First Circuit Revisits Title VII Requirements for Hostile Work Environment and Retaliation

October 28th, 2011

The First Circuit recently revisited the requirements for establishing claims for hostile work environment and retaliation under Title VII of the Civil Rights Act in Bhatti v. Trustees of Boston University.  To establish a hostile work environment claim, the plaintiff must produce evidence that the facts and circumstances of their employment were so “severe” “pervasive” and “abusive” as to “alter the conditions of her job.”  In making this determination, courts consider several factors including “the frequency of the discriminatory conduct, its severity, whether it’s physically threatening or humiliating, or a mere offensive utterance, and whether it unreasonably interferes with an employee’s work performance.

The First Circuit found that the plaintiff’s situation was not severe enough to be considered abusive.  In Bhatti, the plaintiff was a Black dental hygienist at Boston University’s Dental Health Center who claimed that she had been subject to a hostile work environment based on her race.  She claimed that she was required to work harder than her white counterparts, that workplace rules were selectively enforced against her alone, and that her white co-workers were permitted to leave early if they had completed their duties whereas she was not.  The First Circuit found that this conduct was “far from severe, never physically threatening, generally conducted in private so as not to be humiliating and never overtly offensive.”  In addition, the Court held that the fact that the plaintiff had sought psychological counseling was “evidence of subjective offense at best.”  Accordingly, the plaintiff was not entitled to damages on her hostile work environment claim.

Similarly, the Bhatti court determined that the plaintiff had not established a claim for retaliation under Title VII of the Civil Rights Act.  To prove retaliation, a plaintiff must show that the employer took some objectively and materially adverse action against them because of their opposition to a practice forbidden by Title VII.  The plaintiff in Bhatti claimed that she was repeatedly reprimanded because she had complained of discrimination.  The First Circuit found that although reprimands could potentially be considered adverse employment actions, they were not actionable in this circumstance because they did not carry consequences with them.   Consequently, the plaintiff’s retaliation claim failed as a matter of law.

District Court of New Hampshire Finds Manufacturer of Food Packaging Equipment Cannot Repeatedly Postpone Orders

October 14th, 2011

The District Court of New Hampshire recently awarded damages for breach of contract to a Middle Eastern food products manufacturer whose order had been repeatedly postponed in favor of larger more expensive shipments.  In Yorgo Foods v. Orics Indus. Inc., Yorgo Foods entered into a contract in December of 2006, for the creation of a machine that could package both flowable products like hummus, and non-flowable products like tabbouleh.  The agreement between the parties was amended in July 2007 to include an additional filler and scale.  Following the amendment, Yorgo Foods frequently inquired into the status of the machine and was repeatedly assured that it was would be forthcoming.   On October 28, 2008, Yorgo Foods filed suit against Orics for failing to produce the machine or return its down payment.

Under Sections 1-205 and 2-309 of the Uniform Commercial Code, a seller has a “commercially reasonable time” to deliver goods before breaching the contract.  The period of a commercially reasonable time varies on a case-by-case basis depending on the “nature, purpose, and circumstances of the transaction, including… the usages of trade in the pertinent industry.”  After hearing expert testimony, the court determined that a reasonable period of time for the manufacture of a food-packaging machine was 6 to 8 months.  Furthermore, the Court held that Orics had exceeded the reasonable time period not due to any legitimate reasons, but because it had received a larger order that it prioritized above that of Yorgo Foods.  Accordingly, Yorgo Foods was entitled to damages resulting from Orics’ breach of contract.

Although the Court found that Orics had breached its contract, it further held that this breach was not alone sufficient to give rise to a claim under the New Hampshire Consumer Protection Act.  To recover under the New Hampshire Consumer Protection Act, the defendant’s behavior must “attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble world of commerce.”  Even though Orics’ conduct was reprehensible, the Court found that repeated assurances of future performance by merchants “are not unknown in the rough and tumble world of commerce.”  As a result, Yorgo’s claim did not rise to the level of rascality necessary to support a cause of action under New Hampshire’s Consumer Protection Act.

Federal Agency Employees Must Exhaust Administrative Remedies Before Filing Title VII Claims

October 6th, 2011

The First Circuit recently held in Velazquez-Ortiz v. Vilsack, that a federal employee claiming sex discrimination under Title VII of the Civil Rights Act of 1964 must exhaust all administrative remedies before filing suit in federal court.   A federal employee may sue in federal court, but must first seek relief in the agency that allegedly discriminated against them.   A federal employee’s “failure to exhaust the administrative process” in this manner, will “bar the courthouse door.” 

In Velazquez-Ortiz, the plaintiff was employed at the Department of Agriculture for a period of thirty years.  During that time, she filed two relevant Equal Employment Opportunity (EEO) complaints and one informal grievance with her union.  The plaintiff filed her first EEO complaint in 1997, alleging that the department’s decision to give a promotion to a male worker constituted gender discrimination.  In 2003, the plaintiff made an informal grievance with her union claiming mistreatment and workplace harassment by a male supervisor, but the grievance did not explicitly allege sex-based harassment or discrimination.  The plaintiff filed her second EEO complaint in 2004 claiming discrimination on the basis of age and retaliation as a result of the agency’s decision to promote two younger employees.  The 2004 EEO complaint mentioned the plaintiff’s two previous complaints, but did not specifically allege sex discrimination.   In 2008, the plaintiff filed suit in federal court claiming discrimination on the basis of age and sex.

The Court found that the plaintiff’s previous complaints did not adequately exhaust the administrative process.  The fact that a complainant has filed an EEO complaint does not open the courthouse door to all claims of discrimination.  Instead, it only opens the door for complaints that “bear some close relation” to the EEO complaint.  The purpose of the administrative requirement is to give the involved agency notice of the issue and to create an early opportunity for resolution.   This may only be achieved if the EEO complaint alleges the facts that form the basis of the complainant’s federal court complaint.   In Velasquez, the Court determined that the plaintiff’s previous complaints did not sufficiently allege sex discrimination, but instead only mentioned the sex discrimination as part of her complaint for retaliation.  Consequently, the First Circuit affirmed the District Court’s finding that the plaintiff’s Title VII claim was barred for failure to exhaust her administrative remedies.

Texas Roadhouse Targeted by EEOC over Age Discrimination Allegations

October 3rd, 2011

The Equal Employment Opportunity Commission filed an action today against Texas Roadhouse in the United States District Court for the District of Massachusetts.  The lawsuit alleges that Texas Roadhouse has been avoiding hiring people over 40 years of age for their more publicly-visible positions, such as wait staff, bartenders, and hosts, since at least 2007.   The lawsuit alleges that Texas Roadhouse specifically trained managers to emphasize youth in its hiring practices, and ensured that all images in its training manuals are of younger people.

The lawsuit also alleges that Texas Roadhouse used language indicative of discriminatory animus in refusing employment to workers over 40 years of age.  Specifically, the EEOC claims that unsuccessful applicants were told some of the following:

  • “There are younger people here who can grow with the company”;
  • “You seem older to be applying for this job”;
  • “Do you think you would fit in?”;
  • That the restaurant was “a younger set environment”;
  • “We are looking for people on the younger side… but you have a lot of experience”; and
  • “How do you feel about working with younger people?”

Before filing suit, the EEOC sought to settle the case.  Now, the EEOC seeks money damages for all of the applicants allegedly denied employment on account of their age, and additionally seeks to compel Texas Roadhouse to institute policies and procedures to prevent future occurrences of age discrimination.   It also seeks new training procedures for managers to avoid impermissible emphasis on age.

The EEOC press release can be found here.

Misclassifying Employees as Independent Contractors Just Got More Expensive

September 23rd, 2011

On September 19, 2011, the US Department of Labor announced that it had reached agreements to share information with several states and the IRS in an attempt to deter the misclassification of employees as independent contractors.  This is part of the DOL’s prioritization of wage and hour law enforcement since Labor Secretary Hilda Solis took office with the Obama administration.  The stated goal of this new policy is to increase the severity of punishment by making the employer subject to multiple fines, instead of just one.  The states signing on to the DOL agreement are Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah, and Washington, with New York and Illinois indicating their intent to soon follow suit.

Previously, an employer caught misclassifying employees as independent contractors by a state agency would usually pay a fine only to that agency.  Under the new agreements, however, an employer in one of the signatory states will not only pay a fine to the state agency, but will be reported to both the DOL and the IRS.  The Department of Labor may seek its own fines and penalties from the offending employer.  The IRS may pursue action against the employer for unpaid back taxes.

The DOL has hired 300 additional investigators to pursue these so-called “wage theft” complaints.  The DOL has also indicated that the restaurant industry is one of the main industries they will target.

NLRB rules that some social media comments are protected by law

September 16th, 2011

In a recent decision, the National Labor Relations Board ruled that employers may not terminate employees criticizing their working conditions using Facebook under certain circumstances.  The ruling stems out of the termination of five employees at Hispanics United of Buffalo.  One of the employees had posted comments from a co-worker relating to fellow employees on Facebook, and then commented that this individual was not providing enough help to Hispanics United’s clients.  The employee also asked her coworkers to give input on the situation.  Several comments followed, many of which related to the working conditions at Hispanics United, including excessive workloads.  Some comments also contained profanity.  The employee who had made the original comments regarding her fellow employees considered the postings to be “cyber-bullying.”  Hispanics United fired the employee who made the Facebook post, and four other employees who had commented on the post, claiming that the posts had constituted harassment.

An administrative law judge for the NLRB ruled, however, that the Facebook discussion was considered protected conduct under the National Labor Relations Act.  Section 7 of that Act protects the discussions of workers about the terms and conditions of employment.  This means that certain employee criticisms of their employers on social networking sites like Facebook and MySpace are protected by law.  Terminating an employee for posting such criticism on social networking sites may also lead to liability for employers.  This is not, however, to say that any posting about an employer constitutes protected conduct.  Posting confidential business or client information is not protected conduct, and an employee posting such information may be subject to termination.  Employees also may not defame management or the company.   Protected conduct is limited to discussions of the terms and conditions of employment.

There may often be a fine line between what constituted protected employee discussion of the terms and conditions of employment, and what might be outside of the zone of protection and subject to employer discipline.  In such cases, it is critical to approach the situation with caution in order to avoid potential liability.

FEDERAL LAW DOES NOT REQUIRE ACCOMMODATION FOR “WORK-LIFE” BALANCE

August 23rd, 2011

The EEOC’s class action claim for sex discrimination against Bloomberg, L.P. failed in the Southern District of New York when Judge Loretta A. Preska dismissed the class action alleging a “pattern of discrimination” and emphasized that “the law does not mandate ‘work life balance.’”  As Judge Preska explained, “In a company like Bloomberg, which explicitly makes all-out dedication its expectation, making a decision that preferences family over work comes with consequences.”  Apparently, such consequences do not include a sex discrimination claim against the employer. 

The individual plaintiffs remain in the case and will continue to press their claims against the company.  But their theory of a claim on behalf of a class of women who have chosen to balance “life” with “work” has been sternly rejected as having no legal basis.  While quotable, the opinion is not surprising.  Life choices de-emphasizing career are made by men and women all the time in the work place, and trade-offs are constantly made as a result.  The law does not mandate accommodation for a balanced life with family.  Rather, it simply requires that men and women face substantially similar trade-offs if in substantially similar circumstances when those decisions are made.  You can find the decision here http://www.nytimes.com/interactive/2011/08/17/nyregion/17bloomberg-eeoc-ruling.html?ref=nyregion

Dorchester Pub Accused of Discrimination in Admitting Minorities

August 19th, 2011

On August 15, 2011, the Massachusetts Attorney General’s Office announced that it was bringing suit against Peggy O’Neil’s Pub and Grille in Dorchester, accusing the pub of engaging in a pattern of discriminatory behavior by refusing to admit minority individuals. The suit seeks money damages, penalties, and the creation of antidiscrimination policies and employee training.

In the suit, the Attorney General’s Office cites to two separate refusals to admit people of African-American, Hispanic, and Cape Verdean descent during a birthday celebration in December 2010.  The individuals were not admitted to the pub despite the attempted intercession of the woman celebrating her birthday, who is Caucasian. The suit alleges that the owner, Caron O’Neil, asked the group whether it was their first time there.  She also said: “We don’t want any trouble tonight. I don’t know you guys, and you should try to find another place to go.’’ The friends then left the area.

Shortly thereafter, another group of friends of several racial backgrounds arrived as part of the same birthday celebration.  The suit alleges that they were denied entry once the bouncers discovered that they did not know the owner.  The suit further alleges that several Caucasian patrons were admitted despite not knowing the owner, being dressed more casually, and appearing intoxicated.  According to the suit, the owner told them that “We don’t like people of your kind here. We’ve been doing this for a while and it’s been working fine and we don’t want any problems . . . I’m not letting you people in.’’

The suit also alleges that a group of African-American women were denied entry to the pub in April 2011.

Assuming that Peggy O’Neil’s Pub and Grille refused entry to these potential patrons for reasons other than their race, this lawsuit should serve as a reminder that refusing admittance to potential customers can be a risky business.  A bar, pub, or club must balance important considerations of both customer safety, such as refusing to admit patrons wearing gang colors or who appear to be excessively intoxicated, with caution as to who is denied entry.  If you refuse entry to members of one race for a certain reason, it must be clear that you refuse entry to members of all races for that same reason. Otherwise, you could find yourself on the wrong side of a discrimination lawsuit, even if you never intended to discriminate against anyone.

The original story as reported by the Boston Globe appears here.

Massachusetts Appeals Court Affirms Award for Racial Discrimination and Retaliation Likely to Exceed $10 Million Dollars Against the City of Cambridge

August 18th, 2011

On Monday, August 15, 2011, the Massachusetts Appeals Court affirmed a jury verdict in favor of the plaintiff in the case of Monteiro v. City of Cambridge. The Appeals Court found no reason to disturb the jury verdict in favor of the plaintiff, Malvina Monteiro, who alleged that she was fired in retaliation for filing a discrimination complaint with the Massachusetts Commission Against Discrimination.  The jury originally awarded her more than $4.5 million dollars in compensatory and punitive damages, and with interest and fees the total award has already reached $7.6 million dollars.  With the likelihood of an award of attorney’s fees for the decade-plus of litigation leading up to this decision, the City of Cambridge may face a total bill of over $10 million dollars.

This case brings two critical issues into sharp relief.  First, take complaints of discrimination seriously, and make sure all of your employees, from the top to bottom, understand that taking retaliatory action in response to a complaint of discrimination is not only illegal, but extremely bad business.  Second, understand that what might initially appear to be a lawsuit for thousands of dollars can, if not handled correctly, become a lawsuit that costs you millions.  Although you might not always be able to avoid an employee acting in a discriminatory manner, seeking experienced legal counsel as soon as you are threatened with a charge of discrimination can help you to minimize any damage that might result.

11th Circuit Rules Individual Mandate in Obama Health Care Law Unconstitutional

August 16th, 2011

Last week, the 11th Circuit Court of Appeals ruled the individual mandate in the Obama Health Care Law unconstitutional.  It did not, however, strike down the entire law.  (The opinion can be found here.)  In January, a federal district court in Florida had found the mandate, which requires citizens to buy health insurance, was unconstitutional and struck down the entire law because it did not have a savings clause.  The 11th Circuit affirmed part of that decision—i.e., that the mandate is unconstitutional.

A divided three-judge panel of the 11th Circuit sided with 26 states that filed a lawsuit to block President Obama’s signature domestic initiative.  The panel said that Congress exceeded its constitutional authority by requiring Americans to buy insurance or face penalties.  In particular, it stated the mandate to be “a wholly novel and potentially unbounded assertion of congressional authority.”

The panel further stated, “[T]he individual mandate contained in the Act exceeds Congress’s enumerated commerce power. . . .  The power that Congress has wielded via the Commerce Clause for the life of this country remains undiminished. Congress may regulate commercial actors. It may forbid certain commercial activity. It may enact hundreds of new laws and federally-funded programs, as it has elected to do in this massive 975- page Act. But what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.”

The panel also concluded, “It cannot be denied that the individual mandate is an unprecedented exercise of congressional power. As the CBO observed, Congress ‘has never required people to buy any good or service as a condition of lawful residence in the United States.’ . . . .  “Never before has Congress sought to regulate commerce by compelling non-market participants to enter into commerce so that Congress may regulate them. The statutory language of the mandate is not tied to health care consumption—past, present, or in the future. Rather, the mandate is to buy insurance now and forever. The individual mandate does not wait for market entry.”

The decision is a major setback for President Obama.  The federal government had appealed the ruling by the federal district judge who struck down the entire law in January.  The case, however, is clearly headed to the U.S. Supreme Court, which will have the final say.  In fact, it is now more likely that the Supreme Court will hear the case.  The fact the 11th Circuit and 6th Circuit are at odds with each other in their respective rulings increases the likelihood that the Court will decide this issue.

What is particularly notable about this decision is that it overturned the district court’s severability ruling—i.e., it held that, regardless whether the mandate is unconstitutional, the rest of the law remains intact.  If the Supreme Court rules that way too, it will mean the rest of ObamaCare will remain intact and good law even after the mandate is stricken.  This outcome, however, will not have been intended. As news reports indicated last year, the whole reason the mandate exists in the first place is so that insurers have a large new pool of premiums flowing in to help offset the costs they will incur from now having to cover people with preexisting conditions, etc.  If that pool disappears, the whole arrangement theoretically becomes financially unsustainable.

As stated above, the Supreme Court will likely combine this decision and the Sixth Circuit’s decision from just two months ago and ultimately resolve once and for all the issue of whether the individual mandate in the Obama health care law is constitutional and, perhaps, whether the rest of the law itself can remain in effect without a savings clause.

Escaping the Snare of the Patent Troll’s Net: What happens when a patent troll accuses restaurants and hotels of patent infringement?

August 2nd, 2011

The rising tide of patent litigation is now affecting the hospitality industry in surprising and substantial ways.  How?  We can list two very real examples:  For one, what café or hotel does not offer wi-fi to customers these days?  For another, how many restaurant or retail businesses use search locator software on their websites to help customers find them?  You may yourself have installed a free wi-fi service for your customers so they can use their laptops and tablets while sitting in your restaurant.  Or you may have a service that provides a search engine on your website to help customers find your location.  If so, you might be surprised to receive a letter in the mail from a company you’ve never heard of, telling you that your locator service and wi-fi might infringe on their patents.  You might be even more surprised when you read the demand for you to fork over a monthly licensing fee or a substantial lump sum payment, or face a lawsuit.  In that event, you’ve been snared by the net of a patent troll, and you need to develop a strategy to deal with it.

                What is a patent troll?  The very term conjures a Grimm Fairy Tale image of a hunched and hungry monster who lays in wait under a bridge to catch unsuspecting and innocent passers-by.  Indeed, the Grimm image is often not far from the fact.  Typically, a patent troll is a company that purchases patents from bankrupt entities or other companies that hold patents but no longer actively use them.  The patent troll does not intend to put the inventions claimed in its patents into practice or to make anything.  Rather, the troll’s business model is simply to threaten litigation against potential infringers and to collect royalties they can extract through such threats.  Upon assembling its patent portfolio, the troll will send out demand letters to a host of businesses, alleging that they may be infringing on the troll’s patents.  Often, these demand letters are short on specifics, make very broad claims, and are accompanied by an offer to reach a “reasonable” agreement with the business, which typically includes a “reasonable” licensing fee in the form of either monthly payments or a lump sum amount. In many cases, refusal to pay the licensing fee can result in a potentially expensive patent infringement lawsuit.

                If you want to know more about patent trolls, you can just ask one of over three hundred retail and hospitality industry defendants sued by Geotag, Inc., a patent troll company.   Some of these defendants include Starbucks, Barnes and Noble, Best Buy, and McDonald’s, and are scattered throughout the entire United States.  They, like many other patent infringement defendants, have been forced to defend themselves in the Eastern District of Texas against Geotag’s claim that the store locator services the various defendants allegedly provide on their respective websites infringe a patent Geotag holds concerning web search technology.  The defendants have been sued despite the fact that most of them buy their locator search engines from service providers that include, for example, Google and Microsoft.  Both Google and Microsoft have entered the fray by filing a separate declaratory judgment action against Geotag in Delaware seeking, among other things, to invalidate the patent at issue, but the infringement cases against most of the original defendants are still pending in the Eastern District of Texas.

                Another example of patent troll litigation against the hospitality industry includes a string of lawsuits filed by Innovatio IP Ventures, another patent troll company, against multiple defendants including Panera Bread and Best Western Hotels.  Innovatio essentially claims that all businesses providing wireless networking capability to customers infringe on a series of patents it claims to hold.  Innovatio has also been engaged in a letter-writing campaign, sending threatening letters with demands for quick payment of licensing fees to many other businesses.  Similar to the Geotag pattern, the large providers of the service or product at issue (in this case Cisco and Motorola) have filed suit against the patent troll in another court seeking, among other things, to invalidate the patent at issue, but the case against Best Western continues for now.  There are still numerous cases pending against businesses sued by Innovatio.

                How does one respond when caught in the troll’s snare?  When a company receives one of these demand letters, it should make several calls immediately. First, it should call its lawyers, inform them of the letter, and get them a copy of the letter quickly. Then it should call its insurance providers to notify them of the claim.  If applicable, the company should inform its provider of the allegedly infringing product or service and seek cooperation from them, and potentially indemnification depending on your vendor contract.  With the assistance of counsel, and perhaps with technical assistance as well and input from your vendor, you can examine the patent claims and compare them to the product or service you offer to determine whether you have an argument that you do not infringe.  You can also, again with the help of counsel, research what prior art may exist that could serve to invalidate the patent at issue.  You can also review your insurance policies and your vendor contracts to determine whether you may have a third party source to help pay for your legal defense.  Additionally, you may investigate whether there exists similarly-situated businesses that may be interested in pooling resources and forming a defense group which could help defray legal and expert fees and expenses.  

                Patent claims can be very expensive, time consuming and fraught with risk.  When faced with a demand, seek counsel and develop a strategy that works for you, considering both your legal and economic positions.  Then you can move forward in a rational manner and minimize the risk to you and your business.    

About the authors:

Christopher T. Vrountas is a partner at Nelson Kinder + Mosseau PC. He chairs the firm’s Employment Litigation and Counseling Group as well as the firm’s Food and Hospitality Practice Group and its IP Trial Practice Team.  Chris is a member of the New Hampshire Lodging and Restaurant Association as well as the Academy of Hospitality Industry Attorneys. He and the firm are “preferred providers” of legal services to the members of the NHLRA.  Chris regularly publishes in the NHLRA’s “The Dish” and edits the firm’s LegalBites blog which can be found at www.nkms.com/legalbites/and which covers various legal issues affecting the hospitality industry.

Richard S. Loftus is an associate at Nelson Kinder + Mosseau PC.  He works in the areas of commercial, employment, construction, and IP litigation.  He has worked on many complex civil litigation cases in state and federal court, including arguing successfully before the New Hampshire Supreme Court.  He has also worked in complex international litigation.  Before joining the firm, he served as judicial law clerk for the Honorable Andre Gelinas of the Massachusetts Appeals Court.

Supreme Court Helps Employers with Decision in Wal-Mart v. Dukes Class Action Lawsuit

June 20th, 2011

This morning, the Supreme Court issued its opinion in the Wal-Mart v. Dukes class action lawsuit that alleged discrimination of female employees.

The Court held 9-0 that a class of over one and a half million plaintiffs (current and former female employees of Wal-Mart) was improperly certified.  The Court was split 5-4, however, in how it reached this decision.  The majority—comprised of Justices Scalia, Roberts, Alito, Thomas, and Kennedy—concluded the class lacked commonality under Federal Rule of Civil Procedure 23(a)(2).

By contrast, Justice Ginsburg, who dissented in part—and was joined by Justices Breyer, Sotomayor, and Kagan—agreed the class action should not have been certified, but she states she would have ruled on a narrower ground than the majority.  Although she agrees with the majority that the class should not have been certified under Rule 23(b)(2) (a provision in the Rule that allows requests for injunctive or declaratory relief and does not allow claims for monetary relief where such relief, as in this case, is not incidental to the injunctive or declaratory relief sought), Ginsburg indicates the lower court’s finding of commonality was correct.  Instead, she hints that “[a] putative class of this type may be certifiable under Rule 23(b)(3),” and she would remand the case to determine whether the class meets those requirements.

In the case, the plaintiffs alleged that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII by discriminating against women.

The Majority Opinion

Writing for the majority, Justice Antonin Scalia held that, under Federal Rule of Civil Procedure 23, to certify a class, a plaintiff must do more than ask broad questions of the class to satisfy the requirements of the Rule.  Instead, a court must perform a rigorous analysis (as stated time and again) and, sometimes, that analysis may require that the court explore the claims of the plaintiffs more than usual. (As the Court stated, “that ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff ’s underlying claim. That cannot be helped.”)

In particular, the plaintiffs did not allege that Wal-Mart had any express corporate policy against the advancement of women; rather, they claimed their local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.  The plaintiffs claimed this discrimination was common to all Wal-Mart female employees.  Their theory alleged that a strong and uniform “corporate culture” permits bias against women to infect, perhaps subconsciously, the discretionary decision-making of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.

The Court stated “the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once.”  Rather, “[t]heir claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor.”  Moreover, “[t]hat common contention . . . must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

Here, the Court noted the crux of a Title VII inquiry is “the reason for a particular employment decision,” and the plaintiffs wished to sue for millions of employment decisions at once.  Without some glue holding together the alleged reasons for those decisions, the Court stated, it would be impossible to say that examination of all the class members’ claims would produce a common answer to the crucial discrimination question.

Scalia further dismissed the statistical and anecdotal evidence filed by the plaintiffs, stating “Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters” was “just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.”  Scalia also relied on the fact that Wal-Mart has a written policy of non-discrimination.

Justice Ginsburg’s Concurrence and Dissent

Ginsburg took the opposite view.  She agreed the class action should not have been certified under Rule 23(b)(2), but she indicates the lower court’s finding of commonality was correct.  Moreover, she states a class might be certifiable under Rule 23(b)(3).

She argued Wal-Mart’s non-discrimination policy has a disparate impact: she noted that, at Wal-Mart, women fill approximately 70% of the hourly retail jobs, but only 33% of management positions.  The reason, she argues, may be the subjective “tap on the shoulder process” that allows certain subjective standards, influenced by gender bias, to prevail when it comes to selecting employees deemed “management material.”  She further wrote, “The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects.  Managers, like all humankind, may be prey to biases of which they are unaware.  The risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes.”

What Does This Mean For Employers?

The Court’s decision in the Wal-Mart v. Dukes class action lawsuit is good news for employers because it sets a new higher standard for defining a class, which will likely make it difficult in the future for other class action claims against large companies based on discrimination to be certified.

Hearing Held on Bill Prohibiting Discrimination Against Transgendered Persons

June 13th, 2011

The Massachusetts Legislature’s Committee on the Judiciary held a hearing on Wednesday June 8, 2011 to hear testimony on a bill that would outlaw discrimination on the basis of “gender identity or expression.”  The effect of the bill would be ban discrimination against transgendered persons in employment, housing, education, credit and public accommodations.  With the exception of New Hampshire, every other New England state has already passed similar legislation.

At the hearing, the bill’s proponents read the names of several transgendered individuals who had been murdered in Massachusetts since the late 1970s.  The bill’s supporters further claimed that the bill would provide transgendered individuals with necessary protection against discrimination when looking for a job or housing.  The opponents of the bill have re-labeled it the “bathroom bill” and have argued that it would result in a breakdown in privacy in restrooms, locker rooms, and other single gender facilities.  Should the bill pass, Massachusetts employers would be required to prevent harassment of transgendered employees and abstain from such discrimination in hiring, firing and promotion decisions. 

Click here for a full article from the Boston Globe on this issue.

Supreme Court Holds States May Require Employers to Use E-Verify

June 6th, 2011

The Supreme Court recently determined in that states may require employers to use “E-Verify” to determine the legal status of their employees.  “E-Verify” is an internet-based federal system that permits employers to check the work status of their employees.  Chamber of Commerce v. Whiting, involved the challenge of an Arizona state law that requires all employers to use E-Verify or face civil and criminal sanctions. A combined class of business groups and immigrants rights groups challenged the law on the grounds that the Federal Immigration Control and Reform Act (FICRA) preempted it. 

The Supreme Court rejected the argument that FIRCA impliedly preempts the Arizona statute.  The goal of E-Verify was to make it easier for employers to obtain accurate information about their employees.  According to government counsel in Whiting, the system is the best means available for determining the employment eligibility of new hires.  Furthermore, the system has the capability to handle large volumes of requests and therefore is equipped to handle the increased use created by the Arizona statute.  As a result, the Court concluded that the Arizona statute does not conflict with the scheme created by FIRCA and was instead entirely consistent with federal law. 

The Court’s decision in Whiting has opened the door for other states to enact legislation that both requires employers to use the E-Verify system and imposes strict penalties on those who employ illegal immigrants.  In the week following the Supreme Court’s decision, state legislatures in South Carolina and Texas have already introduced   bills that mirror Arizona’s statute.  In light of Whiting, employers should be aware of legislative developments in their states, and take care to verify the work status of their employees. 

Click here for a full article on this matter.

EEOC sues Starbucks for Failing to Provide Reasonable Accommodation for Employee with Dwarfism

May 27th, 2011

The Equal Employment Opportunity Commission (EEOC) recently filed suit against Starbucks alleging that the chain violated the American Disabilities Act (“ADA”) by firing an employee with dwarfism.  The employee had worked at the coffee chain for three days as a barista when she requested a stool or a small stepladder to help her reach the coffee slinging equipment.  Instead of providing the equipment, Starbucks fired the employee.

The ADA requires employers to provide a reasonable accommodation to employees with disabilities so long as it will not result in an undue hardship for the employer.  In its suit against Starbucks, the EEOC claims that the chain not only failed to provide such an accommodation, but also violated the act by firing the employee because of her disability.  Starbucks argues that its actions were justified because providing a stool to the employee would have been dangerous and hazardous to other employees, making the request unreasonable and outside of the scope of the ADA.

Whether or not Starbucks has a valid legal defense, the EEOC’s suit should serve as a reminder to employers that they have an obligation to engage in an interactive process to determine whether to provide a reasonable accommodation to disabled employees.  As the trial attorney for the EEOC stated: “Employers cannot blithely ignore a request for a reasonable accommodation by a qualified individual with a disability…Starbucks flatly refused to discuss [the employee’s] reasonable request.  Instead, they assumed the worst and fired her.  The ADA was enacted to prevent that kind of misguided, fear-driven reaction.”

Supreme Court Finds ERISA Disclosure Violation Requires Showing of Actual Harm

May 23rd, 2011

On May 16, 2011, the Supreme Court determined in Cigna Corp v. Amara, that an employee is only entitled to relief under Section 502(a)(3) of the Employee Retirement Income Security Act (ERISA), if they can demonstrate that they were actually harmed by a misrepresentation made in a pension plan summary. The Amara decision arose out of a 1998 change to the Cigna Corp’s pension plan. The outcome of the new plan was that many employees received far fewer benefits than with the old plan resulting in thousands of dollars of savings for the employer. However, the descriptions to the new plan did not adequately describe the effect of the changes, and the employer did not explain them to the employees. In fact, the employer sent out a newsletter claiming that the new plan would “significantly enhance” its retirement program, would produce “an overall improvement in retirement benefits” and would not result in cost savings for the company. The beneficiaries of the plan filed a class action suit claiming the employer had violated the disclosure requirements of ERISA.
The District Court found that the employer had violated ERISA’s disclosure requirements and granted relief under Section 502(a)(1)(B) of the statute by reforming CIGNA’s pension plan. Writing for the majority, Justice Breyer explained that the cited section of the statute did not authorize the District Court to reform the employer’s pension plan. The Court instead found that Section 502(a)(1)(B) only permits a court to enforce the terms of the existing plan, and not to rewrite the plan to conform with a misleading plan description.
Nevertheless, the Amara majority went on to find that relief could be granted for misrepresentations in pension plans under Section 502(a)(3) of ERISA. Section 502(a)(3) allows a plan beneficiary “to obtain other appropriate equitable relief” for violations of ERISA. ERISA, however, does not set forth any particular standard for determining when such relief may be granted. Instead, it simply requires plan administrators to “write and distribute written notices that are sufficiently accurate and comprehensive to reasonably appraise” plan participants and beneficiaries of “their rights and obligations under the plan.” The Court therefore determined that any requirement of harm under the statute is derived from the law of equity, which requires a showing of actual harm proven by a preponderance of the evidence.
The Amara decision indicates that summary plan descriptions of pension plans may not be enforced as contracts. Nevertheless, an employer may be held liable in circumstances where the summary plan description is sufficiently misleading an employee suffers actual harm as a result. Consequently, employers should take care to ensure that plan descriptions sufficiently describe the terms of offered pension plans.

Click here for a full article on this matter.

Employees May File Retaliation Claims After End of Employment

May 16th, 2011

On May 12, 2011, the Massachusetts Supreme Court in Psy-Ed Corp v. Klein, determined that a person does not need to be a current employee at the time of the wrongful conduct to receive protection under the retaliation provisions of the Massachusetts anti-discrimination laws.  Psy-Ed Corp, involved a former associate editor of a magazine company, who was deaf and required an interpreter to accompany her at meetings, which the company frequently failed to provide.  Following a partial relocation of the business, the employee was fired, and she subsequently filed a complaint against her employer with the Massachusetts Commission Against Discrimination (“MCAD”).  At the same time, tension developed between the company’s owners, and one of the co-owners entered negotiations to separate from the company.  Although the co-owner had previously signed an affidavit stating that he agreed with the company’s response to the employee’s MCAD complaint, he then filed a second affidavit reversing his position.  MCAD subsequently issued a finding of probable cause in the employee’s case.  As a result, the company sued the co-owner and the employee for defamation, civil conspiracy, and tortious interference of contract.  The employee entered a counterclaim, stating that the suit violated the Massachusetts anti-discrimination laws as it was filed as retaliation for her MCAD complaint.

            The Supreme Court held that the company did retaliate against the employee by filing suit, even though it occurred two years after the end of her employment.  To make out a prima facie case of retaliation, the plaintiff only needs to show that “he engaged in protected conduct, that he suffered some adverse action, and that ‘a causal connection existed between the protected conduct and the adverse action.’”  A prima facie case may be established regardless of whether an employment relationship existed at the time of the wrongful conduct.  The Court determined that such an interpretation of the law was necessary to have the intended effect of protecting victims of discrimination from suffering further ill treatment as the consequence of exercising their rights.

            Psy-Ed Corp, illustrates the broad scope of the Massachusetts anti-discrimination laws.  In Massachusetts, the end of the employment relationship does not signal the end of an employer’s obligation not to discriminate.  Consequently, employers should be aware that they may be held liable for discriminatory conduct occurring years after the employee leaves the company’s employ.

Supreme Court Finds Oral Complaints Fall Within FLSA’s Protection Against Retaliation

April 29th, 2011

The Supreme Court recently held in Kasten v. Saint Gorbain Performance Plastics that an oral complaint by an employee qualifies for protection against retaliation under the Fair Labor Standards Act (FLSA).  In Kasten, a discharged employee claimed that he was fired for complaining to his employer about the placement of time clocks in such a way that prevented workers for receiving credit for time spent putting on and taking off protective gear, as required by the FLSA.  The employee complained of the error to his supervisor, and repeatedly called the employer’s attention to it through the employer’s grievance procedure.

The FLSA prevents an employer from disciplining or discharging employees who have “filed any complaint” under the act.  The Court held that the oral complaint made by the employee in Kasten was sufficient to invoke the protection of the retaliation provisions of the act.  Although the term “filed” could imply that the complaint must be in writing, the Kasten majority determined that when read in connection with the following phase “any complaint,” the statute suggested a broad interpretation that encompasses oral complaints.  Furthermore, in examining the interpretations given to the term by federal agencies and similar state statutes, the Court found that “filed” frequently was construed to include oral complaints.

The employer argued that an oral complaint could not be permitted under the act because it would not provide sufficient notice to the employer.  The Court agreed that some level of formality was required in making a complaint in order to provide notice to the employer.  However, the Kasten majority found that an oral complaint could provide sufficient notice as long as “a reasonable, objective person would have understood the employee” to have put the employer on notice.

            The ruling in Kasten resolves the dispute of the lower federal courts on the scope of the term “filed any complaint.”  It is now clear that verbal complaints of a violation invoke the protection of the retaliation provisions of the FLSA.  In light of Kasten, employers should ensure that they keep careful records of employee complaints as to FLSA compliance, and institute a system for quickly and uniformly investigating all such complaints.

First Circuit Finds No Liability For Hostile Work Environment Where Employer Strictly Adhered to Anti-Harassment Policy

April 28th, 2011

The First Circuit recently found that an employer is permitted to apply progressive discipline in response to a complaint of racial harassment by an employee.  In Wilson v. Moulison North Corporation, the co-workers of an African American employee repeatedly referred to him with racial epithets and engaged in other abusive behavior such as contaminating his water bottle with gas, dirt and oil.  The employee filed suit against his employer, alleging that he was forced to work in a racially hostile environment in violation of Title VII and that his employer failed to act appropriately in deterring the perpetrators.  

            The First Circuit held that it was sufficient for the employer to issue a written warning in response to the plaintiff’s report of harassment. To incur liability under Title VII, an employer must have notice of the conduct and fail to take appropriate remedial steps.  An employer is not required to dismiss or suspend an employee for engaging in behavior that violates Title VII.  In this case, it was sufficient for the employer to give a written warning because the involved employees were not repeat offenders, the warning specifically stated that future conduct would result in dismissal, and the employer’s anti-harassment policy provided that disciplinary measures could include written warnings.

            The employer further avoided liability because the plaintiff failed to follow the employer’s anti-harassment policy in notifying the employer of his coworkers continued harassment.  Although the employee notified the appropriate supervisor of the first instance of harassment, he only informed the “lead worker” on his shift, that the behavior persisted after the written warning.  The First Circuit held that complaining to the lead worker was insufficient to notify the employer of the continued harassment because the employer had an established anti-harassment policy that clearly designated the employee’s supervisor, and not the lead worker, as the appropriate contact for reporting harassment.

            The decision of the First Circuit clarifies that an employer may avoid liability for Title VII harassment by having and implementing a clear anti-harassment policy.  To be effective, such a policy should include a procedure for quickly dealing with complaints of harassment and should designate a specific manager to whom the complaints may be made.

Department of Labor’s Final Rule under the FLSA Alters Requirements for Tip Pooling and Fluctuating Workweeks

April 27th, 2011

 On April 5, 2011, the Wage and Hour Division of the Department of Labor issued a final rule entitled “Updating Regulations Issued Under the Fair Labor Standards Act.”  The final rule makes several “updates” to the Fair Labor Standards Act (FLSA), but most significantly impacts the areas of tip pooling and the fluctuating workweek.

First, with regards to tip pooling, the final rule increases the maximum amount that an employer may claim as a tip credit from $4.42 per hour to $5.12 per hour.  However, an employer may only apply the credit to a tipped employee if the employee has been given notice of the tip credit provisions under FLSA and all tips above the maximum credit amount are kept by the employee.  Although there is no cap on a tip pool, under the final rule, an employer is not permitted to use tips for any purpose other than a tip pool, regardless of whether they choose to participate in the practice.

Second, the final rule places more stringent requirements on the use of the fluctuating workweek.  A fluctuating workweek allows an employee covered by the FLSA who works on an irregular schedule to be paid a straight time salary.  Under the new rule, an employer is prohibited from paying bonuses, premium payments or other additional amounts in conjunction with a fluctuating workweek. The comments to the rule indicate the belief that allowing these payments causes a drop in the overall salary paid.  Additionally, the new rule clarifies that the fluctuating workweek can only be used where the employee’s hours actually fluctuate in an irregular and unpredictable manner.

In light of the new rule, employers engaging in a tip pool should ensure that they do not exceed the maximum tip credit amount and that all involved employees have been given notice of their rights under the FLSA.  Furthermore, employers who use a fluctuating workweek in compensating their employees should verify that all involved employees have irregular hours.  The final rule will go into effect on May 5, 2011.


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