Disparate-Impact Claims Get a Boost in Unanimous Supreme Court Opinion Written by Justice Scalia

In Lewis v. City of Chicago, 2010 U.S. LEXIS 4165 (May 24, 2010), Justice Scalia, writing for a unanimous Court, held that plaintiffs had timely filed their charges of discrimination with EEOC when they filed more than 300 days after the adoption of the allegedly unlawful practice, but within 300 days of the City’s use of that practice, a use which plaintiffs contend causes a disparate impact on one of the bases prohibited by Title VII. 

In July 1995, after taking some years to develop the examination, the City administered for the first, and only, time the examination to some 26,000 applicants.  The City scored the tests, listed applicants from highest to lowest score, and divided the list into three categories.  The first category included those scoring 89 or above, who were deemed “well qualified”; the second included those scoring 88 to 65, who were deemed “qualified”; and the third included those scoring 64 or below, who were deemed “not qualified.”  In January 1996, after the hiring list was adopted, the City advised the “well qualified” that they would be called in random order to continue the hiring process, which included a physical abilities test, background check, medical evaluation, and drug test.  The “qualified” were told that it was “not likely that they would ever be called due to the large number of applicants who had received “well qualified” scores.  The “qualified” were also told that they would remain on the eligibility list for so long as the list was used. 

Also, in January 1996, the City’s Mayor publicly announced the results, noting that 6.8% (1,782) of the 26,000 applicants were deemed “well qualified”; and that of those “well qualified” candidates, 75.8% were white and 11.5% African American. 

The City used the eligibility list for the first time in May 1996; the second time in October 1996; and eight more times until November 2001, each time selecting at random from the “well qualified” category.  Not until March 31, 1997 did a charge of discrimination get filed with the EEOC. 

Eight “qualified” applicants, as well as the African American Fire Fighters League of Chicago, filed suit against the City, and the District Court, Judge Joan Gottschall, certified a class of about 6,000 African-Americans in the “qualified” category. 

The City admitted adverse impact, and thus the liability phase of the trial focused on issues of job relatedness and whether the examination’s use was consistent with business necessity.  The district court rejected the City’s defense and found the City liable under Title VII. 

On appeal, the City challenged the district court’s holding that the plaintiffs had timely filed a charge with the EEOC.  The Seventh Circuit, Judge Posner writing for the panel, reversed the district court on the timeliness issue, finding that plaintiffs had failed to file an EEOC charge within 300 days after the unlawful practice occurred, which it found to be when the list was adopted and announced.

Justice Scalia, in reversing the Seventh Circuit, held that disparate impact cases are different than disparate treatment cases with respect to the time within which a charge must be filed.  Noting that the language of Title VII’s disparate impact provision talks in terms of an employer’s use of an employment practice that causes a disparate impact, he held that the time within which to file ran from the utilization of the list generated from the test scores.  Thus, in this disparate impact case, the charges were held to be timely filed. 

The opinion rejects the defense argument relying on United Air Lines, Inc. v. Evans, 431 U.S. 553 (1977), that the present effects of prior actions cannot lead to Title VII liability.  The Court in rejecting that argument states: 

“As relevant here, those cases establish only that a Title VII plaintiff must show a ‘present violation’ within the limitations.  What that requires depends on the claim asserted.  For disparate-treatment claims—and others for which discriminatory intent is required—that means the plaintiff must demonstrate deliberate discrimination within the limitations period.  But for claims that do not require discriminatory intent, no such demonstration is needed.  Our opinions, it is true, describe the harms of which the unsuccessful plaintiffs in those cases complained as ‘present effect[s]’ of past discrimination.  But the reasons they could not be the present effects of present discrimination was that the charged discrimination required proof of discriminatory intent which had not even been alleged.  That reasoning has no application when, as here, the charge is disparate impact, which does not require discriminatory intent.”  (citations omitted)

In addition to the good news for plaintiffs with respect to disparate impact claims and charge filing, Justice Scalia, in a pithy sentence, summarizes how easy it is to establish a prima facie claim of disparate impact discrimination.  Citing Ricci, he states that “a plaintiff establishes a prima facie disparate impact claim, by showing that the employer ‘uses a particular employment practice that causes a disparate impact’ on one of the prohibited bases.”

While the City stated yesterday that the case is not over yet, assuming that the Seventh Circuit upholds the district court’s liability ruling, the City will now apparently distribute millions of dollars in back pay to “132 undifferentiated” individuals.  At oral argument before the Supreme Court, Chief Justice Roberts in a colloquy with the Deputy Solicitor General arguing as amicus for the United States, asked:  “So everybody gets 132 over 6,000 times whatever the number of people who would have been hired?”  To which the Deputy Solicitor stated that the Chief’s math was correct.

What seems clearly to have driven the Court to this unanimous result is the fact, which was underscored over and over during oral argument, that if someone had not challenged the announcement of the test results within 300 days, under the City’s interpretation of Title VII’s limitations periods, the City would have “a get-out-of-jail-free card to use for all time.”  Oral argument of Neal Katyal, Esq., Deputy Solicitor General, at p. 18. 

One interesting footnote is that consistently throughout the litigation, the City trumpeted the fact that it had developed the test in consultation with “a prominent African American industrial psychologist” (Oral Argument at p. 38). 

There is an interesting “Cf.” in Justice Scalia’s opinion where he cites Connecticut v. Teal, 457 U.S. 440, 445-51 (1982), after stating the following:  “It may be true that the City’s January 1996 decision to adopt the cutoff score (and to create a list of the applicants above it) gave rise to a freestanding disparate impact claim.”  The Bluebook says that the “Cf.” signal means that one is citing an authority that “supports a proposition different from the main proposition but sufficiently analogous to lend support.”  Having read and re-read the preceding sentence and the “Cf.” to Teal, one can only guess as to what Justice Scalia’s obscure reference means.  I assume that the Justice is relying upon Teal for the proposition that the development and administration of a test, the results of which contain adverse racial impact, is a violation of 703(a)(2) of Title VII and possibly suggesting that Teal’s ultimate holding is still good law, that is, the Teal majority’s rejection of the so-called “bottom-line” defense where an employer argues that it has no disparate-impact liability for a test if the “bottom-line” results of the promotional process was an appropriate racial balance.  All of this is about as obscure as the Greeks reading the entrails of animals (known as “hepatoscopy”—$25 word of the day).  I do note that Teal was a 5-4 decision with Justice Powell writing a dissent on behalf of then Chief Justice Burger and Justices Rehnquist and O’Connor. 

As we have reported in an earlier post, there appears to be a significant uptick in disparate-impact claims, and certainly Lewis will not discourage plaintiffs and EEOC from pursuing such claims.  Presumably, we will increasingly see disparate-impact challenges to background checks that incorporate reliance on criminal history (see Arroyo v. Accenture LLP, Civ. No. 10-03013 (S.D.N.Y.); Michael A. Stoll, Ex-Offenders, Criminal Background Checks, and Racial Consequences in the Labor Market, 2009 U. Chi. Legal F. 381 (2009)); background checks that rely upon an applicant’s credit rating and credit report (see EEOC v. Freeman, Civ. No. 09-02573 (D. Md.); EEOC Advisory Letter, Title VII:  Employer Use of Credit Checks, Mar. 9, 2009, available here)); reliance on educational qualifications for new hires and promotions (see EEOC Advisory Letter, Title VII:  Disparate Impact of Education Requirements, Feb. 19, 2010, available here (in response to an EEOC inquiry as to whether requiring a master’s degree as a hiring requirement would violate Title VII, the letter responded that if a disproportionate exclusion of racial minorities could be proven, then adopting the requirement could subject the employer to liability for disparate impact discrimination unless the employer could show a business necessity for the requirement, and unless the plaintiff failed to show an equally effective less discriminatory requirement)); pencil and paper written tests; prior performance evaluations; and other practices that arguably have a disparate-impact on the bases of criteria, like race, gender, national origin, and age, that are prohibited by federal law.  See also, e.g., Equal Employment For All Act, H.R. 3149, 111th Con. (2009); Testimony of Adam T. Klein, Esq., EEOC Commission Meeting (May 17, 2007), available here.  In addition, state and local courts are interpreting their statutes to recognize disparate-impact claims.  See, e.g., Estenos v. PAHO/WHO Fed. Credit Union, 952 A.2d 878 (D.C. 2008) (“. . . the [D.C. Human Rights Act] also offers protection against unintentional discrimination under the Effects Clause, in which case the employer may defend based only on the narrowly-drawn exceptions in the DCHRA . . .”).

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Social Network Discovery and Discovery Regarding Past Employers

On May 11, 2010, Magistrate Judge Lynch of the Southern District of Indiana entered an order in EEOC v. Simply Storage Mgmt., LLC, No. 09-1223 (S.D. Ind. May 11, 2010) (relying heavily on Canadian law), in which she permitted broad discovery by the defense of plaintiff’s social network sites. The EEOC brought suit on behalf of two female employees of a self-storage firm, the property manager and the associate manager, contending that the two and other similarly situated female employees were subjected to unwelcome sexual groping, sexual assault, and sexual comments by a male property manager. The two females alleged that the sex harassment resulted in severe emotional distress. Judge Lynch ordered them to disclose to the defense extensive information from their MySpace and Facebook accounts, including all profiles, status updates, wall posts, groups joined, causes supported, photos, applications, and the like that “reveal, refer, or relate to any emotion, feeling, or mental state, as well as communications that reveal, refer, or relate to events that could reasonably be expected to produce a significant emotion, feeling, or mental state.”

Judge Lynch held that any privacy concerns were overridden by the fact that plaintiffs had already shared the information “with at least one person.” In support thereof, Judge Lynch cited two Canadian cases—Leduc v. Roman, 2009 CanLII 6838, at ¶31 (ON S.C.) (“Facebook is not used as a means by which account holders carry on monologues with themselves.”), available here, and Murphy v. Perger, [2007] O.J. No. 5511 (S.C.J.) (Ontario Superior Court of Justice)—as well as Mackelprang v. Fidelity Nat’l Title Agency of Nevada, Inc., 2007 U.S. Dist. LEXIS 2379 (D. Nev. 2007), for the proposition that “merely locking a profile from public access does not prevent discovery” under the auspices of privacy.

In Murphy, the Ontario Superior Court of Justice ordered a plaintiff in a motor vehicle suit to produce copies of her Facebook pages. The defendant successfully argued that the pages were likely to contain photographs relevant to the plaintiff’s damages claim, and was buttressed by the fact that the plaintiff had served photographs showing herself participating in various forms of activities pre-accident. The court concluded:

“Having considered these competing interests, I have concluded than any invasion of privacy is minimal and outweighed by the defendant’s need to have the photographs in order to assess the case. The plaintiff could not have a serious expectation of privacy given that 366 people have been granted access to the private site.” [Thanks to Dan Michaulk for the preceding synopsis and quotation.]

In Leduc, the Ontario Superior Court of Justice overturned the trial court’s holding that the existence of the plaintiff’s Facebook was not reason to believe it contained relevant evidence about his lifestyle. In so doing, the court stated:

“With respect, I do not regard the defendant’s request as a fishing expedition, Mr. Leduc exercised control over a social networking and information site to which he allowed designated ‘friends’ access. It is reasonable to infer that his social networking site likely contains some content relevant to the issue of how Mr. Leduc has been able to lead his life since the accident . . . a court can infer, from the nature of the Facebook service, the likely existence of relevant documents on a limited-access Facebook profile.” Leduc, 2009 CanLII 6838, at ¶¶ 32 & 36.

The Simply Storage court also ruled, following the rationale articulated several years ago in Woods v. Fresenius Med. Care Grp. of N. America, 2008 U.S. Dist. LEXIS 3756 (S.D. Ind. Jan. 16, 2008), that the past work history of the two plaintiffs need not be produced as the defense had failed to demonstrate its relevance to the particular claims and defenses in this case.

A number of courts have held as a “general rule” that plaintiff’s prior job performance is irrelevant in employment cases. See Laffey v. Janssen, 2006 U.S. Dist. LEXIS 14833 (M.D. Fla. 2005) (excluding evidence of prior performance for the same employer). See also Neuren v. Adduci, Mastriani, Meeks & Schill, 43 F.3d 1507, 1511 (D.C. Cir. 1995) (holding that because plaintiff’s difficulties with interpersonal relationships at her prior job was irrelevant, the district court improperly admitted such evidence); Zenian v. District of Columbia, 283 F. Supp. 2d 36 (D.D.C. 2003) (holding that evidence of prior employment cannot be introduced in the attempt to prove that plaintiff acted consistently with his prior conduct); Fyock v. American Public Gas Ass’n, Civ. No. 2008 CA 006454 B (D.C. Sup. Ct. Apr. 24, 2009) (finding that defendant’s proffered justification for the discovery of plaintiff’s employment records—including that it is “standard practice” and that such discovery would "shed light on Plaintiff’s termination of previous employment” and “lead to discovery of admissible evidence"—failed to demonstrate how plaintiff’s employment records were relevant or discoverable).

Courts have consistently prevented discovery of employees’ character. See Neuren, 43 F.3d at 1511 (holding that the district court improperly admitted evidence of plaintiff’s difficulties with interpersonal relationships at her prior job); Zubulake v. UBS Warburg, LLC, 382 F. Supp. 2d 536 (S.D.N.Y. 2005) (holding that using plaintiff’s prior job performance to show plaintiff was insubordinate and uncooperative at the job he was terminated from was inadmissible propensity evidence); Fyock, Civ. No. 2008 CA 006454, at p. 9-10 (“As to Plaintiff’s employment with [his former employers], this Court finds that even if the Plaintiff’s employment records did contain evidence suggesting that Plaintiff had a problem with his emotional behavior during his employment with [his former employers], such information is irrelevant to Plaintiff’s claims of age discrimination, breach of contract and promissory estoppel.”). Such evidence would not be admissible at trial as its only purpose would be an attempt to prove that the employee acted consistently with his character as evidenced by his prior employment. See Neuren, 43 F.3d at 1511 (holding that the district court improperly admitted evidence of plaintiff’s difficulties with interpersonal relationships at her prior job); Zenian, 283 F. Supp. 2d at 40 (D.D.C. 2003) (“If the District is offering the [prior employment] evidence to show that plaintiff has always been a bad employee, it is doing exactly what it cannot do: introduce evidence of a person’s character to prove that his behavior on one or more occasions was consistent with that character. Fed.R.Evid. 404(a). … That, of course, is exactly what a litigant cannot do.”). Moreover, character evidence is generally considered not to be an element of any claim or defense in employment cases. See Zubulake, 382 F. Supp. 2d at 539 n.1 (“Plaintiff’s character is not an essential element of any claim or defense in an employment discrimination case. The prohibitions of Rule 404(b) therefore apply.”). See also EEOC v. HBE Corp., 135 F.3d 543, 553 (8th Cir. 1998) (plaintiff's character was not an essential element of his retaliatory discharge claim).

Thanks to the Baker & Daniels “News & Events,” Robert Iafolla of Civilian Review, and Cath Everett of HRZone for calling Judge Lynch’s opinion to our attention.

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Department of Labor Files Amicus Brief, Arguing That an Employee’s Pursuit of a Grievance Under the Railway Labor Act Does Not Preclude a Whistleblower Complaint Under the Federal Railroad Safety Act

Today, the Office of the Solicitor of the Department of Labor filed an amicus brief with the Administrative Review Board in Mercier v. Union Pacific Railroad, ARB Case Nos. 09-121 & 09-101 (May 21, 2010), available here, in which the Assistant Secretary of Labor for Occupational Safety and Health argues that the election of remedies provision in the Federal Railroad Safety Act (49 U.S.C. § 20109(f)) does not preclude a FRSA complaint where the employee / complainant has pursued a grievance and / or arbitration pursuant to the employee’s collective bargaining agreement under the Railway Labor Act. FRSA’s whistleblower protection provision contains an election of remedies provision, which reads as follows:
An employee may not seek protection under both this section and another provision of law for the same allegedly unlawful act of the railroad carrier.
49 U.S.C. § 20109(f).

In these consolidated cases, the Assistant Secretary argues that the act for which an employee seeks protection through a grievance and / or arbitration process is for a violation of the collective bargaining agreement and, the Assistant Secretary argues that an employee cannot seek protection through the grievance and / or arbitration process for retaliation, as a retaliation claim does not require the application or interpretation of the CBA. Thus, the Assistant Secretary argues that “even where a dispute under the CBA and a FRSA claim might address the same facts, the [Railroad] Adjustment Board has no authority to address an employee’s claim of retaliation” (footnote omitted). Therefore, the Assistant Secretary argues that “utilizing the grievance and / or arbitration process is not an election to seek protection for the unlawful act of retaliation.”

Tip of the hat to the Train Blog for calling this development to our attention.

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Tipped Employees: Dual Employment

A recent decision by Judge Laughrey of the Western District of Missouri in Fast v. Applebee’s Int’l, Inc., 2009 U.S. Dist. LEXIS 67564 (W.D. Mo. Mar. 4, 2010), on appeal, Appeal No. 10-1725 (8th Cir.), underscores the complexity regarding the proper calculation of compensation for tipped employees. The Fast decision involves an aspect of wage and hour law where an employee is employed concurrently in both a tipped and a non-tipped occupation. Some background is necessary in order to understand the issues presented by the Fast case and the court’s resolution of them. 2007 WL 1309680 (W.D. Mo. May 3, 2007) (denying employer’s summary judgment motion).

Generally, the FLSA requires employers to pay a minimum wage of $7.25 per hour. 29 U.S.C. § 206(A)(i)(c). The FLSA permits employers to pay a so-called “direct wage” of $2.13 per hour to employees worked in a “tipped occupation” (29 U.S.C. § 203(m)), so long as they then take a “tip credit” to meet the $7.25 per hour minimum wage requirement. Where tips do not make up the difference, the employer must supplement so the employee receives no less than the full minimum wage for all hours worked.

A “tip credit” is the amount of the employee’s tips that the employer can use to make up the difference between $2.13 per hour and the $7.25 minimum wage. 29 U.S.C. § 203(m).

A “tipped employee” is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t). In determining whether the employee is a “tipped employee,” the courts have focused on the level of customer interaction involved in the particular occupation. Customer service positions in which the employee has more than de minimus interaction with customers have been found to be a tipped occupation even where the employees are prohibited from accepting tips directly from customers. See, e.g., Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294, 301 (6th Cir. 1998) (finding restaurant hosts to be tipped employees); Dole v. Continental Cuisine, Inc., 751 F. Supp. 799 (E.D. Ark. 1990) (finding maitre d’ to be a tipped employee). In contrast, employees who do not have any customer contact have been found not to be tipped employees. See, e.g., Elkins v. Showcase, Inc., 704 P.2d 977, 989 (Kan. 1985); Myers v. The Copper Cellar Corp., 192 F.3d 546 (6th Cir. 1999).

Under the “tip credit” provisions, an employer is only required to pay $2.13 in direct wages so long as that amount, combined with the employee’s tips, equals the hourly minimum wage, currently $7.25.

If an employee is engaged in both a tipped occupation and a non-tipped occupation, so-called dual employment, then the tip credit can only be taken for the time worked in the tipped occupation. Employers are required to keep separate records for tipped and non-tipped occupations. 29 C.F.R. § 516.28. A DOL regulation addresses the circumstance of dual occupations. 29 C.F.R. § 531.56(e). The regulation provides that so long as a tipped employee is doing related work in the tipped occupation, a tip credit is permitted. Thus, the regulation, by way of example, references a waitress who spends part of her time cleaning and setting tables, toasting bread, making coffee and occasionally washing dishes or glasses, as an example of someone in a tipped occupation performing duties related to that occupation for whom the employer may take a tip credit.

DOL’s Field Operations Handbook contains guidelines for determining how much non-tipped work can be assigned to an employee before the employee has become a dual employee, that is, an employee working in a tipped and a non-tipped occupation. The Handbook (Section 30d00e) indicates that employees who spend more than 20% of their time on general preparation and maintenance work cannot be considered tipped employees for the time spent doing general preparation and maintenance.

In a 1985 opinion letter (Dep’t of Labor, Wage & Hour Div., Op. Letter FLSA-854 (Dec. 20, 1985)), the Department addressed the issue further and stated that the tip credit could be taken for “preparation work or after hours clean-up if such duties are incidental to the waiter or waitress’s regular duties and are assigned generally to the waiter/waitress staff. However, where the facts indicate that specific employees are routinely assigned to maintenance work or that tipped employees spend a substantial amount of time performing general preparation work or maintenance, we would not approve a tip credit for hours spent in such activities.” Several years later, in 1988, DOL’s Handbook contained the 20% rule, which defined when general preparation or maintenance work had become substantial.

With this background, the principal contention in Fast is Applebee’s argument that the district court used a task-based analysis rather than an occupation-based analysis. In its opening brief to the Eighth Circuit, Applebee’s argues that the FLSA’s tip credit requires an occupation-based analysis. Applebee’s relies upon the language of the statute (§ 203(t)), which refers to “an occupation” as well as the record-keeping regulation (29 C.F.R. §516.28(a)(4) and (5)), which also uses the terminology “occupation.”

Like all tipped employee issues, these issues are complicated and of enormous importance to the restaurant industry and those employed therein. The National Council of Chain Restaurants is scheduled to file an amicus brief in Fast on June 18th. We will post further about the arguments in Fast in the coming days.

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Montana’s Disapproval of Employee Benefit Plans with a “Discretionary Clause” Upheld: Supreme Court Denies Cert

In Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009), cert. denied sub nom. Standard Ins. Co. v. Lindeen, 2010 U.S. LEXIS 4079 (May 17, 2010), a panel of the Ninth Circuit unanimously affirmed the decision of Judge Molloy of the District of Montana, which rejected Standard Insurance Company’s (“Standard”) challenge to the Montana Insurance Commissioner’s disapproval of any employee benefit plan that contains a “discretionary clause”  (537 F. Supp. 2d 1142 (D. Mont. 2008)).  Judge O’Scannlain, writing for the Ninth Circuit panel, affirmed, finding that although the Commissioner’s practice relates to a covered employee benefit plan (29 U.S.C. §1144(a)), it was not preempted on account of ERISA’s clause that expressly saves from preemption any state law that “regulates insurance, banking, or securities” (29 U.S.C. § 1144(b)(2)(A) (the so-called “savings clause)).  Applying the two-part test set forth in Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329, 342 (2003), the court found that the Montana practice was specifically directed towards entities engaged in insurance (prong one of the two-part test) and substantially affected the risk-pooling arrangement between the insurer and the insured (the second prong).

The federal courts review ERISA benefit determinations deferentially so long as the plan confers discretion upon the plan administrator to interpret its provisions in making benefit determinations.  Firestone & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989).  If the plan does not contain a discretionary clause, benefit determinations are then reviewed de novo.  Id. at 115; see also Roy F. Harman III, The Debate Over Deference in ERISA—Judicial Review of Decisions by Conflicted Fiduciaries, 54 S.D. L. Rev. 1 (2009); Joshua Foster, ERISA, Trust Law, and the Appropriate Standard of Review:  A De Novo Review of Why the Elimination of Discretionary Clauses Would Be an Abuse of Discretion, 82 St. John’s L. Rev. 735, 739 (2008).  As a result of the deferential review that pertains in most cases, many state insurance commissioners have campaigned to create a de novo review standard.  The National Association of Insurance Commissioners (“NAIC”) has adopted a model law prohibiting discretionary clauses in medical insurance contracts.  See 1 Proceedings of the National Association of Insurance Commissioners 4, 12-13 (2002).  Thereafter, NAIC also included disability insurance policies in its model act, available here.  Numerous states have adopted bans on discretionary clauses.  See Texas Advocate Seeks Ban on Insurers’ Blanket Clauses, Dallas Morning News (Dec. 17, 2009) ("Twenty-two states have banned the practice, either through state law or new regulations."); see also Me. Rev. Stat. Ann. tit. 24-A § 4303; Ill. Admin. Code tit. 50, § 2001.3; Mich. Admin. Code § 500.2201-2202; N.J. Admin. Code § 11:4-58 (2007); Notice, Cal. Dep’t of Ins., Notice to Withdraw Approval and Order for Information (Feb. 27, 2004), available at www.insuranee.ea.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notiees-eommissopinion/upload/Notiee-February-27-2004.pdf; Commissioner’s Memorandum 2004-13H from the Hawaii Dep’t of Ins. On Discretionary Clauses in HMSA’s Agreement for Group Health Plan and Guide to Benefits (Dec. 8, 2004), available at http://hawaii.gov/dcca/ areas/ins/commissioners_memo; Bulletin 103 - Full and Final Discretion Clauses in Group Health Contracts (Ind. Dep’t of Ins. June 8, 2001), available at http://www.in.gov/idoi/lookAtTheLaw-/pdfs/Bulletin 103.pdf; Circular Letter No. 14 (State of N.Y. Ins. Dep’t June 29, 2006), available at www.ins.state.ny.us/cl06_14.htm; Idaho Dep’t of

Insurance Rule IDAPA 18.01.29; Wash. Admin. Code § 284-44-015; Wyo. Stat. § 26-13-301; S. Dak. Admin Code § 20:05:52:02.

While the Supreme Court’s denial of cert is silent as to the Justices’ reasons for declining to review this case, it is noteworthy that there is no circuit split, the Sixth Circuit having determined that the states’ power to regulate insurance authorizes the exclusion of policies containing discretionary clauses.  American Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009); see also Hancock v. Metropolitan Life Ins. Co., 590 F.3d 1141 (10th Cir. 2009) (Utah’s prohibition on the use of discretionary clauses was approved; Utah’s rule provided that plans governed by ERISA were exempt from the prohibition).

See our earlier post on this subject here.

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Employees Harassed by Third-Parties: Male Prisoners Harassing Female Correctional Employees

The Eleventh Circuit, Judge Pryor writing for the unanimous panel, recognized that a correctional facility is responsible under Title VII for sex harassment of female employees by prisoners. In Beckford v. Dep’t of Corrections, State of Florida, 2010 U.S. App. LEXIS 9452 (11th Cir. May 7, 2010), the court finds that it is black letter law that employers may be held liable under Title VII for harassment by third-parties when the conduct of the third-parties creates a hostile work environment. Further, the court refuses “the invitation of the Department to treat inmates differently from other third-party harassers and prisons differently from other employers under Title VII.” In refusing to exclude prisons from the line of cases holding an employer responsible for third-party harassment, the court states: “Although some harassment by inmates cannot be reasonably avoided, the Department, on the other hand, cannot refuse to adopt reasonable measures to curtail harassment by inmates.” Additionally, the court makes short shrift of the Department’s arguments that the harassment of employees by inmates was not based on sex. For example, the court, aligning itself with the Ninth Circuit’s holding in Freitag v. Ayers, 468 F.3d 528, 540 (9th Cir. 2006), that “exhibitionistic masturbation, especially gunning, is sex based and highly offensive conduct.” Finally, the court finds that because the employees in the instant case are complaining of harassment by someone other than a supervisor, the Faragher affirmative defense is not available to the Department, relying on the holding in Erickson v. Wisconsin Dep’t of Corrections, 469 F.3d 600, 604 (7th Cir. 2006) (“One standard exists for harassment by supervisors and another for harassment by co-workers” and third-parties).

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National Mediation Board Overturns 75-Year-Old Voting Rules

A sharply divided National Mediation Board published on May 11, 2010, a final regulation dramatically revising the voting rules pertaining to union representation balloting. The new rules apply to airlines and railroad workers. The NMB now has a new member, Linda Puchala, who joined with long-time member, Harry Hoglander, to forge the new rule to which the lone Republican member, Elizabeth Dougherty, dissented, available here. Ms. Puchala was once with the Association of Flight Attendants-CWA and Mr. Hoglander was once with the Air Line Pilots Association. The Board Members’ bios are available here.

The old rule in effect provided that a majority of the bargaining unit had to vote for the union for the union to prevail in an effort to unionize under the Railway Labor Act. The new rule provides that the union need only obtain a majority of those members of the bargaining unit who actually vote.

There has been talk that the Congress may use the Congressional Review Act (5 U.S.C. §§ 801-808) to overturn the NMB decision. The CRA allows Congress to pass a resolution of disapproval which if approved would trump the attempt at a rule change. In order to bring a resolution of disapproval to the floor, a discharge petition would need to be approved—only 30 votes are needed to discharge such a resolution and bring it to the Senate floor.

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Job Applicant Cannot Sue For Retaliation Under FLSA

In Dellinger v. Science Applications Int’l Corp., 2010 U.S. Dist. LEXIS (E.D. Va. Apr. 2, 2010), Judge Cacheris, applying the text of the FLSA’s anti-retaliation language (29 U.S.C. § 215(a)(3)), held that those protections are limited to employees, and not a job applicant.  Thus, in Dellinger, the plaintiff who allegedly was refused employment by defendant after defendant became aware that plaintiff had filed an FLSA action against another employer.  As plaintiff had never been an “employee” of defendant, the prohibition of the FLSA, which states that “it shall be unlawful for any person . . . (3) to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter . . .,” did not apply.  Judge Cacheris, relies upon the textual analysis and two other district court decisions that have arrived at similar results.  See Harper v. San Luis Valley Reg’l Medical Ctr., 848 F. Supp. 911 (D. Colo. 1994); Glover v. City of North Charleston, 42 F. Supp. 243 (D.S.C. 1996).  Plaintiff has lodged an appeal to the Fourth Circuit.

Thanks to the Overtime Law Blog for calling this case to our attention.

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Although Client Prevailed, Lawyers Get No Fees Due to Lack of Civility

In Sahyers v. Prugh, Holliday & Karatinos, P.L., 560 F.3d 1241 (11th Cir. 2009), a panel of the Eleventh Circuit, in an opinion written by Chief Judge Edmondson, affirmed the district court’s denial of plaintiff’s petition for attorneys’ fees in her successful FLSA lawsuit on the ground that plaintiff’s counsel, prior to filing suit against a law firm, “made absolutely no effort—no phone call; no email; no letter—to inform them of Plaintiff’s impending claim much less to resolve this dispute before filing suit.”  Instead, as Judge Edmondson put it:  “Plaintiff’s lawyer slavishly followed his client’s instructions and—without a word to Defendants in advance—just sued his fellow lawyers.” 

A petition for rehearing en banc was recently denied with Judge Wilson being the only dissenter, taking the position that the courts are not entitled to add an exception to a mandatory fee statute.  Judge Edmondson filed a lengthy statement, concurring in the denial of en banc rehearing, chastising Judge Wilson for filing a dissent (“Decisions on whether or not to grant en banc rehearing are not decisions on the merits of the appeal.  As I understand it, the only judges of this Court who have had the merits of this case put before them for decision are the members of the panel who decided the case.  Nevertheless, it, in the past dozen years or so, has become the fashion—moving from the exceptional to the normal—of our Court for some judges, who were not on the pertinent panel, to file dissents regularly when en banc rehearing is denied.”).  Judge Wilson in dissent notes that the Sahyers holding has been repeatedly relied upon by other courts to deny fees.  See Roldan v. Pure Air Solutions, Inc., S.D. Fla. 2010, ___ F. Supp. 2d___, at *3 (No. 07-22203-Civ, Jan. 29, 2010) (citing Sahyers and commenting that “whether or not such an outcome [of no fee as a reasonable fee] amounts to judicial policy-making in the face of clear statutory language, we are bound by it”).  See 2 also Zuleta v. Prof’l Team Paint, Inc., M.D. Fla. 2009, ___ F. Supp. 2d ___, at *2 n.2 (No. 6:08-cv-1950-Orl-31DAB, Dec. 10, 2009) (citing Sahyers and providing that no fee may be a reasonable fee under the FLSA); Mora v. Cemex, Inc., M.D. Fla. 2009, ___ F. Supp. 2d ___, at *3 (No. 6:08-CV-954-ORL-19DAB, Sept. 29, 2009) (same); Kerpan v. Biscuits Cafe, Inc., D. Or. 2009, ___ F. Supp. 2d ___, at *7 (No. 08-CV-811-ST, June 23, 2009) (citing Sahyers, recognizing that “the district court denied a request for attorney fees to a paralegal . . . because her attorney gave his fellow lawyers no notice by telephone, email, or letter of her claim and made no effort to resolve the dispute before filing suit,” and declining to apply Sahyers because it did not involve lawyers as parties); Varela v. Innovative Wiring Solutions, LLC, M.D. Fla. 2009, ___ F. Supp. 2d ___, at *5 (No. 6:07- cv-165-Orl-28KRS, June 22, 2009) (citing Sahyers and providing that no fee may be a reasonable fee under the FLSA); Kwasnik v. Charlee Family Care Servs. of Cent. Fla., Inc., M.D. Fla. 2009, ___ F. Supp. 2d ___, at *12 (No. 6:08-cv-926-Orl-31KRS, June 9, 2009) (same).

So, moral of the story is—not real wise, at least in the Eleventh Circuit, to be  a drive-by shooter.

 

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Federal Judge Disapproves Confidentiality and Non-Disparagement Clauses in Settlement Agreements

In a spate of orders in the past few weeks, Judge Steven Merryday has disapproved confidentiality and non-disparagement clauses in FLSA settlements presented to him for court-supervised approval in accordance with the statutory requirement that either the Secretary of Labor supervise the waiver of claims (29 U.S.C. § 216(c)) or the court supervise the waiver (29 U.S.C. § 216(b)). In Lynn’s Food Stores v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982), the Eleventh Circuit held that claims for compensation under the FLSA may only be settled or compromised when the Department of Labor supervises the payment of back wages or when the district court enters a stipulated judgment “after scrutinizing the settlement for fairness.”

In Dees v. Hydradry, Inc., 2010 U.S. Dist. LEXIS 40900, 2010 WL 1539813 (M.D. Fla. Apr. 19, 2010), the court in an extensive opinion found that confidentiality clauses are “antithetical to the FLSA,” and declined to approve the settlement of FLSA claims. Shortly thereafter, on April 18th, the same judge in Valdez v. TASO Properties, Inc., 2010 WL 1730700 (M.D. Fla. Apr. 28, 2010), again declined to approve a confidentiality clause in an FLSA settlement. In Valdez, the court also held that a non-disparagement provision constituted a judicially imposed “prior restraint” in violation of the First Amendment, and rejected that provision also. Then, on April 29th, in McGowan v. CSPS Hotel, Inc., No. 8:09-cv-02311 (M.D. Fla. Apr. 29, 2010), the court yet again disapproved a confidentiality clause in an FLSA settlement as well as a non-disparagement clause. See also Head v. V&L Servs. III, Inc., 2009 U.S. Dist. LEXIS 99784 (M.D. Fla. Oct. 27, 2009) (approving magistrate’s report and recommendation, 2009 U.S. Dist. LEXIS 99764 (M.D. Fla. Oct. 2, 2009)). At least one other federal judge has adopted Judge Merryday’s reasoning. Judge Moon of the Western District of Virginia in Poulin v. General Dynamics Shared Resources, Inc., No. 3:09-cv-00058 (M.D. Fla. May 5, 2010) followed the reasoning of Valdez and Dees, and declined to approve an FLSA settlement that contained a confidentiality clause. See also Laurie Kratky Dore, Secrecy by Consent: The Use and Limits of Confidentiality in the Pursuit of Settlement, 74 Notre Dame L. Rev. 283 (1999).

It would appear that the reasoning of these cases only applies to settlements that must be approved by a court, and has no impact on the great bulk of settlements of employment disputes that never see the light of day.

Tip of the hat to the Overtime Law Blog for calling this to our attention.

Circuits Split Whether a Claim May Be Brought Solely to Recover Attorneys’ Fees Incurred in a Title VII Administrative Proceeding

In Porter v. Winter, 2010 U.S. App. LEXIS 9205 (9th Cir. May 6, 2010), Judge Reinhardt, writing for a panel that also included Judges Schroeder and Bea, diverged from the holding of the Fourth Circuit in Chris v. Tenet, 221 F.3d 648 (4th Cir. 2000), which held that the federal courts do not have subject matter jurisdiction over claims exclusively for Title VII legal fees. 

Some background is important to understand the split among the circuits.  In 1984, the Supreme Court decided New York Gaslight Club, Inc. v. Carey, 447 U.S. 54 (1984), in which the Court held that two sections of Title VII “authorize a federal-court action to recover an award of attorney’s fees for work done by the prevailing complainant in state proceedings to which the complainant was referred pursuant to the provisions of Title VII.”  Id. at 71.  In reaching this conclusion, the majority stated:

“It would be anomalous to award fees to the complainant who is unsuccessful or only partially successful in obtaining state or local remedies, but to deny an award to the complainant who is successful in fulfilling Congress' plan that federal policies be vindicated at the state or local level. Since it is clear that Congress intended to authorize fee awards for work done in administrative proceedings, we must conclude that [Title VII's] authorization of a civil suit in federal court encompasses a suit solely to obtain an award of attorney's fees for legal work done in state and local proceedings . . . We note that if fees were authorized only when the complainant found an independent  reason for suing in federal court under Title VII, such a ground almost always could be found. . . . The existence of an incentive to get into federal court, such as the availability of a fee award, would ensure that almost all Title VII complainants would abandon state proceedings as soon as possible. This, however, would undermine Congress' intent to encourage full use of state remedies.”  Id. at 66, n.6.

In Carey, the plaintiff initially sought relief in federal court on the merits of her claims in addition to her claim for attorney’s fees.  Id. at 58.  Justice Stevens, concurring, stated that “this federal litigation was commenced in order to obtain relief . . . on the merits . . . and not simply to recover attorney’s fees.”  Id. at 71.  Justice Stevens went on to state as follows:  “Whether Congress intended to authorize a separate federal action solely to recover costs, including attorney’s fees . . . is not only doubtful but is a question that is plainly not presented . . .” 

Two years later, in 1986, the Court decided North Carolina Dep’t of Transp. v. Crest Street Community Council, Inc., in which it discussed the Carey decision and dismissed certain statements that might support the notion that one could sue solely to recover attorneys’ fees as “dicta” and “exaggerated.”  479 U.S. 6, 13-14 (1986).  In Crest Street, a Title VI of the Civil Rights Act of 1964 case, the underlying dispute had been settled, and the Community Council filed a civil action in federal court to recover attorneys’ fees under 42 U.S.C. § 1988(b).  The Crest Street Court held that a suit for attorneys’ fees is not an action to enforce any of the civil rights law listed in § 1988, and therefore the federal courts are not authorized to entertain an action under that section solely for attorneys’ fees. 

Two years later, in 1988, the Eighth Circuit in Jones v. American State Bank, held that “the policy arguments” set forth in the Carey decision dictated the result that Title VII authorized a civil action solely for attorneys’ fees.  857 F.2d 494, 498 (8th Cir. 1988); see also Slade v. U.S. Postal Serv., 952 F.2d 357, 360-61 (10th Cir. 1991) (Slade is distinguishable from Carey as Slade originally sued for substantive relief, and the case eventually devolved into a claim only for attorneys’ fees).  The Eighth Circuit did not address the Crest StreetCrest Street, which did not involve mandatory administrative deferral.  Id. decision and other than simply noting that the mandatory administrative deferral requirements of Title VII distinguished the case before it from at 498 n.10.

In 1999, Judge Ellis of the Eastern District of Virginia held in Chris v. Tenet, 57 F. Supp. 330 (E.D. Va. 1999), that the phrase in Title VII “actions brought under [Title VII]” referred only to legal proceedings instituted to enforce substantive rights guaranteed by Title VII and that accordingly the federal district courts lacked subject matter jurisdiction over a claim brought solely for attorneys’ fees.  In 2000, a panel of the Fourth Circuit affirmed, 221 F.3d 648, and the Supreme Court thereafter denied cert, 2001 U.S. LEXIS 1722.

The issue seemed resolved until last week when the panel of the Ninth Circuit headed by Judge Reinhardt reversed the 2007 decision of District Judge O’Neill (2007 U.S. Dist. LEXIS 43918 (E.D. Cal. June 5, 2007)), in which that court rejected the notion that a Title VII plaintiff could sue solely for attorneys’ fees.  In reversing, the Ninth Circuit embraced the rationale of the Eighth Circuit in Jones, which had rejected the Fourth Circuit’s Chris decision as being based upon a “distinction without a difference.”  Jones, 857 F.2d at 497.  Instead, the Ninth Circuit embraced Carey’s “dicta” noting Justice Stevens’ concurrence by stating that “none of the six justices in the majority agreed with [Stevens’] contention.”  With respect to the subsequent Supreme Court decision in Crest Street, the court distinguished it on the ground that it is an interpretation of § 1988; whereas Carey involves an interpretation of Title VII. 

So, we now await the inevitable petition for certiorari and potentially a resolution by the Supreme Court.

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The Assault on Credit Checks

As we reported in our post of April 19th (http://robertfitzpatrick.blogspot.com/2010/04/use-of-credit-checks-by-employers-is.html), on many fronts, employers’ reliance on credit checks for employment purposes is under attack.  The latest is a May 4th Feinstein amendment, S.Amdt. 3795 to S. 3217 (the Restoring American Financial Stability Act of 2010).  To date, no further action has been taken on the amendment.

Senator Feinstein’s amendment would revise the Fair Credit Reporting Act (15 U.S.C. § 1681b) to generally prohibit employers from obtaining credit reports for employment purposes.  Senator’s Feinstein’s amendment would permit the use of credit checks where the job “requires national security or Federal Deposit Insurance Corporation clearance.”  For example, the FDIC is authorized to review credit reports of its contractors as part of its check on contractors’ standards of integrity and fitness.  See 12 C.F.R. Part 366.

The Feinstein amendment would further permit the use of credit checks where:  the employee “applies for, or currently holds, employment with a State or local government agency which otherwise requires use of a consumer report”; the employee “applies for, or currently holds, any management position or other position involving the handling or supervision of, or access to, customer funds or accounts at a financial institution (including any credit union)”; and use of credit checks with respect to an employee or prospective employee is otherwise required by law.

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Employers Held Not to Have Faragher-Ellerth Affirmative Defense Under New York City Human Rights Law

 In Zakrzewska v. The New School, 2010 N.Y. LEXIS 632 (N.Y. May 6, 2010), the New York Court of Appeals, answering a question certified to it by the Second Circuit, held that the plain language of the New York City Human Rights Law (NYCHRL) precludes the Faragher-Ellerth defense, finding that the language of Section 8-107(13)(b) is inconsistent with that defense.  Specifically, the court found that that provision creates vicarious liability for the acts of managerial and supervisory employees even where the employer has exercised reasonable care to prevent and correct any discriminatory actions and even where the aggrieved employee unreasonably has failed to take advantage of employer-offered corrective opportunities. 

In light of this holding, practitioners should look to their state and local anti-discrimination statutes to see whether or not the language is similar to that of the NYCHRL.  The specific statutory language at issue in Zakrzewska reads as follows:

“[a]n employer shall be liable for an unlawful discriminatory practice based upon the conduct of an employee or agent which is in violation of subdivision one or two of this section only where: (1) the employee or agent exercised managerial or supervisory responsibility; or (2) the employer knew of the employee's or agent's discriminatory conduct, and acquiesced in such conduct or failed to take immediate and appropriate corrective action; an employer shall be deemed to have knowledge of an employee's or agent's discriminatory conduct where that conduct was known by another employee or agent who exercised managerial or supervisory responsibility; or (3) the employer should have known of the employee's or agent's discriminatory conduct and failed to exercise reasonable diligence to prevent such discriminatory conduct.”

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POWADA Round 2: The Senate’s Take on the Gross v. FBL Financial Services, Inc. Override

Yesterday, 24 hours following the House Subcommittee on Health, Employment, Labor, and Pensions’ hearing on the Protecting Older Workers Against Discrimination Act (POWADA), the full Senate Committee on Health, Education, Labor, and Pensions took its own look at POWADA. EEOC Chair Jacqueline Berrien was given her own panel, and Ms. Helen Norton of the University of Colorado Law School was also added for the Senate’s iteration. Re-testifying were Mr. Jack Gross, the plaintiff in the underlying Gross case; Mr. Eric Dreiband, former General Counsel with the EEOC; and Ms. Gail Aldrich, of the AARP Board of Directors. To access the prepared testimony and a video replay of the proceedings, click here.

POWADA is designed to reverse the Supreme Court’s holding in Gross that claims under the Age Discrimination in Employment Act must be established under a “but-for” causation model, not a “motivating factor” model. Again, please see our previous posts regarding Gross here, here, here, and here, and my paper on Gross here.


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Washington’s Next Acronym?: POWADA—the Gross v. FBL Financial Services, Inc. Override

Yesterday, the House Subcommittee on Health, Employment, Labor, and Pensions held a hearing on the Protecting Older Workers Against Discrimination Act (POWADA). This proposed legislation is designed to reverse the Supreme Court’s holding in Gross that claims under the Age Discrimination in Employment Act must be established under a “but-for” causation model, not a “motivating factor” model. To access the bill and the hearing’s prepared statements, click here. See our previous posts regarding Gross here, here, here, and here, and my paper on Gross here.

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Spoliation Sanctions Against Plaintiff Employee

In Stein v. Clinical Data, Inc., 2009 Mass. Super. LEXIS 296 (Mass. Super. Oct. 9, 2009), available here, Judge Fabricant sanctioned the plaintiff who had run a “scrubbing” software on his computer at least three times both before and after a court order prohibiting from deleting emails, and also using registry cleaning software designed to remove any traces of the use of scrubbing software. All of this was revealed when a court-ordered forensic examination of the plaintiff’s computer was conducted. The court found plaintiff’s intentional misconduct caused prejudice and substantial harm to the defendant, and granted the defendant’s motion to dismiss plaintiff’s claims, ordering plaintiff to pay defendant’s costs reasonably incurred in its efforts to obtain discovery, including attorneys’ and experts’ fees. In addition, defendant had counterclaimed against plaintiff, alleging that he had consulted with competitors of defendant in violation of his employment agreement and had used defendant’s confidential information in those consultations. Additionally, defendant alleged that plaintiff solicited defendant’s chief scientist to leave his employment with defendant, in violation of plaintiff’s employment agreement. As an additional sanction for plaintiff’s spoliation, the court ordered that defendant would be permitted to introduce evidence of plaintiff’s spoliation misconduct before the jury on the counterclaims, and that the court would instruct the jury that it may infer from plaintiff’s misconduct that additional relevant materials existed but have not been recovered or produced, and that such materials would have provided evidence of facts inconsistent with plaintiff’s position with respect to defendant’s counterclaims.

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Legendary Detroit Tigers Broadcaster Ernie Harwell Dies at 92

"For lo, the winter is past, the rain is over and gone; the flowers appear on the earth; the time of the singing of birds is come, and the voice of the turtle is heard in our land." Song of Solomon ii:11-12, read by Ernie Harwell at start of every final spring training game.

Mr. Harwell died yesterday at 92, after a yearlong bout with cancer.  To best understand Ernie, listen to his Hall of Fame Induction Day Speech (August 2, 1981), here.

Employees Harassed by Customers: When is the Employer Responsible?

The Equal Employment Opportunity Commission’s “Guidelines on Sexual Harassment” take the position that “[a]n employer may also be responsible for the acts of non-employees, with respect to sexual harassment of employees in the workplace, where the employer (or its agents or supervisory employees) knows or should have known of the conduct and fails to take immediate and appropriate corrective action.” EEOC Guidelines on Sexual Harassment, 29 C.F.R. § 1604.11(e) (2010).

Case law holds the same (in fact, generally applying the same negligence standard in non-supervisory co-worker harassment cases), finding employers responsible if they knew or should have known of non-employees’ harassing conduct and failed to take appropriate remedial measures. See, e.g., Erickson v. Wisconsin Dep’t of Corr., 465 F.3d 600 (7th Cir. 2006) (“[F]or purposes of Title VII hostile work environment liability based on negligence, whether the potential harasser is an employee, independent contractor, or even a customer is irrelevant: The genesis of inequality matters not; what does matter is how the employer handles the problem. This is because employers have an arsenal of incentives and sanctions . . . that can be applied to affect conduct that is causing the problem.”) (quoting Dunn v. Washington County Hosp., 429 F.3d 689, 691 (7th Cir. 2005)) (internal quotations omitted) (emphasis in original); Galdamez v. Potter, 415 F.3d 1015, 1022 (9th Cir. 2005) (“An employer may be held liable for the actionable third-party harassment of its employees where it ratifies or condones the conduct by failing to investigate and remedy it after learning of it.”); Weston v. Pennsylvania, 251 F.3d 420, 427 (3d Cir. 2001) (“Prison liability for inmate conduct may indeed apply when, for example, the institution fails to take appropriate steps to remedy or prevent illegal inmate behavior.”); Slayton v. Ohio Dep’t of Youth Servs., 206 F.3d 669, 677 (6th Cir. 2000) (“[A] general rule against prison liability for inmate conduct does not apply when the institution fails to take appropriate steps to remedy or prevent illegal inmate behavior”); Lockard v. Pizza Hut, Inc., 162 F.3d 1062, 1073-75 (10th Cir. 1998) (finding a one-time event in which a waitress had her hair pulled by a customer, who also grabbed and placed his mouth on her breast was severe enough to create an actionable hostile work environment); Rodriguez-Hernandez v. Miranda-Velez, 132 F.3d 848, 854 (1st Cir. 1998) (finding that under Title VII “employers can be liable for a customer’s unwanted sexual advances, if the employer ratifies or acquiesces in the customer’s demands”); Crist v. Focus Homes, Inc., 122 F.3d 1107, 1108-1111 (8th Cir. 1997) (operator of residential facility for developmentally disabled individuals may be held liable for failure to respond appropriately to sexual harassment of caregivers by a mentally incapacitated resident); Folkerson v. Circus Circus Enter., Inc., 107 F.3d 754, 756 (9th Cir. 1997) (employer may be held liable for sexual harassment of employee by casino patron where employer ratifies or acquiesces in the conduct); Henson v. City of Dundee, 682 F.2d 897 (11th Cir. 1992) (“[T]he environment in which an employee works can be rendered offensive in an equal degree by the acts of supervisors, coworkers, or even strangers in the workplace.”); Lopes v. Caffe Centrale LLC, 548 F. Supp. 2d 47, 53 (S.D.N.Y. 2008) (“An employer can be held liable for the harassing acts of non-employees if a plaintiff adduces evidence tending to show that the employer either failed to provide a reasonable procedure or that it knew of the harassment by a non-employee, such as a customer and failed to take any action.”) (internal quotations omitted); McGuire v. Virginia, 988 F. Supp. 980, 989 (W.D. Va. 1997) (“[E]mployer liability for a hostile work environment has been extended to situations in which the harassing conduct comes from nonemployees on the employer’s premises.”); Hanlon v. Chambers, 464 S.E.2d 741, 750 (W. Va. 1995) (“A hostile work environment can be just as oppressive when it is created by co-workers, subordinates, or customers as when it is caused by a superior.”); Powell v. Las Vegas Hilton Corp., 841 F. Supp. 1024 (D. Nev. 1992) (holding that whether two incidents of verbal abuse—“great t[*]ts” and “great legs”—and three incidents of staring by non-employees constituted sexual harassment of plaintiff was a triable issue of fact); Llewellyn v. Celanese Corp., 693 F. Supp. 369 (W.D.N.C. 1988) (employer liable where he failed to take prompt and adequate remedial action against sexual harassment, including harassment by customer); EEOC v. Sage Realty Corp., 507 F. Supp. 599, 611 (S.D.N.Y. 1981) (“Although section 703(a) [of Title VII of the Civil Rights Act of 1964] makes unlawful only discriminatory employment practices of an ‘employer,’ this term has been construed in a functional sense to encompass persons who are not employers in conventional terms, but who nevertheless control some aspect of an employee’s compensation of terms, conditions, or privileges of employment.”). See also Noah D. Zatz, Managing the Macaw: Third-Party Harassers, Accommodation, and the Disaggregation of Discriminatory Intent, 109 Colum. L. Rev. 1357, 1372-73 (2009) (collecting cases for the proposition that “[t]hird-party harasser cases apply the same negligence rule as coworker cases: The employer is legally responsible if it knew or should have known about the harassment and failed to take corrective or preventive action”).


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Lilly Ledbetter Fair Pay Act and Section 1981 Claims

Judge Frederick Martone of the District of Arizona issued an interesting opinion recently in Ekweani v. Ameriprise Financial, Inc., 2010 U.S. Dist. LEXIS 24219, 108 Fair Empl. Prac. Cas. (BNA) 1266 (D. Az. Mar. 3, 2010), where Plaintiff argued that the LLFPA applied to his compensation claim predicated on the denial of a promotion, said claim being pursued under 42 U.S.C. § 1981.

In rejecting the claim, the court made one interesting observation and one interesting holding.

First, the Court observed that the LLFPA arguably might not have any impact on claims under Section 1981, as the LLFPA amended Title VII, the ADEA, the ADA, and the Rehabilitation Act, but not specifically Section 1981. But while the Court suggested that “Congress did not amend § 1981 through the Ledbetter Act,” it noted that the courts use Title VII as a guide in resolving Section 1981 claims. At any rate, the Court went on to state that it “need not decide whether the legal principles from the Ledbetter Act apply to Section 1981 compensation discrimination claims, because Plaintiff did not bring one.” This issue is, in different clothing, the same issue that we posted about recently here, where Texas courts have read the LLFPA into the state anti-discrimination statute. Further, note that Judge Yvette Kane of the Middle District of Pennsylvania has adopted essentially the same reasoning, reading the LLFPA into the Pennsylvania Human Rights Act. Summy-Long v. Pa. State Univ., 2010 U.S. Dist. LEXIS 27953 (M.D. Pa. Mar. 24, 2010).

The Court in Ekweani skirted this issue, and disposed of the LLFPA case by adopting the reasoning of the panel of the D.C. Circuit, Judge Daniel Ginsburg writing, in Schuler v. PriceWaterhouseCoopers, LLP, 595 F.3d 370, 375 (D.C. Cir. Feb. 16, 2010), in which it was held that “the decision whether to promote an employee to a higher paying position is not a ‘compensation decision or other practice.’” On this issue, the courts remain divided. See, e.g., Barnabas v. The Board of Tr. of the Univ. of the District of Columbia, 2010 U.S. Dist. LEXIS 17711 (D.D.C. Mar. 1, 2010) (finding, in light of Schuler, a failure to promote to full time professor is not a compensation decision or other practice); Bush v. Orange County Corrections Dep’t, 597 F. Supp. 3d 1293, 1295 (M.D. Fla. 2009) (holding that while plaintiff’s complaint about demotions and pay reductions that occurred sixteen years before EEOC charge was filed would plainly be barred under Supreme Court’s Ledbetter decision, “with the passage of the [LLFPA] Plaintiff’s Title VII claims [were] no longer administratively barred”); Rehman v. State Univ. of New York at Stony Brook, 596 F. Supp. 2d 643, 651 (E.D.N.Y. 2009) (in case involving allegations that defendant refused to propose the plaintiff for appointment to associate of full professor with tenure, court held that although plaintiff filed his EEOC charge on April 13, 2007, under LLFPA, his wage discrimination claims based upon actions occurring on or after April 13, 2005, two years prior to his EEOC charge, were timely, which claims presumably included the defendant’s refusal to consider him for tenure); Rowland v. Certainteed Corp., 2009 U.S. Dist. LEXIS 43706 (E.D. Pa. May 21, 2009) (holding that plaintiff’s untimely “failure to promote” claim was not saved by the Act because it was not a discriminatory compensation claim and thus was not within the scope of the Act); Gentry v. Jackson State Univ., 2009 U.S. Dist. LEXIS 35271 (S.D. Miss. April 17, 2009) (holding that a denial of tenure to a university professor qualified as a compensation decision or other practice affecting compensation within the Act, and that the professor’s Title VII claim based on that tenure denial was thus timely even though it was filed well after the 180-day deadline under Title VII for timely submission of claims); Shockley v. Minner, 2009 U.S. Dist. LEXIS 31289 (D. Del. Mar. 31, 2009) (applying LLFPA to find failure to promote claim timely).

Presumably Ekweani will now be the subject of an appeal to the 9th Circuit.

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