The New Hampshire District Court recently granted summary judgment on all of the plaintiff’s claims in an employment discrimination case predicated on the FMLA and the ADA. In St. Hilaire v. Morgan Stanley Smith Barney, LLC, the plaintiff who had a well-documented history of poor job performance, alleged that she was terminated by her employer due to her absences from work when she took time off to care for her husband who was diagnosed with cancer.
The plaintiff advanced two theories in support of her allegations that her employer’s conduct was discriminatory. First, the plaintiff argued that her termination violated the ADA because it was “association discrimination,” or discrimination on the basis of her “association with a person who was disabled or perceived to be disabled.” The court found that the plaintiff’s relationship with her sick husband was sufficient to plead a claim for association discrimination, but that alone was not enough to demonstrate could establish a prima facie case for discrimination, but could not succeed on her claim because the employer successfully established that she was terminated due to her poor job performance and not because of the work she missed to care for her husband.
Second, the plaintiff argued that she was terminated in preemptive retaliation for her intent to take leave under the Family Medical Leave Act. At the time of the plaintiff’s termination she did not yet qualify as an “eligible employee” under the FMLA because she had not yet worked for her employer for a full year. The plaintiff, however, argued that her termination was in violation of the FMLA because she had made it clear that she intended to take FMLA leave once she became eligible. The plaintiff cited a string of cases in support of her claim, but the court avoided addressing the issue by stating “even assuming that those decisions accurately interpret the anti-discrimination provisions of the FMLA, they do not assist plaintiff in this case because she failed to demonstrate that her termination was connected to anything but her poor job performance.”
Accordingly, the district court granted the employer’s motions for summary judgment.
The United States Court of Appeals for the First Circuit recently ruled what it described as “two of the many private lawsuits brought against healthcare providers throughout the country by a single law firm.” The plaintiffs sought to represent a potential class of hospital employees alleging a number of wage and hour violations, and related claims alleging fraud, negligent misrepresentation, and contract violations. The court found that the federal Labor Management Relations Act, which gives federal courts jurisdiction over suits for violation of collective bargaining agreements, pre-empted the plaintiff’s claims. Thus, the court ruled that the state law claims that depend at least in part on the interpretation of a collective bargaining agreement were properly removed to the federal court.
The court then turned to the question of whether such claims were properly dismissed so that the parties could pursue the remedies, such as arbitration, provided for in the applicable collective bargaining agreement. The court found that those claims that are “sufficiently intertwined” with the collective bargaining agreement would require the use of the processes provided for in the collective bargaining agreement. This would include state regulatory claims if (but only if) the issue before the court depended on interpretation of the collective bargaining agreement.
For example, the plaintiff’s claim under the Massachusetts Weekly Wage Act, requiring timely payment of wages, depended on figuring what wages were owed to the plaintiffs under the collective bargaining agreement. Therefore, this claim was properly dismissed for resolution by arbitration under the terms of the collective bargaining agreement. On the other hand, if there had been no dispute as to the amount owed, and the parties were merely litigating whether the wages owed were timely paid under state law, the collective bargaining agreement would not have been implicated and dismissal would not have been inappropriate.
In sum, many wage and hour claims, whether framed in terms of common law or regulatory law, may in fact be sufficiently related to a pending collective bargaining agreement to be properly resolved by a federal court and/or by the processes, such as arbitration, provided for in the applicable collective bargaining agreement. This may be true even if the claims do not specifically refer to the collective bargaining agreement, as long as the claims do in fact hinge on the interpretation of said agreement. Cavallaro v. UMass Memorial Health Care, Inc., Nos. 110-1073 and 11-1793 (April 18, 2012).
A recent opinion piece in General Surgery News has an interesting take on physician attitudes toward medical malpractice claims as more and more of their practice groups are being acquired by large healthcare systems:
A politician recently complained to me she couldn’t get doctors riled up about tort reform anymore. It used to be the one issue she could count on to get the MDs agitated across almost all gender, age, ethnic and specialty lines. I explained to her the answer is simple: The doctors are not paying their premiums anymore, their bosses are. The days of opening the envelope from the insurance company and gagging while you converted the premium to surgical units are over (how many carotids am I going to have to do to pay this monster with premiums going up and fees going down!). I doubt the majority of surgeons even see their premium notices anymore.
As an employee, the economic imposition of discovery and trial is also eliminated. To a small-business owner, sitting in court for three weeks as a defendant with no income while bills pile up on your desk is almost worse than the indignity of being sued. When you’re drawing a salary and someone else is paying the practice expenses, three weeks in trial that starts at 10 a.m. and ends at 4 p.m. with 90 minutes for lunch Monday through Thursday, unless the judge has a dental appointment, can be a relief from the daily grind. Working in a system also depersonalizes malpractice actions because the entity is the defendant. In the Kaiser system, the plaintiff’s case is brought against Kaiser and its employees. It is not necessary to single out the emergency room doctor, nurse, hospitalist, internist, anesthesiologist or surgeon. Nasty finger pointing among co-defendants who are colleagues has no strategic value and is eliminated. With all the defendants lined up like fish in a barrel, the job of the plaintiff’s lawyer is easier and cheaper.
Are you surprised the plaintiff’s lawyer winds up being the main beneficiary from the shifting attitudes among surgeons concerning the litigation crisis? Intractable problems rarely get solved. Problems cease when those affected have a change in circumstances or perception. Replace surgeons in private practice with surgeons who don’t pay their own insurance premiums and the malpractice crisis for doctors becomes a line item expense for ownership. You can argue about the wisdom of replacing the court system with medical tribunals, limiting damages for noneconomic awards and the ultimate cost of defensive medicine, but it all becomes academic to the surgeon when the boss starts paying the bills.
The editorial, entitled “Spam in a Can,” was written by Dr. David Cossman, a vascular surgeon in Los Angeles.
Last week, seven Massachusetts hospitals, and coalition of physicians and patient groups detailed an initiative – “The Road to Reform” which they hoped would increase the reporting of medical mistakes and curtail lengthy malpractice litigation. Three insurers and a medical group have donated approximately $1 million for a pilot program, the Boston Globe reported. Any suspected medical error can be reported to the hospital, which will determine whether the caregivers or hospital policy or practice were at fault. If fault is determined, the caregivers will apologize and the hospital and insurers will determine what compensation to be offered to the patient. Hospitals will encourage patients to hire lawyers to evaluate the offer’s fairness; and if the proposed settlement is insufficient, the patient can sue the hospital and care providers. The results of the pilot program will be evaluated. The coalition is also seeking legislation providing a six month cooling period after an error occurs before a patient can sue; and to prohibit the admissibility of caregiver apologies in subsequent lawsuits.
Meanwhile, in New Hampshire, the Concord Monitor reported on the first day of hearings on Senate Bill 406 which would give patients the option of accepting an early money offer from a medical provider after a botched procedure or other medical injury. The legislation’s purpose is to “cut down” costs and protracted disputes with uncertain results. A leading advocate for the program, Jeffrey O’Connell, a University of Virginia law professor, testified the bill allows both sides to “bypass the lawyer’s game.” If the patient rejects the offer and subsequently sues, they must meet a higher burden of proof to be compensated for their medical injury claim. Opponents call the bill a “Trojan Horse” that will lure patients into accepting a low ball offers or fighting an uphill court battle. Further testimony is planned for next week.
The New Hampshire Senate Commerce Committee will hear House Bill 1574 this morning, which would increase the number of hours an employee may be required to work before being granted a half hour lunch break from 5 hours to 6 hours. New Hampshire’s current statute, RSA 275:30-a, requires that every employee within the scope of the statute be granted a lunch break, except for where it is feasible for the employee to eat during the performance of their work and the employer permits them to do so. HB 1574 narrowly passed the House on a vote of 168-161.
The U.S. District Court for the District of Columbia recently upheld the National Labor Relations Board’s (“NLRB”) rule requiring all private sector employers covered by the National Labor Relations Act (“NLRA”), to post notices notifying employees of their right to unionize as well as their right to strike and picket. The NLRB Rule further makes an employer’s failure to post the required notices a per se unfair labor practice under the NLRA.
As previously discussed on this blog space, many employers across various industries have objected to the posting requirement announced by the NLRB this past fall, as an unfair and disruptive intrusion by the NLRB into the workplace, essentially advocating for unionization. The National Association of Manufacturers (“NAM”) filed the instant lawsuit against the poster requirement on September 8, 2011, seeking an injunction to strike down the posting regulations as unlawfully exceeding the jurisdiction of the NLRB. On September 19, 2011, the United States Chamber of Commerce and the South Carolina Chamber of Commerce filed a second lawsuitseeking injunctive relief, as well as a declaratory judgment that the poster requirement violates various statutes. As a result of these lawsuits, the NLRB moved the effective date of the rule from November 14, 2011 until April 30, 2012.
In National Association of Manufacturers v. NLRB, the U.S. District Court for the District of Columbia upheld the overall legitimacy of the poster requirement, simultaneously invalidated several provision related to the rule’s enforcement. The Court found that while an employer’s failure to post the required notice could be considered an unfair labor practice under the NLRA, it could not be viewed as a per se unfair labor practice. Additionally, the Court found that the provision of the rule equitably tolling the statute of limitations for unfair labor practice charges simply due to an employer’s failure to post the notice was beyond the scope of the NLRB’s authority.
Despite the NAM’s partial victory, the Association has already filed notices of appeal against the Court’s decision. Regardless, the NLRB notice requirements remains scheduled to take effect on April 30, 2012.
The New York Times is reporting that celebrity chef, Mario Batali has agreed to settle a class-action lawsuit by paying a $5.25 million dollars for alleged violations of state and federal wage law stemming from illegally withholding tips from restaurant employees. The lawsuit is a class-action brought by more than 1,000 restaurant employees, including servers, busboys, runners, and bartenders who worked at Batali-owned restaurants in Manhattan, such as Babbo, Del Posto, Casa Mono, Bar Jamón, Esca, Lupa and Otto. The class-action suit alleged that it was the policy at Batali’s restaurants to deduct an amount equivalent to 4 to 5 percent of total wine sales at the end of each night from the tip pool. Some employees understood that Batali and his business partner kept the money to boost their own profits, while others were told that the withheld tip money was used for wine research or other expenses. Whatever the motivation, if an allegation of withholding tips is true, it is likely to constitute a violation the Fair Labor Standards Act and most state laws. If a federal judge approves the proposed multi-million dollar settlement, the $5.25 million dollars will be divided among the plaintiffs/restaurant employees.
Based on prior case law and the language of New Hampshire’s consumer protection statute, many have long believed that, in New Hampshire, insurance companies and public utilities were not subject to claims for multiple damages under our state’s version of the Consumer Protection Act. This differs from other states, in particular Massachusetts, where entities that do not fit the typical consumer medical, like an insurer for example, could be hit with claims for treble damages for alleged unfair and deceptive insurance practices. That said, the Supreme Court case law over the past 20 or so years has managed to issue a series of inconsistent rulings that have muddled the issue.
The New Hampshire Supreme Court recently made a significant ruling in Rainville v. Lakes Region Water Company, which clarified the issue. In brief, the court ruled that the New Hampshire consumer protection act does not apply to alleged fraudulent conduct by regulated utility companies. This dramatically affects the potential liability to insurance companies and public utilities in New Hampshire as it allows them to avoid potential liability for penalties, multiple damages and attorneys’ fees in a case where they might otherwise have faced significant damages from a large number of plaintiffs. Between the analysis of the facts in this case and another recent decision, the Court goes through a fairly detailed analysis of what is and is not exempt from the Act.
The U.S. Equal Employment Opportunity Commission (“EEOC”), just recently issued a series of Questions and Answers which clarified an earlier EEOC informal discussion letter about ADA requirements for employers who require applicants to have high school diplomas to qualify for certain jobs.
That November 17, 2011 letter opined that an employer who made high school graduate a job requirement may well violate the Americans with Disabilities Act (“ADA”), unless the employer could demonstrate that the requirement was 1) job related and 2) consistent with business necessity. The earlier EEOC letter also said that to the extent a learning disability prevented the job applicant from meeting the high school graduation requirement, the employer might also have to have to make an individualized determination whether a particular applicant could perform the essential functions of the job, with or without an accommodation, before the employer could deny the applicant a job on the basis of the failure to complete high school.
Now, the EEOC has clarified that its earlier letter did not make it illegal, per se, for businesses to require a high school diploma for a job. Rather, according to the EEOC’s recent Q & A discussion, an employer may have to allow someone who says that a disability has prevented him from obtaining a high school diploma to demonstrate qualification for the job in some other way. The new Q & A from the EEOC also made clear that its earlier opinion letter did not create protection in the ADA for people who do not graduate from high school, unless a disability as defined by the ADA was the reason that it was impossible for the job applicant to obtain a high school diploma. The Q & A’s issued by the EEOC also stated that an employer is not required to hire a person who is unable to graduate from high school because of a disability. The new EEOC Q & A’s do provide that as with any job criteria which may tend to screen out persons with disabilities, an employer who requires a high school education may have to evaluate whether there exists an ADA reasonable accommodation to allow a learning disabled person to perform the essential functions of the job. According to the EEOC:
Employers may continue to have high school diploma requirements and, in the vast majority of cases, they will not have to make exceptions to them. However, if an applicant tells an employer she cannot meet the requirement because of a disability, an employer may have to allow her to demonstrate the ability to do the job in some other way. This may include considering work experience in the same or similar jobs, or allowing her to demonstrate performance of the job’s essential functions. The employer can require the applicant to demonstrate, perhaps through appropriate documentation, that she has a disability and that the disability actually prevents her from meeting the high school diploma requirement.
The complete text of the EEOC’s Q & A can be found here.
The Ninth Circuit recently upheld a California district court’s grant of summary judgment against a corporate owner of restaurant where copyrighted songs were performed without the artists’ permission. In Range Road Music, Inc., v. East Coast Foods, a group of copyright owners filed suit against the owners of Roscoe’s House of Chicken n Waffles (Roscoe’s) following a private investigator’s visit to the restaurant’s lounge where the investigator heard a live band perform several copyrighted “Coltrane standards” and a disc jockey play another set of copyrighted songs from a compact disc. The defendants, Herbert Hudson and East Coast Foods, argued that the plaintiffs had failed to state a claim for vicarious infringement liability because the restaurant at issue was owned by Shoreline Foods, an independent corporate entity.
The Ninth Circuit rejected the defendant’s argument on the grounds that the defendants’ had the requisite control over the restaurant to impose liability. To impose vicarious liability on a defendant for copyright infringement, a plaintiff must establish that the defendant exercises the requisite control over the direct infringer and that the defendant derives a direct financial benefit from the direct infringement. Control exists where the defendant has a legal right to stop or limit the directly infringing conduct as well as the practical ability to do so. The Court found that the evidence clearly demonstrated that the defendants exercised control over the restaurants and derived a financial benefit from the musical performances at the lounge as Herbert Hudson was the president of both East Coast Foods and Shoreline Foods. Furthermore, East Coast Foods had managerial authority over Roscoe’s, and issued the paychecks of the restaurant’s employees. Accordingly, the Ninth Circuit affirmed the district court’s decision that the defendants were liable for copyright infringement.
In light of the Ninth Circuit’s decision in Range Road Music, Inc., restaurant owners should proceed carefully in allowing the performance of live music in their establishments. An owner of an establishment where live music is played should attempt to ensure that all publicly performed music is either not under copyright protection, or the appropriate licenses have been obtained.
NK+M to Exhibit at the Massachusetts Restaurant Association’s annual trade show, The New England Food Show (NEFS). With over 11, 000 guests attending the show annually, The New England Food Show is the region’s largest trade event focused on the retail and foodservice markets. This year, the NEFS exhibition will run in Boston from March 11-13, 2012. Come visit us at our booth and find out more how NK+M can assist your hospitality enterprise in meeting its business and legal goals. We truly look forward to meeting you. Download your VIP Pass here.
The US District Court for the Eastern District of Louisiana found a clearly drafted engagement letter provided a defense to the client’s allegation that the firm did not provide adequate representation.
The plaintiff had formed a community development district to issue bonds in order to fund a planned residential development. The defendant law firm was hired as special counsel and bond counsel, and the parties signed a detailed engagement letter defining the scope of representation. After development of the project commenced, the Army Corps of Engineers issued a public notice that part of the property had been used for gunnery, rocket and bombing practice in the 1940s, and noted the potential for unexploded munitions. All further permits and approvals for the property were withheld pending investigation and remediation of concerns related to the notice.
The developer defaulted on the bonds and filed suit against the law firm for failure to conduct environmental due diligence, failure to obtain informed consent for limited scope of representation and charging excessive fees. The law firm argued its engagement letter clearly defined the scope of its obligations, and that it undertook no duty to perform environmental due diligence. The plaintiff countered that the firm failed to obtain informed consent for the limited scope of its duties.
The Court granted the law firm’s summary judgment motion based on its finding that the engagement letter was clearly drafted and created a clear scope of representation.
The First Circuit recently refused to overturn a jury’s finding of retaliation under the Age Discrimination in Employment Act (“ADEA”) despite the defendant’s claims that the plaintiff had not established a prima facie case. In Munoz v. Sociedad Espanola de Auxilio Muto Y Beneficiencia De Puerto Rico, the Plaintiff was a cardiologist who was terminated by the defendant-Hospital one day after the Plaintiff was deposed in a lawsuit against the hospital for age discrimination. The Plaintiff then promptly filed a second suit against the Hospital claiming that he was terminated in retaliation for his pending age discrimination suit. The jury agreed with the Plaintiff and awarded him nearly $2 million. On appeal, the Hospital argued that its renewed motion for judgment as a matter of law should have been granted with respect to the Plaintiff’s retaliation claim because the Plaintiff had failed to establish a prima facie case of retaliation or any evidence of a causal connection between his protected conduct and his termination.
The First Circuit rejected the Hospital’s argument that judgment as a matter of law should be granted for the Plaintiff’s failure to make out a prima facie case on the grounds that it was “not the correct focus at this juncture.” The McDonnell-Douglas framework that requires the plaintiff to prove a prima facie case before putting the burden of proof on the defendant “is not a religious rite” but “merely a sensible, orderly way to evaluate the evidence in light of common experience as it bears on the critical question of retaliation.” Once the question of retaliation has been submitted to the jury “backtracking serves no useful purpose.” The First Circuit therefore held that its correct focus on appeal was whether a jury reasonably could have inferred by a preponderance of the evidence that the Plaintiff was terminated because of his protected conduct.
The First Circuit went on to reject the Hospital’s argument that the Plaintiff had failed to establish the causal connection required to prove retaliation on the grounds that the evidence presented at trial was sufficient to support the finding, even if the determination was not “inevitable.” The Hospital’s argument hinged on the fact that Hospital decided to terminate the Plaintiff three weeks before the Plaintiff was deposed in his age discrimination case, claiming that the causal element of retaliation was therefore lacking in the Plaintiff’s claim. Although the Court agreed with the Hospital that an adverse employment action pre-dating the protected activity generally cannot support a retaliation claim, it found that the remainder of the evidence presented at trial supported the jury’s finding. Accordingly, the First Circuit affirmed the trial court’s decision.
For the second year in a row, there were a record number of private sector discrimination claims lodged in the EEOC in 2011, breaking the record set in 2010 by a small margin. The EEOC also announced that relief to workers in the form of settlements and as a result of litigation exceeded $455 million. This number exceeds the relief from 2010 by over $50 million and continues an upward trend in settlement and litigation awards to workers alleging discrimination. The EEOC itself filed 300 lawsuits and obtained over $90 million in awards to workers, reflecting another increase in the money recovered by the EEOC’s own litigation efforts.
For the second straight year, retaliation claims represented the largest single category of allegations of discrimination. This represents only the second time, along with 2010, that retaliation claims have constituted the largest category. Allegations of race and sex discrimination decreased, while allegations of disability and age discrimination increased. Age discrimination claims also represented the category of allegations resulting in the largest amount of money awarded, increasing my almost $30 million dollars. The largest subset of disability claims were made up of back impairments.
This was also the first full year that the EEOC has enforced the Genetic Information Nondiscrimination Act. This Act seeks to prevent discrimination based upon the genetic information of employees, which includes genetic diseases in their family histories. The EEOC received 245 charges under this Act, but none have yet proceeded to litigation.
The clear trend over the past few years reflects an increase in allegations of workplace bias and discrimination to record levels. These increases provide new challenges for employers as they attempt to navigate through this difficult economy. In any event, it provides a very real warning that employers must take workplace discrimination laws seriously, and enact workplace policies to prevent such conduct.
The Massachusetts Department of Public Health and the Department of Fish and Games Division of Marine Fisheries recently announced that they are considering using DNA testing to prevent fish mislabeling and are launching a pilot program in partnership with Legal Sea Foods that would trace seafood using barcodes. The announcement follows the results of the Boston Globe’s five month investigation revealing extensive seafood misrepresentation at Boston area restaurants. Seafood mislabeling puts consumers at risk by violating dietary restrictions, permitting customers to ingest chemicals banned in the United States, and increasing the potential for customers to suffer allergic reactions. The pilot programs will enhance trace-back procedures by using barcoding to follow fish products through the production system. The pilot programs will be accompanied by a statewide education and outreach effort by the Department of Public Health that will be aimed at alerting local officials and industry partners about the laws related to the sale of fish and fish products.
Last month, Massachusetts Governor Deval Patrick signed a new transgender equal rights bill, making Massachusetts the sixteenth state to prohibit discrimination based on gender identity. The bill goes into effect on July 12, 2012.
The bill prohibits discrimination based on gender identity in the areas of employment, education, housing, and credit. It also categorizes violence against transgendered individuals as a hate crime. “Gender identity” is defined in the bill as gender-related identity, appearance or behavior whether or not it is different from that “traditionally associated with the person’s physiology or assigned sex at birth.”
Connecticut also passed a transgender rights bill earlier this year. New Hampshire will now be the only New England state that does not prohibit discrimination based on gender identity.
In Farris v. Shineski, the plaintiff, a former employee of the Department of Veteran’s Affairs (“the VA”), claimed that the VA discriminated against her based on disability when it terminated her employment. She originally complained to the VA’s EEO counselor. She then underwent an unsuccessful formal mediation through the VA’s Office of Resolution Management. After the mediation failed, the VA Office of Resolution Management sent her a letter advising her of the deadline to file a complaint with the EEOC. Plaintiff promptly informed her attorney of the deadline, and her attorney assured her that the filing would be made on time. Although the deadline was January 2, 2009, plaintiff’s attorney filed the complaint on January 13, 2009, requesting that she be permitted to file the complaint late as the attorney inadvertently missed the original filing date due to the “holiday rush.”
Last month, the U.S. District Court for the First Circuit affirmed dismissal of plaintiff’s disability discrimination complaint due to the untimely filing. The court rejected the plaintiff’s “equitable tolling” argument – i.e. that “circumstances beyond [plaintiff’s] control precluded a timely filing.” The court noted that the plaintiff “is deemed bound by the acts of [her] lawyer-agent” and therefore, the plaintiff is bound by her lawyer’s error.
The deadline would likely have been tolled if (1) plaintiff had received inadequate notice of the statute of limitations; (2) plaintiff was awaiting the result of a motion for appointment of counsel and equity would justify tolling the deadline until the motion was acted upon; (3) the court led the plaintiff to believe that she had done everything required of her; or (4) affirmative misconduct on the part of a defendant lulled the plaintiff into inaction. In this instance, the employer properly advised plaintiff of the correct deadline to file her EEOC complaint. Thus, plaintiff’s complaint was properly dismissed as untimely, leaving her to possibly seek relief from her attorney rather than her employer.
John Ingalls, a long time store manager for Walgreens, thought he was untouchable because he had the goods on his employer. In 2006, the roof of a Walgreens store partially collapsed during a rain storm. Mr. Ingalls claims that his district manager asked him to transfer inventory from that store to other stores for sale without telling anyone. Mr. Ingalls further claims that his employer was committing insurance fraud by declaring the store with the damaged roof “a total loss” when, in fact, there was inventory left to be sold to the public. In addition, the transfer of pharmaceutical and tobacco products allegedly violated certain state and federal laws.
Mr. Ingalls did not say a word about these alleged violations by his employer until three years later, when Walgreens lowered the amount of his bonus. In the course of complaining about this change, Mr. Ingalls stated that if Walgreens punished him for complaining, he would report them to the ATF and IRS.
Shortly after making this statement, Walgreens learned that Mr. Ingalls failed to ensure that employees under his supervision completed certain training sessions required by law and by Walgreens policy. It also emerged that Mr. Ingalls encouraged employees to work “off the clock” in violation of wage-and-hour laws, and even altered timecards in order to avoid paying overtime.
During the investigation into his conduct, Mr. Ingalls said, “I can’t believe this. Walgreens commits insurance fraud and you’re investigating me for this.” Mr. Ingalls was terminated and then filed reports against Walgreens with the ATF and IRS. He also filed suit for wrongful termination under New Hampshire law and for intentional infliction of emotional distress. The wrongful termination claim was based on a theory that he was terminated for engaging in an act that public policy would encourage.
In Ingalls v. Walgreen Eastern Co., Inc., the United States District Court for the District of New Hampshire granted summary judgment in favor of Walgreens because the undisputed facts established that Mr. Ingalls had not been terminated for an act that public policy would encourage. As the court stated: “Public policy may support the right of an employee to be free from retaliation for exposing his employer’s fraudulent conduct. It does not, however, support the right of an employee to keep quiet about the fraudulent conduct for three years and then to threaten exposure as a bargaining chip in an effort to keep his job.” Public policy is generally determined by “the interests of society and . . . the morals of the time,” but in this case, the evidence established that Mr. Ingalls’s “actions were not designed to protect any interests other than his own.”
Three sales managers sued their former employer, a chain of banquet facilities that host high-end social functions, for overtime pay under the Fair Labor Standards Act (FLSA) in Hines v. State Room, Inc. The banquet facilities stated that the sales managers were exempt from the overtime requirement because they were administrative employees under FLSA, 29 U.S.C. §213(a)(1).
The FLSA’s administrative employees exemption applies to employees who: (1) make more than $455 a week exclusive of room and board; (2) perform office or non-manual work relating to the management or general business operations of the employer; and (3) have a primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance. The sales managers did not dispute that the first two parts of the test applied to them. With respect to the third part of the test, they claimed that they did not have sufficient discretion or independent judgment to be considered administrative employees.
The sales managers’ role was to secure event business by cold calling potential clients and maintaining relationships with past clients, to serve as the primary client contacts, and to ensure the success of client’s events. The sales managers also engaged in broader marketing efforts such as representing the company at the Chamber of Commerce convention. In performing their role, the sales managers had discretion as to which cold calls to make, what to say to clients and potential clients in marketing the facility, how to help clients figure out the most appropriate venue and time for an event, how to counsel clients as to minimum charges, how to manage client expectations, and how to assist clients in designing the menu and other details for an event.
The sales managers stressd that they had no authority to make financial decisions or policy for the company. They were bound by price schedules. In addition, their management had final approval authority over client contracts. The sales managers were not supervisors and had no direct authority over staff, although they would at times convey the details of an event to the staff.
The First Circuit was not impressed with the sales manager’ lack of financial authority and lack of authority for final approval of contracts. First, the court noted that the lack of financial authority is only one factor that may be considered and is not dispositive. Second, the regulations provide that an employee’s discretionary actions (such as initial contract approval) need not “have a finality that goes with unlimited authority and a complete absence of review.” The court concluded that the sales managers were administrative employees, with the requisite discretion, because their role was integral as the face of the employer’s business, and based on the independent judgment they exercised as to “how best to represent the employer and to develop a proposal that would attract the prospective client to a contract with the venues.” Thus, court affirmed the lower court’s summary judgment order, ruling that the sales managers were not entitled to overtime under the FLSA.
I was privileged to moderate a round table discussion, hosting 4 prominent businesspeople in the hospitality industry, at the New Hampshire Lodging and Restaurant Association’s Annual Expo and Awards dinner held at the Grappone Center in Concord, NH on November 9, 2011. We had a lively and enlightening discussion worth sharing with everyone who runs a business during these challenging times.
The roundtable discussion was entitled “How do they do it? Success stories in challenging times.” Panelists included Alex Ray, owner and founder of The Common Man Family of Restaurants; Tom Boucher, owner of Great NH Restaurants (Cactus Jack’s, T Bones, and The Copper Door); Dave Roedel, owner of Roedel Companies; and Rusty McLear, owner of the Inns & Spa at Mill Falls.
The panelists talked about the economy, the casual dining market, the challenges to running a hospitality business in the current climate, and their recipes for success. The repeated themes centered on the economy generally, the impact of national chains, the importance of a strong corporate culture, the need for a well-defined value proposition for customers, the negative effects of over-regulation, and the benefits of social media. Here is the brief run-down of what they had to offer:
Everybody agreed the economy has been a major challenge these last three years. Rusty McLear mused that these days, it pays to have the benefit of the perspective of history. He said he’d “been around a while” and had been through “a lot of recessions.” He said, “We look forward, but remember the past” and that Recessions are times to “get a good deal.” He explained that slow times are times to take advantage of low prices and low borrowing costs. Importantly, however, strong relationships with vendors, and particularly with the bank, will be the key to one’s ability to take these opportunities and to thrive in a recessionary environment.
Dave Roedel also said that slow times are times when one can “buy low.” He also warned not to make cuts where it matters when trying to save on costs during tough times. Rather than cutting on employee salaries, or on lighting, or on service generally, find a way to deliver service more efficiently. He discussed for example how he reduced fuel costs for one of his hotels by scheduling van runs to the airport more efficiently, saving money while not compromising on customer service or employee compensation. Strict controls of inventory can also provide the same benefits.
The Chain Invasion:
The panelists noted that the casual dining market in particular was and perhaps still is oversaturated. That in part has to do with national chains flooding into the region. Alex Ray remembered that in the early to mid-1990’s there were no chains in Concord, NH. Now, 21 years later, he sees a glut of chains challenging local business and crowding out the share of the market each participant can take.
Tom Boucher agreed that the word “chain” has become a dirty word in New Hampshire, symbolizing lack of distinctiveness and specialized service, but he noted that the national chains do some things right, like managing for consistency in the eyes of a customer. A successful chain with a record of consistency instills confidence in a customer who can be sure he or she knows what to expect when walking into the chain restaurant, anywhere in the country.
Dave Roedel reminded the audience that most national chains are franchised, which usually means local owners. He noted that “every sale is local.”
The Culture Connection:
The discussion regarding the response to the “Chain Invasion” began to center on culture and service. While the chains have known brands, the local independents can create equally strong brands locally by creating a strong corporate culture that produces high quality customer service.
Tom Boucher, for example, said that owners should make it a priority to reinvest into their business rather than to take early profits, and to be flexible for employees in scheduling and other matters to encourage loyalty and teamwork, which in the end translates to better service to customers. He described his company’s concept of “the 3 legged stool.” Very simply, a business stands on three constituencies like a three legged stool stands on three legs, i.e., employees, customers, and profits. Tom explained that you cannot favor any one of these legs or else the stool becomes unstable. In 2008, to bring customers back during the recession, Tom explained that his business made pricing and other decisions that favored the customers over the other constituencies. Employees agreed to take a moratorium on benefits, owners took a hit, and the company kept prices low for otherwise reluctant customers. The result was to stabilize the traffic flow, but that approach was obviously unsustainable. Now that the economy has improved somewhat over the last 12 to 18 months, the business has limited the discounting and has begun to “rebalance” the stool. The main point, however, was to recognize the employees as an equally critical leg to the business as customers and profits.
Alex Ray agreed that his employees were the core of his business, and he noted that his culture is key to his branding and his resulting competitive edge. He said, “I’m proud to be New Hampshire. The customers own our brand. That comes from differentiation, which is the absence of indifference. Take your employees. They need to have the passion to care for the customer and to understand the need to satisfy their needs efficiently. It can’t just be business as usual.” In short, it’s about having a culture that teaches employees and serves customers.
Rusty McLear noted that his business’s market is truly the world and that customers can go anywhere for vacation or special get-a-away. He said that, “we need to entice people to come here, and we need good people here to perform at that [world class] level.” He gave some specific economic incentives for attracting and keeping the kind of people he needs to run his business, such as a 20% end of year performance bonuses. He said his turnover has been rather low, with an average employee tenure of 14 years, and he attributes that success in part to the economic incentives as well as to a culture that recognizes employee achievements which encourages a “pride of authorship.”
The Value Proposition:
The discussion of culture then turned to what good culture produces, i.e., good value for the customer. The panelists all agreed that value is not the same as cheap, and it does come from a culture focused on delivering it to the customer. Alex Ray explained that in the restaurant industry, value is delivered from the attitude of the employee. “We don’t just sell food,” he said, “We are not Market Basket. It’s about the guest experience. By achieving balance in the company that truly appreciates the employee, accommodates his or her reasonable needs and respects his or her achievements, you create a culture that forms your marketing brand and your mechanism for delivering value to the guest.”
Rusty McLear agreed, and said that “value is about service. Employees need to be interested, not just act interested.” He said that a guest can have the best hotel room, the best food, the best facilities, but that one surly server can completely turn the guest experience and adversely affect the customers’ perception of value.
Tom Boucher also agreed that value was not just about low price. He said it was “the entire package, a balanced three legged stool.” In fact, when pricing the menu, he said he never asks about food cost. Rather, he simply tastes the item and assesses what it’s worth. He also discussed value pricing without discounting, such as half sized portions for essentially half price. He explained that a business should reevaluate and change its marketing plan every year.
The Regulation Strangulation:
There was an equal amount of agreement about the effect of undue regulation. Simply put, the panelists viewed much of recent government regulatory activity as unnecessary, idiosyncratic, harmful to business, and sometimes flatly unfair.
Alex Ray made the initial point that New Hampshire generally is friendly to business, but he encouraged members of the audience to let their government know how undue regulation hurts business. Tom Boucher noted that government oversight has reached onerous levels. He gave many examples, including how newly constructed restaurants must use LED lighting, which are less attractive and less inviting for customers, while older restaurants can continue with regular lighting and thereby maintain yet another competitive advantage in an industry where the details count.
The panelists briefly spoke about social media. Tom Boucher in particular noted that social media venues like FaceBook, MySpace, blogs, chatrooms, or basic websites can be effective or ineffective, based on how they are used. Simply put, if you use these media to talk about yourself, they are one-way and boring. If you use these media to reach out and engage the customers, pose questions and to have them start thinking about your market and your service, you create awareness, interest and potentially brand loyalty.