When Evaluating a Matter With a Potential Claim of Discrimination Under New York City Law, Be Sure to Be Aware of the Implications of the Local Civil Rights Restoration Act of 2005

We are so used to evaluating an employer’s actions in discrimination cases as to whether they constitute an adverse action, that we forget that the adversity requirement does not necessarily pertain under all local anti-discrimination laws.  For example, in 2005, the New York City Human Rights Law was amended by the Local Civil Rights Restoration Act of 2005 N.Y.C. Local Law No. 85 (2005), which provides, now, that discrimination in “any manner” is prohibited by the City human rights law, and thus an adverse employment action is not an element of a prima facie case under the local law.  See N.Y. City Admin. Code § 8-107 (2009); Williams v. N.Y.C. Housing Auth., 61 Ad.3d 62, 70, 2009 N.Y. App. Div. LEXIS 433 (1st Dep’t 2009); See also Joseph v. N.Y. City Dep’t of Corrs., 2011 U.S. Dist. LEXIS 51690, 2011 WL 1843162, at *9 (E.D.N.Y. May 13, 2011); and Margherita v. Fed. Express, 2011 U.S. Dist. LEXIS 121249 (E.D.N.Y. Oct. 20, 2011); Prof. Craig Gurian, A Return to Eyes on the Prize: Litigating under the Restored New York City Human Rights Law, 33 Fordham Urb. L. J. 255, 288 (2006).

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Federal Express’ Six-Month Limitation on Statutes of Limitations in Employment Disputes Approved

In Wilkerson v. Federal Express, 2011 U.S. Dist. LEXIS 59708 (D. Md. June 2, 2011), Judge Alexander Williams approved a contractual limitation clause which provided that any claim against Federal Express had to be brought within the earlier of the time prescribed by law or six months.  The Court found, as previously the Maryland Court of Special Appeals had in Coll. of Notre Dame of Md., Inc. v. Morabito Consultants, Inc., 752 A.2d 265 (2000), that “there is nothing in the policy or object of such statutes which forbids the parties to an agreement to provide a shorter period, provided the time is not unreasonably short.”  The Wilkerson Court adopted the criteria used by the Maryland Court of Special Appeals in assessing the reasonableness of a provision shortening statutes of limitations.  The three criteria being:

1. There is no controlling statute to the contrary
2. It is reasonable; and
3. It is not subject to other defenses such as fraud, duress, or misrepresentation.

Morabito, 752 A.2d at 174.  The Court found that, were it not for the contractual limitation, the statute of limitations would be three years in the case before it.  Nonetheless, the Court found the six-month time period to be reasonable, indicating that the clause was written in bold, capitalized letters; was not hidden in any way; and that there were no apparent statutes preventing such a shortening of the statute of limitations.  

The Wilkinson opinion appears to be consistent with the line of authorities about which we previously blogged. 

Court Enforces Arbitration of FLSA Claims Where Arbitration Agreement is Contained Within 51-Page Employee Handbook

In Brown v. Luxottica Retail N. Am., Inc., 2010 US. Dist. LEXIS 104642 (N.D. Ill. September 29, 2010), Judge Gottschall granted the defense motion to compel FLSA claims. Defendants had a 51-page employee handbook, which contained within it, commencing on page 27 and consisting of five pages, a Dispute Resolution Agreement. That Agreement, among other terms, provided as follows:

1. That the employee would not file, join, participate or intervene in a class action;
2. That arbitration of any claim on a class or collective basis was prohibited;
3. That all legal disputes, including claims under the FLSA, had to be submitted to binding arbitration before the AAA;
4. That the employee would be required to pay a filing fee to the AAA only up to the amount required to file a lawsuit and that the employer would pay any difference;
5. That the employer would pay all of the arbitration fees and costs;
6. That, to the extent authorized by applicable law, either the employee or the employer could seek an award of attorney’s fees from the other; and 
7.  That the Dispute Resolution Agreement was not offered on a take-it-or-leave-it basis, but rather the employee could opt out of the Agreement within 30 days of receipt of the Agreement, by completing an opt-out form attached to the Agreement.

The court found the Agreement to be neither procedurally or substantively unconscionable. The court rejected plaintiff’s argument that the dispute resolution agreement was “buried” in the handbook and that its language and format was confusing such that a reasonable worker could not understand it. The court found the Agreement to begin in a large, bold font; the text to be in a regular font; that there was “a dearth of legalese”; and, while single-spaced, was easily readable. The court stated that “[t]here is nothing hidden or buried about this Agreement, as long as an employee reads the Handbook”. The court further found that it was “written in easily readable type and about as plain as a legal agreement can be.” The court went on to state that “the law does not protect persons who choose not to read documents given to them.” Finally, the court stated unequivocally as follows:

“Nothing in the FLSA precludes an agreement to arbitrate a FLSA claim, even when the arbitration agreement is part of an employee handbook and whether or not the employee signs the agreement or the handbook.”

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Second Circuit, Like the First Circuit, Finds an Expired Restrictive Covenant to be Unenforceable

On September 19, 2011, we reported about a First Circuit opinion, authored by retired justice Souter, in EMC Corp. v. Arturi, No. 11-1001, 2011 U.S. App. LEXIS 17834 (1st Cir. Aug. 26, 2011), in which the Court found the non-compete to no longer be enforceable because more than a year had elapsed since plaintiff’s departure from the company and the non-compete was for one year’s duration.  In that case, Justice Souter noted that the non-compete could have been more carefully drafted to account for the delays in obtaining enforcement attendant to litigation.  Recently, the Second Circuit addressed the same drafting problem in Aladdin Capital Holdings, LLC v. Donoyan, 2011 U.S. App. LEXIS, 19083, 2011 Westlaw 4063012 (2d Cir. Sept. 14, 2011).  In Aladdin, the Court stated that the expiration of a restrictive employment covenant renders an employer’s request for injunctive relief moot, as the employer did not include language in the non-compete that provides for an extension of the restrictive covenant during the period of breach, the court was unable to enforce what otherwise might have been an enforceable restrictive covenant.  See also the District Court’s opinion authored by Judge Kravitz at 2011 U.S. Dist. LEXIS 61095 (D. Conn. June 8, 2011) and Van Dyck Printing Co. v. DiNicola, 648 A.2d 877 (Conn. 1994) (finding claim for injunctive relief to be moot).

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Single Racial Slur Found to be Sufficiently Severe for Purposes of a Racial Harassment Claim

In Muldrow v. Schmidt Baking Co., Inc., 2011 U.S. Dist. LEXIS 70576 (D. Md. June 30, 2011), the Court, in denying the employer’s motion to dismiss, found that the use of the “n” word on one occasion is “extremely serious” and may be sufficient to state a claim of a hostile work environment based on race.  The Court relyied on cases such as Ferris v. Delta Air Lines, Inc., 277 F.3d 128, 136 (2d Cir. 2001) (“…a single instance can suffice when it is sufficiently egregious”); Ezell v. Potter, 400 F.3d 1041, 1048 (7th Cir. 2005) (“[I]n the case of racial and ethnic slurs, some words are so outrageous that a single incident might qualify for a hostile environment claim.”); Cerros v. Steel Techs., Inc., 398 F.3d 944, 950-51 (7th Cir. 2005) (“we have recognized before that an unambiguously racial epithet falls on the ‘more severe’ end of the spectrum.”).  

In addition, the Court was dealing with conduct by non-employees.  Plaintiff was a general helper for the bakery, and thereafter was promoted to route salesman.  While at a store, which was a customer of the bakery, the store’s white, female, manager referred to plaintiff, an African American, using the “n” word.  The Court found that the employer’s response to harassing conduct of non-employees is evaluated using a negligence standard, finding that an employer can be liable if it took no steps to protect its employees and if it had actual or constructive knowledge of the situation.  See EEOC v. Cromer Food Servs., Inc., 2011 U.S. App. LEXIS 4279 (4th Cir. Mar. 3, 2011); See also Galdamez v. Potter, 415 F.3d 1015, 1022 (9th Cir. 2005) (employer can be liable for third parties if it ratifies their actions by failing to act); Quinn v. Green Tree Credit Corp., 159 F.3d 759, 767 (2d Cir. 1998) (employer is generally not liable for non-employee conduct unless employer provided no reasonable avenue for complaint or knew of the harassment but failed to address it). 

For more on this subject, see our prior post on the topic here.

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Rule 11 Sanctions: Know When to Drop Your Sails

In Moody v. Arc of Howard Cnty., Inc., 2011 U.S. Dist. LEXIS 73540 (D. Md. July 7, 2011), Judge Bredar sanctioned counsel for the plaintiff under Rule 11 where counsel persisted in contending that individuals are suable under Title VII.  In concluding his opinion, the judge had the following to say, all of which should guide all of us during the heat of litigation:

“A license to practice law brings with it substantial responsibilities, and one of those is an obligation of prudence when bringing and pressing a claim. Attorneys are entitled, and sometimes even obligated, to sail into shallow waters as investigation and discovery reveal weaknesses in the factual and legal theories of a case. However, once the ship has not just bumped a shoal or two, but instead has collided with rocks and begun taking water, the voyage is over and counsel is required to drop his sails. A reasonable and prudent attorney would have known and accepted that his claims were finished — that his voyage had ended — upon reading and reflecting upon the Rule 11 notice filed on February 22, 2011. It was clear then that the plaintiffs had no case, legally or factually. Under generous rules of procedure, safe harbor remained available to Mr. Ostendorf even after this grounding, see Fed. R. Civ. P. 11(c)(2), and had he elected that course and dismissed his claims before March 15, 2011, he would have avoided the wreck that has now ensued.”  Moody, 2011 U.S. Dist. LEXIS 73540 at *27-*28.

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Fifth Circuit's Decision Finding USERRA Harassment Claims Not Cognizable Mmay Be Overruled by the Congress

In Carder v. Continental Airlines, 636 F.3d 172 (5th Cir. 2011), petition for cert. denied 181 L. Ed. 2d 235 (Oct. 3, 2011), the Fifth Circuit held that USERRA does not create a cause of action for hostile work environment.  The Court’s decision, authored by Circuit Judge W. Eugene Davis, relied on the current language of USERRA, which does not contain the phrase “the terms, conditions, or privileges of employment” found in Title VII, which the Supreme Court heavily relied upon to find a cause of action for harassment.  Meritor Sav. Bank FSB v. Vinson, 477 U.S. 57, 63-66 (1986).  In contrast, USERRA, in current § 4311(a) states that a protected person “shall not be denied initial employment, reemployment, retention in employment, promotion, or any benefit of employment by an employer on the basis of that [protected status].” (emphasis supplied).

Presumably, both houses will agree shortly on legislation containing a Carder-override.  Given that it is characterized as a clarification, and thus potentially retroactive, employers should proceed henceforth, if they have not already, to conduct their business as though the law prohibits harassment of those protected by the Uniformed Services Employment and Reemployment Rights Act. 

On October 12, 2011, the U.S. House of Representatives passed H.R. 2433, the “Veteran Opportunity to Work Act”, which contains § 401, which would effectively overrule the Carder decision.  H.R. 2433, 112th Cong. (2011). Section 251 states as follows:

“Section 4303(2) of title 38, United States Code, is amended by inserting ‘the terms, conditions, or privileges of employment, including’ after ‘means’.”

The House indicated that the legislation is intended to “clarify” USERRA.  Thus, it is already being argued that the amendment would be retroactive.  See H.R. 2433, Section 1 “Short Title; Table of Contents”.  

On November 11, 2011, the Senate passed similar legislation in the form of section 251 of the VOW to Hire Heroes Act, S. 951, which was combined with H.R. 2433 and inserted as an amendment replacing the entirety of H.R. 674. See S. Res. 951, 112th Cong. (2011); H.R. 674, 112th Cong. (2011).

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Sternly, and In Writing, Warn Clients Not to Mess With Facebook

Sternly, and In Writing, Warn Clients Not to Mess With Facebook

In Lester v. Allied Concrete Co., Nos. CL08-150, CL09-223 (Va. Cir. Ct. Oct. 21, 2011), Judge Edward Hogshire of the Circuit Court for the City of Charlottesville, Virginia issued an order which reduced by fifty-percent a $10.6 million jury verdict and imposed $722,000 in sanctions.  $542,000 of the sanctions were imposed on counsel for plaintiff-Lester, and the remaining $180,000 on plaintiff Lester himself.  The basis for the court’s sanction was an “extensive pattern of deceptive and obstructionist conduct of Murray and Lester…”  In March of 2009 plaintiff’s counsel received a discovery request for the contents of plaintiff’s Facebook account.  At that time, plaintiff’s Facebook account contained a photo of plaintiff wearing a “I [heart] Hot Moms” t-shirt and holding a beer can with other young adults.  According to later deposition testimony, plaintiff’s counsel instructed a paralegal to tell plaintiff to “clean up” his Facebook page because “we don’t want blowups of this stuff at trial.”  Thereafter, plaintiff’s counsel allegedly came up with a scheme to take down or deactivate plaintiff’s Facebook account so that he could respond to defendant’s discovery request by stating that plaintiff had no Facebook page on the date the discovery was signed.  Allegedly, when defense counsel filed a motion to compel, plaintiff’s counsel instructed plaintiff to reactivate the account. Plaintiff denied deactivating the account during a later deposition.  Plaintiff’s counsel was also accused of withholding an e-mail from the paralegal instructing plaintiff to “clean up” his Facebook page.  Finally, plaintiff’s counsel allegedly claimed, falsely, after the trial, that the failure to produce the e-mail was the paralegal’s mistake.

 

In addition to the $542,000 sanction imposed on plaintiff’s counsel, the judge referred the matter to the Virginia state bar.  

Tip of the hat to Christopher Danzig, writing for Above the Law, whose post called this to our attention. 

See also

• Lisa Provence, Sanctions: Allied Concrete Attorneys Want $900K in Legal Fees, The Hook, (Sept. 24, 2011) (cite online: http://www.readthehook.com/100997/sanctions-allied-concrete-attorneys-wants-900k-legal-fees accessed: November 14, 2011).
• Lisa Provence, Unusual Outcome: $722K in Sanctions, Juror Judges Judge, The Hook, (Nov. 4, 2011) (cite online: http://www.readthehook.com/101759/final-order-plaintiffs-sanctioned-722k-juror-judges-judge accessed: November 14, 2011).
• Lester v. Allied Concrete Co., 80 Va. Cir. 454 (Va. Cir. Ct. 2010) (Court held that plaintiff’s counsel violated Rule 3:3(a) of the Virginia Rules of Professional Conduct by when he alleged that defendant had “hacked into” plaintiff’s Facebook account based on no inquiry into the relevant facts “beyond the bare, unsubstantiated assertions of his client.”)

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Circuits Split as to Whether Public Officials Can be Sued Individually Under the FMLA

The Fifth and Eighth Circuits have concluded that public officials can be sued in their individual capacities under the FMLA.  See Modica v. Taylor, 465 F.3d 174, 184-87 (5th Cir. 2006); Darby v. Bratch, 287 F.3d 673, 681 (8th Cir. 2002).  In contrast, the Sixth and Eleventh Circuits have held that FMLA suits against individual public officers are not cognizable.  See Mitchell v. Chapman, 343 F.3d 811, 825-33 (6th Cir. 2003); Wascura v. Carver, 169 F.3d 683, 685-87 (11th Cir. 1999).  The Fourth Circuit has not addressed this issue, and the district courts within the Fourth Circuit have reached contrary conclusions on the subject, with, for example, one judge on the Maryland federal district court bench allowing such claims (Knussman v. Maryland, 935 F. Supp. 659, 664 (D. Md. 1996) (Black, J.), and another judge on the same bench rejecting such a claim (Sadowski v. U.S. Postal Serv., 643 F. Supp. .2d 749, 753 (D. Md. 2009) (Bennett, J.) (recognizing the opinion in Sadowski is “at variance” with the decision in Knussman)).  Recently, Judge Brinkema of the Eastern District of Virginia held, in Weth v. O’Leary, 2011 U.S. Dist. LEXIS 74432 (E.D. Va. July 11, 2011) held that public officials who acted directly or indirectly in the interests of the employer can be personally liable in FMLA cases.

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Affidavits of Defendant’s Current Employees May Be Subject to Bias

            In Lopez v. Asmar’s Mediterranean Food, Inc., 2011 U.S. Dist. LEXIS 2262 (E.D. Va. Jan. 10, 2011), Judge Cacheris in a FLSA case where defendant had interviewed all of the employees whom plaintiff had identified as “similarly situated”, and had submitted affidavits from each of those employees contradicting plaintiff’s assertion that she worked overtime, denied summary judgment to the employer, stating that “because these affidavits are of Defendant’s current employees, they may be subject to bias.”  Lopez, 2011 U.S. Dist. LEXIS 2262 at *6.  The court stated that such current employee affidavits must be discounted, as discovery is not yet complete, and plaintiff has not had the opportunity to depose these witnesses.  See, e.g., Francis v. A & E Stores, Inc., No. 06 Civ. 1638, 2008 U.S. Dist. LEXIS 83369, 2008 WL 4619858, at *3 (S.D.N.Y. Oct. 16, 2008) (discounting affidavits of defendant's employees); Vaughan v. Mrtg. Source LLC, No. CV 08-4737, 2010 U.S. Dist. LEXIS 36615, 2010 WL 1528521, at *7 (E.D.N.Y. April 14, 2010) (“[C]ourts may assign the weight they think appropriate to affidavits from current employees because of the risk of bias and coercion.”)(citation and internal quotation marks omitted); Damassia v. Duane Reade, Inc., No. 04 Civ. 8819, 2006 U.S. Dist. LEXIS 73090, 2006 WL 2853971, at *4 (S.D.N.Y. Oct. 5, 2006) (declining to consider affidavits where plaintiffs had not yet had the opportunity to depose affiants); Morden v. T-Mobile USA, Inc., No. C05-2112, 2006 U.S. Dist. LEXIS 68696, 2006 WL 2620320, at *3 (W.D. Wash. Sept. 12, 2006) (discounting current employees’ declarations “because of the risk of bias and coercion inherent in that testimony”)

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UNCERTAINTY REMAINS AS TO THE PROPER TEST FOR INDIRECT SEX DISCRIMINATION UNDER THE U.K. EQUAL PAY ACT

I.          Legal Background

The U.K. Equal Pay Act of 1970 required equal pay for work of equal value unless “the employer proves that the variation is genuinely due to a material factor which is not the difference of sex and that factor… must be a material difference between the woman’s case and the man’s…” Equal Pay Act, 1970, c. 41, § 1(2)-(3).  The EPA was repealed, and largely restated, by the Equality Act of 2010, and while section 69 effectively overrules Armstrong (discussed below), by requiring objective justification in all cases of indirect discrimination in pay, the issues discussed herein are very relevant to the many cases still governed by the historical Equal Pay Act.

The European Court of Justice, in Case C-127/92, Enderby v. Frenchay Health Auth., 1993 E.C.R. I-05535, held that the Equal Pay provision of the Treaty of Rome’s^[1] Article 141 (formerly Article 119) and the Equal Pay Directive,^[2] prohibited disparities in pay between equivalent-value jobs where one job is performed primarily by women and the other by men.  Significantly, this prohibition applies even when those differences are arrived at by collective bargaining processes which are, in themselves, non-discriminatory. Enderby also suggested that when statistics showed that predominantly female groups were paid less than predominantly male groups for same-value work, the employer must provide objective justification for the difference in order to escape liability.

The Enderby decision led to a flurry of activity in the U.K. as courts attempted to determine how it affected the Equal Pay Act. The most notable of the decisions during this period was Armstrong v. Newcastle Upon Tyne NHS Hosp. Trust, [2006] IRLR 124, [2005] EWCA (Civ) 1608. In Armstrong, Buston LJ added a “sophistication” to the holding in Enderby, stating: “if the employer proves the absence of sex discrimination [it] is not obliged to justify the pay disparity.”

Recently, it appeared that the U.K.’s new Supreme Court would have an opportunity to resolve some of the troubling questions regarding indirect discrimination in the case of Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63. However, Gibson settled shortly before a three-day hearing was scheduled before the Supreme Court. In light of this development, it appears that questions regarding indirect discrimination will have to wait for another opportunity to gain much-needed clarity. This article summarizes Gibson, and the questions which it raised.

II.          Facts of Gibson

Sheffield City Council employs individuals as “carers”, cleaners, and gardeners. Carers and cleaners are predominantly female, while gardeners and street cleaners are predominantly male. In the hearings before Judge Trayler of the Employment Tribunal in 2007 and 2008 the parties stipulated that individuals in these jobs do work of equal value. Crosby & Ors. v. Sheffield City Council, No. 2800460/07 & others, Appx. B. (the “Gibson Tribunal”). Prior to Gibson, street cleaners and gardeners were paid 33.3% and 38% respectively more than carers and predominantly female cleaners, despite the fact that all positions afforded the same “base pay.”  This disparity resulted from a “productivity bonus” that street cleaners and gardeners received in addition to their base pay, but which was not available to carers or predominantly female cleaners.  The predominantly female cleaners, led by Ms. Crosby, prevailed in Judge Trayler’s decision in Crosby & Ors. v. Sheffield City Council in 2008, and the case was subsequently re-captioned Gibson & Ors. v. Sheffield City Council.  The following discussion will accordingly focus on matters related to the pay of carers.

III.          Decisions of the Employment Tribunal

As an initial matter, Judge Trayler found that there was no evidence that bonuses were denied to carers on account of sex, stating:

 “…we believe the reason why the male comparators received a bonus is in return for productivity in relation to outcomes which are measurable. This productivity is achieved by more flexible efficient working which has been kept up to date by the various pressures on the part of the respondent employing the comparators. It is a genuine scheme. It is material in that it is there to provide efficiency of production. It is unrelated to the gender of the recipients.”^[3]

Relying on the reasoning of the Court of Appeal in Armstrong, Judge Trayler then found that this conclusion ended the inquiry, holding:

[t]he reason [for the pay differential] is the need to provide payments for increased productivity which [respondent] cannot and does not need to make to these claimants.

This is a reason which is not the gender of the recipients of the bonus or the claimants. In our view, the respondent has proved that the reason is not the reason of the sex of the group of workers.^[4]

The carers appealed Judge Trayler’s decision to the Employment Appeals Tribunal, which dismissed their appeal.  The Employment Appeals Tribunal agreed with Judge Trayler that, since the Sheffield City Council had “negatived” the taint of sex discrimination, it was not required to objectively justify the pay differential between carers on the one hand, and street cleaners and gardeners on the other.^[5]

IV.          Decision of the Court of Appeal

The carers were granted leave to appeal to the Court of Appeal, where they raised three issues:

1.      Where jobs performed predominantly by women are equivalent to jobs performed predominantly by men, but the predominantly female jobs are compensated at a lower level, does this, of itself, amount to prima facie sex discrimination which requires the employer to objectively justify the pay differential to avoid liability, or may the employer also avoid liability by proving that the difference in pay is not sexually discriminatory?

2.      If the employer is entitled to prove the absence of discrimination, is it enough to establish a gender neutral explanation for the higher payments to the male employees or is something more required?

3.      On either analysis, on the ET’s findings, had the Council proved sufficient to avoid the requirement to provide objective justification?

The parties’ arguments on appeal centered largely on the validity and applicability of Armstrong, both as a general matter and with regard to the specific facts of the case.  Appellants argued that the Armstrong “sophistication” which allowed an employer to prevail upon showing the absence of sex discrimination ran contrary to Enderby and several other decisions of the Court of Appeal.  Appellee contended that Armstrong was rightly decided and binding on the Court of Appeal.

On February 10, 2010, The Court of Appeal attempted to split the baby by declaring that Armstrong was consistent with Enderby but refusing to apply it on the specific facts presented in Gibson.  The Court of Appeal unanimously concluded that the Employment Tribunal and Employment Appeals Tribunal had erred in finding that the reason for the differential treatment between claimants and comparators was free from sex discrimination and remanded the case to the Employment Tribunal to determine whether the difference in pay could be objectively justified. In so doing, the majority held that Armstrong had been correctly decided and that it was open to an employer to establish that a difference in pay was not discriminatory, notwithstanding statistics which show an adverse gender impact. Lord Judge Pill, however, noted that it was difficult to reconcile Armstrong with Enderby as well as the second paragraph of Directive 97/80/EC,^[6] though he concluded only that Armstrong was inapplicable “given the clear and compelling statistics.”

The City Council was granted permission to appeal to the Supreme Court of the United Kingdom, and a three day hearing was scheduled before the Supreme Court on both the council’s appeal and the workers’ cross-appeal.

V.          Unresolved Questions

The central issue that remains for future resolution is whether, once so-called “indirect” sex discrimination is established by showing that a group predominantly composed of women is placed at a disadvantage as compared to a group predominantly composed of men, the employer can escape liability by showing that the pay difference resulted from an ostensibly gender-neutral policy, or whether the employer must show that the pay difference is “objectively justified” as serving a legitimate purpose.

The decision in Gibson also did little to reconcile the inherent tension between Enderby and Armstrong.  With little to guide lower courts as to when Armstrong ought to be applied, clarity in the many cases based on the historical Equal Pay Act must await future pronouncements by the Courts.

---

* Mr. Fitzpatrick would like to acknowledge and thank Mr. Ben Patrick, in-house Solicitor with the trade union UNISON, who represented the carers in Gibson and who provided assistance and insight in the drafting of this article
[1] Treaty Establishing the European Economic Community, 25 March 1957, 298 U.N.T.S. 3.

[2] Council Directive 75/117, art. 1, 1975 O.J. (L045) 1 (EC).

[3] Gibson Tribunal, Paragraph 5.26.

[4] Gibson Tribunal, Paragraphs 5.8, 5.9.

[5] Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63, Paragraph 34.

[6] Gibson & Ors. v. Sheffield City Council, [2010] ICR 708, [2010] EWCA (Civ) 63, Paragraph 49 (Lord Justice Pill); Paragraph 57 (Lady Justice Smith); Paragraph 74 (Lord Justice Kay).

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Fourth Circuit: NLRB ALJs May Rule on Claims of Privilege, but Only an Article III Court Can Require Production

In a recent Fourth Circuit opinion written by Judge Niemeyer, NLRB v. Interbake Foods, LLC, 637 F.3d 492 (4th Cir. 2011), the Court held that an administrative law judge (“ALJ”) had authority to receive and evaluate evidence under the Federal Rules of Evidence and to rule on claims of privilege made with respect to that evidence. In so ruling, the Court overruled the District Court’s holding by Judge Bennett that “only an Article III court may determine whether subpoenaed documents are protected by the attorney-client or attorney work-product privileges…” NLRB v. Interbake Foods, LLC, No. RDB 09-2081, 2009 U.S. Dist. LEXIS 86826, 2009 WL 3103819 at *4 (D. Md. Sept. 22, 2009).

The dispute revolved around an order requested by the NLRB directing Interbake to produce three subpoenaed documents to the ALJ in order for the ALJ to determine whether the documents were protected by a privilege.

As a preliminary matter, it is worth noting that the Fourth Circuit upheld the the District Court’s decision not to conduct an in camera inspection of the documents at issue because “‘Interbake ha[d] met its burden of establishing that the documents [were] privileged… and the NLRB ha[d] not articulated a good faith basis for doubting Interbake’s claim of privilege.’” NLRB v. Interbake Foods, LLC, 637 F.3d at 494 (quoting NLRB v. Interbake Foods, LLC, No. RDB 09-2081, 2009 U.S. Dist. LEXIS 86826, 2009 WL 3103819 at *4 n.1.)  The Fourth Circuit explained that, once a prima facie showing of privilege is made, the opposing party must have a “factual basis sufficient to support a reasonable, good faith belief that in camera inspection may reveal evidence that information in the materials is not privileged” before becoming entitled to such review.  Interbake Foods, 637 F.3d at 494 (quoting In re Grand Jury Investigation, 974 F.2d 1068, 1074 (9th Cir. 1992)).  Other courts have reached similar conclusions, holding, for example, that challenges to privilege must have a “cogent basis” to justify in camera review.  See G.D. v. Monarch Plastic Surgery, 239 F.R.D. 641, 650 (D. Kan. 2007).

Returning to the Fourth Circuit’s discussion of the authority of the ALJ, although the Court held that the ALJ could decide matters of privilege, it also held that an ALJ’s order ruling on evidence could only be enforced by an Article III court. Interbake Foods, 637 F.3d at 499 (“[T]he ALJ has no power to require the production of documents for in camera review or for admission into evidence when a person or party refuses to produce them. That would require Article III power, which the ALJ does not have.”) (emphasis in original). The Court noted the “line of division” between administrative bodies and Article III courts, quoting Interstate Commerce Comm’n v. Brimson, 154 U.S. 447, 485 (1984) (abrogated on other grounds by Bloom v. Illinois, 391 U.S. 194, 198-200 (1968)) as follows:

The inquiry whether a witness before [an agency] is bound to answer a particular question propounded to him, or to produce books, papers, etc., in his possession and called for by that body, is one that cannot be committed to a subordinate administrative or executive tribunal for final determination. Such a body could not, under our system of government, and consistently with due process of law, be invested with authority to compel obedience to its orders by a judgment of fine or imprisonment.

The Fourth Circuit noted that this limitation on the NLRB’s authority emanated from “the Constitution’s separation of powers and due process requirements.” Interbake Foods, 637 F.3d at 497-98. Further, the Fourth Circuit explained that a district court  could not “delegate its task of conducting an in camera review to an ALJ.” Id. at 498. The district court can rule on the basis of the privilege log, but “what it cannot do is order production of documents to the ALJ to conduct an in camera review. Rather, the district court must satisfy itself whether, under appropriate legal standards, it should enforce the subpoena and thus overrule [the] claim of privilege.” Id. at 500 (emphasis in original).

This limitation of power is intended to protect against abuse of the subpoena power, in part by guaranteeing a party an opportunity to present defenses against a subpoena. Where an administrative agency seeks enforcement of a subpoena in court, “the respondent is guaranteed an opportunity to contest the subpoena’s validity through any appropriate defense.” Id. at 499 (citing Penfield CO. v. SEC, 330 U.S. 585, 604 (1947) (“‘[a]n administrative subpoena may be contested’”); NLRB v. Cable Car Advertisers, Inc., 319 F. Supp. 2d 991, 996 (N.D. Cal. 2004) (“‘[A] party [to]… a subpoena enforcement proceeding may raise appropriate defenses once in district court.’”)). Further, the right to raise defenses before a district court “includes the right to vindicate claims that a subpoena improperly calls for records protected by the attorney-client or work-product privileges.” Interbake Foods, 637 F.3d at 499. Along those lines, the Fourth Circuit cited NLRB v. Int’l Medication Sys., Ltd., 640 F.2d 1110, 1115-16 (9th Cir. 1981), in which “the district court was required to conduct ‘a full evidentiary hearing’ before enforcing a Board subpoena challenged on privilege grounds.”

As noted by the Fourth Circuit, privilege rulings by an ALJ typically are not enforced by district courts because the parties either comply voluntarily (see e.g. Patrick Cudahy, Inc., 288 N.L.R.B. 968, 968-69 (1988); see also Horizon Corp. v. FTC, No. 76-2031, 1976 U.S. Dist. LEXIS 12222, *2-7 (D.D.C. Nov. 18, 1976)) or because “the ALJ’s rulings are made without the need for inspection of the underlying documents.” Interbake Foods, 637 F.3d at 498 (citing Taylor Lumber and Treating, Inc., 326 N.L.R.B. 1298, 1299-1300 (1998)). However, if enforcement becomes necessary, only the district court can do so. Id.

Finally the Fourth Circuit noted that federal courts would not rubber stamp the enforcement of subpoenas, quoting Justice Frankfurter’s dissent in Penfield, supra:

Instead of authorizing agencies to enforce their subpoenas, Congress has required them to resort to the courts for enforcement. In the discharge of that duty courts act as courts and not as administrative adjuncts. The power of Congress to impose on courts the duty of enforcing obedience to an administrative subpoena was sustained precisely because courts were not to be automata in carrying out the wishes of the administrative. They were discharging judicial power with all of the implications of the judicial function in our constitutional scheme.

Penfield, 330 U.S. at 604. 

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Title VII Damages Cap Is Based On the Number Of Employees at the Time of the Alleged Violation

In Hernandez-Miranda v. Empresas Diaz Masso, Inc., No. 10-1639, 2011 U.S. App. LEXIS 13259 (1st Cir. June 29, 2011), the First Circuit held that, for the purposes of counting the employer’s number of employees to establish the damages bracket under Title VII, 42 U.S.C. § 1981a(b)(3), Congress intended the relevant time period to be the time during which the alleged discrimination occurred. The Fourth, Fifth, and Seventh Circuits concur.  See DePaoli v. Vacation Sales Assocs., L.L.C., 489 F.3d 615 (4th Cir. 2007); Vance v. Planters Corp., 209 F.3d 438 (5th Cir. 2000); Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995).

The relevant portion of § 1981a(b)(3) provides: 

The sum of the amount of compensatory damages awarded under this section for future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses, and the amount of punitive damages awarded under this section, shall not exceed, for each complaining party --

(A) in the case of a respondent who has more than 14 and fewer than 101 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 50,000;

(B) in the case of a respondent who has more than 100 and fewer than 201 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 100,000; and

(C) in the case of a respondent who has more than 200 and fewer than 501 employees in each of 20 or more calendar weeks in the current or preceding calendar year, $ 200,000 . . . .

42 U.S.C. § 1981a(b)(3) (emphasis added).

In Depaoli v. Vacation Sales Associates, LLC, supra, Judge Niemeyer, writing for a panel of the Fourth Circuit, held that current year is not the year in which the damages are awarded, but rather to the year in which the Title VII violation occurred. The Fourth Circuit, like other courts that have addressed this question, focused on the fact that the word “current” also appears in § 2000e(b) of Title VII which defines an “employer” as “a person… who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year…” (emphasis supplied). As § 2000e(b) has been interpreted to refer to the year of the discrimination (Walters v. Metro. Educ. Enter. Inc., 519 U.S. 202, 205 & n.*(1997)), the Court applied the rule of statutory construction that “identical words used in different parts of the same act are intended to have the same meaning.” Dept. of Revenue of Or. v. ACF Indus., 510 U.S. 332, 342 (1994). 

Several circuit courts have interpreted § 2000e(b) to define “current year” as being the year of the discrimination. See e.g. Komorowski v. Townline Mini-Mart and Rest., 162 F.3d 962 (7th Cir. 1998); Vera-Lozano v. Int’l Broad., 50 F.3d 67, 69 (1st Cir. 1995); Rogers v. Sugar Tree Prods., Inc., 7 F.3d 577, 579 (7th Cir. 1993); McGraw v. Warren Cnty. Oil Co., 707 F.2d 990, 991 (8^th Cir. 1983) (per curiam); Dumas v. Town of Mt. Vernon, Ala., 612 F.2d 974, 979 n.4 (5^th Cir. 1980); Slack v. Havens, 522 F.2d 1091, 1093 (9th Cir. 1975). 

While a bright-line rule defining the year in which one counts employees for the purpose of determining the cap on certain damages would certainly be preferable, I am struck by the fact that, apparently, none of the circuit courts that have addressed this question have spoken to the fact that the statutory language is not simply “the current year”, but rather the current year or the preceding year. Assume, hypothetically, that in the year of the discrimination the defendant has more than 100 but less than 201 employees, and in the preceding year had more than 200 and less than 501 employees. Is the cap $100,000.00 or is it $200,000.00? I am confident that there is some simple response to my contrariness, but at first neither the statute nor the case law address this conundrum. 

Another wrinkle that occurs to me is harassment cases which, under the Supreme Court’s holding in Nat’l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002), that a hostile work environment claim is a cumulative claim and that the continuing violation doctrine applies to such a claim. In harassment cases, after Morgan, so long as the plaintiff alleges that a single act of harassment occurred within 300 days of the EEOC charge-filing, the plaintiff can go back in time beyond the 300^th day as far as the cumulative chain of events leads, so long as the defense cannot establish a “break” in the chain, typically a discrete act. So, in such a case, is the plaintiff permitted to “cherry pick” the best year in that chain for purposes of maximizing damages. Again, a hypothetical—assume a chain of events over 3 years that cumulates into an actionable hostile work environment, and assume that in year 1 of that chain, the employer has more than 200 employees and less than 200 in the ensuing 2 years. Can plaintiff go to the maximum damages permissible under the statute or is plaintiff limited to a lower capped amount? 

Another oddity that I note is § 1981a(b)(3)(c), which refers to employers of more than 200 and fewer than 501 employees. Does that mean that, for employers of 501 or more employees, there is no cap? A textual analysis would seem to suggest that there is no cap. 

The “takeaways” on these issues would seem to be the following:

1. Plaintiff should take discovery to establish the number of employees during the year or years of the alleged discrimination. 
2. In light of Judge Evans’ unwillingness in Hennessy v. Penril Datacomm Networks, Inc., supra, to take judicial notice of the SEC 10-K form under Rule 201 of the Federal Rules of Evidence, plaintiff should be scrupulous to have admissible evidence regarding the number of employees.
3. If plaintiff is within touching distance of a higher damage cap, plaintiff should be scrupulous in discovery regarding how the defense has classified certain individuals. See e.g. Thurber v. Jack Reilly’s Inc., 717 F.2d 633, 634 (1st Cir. 1983) (court concluded that defendant was an employer under § 2000e(b), finding that the relevant employees were not only those who were physically present at work each day, but all those who had an ongoing employment relationship with the employer during the requisite 20 weeks during the relevant calendar year). A unanimous Supreme Court, Justice Scalia writing, in Walters v. Metropolitan Educational Enterprises, Inc., supra, adopted the payroll method of counting employees, citing Thurber with approval.
4. Counsel should be familiar with the case law on independent contractors (Zimmerman v. N. Am. Signal Co., 704 F.2d 347, 352 n.4 (7th Cir. 1983) (disapproved of in Walters v. Metro. Educ. Enters., 519 U.S. 202 (1977) on other grounds) (“We caution that employers cannot avoid having employees counted toward the jurisdictional threshold by denominating them as directors, independent contractors, or other designations besides ‘employee.’ The issue is whether an employer-employee relationship exists, not what title a worker holds.”)), part time employees (Hornick v. Borough of Duryea, 507 F. Supp. 1091, 1098 (M.D. Pa. 1980) (a number of courts have held that “part-time workers are to be counted in ascertaining whether a ‘person’ is an ‘employer’ and therefore subject to… Title VII”)), volunteers (Hall v. Del. Council on Crime & Justice, 780 F. Supp. 241, 244 (D. Del. 1992) (reimbursement for work-related expenses is not sufficient to cause volunteers to be counted as employees), aff’d mem., 975 F.2d 1549 (3d Cir. 1992); City of Ft. Calhoun v. Collins, 500 N.W.2d 822, 826 (Neb. 1993) (a volunteer fire department is not an employer within the meaning of the state fair employment practices act); but see Haavistola v. Cmty. Fire Co., 6 F.3d 211, 222 (4th Cir. 1993) (volunteer firefighters may sue under Title VII)), shareholders (EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177, 1178 (7th Cir. 1984) (abrogated on other grounds in Clackamas Gastroenterology Assoc., P.C. v. Wells, 538 U.S. 440 (2003) as noted in Ruiz v. Trustees of Purdue Univ., 2008 U.S. Dist. LEXIS 118835 (N.D. Ind. Feb. 20, 2008)) (law firm “shareholders” are not counted)), directors and officers (EEOC v. First Catholic Slovak Ladies Ass’n, 694 F.2d 1068, 1070 (6th Cir. 1982) (corporate directors who drew salaries as employees and who had duties as employees in addition to those of directors are counted as employees); but see Zimmerman, supra at 352 (“We do not believe Congress intended the term ‘employee’ to include persons who are no more than directors of a corporation or unpaid, inactive officers.”); McGraw v. Warren County Oil Co., 707 F.2d 990, 991 (8th Cir. 1983) (per curiam) (affirming dismissal on the ground that corporate directors should not be counted as employees); Schoenbaum v. Orang County Ctr. For the Performing Arts, 677 F. Supp. 1036, 1038 (C.D. Cal. 1987) (“Congress did not intend the term ‘employee’ in the ADEA to include the defendant trustees and directors by virtue of the functions they performed for the Orange County Center.”) (quoting Zimmerman, supra)).
5. Counsel may want to explore whether the employees of one entity can be aggregated with another under the “single employer”/single enterprise (e.g. EEOC v. McLemore Food Stores, Inc., 25 FEP 1356, 1358, 1977 U.S. Dist. LEXIS 13741 (W.D. Tenn. Sept. 29, 1977) (since three defendants might be held to constitute a single enterprise, a charge against one might meet the jurisdictional prerequisite of a timely charge with respect to all three); Eskridge v. Coates, 57 FEP 589, 591, 1991 U.S. Dist. LEXIS 19914 (N.D. Ind. 1991) (the defendant corporations had interrelated operations, common ownership, and common management, with one specific individual in charge of hiring and firing for all of the corporate defendants); compare McKenzie v. Davenport-Harris Funeral Home, 834 F.2d 930, 933-34 (11th Cir. 1987) (demonstration of common ownership, management, personnel, and administrative functions raised a genuine issue of material fact) and EEOC v. Christie Lodge Assocs., 51 FEP 916, 920, 1989 U.S. Dist. LEXIS 14469 (N.D. Ill. 1989) (no summary judgment for parent company where disputed issues existed regarding centralized control of labor relations and other issues) with Morgan v. Safeway Stores, 884 F.2d 1211, 1213-14 (9th Cir. 1989) (no genuine issue of material fact raised where common management, control of labor relations, and ownership were not shown between employer and credit union))  or “joint employer” theories (e.g. EEOC v. Sage Realty Corp., 87 F.R.D. 365, 368-69, 1980 U.S. Dist. LEXIS 12404 (S.D.N.Y. 1980) (denying the defendant’s summary judgment motion; the contractor, who paid the plaintiff, and the building management company, which hired the contractor, may be joint employers; evidence showed that the latter hired, trained, and supervised the plaintiff, then ordered her fired when she refused to wear a revealing costume); Compare Evans v. McDonald’s Corp., EEOC Dec. 71-708, 3 FEP 141, 141 (1970) (franchisor and franchisee were joint employers where franchisor controlled the hours of work, work assignments, and products used, and was a named insured on policies covering store property) and Guerra v. Tishman E. Realty, 52 FEP 286, 288, 1989 U.S. Dis. LEXIS 6744 (S.D.N.Y. 1989) (summary judgment is inappropriate where the business relationship between the building owner and those who managed its buildings might be considered to be that of joint employers)).

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