Employment Law Outline - Fall 2009 - Prof. Kordek

Published on December 2016 | Categories: Documents | Downloads: 51 | Comments: 0 | Views: 1376
of 108
Download PDF   Embed   Report

Comments

Content

Employment Law Outline Chapter 1 – Work and Law - Only one case (Bammert) in this chapter, it gets moved to below Chapter 2 – The Development of Employment Law A. The Foundations of Employment Law Master-Servant: - The Ordinance of Labourers (1349), Statute of Labourers (1351, amended 1562) are important because the made the employment contract different from all others and made illegal any attempt on the part of workers to bargain collectively. - Respondent superior is mainly in torts cases only. Employer-Employee: - This relationship is based on contract. It is also influenced by property law, in that the employer is able to justify a wide range of conditions on employment because the work is done on his land, his equipment, and his intellectual property. - What makes an employee an employee, is the amount of control over the work that the employer has over the employee, and, to a lesser extent the employees expectation of payment for this work. Lemmerman (1986) (An 8-year-old kid was paid a dollar a day by the manager of the store to do odd jobs. He was hurt and mother sought tort damages. The court held, however, that the child was an employee, and, therefore lacked jurisdiction (case goes to workers’ comp. board instead). Because the employer directed the odd jobs of the child, and because the child expected payment he was an employee. The fact that the child never filled out a job application was irrelevant.)

Employment at Will: - At first the American System allowed termination of at will employees without any restrictions based on “Liberty of Contract” principles. These early cases illustrated three aspects of the common law “at will” rule: the employer was free to (1) impose any conditions of employment, (2) discharge an employee at any time for any reason, and (3) effect the discharge in virtually any manner.

Judicial Modification of the At Will Rule: The Public Policy Exception: The employee must identify a constitutional (state or federal), statutory, or administrative provision that clearly articulates a fundamental and well-defined public policy and it must directly involve the employee. Bammert (2002) (An at-will employee was fired after her husband arrested her employer’s wife for drunk driving. Did not meet the Public Policy Exception, because the employee was not involved in the arrest. Dissent – Argued that the public policy of law enforcement should have prevailed). Implied Contract: Based either on written statements contained in employee handbooks or oral statements made at the time of hiring or shortly thereafter, which would lead employees to reasonably believe that they had job security.

Good Faith and Fair Dealing (Minority of Jurisdictions): Recognizes an exception based on an implied covenant of good faith and fair dealing in employment agreements, similar to that implied in commercial contracts covered by the UCC, and considers a breach of such covenant as the basis for a contract or tort action. - The remedy for these judicially created exceptions to the At Will Rule is damages rather than specific performance, in contrast to legislative exceptions that authorize reinstatement and back-pay. B. Sources of Modern Employment Law Civil Service/Public Employment: - In McAuliffe (1892) a Massachusettes Court upheld the firing of a police officer for violating a statute barring political affiliations, holding that he has no constitutional right to be a police officer, and, therefore, must be bound by the conditions of his contract. This case would not stand up to 1st Amendment scrutiny today. - The Rutan (1990) Court held that the promotion, transfer, recall, and hiring decisions involving low-level public employees by the Gov. of Illinois based on political party affiliation violated the First Amendment, which forbids government officials to discharge or threaten to discharge public employees solely for not being supporters of the political party in power, unless party affiliation is an appropriate requirement for the position involved.

The Hatch Act: Restricts the political activities of federal employees (other than Congress, the President, and the Vice-President) and employees of state and local government agencies that receive federal funds. - The Merit Systems Protection Board (MPSB) lists five permissible political activities for state and local govt. employees: (1) May be a candidate in completely non-partisan elections, which has been interpreted to mean “only if none of the candidates in the race can be considered partisan (Indies and bipartisan candidates do not count)”; (2) May participate in political campaigns, as long as they are not running for office; (3) May campaign for and hold elective office in political clubs and orgs; (4) May contribute money to political orgs or attend political fundraising functions; and (5) may participate in any activity not specifically prohibited by law or regulation. - A State or local govt. employee may not: (1) Use his official authority or influence for the purpose of interfering with or affecting the result of an election or a nomination for office; (2) directly or indirectly coerce, attempt to coerce, command or advise a state or local officer or employee to pay, lend, or contribute anything of value to a political party, committee, org, agency, or person for political purpose; and (3) be a candidate for elective office in a partisan election. Collective Bargaining: - The National Labor Relations Act (NLRA) created the National Labor Relations Board (NLRB) to regulate union organization, representation elections, and unfair labor practices; gave employees the rights of self-organization and collective bargaining; and prohibited certain unfair employer labor practices. - The Labor Management Relations Act amended the NLRA to give employees the right to refrain from (as well as participate in) union activities; expanded the NLRB from three to five members; and added a series of prohibited unfair labor practices by unions.

- Strikes are permitted to pressure an employer into making concessions in collective bargaining. The primary strike is legal under the NLRA, but secondary strikes (against customers and suppliers) usually are not and may be enjoined by the courts. The employer may not discharge employees engaged in protected, concerted activity (including a primary strike), however, the Court has held that the employer may hire permanent replacements. NLRB v. Mackay Radio. In effect, strikers may lose their jobs and need only be placed on a preferential hiring list for the next available opening. If the employees strike simply to protest employer unfair labor practices the employer may hire only temporary replacements. Arbitration: - Under the Federal Arbitration Act an employer can prevail on its demand for arbitration in a suit brought for illegal firing under the Americans with Disabilities Act (ADA) only if it can establish that the provision for mandatory arbitration is part of a valid contract and that enforcement of the arbitration provision would be appropriate under the ADA. Campbell v. General Dynamics (2005). The appropriateness of enforcing an arbitration agreement hinges on whether, under the totality of the circumstances, the employer’s communications to its employees offered “some minimal level of notice” sufficient to appraise those employees that continued employment would effect a waiver of the right to pursue the claim in a judicial forum. Id. An employer will be able to satisfy this burden per se by producing evidence demonstrating that the employee had actual notice of the agreement. Id. Without actual notice, however, the sufficiency of the notice turns on whether the employer’s communication would have provided a reasonably prudent employee notice of the waiver. Id. (affirming the lower court’s holding that an email, which contained an explanation the implementation of a new arbitration policy, but didn’t mention how it affect one’s right to go to court, nor the fact that this agreement would become binding upon coming to work the next day, did not provide adequate notice. The actual text of the policy was not within the email, but within a hyperlink within the email. Lastly, the employer only had notice that the employee read the email, but could not verify that they clicked the hyperlink.) Chapter 3 – The Hiring Process A. Introduction Nepotism: Nepotism, per se, does not violate the nondiscrimination provisions of Title VII of the Civil Rights Act of 1964, but, if the effect of nepotism is discrimination on the basis of race, sex, or some other proscribed classification, it is illegal. See Asbestos Workers v. Vogler (1969) (the union had a policy restricting membership to sons or close relatives of current members. The effect of the policy was to perpetuate the exclusion of minorities from the all-white union. The court invalidated the policy due to the violation of Title VII.) - In 1947, the Court held in Kotch v. Board of River Port Pilot Comm’rs (1947) that the hiring of exclusively family members and friends of State Pilots did not violate the 14th Amendment, because of the “unique character of river piloting.” This case makes it clear that nepotism in governmental hiring requires some measure of justification before it can pass constitutional muster. However, it would likely fail today due to employment law statutes. Intentional Discrimination in Hiring: In EEOC v. Consolidated Serv. Sys. (1993) a small company providing janitorial services was owned by a Korean immigrant, and most of his employees were also Korean immigrants. 73% of applicants were Korean, whereas they made up less than 1% of the overall work force and at most 3% of the janitorial work force.

Finding no direct evidence of discrimination, the issue was whether the circumstantial evidence compelled an inference of discrimination. He hired through word of mouth and an ads in a Korean newspaper and the Chicago Tribune. Hires only resulted through word of mouth. - The Court noted that hiring through word of mouth was efficient (Posner wrote the opinion) and was bound to create a workforce confined largely to the community by which it occurred (i.e., Koreans). Therefore, “discrimination is not preference or aversion; it is acting on the preference of aversion. If the most efficient method of hiring, adopted because it is the most efficient, just happens to produce a workforce whose racial or religious or ethnic or national-origin or gender composition pleases the employer, this is not intentional discrimination.” Want Ads: Title VII and the Age Discrimination in Employment Act (ADEA) expressly prohibit discriminatory want ads. §704(b) of Title VII provides that Ads may not indicate any preference, limitation, specification, or discrimination, based on race, color, religion, sex, or national origin (or age - ADEA), except for when religion, sex, or national (or age – ADEA) origin is a bona fide qualification for employment. - However, although you are not allowed to run a discriminatory ad, a non-discriminatory ad that is run in a newspaper that targets a certain group (like an ad for waiters at a Chinese restaurant running only in a Chinese newspaper) would not be unlawful. See also Consolidated. Employment Agencies: It is unlawful for an employment agency to fail or refuse to refer for employment, or otherwise to discriminate against, any individual because of his race, color, religion, sex, or national origin, or to classify or refer for employment on the basis of race, color, religion, sex, or national origin. - In addition to statutory duties, employment agencies owe a common law duty of reasonable care to their clients. See Keck v. American Employment Agency (holding the agency’s failure to make further inquiries of the caller liable for negligence after sending a woman to do routine office work for an employer, which another agency refused to refer anyone to because he sounded “fishy.” The office she went to was an empty room, and she was then sexually assaulted.) Hiring Halls: The problem here has centered around the Union’s role in administering hiring halls. §8(a)(3) of the NLRA makes it an unfair labor practice for an employer “by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization.” - Hiring Halls are not illegal per se; §8(a)(3) only prohibits encouragement or discouragement of union membership accomplished by discrimination. See IBT v. NLRB. Therefore, even if a hiring hall encourages union membership, it is not illegal if the hiring hall is run in a nondiscriminatory manner (i.e., union members may not be given preference over nonunion workers in job referrals). Id. Referrals, however, may be based on other reasonable criteria such as seniority in the industry; residence in a local area; or passing a union-administered examination. - Race or gender discrimination in the admission of individuals to apprenticeships and training programs may violate Title VII, if, for instance, the use of tests and admissions criteria are not job related; if recruitment efforts are aimed only at whites; and if admissions requirements are applied in a discriminatory fashion.

B. The Labor Pool

Undocumented Aliens: Immigration Reform and Control Act of 1986 (IRCA): Applies to all employers. It prohibits employers from hiring undocumented workers and provides civil penalties of $250 to $2,000 for each undocumented worker hired. For subsequent offenses, penalties of up to $10,000 may be assessed and for a “pattern or practice” of violations, the employer is subject to a $3,000 criminal fine and six months imprisonment. - The employer is required to ask all job applicants for documents (passport, birth certificate, or driver’s license) to confirm they are authorized aliens or citizens of the U.S., however, the employer is not required to check the authenticity of the documents. - In Collins Foods v. INS (1991) the employer offers a job to an employee over the phone without having seen documentation. When the employee began working, the employer failed to compare the back of employee’s social security card with the example in the INS manual. The INS argued that this amounted to “constructive knowledge” and charged employer with one count of hiring an alien, knowing him to be unauthorized to work in the U.S. - The Court found that the facts did not meet the standard for constructive knowledge because: (1) nothing in the statute prohibits the offering of a job prior to checking documents (regulations actually contemplate this -> not required to verify documentation until actual employment for wages begins); and (2) because verification of documents is met if the document “reasonably appears on its face to be genuine,” which does not mean the employer is required to compare the social security card to the example in the INS handbook. - The Court was also worried that a decision to force employers to ask about citizenship status prior to hiring could put the employer in violation of Title VII.

Constructive Knowledge: An employer has been held to violate the IRCA based on constructive knowledge when the INS notified the employer that employees were suspected illegal’s and instructed the employer to verify that the employees had authorized documentation or to verify that the employees’ documentation did not match the known-to-be fraudulent info within the letter, and the employer failed to do so. See Mester Mfg. Co. v. INS; El Rey v. INS. When other laws infringe upon the IRCA: The IRCA forecloses an award of backpay by the National Labor Relations Board from an employer to an undocumented alien who has never been legally authorized to work in the United States. Hoffman Plastic Compounds (2002) (Finding that an illegal worker who the NLRB ordered backpay to after the employer unlawfully selected the illegal worker for layoff in order to rid itself of known union supporters in violation of §8(a)(3) of the NLRA, was not allowed to collect backpay because to allow the NLRB to do so would unduly trench upon explicit statutory prohibitions critical to federal immigration policy, as expressed in the IRCA.); But See Farmers Bros v. Workers Comp. (2005-California) (Rejecting the argument that federal immigration law preempts workers comp. claims, and holding that an undocumented alien who was injured on the job was entitled to state worker’s compensation.) When legal workers sue employer based on employment of illegal’s: - In Mohawk (2006) the employer - Mohawk a rug manufacturer with 30k employees – was sued by former hourly employees claiming that: (1) employing and harboring illegal’s allowed the employer to reduce labor costs by depressing wages for its legal hourly employees and discouraging worker’s-compensation claims, in violation of federal and state

RICO statutes; and (2) the lower wages and reduced number of worker’s compensation claims paid amounted to unjust enrichment. The employer is appealing the denial of summary judgment on both counts. (1) Rico – The Court upheld the denial of employer’s motion for summary judgment -> Under RICO the plaintiff must satisfy four elements of proof (substantive provision): (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering (to extort money from) activity. The Court held, without explanation, that the substantive provision was met. - Because this is a civil claim, in order to receive treble damages, the plaintiffs must also establish that (A) the requisite injury to business or property, and (B) that such injury was by reason of the substantive RICO violation. - (A) - The Court then held that the plaintiffs had a “business or property” interest that could have been injured, because – given that a relationship clearly existed between the plaintiffs and employer – they had a legal entitlement to business relations unhampered by schemes prohibited by the RICO statutes. - (B) - Turning to whether the injury was caused by the RICO violation, the Court held that the plaintiffs’ claim was sufficient to overcome summary judgment because: (i) There was sufficient Proximate Cause because the illegal hiring depressed wages, which had a substantial and direct effect on the wages of legal workers; and (ii) plaintiff’s had Statutory Standing because the injury was sufficiently directed at them – i.e., hiring illegal’s to depress wages was aimed at depressing legal wages. (2) Unjust Enrichment – The Court granted the employer’s motion for summary judgment -> The plaintiffs worked for an agreed upon wage, and, because unjust enrichment is an equitable concept (in GA where this took place) and applies when, as a matter of fact, there is no contract, there can be no unjust enrichment. Furthermore, the fact that the employer may have increased profits by lowering the number of worker’s-comp claims it paid is not related to what wages were paid to the plaintiffs, and, therefore, no unjust enrichment.

Residency Requirements: - The Supreme Court has upheld municipal employee residency requirements against a variety of constitutional challenges. - In Wardwell (1976) the City’s Board of Education required all teachers in the City’s schools hired after 12/13/72, to establish residency within the City’s school district within 90 days of employment. An employee filed for an injunction claiming the requirement violated his constitutionally protected right to travel. The Court held that the right to intrastate (within the state) travel has not been afforded federal constitutional protection. In cases involving infringement to the right of interstate (between states) travel by durational residency requirements a “compelling state interest” test is applicable. However, where a continuing employee residency requirement affecting at most the right of intrastate travel is involved, the “rational basis” test is applied. The Court held that the rational basis test was met, because it was meant to get teachers more involved in the City by paying taxes, voting, etc. and so that they sympathize with the diversity of the

children. - The Court further held that the fact that the requirement covered new teachers and not older ones did not violate the Constitution because the Supreme Court has held that this is ok as long as there is a rational basis. C. Applications, Interviews, and References Applications: - In Sullivan (1996) the Plaintiff took a civil service test for employment at the USPS. He filled out an application for the job and checked off that the USPS could not contact his former employer. A USPS employee, however, contacted the current employer, and, plaintiff was fired due to the disclosure that he applied to the USPS. Plaintiff brought a claim against the USPS claiming that the USPS violated his rights under the Privacy Act. (1) Privacy Act -> The Privacy Act states “no agency shall disclose any record which is contained in a system of records…to any person, or to another agency, except pursuant to a written request by, or with prior written consent of, the individual to whom the record pertains. 3 elements must be satisfied in a Privacy Act claim – (1) that there was a disclosure of a record; (2) which was the proximate cause of termination; and (3) the disclosure was intentional or willful. - (1) The Court held that the disclosure of the fact plaintiff had applied for a job at USPS constituted the “disclosure” of a record for the purposes of the Privacy Act, and denies summary judgment. (2) Whether this disclosure was the proximate cause of his firing is to be determined by a jury, although the court mentions that the employer had no intention to fire plaintiff and that the disclosure was the “ultimate” reason. (3) Whether it was willful or intentional is also a question of fact, but the legislative history describes this standard as “somewhat greater than gross negligence.” The court noted however that the USPS employee that disclosed was aware the application was covered by the Privacy Act; had training regarding the Privacy Act; and was aware of the waiver form permitting the USPS to contact the employer, but took no steps to obtain waiver. Title VII and Applications: Title VII does not specifically prohibit employers from asking any questions about an applicant’s race, color, religion, sex, or national origin, however, inquiries which either directly or indirectly disclose such information, unless otherwise explained, may constitute evidence of discrimination prohibited by Title VII. Thus, by declining to ask such questions employers avoid obtaining information that might be used in an effort to prove discrimination. Some states go beyond the Title VII prohibitions, especially in the area of pre-employment inquiries. Interviews: - An employer is barred from discharging an employee due to the employee’s false responses to the employer’s unlawful inquiries (Kraft (employee discharged for not answering a question about his mental history on an application)); however, the employer is not barred from discharging an employee due to unsolicited, volunteered, false statements that were made. See Lysak (1993) (Plaintiff knew she was pregnant, but, during the interview, she told the employer that her husband and au pair took care of her children and she had no intention to have more. The employer had not asked about her intentions regarding children. When he found out she had lied, he felt that she couldn’t be trusted and he requested that she be considered an independent contractor and not an employees); But See Hartman Brothers (Holding it lawful for a “salt” (person who obtains non-union employment for the purposes of organizing employees) to lie about status as salt, union

organizer, or union supporter, but not about qualifications for the job.) Representations in an interview that bind employer: In Weiner the employer assured the interviewee (and future employee) that the employer terminated employees “only for just cause.” The employment application specified that employment was subject to the employer’s handbook, which stated that the employer “will resort to dismissal for just and sufficient cause only.” The Court held that an action for breach of contract would lie based on the employee’s dismissal. References: Negligent Misrepresentation: An employer can be held liable for the negligent misrepresentation of a former employee’s work history if: (1) the inquiring party clearly identifies the nature of the inquiry; (2) the employer voluntarily decides to respond to the inquiry, and thereafter unreasonably provides false of inaccurate information; (3) the person providing the inaccurate information is acting within the scope of her employment; (4) the recipient of the incorrect information relies on its accuracy to support an adverse employment action against the plaintiff; and (5) plaintiff suffers quantifiable damages proximately caused by the negligent misrepresentation. Singer (2005) (Plaintiff left former employer, and when current employer called former, the former’s customer service rep intentionally misled the current employer tell him that plaintiff was not as experienced as he believed; she was then fired by current employer. The court remanded, holding the facts were sufficient to overcome summary judgment of her negligent misrepresentation claim.) Defamation: There are three prima facie elements to a claim for defamation: (1) False statement of fact (not opinion); (2) Publication of statement to 3rd person; and (3) Damages. - Qualified Privilege Defense to Defamation - Qualified privilege is generally a defense to defamation and it applies to communications made in good faith on any subject matter in which the party making the communication has an interest or in reference to which he has a duty, either public or private, either legal, moral, or social, if made to a person having a corresponding interest or duty. See Circus Circus (Employee was discharged b/c an agent of Gaming Control Board allegedly saw him "past posting" a toke bet, which constitutes the crime of swindling in Nevada. Plaintiff sued casino over a letter it sent to the Nevada Employment Security Dept about his eligibility for unemployment compensation and a statement it made to a prospective employer that plaintiff "was a good kid that went sour.") - Generally, an employment reference given by a former employer to a prospective employer is protected by a qualified privilege. However, a statement otherwise protected by the qualified privilege may lose its privileged character upon a showing of abuse, namely: (1) The communicator was primarily motivated by ill will in making the statement; (2) There was excessive publication of the defamatory statement; or (3) the statement was made w/o belief or grounds for belief in its truth. - A Texas court has held that statements that were published constituted actionable defamation, even though the publishers were mistaken as to the identity of the person to whom the publication was made. See Buck (1985) (Employee was fired w/o reason and hired a private investigator to discover the true reasons for his termination. The investigator contacted 3 managers, told them he was an investigator, but claimed he was seeking information about plaintiff b/c plaintiff was under consideration for a position of trust and responsibility w/ another company. The investigator taped the discussions, in which plaintiff was described as untrustworthy, disruptive, paranoid, hostile, guilty of padding expense acct, ruthless, and a classical sociopath. Otherwise, they said he was a nice guy.)

Defamation Based on Compelled Self-Publication (Minority Rule – prohibited by most states): - In Lewis (1986) Plaintiffs were fired for "gross insubordination" and later had difficulty finding jobs because they felt compelled to list "gross insubordination" as the reason for leaving their previous employment. Plaintiffs sued former employer for defamation. - The Court held for a statement to be considered defamatory, it must be communicated to someone other than the plaintiff, it must be false, and it must tend to harm plaintiff's reputation in the community. Generally, there is no publication where defendant communicates the statement directly to plaintiff, who then communicates it to a third party. However, the concept of "compelled self-publication" holds the originator of the statement liable where the originator knew, or should have known, of circumstances whereby the defamed person has no reasonable means of avoiding publication of the statement or avoiding the resulting harm. - In Richland Sch. Dist. (2002)1 the employer hired the employee as a night custodian from a different school district that wrote him letters of recommendation, however, the school district did not inform the employer that the employee had resigned in exchange for the dismissal of three counts of child molestation. (The child molestation charges, however, were tenuous as the employee simply said inappropriate things to students, and none of employee’s reprimands involved the risk of physical harm.) The employer then fired the employee, gave him $100k in back and front wages, and then sued the school district claiming they had a duty to disclose under (1) a theory of negligent misrepresentation or (2) on basic negligence principles. (1) Negligent Misrepresentation -> The Court held that the state has never adopted the restatement 2nd, so, even if the court found a duty of care to not misrepresent the facts in describing a former employee, the employer could not present a substantial, foreseeable risk of physical injury or that any person would suffer physical harm based on the employee’s record of questionable accusations and minor discipline problems. (This court sees negligent misrepresentation differently from Singer, likely because it didn’t adopt the Restatement, therefore, its likely a minority rule.) (2) Negligence (“common interest privilege”) -> The employer claimed that the “common interest privilege” of defamation created an affirmative duty to give accurate recommendations. The Court held that this privilege protects the school district from liability from the employee for any defamatory statements, but it does not create a duty to disclose potentially defamatory information to the employer. The privilege acts as a shield in cases involving defamation, not as a sword urged here. D. Negligent Hiring - Negligent hiring is an independent tort, and therefore does not require proof that the misconduct was within the wrongdoer’s scope of employment. See Victory Tabernacle Baptist Church (Va. - 1988). - In Malorney (1986) the employee raped a hitchhiker. The employer, a trucking company, did not investigate one of their employee’s non-vehicular criminal record, and failed to follow up on his negative statements regarding criminal offenses during his application. He had a history of violent sex-related crimes and had been arrested the year prior to his employment for sodomy of two hitchhiking teenagers, while working as a truck driver for a different employer. - The Court held that the employer had a duty to entrust its truck to a competent employee fit to drive an over-the-road
1

This case is in the negligent hiring section, but it really doesn’t belong there.

truck equipped with a sleeping compartment. An employer is required to exercise the degree of care reasonably commensurate with the perils and hazards likely to be encountered in performance of an employee’s duty. The employer gave the employee a truck with a sleeping compartment and should have known that truckers usually give rides to hitchhikers. Therefore, the court overturned summary judgment for the employer, so that a finder of fact could determine if the employer breached its duty to hire a competent driver who was to be trusted with an over-the-road truck. E. Truth Detecting Devices and Psychological and Personality Testing The Polygraph: Employee Polygraph Protection Act: The Act, which went into effect in 1988, is applicable to most private employers and prohibits most uses of polygraphs in employment. The Act does not prohibit the use of paper and pencil honesty questionnaires or tests. Employers who violate the Act are subject to a civil penalty of $10,000, injunctive actions by the Secretary of Labor, and private civil actions. - The Act contains the following exemptions: (1) it does not apply to federal, state, or local govt. employers; (2) it does not prohibit the testing by the federal govt. of experts, consultants, or employees of federal contractors engaged in national security intelligence or counterintelligence; (3) it permits the testing of employees who are reasonably suspected of involvement in a workplace incident that results in economic loss or injury to the employer’s business; (4) it permits the testing of some prospective employees of private armored car, security alarm, and security guard firms; and (5) it permits the testing of some current and prospective employees in firms authorized to manufacture, distribute, or dispense controlled substances. (With the last 3 exemptions, the examinee may not be asked questions about religious beliefs, sexual behavior, or union affiliation. See Mennen v. Easter Stores.) Other Truth-Detecting Devices, Psychological & Personality Tests: - In other words, paper and pencil honesty tests, such as the Reid Report, which includes 100 questions on theft and honesty, and another 93 questions about lifestyle; the Reid Associates recommends the employee if they score well. These types of questionnaires contain questions like: How honest are you? What should be done to an employee who occasionally smokes marijuana? What should happen to an employee caught stealing a few dollars a week? Some states have specifically prohibited these tests (e.g., Massachusetts) or they may be used as long as they are not the “primary basis for an employment decision” (e.g., Rhode Island). States without legislation specifically prohibiting written honesty tests have been unsuccessful in using their anti-polygraph laws against these tests. - In Greenwalt (2005) an employee hired by the Indiana Dept. of Corrections as a research analyst, was told she had to submit to a psychological exam in order to keep her job. The test lasted 2 hours and asked her personal questions. She claimed that it was a search in violation of the 4th Amendment. 4th Amendment -> The Court held the test to be constitutional; that the 4th Amendment should not be interpreted to reach the putting of questions to a person, even when the questions are skillfully designed to illicit what most people would regard as highly personal private information. - The Court does in dicta suggest, however, that an intrusive psychological test may be a deprivation, without due process, of an interest in privacy that is an aspect of the liberty protected by the due process clauses of the 5th and 14th

Amendments. F. Medical Screening Purpose: - Involves the use of medical criteria in the selection and maintenance of a work force and is sometimes referred to as “selection screening.” Today it is used to predict whether an individual is at risk of developing medical impairment in the future. Medical Questionnaires: - A non-disabled individual has a cause of action under the Americans with Disabilities Act (ADA), when, as a job applicant, he or she is asked questions regarding his or her medical history or condition on an employment application. Griffin (1999) Americans with Disabilities Act: Prohibits “traditional” pre-employment medical examinations and questionnaires. An employer may not conduct a medical examination or make inquiries of a job applicant as to whether such applicant is an individual with a disability or as to the nature or severity of such disability. Id. After a conditional offer of employment an employer may require an employment entrance examination (pre-placement examination), which need not be job related, but must be given to all employees in a job category regardless of disability. Thereafter, all medical examinations and inquiries must be job related and consistent with business necessity. Non-job related exams can be offered, but can only be voluntary. Medical Examination: - When conducting an annual employment physical, the examining physician/patient relationship exists, and the physician has the obligation to perform the examination with due care and to appropriately report thereon. Green (1990) (employee had a physical done by the doctor, who reported all test results, including a chest x-ray, as normal and classified the employee as “employable without restriction,” the best possible rating on the report; however, the man had lung cancer.) G. Drug Testing and Other Laboratory Procedures Drug Testing: - Drug tests that are a condition for employment with the govt. or placement of current govt. employees within a new position that have: (1) the direct involvement in drug interdiction or enforcement of related laws; or (2) the requirement to carry firearms; or (3) the requirement to handle “classified” material are reasonable under the 4th Amendment (i.e., warrantless urine analysis (drug test) are reasonable). See National Treasury Employees Union (1989) (Finding that it was reasonable for these warrantless searches, however, the court did remand to find if all of the positions claimed to handle “classified” info actually did so); But See Chandler (1997) (Holding that a Georgia statute requiring candidates for designated state offices to present certification of a negative result on a urine analysis 30 days prior to qualifying for election or nomination violated the 4th Amendment; the purely “symbolic” function of the law was insufficient.) - Federal Railroad Administration regulations requiring railroads to conduct post-accident drug tests of railroad crews also meets 4th Amendment security. Skinner (1989).

Genetic Discrimination: - In 1995, the EEOC issued its first official interpretation of the coverage of genetic predisposition under the Americans with Disabilities Act: “This part of the definition of ‘disability’ applies to individuals who are subjected to discrimination on the basis of genetic info related to illness, disease, or other disorders. Covered entities (i.e., employers) that discriminate against individuals on the basis of such genetic info are regarding the individuals as having impairments that substantially limit a major life activity. Those individuals are, therefore, are covered by the third part of the definition of ‘disability.’” In other words, genetic discrimination can be brought under the ADA. Chapter 4 – Discrimination A. Discrimination on the Basis of Race or Sex Sources of Protection: Title VII – Uses the Commerce Clause to outlaw discrimination in employment based on race, color, religion, sex, or national origin. The primary aim of the law was to end racial discrimination in employment and if broader economic and social effects. The Act applies to private employers with 15 or more employees, and to federal, state, and local govt. employers. However, the following employers are not included: (1) educational institutions owned or supported by a religious organization and employing members of that religion; (2) businesses operating on or near an Indian reservation and giving Indians preferential treatment; and (3) members of the Communist Party. - §703(a) – It shall be unlawful for an employer: (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin. - §703’s exceptions to the nondiscrimination obligation: (1) religion, sex, or national origin (but not race) is a bona fide occupational qualification (BFOQ) reasonably necessary to the normal operation of business; (2) the employer acts pursuant to a bona fide seniority or merit system, or measures earnings by quantity or quality of production; (3) the employer acts on the results of a professionally developed ability test that “is not designed, intended, or used to discriminate because of race, color, religion, sex, or national origin”; and (4) differences in pay based upon sex are authorized by the Equal Pay Act of 1963. State Fair Employment Practice Laws: Most state laws have narrower exemptions for small employers than Title VII, and so this may be the only protection for some applicants and employees. Second, some state laws go beyond Title VII, the ADA, and the ADEA, to band discrimination on broader criteria, such as marital status, sexual orientation, etc. 14th Amendment and Reconstruction Era Civil Rights Statutes:

- Civil Rights Act of 1866 (42 USC § 1981) – Ratified by the 14th Amendment and applies to all employers regardless of the number of employees (i.e., if employer is exempt under Title VII, then try under this). It prohibits purely private discrimination in the making or enforcement of contracts, including employment, against, or in favor of, any race. Railway Express Agency (1975); McDonald (1976). - Civil Rights Act of 1871, a.k.a. the KKK Act (42 USC 1983 and 1985) – - §1983 Grants a civil action for a deprivation of rights under color of any statute, ordinance, regulation, custom, or usage of any State, Territory, or District of Columbia. §1985 grants a civil action against those who conspire to interfere with civil rights by preventing officers from performing their duties, however, state action is required to bring suit, which limits the utility of bringing this as a separate cause of action (Novotny). Executive Order 11246, §202: Applies to all govt. contracts in excess of $10,000. Contractors with 50 or more employees and contracts of more than $50,000 are required to have a written affirmative action plan. If a contract is in excess of $10,000,000, the contract cannot be awarded until a pre-award compliance review of the affirmative action program has been completed and approved. - The Order prohibits employment discrimination by govt. contractors, and also requires govt. contractors to take “affirmative action” to ensure that applicants are employed, and that employees are treated during employment, without regard to race, religion, color, or national origin. Disparate Treatment: - Three-part structure for proving discrimination (McDonnell Douglas (1973)/Burdine (1981)) in a Title VII case: (1) In order to prove a prima facie case of disparate treatment the plaintiff must prove by a preponderance of the evidence that she applied for an available position for which she was qualified, but was rejected under circumstances which give rise to an inference of unlawful discrimination; (2) the burden then shifts to the defendant to rebut the presumption of discrimination by producing evidence that the plaintiff was rejected, or someone else was preferred, for a legitimate, nondiscriminatory reason; the defendant need not persuade the court that it was actually motivated by the proffered reasons, because all that is sufficient is for the defendant to raise a genuine issue of fact as to whether it discriminated against the plaintiff; (3) The plaintiff retains the burden of persuasion (at all times) and now must have demonstrate that the proffered reason was not the true reason for the employment decision, but was a mere pretext for the unlawful discrimination. - The ultimate burden of persuasion remains on the plaintiff at all times. - In McDonnell Douglas Employee sued his former employer for race discrimination when he was not rehired after he engaged in an illegal civil rights "stall in" at the employer's plant. The employee was criminally charged with obstructing traffic as a result of his involvement in the protest. (1) Plaintiff met prima facie case by showing: (i) He belonged to a protected class; (ii) he applied and was qualified for a job for which employer was seeking applicants; (iii) despite his qualifications, he was rejected; and (iv) after he was denied employment, the position remained open and available. (2) Employer met burden of showing legitimate business reason for not rehiring: plaintiff had engaged in illegal conduct. The court remanded the case to (3) allow plaintiff to establish that employer's proffered justification for refusal to hire (i.e., engaging in illegal activity) was a mere pretext for unlawful discrimination. (For example, Plaintiff could establish pretext if, for example, white employees involved in the same illegal activity were either retained or rehired by the

employer after the activity, or that employer has been hostile to black employees in the past, etc.) - A finding that the employer was not actually motivated by the reasons asserted for dismissal is not the equivalent of finding a discriminatory intent. Hicks (1993) (Holding that even though the fact finder rejected the defendant’s proffered nondiscriminatory explanation did not mean that the plaintiff proved that the “crusade to terminate him” was racially, rather than personally, motivated.) - There is a cause of action under Title VII claim alleging sex stereotyping where plaintiff proves adverse employment action was based on mixed legitimate & discriminatory reasons; employer must respond by showing that decision would have been same absent the discriminatory reasons. Price Waterhouse (1989) (Court remanded for employer to prove, if it can, that it would rejected the partner for reasons other than the grounds that she is regarded by most as abrasive and unfeminine.) On remand, the district court found that Price Waterhouse had not, by a preponderance of the evidence, established that it would have refused the partnership notwithstanding the sexual stereotyping. The court ordered she be offered the partnership with compensation and benefits as if she had been admitted to the partnership from the beginning, and because she had not tried hard enough to find equivalent work, was awarded back pay (including interest) of only $371,175. The Civil Rights Act of 1991: Responded to Price Waterhouse by allowing an unlawful employment practice to be established "when the complaining party demonstrates that race, color, religion, sex, or national origin was a motivating factor for any employment practice, even though other factors also motivated the practice. If, however, the employer demonstrates that it would have taken the same action absent the impermissible motivating factor, the court may grant the plaintiff declaratory relief, certain types of injunctive relief, and partial attorney's fees, but it may not award damages. - The Civil Rights Act of 1991 also made changes in Title VII procedures and remedies. For the first time, both compensatory & punitive damages are available, but only for intentional discrimination and subject to caps based on the size of the workforce (up to a cap of $300k for employers w/ more than 500 employees). Punitive damages are available only if employer acted "with malice or with reckless indifference." - Direct evidence of discrimination is not required for a plaintiff to prevail in a mixed motive Title VII case. The plaintiff can succeed by proving her case by preponderance of the evidence using direct or circumstantial evidence. A discrimination plaintiff need not demonstrate that she was replaced by a person outside her protected class to establish that her dismissal was a consequence of unlawful sex discrimination. - A male executive’s romantically motivated favoritism toward a female subordinate is not sex discrimination even when it disadvantages a male competitor of the woman. Preston (2005). When no reason is given why men might be expected to discriminate against men, the plaintiff, to raise a triable issue of discrimination, must present some evidence beyond the bare fact that a woman got a job that a man wanted to get or keep. Id. The reason why the plaintiff did not get the job was personal (the executive was fooling around with the plaintiff’s female competitor), and unrelated to sex discrimination. Id. - In a suit claiming a violation of the constitutional right to equal protection (42 USC 1983), stereotyping about the qualities of mothers is a form of gender discrimination, even in the absence of evidence regarding how the employer in

question treated fathers. Back (2004) (Young mother was given great reviews, but was told that young mothers aren’t motivated to work, and so, when she was up for tenure she was denied for it by her superiors.) A school district is regarded as a person within the meaning of § 1983, however, it can only be found liable if its policy or custom, whether made by its lawmakers or by those whose edicts or acts may fairly be said to represent official policy, inflicts the injury, but not when employees without that power do so. (The Plaintiff in Back didn’t make this claim, and so she could only sue her supervisors that denied her tenure.) Pregnancy Discrimination Act of 1978: Amended Title VII to provide that the terms “because of sex” or “on the basis of sex” include, but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions; and women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employmentrelated purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability to work.

Disparate Impact/Adverse Impact: - Nothing in Title VII precludes the use of testing or measuring procedures. However, Title VII forbids employers to give these devices and mechanisms controlling force unless they are demonstrably a reasonable measure of job performance. Griggs (1971). Title VII doesn’t command for the less qualified to be preferred simply because of race, but does allow for a qualification to be the controlling factor in employment, in order to make the race, religion, nationality, or ex of the individual irrelevant. Id. Tests must be used to measure the person for the job, and not the person in the abstract. Id. (Holding that although there was no discriminatory intent (court cited to the fact that the employer helped educate employees) in the need of a high school education or passing a standardized test to attain employment to any department other than labor (there were 5 departments, blacks were only in labor), it violated Title VII, because neither standard was significantly related to the job, while both operated to disqualify blacks at a substantially higher rate.) Statistics – Statistics alone do not create a prima facie case of disparate impact. Wards Cove (1989). The proper comparison is between the racial composition of the at-issue jobs and the racial composition of the qualified population in the relevant labor market. Id. Where such statistics are hard or impossible to ascertain, such measures indicating the racial composition of “otherwise-qualified applicants” for at-issue jobs are equally probative for this purpose. Id. If the absence of minorities holding skilled positions is due to a lack of qualified nonwhite applicants (for reasons other than the employer’s fault), then the employer’s selection methods cannot be said to have had a “disparate impact” on nonwhites. Id. In order to prove that the employer’s selection methods caused the disparate impact, the employee must prove that each challenged selection practice has a significant disparate impact on employment opportunities for whites and nonwhites, because to hold otherwise, would hold employers liable for a combination of innocent selection methods that lead to statistical imbalances. Id. - If the employees meet this burden of proof, and establish a prima facie case with respect to any of the employer’s selection practices, the burden shifts to the employer to offer a business justification of these practices. Id. The employer

carries the burden of producing evidence of a business justification, while the burden of persuasion remains on the employees. Id. If the employees cannot persuade that there is a lack of a business justification, then they may still be able to prevail by persuading the fact finder that other selection practices that do not create a disparate impact would satisfy the employer’s legitimate business interest, and, if successfully, the employees would then prove that the employer’s selection practices were merely a pretext for discrimination. Id. These alternatives must, however, be equally as effective as the discriminatory practices, while taking into account the costs and burdens of the alternatives. Id. Civil Rights Act of 1991 modifies Wards Cove: It overturned Wards Cove’s formulation of the burden of proof and the types of proof necessary to show disparate impact. If the employee cannot separate out which specific practice creates the discrimination, then the court must analyze the decision making process as one practice. - In addition, the burden on the employer is increased in that he must demonstrate that a challenged practice is job related for the position in question and consistent with business necessity. The burden of persuasion remains with the employer to prove business necessity. The Bona Fide Occupational Qualification Defense: Title VII §703(e): it is not unlawful for an employer to differentiate in hiring on the basis of religion, sex, or national origin (but not race) in certain instances where religion, sex, or national origin is a bona fide occupational qualification (BFOQ) reasonably necessary to the normal operation of that particular business or enterprise. - The following ≠ BFOQ exception – (1) refusal to hire a woman is based on the assumption of employment characteristics of women in general (e.g., turnover rate higher among women); (2) refusal to hire is based on sex stereotypes (e.g., women cannot be aggressive salespersons); (3) refusal to hire is based on the preferences of co-workers, clients, customers, or the employer; and (4) the fact that the employer may have to provide separate facilities. - Title VII has struck down state laws prohibiting women from working certain hours or lifting certain weights (“women’s protective laws”). See Dothard (Holding that Alabama’s height (5’2”) and weight (120lbs.) for correctional officers were discriminatory, however, the court upheld the rule forbidding women from “contact positions” in maximum security male penitentiaries, even though it excluded women from 75% of jobs, because it could effect the ability to maintain order (i.e., BFOQ).) - Female sex appeal is not a BFOQ for flight attendants, because, although sex appeal would have been qualifications for Southwest’s contact personnel by virtue of the “love” campaign (hiring attractive women to attract press and male business), the functions served by employee sexuality in Southwest’s operations are not necessary for the airline’s ability to perform its primary business function, the transportation of passengers. Southwest (1981); But See Healey (holding it not to be discriminatory to assign a female to the night shift, even though it added housekeeping duties, because the hospital was unable to provide adequate care without both genders present, because sexually abused patients felt more comfortable talking to therapists of their own gender.) - Cultural differences between men and women – Attributes that are culturally more common to one sex than the other are an insufficient basis for a BFOQ. See In re Consolidated Proceedings (holding that an airline’s requirement that cabin attendants who became mothers switch to ground duty, but not fathers, violates Title VII); See Also Longo (holding that a

requirement that male employees, but not females keep their hair a certain length violates Title VII); But See Macon (holding that Title VII does not bar different hair lengths for males and females because such a rule is discrimination based on grooming, and not upon sex, and because Title VII does not bar distinctions between men and women on the basis of something other than immutable or protected characteristics.) - In Sears (1988) the Court accepted, as a legally sufficient explanation for statistical disparity between men and women in better paid commission sales positions, that women were not as interested in commission sales positions as men, but were more interested in product lines like clothing, jewelry and cosmetics that were not sold on a commission basis. - An employer who acts with no racial animus, but makes job assignments on the basis of race can be held liable for intentional discrimination under § 1981; the BFOQ and business necessity defenses are not available to an employer who discriminates on the basis of race. See Ferrill (1999) (hold that race-matched political calls assigning separate calling areas and separate scripts according to race violates § 1981.) B. Procedure Filing a Charge of Employment Discrimination: Title VII, § 706: A charge must be filed with the EEOC within 180 days after the “occurrence” of the alleged unlawful employment practice. If the charge is filed with a state or local administration with their own procedures, then an EEOC charge may be filed up to 300 days after the occurrence of the alleged discrimination or 30 days after notice of termination of state or local proceedings, whichever comes first. If the charge is filed first with EEOC, it must defer to local proceedings for 60 days before undertaking its own investigation. - After a Title VII charge is filed, the EEOC must serve notice within 10 days. EEOC then investigates to determine if there is reasonable cause to believe discrimination has occurred. If cause is found, the EEOC attempts conciliation, but if no conciliation can be reached, the EEOC may bring a civil action in the U.S. district court. If no cause is found, or if within 180 days of the filing of the charge there has been no conciliation or civil action filed by the EEOC, the EEOC notifies the complainant in a “right to sue” letter. The charging party has 90 days after the receipt of the letter to bring a civil action in federal district court. - All district court proceedings under Title VII are de novo. If the court finds and unlawful employment practice, it may enjoin the practice and grant affirmative relief including reinstatement, retroactive seniority, and back pay. Compensatory and punitive damages may also be awarded, up to $300k for companies with more than 500 employees. - An employment discrimination complaint need not include specific facts establishing a prima facie case of discrimination under the framework set forth in McDonnell Douglas, and instead must contain only “a short an plain statement of the claim showing that the pleader is entitled to relief,” pursuant to Fed. R. Civ. Pro. 8(a)(2). See Swierkiewicz (2002). Damages: - A front pay award (which is money awarded for lost compensation during the period between judgment and reinstatement or in lieu of reinstatement) is not an element of compensatory damages under the Civil Rights Act of 1991, and, therefore is not subject to the statutory cap of $300k imposed on compensatory damages. Pollard (2001). Front pay is not an element of compensatory damages, because it is a replacement for the remedy of reinstatement in situations

when reinstatement would not be appropriate. Id. - Compensatory damages provide a plaintiff with the monetary amount necessary to replace what was lost, and nothing more. So, front-pay is not included because it includes the time after judgment, but before reinstatement, whereas compensatory damages would occur before the judgment. - Punitive damages can be awarded if the plaintiff shows “malice” or “reckless indifference.” And the employer’s conduct need not reach the level of “egregious” to be held liable for punitive damages. See Kolstad (1999). Good faith efforts by the employer to enforce anti-discrimination policies can be a defense to punitive damages. Id.

Retaliation: Title VII, §704(a) - Title VII protects employees from retaliation by their employers as punishment for exercising their rights and seeking protection under the statute. For example, in Robinson (1997) a black sales rep was fired and sued unsuccessfully under Title VII. When he applied for another job, the prospective employer received an unfavorable reference. Robinson then sued the former employer for retaliation. The Court read §704(a) as prohibiting retaliation against former employees as well as current ones. - The anti-retaliation provisions of Title VII does not confine the actions and harms it forbids to those that are related to employment or occur at the workplace. Burlington (2006). The provision covers those (and only those) employer actions that would have been materially adverse to a reasonable employee or job applicant. Id. In other words, the employer’s actions must be harmful to the point that they could well dissuade a reasonable employee from making or supporting a charge of discrimination. Id. (Employee complained to employer that her immediate supervisor had repeatedly told her that women shouldn’t work in the maintenance department, and that he also made insulting and inappropriate remarks to her in front of male coworkers. The supervisor was suspended, but the employee was removed from her position. She filed a claim of discrimination and retaliation. Two months later another supervisor called her insubordinate after an argument – she was immediately suspended without pay for 37 days, but reinstated and given back pay once internal procedures found she was not. She claimed the employer’s actions of (1) changing her job responsibilities; and (2) suspending her for 37 days without pay – amounted to unlawful retaliation. - An employee’s refusal to follow a supervisor’s order that she reasonably believes to be discriminatory constitutes protected activity, and an employer may not retaliate against an employee on the basis of such conduct when the employer, in light of all the circumstances, knows that the employee believes the order to be discriminatory, even when the employee does not explicitly state to her supervisor or employer that she believes the order to be discriminatory. L’Oreal (CA - 2005) (This case was under California’s Fair Employment and Housing Act -> plaintiff refused to fire a sakes associate whom a male supervisor those wasn’t “hot enough” to work there, because of this she was subject to heightened scrutiny and increasingly hostile adverse treatment that undermined her relationship with those she supervised, and cause severe emotional distress that led her to leave her position.) D. Affirmative Action and Reverse Discrimination - A Mayor (i.e., govt.) may mot employ a race-based transfer and assignment policy when any racial imbalance in the

City’s 108 fire departments is not the result of past intentional discrimination by the City. Lomack (2006) (Held that a mandate issued by the Mayor of Neward that all single-race fire companies in Newark would be eliminated by involuntarily transferring fireman violates the Equal Protection Clause, because a compelling interest (such as diversity in education, Grutter) is not present here, nor was there the intentional discrimination present that could have justified the racial classification (Brown), because the discrimination was not intentional.) - An affirmative action plan to grant a non-remedial work force preference in order to promote “racial diversity” violates Title VII. See Taxman (1996) (Due to cut-backs the school fired the white teacher instead of the black teacher, even though they started on the same day, in order to promote racial diversity.) E. Discrimination Based on Factors Other Than Race or Sex Religion: - Title VII forbids discrimination on the basis of one's religion and imposes on the employer the affirmative duty to reasonably accommodate any bona fide religious beliefs of which the employer is informed (i.e., employee must inform b/c religion is not evident like race or sex), however, the accommodation may not present an undue burden or cost on the employer, nor can an employee assert a mere personal preference as a religious view to obtain the accommodation. Reed (2003) (Held for the employer after the employee walked out of a work meeting that unexpectedly including a bible meeting, because there was no evidence that employee was discharged because of his religion; In fact, religion could not have possibly been the basis for the discharge since plaintiff never disclosed his religious beliefs, and still did not disclose them in court.) - Employers are required to bare only a de minimis cost to accommodate an employee. Anything more than de minimis constitutes undue hardship. Employer need not show that each of the employee's proposed alternatives would result in undue hardship. See Nobel-Sysco (1990) (Holding employer has a duty to accommodate applicant's religious use of peyote (two times in a 6-month period).) - Unlike Reed, where the employee objected to the religious conduct in the workplace, many cases involve employees who seek to practice their religion in the workplace. For government employers, it is often a difficult task balancing the First Amendment's Free Exercise & Establishment clauses. - In Berry (2006) the employee alleged the employer violated Title VII and the 1st Amendment when it prohibited him from discussing religion w/ clients, displaying religious items in cubicle, and using a conference room for prayer. - The Court affirmed summary judgment for the employer, holding that the employer’s action was reasonable because it only restricted personal religious displays in areas that clients visited, and that other areas besides the conference room were available to employees for prayer and other meetings during nonworking time. - A comparable private sector case is Moranski (2005) where GM established a voluntary "affinity group" program, which it supported through company resources. Some of the approved groups were those of people with disabilities, veterans, and employees of African ancestry. GM had a policy of not approving a group that promotes or advocates a particular religious or political position. - The Court held that the program does not constitute religious discrimination under Title VII, because it did not

discriminate on the basis of religion; it treated all religions alike—including atheism and agnosticism—by excluding them. National Origin: - The EEOC's regulations on national origin indicate that Title VII protection extends to the following: (1) Marriage or association with a person of a specific national origin; (2) Membership in, or association with, an organization identified with or seeking to promote the interests of national groups; (3) Attendance at, or participation in, schools, churches, temples, or mosques generally used by persons of a national origin group; and (4) Use of an individual's or spouse's name which is associated w/ a national origin group. - Since height and weight requirements adversely affect Asians & Hispanics, they have been held to constitute disparate impact discrimination of national origin. - The bona fide occupational qualification (BFOQ) is a defense to national origin discrimination. This would permit a restaurant to advertise for or hire only a French or Italian chef. - In Fragante (1990) the applicant applied for a job with a city agency. He was foreign and had heavy Filipino accent, and was denied on the ground that customers would not be able to understand him. The job required the worker to interact with members of the public on a regular basis. - The Court held for the employer, reasoning that he was discriminated against not for his national origin, but because he couldn’t speak proper English. - Essentially, Fragante held that if the ability to speak English is job-related, the employer might require it of prospective employees. The EEOC provides that if such an English-only rule applies at all times, it is presumptively a violation of Title VII, but a limited rule justified by a business necessity will be upheld. - In Garcia (1993) the court held that an English-only rule in the workplace did not impose significant adverse effects on terms of employment. - In Maldonado (2006) the Court reversed the grant of summary judgment to the employer, noting that the English-only policy created a hostile atmosphere for Hispanics in the workplace and exposed them to harassment. Age: Age Discrimination in Employment Act (age 40 and up): Applies to every employer engaged in an enterprise affecting interstate commerce that has 20 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year. It also applies to employment agencies, unions, state and local political subdivisions, and the federal govt. The EEOC enforces the Act. - The Courts have applied the McDonnell Douglas test to disparate treatment age discrimination cases. The burden then shits to the defendant to prove a lawful, nondiscriminatory reason for the plaintiff’s adverse treatment. However, Wards Cove analysis applies in disparate impact cases. - § 4 sets forth five affirmative defenses: (1) BFOQ (it must be proved that (i) the age is reasonably necessary to the essence of the business, and either (ii) that all of substantially all individuals excluded from the job involved are in fact disqualified or (iii) that some of the individuals so excluded possess a disqualifying trait that cannot be ascertained except by reference to age. If the objective is public safety the employer must prove that the challenged practice does indeed

effectuate that goal and that there is no acceptable alternative which would better advance it with less discrimination); (2) where the different action is based on reasonable factors other than age (i.e., can be mixed motive); (3) to observe the terms of a bona fide seniority system; (4) to observe the terms of any bona fide employment benefit plan; (5) to discharge or otherwise discipline and individual for good cause. - The Age Discrimination in Employment Act authorizes recovery in “disparate-impact” cases comparable to Griggs. Smith (2005). However, the scope of disparate impact liability under the ADEA is narrower as compared to Title VII in two respects: (1) it permits any “otherwise prohibited” action “where the differentiation is based on reasonable factors other than age (RFOA) (i.e., can have mixed motive); and (2) the Civil Rights Act of 1991 amended Title VII to expand Title VII’s coverage by overturning Wards Cove, however, because the amendment only applied to Title VII, the pre1991 Wards Cove interpretation of Title VII’s identical language still applies to the ADEA (i.e., Wards Cove’s holding applies to the ADEA). Smith. - In Smith the City adopted a pay plan granting raises to all city police officers, which had the effect of giving a higher proportion raise to those with less than 5 years of tenure. Therefore, most of the officers over 40 received a lower proportion raise. - However, the Court held that, as in Wards Cove, it is not enough to allege that there is a disparate impact or point to a generalized policy. Rather the employee is responsible for isolating and identifying a specific employment practice that is responsible for any observed statistical disparity. The employees failed to find such practice, because the plan to raise salaries was based on reasonable factors other than age. Disability: Americans with Disabilities Act (ADA) : Title I of the ADA requires employers with 15 or more employees to provide qualified individuals with disabilities an equal opportunity to benefit from the full range of employment-related opportunities available to others. For example, it prohibits discrimination in recruitment, hiring, promotions, training, pay, social activities, and other privileges of employment. It restricts questions that can be asked about an applicant's disability before a job offer is made, and it requires that employers make reasonable accommodation to the known physical or mental limitations of otherwise qualified individuals with disabilities, unless it results in undue hardship. Religious entities with 15 or more employees are covered under Title I. - A “Qualified individual with a disability" is defined as someone who, "with or without reasonable accommodation, can perform the essential functions of employment position." “Disability” under the ADA: - The ADA only applies to persons who meet the definition of "disabled" under the Act. A person is considered disabled, and so protected under the ADA, if he or she either (i) has, (ii) has a record of, or (iii) is regarded as having a physical or mental impairment that substantially limits what the ADA calls a "major life activity." - The major life activity that is substantially limited must be one that the average person in the general population can perform, considering factors such as the nature & severity of the impairment and the duration of the impairment. - "Major life activities" include: (1) Caring for oneself; (2) Performing manual tasks; (3) Walking; (4) Seeing; (5) Hearing; (6) Speaking; (7) Learning; (8) Breathing; and (9) Working.

- The ADA does not protect any employee or applicant who is currently engaging in the use of illegal drugs. However, individuals who are not currently using are covered if they have been rehabilitated or are currently participating in rehabilitation. - The following have been held not to be disabilities b/c they can be mitigated: (1) diabetes; (2) hypertension; (3) hearing impairment; (4) asthma; (5) depression - The following have been found to be disabilities: (1) cane did not mitigate neuropathy; (2) uncontrolled epilepsy - Regardless of whether an impairment can be mitigated, the ADA does not apply to minor or temporary impairments. - Morbid obesity has been found not to be a disability under the ADA. - Asymptomatic HIV is a disability under the ADA "in light of the immediacy with which the virus begins to damage the infected person's white blood cells.

"Reasonable Accommodation”: - An employer's duty of accommodation extends only to reasonable accommodations. The employer may thus refuse to employ individuals with disabilities who are unable, even with reasonable accommodations, to perform the essential functions of the job. - The accommodation need not be ideal. Burden of proof is on the individual to prove that accommodation exists that will permit him to perform the essential functions of the job. Accommodations that pose an undue hardship are not required. - Unpaid leave to obtain medical treatment is a reasonable accommodation. - The Employer has no duty to reassign an individual where there is no vacant position. - The USSC has held that, when an employee's request for reassignment to another position as a reasonable accommodation under the ADA conflicts w/ the employer's unilaterally imposed seniority rules, the employer's rules presumptively will prevail. To rebut this presumption, employee must prove existence of "special circumstances," such as where the seniority policy is changed so frequently as to reduce employee expectations. The result is that the employee w/ the most seniority, rather than an employee w/ a disability, ordinarily will be awarded the position. Common Defenses to Disability Discrimination: - Employee Misconduct - Employee discharges have been upheld where they were the result of misconduct, such as shoplifting, fighting, and making threats. - Customer/Co-worker Preference - In race, sex, and other discrimination cases, this defense has failed. Courts may not reject it out of hand, however. Employer's refusal to promote employee (called "elephant man") because of "unsavory appearance" was not unlawful b/c the employee did not have a disability.

The Unusual Coverage Scheme of ADA: The ADA has an unusual coverage scheme. Individuals are protected by the ADA only if they have an impairment severe enough to constitute a substantial limitation on a major life activity. If the condition can be mitigated, or does not affect daily activities, it is not severe enough. If, however, an impairment is so

severe that the worker cannot, even with reasonable accommodation, perform the essential functions of the job, then the individual is also not protected. Thus, there are two ranges of uncovered conditions: those too minor and those too severe. - In Sutton (1999) two sisters applied for a position as a commercial pilot at United Airlines. They were initially granted an interview but later declined because of poor uncorrected vision. The sisters sued under the ADA for disability discrimination contending that their corrected vision met the airline's (FAA's) minimum standard. The sisters argued that the court should defer to the EEOC guidelines interpreting the ADA, which provide that the determination of limitation of a major life activity should be made without regard to mitigating factors. - The Court held that the sisters were not disabled under the ADA, and, therefore, were not protected. The determination of whether an individual is disabled within the meaning of the ADA should be made w/ reference to measures that mitigate the individual's impairment. - In Toyota (2002) an employee worked on assembly line of car manufacturer, and had carpal tunnel syndrome. The employee was able to perform most of the tasks required of employer, but there were a few that she claimed she could not perform. The employee testified that she had no problem brushing her teeth and taking care of herself, but could not garden or play w/ children. Employee was terminated for constant absenteeism - The Court held that in order to qualify as "disabled," under ADA, a claimant must initially prove that he has a physical or mental impairment that substantially limits a major life activity. Therefore, the court held for the employer. - The Employee argued that the impairment substantially limited the major life activity of performing manual tasks. As a result, the court looked to all aspects of the employee's life, not just the aspects of her employment. The only time that the court will limit its inquiry to the employment sphere is if "working" is the major life activity that is alleged to be substantially impaired. Here, employee was not substantially limited in working since she could perform most of the employer's tasks, and also could work somewhere else not involving manual tasks. Moreover, the impairment did not substantially limit her performance of manual tasks, since plaintiff could still take care of herself and perform functions central to daily life. Playing with children and gardening are not major life activities. Sexual Orientation: - Not Covered by Title VII, but states can cover it if they wish. - In Shahar (1997) a Woman’s job offer at the Georgia Attorney General’s Office was rescinded after the office became aware that she was getting married to another woman. She claimed that revoking her offer violated her free exercise and free association rights and her rights to equal protection and substantive due process. - The Court used Pickering balancing of the woman’s associational rights against the govt. employer’s interest in maintaining the effective functioning of his office. The court held that the AG’s concern over the significance o public perception of his office’s law enforcement duties (i.e., she has a personal bias) outweighed her interests. - The Dissent points out the fact that the majority dismisses the plaintiff’s interests (which it does, in very condescending terms), and that the AG’s interest is not reasonable, and that other lawyer’s also have “special interests” on a number of topics.

Chapter 5 – Wages and Hours A. Federal and State Wage and Hour Regulation - Until the 1930’s, state legislatures were more active than the federal govt. in regulating working conditions. However, their regulations were often deemed unconstitutional as limits on the “Freedom of Contract.” - In Lochner (1905) the Court struck down a NY law limiting bakery workers to 10 hours of work a day. The majority held that the legislative Act violated Due Process, by infringing on the Freedom of Contract. The Dissent, however, written by Justice Harlan took today’s view, stating that infringements upon the Freedom of Contract should be presumed constitutional, emphasizing a need for judicial deference toward legislative choices. - The widespread unemployment of the Great Depression began to disrupt the court’s view of the Freedom of Contract. It was overturned, and the Dissent of Lochner became the view of the court. The Fair Labor Standards Act Fair Labor Standards Act: - The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. - The purpose of the FLSA is to help low paid and over-worked workers who lack sufficient bargaining power to protect themselves. The main purposes were shorter workweek, compensation for overworked employees, and spreading work to a larger number of citizens. Employees cannot bargain away their rights under FLSA or release their employers from paying the full amounts thereunder. - Minimum Wage - Nonexempt workers are entitled to a minimum wage of not less than $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009. - Overtime - Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek. The overtime provisions do not apply to executive, administrative, and professional (i.e., white collar and creative/artistic) employees. Dalheim. - There are two kinds of professionals: (1) academic professionals - Professional that have academic degree and whose job entails exercise of discretion & independent judgment; and (2) creative professionals - Professionals who must perform work that is original & creative and depends on innovation, imagination, or talent of the employee. Who is a covered employee?: Employment is generally tested according to "economic reality." Independent contractors, who bear risk of economic loss, are not "employees" covered under the FLSA. - The relevant factors (none of which are dispositive) are: (1) Degree of the employer's right to control manner in which work is done; (2) Worker's opportunity for the profit & loss depending on managerial skill; (3) Worker's investment in equipment or materials; (4) Whether the service rendered requires a special skill; (5) The degree of the permanence of the working relationship; and (6) Whether the service rendered is an integral part of the employer's business.

- In DialAmerica (1985) a telemarketing firm employed at-home workers. It never rejected any applicants. Workers could work their own hours. The workers were paid according to number of calls made. - The Court held that the at-home workers were “employees” under the FSLA. The fact that company has little or no control over at-home workers is insignificant in determining whether such workers are "employees" under the FLSA. - The economic reality was that the workers were dependent on the continuance of the company's program. They were not in a position to offer services to other businesses (i.e., like an independent contractor). The right to control factor is insignificant b/c the nature of the at-home work is such that little control is exercised by the employer to begin with. Finally, although the program accounted for only 4-5% of the employer's total business, searching for numbers was still an integral part of its business. Analysis - The agreement between the parties is rarely, if ever, controlling on the issue of whether an employment relationship exists. Instead, courts are often guided by the economic realities of the relationship. In this case, the court's opinion states that the district court erred in focusing on the lack of control exercised over the home researchers by DialAmerica. The control test has long been a controlling factor in determining the existence of an employer-employee relationship. But the court realized that as times change, and more workers render services at home, the courts must adapt their analysis accordingly. Therefore, considering that every other factor favored a finding that the home researchers were not independent contractors, the court held that DialAmerica was liable under the FLSA. Who are exempt employees?: - In Dalheim (1990) the Plaintiff and a group of reporters, producers, directors, and assignment editors brought suit against the employer, a television program, alleging that the station required them to work more than 40 hrs a week without overtime pay, in violation of the FLSA. - The Court affirmed the district court’s holding that producers, directors, reporters, and editors are not "creative professionals" exempt from the FLSA, and, therefore, the employer was violating the FLSA. - The argument that these producers are creative professionals must fail b/c they perform their work within a well-defined framework of management policies. To the extent they exercise discretion, it is governed by skill & experience rather than originality & creativity. The producers cannot be considered administrators b/c they were not responsible for setting business policy, planning objectives of the news department, promoting the newscast, or any other administrative duties. The control they exercise is limited to a 10 minute portion of the newscast. In addition, the fact that the quality of a producers' work has a direct impact on profit & loss does not alone make him an exempt administrator. Finally, b/c the producers do not normally perform management functions such as training, supervising, disciplining, or evaluating employees, they are not exempted executives. - Courts are undecided as to whether the artistic professional exemption applies to news reporters and newscasters. - The Dept of Labor (DOL) has a regulation that describes how an employee may be exempt under the FLSA: An employee—not a position—must meet all the requirements of the applicable exemption test to be exempt. That said, an employee who changes positions may change from being exempt to nonexempt (or vice versa) based on the duties of the new job. - Under the DOL regulation, the 5 categories in which a worker may qualify as exempt are: executive, administrative,

professional (learned or creative), computer, or outside sales. - The DOL has one standardized test for each exemption: (1) Salary Limit Test -> is the same for all exemption categories except outside sales. The 2004 regs raised the salary limit from $155 to $455 per week ($23,660/year). Under this test, any employee earning less than that amount is nonexempt regardless of duties performed. (2) Salary Basis Test -> mandates that exempt employee must be salaried. To be salaried, employee must be paid the full salary for the workweek regardless of hours worked. The only exception to this is the computer professional. (3) Duties Test -> Duties test is different for each exemption: (i) Executive Exemption (employee must have the primary duty of managing the enterprise of a recognized dept. or subdivision (i.e., can hire, fire, and have control over other employees); (ii) Administrative Exemption (employee’s primary duty must be the performance of office or non-manual work directly related to management policies or general business operations of the employer or the employer’s customers); (iii) Professional Exemption (learned professional = requires adavanced knowledge, predominately intellectual in nature, and independent judgment/discretion (i.e., lawyer) – creative professional = invention, imagination, talen (i.e., actor)); (iv) Computer Employees (primary duty is to perform work requiring theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming and software engineering); and (v) Outside Sales (primary duty is making sales, or obtaining orders o contracts for services or for the use of facilities or which a consideration will be paid by the client. Must be customarily and regularly engaged away from the employer’s place(s) of business). What constitutes compensable hours?: - Portal-to-Portal Act - "No employer shall be subject to any liability or punishment under the FLSA on account of failure of such employer to pay minimum wages, or to pay employee overtime compensation, for or on account of: (1) walking, riding, or traveling to or from the actual place of performance of the principal activity or activities which such employee is employed to perform, and (2) activities which are preliminarily to or postliminary to said principal activity or activities, which occur either prior to the time on any particular workday at which such employee commences, or subsequent to the time on any particular workday at which he ceases, such principal activity." - Employees must be paid for time they're engaged in "principal activities" as well as "incidental" activities which are integral part of their work. - The Portal-to-Portal Act excludes preliminary & postliminary activity from compensable time, but does not apply when activities described in the Act (e.g., walking, etc) occur during the "workday." - Generally, time spent during coffee breaks, staff meetings, fire drills, and grievance adjustment are compensable. - Meals longer than 30 minutes, scheduled maintenance shutdowns, union meetings for union affairs, voting time, absences for illness, holiday, and vacation are noncompensable - In Alvarez (2005) employees were required to wear various protective clothing, which they changed into in company locker rooms before and after work. - The Court held that clothes-changing was compensable under FLSA as integral to performance of plaintiffs' jobs. Also, the continuous workday rule dictates that, for employees required to wear protective clothing, the time between changing clothes and beginning work production was also compensable. In other words, An activity that is "integral and

indispensable to a principal activity" that the employee is employed to perform is compensable under the "continuous workday rule." - In Kavanaugh (1999) the plaintiff sought overtime wages for the large amts of time he spent driving between his home and the stores where he performed mechanical services. He lived in Long Island and was assigned to stores in Connecticut and NY, including upstate NY. He was paid for daytime travel between job sites but not for travel between his home and the first or last job of the day. - The Court held that even though the employer's treatment of the plaintiff was "inequitable,” it was not in violation of the Portal-to-Portal Act, which declines coverage for "normal travel" between home and work. - In Townsend (1988) operating room employees in hospitals are required to work "on-premises-on-call" overtime, during which they have to remain at the hospital, although they are not on active duty until called. When on active duty, they perform their regular jobs and are paid 1.5 times their regular shift rate. During waiting periods, employees have no duties and may sleep, watch tv, etc. Employees are paid 1.5 times the minimum wage for waiting periods, an amount considerably less than their usual rate. The employer did not pay two different wages for active duty and waiting periods during employees' regular hrs; the two-rate structure applied only to "on-call-on-premises" overtime. - Under §7(g)(2) of the FLSA, an employer & employee may agree to a "bona fide rate" that is different from the employee's regular rate of pay and is applicable to work performed only during overtime hours. Typically, the parties agree to two rates when the employee performs two or more kinds of work in the ordinary course of working, with the two-rate structure being carried over to overtime. - The Court held there was no violation of FLSA. The court found that in addition to there being an agreement between the parties, there was a qualitative difference between "idle time" during regular shift hours, when employees were constrained in what they could do (e.g., no sleeping or watching tv), and the separately compensable "waiting time" that occurred during the on-call overtime shifts. Child Labor: FLSA restricts the employment of children under the age of 18 and limits the conditions under which they may work. Specifically, employees must be at least 16 years old to work in most non-farm jobs and at least 18 to work in non-farm jobs declared hazardous. Youths 14 and 15 years old may work outside school hours in various nonmanufacturing, non-mining, non-hazardous jobs under specified conditions. Enforcement of The FLSA: Five different enforcement actions: The Sec. of Labor may commence either (1) an action for civil liability, (2) an action for civil money penalties for making use of oppressive child labor or (3) an action for an injunction; (4) one or more employees may seek civil damages for minimum wage or overtime compensation violations or after a retaliatory act by the employer after the employee institutes an FLSA suit; and (5) the DOJ may bring an action for criminal penalties who willfully violates any of the provisions in § 215. - Statute of Limitations – Ordinarily, the limitations period is two years, unless the employer’s violation is “willful,” in which case a three-year period applies. The question then becomes: What is “willful” conduct? - In Richland Shoe (1988) the Secretary of Labor filed a complaint against Richland Shoe, alleging it failed to pay overtime to mechanics as required by the FLSA. As affirmative defense, Richland pleaded that the 2-year SOL had run. - The Court resolved a 3-way circuit split. The Court adopted the 3rd Circuit's interpretation of "willful." (see below).

Thus, plaintiff must allege specific intent or recklessness on the part of employer. - Willful under FLSA -> Violations are "willful" if plaintiff shows that employer either (i) knew he was violating the FLSA; or (ii) acted in reckless disregard as to whether it was violating the FLSA. - The Court noted that completely ignorant employers, such as in this case, would get the 2-year SOL - The Secretary of Labor, however, argued for an intermediate standard that would deem a violation "willful" if the employer, "recognizing it might be covered by the FLSA, acted without a reasonable basis for believing that it was complying with the Act.” The problem here, the Court reasoned, is that this standard would make the issue in most cases turn on whether employer sought legal advice concerning pay practices. - Dissent: Argued that the intermediate standard urged by the Secretary of Labor is a better approach to determining whether an FLSA violation is "willful." Miscellaneous Federal Statutes: The Walsh-Healey Public Contracts Act: Establishes basic labor standards for work done on US govt. contracts in excess of $10k I value for materials, supplies, articles, equipment, or naval vessels. All persons engaged in the manufacture or furnishing of contracted items covered, except those in executive, administrative, or professional positions, or those performing office, custodial or maintenance work. The Davis-Bacon Act: Covers construction, alteration, or repair of federal buildings or other public works or contracts in excess of $2,000. It applies top all agencies of the federal govt. and the District of Columbia. Requires that federal contractors pay wages on construction work that are equivalent to the prevailing wages for corresponding types of workers on similar construction in the locality where the work is performed, and also provides for the determination of prevailing fringe benefits, by the Sec. of Labor. The Service Contract Act: Establishes labor standards for federal contracts in excess of $2,500 for the provision of services through the use of service employees. This includes employees in a wide variety of occupations: cafeteria and food service, maintenance and guard service, linen supply services, warehousing or storage services, laundry and drycleaning, and secretarial services. As with Wash-Healey, executive, administrative, and professional employees are exempt.

Wage Comparability for Individuals: The Quest for Pay Equity: The Equal Pay Act: Was an amendment to the FSLA passed in 1963, and it prohibits sex-based wage discrimination. The act forbids an employer to discriminate by paying wages to employees at a rate less than the rate at which he pays wages to employees of the opposite sex for equal work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions. It is common for claims under this statute to be combined with claims under Title VII. - The plaintiff’s basic burden of proof is usually carried out by establishing that a comparator of the opposite sex (a) performs equal work, and (b) receives higher pay. Measuring the “sill, effort and responsibility” components of jobs can sometimes be easy, sometimes hard. - This is not a “comparable worth” statute, but jobs need not be absolutely identical to be “equal.” Small differences do not matter. Thompson (1982) (using a “substantially equal test”).

- The line drawing about “effort” can get very fine, as in Usery v. Richman (1977), in which the court held that males who worked the “heavy shift” did work that was not “equal” to that of women cooks on a “light” shift. - In the case of an alleged difference in “skill,” the question is usually how essential the skill is to the job in question. A job description calling or a particular skill is not controlling if in fact the skill is never used. Brennan v. Prince William (1974). - In Corning Glass Workers (1974), an early case interpreting the Equal Pay Act, the question was whether the employer violated the Equal Pay Act by paying a higher base wage to male night shift inspectors than it paid to female workers performing the same task during the day. - The Court held that “working conditions” is a term of art that refers to tow factors” (1) “surroundings” and (2) “hazards.” The Court rejected an employer argument that the time of day when work was performed should be considered. - Defenses – There are four exceptions, or defenses, to the Equal Pay Act. A different payment to male and female workers is lawful if made pursuant to: (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex. - In Wernsing (2005) the employer, the Illinois Department of Human Services, had a practice of giving lateral employees a salary that was at least equal to what they had been earning with their prior employer. Wernsing was hired as an Internal Security Investigator in 1998. The job had a salary range that was based upon prior experience and years of service. Her starting salary was $2,478 monthly, 30% more than she was making in her prior position as a Special Agent with the Southern Illinois Enforcement Group. A male employee who was hired at the same time as Wernsing received a monthly salary of $3,739, 10% more than he was earning in his prior position. Although they did the same work, Wernsing and the male employee were paid substantially different salaries. Wernsing argued that the practice discriminates against women because it perpetuates the historic wage gap between men and women. - The court held that so long as sex is not a factor in determining salaries, there is no Equal Pay Act violation in considering the employee's wage history. The court refused to look at the legitimacy of the employer's stated reason for the practice. According to the Court, like Title VII and other anti-discrimination laws, the Equal Pay Act does not permit a court to assess the reasonableness of the employer's stated business purpose. Rather, the burden rests with the employee to show that the stated reason is really a pretext for discrimination. - In other words, the pay scheme met the 4th exception to the Equal Pay Act, because the difference in wages was due to a factor other than sex (i.e., the employer’s policy regarding lateral employees).

Lilly Ledbetter Fair Pay Act of 2009: (not in the casebook, but talked about in class) Amends the Title VII stating that the 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination resets with each new discriminatory paycheck. The law was a direct answer to the Ledbetter v. Goodyear Tire & Rubber Co. (2007), a U.S. Supreme Court decision holding that the statute of limitations for presenting an equal-pay lawsuit begins at the date the pay was agreed upon, not at the date of the most recent paycheck, as a lower court had ruled. Title VII & The Equal Pay Act -> The Comparable Worth Doctrine: The Equal Pay Act requires equal pay for equal

work. In addition, it is unlawful under Title VII to discriminate in wage rates on the basis of Title VII’s protected categories. The Equal Pay Act only applies to circumstances in which employees are performing “substantially equal” work, as interpreted by Corning Glass Workers; it does not apply to situations where men and women perform work similar in “skill, effort, and responsibility” and are not paid equally. Nor can it be used to attack an employer’s decision to pay a female-dominated occupation less than it would pay a male-dominated occupation; this common situation is the target of “comparable worth” advocates. - The “comparable worth” movement centers on whether pervasive sex-based wage discrimination in the workplace actually exists, its sources in the economics and politics of the labor market, and the appropriateness of legal efforts to change practices. - Comparable Worth Theory – postulates that sex-based wage discrimination exists if employees in job classifications occupied primarily by women are paid less than employees in job classifications filled primarily by men, if the jobs are of equal value to the employer, though otherwise dissimilar. - Arguments have been made that the application of disparate impact analysis (Griggs) would lead to a conclusion that gender-based pay scales violate Title VII’s ban on discrimination on the basis of sex, but the legislative history of the Civil Rights Act of 1991 specifically disclaimed such arguments. - In County of Washington v. Gunther (1981) a group of four female county prison guards sued the County of Washington for unequal wages, alleging that their pay was less than that of male guards for no reason other than sexual discrimination. The female guards only watched female prisoners, and the male guards only watched male prisoners. A survey indicated that the female jobs were worth 95% of the males, but they were only paid 70% of the males’ pay. - The Plaintiff’s argued that the Bennett Amendment (which was inserted into Title VII to harmonize it with the Equal Pay Act), which states that it is not an unlawful practice under Title VII to differentiate wages on the basis of sex, as lons as it is allowed under the Equal Pay Act (i.e., as long as it meets one of the four defenses to the Equal Pay Act). - The Court held that the Bennett Amendment was “technical,” and was intended only to harmonize potential conflicts between Title VII and the Equal Pay Act. Thus, it only incorporated the affirmative defenses of the Equal Pay Act into Title VII; it did not usurp an independent claim for sex-based wage discrimination that could arise under Title VII - Gunther, however, did not prove as definitive on the question as first believed, both because it did not address all factors under consideration and because it was a narrow decision. The Court did not determine how jobs might be properly compared, and one of the primary opponents of the majority opinion was the soon-to-be Chief Justice of the United States William Rehnquist. Rehnquist wrote explicitly against the comparable worth theory in his dissent (speaking as well for Warren E. Burger, Lewis F. Powell, Jr. and Potter Stewart), while Brennan countered that the majority opinion was not explicitly or implicitly supporting or refuting the comparable worth doctrine. In other words, the Gunther ruling did not validate comparable worth theory; it merely permitted plaintiffs to try to make the prima facie claim under Title VII rules and added that "[s]o far plaintiffs have been thwarted in every case.” - In AFSCME (1983) (a class action suit brought by 15,500 employees of Washington State) the State of Washington conducted a study that found that there was a wage gap between job classes predominately held by women and men, and that, in those jobs of “comparable worth,” women were paid 20% less than men. The State required salaries of state employees to reflect prevailing market rates. The lower court found that the state violated Title VII by paying jobs held

by women of comparable worth to those of men less. - The Court overturned the lower court, finding that there was no Title VII violation. First there was no disparate impact violation because disparate impact analysis is confined to cases that challenge a specific, clearly delineated employment practice applied at a single pint in the job selection process, and the fact that the State uses market values for wages doesn’t meet this test. (This refers to Wards Cove, which is overturned in the Civil Rights Act of 1991 to allow for disparate impact in the overall practice, not just specific, but the Act explicitly states that Comparable Worth theory is still not allowed under the change). Second, there was no disparate treatment, because the plaintiffs fail to prove the requisite element of intent as required to prove a prima facie case of sex discrimination by a preponderance of the evidence; the state did not create the disparity in wages that have occurred in the market that they base their wages on. Chapter 6 – HEALTH BENEFITS A. Federal Regulations and the Employers Growing Role I. Employment Retirement Income Act of 1974 (ERISA) a. Background i. Before 1974, states generally regulated private health insurance. ii. ERISA aimed primarily at private employer pension plans, although, over the years courts have interpreted ERISA as preempting a number of state regulations regarding employment-based health plans. b. Effects of the Regulation i. Because ERISA plans are preempted by Federal law, many employers, including small employers, are choosing to provide health plans to their workers to avoid any state regulation that might exist. ii. Under ERISA, such health plans are exempt from: 1. State Taxes on insurance premiums 2. State Mandates that certain types of benefits be provided 3. State limits on certain kinds of utilization management and provider contracting arrangements 4. Solvency and prefunding requirements 5. Definded claims settlements procedures 6. State law claims for various kinds of damages, and 7. Mandatory participation in state risk pools or uncompensated care plans iii. Requirements Imposed on Employers 1. Pretty limited requirements 2. Primarily involve: a. Information reporting and disclosure b. Prudent exercise of fiduciary responsibilities c. Limits on Disproportionate benefits for highly compensated employees d. Continued coverage for certain former workers and others. iv. Problems w/ ERISA 1. Although ERISA preempts state regulations, explicit federal regulations have never been substituted. 2. States concern about high costs of health care and the uninsured has been stifled by ERISA – they can’t create state risk pools or set minimum standards for certain kinds of health benefit programs II. COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) a. Mandate on employers of more than 20 people who offer health benefits – They have to continue

coverage to most former employees, their dependents, and certain others, for 18 or 36 months or until coverage under another plan begins. III. HIPAA (Health Insurance Portability and Accountability Act of 1996) a. Applies to ERISA plans; and commercially issued employment-based group health insurance b. Effects of HIPAA: i. It curtails the use of preexisting conditions 1. Also can’t use preexisting conditions to set individual premiums ii. No exclusions at all for pregnancy, newborns, or adopted children iii. Genetic information may not be treated as a preexisting condition in the absence of a diagnosis No exclusions for genetic predisposition iv. Privacy Rule – 1. Health providers, health plans, and health clearinghouses (formats for billing) are covered under this Rule 2. And, even though Employers are not covered, they are required to keep a fire wall between employee health benefit information and other employment records because the Health plan is covered.

B. ERISA – Substantive Provisions

1. Denial of Benefits

I.

Salley v. E.I. Dupont De Nemours & Co. (5th Cir. 1992) a. Rule: i. A health care plan administrators decision to deny benefits is to be accorded substantial deference if plan documents afford the health care plan administrator discretion to deny benefits – but, the plan administrator can abuse his discretion if he fails to obtain necessary information b. Facts: i. Π, retired employee of ∆, was insured under ∆’s health plan. ii. Π’s daughter was in hospital 3 times for emotional and psychological disabilities iii. The doctor advised that she needed to be moved to a suitable environment to help her recovery 1. They were unable to find one quick enough, however iv. Since the plan paid for only “medically necessary” expenses the administrator terminated the benefits for inpatient care 1. The administrator did not have the patient examined c. Decision and Rationale i. When a plan administrator expressly reserves final authority to terminate or deny benefits, courts must apply an abuse of discretion standard in reviewing 1. In this case, the ∆ had done this ii. BUT – an administrator can abuse their discretion by not obtaining necessary information 1. The administrator had the right to rely on the doctors recommendation or conduct an independent investigation to determine necessity – since he did not evaluate the patient and was ignoring the doctors recommendation he was abusing his discretion. d. Analysis i. Basically, make sure you include a clause in the health plan documents that give the plan administrator authority to deny or terminate benefits ii. Also, if a doctor recommends something, the administrator had either go along with the doctors recommendation or conduct an independent investigation.

1. (At least in the 5th Circuit) e. Notes and Questions i. How claims works procedurally: 1. May be brought as actions for injunctive relief, where the π is seeking an order directing the approval of certain treatment. 2. May also be brought after treatment has already been provided, in which the action is seeking reimbursement ii. Beneficiaries 1. They must normally exhaust their internal plan remedies before seeking judicial relief. a. Exception exists where using internal remedies would be futile. 2. Discrimination

I.

Phelps v. Field Real Estate Co. (10th Cir. 1993) a. Rule i. The Plaintiff in action under ERISA’s anti-discrimination provision bears the burden of proving that his termination was motivated by a specific intent to interfere with employee benefits protected by ERISA b. Facts i. Π (manager of real estate division) was fired 14 months after upper management found out he had a “fatal blood disease” ii. Π had received positive work evaluations (including 4’s out of 5 across the board during his last year) 1. However, the evaluation did note that his division that he managed was doing very poorly and that the π had room for improvement. iii. Π’s supervisor got an anonymous note about the π’s condition and the supervisor confronted the π 1. Supervisor never inquired into exact nature of condition. iv. 14 months later, he was fired b/c of his division’s poor performance c. Decision and Rationale i. The π has the burden of proving that his termination was motivated by a specific intent to interfere with the employees benefits protected by ERISA. d. Analysis i. The court will usually rely on an employer’s reason for a termination as long as it is reasonably supported by the facts ii. The fact that the division was performing poorly was persuasive enough for the court 1. It was very important that the employees personnel file contained info about the divisions poor performance under his management. iii. The court also found it important that he was fired 14 months after they found out about his fatal disease – doesn’t show an intent to discriminate if you wait 14 months e. Notes and Questions i. Outsourcing of a job violates ERISA is the employer’s sole motivation is to avoid paying for employees’ ERISA benefit plans. 1. It is difficult for employees to win on this, however, because it is pretty easy for employers to articulate a legitimate, nondiscriminatory reason for the outsourcing

3. Changes in the Plan

I.

McGann v. H & H Music Co. (5th Cir. 1991)

a.

Rule i. ERISA does not prevent an employer from reducing or eliminating coverage for a particular illness in response to the escalating costs of covering an employee suffering from that illness. b. Facts i. Π was a musician employed by the ∆ ii. When the ∆ discovered that the π had AIDS, the ∆ modified the company medical plan to limit coverage for AIDS-related claims to $5,000 – down from $100,000 1. No modifications regarding other illnesses were made iii. ∆ concedes the reason for changing the plan was to save money on the AIDS treatment. c. Decision and Rationale i. There are 2 things prevented under §510 of ERISA – Employer cannot: 1. Discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of the Plan 2. Interfere with the attainment of any right to which such participant may become entitled under the plan. a. NEITHER of these happen in this case ii. ERISA does not require an employer to continue the same level of benefits once they are included in a plan. d. Analysis i. Courts usually require a change in the employment relationship before they will find a violation of §510 of ERISA. ii. Since ERISA does not require employers to offer benefits, nor does it prevent them from amending a health plan, the employee is entitled to only those benefits the employer contractually binds himself to give 1. And it does not matter what the motivation is for amending the plan, since ERISA allows employers to amend. e. Notes and Questions i. Stiltner v. Beretta USA Corp (4th Cir. 1996) 1. Note case 2. Employer threatened to cut off employees free health insurance if he didn’t drop his $332,000 suit for long-term disability benefits. 3. 4th cir. held that ERISA does not prevent employers from revoking gratuitous benefits. ii. Had HIPAA been in effect at the time of McGann, the ∆ would not have been able to reduce the benefits only for AIDS (because HIPAA provides that individuals in a group health plan may not be subject to discrimination based on health status in their eligibility, enrollment, or premium contributions. 1. Although, the ∆ could have reduced benefits across the board, or even eliminated all benefits. 4. Continuation Coverage Under COBRA

I.

McDowell v. Krawchison (6th Cir. 1997) a. Rule i. For purposes of continuing coverage under COBRA, beneficiaries under the same plan are to be treated Separately ii. (COBRA’s notice provisions do not treat a covered employee and his spouse as a unit for notice purposes, such that the plan administrator is absolved of his duty to notify the spouse once the employee has been notified) b. Facts i. ∆ hired π and provided insurance to him and all of his employees through a single plan. But after

the company was sold, the π was terminated. The new owner of the company assured the π that he would continue to have health coverage, although the ∆ claims that the new owner had no authority to do that. ii. Although the π never paid any premiums, he was under impression he was still covered. But about 1 year later, the π’s wife sought treatment for breast cancer. They were told that they didn’t have any insurance coverage. iii. They filed suit claiming they were not notified of their statutory (cobra) right to continuing coverage c. Decision and Rationale i. COBRA imposes a statutory requirement that a plan administrator notify any “qualified beneficiary” of his or her right to continuing health insurance for up to 18 months after a “qualifying event” 1. Qualifying event would be when the employee is terminated or has a reduction in hours that causes a loss of coverage ii. Statute requires notice be given to each qualified beneficiary. 1. Under COBRA, the beneficiaries rights are independent of the employee’s. A spouse can even elect to continue coverage even though the employee chooses not to. Even if the employee is fired for gross misconduct, the beneficiaries still have a right to continuing coverage. 2. However, notice does not have to be given to children, just the spouse. d. Notes and Questions i. COBRA contains an exemption for employers with fewer than 20 employees. 1. Kidder v H&B Marine, Inc: court held that in computing whether a company has 20 or more employees, closely related corporations with the same ownership may be considered as a single employer.

C. ERISA – Preemption of State Actions

• •

ERISA bars state regulation of benefit plans, both pension and welfare. However, there are only substantive standards for pension plans, not welfare plans. The exceptions to ERISA preemption include state laws that regulate: o Insurance, banking, or securities o Generally applicable criminal laws, and o Qualified domestic relations orders.

I.

NY State Conference of Blue Cross/Blue Shield Plans v. Travelers Ins. Co. (Sup.Ct. ‘95) a. Rule i. ERISA does not preempt ALL related state laws ii. (State laws that have only an indirect economic effect on ERISA plans do not sufficiently “relate to” ERISA plans such that they are preempted. b. Facts i. NY law that establishes the rates of payment. People w/ Blue Cross/Blue Shield, Medicaid, get a certain rate (the average cost of what it costs to treat whatever illness they have). People w/ other plans, like ERISA plans or commercial insurance on an expense-incurred basis, were charged the average rate plus a 13% surcharge. ii. A bunch of commercial insurers challenged the law as being preempted by ERISA. c. Decision and Rationale i. ERISA expressly preempts “all state laws insofar as they relate to any “employee benefit plan”

covered by ERISA. 1. A law “relates to” an ERISA plan: “if it has a connection with or reference to such a plan.” 2. In this case, the surcharges applied to commercial insurers regardless of whether the coverage was secured by an ERISA plan or not. ii. Yes, this law may cause health insurance consumers, including ERISA plans, to choose Blue Cross/Blue Shield over commercial insurers, but this indirect economic effect is not enough to compel the plan to act – and thus does not regulate it. 1. If such indirect effects could be construed to “relate to” an ERISA plan, the limiting language in the statute would become eroded and meaningless, b/c lots of laws could be considered indirectly “connected with” ERISA plans. d. Analysis i. Because this law did not impose the kind of substantive coverage requirements, like requiring plans to deal with only one insurer, or to insure against an entire category of illnesses that the plan might not otherwise cover, the statutes are not preempted by ERISA. e. Notes and Questions i. Courts use 2 tests to determine whether a law “relates to” an ERISA plan: 1. “Reference to” test a. State laws preempted if the refer to an ERISA plan. They have the necessary reference if they act “immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law’s operation.” b. Example: Dist. Of Columbia v. Greater Washington Bd. Of Trade (1992) i. DC law was preempted by ERISA. The law tried to require employers who offered coverage, to offer equivalent coverage when an employee is getting worker’s comp. ii. This was preempted b/c it specifically “refers to” welfare benefit plans. iii. The Traveler’s case was not preempted b/c it did not refer only to ERISA plans, but applied more broadly to all commercial insurance. 2. “Connection with” test a. This is what Traveler’s case used. b. Other leading connection with case is: Egelhoff v. Egelhoff i. Man made wife beneficiary. They divorced and he died a short while later. She was still listed as beneficiary. Washington state had law that said that when a couple divorces, the listing of an ex-spouse as a beneficiary is invalidated ii. Court struck this down b/c there was connection with ERISA. Allowing this state law would reduce the uniformity of laws governing ERISA. Also, this law regulates the payment of benefits, which is a core concern of ERISA. c. Contrast: Hattem v. Schwarzenegger i. ERISA did not preempt a state tax on the business-related income of non-profit corporations’ trusts. This tax did not govern an area traditionally found to be at the core of ERISA ii. Statutory Exceptions to ERISA 1. Qualified Domestic Relations Orders (QDRO) a. These are orders that relate to “the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and are made pursuant to a State domestic relations law. i. So a court can order a retiree to give ½ of his ERISA benefits to his exspouse in a divorce settlement. 2. Insurance Exception a. ERISA does not preempt any state laws that regulate insurance. Regulation of insurance is the province of the states.

3. Even state laws that regulate the substantive terms of insurance contracts are considered to be OK. a. There have been a lot of disagreements among the courts about how to determine whether a law does in fact regulate insurance. In Kentucky Ass’n of Health Plans v Miller (below), the US Supreme Court is again modifying the doctrine. II. Kentucky Ass’n of Health Plans, Inc. v. Miller (US S.C. 2003) a. Rule i. ERISA preempts state laws that “relate to any employment benefit plan,” except for state laws that “regulate insurance, banking, and securities.” 1. Laws are constituted as regulating insurance if the law is: Specifically directed toward entities engaged in insurance and substantially affect the risk pooling arrangement b/t the insurer and the insured. b. Facts i. Kentucky had 2 state statutes that were challenged as being preempted by ERISA 1. “A health insurer shall not discriminate against any provider who is located w/i the geographic coverage area of the health benefit plan and who is willing to meet the terms and conditions for participation in established by the health insurer…” 2. “Any health benefit plan that includes chiropractic benefits shall permit any licensed chiropractor who agrees to abide by the terms, conditions, reimbursement rates, and standards of quality of the health benefit plan to serve as a participating primary chiropractic provider to any person covered by the plan.” c. Decision and Rationale i. ERISA looks at what the law regulates, not how the law regulates it. 1. Here, although the statutes do not address the actual terms of insurance policies, they nonetheless substantially affect the business of insurance by expanding the number of providers from whom an insured may receive health services and, in turn, altering the bargains insurers and insureds can expect from the insurance contract. ii. There are basically 2 factors: 1. Must be specifically directed toward entities engaged in insurance, and 2. Substantially affect the risk pooling arrangement b/t the insurer and the insured. d. Notes and Questions i. When an employer chooses to self-insure, they are covered by ERISA and are preempted from any state regulations on insurance. An employee benefit plan is not considered to be an insurance company or other insurer.

D. Family and Medical Leave Act (FMLA)

• •

The act requires that employers provide leaves of absence for childbirth or the care of children or other family members. Employers of 50 or more employees must permit eligible workers to take up to 12 weeks of unpaid leave in any 12-month period for the birth of a child, to care for a child, spouse, or parent w/ a serious health condition that makes him or her unable to perform the job. o Eligible workers: Workers who have been employed by the employer for at least 12 months and have at least 1,250 hours of service during that period. “Serious Health Condition” o Defined as an illness, injury, impairment, or physical or mental condition that involves inpatient care or



continuing treatment by a health care provider. • When leave for childbirth or adoption is foreseeable, employee must give at least 30 days notice of intention to take leave. When treatment is foreseeable, employee has to schedule it so as to interfere w/ work as little as possible and to give 30-day notice when possible. During the leave, the employer must provide health benefits at the same level as when the employee was actively working. When the employee returns from leave, the employer must restore her to the same or an equivalent position, w/ no loss of employment benefits accrued before the date the leave began. o However, an employer can deny to restore employment to a person who earned in the top 10% of the company if the employer can show that restoring the person would cause grievous economic injury. Enforcement Mechanism o Similar to the Fair Labor Standards Act (FLSA). It can be enforced through suit in either Federal or State court by employees individually or on behalf of themselves and other similarly situated employees, or by the sec’y of labor. o Statute of limitations is 2 years from the last event constituting a violation and 3 years for willful violations. o However, unlike the FLSA, there is no administrative prerequisite to suit (like a department investigation) under the FMLA Remedies: o Lost wages and benefits plus interest. If no wages lost, then any actual monetary losses (like cost of providing care). o Important: When a court is determing to award monetary damages, it can decide to lower the award if there is evidence that the employer was acting in good faith with reasonable grounds for believing it was not in violation of the act.  So make sure you document each decision in the file. Ragsdale v. Wolverine World Wide, Inc. (US S.C. 2002) a. Rule i. If an employer fails to designate an employer’s leave of absence as a leave of absence under the FMLA, the employee may not have 12 more weeks of leave. 1. If an employer offers more than 12 weeks of medical leave, it is automatically applied toward FMLA leave b. Facts i. The π was diagnosed w/ Hodgkin’s disease and, pursuant to company policy, the ∆ gave her 30 consecutive weeks of leave. The company held her position open for her and maintained her benefits. ii. However, the ∆ did not notify the π that any of her 30 weeks would be counted as the 12 weeks guaranteed under the FMLA. This violated a Labor Department regulation requiring notice that an employees leave is pursuant to the FMLA. iii. The π requested more time off but was refused. She then failed to show up for work and was fired. She brought suit claiming that none of her leave was FMLA leave b/c she never got any notice. c. Decision and Rationale i. Under the sec’y of labors regulations, employers must give written notice that a leave is the designated FMLA leave. If an employer fails to do this then the leave does not count against the FMLA leave. This regulation alters the FMLA however, b/c it relieves employees of having to prove that they were prejudiced when they sue. 1. It simply assumes they were prejudiced. ii. Also, this regulation amends FMLA’s guarantee of only 12 weeks of leave by potentially giving more. Congress only intended for 12 weeks and that is all the employers have to give.







I.

d. Notes and Questions i. Courts have been lenient in allowing both employees and employers to assert FMLA claims 1. Smith v. BellSouth: term “employees” includes “former employees” ii. “Serious Health Condition” 1. Labor department issued final regulations on this. There must be a period of incapacity of more than 3 days. 2. Examples of Serious a. Flu can be serious b. Ingrown toenail was a serious illness 3. Examples of Non-serious a. Food poisoning not serious b. Poison ivy not serious c. Rectal bleeding not serious d. Upper respiratory infection not serious. iii. An employee loses the protections of the FMLA if unable to return after the 12 weeks are up.

E. Nondiscrimination in Benefits

1. Pregnancy





Congress amended Title VII by adding the Pregnancy Discrimination Act of 1978. It provides: o “Because of sex” or “on the basis of sex” include – pregnancy, childbirth, or related medical conditions. Women affected by one of these things shall be treated the same for all employment-related purposes as other people not so affected. This language made clear that an employer must treat pregnant employees the same as nonpregnant employees. Can’t have a policy that adversely affects pregnant employees relative to other employees (unless the employer can establish a business necessity or BFOQ defense) Lang v. Star Herald (8th Cir. 1997) a. Rule i. The prohibition against the discrimination on the basis of pregnancy does not require an employer to make special concessions to pregnant employees. 1. An employer may adhere to company policy and refuse to give pregnant employees an unpaid leave of absence guaranteeing continued employment upon return. b. Facts i. Π was on vacation from work. During vacation, she experience complications w/ her pregnancy. She stayed at home for an additional week and used the remainder of her vacation days. She asked for an indefinite unpaid leave, but was told that she would not have a job guaranteed. c. Decision and Rationale i. The question here is whether the ∆ treated her differently than a non-pregnant person. 1. There is no evidence this is the case. The ∆ didn’t give any other employees indefinite unpaid absences w/ a guaranteed job upon return. ii. Title VII does not entitle rights to preferential treatment. d. Analysis i. Π fails to prove that she was disparately impacted by the policy ii. However, this case more or less rendered moot b/c of the FMLA

I.

1. If the company has more than 50 employees and she has been there for 12 months, they have to give her 12 weeks of leave. II. Erickson v. Bartell Drug Co. (Wash. Dist Ct 2001) a. Rule i. Employer must cover contraceptive prescriptions or be liable for sex discrimination. b. Facts i. Employer refused to cover prescription contraceptives like birth control, Norplant, and DepoProvera. c. Decision and Rationale i. Court decided in favor of the π on her disparate treatment claim. ii. The Pregnancy Discrimination Act does not mention contraceptives but it shows congress’ recognition that there are differences b/t men and women and that employers must incur additional expenses for women in order to treat men and women the same. iii. Employers do not have to provide health benefits, but if they do, they must provide equally comprehensive coverage for both sexes. 1. Contraceptives may be the most important daily healthcare need for a woman. 2. Marital Status

I.

Braatz v. Labor & Indus. Rev. Comm’n (Wis. 1993) a. Rule i. A policy that requires a married employee to elect between the employer’s health plan and a health plan offered to the employee’s spouse constitutes discrimination on the basis of marital status. b. Facts i. School District required married employees to choose to have either the health plan offered by the school, or a plan offered by their spouse’s employer. The district did not require single employees with health insurance from another source to choose. ii. There was a state law in Wisconsin that prohibited discrimination based on marital status. c. Decision and Rationale i. Some states have laws that prevent discrimination on basis of marriage. This policy placed burdens only on married employees. Single employees were free to have dual coverage, just not married employees.

3. Sexual Orientation

I.

Alaska Civil Liberties Union v. State (Alaska 2005) a. Rule i. When couples cannot legally marry, the state may not condition the receipt of benefits on marital status. b. Facts i. State of Alaska offered certain health benefits to employees and their spouses. But single employees partners did not receive any benefits. ii. Alaska also had voted in a Const. amendment defining marriage as between 1 man and 1 woman. c. Decision and Rationale i. The state does not recognize same-sex marriage, so same-sex partners will never have the

opportunity to receive benefits. It is not enough that opposite sex domestic partners are precluded from receiving benefits because at least they have the opportunity to marry. The states marriage amendment makes this impossible for same-sex partners. d. Notes and Questions i. Although not required to do so by law, many companies have extended health insurance benefits to same-sex partners of employees. In 2005 56% of respondent organizations offered the benefits. They generally extend benefits to homosexual partners, but not heterosexual partners.

Chapter 7 – Freedom in the Workplace



There is a recurring theme in employment law: the struggle for control in the workplace. Traditionally, the employer could freely dictate any and all working conditions. Today, society recognizes other values, such as privacy, freedom of expression, and freedom from sexual harassment.

A. Grooming and Dress

I.

Kelley v. Johnson (US S.C. 1976) a. Rule i. Police Department regulation that banned certain hairstyles and lengths for male officers did not violate the officers’ 1st or 14th Amendment rights because the regulation is rationally related to the goals of officer identifiability and esprit de corps. b. Facts i. Commissioner of police department prohibited officers from wearing beards or goatees, except for medical reasons.

c. Decision and Rationale i. The restrictions here are not arbitrary. 1. Must examine the restriction within the context of the “organizational structure” adopted by the police force. 2. The hair restrictions are apart of “the overall need for discipline, esprit de corps, and uniformity.” Almost all police departments choose to have officers uniformed to make them easily recognizable. ii. State infringements in “matters of procreation, marriage, and family life” are protected by the 14th Amendment, but “matters of personal appearance” have not been held to receive the same respect. iii. Furthermore, the π is a police officer, not a citizen. The state has a right to restrict the activities and speech of its employees. iv. Burden is on the π to prove that there is no rational connection between the regulation and the state’s police power. The state does not have to show “genuine public need.” d. Dissent i. Thinks personal appearance is at the heart of the 14th amendment. Also says this regulation isn’t rationally related b/c having shoulder length hair or a goatee isn’t going to make it more difficult to identify the person as an officer. e. Notes and Questions i. Hair length cases in Private employment 1. Most have been brought under Title VII sex discrimination theory. Π have argued that employer rules prohibiting men but not women from having long hair discriminate on the basis of sex. Π’s have generally been unsuccessful for 2 reasons: a. First, it has been held that Title VII was designed only to prohibit discrimination based on immutable characteristics. b. Second, the cases have declared that hair length regulations do not inhibit employment opportunity. 2. Implicit under both of these theories is the idea that differential hair length is a social norm, that grooming regulations seek to project a company favorable image to the public, and that “Congress only sought to give all person equal access to the job market, not to

limit an employer’s right to exercise his informed judgment as to how best to run his shop.” ii. No-Beard Cases 1. Theories: a. Sex-discrimination is usually held in favor of the defendant/employer b. Racial discrimination also found in favor of the defendant/employer c. Religious discrimination i. No-beard rules can sometimes constitute religious discrimination. Example Muslim police officer. d. Health requirement i. If employee has a legitimate medical reason (like ingrown hair that is painful to shave) the employer will probably have to let him not shave, unless employer can show that it is BFOQ that he be clean shaven. iii. Public Contact Position 1. Maid applied for position as secretary in hotel but was rejected because “her hair was not clean, neat, or combed, she was slightly overweight, and her clothing was not neat or tidy or coordinated.” a. The court held that this was NOT a violation of Title VII II. Jespersen v. Harrah’s Operating Co., Inc. (9th Cir. 2006) a. Rule i. Requiring female employees, but not males, to wear make-up on the job is not discriminatory. 1. Gender-specific differences in employment policies generally applicable to both men and women do not constitute discrimination when they do not unequally burden one sex over the other. b. Facts i. Π was successful bartender at Harrah’s casino. The casino implemented new policies that required female bartenders to wear make-up and prohibited men from wearing it. The π quit b/c she refused to wear the make-up. She claimed that wearing it lowered her self-esteem.

c. Decision and Rationale 1. An appearance standard that applies only to women and not men is discriminatory on its face, but an employer’s appearance standard that applies to both males and females and is designed to create a common, professional look is not discriminatory per se, even if certain standards apply only to one gender. 2. There is nothing in the record to show that gender was a motivating factor behind the appearance policy. d. Analysis i. Requiring make-up in a bar or casino is more appropriate than in a bank. There has to be an element of job-relatedness to the requirements, and in a bar, it is expected that the bartenders and servers are going to look a certain way. 1. If she could prove that she were allergic to the make-up they would have to make an exception though. 2. Also, if she wear too large for the uniform they required, they would have to make an exception. ii. The line in these cases is shifting – it has gone from what people can’t wear, to what they must wear, now to grooming. e. Notes and Questions i. An employer can regulate an employee’s appearance but there are limitations. It goes to jobrelatedness. Also have to consider the image of the business. Weight-watchers is going to want to hire thin and healthy people. 1. In some businesses, a sexually provocative appearance is the “essence of the business” and therefore it would not violate Title VII to require exotic dancers to wear revealing

outfits. ii. An employer can require all employees to wear sex-differentiated uniforms, but it would violate Title VII for the employer to require only female employees to wear uniforms. B. Harassment

• •

• •

EEOC issued guidelines in 1980 specifying that sexual harassment constituted a form a sexual discrimination. They defined sexual harassment as “unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature.” 2 types of Sexual harassment: o Quid Pro Quo  When agreement to engage in sexual activity is made a condition of employment o Hostile Work Environment  Exists when statements or conduct of a sexual nature creates an environment of intimidation, insult, or ridicule.  This represents the overwhelming majority of sexual harassment cases  Standards: • Has to sufficiently severe or pervasive to alter the conditions of employment. • It has to have some sort of effect, but it does not have to be economic injury. Harasser can be employer, employer’s agent, coworker. There were 2 important cases in 1998: o These cases put a clear responsibility on the employer to educate. Employers have to have a policy, they have to communicate the policy to employees, and you have to have a record of enforcement and how you dealt with it. o If the employer does these things, they have an affirmative defense against liability for the harassment. Pennsylvania State Police v. Suders (US S.C. 2004) a. Rule i. An employer is not vicariously liable for the constructive discharge of an employee suffering hostile work environment sexual harassment by her supervisors if the employee fails to utilize established procedures for correcting such conduct in the workplace. b. Facts i. Π was hired to work as a dispatch operator for police. She was subjected to crude conversations about sex with animals on a daily basis. ii. She was told that she had failed some computer tests that she needed to satisfy a job requirement. But she found these tests in a drawer that seemed to indicate that they had not been graded at all. Well the department basically set her up and dusted the drawer and caught her taking the documents. So she was arrested and then she resigned. c. Decision and Rationale i. Although there is harassment here, the employer is not liable. ii. In this case, there was not a tangible employment action taken because the employee voluntary quit. This is a case of Constructive Discharge. 1. This is where the employer makes conditions of employment so intolerable that a reasonable person has no option but to quit. This means that legally, the person was fired. 2. But it is hard to determine whether this constitutes a tangible employment action under Hostile Work Environment. a. In this case, the employer may assert that it exercised reasonable care to prevent and promptly correct sexually harassing behavior and that the employee unreasonably failed to take advantage of its preventative or corrective

I.

opportunities to avoid harm. d. Analysis i. Constructive discharge is always tied to an underlying illegal action. Most employees are at will and can be fired at any time, unless it is for an illegal reason. ii. Other Types of Tangible Effects 1. Demotion 2. Firing 3. Pay decrease 4. Taking away benefits iii. If there is a complaint: 1. If you have a decision to make between moving two people b/c of harassment, always move the alleged harasser, never the person who is claiming the harassment. e. Notes and Questions i. An employer is vicariously liable for the sexual harassment of a supervisor when the supervisor’s actions culminate in a tangible employment action. 1. If the employee suffers no tangible, adverse employment action, the employer can defend by showing it exercised reasonable care to prevent and correct promptly any sexual harassing behavior and the employee unreasonably failed to take advantage of the preventative opportunities provided by the employer. ii. Consent is not a defense to sexual harassment 1. Courts will look at whether the action was “unwelcome” 2. Although, truly consensual relationships b/t coworkers can’t give rise to a sexual harassment suit. iii. An employees conduct outside of work (ex: posing for nude photos) does not provide acquiescence to workplace sexual harassment II. Harris v. Forklift Sys., Inc. (US S.C. 1993) a. Rule i. To establish sexual discrimination under Title VII, plaintiff must prove that a reasonable person would objectively perceive the harassment to create an abusive or hostile work environment, but need not prove serious adverse psychological injury. b. Facts i. Π worked as manager for over 2 years with ∆ company. During this time, the company president made numerous inappropriate and sexual comments. The π complained to the president harasser and he promised to stop but did not. She then quit and sued for abusive work environment. c. Decision and Rationale i. The question is whether the discriminatory behavior is “sufficiently severe or pervasive” to create an abusive environment. An abusive work environment may fall short of producing serious harm or injury, yet impede an employee’s performance and chances for advancement. The court says that the discriminatory behavior must be both subjectively and objectively perceived to create a hostile environment. To determine whether a reasonable person (as opposed to reasonable woman) would consider that the harassing behavior in question created a hostile environment, courts must consider the totality of the circumstances. 1. Factors to consider: a. Frequency of discriminatory conduct b. Severity c. Threat of physical harm and humiliation d. Interference with employee’s performance at work e. Effects on employee’s psychological well-being i. NONE of these are exclusive. d. Analysis i. Company has to have a standard and communicate it. It is easy to determine what a reasonable

person would consider offensive if the company spells it out in the policy. Tell employees, if you do any of the following things, your behavior is considered reasonably offensive. Have training sessions and show videos and make sure that everyone is aware of the policy. e. Notes and Questions i. If a former employee is claiming emotional distress, the employer has the right to request a psychological evaluation of the person, although the employer does not get to choose the doctor. (Jansen v. Packaging Corp. of America, Ill. 1994) ii. An employer that tolerates sexual harassment on its premises “should be held liable regardless of whether the environment was created by a co-employee or nonemployee (customer), since the employer ultimately controls the conditions of the work environment.” (Lockard v Pizza Hut, 10th Cir. 1998) iii. Harassment under Title VII can be based on a number of things, not just sex: race, national origin, religion, age, or disability. III. Oncale v. Sundowner Offshore Servs., Inc. (US S.C. 1998) a. Rule i. A Title VII hostle work environment sex discrimination claim is not barred because the plaintiff and the alleged harasser(s) are of the same sex. b. Facts i. Π worked on an oil platform and received constant harassment from coworkers and supervisors. He was humiliated and even physically assaulted. ii. He complained, but the ∆ company did not do anything. He quit and filed an action for Hostile Work Environment discrimination. c. Decision and Rationale i. Courts have generally recognized the possibility of same-sex discrimination in differential compensation or promotion cases (male boss prefers to promote female over more qualified male). ii. Triers of fact may have an easier time construing the facts of male-female harassment as sex discrimination because the conduct may involve explicit proposistions that they might assume would not be directed at the harasser’s sex. The trier of fact might make the same assumptions in same sex harassment cases involving a homosexual harasser. Title VII does not, however, require that the harasser be motivated by sexual desire. What matters is that the harassment is sex-specific and rises to the level of discrimination. iii. Same sex harassment must be evaluated using the same reasonable person considering the totalitly of the circumstances test articulated in the Harris. d. Analysis i. Court says same sex harassment is Actionable. e. Notes and Questions i. Discrimination in employment on the basis of sexual orientation is not prohibited by Title VII, even though same-sex harassment is unlawful under Oncale. C. Privacy



Computers at desk o These belong to the employer. They can treat them as their own, so there is no search if they monitor or look at what you have done. o Emails:  While you are writing it, the employer can see what it is. However, after it is sent, the employer is not allowed to read it because no one owns it anymore.

• •

Telephones o Same thing o Employees do not have an expectation of privacy at work Personal Use o Most companies have established de minimis standards because there is no real way to outlaw this completely. And once you stop enforcing a policy, you no longer have a policy. Bodewig v. K-Mart, Inc. (Or.App. 1981) a. Rule i. Employer held liable for its managers outrageous conduct, even though intent to cause emotional distress is lacking. 1. Employer-employee relationship is special; employer may be liable for the reckless, as well as intentional, infliction of emotional harm on an employee. b. Facts i. Π was a checker at K-mart. Customer left items on counter and returned minutes later. The customer claimed there was $20 also w/ the merchandise she left but the π said she didn’t see it. The customer got irate and demanded a bunch of searches. The manager searched the π’s pockets, counted the register, searched the general area, and even forced the employee to be strip searched down to her underwear in front of both the manager and the customer. 1. The register balanced perfectly and the money was never found. 2. The π quit the next workday after she was forced to work w/ another employee at her checkout stand.

I.

c. Decision and Rational i. This case was remanded, because the court believed there was an issue of fact as to whether the employer caused emotional distress. ii. The biggest thing about this case is that the court found a “special relationship between the employer and the employee.” An employer has special duties with regards to the employee. In this case, a jury could have reasonably found “that the manager’s conduct exceeded the bounds of social toleration and was in reckless disregard of its predictable effects on the π. iii. The court held that the manager/employer did not have to have an intent to cause emotional distress, just that their actions were outrageous. d. Analysis i. Probably the only place a strip search is going to be acceptable is where drugs/pharmaceuticals are made. Even money counters in a bank would not be subject to this. ii. For an issue this small ($20), it is definitely in the employer’s interest to just give the money to the customer and let it go. iii. What an employer can do: 1. Put up cameras with blinking lights so that everyone knows they are being recorded. Even if it is not real, this will help deter. Just don’t say they are being recorded if they are not. It is OK to say they may be being recorded and then have a few cameras that work and some that are just dummy cameras. Vega II. -Rodriguez v. Puerto Rico Tel. Co. (1st Cir. 1997) a. Rule i. There is no reasonable expectation of privacy in open work area 1. Public employer’s use of video camera to monitor an open and undifferentiated work area does not violated the 4th Amendment because employees have no reasonable expectation of privacy in such a work area. b. Fact i. Π’s worked as security operators where they monitored alarm signals. There were cameras in the main work area where everyone worked. No body had private cubicles; it was just an open undifferentiated area.

ii. The π’s used to have the cameras removed b/c they claimed it was an invasion or privacy, and a violation of both their 4th and 1st amend rights (this was a quasi-public employer). c. Decision and Rationale i. There is no expectation of privacy in an open area because the employer has a right to monitor the employees. Wherever an employer can physically monitor employees, they may also electronically monitor them. ii. There are certain times when an employee does have an expectation of privacy in the public sector: 1. Some factors to consider: a. Whether the employee had exclusive use of the area searched b. Whether others could access the area c. The nature of the employment d. Whether the employee had notice that the area was subject to search. iii. In this case, it was very important to the court that the employer was forthcoming with its employees about the existence and placement of the monitoring systems. Make sure employers tell employees about the recording equipment! 1. It was also very important that the monitoring systems only recorded video, not sound. Sound recording would be more prone to pick up things that could not be detected by a human observer. This is not an absolute though, there may be times when it is OK to use sound recording equipment. III. Fraser v. Nationwide Mut. Ins. Co. (3d Cir. 2003) a. Rule i. An employer’s seizure of employee or independent contractor emails stored on its email server does not violate the Electronic Communications Privacy Act. 1. Employees and contractors cannot prevent employer access to emails received and sent at work. b. Facts i. Π is an insurance agent and worked as an ind. contractor and was terminable at will. The employer found 2 letters that the employee drafted but never sent that showed the π trying to solicit employment opportunities with competitors. They also located emails on the company server that confirmed other acts of disloyalty c. Decision and Rationale i. There was a law passed before this case called the Electronic Communications Privacy Act (ECPA). This act forbids the interception of electronic communications. To “intercept,” the employer has to acquire the contents of communication through the use of any electronic, mechanical, or other device and the interception must be contemporaneous with the transmission of the communication. 1. Accessing the emails off the server is not an interception. ii. Furthermore, the ECPA excepts from liability any email seizure authorized “by the person or entity providing a wire or electronic communications service.” Because the email was stored on the ∆’s server, the ∆ is the communications provider and is authorized to seize the emails. d. Analysis i. While the ECPA precludes interception of an email while it is being sent or received, the employer is permitted to access the content of that email after it has been sent or received. So, in the end, the practical effect of the law is to not actually provide any meaningful privacy rights in email communications sent through employer’s servers. e. Notes and Questions i. Employer’s have an interest in wanting to know contents: 1. They are concerned about productivity, the possible disclosure of confidential information, and avoiding potential liability from inappropriate emails.

ii. Allowable technologies 1. Employers can use various technologies including data recovery from hard drive, spyware, or other electronic means, such as a Key Logger. iii. Code of Ethics 1. An employer can put whatever they want in this Code as long as the law does not prohibit it. 2. This makes it easier for an employer to point out when a breach of a duty has occurred. a. Common duties include not giving or accepting gifts, soliciting business opportunities for yourself, etc… D. Freedom of Expression

• •

Regulation of employee speech, whether inside or outside of work, depends to a large extent on whether the employer is private or public. Public Employers: o Where gov’t is the employer, the constitution protects employees from arbitrary “state action” adversely affecting their job status. 14th Amendment ensures them “due process” protection against discipline or discharge, and the 1st amendment provides at least limited substantive protection. o As developed by courts, however, an individual’s freedom speak out on the job is not unlimited. Rankin v. McPherson (US S.C. 1987) a. Rule i. To show legitimate grounds for discharging an employee for employee’s statements, a public employer must show that damage to its interests as an employer outweighed the employee’s 1st amendment rights. b. Facts i. Π was a deputy constable, but her responsibilities just consisted of clerical work. She did not wear a uniform, carry a gun, or act as a law enforcement officer. After attempted assassination of Reagan, she told a co-worker “if they go for him again, I hope they get him.” She was fired after this statement was reported to her supervisor. c. Decision and Rationale i. By firing the π, the law enforcement agency violated her civil rights. ii. Court has to weigh state’s interest in efficient public service against the employee’s right to comment on matters of “public concern.” 1. This is clearly a matter of public concern. 2. Weighing factors: a. Time, place and manner of statement b. Whether the statement had a negative effect on: i. Discipline ii. Harmony iii. Working relationships requiring loyalty and confidence iv. The employee’s duties, or v. Employer’s regular operations. iii. Because the π’s statements were made in private, sealed from the public, they could not have damaged the constable’s office. iv. Because the π’s duties were entirely clerical and non-public, the risk oh her private speech presented only minimal risks to the functions of the constable office. d. Analysis i. Context must be considered when evaluating whether a statement rises to the level for which one

I.

may legitimately be fired. This statement was made out of earshot of public, in private, and in course of emotionally charged political discussion triggered by an even more emotionally charged news report. ii. Training is the seminal issue here: 1. If you tell people that you don’t want them making religious, political, etc, jokes at work (and there is a reasonable employer right to enforce it – like preventing bank employees from talking politics when customers are coming in) then you can prevent this type of talk and take action when it does happen. II. Garcetti v. Ceballos (US S.C. 2006) a. Rule i. When public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline. 1. Citizen speech is entitled to more protection than public-employee speech. b. Facts i. Π is district attorney who follows up on an affidavit complained about by a defense attorney. The π found inconsistencies and wrote a memo saying the affidavit was inaccurate. He was ultimately transferred to a different courthouse, with a different position, and denied a promotion. ii. The π sued claiming retaliation. c. Decision and Rationale i. The issue is whether it is work talk or personal talk. 1. The employee is at work and was performing a work function (the review of files). Therefore the writing of the memo is work – it is not protected speech because he is making the statement as an employee and not as an individual. ii. If it can be determined that the speech was personal, then it has to be determined whether the gov’t employer has an adequate justification for treating the employee differently than any other member of the general public. 1. This is not the case here. 2. What this has to deal with trust and credibility b/c gov’t employees often serve in positions of trust in society, so there speech can sometimes have an effect on the agency. • Private Employers

III. Curay-Cramer v. Ursuline Academy (3d Cir. 2006) a. Rule i. Title VII anti-retaliation claims must be based on retaliation for opposing an illegal employment practice prohibited by Title VII. 1. Religious employers are not exempt from Title VII. b. Facts i. Π was a teacher at a private catholic school. She signed her name to a pro-choice ad that ran in the newspaper. She was fired after revealing other pro-choice activities. ii. She filed suit claiming: (1) wrongful discharge in violation of Title VII and the Pregnancy Discrimination Act (PDA); (2) infringement of her freedom to associate protected under Title VII and the PDA; and (3) discrimination on the basis of sex, because similarly situated males had not been similarly treated. c. Decision and Rationale i. Claims have to be based on retaliation for opposing illegal employment practice prohibited by Title VII. The advertisement was supporting the anniversary of Roe v. Wade, not opposing an illegal practice, thus, the π did not engage in any activity protected by Title VII or the PDA. ii. Under Title VII, a religious employer is conceptually free to suppress those views and beliefs it

sees as antithetical to its religious mission. 1. This is not religious discrimination, because all employees, regardless of religious views, are bound to abide by the employer’s beliefs. d. Notes and Questions i. In the private sector, “free speech” rights often depend on whether it is Internal Speech or External Speech 1. Internal Speech: this is speech made at work. If speech is made at work or while performing a task at the request of an employer, courts usually rule in favor of the employer. 2. External Speech: this is speech made outside of work, like at happy hour. Court will usually rule in favor of the employee for this type of speech. E. Collective Action



She skipped this portion of the reading. The only case in this section is NLRB v. Washington Alum. Co. o Rule:  Collective action, otherwise protected by the National Labor Relations Act, does not lose its protection because workers do not present specific demands prior to taking action. o Instant Facts:  Machine shop workers sought a National Labor Relation Board ruling to get their jobs back after being fired for walking out to protest the inadequate heat of their shop. o Upshot  The clear message of the case is that the law will not cut off the ability of workers to act together to seek better treatment, even when that action seems to evolve out of the immediate circumstances those workers are facing.

F. Regulation of Off-Work Activity



There are 3 areas of employer control: (1) Personal Associations; (2) Political Activity; and (3) Lifestyle.

1. Personal Associations



Anti-Fraternization Policies o A lot of people meet significant other at work. o Problems w/ these policies:  Managers don’t like to get involved with this • They avoid it and avoid it until it becomes a problem  It is very difficult to tell people to break-up or quit. Rulon-Miller v. International Business Machines Corp. (Cal.App. 1984) a. Rule i. Employer breached the duty of fair dealing in at will employment when, in contravention of employer’s stated policy, employer fired an employee for having a relationship with the competitor’s employee. b. Facts

I.

i. Π was employed by IBM in a low level position. She dated another IBM employee, Blum. Blum got a job w/ a competitor and moved. A year or so later, Blum – who still worked for competitor – moved back to area and started dating π again. Despite this, she received a promotion and raise. However, suddenly she was told to break up or quit. The employer then fired her. c. Decision and Rationale i. IBM had a stated policy of not inquiring into employee’s personal lives. The court found that employers have a duty of fair dealing and this duty requires the equal application of the employer’s stated rules to all employees. 1. By finding a duty of fair dealing in at-will employment, the courts are able to bring a company’s own policies and procedures into court in a way analogous to a written employment contract. d. Analysis i. This company had an active policy that they tried to circumvent, which they could not do. However, the same would be true for a written policy that was not enforced for a long period of time – the company would not be able to all of sudden try to use the policy. 1. So it is very important as an employer: you are bound by the policies that are in the manual, unless those policies have been unenforced, then they are no longer company policy. a. A company cannot hide behind a policy that is not enforced or followed. ii. Dating in the workplace: 1. Things that can go wrong: a. It affects other people. They may think certain individuals are getting unfair treatment b. They may break up, where people might take sides, there could be retaliation, sexual harassment claims. 2. So this is a concern, but it is a very sticky area for employers to get involved. iii. Married couples 1. Many companies don’t want married people working in the same department. If both people have to report to the same supervisor, there could be problems. If a supervisor takes an action against 1 he or she is basically taking an action against both. They can team up and share information. iv. Upshot: 1. Have a policy, make it clear, and consistently enforce it, otherwise there is no policy. 2. Political Activity

I.

Nelson v. McClatchy Newspapers, Inc. (Wash 1997) a. Rule i. First Amendment freedom of the press trumps state statute forbidding discrimination on the basis of employee’s political activity. 1. First Amendment guarantee of freedom of the press makes a state statute forbidding employers from discrimination on the basis of employee’s political activities inapplicable to newspapers. b. Facts i. Π was a reporter for a newspaper. The newspaper had an ethics code designed to prevent apparent or actual conflicts of interest. The π was actively involved in several political groups and was visible in the community with these groups. The newspaper asked her to stop but she wouldn’t so the newspaper transferred her to the position of copy editor. c. Decision and Rationale i. The state statute that prevents employers from discriminating against employees b/c of their political activity cannot apply to newspapers. This would infringe on the editorial discretion of

the newspaper to prevent its employees from engaging in activities that could be interpreted as conflicts of interest. ii. Maintenance of the paper’s credibility through enforcement of the conflict-of-interest provision is an essential component of the paper’s editorial discretion. d. Analysis i. Employer’s restricting political support 1. Can have a policy banning all bumper stickers in the office, or all political communication in the office. Just have to be consistent in the enforcement of the policy. e. Notes and Questions i. For public employees it is important to distinguish between partisan and nonpartisan political activities. Nonpartisan activities are almost always protected under the 1st Amendment, Partisan activities may be regulated more closely. 3. Lifestyle

I.

Chambers v. Omaha Girls Club, Inc. (8th Cir. 1987) a. Rule i. Employer did not discriminate on the basis of sex when it fired a single, female employee when she became pregnant because the policy against single pregnant women working with employer’s young female members was a business necessity and a Bona Fide Occupational Qualification b. Facts i. Π is a staff member at a girls social club. The club has a “role model rule” that prohibits single employees from becoming pregnant or causing pregnancy. She got pregnant and was fired. c. Decision and Rationale i. The “role model rule” was a business necessity and bona fide occupational qualification. The club worked w/ young girls and this policy was carefully drafted to insure that these girls had the best possible role models. ii. The court essentially applies the same method of determining both business necessity and BFOQ. So a practice that passes one is likely to pass both. d. Analysis i. Biggest question when stepping on employee’s rights: 1. IS IT BUSINESS RELATED e. Notes and Questions i. Weight loss center did not violate the ADA when it refused to hire a morbidly obese applicant for a sales counselor positin b/c the applicant failed to show that he was an individual with a disability under the ADA; and it was not unlawful to refuse to hire the applicant for fear that his appearance was not in accordance w/ the center’s image.

Chapter 8 – Occupational Safety and Health (OSHA)

A. Introduction

1. Background



The Regulatory Approach to Occupational Safety and Health o 3 ways to approach the problem of workplace safety:  Leave the problem w/ employers and employees • Idea would be that employees and employers would have the freedom to contract – get paid higher wages for more dangerous jobs. • But there are worst case scenarios where the employee can be horribly taken advantage of  Leave regulation to the states • This is difficult to do b/c states border each other. It is difficult for them to work these problems out between themselves because each state is self-interested. There needs to be national standards. o Businesses will choose to not work in certain states.  Enact Federal Legislation (OSHA) • OSHA has overcome a lot of its initial problems (not enough screeners, uneducated screeners, over zealous screeners) but is still unpopular for a number of reasons: o Broad Jurisidiction  OSHA regulates virtually every industry, unlike other agencies that just focus on 1 industry o Intrusive  OSHA will just show up unannounced, demand to inspect, and will tell you to change how you have been doing things for years. o Compliance can be costly • If states do have regulations on the employers, OSHA does not preempt these if they are more severe than the OSHA requirements. o OSH Act  Became law in 1970 and covers employment in every state, DC, Puerto Rico, and all American Territories. Purpose is to ensure a safe and healthful workplace.  Each employer must comply w/ 2 requirements: • Employer must keep place of employment free from recognized hazards that are causing or likely to cause death or serious physical harm to its employees. • Employer must comply w/ promulgated OSHA standards o OSHA has to make up rules as they go along because there is no way to come up front with a bunch of rules to ensure that every workingman and women is safe. It is case by case.  What is Healthful • Cleanliness, breathing (certain chemicals in the air that may not be allowed), heat (OSHA does not say anything about air conditioning, just heat).   OSHA Authorities – What they do • Setting Standards Authority o It sets standards for different risk factors that it identifies. They have studies that they conduct to determine what is safe. • Enforcement o OSHA compliance officers (CO’s) are empowered to inspect any workplace covered by the act. The CO must present his or her credentials. The employer and an employee rep have a right to accompany the CO on the inspection. After this, they discuss any possible violations. Most CO’s canot issue citations on the spot. o If area director determines that a citation is in order, he will mail a letter describing w/ particularity the violations alleged. If the employer does not contest the violation w/i 15 days, the citation becomes final and not subject to review.







Penalties:  There are a variety of different monetary penalties depending on the severity of the infraction.  Penalty structure is such that it hurts • De Minimis Notice - $0 • Nonserious - $0-$7,000 • Serious - $1-$7,000 • Repeated - $0-$70,000 • Willful - $5,000-$70,000 • Failure to Abate- $0-$7,000 per day • Failure to Post - $0-$7,000 o Willful Violations  How many, and of what level fines you have to pay hurts your pocket b/c it is money you have to pay out, but second whammy is that your insurance risk will go up high because of these types of violations  Also there are criminal sanctions for willful violations that have caused the death of one of more employees. • Training o If there are new standards that come out, they will train on what those standards mean. • Coaching o They do audits from time to time. When they come by, if they find something and it is the first time they wont fine you. They will make suggestions for how you can make improvements. • Education o How to avoid accidents – OSHA requires signs to be posted and hard hats to be worn in certain areas, etc. Who works at OSHA • Inspectors, Complaint Investigorts, engineers, doctors, standard writers, technical and support personnel • Over 200 offices around the country. Who OSHA Covers • Covers virtually every industry o There are only a few exceptions • OSHA focuses attention though on High Risk areas o They focus on places with a lot of people and moving parts, like factories o Also focus on any place where something is let into the air. If a place is using a toxic substance or emitting a toxic substance, they are going to focus in on that. Who OSHA applies to: • Employees in the workplace. o OSHA promulgated some rules saying that if you’re employer allowed you to work at home, your home became your workplace. This created problems b/c it put liability on the employer for the safety of the home, which is under the control of the employee. o This rule was pulled because there was no way to enforce this. It was totally unrealistic. • So now, workplace means a place controlled by the employer. o

2. Jurisdiction

I.

Frank Diehl Farms v. Secretary of Labor (11th Cir 1983)

a. Rule i. Jurisdiction under the Act extends to all locations and facilities at or in which an employee is required to be as a condition of his or her employment. 1. House is not a condition employment for the purpose of jurisdiction under OSHA b. Facts i. Migrant workers are provided optional housing at little or no cost. The workers are not required to live in the housing and some workers choose not to live in the housing provided. Workers are allowed to take jobs anywhere they want, even while living in the hosing. However, when work on the farm is available, they are required to work there as opposed to for another employer. c. Decision and Rationale i. OSHA may not regulate this housing. ii. OSHA had changed the standard from “condition of employment” to “directly related to employment. “ However, the “directly related to employment standard” is not the proper standard for determining jurisdiction of OSHA. “Condition of employment” standard better reflects the concern of congress. 1. Directly related to work may bring up issues of whether the housing was beneficial to the employer by providing stable work supply. But that was not the purpose of OSHA. OSHA want to ensure that the place where workers have to actually work is safe. iii. The term “workplace” is left undefined by congress so it must be given its ordinary, commonsense meaning. That is, the place where one must be in order to do his job. d. Analysis i. Migrant housing is a pretty common thing. When OSHA brings a case, they are usually doing it to try and decide a standard for an area where a lot of cases may fall. ii. This new rule is beyond the authority of OSHA to enforce. • Interstate Commerce o OSHA is grounded constitutionally on the Commerce Clause.

II. Chao v. OSHRC (Erik K. Ho) (5th Cir. 2005) a. Rule i. OSHA requirements apply to all employers who affect interstate commerce through their business actions. 1. Local building renovations that affect a national labor market affect interstate commerce. b. Facts i. ∆ purchased building to develop. Despite knowing a license was required due to presence of asbestos, he hired 2 unlicensed people who in turn hired illegal immigrants. Workers were not provided w/ any protective clothing. City inspector issued stop-work order, so ∆ negotiated w/ a licensed company to do the work. Before the case was settled w/ OSHA, however, the ∆ ordered work to start again using the same unlicensed workers, only at night to avoid detection. Later on, the ∆ ordered what he thought to be a connected water line to be tapped to spray down the building – it was actually a gas line which caused an explosion that injured several workers. The ∆ then drafted release letters in English for the workers to sign in exchange for $1,000 each. c. Decision and Rationale i. Issue is whether this employer is regulated under OSHA – whether or not the ∆’s asbestosremoval conduct affected interstate commerce. The court held that, yes, the ∆ did affect interstate commerce. ii. An employer need not engage directly in interstate commerce, but rather must merely affect commerce through his business activities. 1. Here, the ∆ specifically deprived a licensed contractor, who was a national asbestos removal contractor, of a legitimate commercial job. This deliberate decision alters the national economic market for asbestos removal services.

d. Notes and Questions i. In another leading case, Usery v. Lacy, the court held that it was appropriate for the commission to take official notice that the employer used tools and materials that had moved in commerce. 1. Thus, it is relatively easy for the Secretary to prove that the cited employer is covered by OSHA. ii. Important jurisdictional provision of OSHA provides that the Act does not apply to employers that are regulated by other federal agencies. Congress sought to avoid duplication of enforcement by OSHA 1. Employers will often that they are exempt from OSHA enforcement b/c they are regulated by another agency. The employer is going to choose whoever has the most lenient regulations or enforcement mechanisms and push for that. iii. OSHA preempts all state occupational and safety health legislation. However, if a state has an OSHA approved “state plan” w/ comparable standards, enforcement, and adjudicatory functions, jurisdiction may be ceded back to the state. 1. There are currently 23 approved state plans.

E. Promulgation of Standards



Ways OSHA Standards are Promulgated o New o Emergency  For instance, there are stories now about drywall coming from China that is dangerous. OSHA can issue temporary emergency regulations that last for 6 months to address the problem. o Variance  Locality • After Hurricane Katrina there were a lot of variances issued for buildings. It was a matter of getting them up and some short cuts needed to be taken just to get people back in houses.  Geographic Characteristic • If there is a problem w/ soil mixing w/ something else that prevents a normal regulation from being followed, a variance can be granted. OSHA can enforce all of these specific regulations, as well as the General Duty o An employer has a duty to provide a place free of recognized hazards that are causing or likely to cause death or serious injury to employees.  This causes a lot of litigation because there is always a question of what is encompassed in the General Duty OSHA also has authority to Protect Employees from Retaliation o An employee has the right to turn in his or her employer for OSHA violations and that employer is not allowed to take any negative employment action. OSHA can also mandate record keeping of compliance o If an industry is required to do some safety checks, like checking temperature of a furnace every 3 hours, then you will have to have a log sheet w/ your initials next to each time it is checked. o Medical offices have records for disposal of used medical supplies. OSHA has authority to levy penalties o The biggest penalty to an employer is forcing them to do something  OSHA can close you down (through the courts) until you comply









 1. Initial Standards

And they can fine you on their own

• •

The initial standards adopted by OSHA are very problematic. Most of the difficulties with the national consensus standards can be traced to the fact that they were privately, adopted, optional measures. Many of the standards were poorly drafted, extremely general, vague, redundant, contradictory, or hopelessly outdated. Other standards were advisory, directory, or precatory and were never intended to be given binding effect. In its haste to promulgate an intial standards package, OSHA did not review the standards carefully. Because of this, many of the standards were trivial, outdated, and even ludicrous. There was even a regulation that prohibited ice in drinking waters. Usery v. Kennecott Copper Corp. (10th Cir. 1977) a. Rule i. When adopting a national consensus standard, it is impermissible for the Secretary to make a material change in the language of the standard without following formal rulemaking procedures. b. Facts i. Mineral mining company had large vat spring a leak. Workers fixed the leak by using temporary scaffolding, but did not use and toe boards or guard rails. Additionally, the workers did not use a ladder to get to the scaffolding, although there were ladders available. A worker fell and injured himself. ii. Employer was cited w/ 2 OSHA violations: 1. Scaffoldings were supposed to have guard rails and toe guards 2. Ladder use to get to scaffolding c. Decision and Rationale i. When OSHA was passed, there was special interim treatment accorded to “any national consensus standard and any established Federal standard” for the first 2 years. The usual procedural due process safeguards were relaxed only to the extent that standards were adopted as “national consensus standards” 1. HOWEVER, if there is a modification made to the national standard, then formalized procedures had to be followed. ii. Scaffolding Issue: 1. The secretary changed a national standard that used the word should to the word shall – in effect, he changed an advisory standard into a mandatory one. iii. Ladder 1. A regulation required that an “access ladder…be provided.” The court held that the employer met its burden by having ladders available. This regulation does not say the employer “shall require to use,” it just says shall provide. If the employee chooses not to use it, that is the employee’s fault, not the employer’s. d. Notes and Questions i. The Commission has followed the 10th Circuits view that “provide” does not mean “require the use of.”

I.

2. New Standards

I.

Industrial Union Dep’t v. American Petrol Inst. (The Benzene Case) (US S.C. 1980) a. Rule i. OSHA empowers the Secretary to promulgate health and safety standards only where a

significant risk of harm exists. 1. Before issuing any protective standard covering a toxic substance, the Secretary must make the threshold determination that a significant risk of material health impairment exists with respect to that substance. b. Facts i. Benzene is a clear, highly flammable compound widely used in petroleum. It causes quick death when exposed to high levels of concentration, but also can cause slow deaths when exposed to lower levels of concentration over an extended time. ii. After OSHA was enacted, a national standard was adopted that limited benzene to 10ppm. OSHA later proposed and made effective a new regulation that limited benzene to 1ppm. c. Decision and Rationale i. The first thing the secretary has to do when promulgating a new rule is make a threshold determination that such a risk exists with respect to a toxic substance. In this case, they didn’t do anything at all to determine what risk benzene posed to the workplace. The burden is on the agency to prove that there is a need for a proposed standard – here, OSHA was forcing the industry to prove that the new standard was unnecessary. ii. Second, if the secretary is able to determine that there is substantial evidence, then he has to determine whether the method is the most protective standard consistent with economic and technological feasibility. 1. It is impossible to eliminate benzene from a petroleum plant. Even if it could be eliminated at a cost of $100,000 per gas pump, this would economically unfeasible. d. Analysis i. Safe is not the equivalent of risk free. A workplace can’t be considered unsafe unless it threatens the workers with a significant risk of harm. Therefore, before he can promulgate any permanent health or safety standard, the secretary is required to make a threshold finding that a place of employment is unsafe in the sense that significant risks are present and can be eliminated or lessened by a change in practices. e. Notes and Questions i. First step in the rulemaking process is risk assessment. Scientifically, there are 3 main ways in which this can be done: 1. Short term in vitro tests a. These can estimate the carcinogenicity or toxicity of a substance. However, existing tech is not sufficiently developed to permit detailed and precise risk assessment. 2. In vivo tests a. These determine effects of a substance on an animal. But there are a number of problems with theses tests: i. Studies are costly and take 2-5 years to complete ii. Only about 150 chemicals are tested each year, while 1000 new chemicals are developed. iii. Species do not react to chemicals in the same way iv. Diseases may take years to develop 3. Epidemiological Studies a. These attempt to discover correlations between mortality (death) or morbidity (illness) rates and exposure to a certain environmental factor. ii. New standards take years and millions of dollars to promulgate. iii. In American Textile Mfrs v. Donovan (The Cotton Dust Case), the court answered the CostBenefit Analysis issue that the court avoided in the Benzene Case. 1. The court held that imposing a cost-benefit requirement on OSHA in determining whether to promulgate a rule was inconsistent w/ the mandate of Congress. Congress has already decided that health of the worker is the benefit that comes above all else. 2. OSHA has to promulgate a standard for a hazardous area when it is Feasible – or capable of being done.

a. This includes economic feasibility. 3. Emergency Temporary Standards

• •

Secretary can promulgate emergency standards if he determines that employees are “exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards.” These standards are effective immediately upon publication in the Federal Register and are valid for a period of 6 months – after this time, the secretary has to promulgate a permanent standard.

C. Employer Duties





OSHA is very broad, covering about 6 million workplaces, but only has about 1000-1500 inspectors. Because of this, OSHA has imposed preinspection duties on employers – the possibility of inspection, citation, and penalty assessment is designed to encourage preinspection. The duties imposed: o Compliance with Specific Standards o General Duty Clause Specific takes precedent over the general – Thus an employer may not be cited for a general duty violation unless no specific standard applies.

1. Compliance With Standards

I.

Durez Div. of Occidental Chem Corp. v. OSHA (DC Cir 1990) a. Rule i. Manufacturers of hazardous substances must list all potential health risks associated with exposure to a substance no matter the end-user/employee’s expected exposure level. Employer’s are in a better position to determine the exposure levels for their particular use. b. Facts i. ∆ is a chemical manufacturer that sells a compound containing phenol and formaldehyde. ∆’s customers use this compound to make a variety of heatt reisistant products, like pot and pan handles. When it is molded, however, it relaease small quantities of phenol vapor. ii. The Hazard Communications Standard (HCS) requires manufacturers of phenol to disclose to purchasers all potential health risks associated with that chemical. The HCS also requires every manufacturer of chemicals to inestigate the potential hazards of each chemical it either produces or uses in production; to label containers of hazardous chemicals; and to distribute to downstream users a Material Safety Data Sheet (MSDS) disclosing the health hazards posed by exposure to such chemicals. 1. The ∆’s MSDS only disclosed certain risks, but not all. 2. It failed to disclose that overexposure may cause damage to the liver, kidneys, and heart. – The company argued that the potential for these events to take place is so small that it is not necessary to even tell any one. c. Decision and Rationale i. The preamble of the HCS provides that the hazard potential does not change even though the risk of experiencing health effects does vary w/ the degree of exposure. ii. Also, the fact that phenol was not included in a mixture doesn’t make the phenol vapors any less dangerous than if the phenol where in pure form. For this reason, all of the warnings required of

phenol apply equally to this compound. II. Superior Custom Cabinet Co. (OSHD 1997) a. Rule i. Employers are required to provide information and training, modeled on applicable standards, which are specific enough to advise employees of the hazards of their particular workplace(s) and the ways to avoid these hazards. b. Facts i. A delivery crew for a cabinet maker (∆) delivered cabinets to a home under construction. The leadman checked the 1st floor, but never inspected the 2nd floor. The 2 workers carrying the cabinets brought them in the house and were told by another person that they belonged upstairs. There was no guard railing on the stairs or the upstairs landing. One of the workers fell and died. c. Decision and Rationale i. General warnings to employees are not enough. OSHA requires employers instruct employees on (1) how to recognize and avoid unsafe condition they may encounter on the job, and (2) the regulations applicable to those hazardous conditions. Instructions are adequate only if that are specific enough to advise employees of the hazards associated with their work and the ways to avoid them. ii. The only policy was that if the leadman saw conditions that he thought were unsafe, to call the main office and determine what to do. This puts too much discretion in the hands of the workers though. And the particular view of workmen are not necessarily the best determination as to what is safe and what is unsafe. d. Analysis i. This was only a $2,000 penalty in this case, but the ∆ is fighting it so hard b/c of the insurance hikes that will occur. After all, a person was killed in this accident. ii. OSHA investigates all workplace deaths. If they find a violation of a standard, they will assess a penalty on the employer. iii. To avoid this, most construction places have safety meetings. OSHA is going to ask when the last time employees were instructed on the dangers of the worksite. This is why they have to keep detailed records of these types of things. e. Notes and Questions i. Safety Training Programs: 1. The Commission has held that in formulating a training program, the current industry practice is relevant, but not dispositive if industry practice is shown to be inadequate. ii. Examples of Inadequate Training: 1. Merely providing several hundred pages of written safety material, which crane operators could read at their option. 2. Oral direction to employees to leave a confined space if they felt they were getting dizzy or “smelled something a little different.” iii. Prima Facie case requires OSHA to prove: 1. The cited standard applies 2. There was a failure to comply with the standard 3. An employee had access to the violative condition, and 4. The employer knew or could have known of the condition with the exercise of reasonable diligence. 2. General Duty Clause

I.

Pepperidge Farm, Inc. (OSHD 1997) a. Rule i. A prima facie violation of the General Duty Clause occurs where (1) a condition or activity in the

employer’s workplace presents a hazard to employees, (2) the employer or the employer’s industry recognizes the hazard, (3) the hazard has caused or is likely to cause heath or serious physical harm, and (4) feasible means exist to eliminate or materially reduce the hazard. 1. The Secretary may utilize the General Duty Clause to address lifting and repetitive motion hazards, and other issues or “ergonomics” b. Facts i. ∆ had a factory where employees conducted repetitive tasks each day working on a conveyor belt. This type of work was having negative impacts on the workers. OSHA cited the ∆ w/ 175 violations for each employee. c. Decision and Rationale i. The Secretary in this case failed to prove that the actions not taken by the ∆ were feasible (the 4th prong of the test). 1. A condition of activity in the employer’s workplace that presents a hazard to employees a. Where substantial injury is actually occurring, neither precedent nor common sense require that the finding of hazard be foresworn until there is a determination of the threshold at which there occurs a substantial risk of injury. 2. Employer recognizes the hazard a. There was memoranda by the ∆’s corporate ergonomist and medical records of employees that showed the ∆ knew about this. 3. Hazard has caused or is likely to case serious physical harm a. ∆ knew these hazards were causing disabling conditions requiring surgical correction and even termination of employment. This is serious. 4. Feasible means to eliminate or reduce the hazard a. Abatement of this hazard can be required by the General Duty Clause, however, the secretary does not prove that additionally steps need to be taken beyond what the ∆ has already done. The secretary has to show that additional steps proposed but not undertaken were feasible, or that their efficacy is reducing the hazard was so compelling that the failure to implement them by the time of the inspection rendered the process used inadequate. d. Notes and Questions i. General Duty Clause exists b/c it is impossible to promulgate a standard dealing w/ every conceivable workplace hazard. The Pepperidge Farm care illustrates the difficulty in relying on the General Duty Clause (GDC). ii. The Secretary’s burden of proof is higher in cases brought under the GDC. 3. Defenses

I.

Brennan v. OSHRC (Republic Creosoting Co.) (7th cir. 1974) a. Rule i. An employer will not be responsible for unpreventable employee misconduct. 1. Employer are responsible for committing a serious violation by failing to provide safe operating or working instructions only where the injury or harm-causing condition was one the employer knew of or could have known of in the exercise of reasonable diligence. b. Facts i. Π was a new hire at a railroad yard. He was asked to watch the unloading one-day, but was instructed to stay away from the trucks unloading the extremely heavy packages. He disobeyed this instruction and attempted to help unload the package. When he cut the steel band, the package fell on him, killing him. c. Decision and Rationale

i. The employer does not have a duty to warn an employee of hazards that are not associated with that particular employee’s job. ii. OSHA does not require that a new employee always be trained in proper procedures for a task simple because he is required to be present at the place of the operation in question in which he is not a participant. iii. For a serious-violation to stand, the danger must be one of which the employer knew or, with reasonable diligence, could have known. This employer could not have known this employee would have done this. 1. Only a substantial probability of death or serious physical harm will subject an employer to a “serious violation.” iv. The instruction given the the π was general, but it was explicit and unambiguous. And this instruction was sufficient to satisfy the employer’s duty under the act. 1. They had no expectation the employee was going to do what he did. d. Analysis i. The defense to a serious violation is that the employer, exercising reasonable diligence, could not have known of the violation. 1. This employer argued that it did everything possible when it warned it’s employee to stay away from the trucks. Because this employee went near the trucks, he was guilty of employee misconduct. a. 4 part test to invoke the unpreventable employee misconduct defense: i. The employer has established work rules designed to prevent the violation ii. It has adequately communicated these rules to its employees iii. It has taken steps to discover violations iv. It has effectively enforced the rules when violations have been discovered. b. The 4 part test applies to defenses of both general duty violations and specific violations. ii. The best defense is that you are doing exactly what OSHA asked you to do 1. If you are complying w/ OSHA, you will not be liable under state tort law for negligence. e. Notes and Questions i. Unpreventable employee misconduct is the most important substantive defense, but there are others: 1. Vagueness of the standard 2. Infeasibility of compliance 3. Fact that compliance would cause a greater hazard D. Employee Rights



OSHA provides that “Each employee shall comply w/ OSHA standards and all rules, regulations, and orders issued pursuant to this Act which are applicable to his own actions and conduct. o However, this is not enforceable by the government. Neither OSHA or the Commission can sanction disobedient employees nor order their compliance. Employees are the intended beneficiaries of OSHA and have certain rights: o At Rulemaking Stage:  can petition for adoption of a standard, serve on standard advisory committees, seek judicial review of new standards. o At Enforcement Stage:  may file a complaint with OSHA, bring a mandamus action in district court to compel an inspection tour, and have the employer post copies of all citations.



o

At Adjudicatory Stage:  May file a notice of contest to the abatement period in the citation, elect party status in contests initiated by the employer, and seek judicial review of Commission decisions.

I.

Whirlpool Corp. v. Marshall (US S.C. 1980) a. Rule i. An employee may refuse to work in a hazardous environment where the employee reasonably believes the environment poses an imminent risk of death or serious bodily injury. b. Facts i. Factory had conveyors that ran above workers and carried appliance components. To prevent parts that occasionally fell from hitting employees, the company used a mesh wire to catch anything that fell. Workers had to clean this mesh wire of the debris it collected. Sometimes they had to step directly on the mesh (as opposed to the steel frame) and a few workers had fallen through and injured themselves. ii. The company admonished employees to only step on frame and started to install stronger mesh. The π’s tried to complain to management about the quality of the remaining mesh but nothing was done. They contacted OSHA as a result. The next day, they were ordered to work on a section of the old mesh and they refused. They were sent home without pay and reprimands were placed in their employment files. c. Decision and Rationale i. An employee has a right to refuse to work when he or she justifiably believes that a hazard exists and he or she must be free from any subsequent discrimination by the employer because of such refusal. Such a situation may arise when: 1. The employee is ordered by his employer to work under condition that the employee reasonably believes pose an imminent risk of death or serious bodily injury, AND 2. The employee has reason to believe that there is not sufficient time or opportunity either to seek effective redress from his employer or to apprise OSHA of the danger. d. Analysis i. This is OSHA’s self-help remedy. OSHA inspectors cannot be everywhere all of the time, so this puts it into the hands of the employee. It is not the Act’s intention to wait until an employee dies or becomes injured, this why OSHA promulgates regulations in the hope they will prevent deaths and injuries from ever occurring. For the same reason, OSHA allows an employee to avoid a hazardous workplace before an injury takes place. 1. Employee has to go through OSHA, though; they cannot sue their employer for a violation of OSHA. e. Notes and Questions i. There is a statute of limitations on these claims. If an employee believes they have been discriminated against, they have 30 days from the alleged discrimination to file. There is no private right to suit, and the Secretary’s determination about whether to proceed or not is unreviewable.

E. Enforcement and Adjudication

I.

Authority for Investigations – this can be divided up into four categories: a. Imminent Danger i. This often comes from employee reports b. When Investigating Fatality or Catastrophe

c. Specific Complaints d. Regional Programmed Inspections (random) i. This is usually reserved for high hazard jobs or workplaces where there are really a large number of employees. 1. Inspections



Marshall v. Barlow’s, Inc. (US S.C. 1978) o Rule  OSHA does not authorize warrantless inspections in contravention of the 4th Amendment’s guarantee against unreasonable searches and seizures. o Facts 

Under OSHA regulations, no search warrant or other process was expressly required to search an employer’s work area. A 3 judge district court held this to violate the 4th amend.

o

Decision and Rationale  Warrantless searches are generally unreasonable, both in the home and in the business place.  Requiring a warrant would not be a significant burden on OSHA.  OSHA tries to argue that there is an exception to the warrant requirement for “Regulated Industries.” However, this is a small excepion and only applies to industries that have historically been subject to governmental oversight – like guns and alcohol. Analysis  It is really not that hard for OSHA to get a warrant. They have ALJ’s in the same building as the one they work in.  To get the warrant, OSHA will need probable cause, but again, this is not very hard to establish, especially for high hazard workplaces.  Overall thoguh, OSHA does not usually abuse this warrant power. Notes and Questions  A warrant is not required under OSHA is the inspection comes under one fo the 3 relevant exceptions originally set out in Camara v. Municipal Court (US SC 1967): • Consent • Open View • Emergency  Scope of Warrant: • Majority of jurisdictions limit the scope of warrant to the specific area they were a complaint is alleged, unless they are able to make a showing as to why a broader search should be conducted.

o

o



Types of Things They Regulate o Blood-Born Pathogens  Cleaning crews in doctors offices can be hurt easily, so there are OSHA regulations for this o Smoke  State laws prohibit this  OSHA has not taken a position on this because it is too difficult to establish a standard – how much smoke in an area is subject to a series of variables. • Real reason it is not regulated is because it is never really job related. The chemical that is harmful is smoke is not related to the job. o Mold  OSHA only regulates “unnatural levels of mold” in the workplace because this is all the employer

can really control. Can’t prevent all mold growth, just artificially introduced levels of mold. It is really just based on what is normal in the area, there is no standard on parts per billion.

F. Non-OSHA Safety and Health



OSHA is not supposed to supersede other statutory rights of employers and employees. However, in reality, this has been a problem. One of the most contentious issues are the real (or merely alleged) conflicts between antidiscrimination laws and OSHA. o Public policy supports equal employment opportunities, but also support safe and healthful workplaces. In cases involving claims of discrimination based on disability, gender, and religion the courts have been called upon to decide how to balance these interests. International Union, UAW v. Johnson Controls, Inc. (US S.C. 1991) a. Rule i. Under Title VII, gender-based discrimination in employment conditions or opportunities must be based upon bona fide occupational qualifications (BFOQ). A BFOQ is a job qualification relating to the essence or central mission of the employer’s business. 1. Title VII, as amended, forbids sex-specific fetal-protection policies. b. Facts i. ∆ is a battery manufacturer that uses lead as a primary ingredient. The ∆ shifted its policy to prevent women who are pregnant or capable of becoming pregnant from working in jobs that exposed them to lead. Only if they had a doctor’s note saying they were infertile could they work there. c. Decision and Rationale i. ∆ policy is not neutral because it does not apply to the reproductive capacity of the company’s male employees in the same way as it applies to that of the females, and thus is sex discrimination under Title VII. The absence of a malevolent motive does not convert a facially discriminatory policy into a neutral policy w/ a discriminatory effect. 1. ∆’s policy classifies on the basis of gender and childbearing capacity, rather than fertility alone. The ∆ is not trying to protect the unconceived children of all its employees. 2. The policy is facially discriminatory b/c it requires only a female to present proof that she is not capable of reproducing. ii. In order to allow this type of policy, there has to be a BFOQ 1. To qualify as a BFOQ, a job qualification must relate to the “essence,” or to the “central mission of the employer’s business.” The unconceived fetuses of ∆’s female employee are neither customers nor third parties. 2. The safety exception is limited to instances in which sex or pregnancy actually interferes with the employee’s ability to perform the job. iii. Because Title VII bans fetal-protection policies, if the employer fully informs the employee of the risk, and the employer has not acted negligently, the bases for holding an employer liable is remote at best. iv. Congress also passed the Pregnancy Discrimination Act (PDA) as an amendment to Title VII – The PDA contains a BFOQ standard of its own: unless pregnant employees differ from others in their ability or inability to work, they must be treated the same as other employees for all employment-related purposes Chapter 9 – Disabling Injury and Illness (Worker’s Comp)

I.



Every state has a worker’s compensation system and they are all different. There is no comprehensive worker’s comp law except for in certain industries. These systems require employers to obtain insurance (from private companies in some states and a state fund in others) or to self-insure against the economic consequences of certain workplace injuries and illnesses. Purpose o Worker’s comp. is to be the exclusive remedy for workplace injury. So an employee can’t sue her employer if she injures herself at work – she has go through worker’s comp. o It is essentially a mandatory insurance program What is Required o Requires employers to provide cash benefits, medical care, and rehabilitative services for workers who suffer injuries or illnesses arising out of and in the course of their employment.  Cash benefits compensate for lost income and earning capacity and be classified in different ways: • Temporary total o Paid for injuries that prevent an employee from working until he or she is fully recovered. • Temporary partial o Paid during a period of reduced earning and cease when the worker returns to full wages or is found eligible for permanent total or permanent partial benefits. • Permanent total o Paid to workers who are completely disabled for an indefinite time. • Permanent partial o Paid where the employee suffers an impairment that causes a permanent but partial loss of wages or wage-earning capacity. • Death benefits o If fatally injured, employer must provide burial expenses and pay benefits to specified dependent survivors. o Some States also have a drug test requirement  When injured, the employee has to also be tested for drugs. If drugs are found in the injured employee’s system, he or she is not eligible for worker’s comp. Advantages of Worker’s Comp o Prior to worker’s comp, there is evidence that employees were winning a significant number of lawsuits against employers, although for small amounts. Employers were worried these awards would go higher and higher.  Worker’s comp. substituted a fixed and predictable compensation system for uncertain, potentially ruinous liability judgments. o This also removes one source of hostility from the labor-management relations. o It is supposed to be no fault. Disadvantages of Worker’s Comp o If the employer is grossly negligent there is no possible punitive function under worker’s comp. o Worker’s comp wages are not 100% anywhere. They are always less than full wages, although in most states they are not taxed. Important: o Injury or Disease HAS to arise out of or in the course of employment. So 1 defense would be that the injury or illness did not occur because of the worker’s employment.











B. Worker’s Compensation Coverage

1. “Employee”

I.

Eckis v. Sea World Corp. (Cal.App 1976) a. Rule i. When an employee is injured while performing acts beyond her normal duties, worker’s comp benefits may still be the employee’s exclusive remedy. b. Facts i. Π was a secretary at Sea World. She was asked to ride Shamu in a bikini for a promotional picture. She was not warned that Shamu was acting erratically or that he was more prone to bite people wearing bathing suits, as opposed to wet suits. ii. She was bit and seriously injured. Sea World paid her wages and hospital bills while she was out of work. The π also sued for negligence, fraud… and won a jury award. c. Decision and Rationale i. Reversed the jury verdict. ii. Worker’s comp benefits are not limited to injuries that occur whole the employee is performing the normal duties for which she was originally hired. If there are doubts about whether an injury occurred in the course of employment, it will be resolved in favor of worker’s compensation and against the employee’s right to sue. iii. Reasons this was in the course of employment: 1. She was Sea World employee 2. She was on Sea World’s premises, 3. She was engaged in an activity Sea World had requested, and 4. The activity was for the benefit of Sea World. d. Analysis i. This happened while the employee was doing something directed by the employer. Have to look at whether it was something that benefited the employer or was directed by the employer, or if the employer knew about it. 1. So a practical joke that one employee just chooses to play on another does not qualify under worker’s comp.

2. “Course of Employment”

I.

Perry v. State (Wyo. 2006) a. Rule i. When an employee is injured while she deviates from an explicit employment policy, her injury does not occur in the scope of her employment. 1. Worker’s comp benefits are not paid for injuries caused by knowing rules violations. b. Facts i. Π worked as a certified nursing assistant at a nursing facility. On her first day of work she got instructions on proper technique for lifting patients. These included “two-person lifts” for certain patients to ensure safety of both patient and employee. The π acknowledged receiving these. ii. One night a “two-person lift” patient needed to use restroom. The π called for help but no one was available. So the π moved the patient herself. In the process she injured herself. c. Decision and Rationale i. Π is not eligible for worker’s comp b/c she knowingly violated company policy.

ii. What is important in this case is that: 1. The company maintained a written policy 2. The π acknowledged her receipt and understanding of this policy. She was given training numerous times and had even been tested on it. 3. The employer did not knowingly accept the benefits of the π’s violation of the policy. 4. The π admits that she injured herself while violating the facility policy. d. Analysis i. Employer’s contest these types of things b/c it affects them going forward. Employers receive risk ratings and those ratings change based on how many claims are made. Additionally, insurance premiums for worker’s comp are tied to these risk ratings. ii. This case really goes to the policy – they had it, and she knew it. e. Notes and Questions i. Injuries sustained driving to and from work are usually not compensable because they do not arise out of and in the course of employment. C. Occupational Disease

1. Overview

• The disease that an employee develops has to be peculiar to the particular job or employment. This excludes all disease to which the public is generally exposed, unless it is a propotional issue – where it is significantly higher for workers in a certain line of work over the general public • These aren’t very litigated b/c they are difficult to prove and often don’t develop until many years after the exposure. There are also questions of degree – if an employee works for 4 different companies and is exposed to the same chemical at each place, who would be liable. 2. Burden of Proof

I.

Guess v. Sharp Mfg. of America (Tenn. 2003) a. Rule i. An injury is compendable under worker’s compensation only if it arises out of and in the course of employment. 1. An employee’s fear of contracting AIDS was not compensable b. Facts i. Π works on assembly line for ∆. One day a co-worker cut his hand and got blood on the π. She had just gotten a manicure so she reasoned that she had gotten his blood in hers. She believed her co-worker had HIV b/c he was thin, had friends who died of AIDS, was often sick, etc. She was tested 5 times for HIV and each time came up negative, but still suffered psychological injuries from the experience. She sued for worker’s comp. c. Decision and Rationale i. The injury has to have a rational connection to the employee’s duties. Mental disorders unaccompanied by physical trauma are compensable only if it results from “an identifiable stressful, work related event that produces a sudden mental stimulus such as fright, shock, or excessive unexpected anxiety.” Mere worry or general emotional stress is insufficient. ii. There is no causal connection between the π’s mental disease and what occurred at work – there is no reasonable basis for this reaction to what happened at work. d. Analysis i. In high stress jobs, you have to look at whether the company took steps to ameliorate the stress.

1. In this case, the company paid for multiple AIDS tests. D. Determining Benefit Levels

1. Impairment and Disability



Permanently Disabled o Issue: Can you get other work. Is there another job or type of work that you can work in. Turner v. American Mut. Ins. Co. (La. 1980) a. Rule i. Odd Lot Doctrine: An insured employee is entitled to total, permanent disability compensation if the employee canot perform any services other than those which are so limited in quality, dependability, or quantity that a reasonably stable market for them does not exist 1. Injured employee seeking total permanent disability benefits is not required to prove that he cannot perform any jobs. b. Facts i. Π was a mentally retarded employee who worked as a log cutter. He broke several bone in his foot on the job and they did not heal well. He lost all the motion of his big toe and 50% of the motion of the other toes. He attempted to go back to work but was in too much pain. c. Decision and Rationale i. When there is no actual job available for a person near his residence, that person is entitled to permanent disability compensation. ii. If a worker establishes that he fits into the “Odd Lot” category, he is entitled to perm. disability unless the employer can shows that some actual form of suitable work is regularly and continuously available within reasonable proximity to the employees residence. iii. This π had an IQ of 64 and now a physically disabling injury. He is not going to be able to hold and sustain regular employment – he does not have to show that his injury deprived him of absolutely all earning capacity. This is enough to establish a prima facie case. Now it is up for the employer to show that there is work available and for a jury to decide. d. Analysis i. Once the healing process ends, the employee is no longer entitled to temporary benefits and must request permanent partial or permanent total disability benefits, depending on the degree of the injury. ii. Under the “odd-lot” doctrine, employees may be considered totally disabled even if the employee could perform jobs that are sporadic or in unrecognized branches of the labor market. e. Notes and Questions i. Lots of employers will try to “create” jobs for employees that go on workers comp just so they can get them off it. It is better to pay a person to work than to do nothing at all. However, this can’t always be done for some people, like the π in this case. ii. Term “odd lot” come from idea that employee is being left as an odd lot on the market, and it is the employers duty to show that some customer (or other employer) would be willing to take him.

I.

2. Rehabilitation and Other Services

I.

Stone Container Corp v. Castle (Iowa 2003) a. Rule i. A laptop computer that increases an injured worker’s access to the outside world, which has been significantly limited by his injuries, is a compensable “appliance” under state law. b. Facts i. P suffered severe injuries that severely limited his physical mobility. He was given a laptop by workers comp insurer and it allowed him to take college courses and communicate w/ the outside world. When it broke, he requested his employer replace it, they refused. c. Decision and Rationale i. This must be provided by employer under workers comp b/c of state law requiring compensable appliances be paid for by the employer. Under state law, an appliance is compensable if it replaces a function lost as a result of the workplace injury; it does not need to relate to medical care or physical mobility. d. Analysis i. She didn’t cover this case during the lecture.

3. Disputed Claims





When an injured worker files a claim, the employer or employers insurer can dispute it on one of two grounds: o Injury is not compensable  It can often be difficult to prove that an injury or illness arose out of and in the course of employment. o Admit liability, but challenge the extent of disability caused by the injury  Medical records are often incomplete, inconclusive, or incorrect. Also some forms of pain are totally subjective, like back pain and no medical record is going to be able to help quantify what it is worth. Medical Benefits o These are separate from disability benefits. So even if a person misses no work time and suffers no wage loss, they are entitled to have their medical expenses covered.

4. Waste, Fraud, and Abuse in the Worker’s Compensation System

• •



Fraud is a big problem in workers comp. Workers comp was supposed to simplify the system and take care of the problems, but it has failed to do that. It is still heavily litigated and roughly 40% of payments go to just administrative expenses. Fraud takes place quite often. Workers who are laid off might file claims b/c under workers comp they will at least get paid instead of getting nothing. It is really not that hard to get a Doctor to say whatever you want them to say. o In fact in CA, there are doctors who place ads to get people to come to them so they can give them an evaluation and them recommend them to an attorney. Many of these evaluations contain false injuries. If there is no valid injury, the employee can be liable under tort law. To prevent this, most employers have investigation departments that research these types of claims.

F. Tort Actions and “Exclusivity”

• •

Worker’s comp is supposed to be the exclusive remedy for workers, but there are certain exceptions. If an employee can get an award for a tort action it is usually much larger than what they could have gotten from worker’s comp. Tort actions add uncertainty, and costs to the process, however. There are 2 classes of exceptions: Actions against the employer, and actions against 3rd parties.

1. Action Against the Employer a. Dual Capacity

I.

Weinstein v. St. Mary’s Med. Ctr. (Cal.App 1997) a. Rule i. Hospital employee injured at hospital while there for treatment from an earlier work-related injury may sue the hospital in tort action. 1. Under the doctrine of dual capacity, an employee may recover in tort for aggravation of a work-related injury against an employer acting in a capacity other than as an employer when the aggravating injury occurs. b. Facts i. Π is an employee at hospital and injured her foot while working. She stopped working for a time and took temp. disability and medical payments. A couple months later, she went back to hospital for treatment for same injury and slipped on wet floor and reaggrevated the injury. ii. She sued for compensatory damages. c. Decision and Rationale i. Dual capacity doctrine is an exception to the exclusive remedy of worker’s comp. Under the doctrine, an employee may recover in tort for negligent aggravation of an initial work-related injury against an employer who assumes the capacity of medical care provider by undertaking to treat the employee’s injury itself. This is based on distinction b/t the duties of an employer to an employee, and those of a hospital to a patient. ii. Here she was not acting as an employee. d. Analysis i. Dual capacity doctrine is the minority rule. ii. And this is pretty much exclusive to the medical industry.

b. Willful and Intentional Torts



In every jurisdiction worker’s comp is the exclusive remedy only for “accidental” injury or illness. So worker’s comp does not bar actions for assault and battery. However, courts traditionally require a plaintiff to prove that the employer had a specific intent to injure. Willful misconduct is an area in between accidental and intentional. This is addressed in the Mandolidis case. Mandolidis v. Elkins Indus., Inc. (W. Va. 1978) a. Rule i. When an employer’s reckless misconduct causes injury to an employee, the employee may sue the employer in tort. b. Facts i. Π was a machine operator who cut off 2 of his fingers while using a saw at work. The saw did

• I.

not have a guard as required by statute. Also, the employer knew others had been hurt as a result of not using the guard, and had fired people for refusing to use the saw w/o a guard. The employer didn’t want the guard on because it slowed down production. c. Decision and Rationale i. Worker’s comp only applies to negligence. This was not negligence. ii. There has to be a violation of a law though for it to become willful or deliberate. In this case, not having the cover violated the statute. d. Analysis i. This is a very specific exception and is actually the minority view. Most courts require the employee to prove that the employer had actual intent to injure the employee. e. Notes and Questions i. A more typical example of how this case would come out in the majority of states is Grillo v. National Bank of Washington: Tellers requested bullet-proof glass but bank refused. Teller was then killed during robbery, but court held that workers comp was still exclusive remedy.

2. Actions Against Third Parties



Because exceptions to worker’s comp are so limited, employee often go after 3rd parties. There are 3 lines of cases: o 1. Actions may be brought against other employers that are not so closely connected with the primary employer as to be “co-employers” o 2. Actions have been brought against insurance companies, labor unions, and gov’t agencies alleging that the negligent performance of a safety and health inspection at the worker’s place of employment was the proximate cause of injury or illness.  About ½ the states permit actions against insurance companies.  Actions against Unions are rarely successful o 3. Products liability suits – suits brought against the manufacturers of defective products that caused an injury or illness in the workplace.  This is by far the most important 3rd party action York v. Union Carbide Corp (Ind App 1992) a. Rule i. A manufacturer has no duty to warn or train its customers employees b. Facts i. Π died during a procedure to reline the brick interior of the steel plant he worked at. Argon gas that normally pumps into the chamber π worked in was disconnected, however, became reconnected undetected. The workers tested the chamber areas oxygen level incorrectly before the π went in, and it read that it was safe to enter. However, when he entered the chamber he was asphyxiated and died. ii. His family is suing the supplier of the Argon gas for products liability for not warning and training the employee’s of the steel comp. c. Decision and Rationale i. There has to be a breach of a duty in order to go after the manufacturer for products liability. But the manufacturer does not owe a duty to the employees of the steel company. Their duty is to the actual employer. ii. This case is not preempted from state law by OSHA: 1. The Federal Hazard Communications Standards (FHCS) were promulgated under OSHA to ensure that info regarding chemical hazards are communicated to employers and employees. However, OSHA’s “savings clause” provides that any laws enacted under its

I.

authority do not affect worker’s comp laws or any other laws regarding employmentrelated injuries – thus the FHCS does not preempt the π’s claims. iii. The supplier had no duty because there was no defect in the product. The argon was never intended to be released into the chamber like it was, therefore the argon was not defective. iv. The supplier had no duty to train the steel company employees on how to test for oxygen levels because the gas supplier did not provide the oxygen testing equipment. Furthermore, the gas supplier has no duty to train its customers’ employees. d. Analysis i. Employees often try to get more money than what is offered from worker’s comp and 3rd parties provide that opportunity. Insurance companies are commonly targeted. The theory of those cases is that insurance carriers often perform health and safety inspections of the employer’s premises. Injured employees allege that the insurer’s inspection was negligent, thereby causing the injuries. ii. Upshot: You can’t go after any manufacturer if they don’t have a duty to you e. Notes and Questions i. What could cause manufacturers to have duties in this case: State legislature could make them have a duty to warn, then when this is not met, the manufacturers actions become willful and deliberate and rise above mere negligence. ii. Asbestos Cases: 1. These are the most important products liability cases. The principal theory of π’s is that the manufacturers knew that asbestos was dangerous but failed to warn the users. This has worked and cases against asbestos manufacturers show no signs of letting up. II. Obstacles to Tort Recovery for Occupational Disease a. Employer Immunity i. The employer, who may be the most culpable, is normally immune from suit under the exclusive remedy provisions of worker’s comp. b. Statutes of limitations i. These statutes operate differently all over the place. They use different methods in determining when the action “accrues” for the purpose of starting the clock. c. Burden of Proof i. Many π’s cannot meet the burden of proof. Even though a defendant is held out as an expert in its field, π’s may not be able to show that knowledge of the risks was reasonably available at the time of manufacture, many years before the illness. d. Unknown Defendants i. Plaintiffs may not know who produced the toxic substance to which they were exposed. Many workers don’t even know the names of the chemicals they were exposed to, much less the manufacturer. e. Delay i. Plaintiffs who need money desperately b/c of death or disability are often induced to accept relatively low settlements rather than litigate for years. 3. Effect of OSHA Standards

I.

Teal v. E.I. DuPont De Nemours & Co. (6th Cir. 1984) a. Rule i. Independent contractor’s employee can sue for negligence per se based on an OSHA violation 1. An employee of an independent contractor is a member of the class of persons OSHA was intended to protect, and, therefore, can sue for negligence per se. b. Facts i. Π was an employee of an independent contractor who was doing work for the ∆ company. While π was working at ∆’s jobsite, he fell off the ∆’s ladder and injured himself.

ii. There was an OSHA regulation that required the ladder to meet certain specifications, but the ladder did not meet these. The π claimed that violation of the OSHA reg was negligence per se and wanted a jury instruction but the trial court ruled that the OSHA regulation may only be considered as some evidence of the standard of care. c. Decision and Rationale i. This worker is a member of the protected class b/c the court reads OSHA to impose 2 duties on employers. A general duty to each of their employees, and also a specific duty to protect all employees at a jobsite that they control, including employees of independent contractors. d. Analysis i. Most jurisdictions would agree w/ the trial court that OSHA regulations are only some evidence of the Standard of Care. ii. The last 2 cases show the courts willingness to allow a π to make a claim. In the York case the court ruled that OSHA did not preempt an employees claim, and here the court is using OSHA to enable an employee claim. G. Social Security Disability Benefits



Social Security Disability o If a person becomes disabled away from the job but are no longer able to work, they can apply for and receive Social Security Disability (SSD). o This is literally the end of the road for a person. This does not cover medical expenses. Barnhart v. Thomas (US S.C. 2003) a. Rule i. The Social Security Administration need not consider whether a claimant’s previous works is available in significant numbers in the national economy before making a disability determination. 1. A disabled elevator operator who could have done her previous job, it is existed, was ineligible for benefits. b. Facts i. Π was employed as an elevator operator until the position was eliminated. She filed for disability and it was determined that she did suffer from physical and mental conditions, but that she was still able to perform the functions of an elevator operator. ii. She was denied benefits. c. Decision and Rationale i. The Soc Sec Admin does not have to investigate whether or not the previous work is available. ii. Under the Soc Sec Act, a person qualifies for disability benefits and Supplemental Security Income is he suffers a “disability.” A person is disabled “only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work, but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy” 1. There are 2 Questions here: (1) can the person do the previous work; and (2) is she so disabled she cant engage in any other substantial gainful work. a. “Which exist in the national economy” only modifies the 2nd of these. The SSA does not have to determine whether the previous job exists anymore. iii. For the π to win: 1. Prove he is working at a “substantial gainful activity” 2. Suffers a “severe impairment” which significantly limits the claimants physical or mental ability to do basic work activities 3. SSA will determine impairment claimed is on list of covered impairments

I.

4. If not on the list, claimant must prove he is nonetheless unable to do his previous work 5. SSA considers claimants age, education, and past work history, to determine whether the claimant is capable of performing other hobs existing in significant numbers in the national economy. iv. In this case, the π could not prove that she was unable to do her previous job b/c she could do it – she did it until they eliminated the position. d. Analysis i. 2 Questions: If the person can do their current job, there is no need to go on to the second question. The definition of disability was the key to this case

TERMINATING THE EMPLOYMENT RELATIONSHIP DISCHARGE  Class Notes:  Most employees are At-Will- employment can be terminated by employer at any time, without notice, and for no reason; an employee can also quit at any time, without notice, and for no reason.  2 weeks notice is the general courtesy rule, but it is not required.  Look at whether an employee is at will, contract, or collective bargaining; you are an employee at will unless you can rebut that presumption by showing you have an employment contract or a collective bargaining agreement. Statutory Protection of Employees Whistleblower Laws o Curtail employer rights to dismiss an employee for reporting the employer’s unlawful conduct. o The Whistleblower Protection Act of 1989, 5 U.S.C. § 2301(b)(9), expanded protection for federal employees who expose violations of law, gross mismanagement or waste of funds, abuse of authority, or substantial and specific danger to public health or safety in government agencies.  Under the federal act, “No employer may discharge, threaten or otherwise discriminate against an employer regarding the employer’s compensation, terms, conditions, location or privileges of employment because…the employee, acting in good faith…reports orally or in writing to the employer or the public body what the employee has reasonable cause to believe is a violation of a law.” o Most states have enacted some form of statutory whistleblower protection, but the scope of protected activity varies by jurisdiction.  Bard v. Bath Iron Works Corp. (Me. 1991) Rule: Mere suspicion that an employer is violating the law does not support a claim for retaliatory discharge. Facts: (P-employee) Bard was an inspector in the quality assurance department for Bath

Iron Works (D -employer), and was responsible for inspecting shipping documents and test reports accompanying incoming steel shipments. P discovered perceived flaws in D’s quality assurance process and feared that these flaws violated the company’s contractual duties with the Navy. He expressed these concerns to supervisors and Navy officials. Near the same time, P began receiving negative performance reviews, salary increases stopped, and he was eventually fired for “deliberately restricting work output and creating a nuisance. P filed for reprisal under the Whistleblower’s Protection Act. Decision: Judgment for D-employer. Rationale: To establish a prima facie case for reprisal, P must establish 1) that he engaged in an activity protected by statute; 2) he was the subject of an adverse employment action; and 3) there was a causal link between the protected activity and the adverse employment action. The court says P failed to make a prima facie showing because he failed to demonstrate a reasonable cause to believe that D was engaged in illegal activity (only his fear that some law was violated because of possible contract violations).

Constitutional Protections  In addition to statutory protections, federal and state constitutions can also limit the ability of employers to discharge at-will employers.  Goetz v. Windsor Central Sch. Dist (2d Cir. 1983) Rule: A public employee may not be deprived of property or liberty without due process of the law. There is not a protected property interest in cases where there is merely a unilateral expectation on the employee’s part of continued employment. Facts: The school district (D) fired Goetz (P) when he was suspected of stealing. P sued the school district claiming he was deprived of a property and liberty interest without due process of law. Holding: 1) The right to continued employment is not a property right; so an employer can deprive an employee of his employment with due process. The court determined that Goetz was an at-will employee—and this status determines whether he had a property interest in continued employment. 2) A liberty interest might be implicated when an employer disseminates defamatory information about an employee in connection with the employee’s termination. The court holds that there is a question of fact regarding whether D disseminated the information, and that if P was deprived of a liberty interest, he may be entitled to more due process than was offered.  NOTES:  Protected property interests: Courts look to statues, collective bargaining agreements, implied or express contracts, and employee handbooks to determine whether the employee has a protected property interest. If he does, the state may not deprive the employee of that interest without procedural due process.  Liberty Interests (Defamation): Based on the interest in an individual’s good name and freedom to work. Implicated where an employer creates and disseminates a false and defamatory impression about an employee in connection with their termination. The Supreme Court has held that stigma alone resulting from defamatory statements is insufficient to invoke the liberty interest protection of the due process clause unless it accompanies discharge. The 5th Circuit has required a strict showing that 1) employee was stigmatized in the discharge process where charges made against employee seriously changed his standing in the community or foreclosed his freedom to take advantage of other employment; 2) the charges were false; 3) they were made public; and 4) employee was denied a meaningful name-clearing hearing.  Procedural Due Process: This usually means that, before being fired, or even before being subjected to undesirable job changes, the employee must have notice of the charges against him and an opportunity to be heard. Notice may be

either oral or written and must generally describe the charges against the employee and the supporting evidence, the employer’s intention to fire employee on a certain date, and provide the employee with an opportunity to be heard. The pre-termination hearing does not have to be a full evidentiary hearing, but enough to resolve whether reasonable grounds exist to believe that the charges are true and support termination; the hearing officer need not be impartial. However, a post-termination hearing must have a fair and impartial tribunal. Statutory Contracts—the Montana Exception  Montana is unique among the 50 states in its statutory requirement of just cause for termination. Wrongfully discharged employees may be awarded up to 4 years’ lost wages and benefits, as well as punitive damages in limited cases.  Marcy v. Delta Airlines (9th Cir. 1999) Rule: Under the Montana Wrongful Discharge From Employment Act, it is irrelevant that an employer acted in good faith in terminating an employee if the employee shows the proffered rationale for the termination (1) is invalid as a matter of law under the Act; (2) rests on a mistaken interpretation of the facts; or (3) is not the true reason for discharge, i.e., a pretext. Facts: Delta Airlines (D) fired an employee (P) for claiming hours not actually worked without thoroughly investigating the facts prior to the termination. Although P was considered an “outstanding employee” by Delta, Delta claimed that P’s payroll mistakes were an attempt to defraud them. P maintained that the mistakes were unintentional and told her supervisor that a co-worker could vouch for her version of events. D never investigated. Holding: Upheld jury’s decision in favor of P, employee. Under the Montana Statute, an employer must have a “legitimate business reason” for termination and an employee can prove wrongful discharge by meeting any of the prongs above. Here, P claimed that the rationale for her firing was based on a mistaken interpretation of the facts. The court finds that P offered sufficient evidence for the jury to find in her favor. Contractual Exceptions to At-Will Employment Breach of Contract  States (other than Montana) have generally maintained a rebuttable presumption in favor of at-will employment. However, employers and employees are free to contract around the at-will presumption. Written Contracts  General Rule: If the contract is for a definite term, the employee may be discharged before the expiration date only for breach of a contractual provision or other “good cause.” When the employee establishes that he or she was discharged in violation of an employment contract, the burden of proof shifts to the employer to prove the existence of good cause for the discharge.  States are split over how specifically an employment’s contract’s term must be expressed in order to take it out of the at-will category. For instance, some courts have held that a contract setting forth an annual salary provides a contract for one year (a presumption which might be overcome by reference to an at-will relationship in the K); some courts hold that an employee handbook that describes expected employee performance creates a cause standard. However, employers may include language in their handbooks disclaiming any promises for anything other than at-will employment.  Gordon v. Matthew Bender & Co. (N.D.Ill. 1983) Rule: A contract with no definite period that requires “satisfactory performance” is still an at-will employment contract. Facts: (P-employee) Gordon worked for (D-employer) Bender as a law book sales rep in a large territory including Chicago and surrounding areas. The employment agreement did not include a definite term of employment. For 7 years, P met or exceeded sales

goals. At that point, however, his sales territory was reduced and he received notice of probation and a warning that he would be “restored to the same status of acceptable sales performance as other representatives” if he achieved the same sales figures as before (in the larger region). P did not meet the goals and was fired. Decision: For D- employer, motion to dismiss was granted. Rationale: P claimed that the probation letter created a contract for continuous employment conditioned upon acceptable sales performance. P relied on Scaramuzzo v. Glenmore Distilleries [employment contract that sets conditions upon which termination may be based is terminable only upon existence of conditions], where the employer promised employee that he would be fired only for good cause. The court in that case held that the contract was not terminable at will, but only for good cause. Scaramuzzo is distinguished, however, because “good cause” as applied in Scaramuzzo was an objective standard. In the instant case, “acceptable performance” is subjective. Also, a condition of satisfactory performance could be implied in every employment contract—to do so would eviscerate the at-will doctrine.  Note: A contract without a stated duration is generally terminable at will by either party. When a fired employee sues and alleges that the employer breached the contract, the employee must first prove that an enforceable contract term exists. This is where Gordon (P) failed to meet his burden.  NOTE CASE RULES:  When an employer notifies an at-will employee that the terms of employment are being changed, such as a reduction in salary, the employee has the option of accepting the new conditions or resigning. However, if the employee continues working with knowledge of the changes, he has accepted the changes as a matter of law.  Scribner v. Worldcom, Inc. (9th Cir. 2001) Rule: An employer may retain the right to interpret employment contract terms, but may not effectively rewrite or re-define these terms in a way that undermines the employee’s legitimate expectations under the contract, no matter how much discretion the employer is granted by the contract language. Facts: (P-employee) Scribner was terminated because his position was eliminated due to the sale of his entire division. According to the employment contract, P’s stock options would vest if he was terminated “without cause;” however the contract did not define what constituted “with cause” or “without cause” and gave the employer great discretion in making a binding determination. (D- employer) Worldcom, hoping to avoid the vesting of the employee’s stock options, determined that P was terminated “for cause.” Decision: Summary judgment in favor of P- employee. Rationale: Language is not infinitely elastic. The court looks to the specific language of the contract, the facts of the case, and general contract interpretation as set forth by state law, and determines that “termination with cause” can only mean termination for deficient performance. Although D had broad discretion to construe the contract, it had a duty to exercise its interpretive duty in good faith. D did not retain the power to re-define the term “cause” in a way that would undermine P’s justified expectations as to what the word meant. If you don’t define a term, the court is mad and jury’s are made up of employees. (employment law is people law!)  Note Cases:  Fields v. Thompson Printing Co (3rd Cir. 2004): An employment contract said the K was non-terminable by the employer, and that upon termination of the company president (Fields), all of the benefits should continue in accordance with the K. Fields was fired after 3 sexual harassment complaints. Held: Employer still required to pay benefits. Rule: Employers may separate an employee in violation of written K terms, but cannot simply refuse contractually provided benefits.

 Towson Univ. v. Conte (Md. 2004): Held that the employer prevails if it is genuinely believed that plaintiff was incompetent or willfully neglectful of duties, and that whether or not he was actually incompetent is irrelevant. Rule: The proper question for judicial determination is whether the employer acted in objective good faith (if termination as based on any arbitrary, capricious or illegal reason). Contracts Implied from Conduct o Most employees have no individual written contract which sets out specific terms of employment. In seeking a contract analysis solution to the problem of unfair terminations, courts often have to look beyond the express terms of the contract to the implied ones. o These implied terms may arise from statements in employment handbooks, oral representations, the nature of the employment, the employer’s past practices, the course of dealing between the employer and the employee, the custom in the industry, and the longevity of the employee’s service.  Pugh v. See’s Candies, Inc. (Cal. App. 1981) Rule: An employment contract that is terminable only for cause may be implied-in-fact. Facts: (P-employee) Pugh worked for (D-employer) See’s Candies for 32 years, and received many promotions and commendations for his work over the years. When he first started, the then president of the company told D that if he was loyal to D and did a good job, his future would be secure. The company also had a practice of not terminating administrative personnel except for good cause. Upon return from a business trip, P was fired without warning or explanation. Decision: For P. D’s nonsuit was reversed. Rationale: The employment at-will presumption is subject to contrary evidence, such as an agreement that the employment will continue indefinitely unless there is some cause for termination. A contract that limits an employer’s right to terminate is enforceable even if the employee is not similarly limited in quitting the employment (mutuality of obligation not required). Also consideration in addition to the employee’s services is not required in order to impose a limit on an employer’s ability to terminate an employee. Based on the totality of the facts described above, the court reasoned that the jury could have determined the existence of such an implied promise. Remanding the case, the court gave the following guidance: 1) Once P demonstrates a prima facie case of wrongful termination based on breach of K, 2)D has the burden of coming forward with evidence regarding cause, then 3)P may attack D’s explanation and ultimately bears the burden of proving he was wrongfully terminated. “Good cause” means a fair and honest reason regulated by good faith. Also, employers must be afforded some deference in their managerial discretion.  Notes: Most courts hold that the longevity of service alone is not sufficient to establish an implied promise of continued employment. However, many courts have enforced employer’s oral promises (to not terminate, to continue benefits after layoff, or for at-will re-employment after corporate restructuring).  Courts look very hard to find protection for employees in these cases. Simple longevity doesn’t do it, but longevity+ promotions and good reviews may encourage a court to step in and protect the employee. Modification of Contracts—Employee Handbooks  A number of courts have responded to the employee’s claims that unilaterally issued personnel manuals can create binding obligations on employers.  Woolley v. Hoffmann-La Roche, Inc. (N.J. 1985) Rule: An employment manual may create an employment contract that is terminable only for cause. Facts: After working for a month, P employee received an employee manual—5 pages were devoted to types of termination; it did not include a category for discharge without

cause; and it included a detailed procedure to be used before an employee could be fired for cause. P was fired without cause. P claimed the express and implied promises in D’s manual created a contract under which he could be fired only for cause after the procedure was followed. D claimed the manual was just an expression of employer’s “philosophy” and did not create a contract. Holding: Remanding, the court says that the manual should be considered binding unless there is a clear and prominent disclaimer saying otherwise. The court looks at the context in which the manual was disseminated and determines that it could reasonably give the impression that D intended it to be binding: it applied to all employees, and was carefully prepared and looked official. The fact that D could change it does not mean it wasn’t binding. It was a unilateral contract and is supported by consideration (the employee’s continued work when they have no obligation to continue). The manual’s lack of definiteness on other terms such as wages and hours does not prevent enforcement of the job security provision.  NOTES:  Disclaimers: Employers may easily disclaim any promises in their manuals by prominently and unequivocally disclaiming them or by stating that the employment remains at will. Courts have upheld disclaimers included in employment applications and on separate forms that must be signed by the employees.  Offer: To be enforceable as an offer, a manual must be adequately communicated to employees—if all of them automatically receive the manual, the offer is adequately communicated. However, often only supervisory employees are given manuals, and lower employees may not be able to maintain breach of manual claims.  Acceptance: Most courts do not require that the employee actually read and rely on the manual—courts presume reliance.  Modification: The court here expressed no opinion about whether modification may adversely affect a binding job security provision. Some courts have held that once an employee has “accepted” a promise of job security by continuing to work after receiving the promise, the employer may not revoke it. Other courts have allowed employers to revoke the promise in keeping with the fundamental fairness of the manual exception to the employment at-will doctrine. Other courts have held that employers may revoke the promise only after providing reasonable notice.  Russell v. Board of County Comm’rs (Okla. 1997) Rule: Employee handbooks can be binding employment contracts. An employer’s intent to disclaim the provisions of a handbook must be clear, and its actions in furtherance of the provisions must be consistent with its stated disclaimer. State Law at Issue: Under Oklahoma law, an employee handbook forms an implied employment contract only if 1) the parties are competent, 2) the parties consent to its terms, 3) there is a legal object, and 4) the parties have given valuable consideration. Facts: 10 deputy sheriffs filed a breach of contract action against the Board of County Commissioners (D-employer) seeking payment of overtime pay. The P’s alleged that the D established and published uniform policies governing county employees in a handbook that demonstrated the policy of paying overtime, and that the handbook formed a contract. D argued that the handbook did not form a contract, and it disclaimed promises by purporting to be only a “working guide” for employees. Decision: case remanded for trial; could not be determined by summary judgment. Rationale: In order to create an implied K, the promises made in the handbook must be definite and may only alter the at-will employment relationship with respect to accrued benefits. Likewise, an employer’s intent to disclaim the provisions of an employee handbook must be clear, and its actions in furtherance of the provisions must be consistent with its stated disclaimer. Failure to so act negates the stated disclaimer. Here, there are conflicting inferences: while the handbook disclaims contract formation, it provides for overtime pay to law enforcement and sheriff’s have received overtime pay

under the handbook’s policies in the past. This presents material fact questions as to whether the D’s conduct negates the disclaimer and must be considered by a fact-finder.  Notes: If you have a progressive discipline policy, you must also explain when it is not going to apply. You should have a statement in the policy explaining that the management, at its discretion, may choose not to use the discipline policy. Good Faith and Fair Dealing  One major approach used by courts to address a wrongful discharge in the absence of express contractual rights is to find a covenant of good faith and fair dealing implicit to the employment contract.  Good faith and fair dealing obligates each party to the K to refrain from injuring in any way the other’s right to receive the benefits of the K.  It is a mutual requirement—both on the employee and employer.  Fortune v. National Cash Register Co. (Mass. 1977) Rule: There is an implied covenant of good faith and fair dealing in employment at-will contracts. (MINORITY RULE)** Facts: At will employee (P) was fired as a salesman by employer (D) right before he became entitled to receive a substantial commission. Employer gave P’s commission to an installation guy even though it usually only gave commissions to the sales men. P claimed that, even though his employment was at will, D breached the employment contract by firing him in bad faith. Holding: For (P) employee. The court reasoned that although an employer is entitled to a great deal of latitude in controlling its work force, where commissions are to be paid for an employee’s work, the employer’s decision to terminate the employee must be in good faith. There is evidence of a bad motivation here—to pay P as little of the bonus he earned as possible. Under agency law, a principal acts in bad faith when the principal seeks to deprive an agent of all compensation by terminating the relationship when the agent is on the brink of successfully completing a sale.  Kordek says this is an example of bad facts making bad law.  Note: While most states imply the covenant in non-employment Ks, they reject it in employment Ks because they are concerned that it is too vague and takes away control from the employer. They view the covenant as a way to impose a just cause requirement where the employment is only at-will. However, in most cases where the covenant is implied (including this one), it was used to protect benefits an employee had already earned, rather than to create job security.  Therefore, the courts that do imply the covenant, hold that it is designed to fulfill the parties’ reasonable expectations such as receiving commissions or vesting in a pension plan, but that it does not impose a good cause standard on an at-will relationship. Tort Exceptions to At-Will Employment Good Faith and Fair Dealing Revisited  Cleary v. American Airlines (Cal Ct. App. 1980) Rule: The Cali court held that the covenant of good faith and fair dealing applies to all contracts, and that a wide range of employer actions may give rise to an “implied promise by the employer not to act arbitrarily in dealing with its employees.” This covenant gave rise to both contract and tort causes of action. In this case, the court allowed both compensatory (K) and punitive (tort) damages.  Note: In the following case, the Cali Supreme Court retreated from this position, holding that the good faith covenant does not apply to every employment relationship, only those where there is an express contract.  The Cleary case still stands for the rule that employers must follow company procedures before discharging employees.  Foley v. Interactive Data Corp. (Cal. 1988) Rule: In (Cali) employment actions, tort remedies are not available for breach of the

implied covenant of good faith and fair dealing. Facts: Foley (P) was fired when he reported to is employer, Interactive Data Corp (D), that the FBI was investigating another employee for embezzlement from his former employer. Foley (P) sued (D) for tortious breach of the implied covenant of good faith and fair dealing. Holding: This case ended the California's practice of allowing bad faith breach claims. Rationale: Contract actions enforce the intentions of parties to an agreement, while tort actions vindicate social policy. The covenant of good faith and faire dealing arises from K in order to make a K’s promises effective. K law promotes commercial stability and compensates aggrieved parties rather than punishing breaching parties. The covenant arose under K law as a safety valve for filling gaps. Tort remedies are available in insurance Ks because the interests between the parties are fundamentally at odds and the employee has more bargaining power in K than the insured. So, Cleary’s reliance on the insurance K analogy is misplaced.

 Notes: While the majority in Foley did not eliminate the cause of action for a
violation of the covenant of good faith and fair dealing, it undercut the vitality of litigation in the area by restricting remedies to contract damages. This means that in Cali, the EE cannot recover emotional distress damages or punitive damages under this cause of action.  Majority’s reasoning is questionable- while the employee has strong bargaining power when unemployment is low, employees are desperate when the economy is bad  inequality of bargaining power. Also, low-level employees are more fungible and have little bargaining power at all.  Guz v. Bechtel Nat’l, Inc. (Cal. 2000) Facts: At-will employee (P)sues for breach of implied K and breach of implied covenant. He was fired from a position he held for many years, after receiving steady raises and promotions and after having good performance reviews. Decision: For employer (D) on both claims. Rules: 1) An otherwise at-will employment arrangement can include an implied contract arising from the parties’ conduct evidencing their mutual intent to create enforceable limitations. However, mere passage of time, regular promotions, favorable reviews, praise, and salary increases do not, alone, imply a contractual arrangement.  This is because such events are a part of the normal course of things in a wellfunctioning employment relationship and thus have no special tendency to create an implied K restricting the parties’ rights. Such a rule would discourage retention and promotion of employees. 2) An employee may not rely on the covenant of good faith and fair dealing, implied in every contract, to add terms to an employment contract.  Here, the employee tried to claim both a breach of the employment K and a breach of the implied covenant.  In order for there to be a breach of the implied covenant, there must first be a breach of K—if there is no breach in the first instance, there can be no bad faith breach.  In employment law, an implied covenant theory affords no separate measure of recovery, such as tort damages—there is no tort for “bad faith breach.” Public Policy The primary justification of this tort is that regardless of the terms of discharge established between the contracting parties, certain discharges harm not only the wronged employee but also third parties and society as a whole in ways contrary to established norms of public policy. The tort of retaliation in violation of public policy forced employers to internalize the harm their behavior causes third parties and society and
o

thereby encourages behavior consistent with established norms of public policy. o States have statutes that defining public policy issues. If not then it is governed entirely by common law. o In Virginia, public policy is limited to the violation of statute. Some states will argue that public health and welfare is a public policy.  Most cases regarding public policy cover one of the following categories: i) refusing to perform an illegal act, such as committing perjury; ii) whistle-blowing; iii) exercising legal rights, such as filing a workers’ compensation claim; and iv) performing a public duty, such as serving on a jury. Legal Duties  Gantt v. Sentry Ins. (Cal. 1992) Rule: (In California) In actions for wrongful discharge based on violation of public policy, the public policy must be based on constitutional or statutory provisions. Facts: Sentry Insurance (D) constructively discharged Gantt (P) through demotions because Gantt refused to testify untruthfully or to withhold testimony regarding a coworker’s sexual harassment allegations. Decision: D violated the Fair Employment and Housing Act by obstructing the investigation when it pressured P to lie to the investigator. This violation contravenes the public policy of protecting employees from sexual harassment. P established that D wrongfully discharged him in violation of public policy. Rationale: Requiring a statutory or constitutional expression of public policy strikes the proper balance among employers, employees, and the public. Employers are required to act within the bounds of the law; employees are protected against unlawful employer actions; and the public enjoys a more stable job market.  Note: Cases leading up to Gantt include Petermann v. International Brotherhood of Teamsters: In Petermann, the employer fired P when P refused to testify falsely at a legislative hearing. Petermann established the rule that an at-will employee may sue in tort when the EE is discharged for performing an act that public policy would encourage or for refusing to do something that public policy would condemn.  In Gantt, the Cali Supreme Court refines the Petermann exception, holding that the public policy at issue must be based on statutory or constitutional grounds.  Because the US Constitution and state constitutions protect against government abuses of power, most private sector wrongful discharge claims based on Constitutional grounds fail.  Arres v. IMI Cornelius Remcor, Inc. (7th Cir. 2003) Rule: An employee may not unilaterally disregard an employer’s directions despite a good faith belief that such action is inappropriate. Facts: Contrary to orders from her superiors, Arres (P) refused to process identification information in the HR department because she believed it to be false (from alien employees to lacked authority to work in the US). P was fired for insubordination. Decision: for employer (D) Rationale: Nothing in state or federal law permits an EE to disregard an ER’s view of its legal requirements. Although P had a good faith believe that D’s chosen course of action did nothing to eliminate the problem it faced, D consulted with the Social Security Administration and followed the advice of counsel in determining how to handle the situation. D’s approach allowed it to insist on correction of the inaccurate information while respecting the rights of its lawful alien EEs. A human resources manager is not free to impose a different approach unilaterally—that is insubordination.  Note: The court appears to forbid EEs from acting on their own initiative according to their beliefs about the legality of their ER’s business practices. Certainly, ERs have a right to expect that their EEs will loyally carry out their directions. Yet, at some point, reasonable suspicion entitles an EE to refuse to

carry out an illegal action. Outcome might be different if the court learned the info P refused to process was indeed fraudulent. Statutory and Constitutional Rights o Another public policy exception to at-will employment that the courts have enforced is the employee's right to be free from discharge for exercising statutory or constitutional rights, including the whistleblower protections as well as other rights such as filing worker's compensation claims. But what happens when the employer's right to create workplace standards clashes with the constitutional rights of its employees?  Hanson v. America Online, Inc. (Utah 2004) Rule: Employers may ban guns from their premises without infringing on employees’ constitutional rights. An employer’s public policy interest in ensuring the safety and welfare of its workplace supersedes any public policy interest an employee has to possess a firearm at work. Facts: Three employees (P) were fired for possessing firearms on work property in violation of their employer’s stated policy. EEs sued for wrongful termination alleging that their termination violated a strong public policy (right to carry guns). Decision: For employers (D). Rationale: The appellate court's task was to determine whether the right to keep and bear arms in Utah was a public policy which was so clear and substantial as to supersede an employer's attempt to restrict weapons in the workplace by contract. The appellate court determined that it did not. The language of the Utah Code indicated that the legislature had purposefully declined to give the right to keep and bear arms absolute preeminence over the right to regulate one's own private property. Public policy did not implicate an employer's right to restrict firearms in a parking lot leased by the employer and to terminate an at-will employee for violating that prohibition.  Notes: Not all legal rights and privileges involve the degree of public interest necessary to satisfy the public policy exception. When considering whether a legal right carries the requisite importance, a court must balance the competing interest of the ER in regulating in workplace against the interests of the EE in enjoying his rights. Public Health and Safety  Gardner v. Loomis Armored, Inc. (Wash. 1996) Rule: An employer may not discharge an employee for violating company policy in order to come to the rescue of one who is in imminent danger. Facts: Plaintiff guard and armored car driver left his truck and went to the rescue of a woman during a bank robbery. He was later fired because defendant employer had a "fundamental" company rule forbidding armored truck drivers from leaving the truck unattended. The lower court certified the question to the court whether an employer contravenes public policy when it terminates an at-will employee who violated a company rule in order to go to the assistance of a citizen who was in danger of serious physical injury or death? The court answered that the firing was a contravention of public policy. Ruling: The court found that the four elements of a public policy tort case were met. The court held that the driver's discharge for leaving the truck and saving a woman from an imminent life threatening situation violated the public policy encouraging such heroic conduct. The court noted that the holding did not create an affirmative legal duty requiring citizens to intervene in dangerous life threatening situations. Overlapping and Conflicting Remedies  Lingle v. Norge Div. of Magic Chef, Inc. (U.S. 1988) Rule: The Labor Management Relation Act preempts a state wrongful discharge claim only if the state law claim requires the interpretation of a collective bargaining agreement.

Facts: Norge (D) fired Lingle (P) after Lingle (P) filed a workers' compensation claim. Because a collective bargaining agreement required arbitration of any employment disputes. Norge Division of Magic Chef, Inc. (D) argued that the Labor Management Relations Act ("LMRA") preempted Lingle's (P) state law claim for retaliatory discharge. Decision: No preemption. Rationale: Section 301 of the LMRA provides federal J over suits for violations of collective bargaining agreements so that the agreements will be interpreted uniformly and consistently. Thus, if the resolution of a state law claim depends upon the meaning of the agreement, in order to provide consistency, state law is preempted and federal law is applied. As long as the state law claim can be resolved w/out interpreting the agreement, there is no preemption. Substantive rights in labor relations can exist without interpreting these agreements. For example, 301 does not preempt state anti-discrimination laws.  Notes: Courts have also held that 301 does not preempt state claims involving employers promises to employees before the employees were covered by the collective bargaining agreement.  301 clearly preempts state law cases involving breach of K, breach of covenant of good faith and fair dealing, and other K claims based on the violation of the collective bargaining agreement.  However, in cases where the state law claim might possibly implicate an agreement, courts hold there is no preemption. Thus, EEs in unions may have fewer rights than nonunion EEs on certain issues not expressly included in their CBA. Common Law Claims  Wilson v. Monarch Paper Co. (5th Cir. 1991) Rule: An employee may sue an employer for intentional infliction of emotional distress if the employer’s acts are extreme and outrageous. o Facts: At the age of forty-eight, appellee employee was hired by appellant employers. He routinely received merit raises and performance bonuses. After a new president was brought into the company, the president refused to speak or to interface with appellee. His job was dismantled by appellants' removal of his responsibilities and assigning them to other employees. Appellee took a supervisory position and was subjected to harassment and verbal abuse. Later, appellee as an executive was reduced to sweeping floors and cleaning the cafeteria. Appelle suffered a nervous breakdown. Appellee filed an action for age discrimination and retaliation under the Age Discrimination in Employment Act and for intentional infliction of emotional distress under state law. o Ruling: The trial court's order was affirmed because the evidence supported the conclusion that appellants' conduct was outrageous and extreme. Therefore, appellee was involuntarily terminated and rendered jobless by a condition directly caused by appellants' discriminatory conduct.

LEAVING A JOB   Class Notes: When an employee terminates employment, state statutes determine how fast employees must be paid (normally, an employee cannot be paid on the next pay date). These state

 

 






statutes begin the next day after the employee leaves, is fired, etc. Shortest is in WV employee must be paid within 72 hours (if late, penalty each day that must be paid to state and employee) States also direct how someone can be paid- some allow payment by store value cardseasonal workers like farmers The issue of references comes up when an employee leaves … employers are usually skittish about giving a reference (due to defamation cases); many employers will not give references but will only verify employment. However, over the last 7 or 8 years, states have enacted statutes that confirm the notion that truth is an absolute defense; if the employer reasonably believes that information that is passed onto the future employer, then a safe harbor exists. Some go farther as long as no bad faith/malice. If references are not given out, how can you tell who the bad guys are? The Contract must be based on the law of the state. Employees in the hole on vacation hours- owes money to employer upon termination Return of Property- example- downloading of sensitive company info like client list- does the handbook list what counts as confidential information? Should list it out- things that can’t be taken away after leaving. DUTIES OF LOYALTY: 1) Duty to work; 2) Disclose corporate opportunities/don’t take opportunities for themselves; 3) keep the employer’s confidential info; 4) turn over any inventions made using employer time or resources. When an employee takes confidential info: an employer: 1) will first seek an injunction (stopping client from doing something/or give it back); 2) pay damages to an employer (compensatory/consequential—must show what the employer lost; 3) ask for punitive damages when there is a big loss or employer wants to send a message.

BREACH OF CONTRACT BY AN EMPLOYEE Breach of Express Terms  Employees employed under an employment contract for term may not resign without a sufficient legal basis.  Handicapped Children’s Educ. Bd. V. Lukaszewski (Wis. 1983) Rule: Poor health will excuse nonperformance under an employment contract, but not if the ill health is brought on by the employee herself. Damages for breach of K are in the loss of the bargain (here, replacement costs). Facts: A teacher resigned before her contract with the board expired, claiming that health problems prevented her continued employment. The teacher wanted to move to a higher paying job closer to her home. The teacher said she suffered from high blood pressure due to the stress and her doctor wrote a note saying she shouldn’t drive long distances. The board was forced to hire a more qualified replacement at a higher rate of pay. The board brought an action for breach of contract. Holding: the court found that: 1) the trial court's findings of fact, specifically those that indicated that the teacher's health problems were a result of the stress condition she had created by an attempted repudiation of her contract and that she had resigned for reasons other than her health, were not against the great weight and clear preponderance of the evidence; and 2) the board suffered damages for the loss of its bargain in the amount of additional compensation it was required to pay the teacher's replacement and was entitled to have the benefit of its bargain restored. Dissent: Teacher was justified in resigning- her symptoms were objective and wouldn’t necessarily be cured by moving closer to the school. Nothing in the records showed that the increase in blood pressure was foreseeable when teacher signed the K.  Note: Damages are the difference in cost (between the employee and her replacement). When you sue an employee under a K, you are generally trying to send a message to the rest of the workforce. Generally, the employer needs to make a good faith effort to mitigate damages—this is governed by state law.

Breach of Implied Terms  Depending on her position, an employee may be held to various standards of performance that are not mentioned in contract but are implied under the law of agency. Some employees owe their employers fiduciary duties, duties of care, and duties of loyalty which insure that the employee is acting in the best interests of the employer.  3 Types of Restrictive Covenants in Common Law (but often put into writing contracts) 1) covenant not to compete 2) covenant not to solicit- usually customers or clients 3) covenant not to solicit employees  Courts like covenants not to solicit, but hate covenants not to compete  Be careful about drafting your employment contracts—ie don’t mislabel covenant not to solicit as a covenant not to compete  One way to attack these= lack of consideration. What constitutes consideration by state varies greatly. In VA, giving them the job counts as consideration; in others, you have to pay them a bonus or something for consideration  Reason not to enforce: statues that don’t allow them, public policy doesn’t allow it (more common)  The bad one is the covenant not to compete- viewed as deliberate interference with earning a living outside of that job. Before they say no, court looks at reasonableness 1) time 2) scope 3) geography- no clear rules, look at the case law  For example, restriction for 5 years will never be upheld  Mercer Mgmt. Consulting, Inc. v Wilde (D.D.C. 1996) Facts: Employees who made plans to start competing biz while still employed were sued by employer for breach of fiduciary duty, breach of non-compete K, and interference with contractual relationship. Rules: o Employees have implied duties to their employers to insure that they are acting in the best interests of the employer. o Duty of Loyalty: Prior to termination of employment, an officer may not solicit for himself business which the position requires the employee to obtain for the employer. He must refrain from competing with the employer for customers and employees. An employee does not breach his duty of loyalty by having contact with his employer’s clients before he leaves his employment to start a competing business. Also, the failure to disclose plans to enter into competition is not itself necessarily a breach.  Application: Here, no breach of fiduciary duty because there were no overt attempts at solicitation and the court couldn’t find any harm. o Non-compete Agreements: In order to be valid, they must protect some legit business interest and be reasonable in their scope. Restrictions are unreasonable if the restraint is greater than needed to protect the promisee’s legit interest, or the promisee’s need is outweighed by the hardship to the promisor and the likely injury to the public. A restraint that is limited to one’s taking of customers from a former employer is easier to justify than a restraint against competition in general.  Application: Restriction was enforceable- it had a valid purpose and was reasonable in scope. Breach of K found here—evidence that Ds rendered competitive services and hired P’s employees. o Tortious Interference with K: Competitive activity by itself does not constitute intentional interference—it must be accomplished by wrongful or

improper means, such as fraud, violence or civil suits. Courts are more likely to find a breach if you go to work for a pre-existing, big competitor, not if you go work for yourself—very fact specific.  D’s actions didn’t rise to the level of wrongfulness necessary for this tort (the Ds got away with a defense of ignorance bc they claimed they didn’t know they were bound to the anti-compete agreement). POST-EMPLOYMENT RESTRICTIONS Future Employment o The purpose of a non-compete agreement is not to punish a disloyal employee, but to protect the employer’s interests. o The employee’s interest in continuing to earn a living is factored into the question of how to enforce an agreement, and courts will modify agreements that are unduly restrictive. For example, they will shorten the duration of an agreement or narrow its geographic scope, so that the agreement is no broader than necessary to protect the employer without punishing the employee. o In VA, a P must prove that the covenant is reasonable based on a preponderance of the ev & no greater than necessary to protect a legit biz interest & cannot be unduly harmful or oppressive in preventing the employee from obtaining employment. o Most courts have held that non-compete agreements are completely unenforceable in regards to attorneys. Some professions define who you are/your livelihood.  Estee Lauder Cos. V. Shashi Batra (S.D.N.Y. 2006) Rule: An employee’s agreement not to compete after leaving his or her employment may be enforced by injunction, provided the geographical scope and the duration of the agreement are reasonable. Facts: (P-employer) Estee Lauder sued Batra (D-employee) to enforce a non-compete agreement. The agreement provided that D would not work for any competitor who would benefit for disclosure of P’s confidential information, or in which P’s business could be harmed by such disclosure, for one year after termination. This agreement was limited to geographic areas in which D had job responsibilities or any other area where a competitor could benefit from disclosure. D wanted to resign from his position with P in New York, to work for a competitor in California. D claimed the non-compete agreement would not be recognized in California. Decision: for P- employer (agreement was enforceable, subject to duration modification) Rationale: P established that D was in possession of trade secrets. Although he did not know the formulas or ingredients of products, he was responsible for developing future brand strategies and knew about products under development. In addition, D was going to work for a direct competitor. Because the measure of damages is not quantifiable and the agreement provided for injunctive relief to prevent injury from breach, so an injunction was appropriate. The worldwide geographical limitation of the contract is reasonable under the circumstances due to the scope of the business. Also, there is no concern that D will be unable to make a living bc his salary with P will continue. However, the court modified the duration of the agreement to provide for a 5-month period of enforcement.  Under California Law, the agreement would be unenforceable absent a misappropriation of trade secrets (no actual misappropriation has been shown).  There is a conflict between NY and Cali law, but Cali’s interest in the matter is not materially greater than New York’s interest, so New York law applies.  The court used a “blue pencil” in this case- the K said 12 months, but the court gave him 5 months not to compete.  KGB, Inc. v. Giannoulas (Cal. App. 1980) Rule: Courts are very reluctant to enforce non-compete agreements restricting one’s right

to earn a living and express talent. Also, non-compete agreements are strictly construed against the employer. Facts: Ex-employee of a radio station who performed in public in a chicken suit bearing the radio station’s logo challenged an injunction prohibiting him from performing in any chicken suit. Holding: For employee (injunction invalid). The court held that an ex-employee/mascot could not be barred from wearing a costume similar to that of the former employee’s mascot (but which does not bear its insignia), the effect of which restricts the ex employee’s right to earn his living and express his talents. The employer tries to make a trademark argument here by arguing that the employee would confuse customers by wearing a chicken costume elsewhere. The court holds that the likelihood of confusion is not sufficient; actual injury to the employer must exist to be justified. Also, with trademark law, the employer must write the employee and tell him to stop using the trademark (even in the employment context). Trade Secrets  Springfield Rare Coin Galleries v. Mileham (Ill. App.Ct. 1993) Rule: Customer information is not a secret if it is not treated as confidential or is readily available. Customer information is considered confidential only if the information was developed by the employer over the years at great expense and was kept under tight security. Facts: Coin dealing employer (P) thinks new employee is only there for scouting purposes, so he has him sign a non-compete agreement, preventing him from competing in the whole county for 2 years after termination. Employee worked there 2 years, then left to start his own business. Ex employer sues for injunction + damages. Holding: The restrictive covenant was not enforceable because the P did not have the necessary near-permanent relationship with its customers, and that customer lists, instructions, and pricing info received by D was not confidential info. In this particular market, companies don’t rely upon any given firm, but contract through different providers. UNEMPLOYMENT BANKRUPTCY  Which part of employment money has the first priority? Wages and benefits (health insurance, pension). Each of these is assigned a priority under the bankruptcy code. You want to be the first priority. Procedural Protection for Executory Contracts o First, Section 507(a)(4) of the federal bankruptcy law gives workers preference over certain general creditors as to wages earned but uncollected before bankruptcy. This preference is limited to $10,000 per employee. o Second, once the bankruptcy filing occurs those who supply goods and services to the bankrupt firm have a right to be paid. Under the statutory scheme, these are administrative expenses of the bankruptcy, and must be paid before prebankruptcy creditors receive money. Under 503(b)(1)(A) of the Bankruptcy Code, these goods and services are considered administrative expenses, which include the actual, necessary costs and expenses or preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case and which pursuant to the priority scheme set forth in Section 507., must be paid before most prebankruptcy creditors receive money. The reason for this policy is that the law seeks to encourage continued operation of the enterprise, and such operation requires assurance that new obligations will have priority over those still unpaid from the past. o In Bankruptcy the hierarchy is the IRS, secured creditors, & then unsecured creditors

o o

In general the bankruptcy code gives priority to employee's wages already earned. After paying for employee's wages, secured creditors & unsecured creditors are paid pro rata (however, the IRS comes even before employee wages).

Priorities in Bankruptcy  Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co (US 2006) Rule: Workers’ compensation is not a substitute for compensation for work performed, so the premiums for workers’ compensation insurance coverage are not contributions to an employee benefit plan. Facts: Howard Delivery (P) did business in several states and was required by law in each state to maintain workers’ compensation insurance. P contracted with Zuerich Am (P- workers’ comp insurer) to provide that coverage in 10 states. P filed a Ch. 11 benkruptcy petition, and D sought priority status for $400,000 in unpaid workers’ compensation premiums. D claimed that the unpaid premiums constituted “contributions to an employee benefit plan” and so were entitled to priority under 11 U.S.C. § 507 (a) (5). Holding: Workers’ compensation insurance premiums are not entitled to priority as contributions to an employee benefit plan. Rationale: Employee benefit plans, such as pensions or group insurance, insure the employee or the employee’s survivors only. Those plans are supplements of the employees’ compensation. Congress has linked the employee comp. priority with the priority for unpaid contributions by juxtaposing the two, and by imposing a combined cap on the 2 priorities of $10,000 per employee. But workers’ comp. is not a supplement to compensation, because it protects the employer by shielding it from liability in tort to an injured employee. In addition, employers are required by law to provide workers’ comp. coverage.  D insurer argued that the Court should apply the definition of employee benefit plan in ERISA (which can include workers’ comp) and that giving priority to its claim will encourage insurers to continue the worker’s comp. coverage of a failing business, thus promoting rehabilitation of the biz. The court doubts that this would provide an incentive, however, as there would be competing pressure to stop coverage of an insolvent policyholder to contain losses.  Class Notes: What debt is relevant in this case? Employer would owe premiums for their workers’ comp. The insurance company wants to be included under the category of employee benefits because it is a higher priority than insurance premiums. Why would wages/benefit plans be ahead of insurance premiums in the priority hierarchy? Insurance companies deal with risk and can adjust their premiums—can better absorb the loss. In priority cases, think about what the rationale behind the law.  Law v. Law Trucking Co. (R.I. 1985) Rule: 1.Employees of bankruptcy company have priority over general creditors as to wages earned but uncollected before bankruptcy. 2. Employees who loan money to their employer in the form of wage-cuts are not entitled to bankruptcy preference for uncollected wages. Facts: This was a smaller business with collectively bargained workers- the employer made a back room deal with them (union negotiated for certain hourly wage). The employer(D) called this deal a loan where he paid them less than the collectively bargained rate, with a promise to pay them back to the negotiated rate if they made enough profit. Workers signed this agreement (the loan) only because they needed their job. The company went under, filed for bankruptcy, and there was a priority fight. Holding/Rationale: The court treated this as a basic contract case (a loan) because the agreement lost its characteristic as wages. If you treat wages as something else, it no longer has the protection as wages. Therefore, this unsecured loan agreement is in the lowest tier of priority. There is ample evidence to support the finding that they moneys withheld were loans and not wages. The EEs contend that there was no mutuality of

obligation in the agreement and that it should fail, however, the court disagrees because the president of the company promised to keep the company open for a year in exchange for the loans. Vacation Pay  In re Ionosphere Clubs, Inc. (2d Cir. 1994) Rule: Claims by employees for all vacation pay accrued in one year, but “earned” within 90 days of the employer’s bankruptcy filing, are not entitled to priority. Unfunded Pension Obligations  In re Chateaugay Corp. (SDNY 1991) Facts: LTV (P) had its pension plans terminated by U.S. owned PBGC (D) following LTV's (P) bankruptcy, and PBGC (D) sought priority status for pension plan contribution claims. Rule: Priority status will not be given to claims for contributions to an employee benefit plan where the labor giving rise to the pension obligations is performed more than 180 days prior to the filing of the bankruptcy petition, even though the ERISA obligations are triggered by the post-bankruptcy petition termination of the plan.  Notes: When a company has financial trouble, still have to pay workers or they won’t show up—but they prob don’t check up on the pension plan very often. You can fall behind on it and not be caught as quickly as the other things underfunded plans.  The Code was amended to allow that a worker’s pension benefit up to a certain amount (10K)- given a priority; but after that, you have to go to the pension guarantee fund. PLANT CLOSINGS  The WARN Act: o (Worker Adjustment and Retraining Notification) o Requires 60 days advanced notice of closings/mass layoffs- goes to the workers or to their union rep if they are represented. o Who is covered? Must be 100+ employees. This act is aimed for decisions that will have an economic impact. Employees defined as working more than an ave of +20 hrs of week in the last 12 months bc part time workers not impacted as much. Mass layoff= letting go of about 1/3. No form language- you just have to notify of what is going to happen. o In the sale of a business, the issue is 1) is notice required? and 2) who has to give the notice?—usually it is the purchaser of the business since they will often be doing the laying off (however, might negotiate otherwise) o Exceptions to warning- 1) circumstances not foreseeable 2) natural disaster 3) if at the time the notice was required, the employer was searching for capital or business that would have delayed or avoided the need to shutdown, and the ER reasonably believed that the re notice would have prevented the realization of the capital or business. o What if no notice and doesn’t meet an exception? Will have to pay backpay+ benefits for however many days notice not provided. o Enforcement  us district courts. Court has the discretion to allow for reasonable atty’s fees United Steel Workers of America v. United States Steel Co. (6th Cir. 1980) o Rule: A company has the right to make a business decision to discharge its



former employees and abandon its operation due to unprofitability in the absence of a K based upon promissory estoppel to keep the plant open. Facts: Business decides they need to shut down plant bc it is no longer profitable. Steel workers intervene to try and stop steel co from making a business decision. So union, congressman and the atty general sue. Pleading 1 is don’t let them close; pleading 2 is that the union has a property right in the plants—wants US steel to sell the plants to them at a negotiated price. Decision: Denied both pleadings. Rationale: This is crazy. A deed is a property right; a job isn’t really recognized as such. US Steel used the union agreement as their defense—the company retains the exclusive rights of management. This agreement was negotiated between the parties. The closing of the plants was a management decision.  Carpenters Dist. Council of New Orleans v. Dillard Dep’t Stores, Inc. (5th Cir. 1994) Facts: Laid off EEs sued ER for not being given 60 days notice before layoff. Rule: Mass layoffs require 60 days notice, or damages in lieu thereof. When there is a failure to give the required notice, the damages in lieu thereof are to be calculated using the number of work days within the violation period.  Administaff v. New York Joint Bd. (5th Cir. 2003) Rule: Joint employers may be liable for warn act violations. An employer is liable for a violation only if it ordered a closing or layoff or is the joint employer with the employer that made the order. Facts: Administaff (D) provided support services (personnel mgmt and payroll) for the operation of TCS, and the New York Joint Bd (P) claimed that it was liable for failure to give a WARN notice before TCS ceased operations. There was no interchange of equipment or commingling of finances between TCS and Administaff (D). Decision: For D. Here, the workers went after the wrong entity under the WARN act. D did not order the closing—the closing was ordered by TCS, which informed D after the fact. Administaff does not meet the definition of a joint employer. The factors to be considered for joint employers are: common ownership, common directors/officers, de facto exercise of control, unity of personnel policies, ect. Under this test, the companies are clearly separate. DISPLACED WORKERS Who are they? Displaced workers are defined as persons 20 years of age and older who lost or left jobs because their plant or company closed or moved (49%), there was insufficient work for them to do (22%), or their position or shift was abolished (29%). o Men are more likely to be displaced then women, 74% versus 66%. o Reemployment rates for African Americans, whites and Asians are similar. The reemployment rate for Hispanics was slightly lower. Some studies, however, suggest that the women and minorities historically have a harder time becoming reemployed than white men. o Displaced workers are disproportionately represented in manufacturing sectors. During the 2003-05 period, 1.1 million factory workers were displaced. About half that number were displaced in wholesale and trade sectors.
o

Policies and Programs Federal law grants assistance to workers displaced as a result of the North American free trade agreement. The NAFTA Transitional Adjustment Assistance program for workers displaced due to increased imports from or shifts of production to Canada and Mexico. o However, DOL's process for investigating the activities of both the petitioning workers and their former company must be sufficient competent to answer this critical, starting question. o However, DOL's process for investigating the activities of both the petitioning workers and their former company must improve to determine eligibility.
o

UNEMPLOYMENT INSURANCE The Unemployment Insurance System  Percentages vary by state; funded by employers  Employers pay premiums to insurance funds- based on number of people who used to work for them who they now pay unemployment to—you are assessed by your history.  Primary purpose= partial, temporary replacement of wages for those who have lost job through no fault of their own  Secondary purpose= to stabilize the economy Legal Issues Year-Round Jobs  Zambrano v. Reinert (7th Cir. 2002) Rule: States may exclude seasonal earnings from wages for unemployment purposes. States may treat seasonal employees differently for unemployment insurance purposes, in order to ensure that the workers who receive benefits are firmly committed to the state’s labor market. Separations Good Cause Quit  Jaime v. Director, Dep’t of Emp. Sec. (Ill. App. Ct. 1998) Rule: A substantial change in employment conditions may justify a voluntary cut. A cause for leaving employment is attributable to the employer when that cause was produced or caused by the action or inaction of the employer. Facts: Jamie (P-employee) worked for Miniat (D) for 10 years, until D moved its place of business 16 miles away to a suburban area. P continued to work there for 6 weeks, riding to work with a co-worker. When that co-worker quit, P had no other means of getting to work, so she quit. Her request for unemployment benefits was denied. Decision: P had good cause to quit because the business was inaccessible after the move. Rationale: The purpose of the Unemployment Insurance Act is to alleviate the economic burden caused by involuntary unemployment. The burden is on the claimant to establish eligibility, and the Act will be construed liberally to favor the award of benefits. Good cause may result from circumstances that produce real and substantial pressure to terminate employment and that would compel a reasonable person to act in the same manner under the circumstances. The moving of D’s place of business was an action of the employer and constituted good cause—P wanted and tried to continue to work after the move. However, the relocation was out of her control and it would cause a reasonable person under the circumstances to quit.  NOTE: Good cause does not necessarily mean that the employer did something wrong or malicious—it is looked t solely as it affects the particular employee (an individualized inquiry). In this case, an employee who drives or who lives close to the new location probably would not consider D’s move to be a reason to quit.  Quick n’ Tasty Foods, Inc. v. Division of Emp. Sec. (Mo. Ct. App. 2000) Rule: Any cause that makes it unreasonable to continue working is good cause. A cause for an employee’s resignation is attributable to the employer if it was the work or the employer that created the condition making it unreasonable to expect the employee to continue working. Facts: P was employed by D for over 3 years—she was called into her employer’s office one day to discuss her excessive absenteeism. She received a

verbal warning and then explained that she would have to miss again in the future; her boss said this was unacceptable. They discussed her resignation and the employer said resignation would look better on her record than discharge. P had not planned to resign from her job that day. She was not told that she would be discharged if she did not resign, or that she would be fired if she missed again. However, P claimed she was placed under duress and coerced into resigning. Decision: P did not resign for good cause attributable to her employer. Rationale: Conditions that motivate the EE to quit must be real, substantial and reasonable. Here, P’s resignation was voluntary- it was not cause by anything her employer did. The suggestion that employee resign, and the denial of a future day, alone, do not constitute good cause.  Note: Employers will often give EEs the “option” of resigning instead of being terminated. It is generally made clear, however, that the EE will be fired if he or she does not resign. D stopped just short of giving P that kind of choice, although one might infer the treat behind the offer. The court hints that a resignation under such circumstances might be considered involuntary, but notes that those circumstances were not present in this case.  Tri-County Youth Programs, Inc. v. Acting Deputy Dir. Of the Div. of Emp. & Training (Mass. App. Ct. 2002) Rule: An employee who quits his/her job due to sexual harassment that is not prevented by the employer has quit for good cause attributable to the employer. Facts: P was sexually assaulted while working for D and quit after D employer returned her assailant to P’s workplace. Decision- for P. Note: it is not the sexual assault that was P’s good cause to quit her job, but it was D’s response to that assault. Discharge for Misconduct  Pesce v. Board of Review (Ill. App. Ct. 1987) Rule: Discharge for misconduct does not always disqualify an employee from receiving unemployment benefits. Even though an employee’s conduct may be such that the employer may properly discharge him, such misconduct may not be connected with the work so as to disqualify him from receiving unemployment benefits. Facts: P was fired as a driver of a medicar used to transport patients to and from hospitals, after having 4 accidents in the employer’s vehicle. Each accident occurred with no patients in the car and there were was no severe damage. P applied for unemployment benefits but was denied. Decision- for P (he got benefits) Rationale: Not every violation of a company rule will constitute misconduct that denies unemployment eligibility—to be ineligible, the rule must be a reasonable rule governing the conduct or performance of an employee, and it must be shown that the breach is deliberate or its equivalent. Misconduct has been defined as evincing such willful or wanton disregard of an ER’s interest as is found in deliberate violations or disregard of standards of behavior which the ER had the right to expect. P’s poor driving doesn’t equate to gross indifference to the interests of his employer. There is no evidence of deliberate conduct or willful disregard. Mere inadvertence or inattention usually isn’t enough for disqualification.  Amador v. Unemployment Ins. Appeals Bd. (Cal. 1984) Rule: Intentional misconduct does not automatically disqualify discharged employees from receiving unemployment benefits. There is no misconduct w/in the meaning of the statues where the employee intentionally refuses to perform work because she reasonably and in good faith believed that it would jeopardize

the health of others. Facts: P, a histotechnician who refused to perform a procedure out of concern for patients’ health, was terminated for insubordination and sought unemployment benefits. Decision: For P- she got benefits. Rationale: A claimant may not be denied benefits solely on the basis of a good faith error in judgment.  Note: strong dissent argued that the law does not permit a recalcitrant EE to dictate employment conditions in conflict with the job description pursuant to which she was hired.  Sauerland v. Florida Unemp. Appeals Comm’n (Fla Dist.Ct. App. 2006) Rule: A single act of misconduct involving dishonesty or a critical offense may disqualify a discharge d employee from receiving unemployment benefits. Facts: P juvenile detention officer was discharged after he failed to make required rounds and falsified records to show that he did. Decision: The evidence supported a finding that P was guilty of misconduct no benefits.  Note: The seriousness of a violation will depend on the context—here, P was supervising kids in a detention facility and room checks are necessary for safety. Violation of this rule could have severe consequences. Also, P’s falsification of the log book was a falsification of official state record—a felony. Continuing Eligibility Availability  Petty v. University of Delaware (Del. 1982) Rule: Availability for work means that an employee is willing, able, and ready to accept employment that he or she has no good cause to refuse. Availability incorporates both the ability to work (willing, able, ready) and qualification through skill, training, or experience for a job. Facts: Petty (P-employee) was employed as a custodian at the University of Delaware (D) for 6 years. She suffered medical problems while pregnant and her physician advised her to limit her physical work and suggested that she change departments. D determined that she would not be able to continue in her position, and also that there was no other position available for which she was qualified. D placed her on unpaid leave, but P would be allowed to return when she was able. P’s application for unemployment benefits were denied because she was unavailable for work. Decision: affirmed the decision against P- that she was unavailable. Rationale: Here, the board found that P was physically unable to perform her normal job and was not qualified to do any other type of work (physical limitations as well as education, training, ect). All of P’s experience was in jobs involving activities she was no longer able to perform.  NOTE: The determination of availability for work generally looks only at a claimant’s availability for any type of job—the only inquiry is whether there is some job the claimant is able to do. Therefore, overqualification does not make a person unavailable. Suitable Work  Lester v. Dept. of Emp. Sec. (Ill. App. Ct. 2004) Rule: Not all job offers need to be accepted, but refusal must be reasonable. “Good Cause” to refuse a particular job offer will be judge by the reasonableness of the refusal in light of the particular circumstances. The refusal to work must be based on real and reasonable circumstances, not mere inconvenience. Facts: Lester (P-terminated employee) worked as a diverting coordinator for Purity (D) at an office only a mile from her home; she worked 35 hrs per week for $70,000 per year. P was terminated for financial reasons but was offered another position- this one was 30 miles from her home, paid the same, and was

for 40 hours per week. P claimed she was competent for the job, but that she had good cause to refuse it because of the differences above. D presented evidence that the job was not substantially different and that the pay was more than the average in her line of work. Decision: application for employment benefits denied- P’s refusal of the job disqualified her from receiving benefits. Rationale: Good cause may be found in reasons connected with the employer, the claimant’s personal circumstances, or the claimant’s unsuitability for the job. In order to be eligible for benefits, a claimant must be ready and willing to accept suitable work.  In determining suitability, the states require that consideration be given to the following: risk of the claimant’s health, safety and morals; physical fitness, prior training, experience, and prior earnings; the length of employment and prospects for securing local work in his or her customary occupation; and the distance from the claimant’s residence of the work. A claimant who refuses a job with suitable wages and conditions is not involuntarily unemployed.  Although P’s pay is technically cut bc of the increased hours, the court seems unsympathetic to a claimant who turns down a job that pays a substantial salary for a 40 hour week.  NOTE: Although the court compares P’s salary to others in comparable jobs, this element is not mentioned in the statues or the rule set out by the court as a factor to be used in considering suitability. RETIREMENT MANDATORY RETIREMENT + AGE DISCRIMINATION IN RETIREE BENEFIT PLANS Mandatory Retirement o ADEA Summary: The ADEA makes it illegal for an employer to set a mandatory retirement age for covered employees. o You are protected under the ADEA when you turn 40 and you never lose the protection; the Act bans the ER from discriminating against workers over 40 because of age; Gutted the concept of mandatory retirement for EE o Scope: this only applies to EE’s, not to ER, directors or independent contractors o You cannot mandate or pressure early retirement- can only offer it- and must do it in a way that does not in any way penalize older workers. It’s a numbers game for it to qualify as non-discriminatory. Empirical study to show that the people who stay aren’t harmed by additional years of service. o Any limitations on what early retirement is? No, only if you have a qualified ERISA plan and your plan specifies an age o Exceptions: 1) Employers may impose mandatory retirement based on age when age is a bona fide occupational qualification reasonably necessary to the normal operation of the particular business. The court has endorsed a 2 part test to determine whether the employer can mandate retirement based on age if it can show (1) that the age-related job qualification is reasonably necessary to the essence of the employer's business and (2) either that all or substantially all of the persons over a certain age cannot perform the duties of the job safely and efficiently or alternatively that it would be impossible or highly impractical to deal with older employees on an individualized basis.  Statistics don’t work here (say 95% of firemen over 65 can’t run fast, that doesn’t mean you can say no one over 65 can do it). You have to get to substantially all—beyond a reasonable doubt equivalent for this to work. There are some statutory exceptions for police or firefighters- but most statutes don’t put in age, but put the actual qualifications (like physical tests).Disparate impact wouldn’t work here under the exception.

2) High policy positions with high paying benefits can have mandatory retirement- e.g. Bank of America can require rich CEO to retire at a certain age Age Discrimination in Employee Benefits Plans  Many employers use offers of early retirement as an alternative to laying off employees.  General Rule: early retirement plans are not per se unlawful, provided that the benefits paid, and the eligibility for early retirement are not based solely on age. While early retirement plans may seem like a pretext to eliminate older employees, plans that are truly voluntary and not coercive will generally be upheld.  Solon v. Gary Commun. Sch. Corp. (7th Cir. 1999) Rule: A benefit plan that bases the amount of benefits solely on the age of the employee is age-based discrimination. Offering everyone who is eligible for early retirement the same package for early retirement is not discriminatory. However, sweetening the deal for younger pre-retirement employees is discriminatory. Facts: Plaintiff teachers and administrators filed suit against defendant school corporation for violating the Age Discrimination in Employment Act by offering early retirement incentives to teachers between the ages of 58 and 61. Under the retirement incentives plan, eligible teaches who were at least 58 and who chose to retire early received monthly payments until they were 62. Holding: the plan discriminated on its face because eligibility to receive the incentive payments for early retirement was defined by age. Because plaintiffs established a prima facie case of discrimination where early retirement was defined exclusively in terms of age, the court found that discriminatory intent was inferred so that the lower court was correct in finding defendants liable for discrimination.

PRIVATE PENSIONS ERISA The Scheme
o o

o

o

ERISA does not require employers to provide pensions. It gives tax incentives to employers who set aside funds for employee pension accounts. ERISA is administered by the Dep't of Labor and the IRS of the Dep't of the Treasury. It preempts state and local laws on participation and vesting, funding, fiduciary responsibilities, plan termination insurance, and disclosure and reporting procedures. ERISA's participation and vesting standards enable workers to establish a local claim to benefits. By requiring all employees who have reached age 21 and who have completed one year of service (at least 1000 hours of work) to be covered by their company's pension plan, the Act broadens the number of people eligible to participate in private pension plans. Once workers begin to participate, their benefits become vested after they have completed a minimum period of service. Employers can choose one of two alternative minimum vesting standards: (1) 100 percent vesting after five years of service (with no vesting prior to five years; (2) gradual vesting over seven years (20 percent vesting after three years followed by 20 percent vesting per year for the 4th, 5th, 6th, and 7th years). These vesting requirements do not apply to multi-employer benefit plans; participants in these plans need not be 100 percent vested until after then years of service. Once they are fully vested, employees cannot lose their pension benefits

o

o

o

o

o

o

o

o

even if they leave their jobs before retirement. Thus ERISA encourages job mobility by permitting a worker to accumulate pension rights while working at different jobs. ERISA also contains a set of anti-backloading rules that seek to prevent employers from providing a retirement plan that only grows substantially in the last few years of an individual's employment. In addition, ERISA imposes minimum funding standards. The minimum funding standards were tightened by the Pension Protection act of 2006. Previously, defined benefit plan sponsors were required to fund 90% of the present value of their commitments. The 2006 Act created a 100% funding requirement that will be phased in between 2007 and 2011. To guard a/g abuses of pension plan assets, ERISA sets various fiduciary requirements. Individuals identified as fiduciaries by ERISA include persons who exercise discretionary control over pension plan assets or who, for a fee, offer investment advice relating to pension plan assets. Fiduciaries must exercise the investment skill and care of a prudent man, diversity the pension portfolio (w/o investing more than 10% percent of the plan's assets in the employer's securities), and refrain from using their access to plan assets to benefit themselves or other parties in interest. In addition to imposing fiduciary requirements, ERISA created the Pension Benefit Guarantee Corporation (PBGC), a nonprofit corporation within the Dep't of Labor, to insure a/g loss of pension benefits when plans are terminated. Under ERISA's reporting and disclosure provisions, plan administrators must provide employees summaries of their benefit plans, updates of major alterations, and synopses of annual reports on the financing and operation of the plans. Although employees may request a report on the status of their accrued pension benefits at any time, these reports must automatically be given to employees who leave their jobs temporarily or permanently. Plan administrators must also report certain detailed financial and actuarial data annually to the IRS. ERISA allocates responsibility for the administration and enforcement of its provisions btw the IRS and the Dep't of Labor. The IRS is responsible for enforcing ERISA's participating, vesting, and funding standards. It enforces the participation and vesting requirements by disqualifying offending plans from taxexempt status. It achieves compliance w/ the minimum funding standards through an excise tax on accumulated funding deficiencies. The Labor Dep't has general responsibility for investigating possible violations of all of ERISA's provisions and specific responsibility for handling breaches of the act's fiduciary standards and reporting and disclosure requirements. It enforces ERISA's fiduciaries to recover losses they cause, and assessing civil penalties a/g partiesin-interest who engage in prohibited transactions. It administers the act's reporting and disclosure requirements by suing plan administrators to force compliance or by retaining accountants and actuaries to gather information plan administrators should have provided. ERISA supplements these means of enforcement by granting the right to sue to plan participants and beneficiaries who are harmed by violations of the Act's provisions. ERISA does not apply to government employees- federal, state, or local. Many state and local government pension plans are severely underfunded, and will present a social problem when obligations come due that can only be met by tax increases. Pension types under ERISA is one of three types: • (1) Defined benefit plan - employer makes the contributions to the plan, must be in writing, and meet ERISA scrutiny. After a certain period of time, the employer will vest. Funds contributed on an actuary basis; full retirement is generally 65 for benefit plans. If you leave before you are vested, you lose the benefits. Funding must be disclosed to employees. There is also insurance available for funded plans. Amount paid out is formulaic (calculated by work

period, percentage of pay, etc.) • 2) Defined Contribution Plan - More in the control of the employee; both employer & employee participate. Best example is a 401K plan; in a 401K, the employee makes most of the contribution (which is defined by ERISA, the pay comes out of an employee pay check before taxes); employers are permitted to match the amount of employee's contribution. Defined Contribution Plan vests with the employee; the employee has some options. 401K plans are portable - can take the 401K with you (but you have to put money into another 401K). The amount in the plan is defined by your benefit. • (3) Cash Balance Plan - Employer contributes money & invests that money in individual accounts for each employee. Employer controls the investment. This is also portable like the defined contribution plans (employees own the investment). This is a hybrid of the above 2 plans. • ERISA says that if you establish one of these plans, it must be administered by a specific entity/person (often a trustee); these entities have a fiduciary duty. • ERISA also bars plan amendments that decrease accrued or vested benefits. Fiduciary Duties Under ERISA  Varity Corp v. Howe (US, 1996) RULE: Making intentional representations about the future of plan benefits is an act of plan administration giving rise to a fiduciary duty. Lying about benefits is a breach of fiduciary duty. Facts: Beneficiaries of the benefit plan sued the employer as the plan's administrator, claiming that the employer, through trickery, led them to withdraw from the plan and to forfeit their benefits. They sought an order that would reinstate each of them as a participant in the employer's ERISA plan. Holding: For employees. The court found that the employer was acting in its capacity as an ERISA fiduciary when it significantly and deliberately misled the beneficiaries with regard to the benefit plan. Further, in misleading the beneficiaries, the employer violated the fiduciary obligations imposed upon plan administrators under ERISA 404. Finally, the court concluded that the remedial provision of ERISA that the beneficiaries invoked, ERISA 502(a)(3), authorized their lawsuit for individual relief.  Notes: There is not a prohibition against the employer being the  administrator of the plan; however, when the employer is the administrator, the employer must keep his responsibilities as an administrator & employer separate. The terms of the plan can be changed but employees must be  given notice. The employer can change the benefits going forward w/o agreement, but the employer cannot change the benefits backward w/o an agreement (employees who have vested are entitled to certain rights). Application: The employees here lost their benefits. The  employer was also the administrator and was trying to wear two hats at the same time. The company breached its fiduciary duty and court said the ER/trustee had a duty under ERISA to use the prudent person standard—these duties cannot be given away to the EEs to get rid of responsibility. As administrator of claim, ER has a high level of responsibility. If you tell EE that they can have money to invest now and not  wait later, a high percentage will take advantage of this. Same as Bush’s proposal for individual managing social security funds.

Generally, employers are not fiduciaries with respect to plans that they create. Usually as Varity notes, when employers create, change, or terminate a plan, they are not acting as fiduciaries; instead they are acting in a capacity that is somewhat analogous to the settlor of a trust. Yet, employers become a fiduciary when they are named administrator of a plan. Also, if the plan does not name administer, the employer becomes the administrator by default, in which case it is an ERISA fiduciary. Finally, employers can become fiduciaries even if they appoint a separate administrator if they actual exercise the types of authority or render investment advice for a fee.  Donovan v. Bierwirth (1982) Rule: The exclusive benefit rule under ERISA requires fiduciaries to act with complete and undivided loyalty to the beneficiaries of the pension plan and with an eye single to the interests of the participants and beneficiaries. Facts/Decision: Trustees (D) of pension plan (the employer) were sued by the Secretary of Labor (P) for investments made in the midst of a takeover bid, which violated fiduciary duties owed to beneficiaries. Court held that the trustees (D) breached fiduciary duty because they did not take every feasible precaution with respect to the investments they made. Part of the duty here was to obtain legal and financial advice, which they failed to do. Also, a trustee cannot abdicate this or give the duty away. Rationale: Although officers of a corporation who are trustees of its pension plan do not violate their duties as trustees by taking action which, after careful and impartial investigation, they reasonably conclude best to promote the interests of participants and beneficiaries simply because it incidentally benefits the corporation (or themselves), their decisions must be made with an eye single to the interests of the beneficiaries. This imposes a duty on the trustees to avoid placing themselves in a position where their acts as officers/directors will prevent their functioning with the complete loyalty to participants demanded of them as trustees.  Notes:  ERISA does not prohibit an officer of the ER company from serving as a trustee of the ER’s pension plan; and this case illustrates that fiduciaries do not violate their duties merely b/c their actions benefit the plan and the ER. However, in finding that the trustees breached the exclusive benefit rule here, the court held that the D did not take every feasible precaution with respect to the investments they made. Is it a breach of fiduciary duty to fund plan with company stock?  No Most circuits have found that, when a participant asks a fiduciary  whether the employer might alter an ERISA plan in the near future, the employer may have a duty to disclose information regarding potential plan changes. Most circuits hold that a fiduciary must disclose the existence of potential changes to an ERISA plan if, at the time the participant makes the request such changes are under serious consideration. Some of the serious consideration circuits employ a threefactor test for determining whether a fiduciary is seriously considering amending its plan. Under the three-factor test, the court considers: (1) whether a specific proposal is being discussed, (2) for implementation, and (3) whether the discussion includes senior management with the authority to effect the change. A fiduciary can become liable for a breach of fiduciary duty by  co-fiduciaries if she (1) knowingly participates in or conceals the breach, (2) enables the co-fiduciary's breach of her own breach, or (3) has knowledge of the co-fiduciary's breach and does not make a reasonable effort to remedy it.



Arbitrary and Capricious Decisions by Pension Fund Trustees o An ERISA plan participant can bring a civil action to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. o The Supreme Court then altered this framework in Firestone Tire & Rubber Co. v. Bruch - as a result of the opinion, nearly all ERISA plans contain magic words that explicitly confer on the administrator the authority to construe the terms of plans and determine eligibility for benefits; thus, most decisions by ERISA plan administrators continue to be reviewed under the arbitrary and capricious standard. Federal Preemption of State Law o ERISA preempts state laws that relate to ERISA plans. Courts employ two tests to determine whether a state law relates to an ERISA plan. The first, the "connection with" test. Under the second test, courts find that ERISA preempts state laws that "refer to" ERISA plans. Pension Plan Termination o Pension plans can be overfunded for several reasons. One major cause of overfunded pensions has been the existence of a strong stock market. In the past, companies looked at their pension plan assets when stock prices were high and decided they had better uses for the money. They also feared that a surplus would make the company a takeover target. As a result, companies would terminate their pension plans and start new plans with the proper amount of cash reserves, keeping the excess funds. o Employees have argued that the pension plan is their money and the company should not be able to withdraw it. Employers have replied that they are responsible for increasing contributions if plans turn out to be underfunded, so if their estimates are conservative and excess funds accumulate, those funds belong to the company. o Where terminations did not comply with contractual provisions in the plan, courts have invalidated them. But any legal doubts about the basic legitimacy of excess fund recovery were put to rest by Title XI of the Consolidated Omnibus Budget Reconciliation act of 1985 which imposes procedural requirements on plan termination. The company must buy a fully funded annuity for plan beneficiaries who are already retired, and must create an adequately funded new plan for current workers. o Certain other requirements must also be met before a defined benefit plan may be cancelled if it is not fully funded. If the plan's assets are sufficient to cover all liabilities for benefits earned to date, then the plan sponsor may terminate it as long as certain notice requirements are satisfied. If a plan's assets are not sufficient to cover liabilities for benefits earned to date, the plan may only be terminated if each contributing to the plan is distressed. An employer is distressed if (1) a petition for liquidation of the employer has been filed under bankruptcy laws, (2) the employer is in the process of reorganizing under bankruptcy laws, the bankruptcy court finds that the employer will be unable to both pay its plan debts and to continue business outside of reorganization w/o the plan termination, and the bankruptcy court approves the termination; (3) the employer demonstrates to the PBGC that it will be unable to both pay its debts when they are due and continue in business unless the distress termination occurs; or (4) the employer demonstrates to the PBGC that its pension plans have become unreasonably burdensome solely as a result of a decline in the employer's workforce.  Pension Benefit Guaranty Corp v. LTV Corp. (US 1990) Rule: ERISA protects defined benefit pension plans upon termination. The Pension Benefit Guaranty Corporation (PBGC) may force restoration of involuntarily

terminated pension plans based upon an abusive follow-on plan. Facts: The Pension Benefit Guaranty Corp (P) is a US gov corporation that administers and enforces Title IV of ERISA (to administer rules for defined benefit pension plan terminations and a program of pension insurance. The LVT Corp. (D) file for bankruptcy under Ch. 11. Because of the collective bargaining agreements, D could not voluntarily terminate the plans. D sought to have P terminate the plans. After providing the P with information concerning its financial condition, P invoked its powers under ERISA and determined that the plans should be terminated, and they were. The EEs (who were going to be short-changed and wanted their benefits back) filed suit in bankruptcy court challenging the termination of the plans. This axn was settled, with D and the EEs negotiating an interim collective bargaining agreement that included new pension arrangements to make up for losses suffered. EEs were satisfied, but P objected to the new agreement, characterizing them as “follow-on” plans. A follow-on plan is a new benefit arrangement designed to wrap around the insurance benefits provided by the P in such a way as to provide both retirees and active participants substantially the same benefits as they would have received had no termination occurred. The P determined that D’s financial situation had changed significantly and that the plans should be restored. P issued a notice of intent to restore the terminated plans. The court of appeals held that the decision was arbitrary and capricious b/c P did not consider the labor and bankruptcy laws before making its decision. P appealed to the Supreme Court. Holding/Rationale: For (P)- restoration may be forced. When a covered plan terminates with insufficient assets to satisfy its pension obligations, the P becomes trustee of the plan, taking over the assets+ liabilities to cover what it can of the benefit obligations. It then must add its own funds to ensure payment of remaining non-forfeitable benefits. Upon termination, the ER becomes liable to the P for the benefits that the P will pay out. An ER may terminate a plan voluntarily, by either a “standard termination” or a financial “distress termination.” However, if either type of termination would violate the terms of a collective bargaining agreement (CBA), the ER may not terminate the plan. The P may terminate a plan involuntarily, notwithstanding a CBA, based upon certain determinations concerning funding, financial inability to pay, ect. ERISA allows the termination to be undone by the P and the plan restored. When restoration occurs, the benefits are reinstated and the ER, rather than the PBGC is responsible for the unfunded liabilities. First, the court rejects the court of appeals contention that the PBGC is responsible for the unfunded bankruptcy and labor laws before reaching its decision. ERISA does not direct the PBGC to make restoration decisions based upon the policies of other laws. Second, the court holds that PBGC’s basis for the restoration decision— its policy against follow-on plans—is not contrary to congressional intent and is based on a permissible construction of ERISA. The policy is based on the belief that such plans are abusive of the insurance program and result in the PBGC’s subsidizing an employer’s ongoing pension program in a way not contemplated by ERISA. The anti-follow on policy is premised on the reasonable belief that EEs will object more strenuously to a company’s original decision to terminate a plan if the company cannot use a follow-on plan to put those EEs in a similar position after termination as they were before. The follow-on plan would thus remove a significant check (EE resistance) against termination of a pension plan. Discrimination in Private Pensions o Older Worker Benefit Protection Act - becomes important in retirement plans b/c if there is a plan which could have the effect of age discrimination, but there is a good business reason and people are willing to accept it, there is still liability unless there is a waiver of ADEA rights. This Older Worker Benefits Protection Act governs how ADEA rights may be waived. Waiver requirements are very specific: (1) in writing; (2) writing must be in appropriately written language (understandable); (3) must specifically refer to waiver of ADEA rights & claims (must have ADEA on it & explain the rights); (4) explain that the waiver is only

for rights now and not for rights in the future; (5) must be supported by valuable consideration (valuable consideration is usually money-severance); (6) must state that employee should consult with an attorney before signing this; (7) 21-day callback time. The individual must have 21 days to consider the agreement. Then 7 days are allowed for revocation. These time provisions must be in writing in the document. o Consideration paid on day 29, when waiver is effective. o An older worker under the ADEA = 40 years old. o With this waiver, you have to provide a listing of all people who are losing their jobs, not by name, but by position and age so they know how good of ADEA claim they are waiving. o If waiver has to contain certain elements and one element is missing, waiver is void. o This act sets out standards in a WARN/layoff situation—you have to disclose to your older workers that as part of their receiving severance, they are going to waive their ADEA rights. Why only the older workers? The only ones who have the rights.  City of Los Angeles v. Manhart (US 1978) Rule: Unequal employee contributions to pension plans, requiring higher contributions from female employees based upon sex-based mortality assumptions, unlawfully discriminates against female employees. Facts: Female employees sued for sex discrimination due to employer's requirement that female employees contribute a higher percentage of their wages to pension plan than males. Holding: The paying more is based on gender & is therefore discriminatory. Government Pensions as Contract o ERISA does not apply to state and local government pension plans. Historically, those pensions were treated legally as gratuitous. But new property thinking led to lawsuits in which some courts held that reductions in pension rights were unconstitutional. In addition, many states, either by constitutional amendment or by judicial decision, have declared public pensions to be a contractual right rather than a gratuity. o B/c state & federal plans are not subject to the same requirements, they are generally underfunded. SOCIAL SECURITY RETIREMENT BENEFITS Background o Eligibility for social security retirement benefits is governed by the credits system. As individuals work and pay taxes, they earn Social Security credits. Most workers need 40 credits in order to be eligible for Social Security pension benefits (netting more than 40 credits does not increase an individual's Social Security payments or benefit the individual in any other way. In 2006, a worker gained one credit for each $970 of earnings this amount increases each year; one can earn a maximum of a 4 credits per year. Thus, most people become eligible for Social Security after10 years of work. Once an individual earns enough credits, he or she can collect Social Security benefits if he or she is retired and has reached a certain age (however, if an individual reaches the age of 70 w/o having retired, the individual can start receiving Social Security benefits w/o having to retire). Originally, individuals could receive the full amount of their Social Security benefits at age 65. Now, the age at which an individual is eligible for their full retirement benefits (also known as the full retirement age) varies according to an individual's year of birth. The full retirement age for individuals born in 1937 or earlier is 65; it rises incrementally until, for those born in 1960 or later, it becomes 67. All individuals can retire as early as 62. However, workers who retire early only receive a percentage of the retirement benefits that they would have been entitled to

o

o

o o o o o o

had they waited until the normal retirement age. Full retirement benefits are calculated using a formula based on the wages that an individual receives during his or her best-paid 35 years of work. In order to compute an individual's full retirement benefit, one must calculate the AIME. The social security system is financed by a tax on wages. For the longest time, Social security had a disproportionate standard for women & men; based on premise that women make less money than men. The best way to look at social security is that it is under such attack that there will be changes to it. More attention on private pensions due to problems w/ social security. The Social Security Act provides for widow's benefits only to women who were married to the deceased for at least nine months before his death. The purpose is to prevent marriages arrange solely to obtain the benefits. Social security's formula for the computation of benefits is progressive in that lower income workers' receive a greater percentage of their average wages from Social Security than higher-income workers do. Note, however, that the progressive nature of Social Security benefits is somewhat offset by Social Security's regressive tax system.

The Retirement Test  Taubenfeld v. Bowen (1988) Rule: Under the “Retirement Test,” an individual 65 or over may earn up to a specific sum in wages and still collect retirement insurance benefits. Facts: P was president of a family-owned business. At 66, he allegedly retired and resigned as president and operator of the biz and reduced his hours, with a commensurate reduction in salary. P asserted that his wife and sons took over the bulk of his duties and ran the biz. P filed a claim for Soc Sec benefits but was informed that he was not entitled to payments bc he was still in a position to control all the business activities and his own earnings. (The Social Security Administration thought he was trying to milk the system). The evidence showed that P curtailed his work from a yearly salary of $32,000 to $6,960. Decision: For P- may be eligible for benefits Rationale: The issues for the court were whether the P’s intentional arrangement to receive wages up to the max amount permitted was a sham, and whether the undisbursed corporate profits were constructively received by P to put him over the max wages allowed for collecting retirement benefits. It is clear that P deliberately arranged his affairs to be eligible for retirement. This is proper as long as he was legitimately retired and the arrangement was bona fide. The SSA found the arrangement to be a sham, and that P remained in control and had the ability to set his own salary. In order to find a sham arrangement, 3 factors are considered: 1) whether the claimant continues to contribute substantial + valuable services to the corp; 2) whether the family member receiving the income increases his or her duties commensurate with the increase in salary; and 3) whether the family member’s income is used to support the claimant. The SSA determined that P continued to contribute substantial services—however, there is no finding that P’s wife or sons received wages not commensurate with their allegedly increased duties. The record also does not make this a case of income shifting to another family member constituting an indirect payment to P. There is no authority that allows the SSA to allocate as wages to P the undistributed corp. profits. Is Social Security Property?  Flemming v. Nestor (US, 1960) Rule: Social security benefits are not constitutionally protected property rights and thus the government can take them away. Facts: Facts: P Immigrant deported b/c of past communist membership was wholly cut off from Social Security Benefits. Holding/Rationale: The District Court erred in holding that the P was deprived of an accrued property right.

To engraft upon the Soc Sec system a concept of “accrued property rights” would deprive it of the flexibility in adjustment to ever-changing conditions which it demands. Congress included int eh Act a clause expressly reserving to it the right to “alter, amend or repeal” any provision. Therefore, a person covered by the Act does not have such a right in benefit payments as would make every defeasance of accrued interests a violation of the Due Process Clause. This does not mean, however, that Congress can exercise its power to modify the scheme free of all constitutional restraint. The interest of a covered EE under the Act is of sufficient substance to fall under the protection from arbitrary gov action afforded by the Due Process Clause. However, neither the language and structure of the section, nor the nature of the deprivation, can be considered a punitive design—it is a mere denial of a noncontractual governmental benefit.  Note: This dissent argues that this was ex post facto punishment and a bill of attainder (perpetuated against anyone who has ever even innocently belonged to the Community Party).  US Railroad Retirement Bd v. Fritz (US, 1980) Rule: 1) A law that eliminates certain types of retirement benefits by distinguishing between classes of employees is not unconstitutional if the purpose is rationale. 2) Railroad benefits, like Soc Sec benefits, are not contractual and may be altered or even eliminated at any time. Facts: The RR Retirement Act of 1974 restructured the RR retirement system—it changed the old system’s formula for computing retirement benefits for those in the RR industry by eliminating future accruals of windfall benefits. A windfall benefit is the difference in benefits received by 2 types of EEs, one who works for a certain number of years solely in the RR biz and qualifies for RR benefits and one who splits his employment between the RR and non-RR biz and qualifies for both RR retirement benefits and social security benefits. Thus, those EEs who split their employment received dual benefits in a sum greater than they would have received had they not split their employment—this excess is a windfall. The Act divided EEs into groups, with some having benefits computed under the new system and not receiving any windfall benefits, with others computed under the old system and getting windfall, and others qualifying for a lesser windfall. P and other EEs filed a class action suit seeking declaratory judgment that this was unconstitutional. Decision: For D- there are plausible reasons for Congress’ action- and it did not deny P and other class members equal protection. Rationale: B/C Congress could have eliminated windfall benefits for all classes of EEs, it is not constitutionally impermissible for Congress to have drawn lines between groups for the purpose of phasing out those benefits. The court must determine if Congress achieved its purpose in a patently arbitrary or irrational way. One element of the Act’s formula for benefit determination was the “current connection” test—EEs who had qual’d for both RR and soc sec. benefits as of the changeover date, but who had not yet retired as of that date (and thus were not yet receiving dual benefits), were entitled to windfall benefits if they had a “current connection” with the RR industry as of the date the Act was passed. This was not a patently arbitrary method of determining which EEs were “career railroaders,” particularly since the test had been used before and this group was more likely to be those for whom the Act was designed. Gender Discrimination in Social Security  Califano v. Goldfarb (US, 1977) Rule: 1) Gender-based distinctions concerning eligibility for social security benefits is unconstitutional.2) The dependency requirement for widowers to collect social security benefits is unconstitutional. Facts: Under a federal statute known as the Federal Old Age Survivors Insurance Benefits Act, survivors benefits based on the earnings of a deceased husband are payable to his widow. However, such benefits based on the earnings of a

deceased wife are payable to the widower only if he was receiving at least onehalf of his support from his deceased wife. P contended that the statute’s gender based distinction violates the Due Process Clause. The Supreme Court agreed. Rationale: The court noted that such a distinction is forbidden, at least when supported by no more substantial justification than archaic and overbroad generalizations, such as assumptions of dependency that don’t reflect contemporary reality. Congress responded to this decision by repealing the dependency requirement for widowers and husbands, but mandating that retired federal and state workers offset their pensions against what they would receive as the spouse of a Soc. Sec. contributor. RETIREE HEALTH CARE o One of the most important benefits retirees can receive from their former employers is subsidization of their health care costs. Yet, for a variety of reasons, employers are seeking to cut the cost and coverage of these plans. As the move away from providing retiree health care continues, the legal doctrines that govern when an employer can terminate or modify its existing retiree health care system become more important.  Vallone v. CAN Fin. Corp. Rule: There is a presumption that benefit plans are not vested, and a plan will not be deemed to be vested unless the particular contract provides so. Facts: The retirees accepted a voluntary special retirement program offered by the employer, which included a "lifetime" monthly health care allowance, a welfare benefit offered to all retirees. When the employer's successor terminated the HCA benefit, the retirees filed suit. Decision/Rationale: Affirming in favor of defendants, the court held that 1)the retirees' allegations under ERISA failed because reading the document in its entirety, the reservation of rights clauses explained that although the plan entitled retirees to health coverage for the duration of their lives, the terms of the plan were subject to change at the will of the employer, 2) the estoppel claim failed because the retirees made no showing of a knowing misrepresentation of fact and could not show reasonable reliance; and 3) the employer fulfilled its fiduciary duty under ERISA, because there was no evidence that it set out to deceive its employees. Notes: Adhesion contract argument doesn’t work because this is  a benefit—not giving something up. What is the limit on it- good faith and fair dealing? When a  company is struggling, courts go a long way in keeping an ER afloat.  In re SPECO Corp. Rule: An employer debtor in possession may not unilaterally modify or terminate retiree benefits. Facts: Bankrupt employer sought court order to terminate retirees' health benefits. Rationale: The debtor in possession is required to continue the payment of retirement benefits at pre-bankruptcy levels, unless one of 2 exceptions are met: 1) the court may order modification of such payments pursuant to a motion and hearing or 2) the trustee and the recipient’s representative may agree to modification. If the debtor attempts to modify, it must fulfill several conditions before it may make n application to the court for modification. First, the trustee shall make a proposal to the retirees’ representative A) providing for those necessary modifications in the benefits that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably and B) provide the representative with such relevant info as necessary to evaluate the proposal. The court determined that the debtor corp. failed to show that non-payment was

necessary for reorganization (haven’t decided if proceeding as a going concern or liquidating assets) and that this would be fair and equitable (don’t know how other creditors are being treated).

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close