague charge that management is out to get an employee, and discussions of a pending lawsuit without specific reference to alleged discrimination are insufficient to constitute opposition of an unlawful employment practice and does not merit protection.

Typically, companies should treat employees who have alleged discrimination with kid gloves. The lesson to take away from this case is that no employee is protected from termination merely because he or she files a charge of discrimination or a lawsuit. Eagle got off because Fox did not complain in the right way, These issues, however, operate in very gray areas, and companies would be wise to move cautiously if deciding whether to fire an employee like James Fox - a disgruntled employee with a history of crying discrimination.

Some shameless self-promotion

I'm quoted in an article in Business Insurance Magazine on the Greer-Burger vs. Temesi Ohio Supreme Court retaliation decision:

Jonathan T. Hyman, an employer attorney with Kohrman Jackson & Krantz P.L.L. in Cleveland, said the decision was correct.

The court “was basically balancing employees’ right against retaliation against anybody’s right under the First Amendment of the Constitution to petition the court and file a lawsuit,” said Mr. Hyman, who was not involved the case. “When you’re balancing degrees of importance, the Constitution is going to, and should, trump” the employee’s right against retaliation.

He added, though, that employers should “think long and hard” before filing such suits against employees. The employee’s attorney would likely allege that such a suit is retaliatory, he said.

Employers “face an uphill battle in the courtroom anyway” because those who serve on juries are more likely to be employees than employers, said Mr. Hyman.

To read the full article, click here.

What else I'm reading this week #9

Not surprisingly, another active week across the blogosphere. Please support my fellow bloggers by checking out some of these links.

We'll start out with a couple of wage and hour issues. The Pennsylvania Employment Law Blog cautions companies that there are tricks and traps involved in holiday and year-end bonuses, and to watch out for wage and hour mistakes. Meanwhile, the Evil HR Lady answers a question on the legality and advisability of making deductions from the salary of an exempt employee for time away from work (hint, don't do it, as I advised back in June).

John Phillips, at The Word on Employment Law, has posted the 1st half of a 6-part series on the art of firing employees. (Part I, Part II, and Part III). The highlights so far - fairly evaluate performance, use progressive discipline, be consistent, and document everything. Good, basic, sound advice for all companies to follow. John tells me that Parts IV, V, and VI will be posted in the coming days, so keep an eye out for them.

HR World asks the question, "Are you pregnancy-friendly?", and suggests that such an approach is needed to prevent the loss of talented employees to motherhood.

Finally, Kris Dunn, The HR Capitalist, reports on the proposed Healthy Families Act, which would require employers with more than 15 employees to offer full-time employees seven days of paid sick leave.

House passes expansion of FMLA for military families

By an overwhelming vote of 370-49, the House yesterday approved legislation that would, among other things, expand FMLA leave rights for the families of wounded service members. President Bush will be hard-pressed to veto a bill that also authorizes $696 billion in military programs. If enacted, the legislation will amend the FMLA and provide up to 6 months of leave to family members (i.e., spouse, son, daughter, or parent) of combat-injured service members to care for their loved ones. Click here for the text of section 675 of the National Defense Authorization Act for Fiscal Year 2008.

Hat tip to The FMLA Blog.

The year's worst employees

It's the time of year when everyone is putting out their year-end best of lists, and the employment realm is no exception. Careerbuilder.com has published its list of the year's worst employees. If you thought your company had some doozies, check out the list, available here: Worst Employees of the Year.

My personal favorite:

An off-duty airline employee was arrested on assault charges after he sat down next to a woman trying to sleep and allegedly touched her inappropriately, according to an affidavit filed with a complaint from the woman. The employee was charged with simple assault and was suspended from the airline until further review of the incident.

Feel free to comment with your best employee horror story from the past year.

Ohio Supreme Court holds that an employer's lawsuit against an employee who has engaged in protected activity is not per se retaliation

This morning, the Ohio Supreme Court issued a significant retaliation decision, Greer-Burger v. Temesi, which holds that "an employer is not barred from filing a well-grounded, objectively based action against an employee who has engaged in protected activity." In so ruling, the Court stated that it is balancing "the statutory right of an employee to seek redress for claims of discrimination without retaliation against the constitutional right of an employer to petition courts for redress."

The facts of the case are as follows. In 1998, Tammy Greer-Burger filed a sexual harassment suit against Lazlow Temesi. The case proceeded to trial, at which Temesi prevailed. Thereafter, Temesi filed suit against Greer-Burger seeking to recover the $42,334 in attorneys fees and costs he had incurred defending against the harassment suit, plus compensatory and punitive damages. In response to Tamesi's lawsuit, Greer-Burger filed a charge of discrimination with the OCRC, claiming that Temesi's lawsuit was retaliation for her protected conduct, the prior sexual harassment suit. Based solely on the fact that Temesi had filed suit, the OCRC found that Tamesi's lawsuit was prohibited retaliatory conduct, and ordered Temesi to immediately cease and desist from pursuing his lawsuit and to pay Greer-Burger the $16,000 she claimed to have expended in defending against it. The common please court and appellate court both affirmed the OCRC's decision.

In reversing the lower courts, the Supreme Court started and ended its analysis with the First Amendment's fundamental right to petition and seek redress in the courts. Despite the fundamental nature of that right, the Court recognized that the right to access courts is not absolute. The First Amendment does not protect "sham" litigation, that is, an objectively baseless lawsuit such that no reasonable litigant could expect success on the merits. To find that the mere act of filing a lawsuit is per se retaliatory, in the words of the Supreme Court, would "undermine the right to petition for redress by giving an administrative agency the power to punish a reasonably based suit filed in court whenever it concludes ... that the complainant had one motive rather than another.... This danger is further highlighted when the only evidence of the complainant's retaliatory motive is the simple act of filing a lawsuit." (internal quotations and citations omitted).

Because of the McDonnell Douglas burden shifting analysis used in retaliation cases, the Court placed the burden on the employer to demonstrate, as its legitimate non-retaliatory reason, that an alleged retaliatory lawsuit is not objectively baseless:

Instead, we find it more prudent to permit an employer the opportunity to demonstrate that the suit is not objectively baseless. In determining whether the employer’s action has an objective basis, the OCRC administrative law judge should review the employer's lawsuit pursuant to the standard for rendering summary judgment.... Thus, an employer needs to show his lawsuit raises genuine issues of material fact. If the employer satisfies this standard, the suit does not fall under the definition of sham litigation. The suit, therefore, shall proceed in court while the proceedings before the OCRC shall be stayed. The procedure outlined above falls within the jurisdiction of the OCRC as provided for in R.C. 4112.04 and promotes judicial economy because the employer's lawsuit will not have to be fully litigated in the trial court before the OCRC can make its determination as to the reasonableness of the suit. In this way, the OCRC essentially shall vet the action to ensure it is not sham litigation. (internal quotations and citations omitted)

The majority opinion concluded by recognizing the stigma of being falsely accused as a discriminator, and the importance of being able to seek legal redress to remedy that misclassification:

An employee's right to pursue a discrimination claim without fear of reprisal is a laudable goal entitled to considerable weight. The OCRC's position in this case, however, has the potential to give employees a carte blanche right to file malicious, defamatory, and otherwise false claims. As the concurring opinion of the appellate court astutely noted, the per se standard advocated by the OCRC does not advance the goal of Chapter 4112 when it "permits a claimant to engage in any kind of slander or defamation, and possibly even perjury, without consequence," and then precludes "those falsely accused of being discriminators from seeking legal redress." Greer-Burger, 2006-Ohio-3690, ¶ 38 (Corrigan, J., concurring).

Just because employees do not have carte blanche right to file malicious, defamatory, or otherwise false claims, does not mean that employers should rush into court to clear their names. Instead, employers should be wary in using Greer-Burger v. Temesi as carte blanche for filing lawsuits against unsuccessful discrimination plaintiffs. As the concurring opinion correctly points out, "the majority's 'not objectively baseless' test sets a very low threshold...." Merely because this case gives companies the apparent right to file a claim does not mean ultimate success on that claim. Indeed, the decision whether to pursue a claim against an employee or ex-employee who has brought a discrimination claim must be carefully thought out, and not merely filed as a knee-jerk reaction to being sued.

Should companies move their employment work to small and mid-sized law firms?

Last week, the Legal Intelligencer, as posted on Law.com, reported on the filing of a legal malpractice lawsuit by a nonprofit agency, the The Bair Foundation, against one of the world's largest law firms, Reed Smith. Now, you may ask yourself, why would the Ohio Employer's Law Blog care about a legal malpractice lawsuit filed in suburban Pittsburgh. The answer comes in two parts: 1) the underlying case was a religious discrimination case that was tried in federal court in Cleveland and resulted a nearly $200,000 jury verdict, and 2) the Bair foundation was charged $960,409 to defend the garden-variety discrimination case. According to the Law.com article:

The foundation said in the complaint that it was originally told the case would cost them $50,000. That was then upped to $112,000 during the case....

"In implementing its ambitious strategy of capturing global clients, which Reed Smith boasts results in 'a constant increase in revenue per partner,' it has acknowledged that comparatively small regional or local law firms can or perhaps should service smaller clients," the complaint stated. "This is so because such firms typically charge much lower fees than 'white shoe' international law firms like Reed Smith and are therefore more affordable to these smaller clients. However, Reed Smith has inexplicably continued to represent certain much smaller clients which lack substantial financial resources, such as Bair, a not-for-profit charitable foundation."

The foundation's [current] attorney, Bruce C. Fox of Obermayer Rebmann Maxwell & Hippel in Pittsburgh, said no explanation was ever given as to why the fees increased to nearly $1 million. He said his client was "badly taken advantage of."

Fox said he doesn't think large, international firms should represent clients like the Bair Foundation because of global law firms' economic models.

The lawsuit alleges inappropriate billing practices, including over-staffing the case, failing to adequately describe billing entries by subject matter or activity, and raising billing rates without notice.

The Bair Foundation's predicament illustrates two key trends to watch in the legal profession for 2008, as discussed in Robert Denney Associates' 19^th Annual Report on What’s Hot and What's Not in the Legal Profession (hat tip to Tom Kane at The Legal Marketing Blog): Labor and Employment continues to be a hot practice area, and mid-size firms are thriving by "attracting clients faced with the high rates – and often poor service – of the large firms." KJK has 31 lawyers, so I have a stake in this discussion. That stake, however, does not change the fact that the small and mid-size firms have as much to offer, if not more, than the large institutional firms. It's not just a question of hourly rates, but also more economical staffing, increased efficiency, and better client communication, all with the same or better quality of legal work. My hope is that these issues cause companies of all sizes to consider small and mid-sized law firms the next time they are sued in an employment case.

Supreme Court grants cert petition in Huber v. Wal-Mart Stores

Huber v. Wal-Mart Stores poses the following question: if an employer has an established policy to fill vacant job positions with the most qualified applicant, is that employer nevertheless required to reassign a qualified disabled employee to a vacant position even if that disabled employee is not the most qualified person for the job. The Supreme Court has agreed to review the decision of the 8th Circuit, which answered that question in the negative.

Pam Huber worked for Wal-Mart as a dry grocery order filler, earning $13 per hour. A permanent injury to her arm and hand left her unable to perform the essential functions of her job. As a reasonable accommodation for her disability, Huber asked that Wal-Mart reassign her to a vacant and equivalent position. Instead of agreeing to reassignment as the reasonable accomodation, Wal-Mart told Huber that she could apply and compete for the position. Huber ended up not being the most qualified applicant. Wal-Mart hired someone else for the job, and placed Huber in a janitorial position that paid her less than half of what she made before her injury.

Huber filed suit under the ADA, claiming that she should have been reassigned to the open position as a reasonable accommodation. Wal-Mart defended on the ground that it had a legitimate non-discriminatory policy of hiring the most qualified applicant for all job vacancies and was not required to violate that policy to accommodate Huber's disability. In a very rare instance, the trial court granted summary judgment in Huber's favor, which the 8th Circuit reversed.

The 8th Circuit's analysis starts with the general principle that reassignment to a vacant position generally qualifies as a reasonable accommodation under the ADA. According to the 8th Circuit, however, the ADA is not a mandatory preference act, and it should not violate the ADA for an employer to make a legitimate non-discriminatory decision to hire the most qualified candidate, even if it results in a disadvantage to a disabled employee. Also, the ADA does not entitle a disabled employee to his or her preferred accommodation, only a reasonable accommodation. Thus, the 8th Circuit concluded: "The ADA does not require Wal-Mart to turn away a superior applicant for the router position in order to give the position to Huber. To conclude otherwise is affirmative action with a vengeance. That is giving a job to someone solely on the basis of his status a member of a protected class." (internal quotations omitted).

It is unclear in the 6th Circuit how this case would have come out, and there are courts (such as the 10th Circuit) that differ and hold that the ADA requires employers to automatically award an open position to a qualified disabled employee if even better qualified applicant are available and despite an employer's policy to hire the best person for the job.

A ruling for the employee in this case would undermine one of the most important commandments of employment law - Thou shalt hire the most qualified person for all open positions. When you don't hire the best person, it could lead a court to second-guess your judgment and question why a member of a protected class was overlooked in favor of the second/third/fourth/whatever best person. Which illustrates another important principle of employment law - when you're explaining, you're losing.