February 2006 Quick Clips

Employers With Fewer Than 15 Employees Can Be Sued Under Title VII., February 24, 2006

Title VII makes it "an unlawful employment practice for an employer ... 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." 42 U. S. C. §2000e-2(a)(1). The term "employer" includes only those businesses with 15 or more employees. On February 22, 2006, the U.S. Supreme Court ruled the 15 employee requirement is not jurisdictional. Arbaugh v. Y & H Corp., d/b/a Moonlight Café, U.S., No. 04-944, 2/22/06. Instead, it is an element of a plaintiff's claim for relief under Title VII. So, an employer with fewer than 15 employees can be sued under Title VII if it fails to object.

The Supreme Court's decision arose in the following context. Jenifer Arbaugh brought a sexual harassment action in federal court against her former employer Y&H Corporation ("Y&H"). After judgment was entered on a jury verdict for Arbaugh, Y&H moved to dismiss the case for lack of federal subject-matter jurisdiction. For the first time in the litigation, Y&H claimed it could not be sued under Title VII because it had fewer than 15 employees. The trial court thought it was "unfair and a waste of judicial resources" to grant the motion to dismiss, but the judge found he was required to do so because he believed the 15-or-more-employees requirement of Title VII was jurisdictional. Basically, the trial court decided it had to throw out the jury verdict because it never had authority to hear the case in the first place. The U.S. Court of Appeals for the Fifth Circuit affirmed the trial court's decision.

In an opinion by Justice Ginsburg, a unanimous U.S. Supreme Court disagreed. Ginsburg wrote, "... we hold that the threshold number of employees for application of Title VII is an element of a plaintiff's claim for relief, not a jurisdictional issue." Therefore, Y&H could not raise the 15 employee requirement "defensively late in the lawsuit, i.e., after Y&H had failed to assert the objection prior to the close of trial on the merits." Ginsburg said it was up to Congress to make the 15 employee requirement jurisdictional.

Motor Carrier Act preempts Fair Labor Standards Act if employee is engaged in interstate commerce, February 13, 2006

by Kevin J. Allis

Although the Fair Labor Standards Act ("FLSA") provides that covered workers must receive one-and-one-half their regular rate of compensation for working more than 40 hours per week, one of the most frequently used FLSA exemptions is the motor carrier exemption. (29 U.S.C. § 213(b)(1)). Employees who qualify for the exemption are exempt from the overtime provisions of the FLSA, but not from the minimum wage requirements.

A federal district court in Texas recently held that route sales representatives for Frito- Lay Sales, a general partner of Frito-Lay Inc., were engaged in interstate commerce and thus not eligible for overtime under FLSA. Frito-Lay route sales representatives transported snack foods from a distribution center within Texas to local retailers also located within Texas. Frito-Lay paid these employees a flat weekly rate, and a percentage of the value of the products they delivered rather than overtime.

John Billings the employee who filed the federal district court complaint, asserted that such drivers did not move shipments that originated out-of-state, instead, any such shipments were entirely intrastate. Since intrastate shipments are not under the purview of the FLSA's motor carrier exemption, overtime was due. However, the employer argued, and the court agreed, that the distribution centers were part of the continuous shipping process from Frito- Lay's manufacturing facilities, located outside Texas, to local retailers. Given this, the driver's activities were deemed interstate commerce and exempt from FLSA's overtime requirements.

To be eligible for the exemption, an employee must be subject to regulation by the Secretary of the U.S. Department of Transportation ("DOT") under Section 204 of the Motor Carrier Act ("MCA"). The Secretary of Transportation can establish maximum hours and qualifications for employees who (1) are employed by carriers whose transportation of passengers or property by motor vehicle is subject to Section 204 of the MCA; and (2) engage in activities of a character directly affecting the safety of operation of motor vehicles in the transportation, on the public highways, of passengers or property for commerce. (29 C.F.R. § 782.2). The primary purpose of this FLSA exemption is to preserve the jurisdiction of DOT with respect to setting maximum work hours for certain motor carriers and related activities. A employee cannot be subject to both the FLSA and the MCA at the same time. The possibility of DOT regulation preempts the application of the FLSA.

In this case, the process of moving products from manufacturing facilities to store shelves crossed state lines, and since the distribution center was not the final destination, the transportation of products from the distribution center to local retailers, although entirely within Texas, was in fact interstate commerce subject to MCA and not FLSA. Therefore, overtime compensation pursuant to FLSA was not due Frito Lay's route sales representatives.

Discrimination Charges Filed at the EEOC on the Downturn in 2005, February 13, 2006

by Clifton R. Gray

On February 9, 2006, the EEOC reported that discrimination charges filed with the EEOC against private sector employers declined in 2005 by 5 percent. The total charges filed during the fiscal year, which ended on September 30, totaled 75,428, making 2005 the third year in a row in which the numbers of discrimination charges filed at the EEOC has decreased.

As expected, charges based on race, sex and retaliation were the most frequent filings. The actual 2005 charge filings break down as follows:

Race – 26,740 charges (35.5% of all filings)
Sex – 23,094 charges (30.6% of all filings)
Retaliation – 22,278 charges (29.5% of all filings)
Age – 16,585 charges (22% of all filings)
Disability – 14,893 charges (19.7% of all filings)
National Origin – 8,035 charges (10.7% of all filings)
Religion – 2,340 charges (3.1% of all filings)
Equal Pay – 970 charges (1.3% of all filings)

The EEOC suggests that at least part of the reason for the continuing decrease in discrimination charge filings is its continued efforts with outreach, education and technical assistance events nationwide, which help explain what is considered discrimination under the law and the ways by which employers (and employees) can provide a tolerant and hospitable work environment. A downturn in charge filings is made that much more impressive when one takes into account that more and more employees generally know their legal right not to be adversely treated because of race, sex, age, etc. We'll have to wait and see if fiscal year 2006 continues the trend.

Employee Order to Reveal the Substance of Nearly 400 E-Mails her Boss Hacked from her E-mail Account, February 8, 2006

by Sarah C. Chernish

On January 20, 2006, a federal judge in New York ordered the plaintiff in a civil rights action to turn over nearly 400 e-mails from her America On-Line Account (AOL) to her employer. Rozell v. Ross-Holst, 2006 WL 163143 (S.D.N.Y.). Plaintiff alleged that she had been the victim of sexual harassment, violations of the Electronic Communications Privacy Act and state law. The basis of her claims included allegations that her supervisor made unwelcome sexual comments, inappropriate physical contact, and that after she complained to her Employer, the supervisor retaliated against her and terminated her. Additionally, when her attorney protested to the Employer, the supervisor "hacked" into her AOL e-mail account and forwarded to himself approximately 400 of her e-mails.

The Employer sought to compel Plaintiff to produce every e-mail sent to or from her AOL account during the time period in question, claiming they were relevant to her computer hacking, sexual harassment, and physical and emotional distress claims. Plaintiff objected maintaining she had already produced all relevant e-mails. The judge partially granted the Employer's motion to compel production.

The judge found that the 400 e-mails that the supervisor allegedly diverted from Plaintiff's account were clearly relevant, and Plaintiff had inappropriately redacted the contents of those emails when she produced them to the Employer. The judge ordered unredacted copies be provided, stating that the substance of those e-mails was clearly relevant to determination of both actual and punitive damages for the illegal interception of electronic communications claims.

The judge held that the non-intercepted e-mails from Plaintiff's account need not be produced to the Employer because they were not relevant to either the hacking claim or the sexual harassment claims. The judge disagreed with the Employer that the e-mails were pertinent to the hacking claim as evidence of whether the Employer or Plaintiff had ownership of the AOL account, noting that even if Plaintiff was treating it as a business account, ownership would be determined from the purposes for which she had been authorized to use the account, not how she actually used it.

Additionally, the judge found that the e-mails were not relevant to the sexual harassment claims because Plaintiff asserted she had already produced all communications, including e-mails, potentially related to those claims. Thus, if such documents existed, the Employer had already received them, and if no such documents existed, then the Employer was entitled to argue that the absence of such documentation cast doubt on Plaintiff's allegations.

Faith-Based Organizations Engaged in Secular Activities Are not Exempt from New York Law Requiring Contraception Coverage in Prescription Drug Plans, February 6, 2006

by Sarah C. Chernish

The New York Appellate Division recently upheld the application of the state's Women's Health and Wellness Act (WHWA), upon faith-based organizations that provide secular services, such as health care, education and job placement, counseling, and a wide variety of services to the poor and needy. Catholic Charities of the Diocese of Albany v. Serio , 2006 NY Slip Op. 00194 (1/12/06). The Act requires employers that provide group insurance coverage for prescriptions to include prescription contraceptives in that coverage. Employers engaged in ecclesiastical and ministerial activities are exempt from this requirement.

The faith-based organizations asserted that contraception was contrary to their religious tenets. However, in accordance with religious teachings, they bore a moral obligation to offer their employees fair, adequate and just employment benefits, which they viewed as including prescription drug coverage. Therefore, the WHWA left them with the choice to either declining to provide coverage for all prescription drugs or extending coverage for contraceptives, neither of which they viewed as acceptable.

The court held that the WHWA requirements for the faith-based organizations did not violate either the U.S. Constitution or the New York Constitution. The Act did not violate the Free Exercise Clause because its provisions applied to every group health insurance policy and contract delivered or issued for delivery in the state. Therefore, the Act was generally applicable to all employers and did not selectively impose any burden on conduct motivated by religious belief and Act's object of increasing women's access to health care did not target religious practices.

The Act did not violate the faith based organizations' Free Speech rights. The organizations claimed that by being forced to provide this coverage, they were being "grouped" with other employers who provided contraceptive coverage and that this affiliation was sufficient to support claim that their rights of expressive association were violated. The court found no expressive association was formed because the faith based organizations clearly did not intend their provision of contraceptive coverage to convey a particularized message endorsing contraceptive use nor, given the fact that they were legally obligated to provide the coverage, would their provisions of contraceptives be perceived as an endorsement.

Finally, the court found that the WHWA's contraceptive coverage requirement did not violate the Establishment Provision because the principal or primary effect of the WHWA, as a whole, was not the advancement or inhibition of religion. The "religious employer" exemption for employers engaged in non-secular religious activities did not unlawfully favor some religious groups over others. The court held that drawing a distinction between religious and secular activities or purposes did not, on its face, offend the Establishment Clause as it did not discriminate between religious denominations or sects.

Fair Versus Legal, February 1, 2006

by Frank L. Kollman

A federal appeal's court has upheld a discharge of a minority bank employee, with a disability, even though the court found the termination to be unusually harsh for the misconduct involved. Scott v. FirstMerit Corp., No. 04-4407 (6th Cir., January 23, 2006). The long-term employee was fired for putting another employee's name on a small ledger correction.

The bank won because there was no evidence that race or disability motivated the decision. Further, there was apparently no evidence that the bank had permitted such falsification of bank documents in the past by other employees.

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