January 2010 Quick Clips

Supreme Court To Decide Arbitrability Question, January 26, 2009

In recent years, employers have turned to mandatory arbitration agreements as an alternative to litigating claims of discrimination in state or federal court. Employees seeking to escape their obligations under such agreements often attack them as being "unconscionable," alleging that the terms are arbitrary or unduly favorable to the employer. When employees raise these challenges, the courts have split on the question of whether an arbitrator or a court should decide the issue. On January 15, 2010, the United States Supreme Court agreed to resolve this question by hearing the case of Rent A Center West, Inc. v. Jackson, U.S. No. 09-497.

The case arises out of a race discrimination claim brought by Antonio Jackson, an African-American account manager who worked for Rent A Center in Nevada. Mr. Jackson claimed he was denied promotions because of his race and retaliated against after making complaints about discrimination to the human resources department. In February 2007, he filed suit against Rent A Center, and the company moved to compel arbitration. Jackson argued the arbitration agreement was unenforceable because its terms were substantively and procedural unconscionable. Rent A Center moved to dismiss the case on the grounds that the arbitration agreement provided that it was up to the arbitrator, not the court, to decide this question.

Although Rent A Center prevailed in the trial court, the United States Court of Appeals for the Ninth Circuit reversed the decision and ruled that the question of unconscionability must be decided by a court. On October 23, 2009, Rent A Center petitioned to the Supreme Court for review, and the Court has now agreed to decide this issue.

The outcome of this decision will be anxiously awaited by employers. Should Rent A Center prevail, employers will be able to keep discrimination claims out of court entirely, provided that they include language in arbitration agreements which "clearly and unmistakably" reserve to the arbitrator the right to decide the question of enforceability.

Front Desk Clerk Fired For Not Being “Pretty” Gets New Chance At Sex Discrimination Lawsuit, January 22, 2009

by Randi Klein Hyatt

In a case involving unlawful gender stereotyping, the Eighth Circuit Court of Appeals held, in Lewis v. Heartland Inns of America, LLC, that a female hotel desk clerk, who was fired after a female company executive complained to others that she lacked a pretty “Midwestern girl” look desirable for front-desk employees, may pursue her sex discrimination claims under Title VII. This company executive went about removing Ms. Lewis in an interesting manner. First, she forced Ms. Lewis’s immediate supervisor to resign after the manager would not transfer Ms. Lewis to a night-shift position involving less customer contact. Then, the executive required Ms. Lewis to undergo a second interview to retain the front desk job. When Ms. Lewis refused, the company terminated her for refusing its reasonable interview request. The Eighth Circuit deemed that second interview requirement pretext for the real issue: was Lewis terminated because she was not pretty enough? The Eighth Circuit acknowledged Supreme Court precedent that states unlawful sex discrimination includes bias based on social stereotypes regarding how men and women should look, dress or act.

ADA Trial Permitted For Employee Who Brandished A Gun And Threatened Suicide, January 21, 2009

by Randi Klein Hyatt

In a decision that some will undoubtedly label as taking the protections of the Americans with Disabilities Act (ADA) to the extreme, a federal district court in North Dakota ruled, in Lizotte v. Dacotah Bank, Case No. 4:08-CV-084 (D.N.D. Jan. 7, 2010), that a bank executive who was terminated after threatening suicide with a gun at a cemetery, and then taken into custody by the police thereafter, will get a trial on his claim that he was fired in violation of the ADA. The court permitted the trial because Lizotte, the former bank vice president, had produced enough evidence that the bank regarded him as disabled (bank officials knew he had been receiving treatment for his depression and one had commented she was “blown away” that he was released from custody and to return to work after just a few days). Further, the bank was unable to establish that Lizotte’s actions in the cemetery, or his hospitalization thereafter, were generally known in the community to support its claim that the termination was motivated out of concern for customer and employee safety and/or to protect the bank’s reputation.

In A Rare Case Of Reverse Discrimination, White Male Employee Produced Direct Evidence Of Discrimination, January 20, 2009

by Randi Klein Hyatt

The Fourth Circuit Court of Appeals, in Schafer v. State of Maryland, 2009 WL 5183692 (4th Cir. 2009) (unpublished), held that Stephen Schafer, a white male who worked for the Department of Health and Mental Hygiene since 1975, had produced direct evidence of race and gender discrimination regarding his employer’s decision to promote an African-American female instead of him into a management position. Specifically, the employee produced “smoking gun” evidence that the decision-making committee used improper criterion. One of the committee’s members had said “this position was a done deal, and an African-American female candidate was going to be hired.” The Fourth Circuit held that this statement (along with a few others) were not “stray remarks” because they were statements regarding the hiring decision made by one of the decision-makers.

Department of Labor Provides Small Employers With 7-Day Safe Harbor For Depositing Employee Contributions, January 19, 2009

by Randi Klein Hyatt

On January 14, 2010, the U.S. Department of Labor published its final rule, Definition of Plan Assets – Participant Contributions, to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants. All employers, regardless of size, must transmit employee contributions to pension plans as soon as they reasonably can be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer. The final rule now creates a safe harbor period such that participant contributions to a small plan (less than 100 participants) will comply with the law if those amounts are deposited with the plan within seven business days of receipt or withholding.

Seventh Circuit Rules That Mixed Motive Claims Not Available In Bias Cases Under ADA , January 19, 2009

by John S. Bolesta

On January 15, 2010, the U.S. Court of Appeals for the Seventh Circuit overturned its own precedent by ruling that a plaintiff, who alleged she was fired because of a perceived disability in violation of the Americans with Disabilities Act, may not recover based on a “mixed motive” theory that her former employer acted in part for illegitimate discriminatory reasons. See Serwatka v. Rockwell Automation Inc., Case No. 08-4010 (7th Cir., 2010). Applying the logic of the U.S. Supreme Court's ruling in Gross v. FBL Financial Services, 129 S. Ct. 2343 (2009), which held that the “mixed motive” analysis developed in cases under Title VII of the 1964 Civil Rights Act and codified in the 1991 Civil Rights Act does not apply to age discrimination claims under the Age Discrimination in Employment Act, the 7th Circuit ruled that the reasoning in Gross compels the same conclusion with regard to ADA “mixed motive” claims.

Writing for the majority, Judge Ilana D. Rovner wrote “[l]ike the ADEA, the ADA renders employers liable for employment decisions made ‘because of' a person's disability, and Gross construes ‘because of' to require a showing of ‘but-for' causation.” The Court concluded that “in the absence of a cross-reference to Title VII's mixed-motive liability language or comparable standalone language in the ADA itself, a plaintiff complaining of discriminatory discharge under the ADA must show that [her] employer would not have fired [her] but for [her] actual or perceived disability; proof of mixed motives will not suffice.”

This opinion is certain to rally Democratic lawmakers who, on October 6, 2009, introduced legislation designed to “restore” the burden-shifting approach to mixed motive ADEA cases. In a clear rebuke of the Supreme Court’s analysis, the Senate bill states that:

Gross v. FBL Financial Services, Inc.,

Both bills would insert language into the ADEA requiring the employee to show only that age was a “motivating factor” for the decision. This change would ensure that the ADEA’s language parallels that of Title VII, and would place the burden of persuasion back onto the employer after the employee demonstrates—by either direct or circumstantial evidence—that age was a factor in an adverse employment decision.

Unions Seek Exemption From Excise Tax As Healthcare Reform Nears, January 19, 2009

by John S. Bolesta

The national economy may be in the tank, but these are high times for unions. In an effort to win enough support for the Healthcare Reform Bill, it appears that labor leaders and government officials have reached a compromise to exclude from the bill all high-end “Cadillac” plans that union workers with high-risk jobs often purchase. In a recent FoxNews report, a senior Democratic official speaking on background told Fox News that the threshold for exemption would be raised from $23,000 to $24,000 per family but would remain the same at $8,500 for singles with high-value plans. Dental and vision plans would be removed from that calculation, however. The deal exempts all State and local workers and union members until 2017. The deal further reduces the estimated revenue raised from the excise tax from $150 billion to $90 billion. There has been no announcement from anyone on how the $60 billion deficit will be made up.

To see the full article, go to: http://www.foxnews.com/politics/2010/01/14/deal-reportedly-reached-taxing-cadillac-plans/.

Updated COBRA Model Notices Available, January 15, 2009

by Randi Klein Hyatt

On January 13, 2010, the U.S. Department of Labor released an updated model COBRA notice for employers, which reflects the two-month extension (granted through February 28, 2010) of the health benefit continuation coverage subsidy eligibility period under the Consolidated Omnibus Budget Reconciliation Act (COBRA), set forth in the 2010 Defense Appropriations Act. The notices are available at http://www.dol.gov/ebsa/COBRAmodelnotice.html.

Fourth Circuit Reinstates Whistleblower’s Sarbanes-Oxley Claim, January 1, 2009

by Michael R. Severino

In Stone v. Instrumentation Laboratory Company, et al. (No. 08-2196; December 31, 2009), the Fourth Circuit reinstated David Stone’s Sarbanes-Oxley whistleblower claim and remanded the action to the federal district court for a full de novo proceeding. In doing so, the Fourth Circuit adhered to the clear language of Sarbanes-Oxley and vacated the district court’s dismissal of Stone’s federal complaint.

Pursuant to the Sarbanes-Oxley Act of 2002, Stone filed a retaliation claim with the Occupational Safety and Health Administration, which hears such claims on behalf of the Department of Labor. Unhappy with OSHA’s decision, Stone appealed to an administrative law judge, who also ruled against Stone. Stone thereafter appealed to the Administrative Review Board. Perhaps fearing that the ARB would rule against him as OSHA and the ALJ did, Stone decided to try his hand in federal court. Stone relied on a provision of Sarbanes-Oxley, which permits de novo actions in federal court if the Secretary of Labor has not issued a final decision within 180 days of a claim. Although Stone’s claim had been rejected by OSHA and the ALJ, it was still pending before the ARB and more than 180 days had passed.

The federal district court disagreed with Stone’s logic. The court ruled that Stone was collaterally stopped from litigating his claim in federal court because the ALJ already ruled against him on the merits. On appeal, however, the Fourth Circuit interpreted the statute more strictly than the district court. Noting that Sarbanes-Oxley clearly and unambiguously afforded a claimant a right to de novo, and not deferential, review, the Fourth Circuit ruled that Stone was entitled to a second bite of the apple in federal court. Sarbanes-Oxley’s provision of de novo review barred the application of collateral estoppel preclusion principles.

In the future, one would expect the Department of Labor to either change its administrative review process or expedite it so that a claimant can exhaust all appeals within 180 days.

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