U.S. Supreme Court Protects Employers Against Dubious Title VII Retaliation Claims: Employees Must Show “But For” Causation to Prevail

In California, a plaintiff alleging retaliation  can survive summary judgment, or prevail at trial, simply by showing that her protected activity was a “substantial motivating factor” in her adverse employment action.  But, does that same, relaxed standard apply to cases under Title VII?

That was the question addressed in University of Texas Southwestern Medical Center v. Nassar, which the Supreme Court decisively answered, “No.”

Dr. Naiel Nassar, a physician and faculty member of Middle Eastern descent, alleged that the University of Texas Southwestern Medical Center retaliated against him for complaining that his supervisor harassed him on the basis of his national origin.  The lower court instructed the jury that retaliation claims, like discrimination claims, require only a showing that retaliation was a motivating factor, rather than the “but-for” cause, of his adverse employment action.  The jury returned a verdict for Dr. Nassar, the Fifth Circuit affirmed, and the Supreme Court reversed.

The Court clarified that a plaintiff alleging retaliation under Title VII must show that his or her complaint of harassment or discrimination was the “but for” cause of an adverse employment action.  This means that a plaintiff must convince a jury that he or she would not have suffered the adverse employment action if he or she had not complained.  This is in line with the Court’s decision in Gross v. FBL Financial Services, Inc., which settled a plaintiff’s burden to prove age discrimination/retaliation claims under the ADEA.

With retaliation suits multiplying in frequency (they have nearly doubled in frequency since 1997), the Court’s decision strikes a balance between protecting employees’ rights and employers from frivolous claims.  As the Court noted, allowing a “lessened causation standard” for retaliation claims would “make it far more difficult to dismiss dubious claims at the summary judgment stage.” Slip Op. at 18. It is important to note that the “lessened causation standard” remains in effect in Title VII discrimination claims and under all discrimination and harassment claims under California’s Fair Employment and Housing Act.    Nevertheless, because a plaintiff cannot simply show that his or her protected activity was a motivating factor in the adverse employment action, the plaintiff will have to put in some work to survive summary judgment on his or her retaliation claim.  More importantly, this decision will hopefully lead to clearer jury instructions and less jury confusion on the plaintiff’s burden of proof.

- Ferry Lopez (Los Angeles)

U.S. Supreme Court Will Decide The Legality Of Union Neutrality Agreements

It certainly was not the biggest news out of the U.S. Supreme Court this week, but the Court agreed to resolve a split among the Circuit Courts involving the legality of so-called neutrality agreements in union campaigns.

Neutrality agreements have become a very popular tool among unions.  In the typcial neutrality agreement, an employer will agree with the union to limit one-on-one sessions with employees or captive-audience meetings.

The Taft-Hartley Act, however, makes it unlawful for a union “to pay, lend, or deliver . . . any money or other thing of value” to an employer.  Thus, the question: is an agreement to remain neutral during a union organizing campaign a “thing of value” which a union “pays, lends or delivers” to an employer.

Before this year, two federal Circuit Courts had found that the Taft-Hartley Act did not apply to neutrality agreements, but last year in Mulhall v. UNITE HERE Local 355, the Eleventh Circuit Court of Appeals held that such agreements were prohibited under the law.  In Mulhall, the employer, a casino, agreed to neutrality in exchange for the union’s promise to contribute $100,000 to a campaign for a ballot initiative allowing more casinos.  Not your everyday neutrality agreement.  The Eleventh Circuit found that neutrality in that instance was a “thing of value” especially because the employer was getting something tangible of value in return.

It’s not at all clear that the Supreme Court will agree with the Eleventh Circuit, as this is the first case the Supreme Court has taken up on the issue.  Indeed, the wording of the statute suggests that while an agreement concerning neutrality may well be a “thing of value,” it cannot be “paid, lent or delivered.”  But even if the Court does affirm the Eleventh Circuit, it would not be surprising if an opinion was limited to the particular neutrality agreement here where money actually exchanged hands.

The result remains to be seen.

- Dan Handman

The United States Supreme Court Again Supports the Class Action Waiver in Arbitration

No surprise here.  The United States Supreme Court continued on a consistent path and found that a waiver for class actions in an arbitration agreement was enforceable.  In American Express Co. v. Italian Colors Restaurant, two businesses challenged the waiver of a class action in the arbitration agreement it had with American Express by pursuing federal anti-trust claims.  The Supreme Court, in a decision that was consistent with AT&T Mobility v. Concepcion (2011), found that such class waivers were enforceable under federal law, as they are under state law (Concepcion).

Although these are consumer class actions, the rulings are applicable in the employment context.  The recent activity at the Supreme Court highlights the ability of an employer to enforce an arbitration agreement that precludes class actions, including wage and hour matters.

In California, there has been a split in the state Courts of Appeal as to whether Concepcion precluded class action waivers of employment claims, including wage and hour claims, in light of a prior California Supreme Court case, Gentry v. Superior Court (2007).   Gentry focused on four factors in determining that a class action waiver would not be found valid in a wage and hour case:  the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration.  The split among the Courts of Appeal has resulted in the California Supreme Court agreeing to resolve the issue in Iskanian v. CLS Transportation.  This recent decision in American Express provides substantial support for validating a class action waiver and not employing a multi-factor test, as set forth by Gentry.  Justice Scalia, writing for the majority, specifically rejected this “effective vindication”  argument and the notion that class action waivers are invalid because there is no economic incentive to pursue particular claims individually in arbitration.

Employers with arbitration agreements should revisit the language to ensure the appropriate waiver is included.

- John Baum

Breaking News: USSC Issues Decision in Fisher vs. UT Austin

The United States Supreme Court issued its 7-1 decision in Fisher vs. University of Texas at Austin today.  Justice Kennedy delivered the opinion of the Court, Justice Ginsburg dissented, Justice Kagan recused herself.

The Court vacated the decision of the Fifth Circuit Court of Appeal which had upheld the University’s consideration of race as one of many factors when evaluating applicants for admission.  The Court found that the Fifth Circuit did not appropriately apply the required strict standard of scrutiny.   When racial classifications are used, they are constitutional only if they meet the test for strict scrutiny, which requires a showing of (1) a compelling state interest (in this case diversity as an educational goal) and (2) that the use of such racial classifications is narrowly tailored to achieve the compelling state interest.

According to the majority opinion, the Fifth Circuit accorded the University too much deference when it held that the Petitioner, Abigail Fisher, could only challenge whether the University’s decision to use race as an admissions factor “was made in good faith.”   According to the Court, the University had been given too much deference as to whether its plan was “narrowly tailored to achieve its stated goal” in achieving a more diverse student body.  As such, the Fifth Circuit must review the case again under the strict scrutiny standard without according the University such deference.

We cannot predict what the Fifth Circuit will do.  The Supreme Court has accepted another admissions case and we believe that this issue is far from over.  In concurring opinions today, Justices Thomas and Scalia signaled that they do not consider the educational benefits of diversity to be a compelling state interest that justifies the use of race in evaluating candidates for admission.

Given all of this uncertainty and the impact that diversity has on all of our workplaces, we will continue to monitor this situation and will keep you posted…

- Natasha Baker

A Busy Day In The World of Employment Law

In case you slept late this morning, you missed a flurry of activity in the world of employment law.  The U.S. Supreme Court issued a trio of decisions which affect workplace relations.  In Vance v. Ball State University, the Court held that a supervisor for purposes of vicarious liability under Title VII is a someone whom the employer empowers to take tangible employment actions against the victim.  In University of Texas Southwestern Medical Center v. Nassar, the Court found that retaliation claims under Title VII require proof of “but for” causation, rather than the lower standard of proof the plaintiff’s bar offered.  Finally, in Fisher v. University of Texas At Austin, the Court found that affirmative action in education was still permissible, but nonetheless remanded the case to the Fifth Circuit because the appeals court did not apply the appropriate test for strict scrutiny of race-based decisions.

In other significant news, the U.S. Supreme Court agreed to hear the Noel Canning decision from the D.C. Circuit which had found that the President’s recess appointments to the NLRB were invalid and that the Board did not have a proper quorum.   And, last week, the Court continued its assault against class actions in American Express Co. v. Italian Colors Restaurant, finding that contractual waivers of class arbitration continue to be enforceable, even if the plaintiff’s cost of litigation exceed her potential recovery.

Stay tuned to the blog for updates on these recent developments in the upcoming days.

- Dan Handman

 

 

COURT FINDS SUCCESSOR LIABILITY FOR FLSA JUDGMENT IN ASSET SALE

Recently, the U.S. Court of Appeals for the Seventh Circuit, in a decision authored by Judge Richard Posner, Teed v. Thomas & Betts Power Solutions, L.L.C., held that federal common law and not state law applied to the determination of successor liability for a Federal Labor Standards Act judgment. The case involved a claim for unpaid overtime under FLSA brought by former employees of JT Packard & Associates. When the assets of JT Packard were sold to Thomas & Betts, the plaintiffs substituted Thomas & Betts into the lawsuit (against Thomas & Betts’ objection), and the district court, applying the doctrine of successor liability, enforced a $500,000 settlement that JT Packard had reached with the plaintiffs prior to the asset sale.

On appeal, Judge Posner’s opinion noted that the question to be decided was whether Thomas & Betts was liable for the settlement amount by virtue of the doctrine of successor liability. By way of background, subject to certain exceptions, many states limit liabilities in asset sales unless expressly or implicitly assumed by the buyer. (In a stock sale only the owners of the entity change and thus liabilities of the entity continue in existence; the new owners cannot disclaim such liabilities.) However, the doctrine of successor liability places liability in an asset sale on the buyer in certain circumstances, even if, as in this case, the buyer in the asset purchase and sale agreement expressly disclaimed such liabilities.

Significantly, the court held that the doctrine of successor liability was to be determined by federal common law and not the state law of Wisconsin, which was the governing law otherwise. Wisconsin law would not have found Thomas & Betts to be liable, because in the asset agreement it had specifically disclaimed responsibility for the FLSA settlement. However, the court held that federal common law applied because it was appropriate in suits to enforce federal labor or employment laws and to achieve federal statutory goals of promoting labor peace and protecting workers rights.

Having concluded that federal common law applied to the determination of successor liability, the court then analyzed a five- factor test to find that, on balance, successor liability was appropriate in this case. The five factors consisted of the following:

  1. Whether the successor entity had notice of the lawsuit. Since Thomas & Betts had notice, this factor favored successor liability;
  2. Whether the predecessor entity would have been able to provide the relief sought in the lawsuit prior to the sale. Since JT Packard was insolvent, the answer was no, a factor against successor liability;
  3. Whether the predecessor entity could have provided the relief sought after the sale. Since JT Packard was insolvent, the answer was no, a factor against successor liability;
  4. Whether the successor entity could provide the relief sought, without which successor liability is a phantom. The answer was yes, a factor that favored successor liability; and
  5. Whether there is continuity between the operations and work force of the predecessor and successor entities. The answer was yes, a factor that favored successor liability.

The case should serve as a wake-up call to buyers in an asset sale to consider not only state law in assessing whether they may become liable for the obligations of the seller relating to the business that is purchased. There may be circumstances where a buyer should consider trying to negotiate a reduction in the purchase price to account for such liabilities.

William Ross

U.S. Supreme Court Ruling Suggests Review of Arbitration Language

The U.S. Supreme Court’s decision on June 10, 2013 strongly suggests that employers should ensure that their arbitration agreements contain express language that excludes the arbitration of class action claims for that position to be enforceable.

In Oxford Health Plans LLC v. Sutter, the Supreme Court upheld an arbitrator’s ruling that a broad-based arbitration agreement permitted class arbitration in a dispute brought by a pediatrician.  The arbitration  agreement did not specifically include or exclude the arbitration of class claims.  The arbitrator held that the plain wording of the agreement  (“all disputes”) meant that class claims would be subject to arbitration.  The Supreme Court agreed.  Justice Kagan, writing the opinion for the Court, held:  “In sum, Oxford chose arbitration, and it must now live with that choice.  Oxford agreed with Sutter that an arbitrator should determine what their contract meant, including whether its terms approved class arbitration.”  The Court found that the arbitrator did not exceed his powers in making the ruling to include class claims in the arbitration process.

This decision highlights the need for employers to periodically evaluate the language of their arbitration agreements.  For many employers who want to have enforceable arbitration agreements and also take steps to preclude the arbitration of class claims, then the explicit language excluding class claims should be included in the arbitration agreements.  In a prior ruling, AT&T Mobility LLC v. Concepcion, the U.S. Supreme Court held an arbitration agreement that precluded class claims was enforceable.  So, employers – check your agreements.

- John Baum

Court Holds That Because Rest Periods Must Be Separately Compensated For In A Piece Rate Pay Plan, Class Should Have Been Certified

A recently published appellate decision ordering class certification in a wage/hour class action, Bluford v. Safeway Stores, Inc. has multiple teaching points, some predictable and some unexpected.  Bluford predictably requires class certification where the legality of the employer’s meal break policy, or lack thereof, is at issue.  Bluford also predictably requires certification where the legality of the employer’s rest period policy itself is at issue.  What is unexpected is that in the course of ordering certification of such rest period claims, Bluford holds that piece rate pay does not compensate employees for rest periods, which must be separately compensated for over and above piece rate pay.

Safeway’s drivers were unionized, represented by the Teamsters and subject to a collective bargaining agreement (CBA) that provided for meal and rest periods.  Until 2006, Safeway policy did not provide for a second meal period if the driver worked more than 10 hours, and until 2008, the CBA did not do so either.  In opposition to class certification, Safeway introduced evidence that employees knew they could take a second meal break and in fact did so.  The trial court denied class certification, holding that individual issues predominated because each driver would have to be asked whether they were permitted a second meal period and the reason they did not take them.  The appellate court disagreed, holding that the evidence established that Safeway as a matter of policy failed to authorize second meal periods because there was no indication that drivers knew they were entitled to take them.  It held that the failure to make drivers aware that they were authorized to take a second meal period obviated the need for individual inquiries on the issue of liability, reversing the trial court’s class certification denial.

The plaintiffs also claimed that Safeway did not pay drivers for rest periods, as required by the Wage Order.   Safeway’s compensation system was a modified piece rate system.  It paid drivers based on mileage rates that varied by time of day and location, fixed rates for the performance of specific tasks, and hourly rates for other tasks – none of which included rest periods.  Safeway argued that its piece rate system had been designed to include rest periods and thus compensated for them.  The trial court, apparently accepting this argument, denied class certification, reasoning that individual inquiries into the reason an employee missed a rest period would predominate over common questions.  The appellate court again disagreed.

The court of appeals held that the trial court’s denial was improper because the plaintiffs’ theory of recovery – that drivers were not compensated for the rest periods they did take – had nothing to do with reasons for taking or not taking a rest period.  Going beyond simply holding that the question whether the piece rate system compensated for rest periods was a common one, the court addressed the merits and found the system unlawful.  None of the system’s compensation components directly compensated drivers for rest periods, which violated the requirement that rest periods be paid.  To accept the argument that the piece rate pay included rest period compensation, the court held, would be akin to averaging pay to comply with the minimum wage law, which is disallowed under California law pursuant to Armenta v. Osmose, 135 Cal. App. 4th 314 (2005).

This is the second court of appeal decision out of the Third Appellate District in Los Angeles to hold that piece rate systems do not compensate for all hours worked but instead compensate only for “productive” work time, that is, time not directly related to producing the “piece.”  The first decision, Gonzalez v. Downtown LA Motors, ___ Cal. App. 4th ___ (2013), held that the time automobile mechanics spent waiting for repair jobs had to be separately compensated at the minimum wage because it was not paid for by the fixed “flag rate” pay mechanics earned for each repair job.  (Our firm filed an amicus curiae brief in that case on behalf of the National Automobile Dealers Association.)  A petition for review in Gonzalez has been filed with the California Supreme Court.  We can only hope that the Supreme Court will step in and provide some much-needed clarification and guidance.  In the meantime, employers who use piece rate compensation systems should consult with counsel and evaluate the advisability of changing their pay practices.

- Felicia Reid (San Francisco)

California Supreme Court Finds That Unions Are Entitled To Public Employee Personal Contact Information

In County of Los Angeles v. Los Angeles County Employee Relations Commission, the California Supreme Court recently addressed an important issue involving employee privacy in public sector union representation.  The Court found that a public-sector union’s duty to represent all employees in a bargaining unit trumps their right to keep their contact information private.           

During labor negotiations with the County of Los Angeles, SEIU proposed amending its Memorandum of Understanding (MOU) to require the County to provide SEIU on an annual basis with the names and home addresses of all employees – including nonmembers – for the purpose of communicating with employees about union activities and events, sending Hudson notices (to nonmember “fair share fee payers” explaining membership options, applicable fees, and the reasons for the fees), as well as for recruitment purposes and investigation of grievances.  The County rejected SEIU’s proposal on the ground that the contact information was not relevant to any collective bargaining issue and such disclosure would violate nonmembers’ privacy rights.  The County proposed that the then-current arrangement be retained, or that the parties negotiate a procedure for employees to release their own personal information to SEIU.  SEIU withdrew its proposal and filed an unfair labor practice charge.

Ultimately, the case made its way to the California Supreme Court, where the Court addressed two issues in its decision: (1) whether the MMBA and/or labor law precedent required the County to provide the addresses and telephone numbers to SEIU, and (2) whether such disclosure violated the employees’ constitutional right to privacy.  In addressing the first issue, the Court conducted a lengthy review of legal precedent under the MMBA, PERB decisions regarding the California labor relations statutes it administers, and federal labor relations precedent under the National Labor Relations Act (NLRA).  The Court concluded that SEIU’s request for home addresses and phone numbers of County employees it represented – including nonmembers within the bargaining unit – asked for information that was presumptively relevant to the union’s representation of its employees.  Presumptively relevant information must be disclosed to the union unless the employer proves a lack of relevance or gives adequate reasons why the information cannot be supplied.  Additionally, the Court noted, that a union’s ability to obtain relevant information may be tempered by measures to accommodate privacy concerns.   

The Court then reviewed the employee privacy interests raised by the County in refusing to provide the nonmember employee home addresses and phone numbers.  While agreeing that County employees had a legally protected privacy interest in their home addresses and phone numbers, the Court concluded that the reasonableness of the employees’ expectations, however, were somewhat reduced in light of what the Court viewed as a common practice of other public employers giving unions this information.  Ultimately, the Court determined that the union’s interest in obtaining residential contact information for all employees it represents was both legitimate and important, and favored disclosure.  In this regard, the Court focused on the fact that a union’s duty of fair representation to employees includes the duty to keep employees informed about the status of negotiations or changes in contractual terms, and that the union was required to send employees the annual Hudson notice.  The Court noted that other means of union communication (bulletin boards, union meetings, worksite visits) were often inadequate.  In response to the concern that nonmember employees’ privacy would be subjected to increased contact with the union by mail and “other means,” the Court explained that if harassment is a concern, employers may bargain for procedures that allow nonmember employees to opt out and prevent disclosure of their contact information.

Finally, in finding that the court of appeal had overstepped its authority in imposing an opt-out procedure on the parties, the Court advised that employers remain free to bargain for notice and opt-out procedures in negotiating collective bargaining agreements, and can also draft employment contracts that will notify employees that their home contact information is subject to disclosure to the union and permit employees to request nondisclosure.  The Court also left open the option for PERB to adopt notice and opt-out procedures.

Significance:  This case has made clear that unions representing public employees are entitled to employee personal contact information and that employees in positions within a bargaining unit (including employees who are non-union members) should not expect their personal contact information to remain private when the employer is faced with a union’s request for information.

Carmen Plaza de Jennings and Jayne Benz Chipman

EEOC Shows Employers That Domestic Violence Can Enter The Workplace And Pose Discrimination Issues

The Equal Employment Opportunity Commission (EEOC) recently published Guidelines for employers to handle issues involving employees or applicants who are victims of sexual assault, domestic or dating violence, or stalking.  Sadly, given the prevalence of domestic violence in our country, employers everywhere employ someone who has been or is currently subjected to domestic abuse – often times unknowingly.  According to one study by the Bureau of Labor Statistics, 21% of full-time employed adults are victims of domestic violence.  One state’s Department of Labor found that 75% of domestic violence perpetrators use workplace resources to express anger or remorse towards, check up on, pressure, or threaten their victim.  Human resource managers may not face domestic abuse concerns in the workplace on a daily basis, but they should be aware that domestic violence or assault victims are afforded certain employee protections under federal and often state law.  But given trends in workplace violence, the EEOC Guidelines just begin to scratch the surface of the issue. 

According to the EEOC, domestic violence issues should be considered in light of two EEO laws enforced by the EEOC — Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act.  Because Title VII prohibits disparate treatment based on sex, employers can run afoul of it if they treat employees according to sex-based stereotypes in domestic violence situations.  For example, the employer who allows a male employee to take unpaid leave to testify in a criminal assault proceeding, but denies a female employee the same type of leave to obtain a restraining order against her batterer may violate Title VII.  Likewise, employers who rely on improper stereotypes, such as believing that the domestic violence is a relationship or marital issue undeserving of time off, while allowing an employee to take similar leave for their own court appearance, may face a discrimination complaint. 

The EEOC also takes the position that Title VII can be violated if an employer terminates a woman because she was a victim of domestic abuse.  But, the EEOC did not address  the larger issue when the abusive spouse of a female employee actually threatens the workplace.  That larger, much more common issue must be considered with workplace violence specialists and with an eye towards protecting the safety of an employer’s workforce – a goal which surely trumps that of the domestic violence victim.  

Sexual or sex-based harassment is also barred by Title VII.  It is no surprise that an employee stalking a female employee at work, such as waiting for her in the parking lot, repeated calls to her home, sending personal emails, and other persistent, unwelcome behavior will constitute sexual harassment if it is sufficiently frequent or severe in nature so as to create a hostile work environment.  Or, actionable harassment under Title VII may result when a manager learns that his employee has been abused and seeks to take advantage of her vulnerability by making unwanted sexual advances. 

Retaliation for complaining about a protected activity violates Title VII.  Domestic or dating violence scenarios giving rise to retaliation claims may include an employee who complains about a manager’s sexual abuse and belittling comments, and then suffers a material change in her employment, like a demotion, decreased job responsibilities, or the assignment of less favorable projects. 

Some of the above examples may be straightforward and easily perceived as harassment, discrimination, or retaliation under Title VII.  However, employers need to consider that domestic violence and abuse may also invoke rights under the Americans with Disabilities Act (ADA) or related state laws.  The EEOC gives an example of a female employee who, in suffering from major depression after being stalked by an ex-boyfriend who works in the same office building, seeks a reasonable accommodation in the form of a transfer to a different location.  Failure to accommodate the employee may violate the ADA unless the employer can show the transfer creates an undue hardship on its operations, an often difficult argument to prove.  Similarly, the EEOC posits that in the unlikely event an employer learns that an applicant received counseling for depression related to a rape attack, and declines to select the candidate on this basis, then the failure to hire would likely constitute disability discrimination even if the candidate is still not clinically depressed.  What matters there is that the employer perceived the employee as disabled and neglected to hire the employee based on this perception.  In a more vivid example of harassment, the EEOC describes a situation in which an employee has facial scarring after she was badly burned in an attack by her former domestic partner.  If coworkers snicker and stare at the employee and make hostile remarks about her appearance, but the employer fails to take action to stop such verbal abuse, this may constitute disability-based harassment prohibited by the ADA. 

The EEOC makes no distinction when a domestic violence situation involves someone other than a male abuser and a female victim and, of course, domestic violence can very well occur in same-sex relationships.  Although the agency’s recent guidance is not a change in how the EEOC applies discrimination laws, it clearly illustrates how the consequences of domestic abuse and violence enter the workplace and may lead to discrimination.  The Guidelines remind employers that they cannot turn a blind eye to domestic abuse and expect that it does not involve employment considerations because it happens during an employee’s personal time outside of work.  In determining the correct response and action, employers should not simply ask the narrow question if an adverse decision is improperly based on one’s sex or gender to determine if there is a Title VII violation. 

(Finally, California employers with 25 or more employees should note that they are required under the state’s Labor Code to grant time off from work to domestic violence victims to, among other things, testify in court proceedings, seek medical attention, and obtain counseling or services related to the violence.) 

For the complete description of the EEOC’s Guidelines and its Questions and Answers, click here.

Kristin Oliveira