I. ADA

Just Say No. Thanks to the Supreme Court, employers who have a policy of not rehiring employees who resigned instead of being discharged can just say "no" when such former employees seek re-employment.

In our October newsletter, we reported that the United States Supreme Court was scheduled to hear an appeal involving such rehire policies. In light of the Ninth Circuit's holding that these policies violated the Americans with Disabilities Act (ADA), there was a possibility that employers would have to change their rehire policies. However, the Supreme Court found that a neutral no-rehire policy does not violate the ADA.

A Pain In The Behind — A Disability???
What one employee considered a disability just turned out to be another pain in the behind. After a manager was terminated by her Alabama employer because of her poor performance, she filed a suit against her employer under the ADA for alleged discrimination and retaliation for making complaints about her disability: acute hemorrhoids. The manager claimed that due to her hemorrhoids, she was unable to control when she went to the restroom. Her condition also caused difficulty walking, standing and working. The manager testified that she could not have fixed hours because her condition required that she be able to use the restroom and change her clothes at home. As a result, the manager claimed that hemorrhoids constituted a disability because it "substantially limited" her in the "major life activities" of walking, standing, sitting, eating, drinking, dancing, laughing, coughing and sneezing. In response to the manager's contention, the U.S. District Court for the Northern District of Alabama recently stated that "to characterize such a common malady as hemorrhoids, even severe hemorrhoids, as a disability would thwart the purpose of the ADA" and thus, held that hemorrhoids did not constitute a disability under the ADA.

II. FMLA

Ignorance Is Not Bliss! The Ninth Circuit strikes again. It comes as no surprise that the Ninth Circuit once again makes a decision that does not favor employers. A recent decision warns employers that its lack of knowledge regarding the Family and Medical Leave Act (FMLA) does not protect it from liability.

An employee had taken maternity leave and was entitled to up to four months leave under California's pregnancy disability law – this does not apply to Texas. After that leave expired the employee would then be eligible for up to 12 weeks of leave under the FMLA. However, her supervisor began pressuring her to come back to work before she had taken all of her maternity leave. The employee told her supervisor she was still experiencing medical problems and needed more time to recuperate and requested an extension. The supervisor ultimately agreed to an extension, although shorter than requested, and in the meantime changed the employee's leave from what would have become FMLA leave to personal leave. About the same time the supervisor was told he needed to reduce his department by one employee. Guess who lost her job?

It's easy to see where this employer went wrong. First, even though an employee does not specifically use the words "FMLA leave," once an employer has been given enough information to indicate FMLA leave may be appropriate, the employer is responsible for properly identifying the leave as FMLA and starting the ball rolling on the proper paperwork. Second, once an employee has established that he or she is qualified for and is taking FMLA leave, the employer should not engage in attempts to discourage the use of the leave or refusal to authorize such leave. And third, while it is possible to terminate an employee who is on FMLA leave, proceed at your own risk! Any suggestion that the termination is in retaliation for the employee taking FMLA leave can lead to all kinds of trouble for the employer.

III. AT-WILL EMPLOYMENT

Talk Is Not Cheap. The Connecticut Supreme Court upheld a $850,000 jury verdict in favor of an employee, finding that even though the employee was an at-will employee, a supervisor's statements were "sufficiently clear and definite" to constitute a promise that her at-will employment could be terminated for any reason except her husband's future employment with a competitor.

In 1998, the plaintiff and her husband both worked for the employer. Then in April 1998, the employer terminated the plaintiff's husband. Shortly after his termination, the plaintiff became aware that her husband would probably seek employment with one of her employer's competitors. She then explained to her immediate supervisor her concerns about his potential employment with a competitor and the possibility of it affecting her employment. At that time, her immediate supervisor told the plaintiff that her husband's re-employment in the same industry would have no bearing on her employment. On another occasion, the supervisor informed the plaintiff that he had spoken with the company's president and chief executive officer on her behalf, and that in light of the conversation, she had no reason to be concerned about continuing her employment in the event that her husband were to work for a competitor. He also told her she "was a highly valued employee and there was nothing to worry about." On the basis of these statements, the plaintiff continued her position with the company without pursuing other employment opportunities.

In March of 1999, the employer became aware that the plaintiff's husband was performing consulting services for a competing firm. The employer requested that she verbally agree to provisions of a document it drafted listing her obligations to the company in relationship to her husband's work on behalf of any of the company's competitors. When the plaintiff would not agree to these provisions, the employer fired her. She sued the employer claiming that the employer promised not to fire her because of her husband's position with a competitor. This promise deterred her from pursuing other employment opportunities, and she suffered harm when the employer terminated her employment. At trial, the jury agreed and found the plaintiff's harm to be worth $850,000, which the Connecticut Supreme Court affirmed.

IV. TITLE VII

Balancing Race. Reverse, Reverse Discrimination, Discrimination. In 2000, certain Houston employees filed a lawsuit against their employer under Title VII of the Civil Rights Act of 1964 and 42 U.S.C. Section 1981, alleging it discriminated against them on the basis of their race. One of their claims was that they were denied promotions and pay increases because they were Black. On appeal, the Fifth Circuit reversed the district court's dismissal, finding that in making its decision the district court ignored the employer's "Balanced Workforce Initiative" or "BWF" – a program implemented in the 1990s to insure that all racial and gender groups were proportionately represented at all levels of the company. The Fifth Circuit found that the employer's affirmative action program alone "was sufficient to constitute direct evidence of a form or practice of racial discrimination."

To achieve a "racially balanced" workforce, the employer produced reports listing the actual and desired racial compositions of each office. The reports indicated that Blacks were overly represented and Whites were under represented in the employer's Houston office. Therefore, the general manager in the Houston office directed the Houston office to create its own BWF reports to remedy the disproportionate racial representation. The Houston BWF reports were quite explicit in their racial goals for each job and grade level. Furthermore, notes and evaluations made by the employer's senior staff indicated that managers were evaluated on how well they complied with the BWF objectives. The employees also presented statistical data showing the employer subsequently reduced the percentage of Black employees in the Houston office. In light of this evidence, the Fifth Circuit concluded that a "reasonable jury could find that the employer considered race in fashioning its employment policies and that because the plaintiffs were Black, their employment opportunities were limited."

Achieving workplace diversity is often times a balancing act. Therefore, when instituting affirmative action policies or complying with already existing policies, it is necessary for employers to ensure that these policies are in compliance with the law and to seek legal advice, because compelling adherence to an affirmative action goal could lead to potential liability.

Three's Company. Just when you thought there could not be another cause of action for employees, a court tells us differently. A North Carolina District Court recently decided "third party" friends and relatives may also have actionable Title VII claims of unlawful retaliation. A "third party" claim could arise in the following scenario.

An employee complains to his employer about its allegedly discriminatory practices. Shortly thereafter, he is fired and tells the employer that he intends to file a discrimination charge, pursuant to Title VII of the Civil Rights Act of 1964. The employer then fires another employee who happens to be the fiancée of the employee who threatened to file a discrimination charge. According to the North Carolina court, not only would the former employee who was fired after voicing concerns about alleged discriminatory practices have a claim of unlawful retaliation, but the fired fiancée could also claim unlawful retaliation as a "third party."

However, to initiate a potentially viable claim, "third-party friends and relatives must show that they have sufficient, obvious, known connections and have taken actions with respect to the person originally engaging in protected activity so that it would be reasonable to believe that their employer perceived them as participating in or assisting the protected activity."

In the North Carolina case, the court concluded that the "third-party" plaintiff could reasonably meet this burden because she and her fiancé lived together and allegedly the employer was aware of their living arrangements. Also, shortly after the plaintiff's fiancé announced that he was planning to file a discrimination charge against their employer, the plaintiff, who was out on maternity leave, was allegedly told that she could not return to work. Therefore, the court found that the plaintiff could reasonably demonstrate that she was terminated because of the employer's belief that she would be assisting in her fiancé's impending discrimination charge – as a potential witness as well as financial resource. According to the court, "the fact that the plaintiff's fiancé had not yet filed an EEOC charge did not alter the situation…[since] he had clearly notified the employer of his intent to file, any anticipatory retaliation against him or those who might support him would be illegal at this point." Go figure.

V. FACT ACT

Good News For Employers … And, That's A Fact. On December 4, 2003, President Bush signed into law the Fair and Accurate Credit Transactions Act of 2003 ("FACT Act"). The FACT Act amends the Fair Credit Reporting Act ("FCRA"), which implemented a national credit reporting system and included protections against identity theft. The FACT Act also corrects Federal Trade Commission (FTC) interpretations of the FCRA that were not in the best interest of employers.

According to FTC interpretations of the FCRA, a "consumer report" included "any investigation regarding suspected misconduct related to employment." As a result, before an employer could investigate an employee's possible employment-related misconduct, the employer would have to: 1) obtain the employee's consent before conducting the investigation; 2) provide notice to the employee prior to taking any adverse employment action against the employee; and 3) give the employee a complete copy of any report prepared by the investigator and any other documents relating to the investigation.

However, the FACT Act has changed these requirements for the benefit of employers. Investigation reports regarding employment related misconduct do not constitute consumer reports. Therefore, the employer does not have to obtain written authorization from an employee before allowing an outside agency to conduct an investigation regarding employment-related misconduct. Moreover, if an employer takes adverse action against an employee based on the results of the investigation, the employer does not have to give a complete copy of the investigation report and related documents. The employer is now only required to provide an "investigation summary" after taking such action. This investigation summary does not have to include the specific sources of information that were gathered during the investigation. The summary must contain only the nature and substance of the communication upon which the adverse action is based. Now that's good news for employers.

The effective date of the section of the FACT Act that applies to outside investigations was March 31, 2004.

VI. NLRA

The Grinch Stole Christmas (Bonuses). While a union organizational effort was being undertaken, an employer decided to reduce the annual Christmas bonus for its hourly production employees from 15 cents per hour to 13 cents per hour worked in a 40-hour work week. The Sixth Circuit affirmed the National Labor Relations Board's (NLRB) decision that this reduction occurred because of employees' union activities.

Immediately after the union organization began, management campaigned against the union and those who supported the cause. One of the supervisors paid employees to keep a watch out on the union activities. The employer terminated the employee who spearheaded the campaign for union representation. A high-ranking supervisor also com-piled a list of pro-union and anti-union employees and eventually used it to implement ways to "put a stop to the Union." Management directed supervisors to remove union literature located in the production facility. To further discourage employees from organizing, supervisors created a racist leaflet and constructed it in a manner that it appeared to be authored by the union.

The anti-union activities paid off. The employees overwhelmingly voted against the union -- but those activities also caused the employer to pay up. The NLRB ordered the employer to reinstate the employee who was in charge of organizing the union campaign and to compensate her for any losses she suffered. Also, the employer was required to make the production employees "whole" for unlawful reduction of their Christmas bonuses.

It is common for employers to organize campaigns discouraging employees from approving a union who seeks to represent them, but employers must be careful not to become a grinch in doing so because it could be quite costly. If you need assistance in organizing a campaign, give us a call.

Employers To The Rescue! In an effort to protect employees' safety, an employer does not automatically commit an unfair labor practice when it advises employees to report threats made by union representatives in the course of unionization efforts. However, depending on the factual circumstances surrounding such an advisement, an employer's attempt to protect employees may be found unlawful, as was seen in a recent Seventh Circuit case.

An employer held a meeting to address its employees' unionization efforts. During this meeting, the employer made a speech and told employees: "If you are threatened or harassed about signing a union card, I hope you will let us know about it." The employer argued to the Seventh Circuit that the speech was not made to discourage unionization but rather made in an attempt to protect its employees' physical safety. However, the court concluded that the employer's speech was an unfair labor practice because it encouraged employees to inform the employer which employees were unionizing. When the speech was made, the employer was not aware of any threats or harassment by union representatives. In fact, the employer made the speech on the first day that it learned of unionization efforts. Consequently, there was no evidence to support the employer's belief that there were employees who needed protection from threats or harassment by union representatives.

Furthermore, the court found the company's request that employees threatened or harassed about signing a union card, "targeted only union supporters, as those are the ones who approach others about signing union cards." Additionally, the Seventh Circuit found that employers encouraging employees to report "harassment" is per se a violation of the National Labor Relation Act (NLRA) because it is such a subjective term, "it has a potential for chilling legitimate activity."

VII. ARBITRATION

Sign On The Dotted Line. For employers that have entered into an arbitration agreement with your employees, does your agreement have a space for an employer or an employer's representative to sign? Has that line been signed? If not, pull out your pen and start signing because as you will see below, an unsigned agreement can come back to haunt you.

Recently the Texas Court of Appeals upheld a district court's ruling that a mandatory arbitration agreement not signed by an employer is not enforceable. A discharged employee, who sued his former employer for racial and ethnic discrimination as well as intentional infliction of emotional distress, challenged the validity of a mandatory arbitration agreement. The employment agreement had a signature block intended for the employer's representative to sign, but the employer never signed the agreement. The agreement also stated that "No modification or amendment of any provision of this Agreement is effective unless it is in writing and signed by the parties to this Agreement."

According to the court, the provision and the blank signature block were evidence that the parties did not intend to be bound until both parties signed the agreement. Even though the arbitration agreement was kept in the employee's personnel file and the human resources manager reviewed it before terminating the employee to insure that the employer was complying with its obligations under the agreement, the court determined that this was not enough evidence to indicate that the employer and employee entered into an agreement mandating arbitration to resolve the former employee's claims. So, off to court the employer will go.

Beware Of The One-Sided Monster.
The Sixth Circuit recently held that employers that have mandatory arbitration agreements must also make sure the process by which an arbitrator is selected insures fairness for the employee and lack of potential bias towards the employer. If your arbitrator selection procedure is ever challenged and a court finds it to be unfair, this could have serious consequences. An unfair arbitrator selection could potentially cause the entire mandatory arbitration agreement to be deemed unenforceable.

The Sixth Circuit case involved an employer's mandatory pre-dispute arbitration agreement, which contained a clause granting the employer exclusive control over selecting a pool of potential arbitrators. An employee sought a court's declaration that her Title VII claims were not subject to this agreement because of this clause. The Sixth Circuit did hold the clause was unfair and unenforceable because the potential arbitrators might be biased in favor of the employer. The Sixth Circuit also found the employer's "exclusive control over the pool of potential arbitrators to be particularly problematic because the employer could have easily adopted a procedure in which an unbiased third-party selected the pool of potential arbitrators."

Since the employer's procedure inherently lacked neutrality, the court held that the employee's Title VII claims were not subject to the employer's arbitrator selection provision. However, the Sixth Circuit left it up to the district court to determine whether the entire mandatory arbitration agreement was unenforceable because of the arbitrator selection clause. The issue regarding the enforceability of the entire agreement has yet to be decided but, in the meantime, beware of one-sided clauses that allow you full control over the arbitrator selection process.

Union Organizational Activity Since Our Last Newsletter. Five petitions for certification have been filed by unions. No petitions for decertification have been filed by management. Three elections have been held, of which all have been won by management.

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The Quarterly Update is a newsletter providing recent items of interest to our clients in the various areas of employment law. While the Update is to alert you to potential new problem areas or changes in the law, it is not to be considered legal advice or a legal opinion. Such can only be given after careful consideration of the facts unique to any situation. The contents of this newsletter are copyrighted and may not be used without express written consent of Neel & Hooper, P.C.

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