BSCR Firm News/Blogs Feed Jan 2021 00:00:00 -0800firmwise Court of Appeals holds an employer may not reserve the right to litigate claims against an employee in court while simultaneously restricting the employee to arbitrate her employment claims. Jan 2021Employment & Labor Law Blog<p>The question of whether an arbitration agreement is enforceable is an oft-disputed issue prone to be volleyed between the courts and an arbitrator; such was the case in <i>Caldwell v.</i><i> UniFirst Corporation, </i>No. ED108409, 2020 Mo. App. LEXIS 1328 (Ct. App. Oct. 27, 2020).</p> <p>This case involves a contract within a contract within a contract: a delegation provision contained in an arbitration agreement, which was contained in an employment contract. This not-uncommon scenario requires a court to look at the three contracts and analyze each independent of the others.&nbsp;</p> <p>In <i>Caldwell</i>, a former at-will employee sued his former employer (UniFirst) under the Missouri Human Rights Act alleging disability discrimination and retaliation claims.&nbsp; UniFirst moved to compel arbitration based on the arbitration clause in Caldwell&rsquo;s employment contract.&nbsp; UniFirst also asserted the employment contract contained a binding delegation clause that rendered the threshold issue of whether the case was arbitrable a matter to be determined by an arbitrator rather than by the court.&nbsp; The district court denied UniFirst&rsquo;s motion holding the arbitration clause lacked adequate consideration in two aspects: first, Caldwell&rsquo;s at-will employment was insufficient consideration to support the arbitration agreement, and second, the arbitration clause lacked mutuality because UniFirst unilaterally reserved for itself the ability to assert certain claims against Caldwell in court while Caldwell was required to arbitrate all potential claims.</p> <p>The case made its way to the Missouri Supreme Court, which transferred the case back to the Court of Appeals with the direction to reconsider the case in light of the Supreme Court&rsquo;s decision in<i> Soars</i> <i>v. Easter Seals Midwest</i>, 563 S.W.3d 111 (Mo. banc 2018).&nbsp; In <i>Soars</i>, the court held a delegation clause is severable and should be reviewed independent of any underlying arbitration clause.&nbsp; But in <i>Caldwell</i>, the parties conceded the delegation provision was not at issue, so on reconsideration, the Court held that because the subject delegation provision &ndash; standing alone &ndash; was valid, the question of whether the arbitration agreement as a whole was valid was for the arbitrator to decide.&nbsp;</p> <p>Under Missouri law, an arbitration clause requires its own consideration.&nbsp; Accordingly, the arbitrator ruled that while Caldwell&rsquo;s at-will employment may have supplied sufficient consideration to support the employment agreement, it could not also provide adequate consideration to support the arbitration clause.&nbsp; UniFirst moved to vacate the arbitration order arguing the arbitrator exceeded his power.&nbsp; The trial court denied the motion and affirmed the arbitration order, which UniFirst then appealed.&nbsp;</p> <p>On appeal, in relevant part, only the question of whether the arbitration agreement was supported by consideration was before the Court.&nbsp; At the outset, the Missouri Court of Appeals (Eastern District) held that Missouri contract law principles &ndash; including consideration &ndash; govern whether an arbitration agreement is valid.&nbsp; Under Missouri law, a promise by one party to a contract is sufficient consideration in exchange for a promise by the other party.&nbsp; But when one party retains the unilateral right to sidestep its obligations, that party&rsquo;s promise is considered &ldquo;illusory&rdquo; and thus unenforceable. &nbsp;Here, because only one party was bound to arbitrate its claims both the trial court and the Court of Appeals concluded that the arbitration agreement lacked mutuality of promise and therefore lacked consideration.&nbsp; Thus, the arbitration provision was held unenforceable and the arbitrator&rsquo;s order was affirmed.&nbsp;</p> <p>A little over a year ago, BSCR published a <a href=";an=96663&amp;format=xml&amp;stylesheet=blog&amp;p=5258">blog</a> that describes a case in which the Eighth Circuit reminds employers to go back to the basics when administering arbitration clauses.&nbsp; The Eighth Circuit held an employee&rsquo;s tacit acknowledgement of an arbitration provision by, for example, clicking through the pages of an employment contract on the computer, is not evidence that an employee accepts an arbitration provision contained therein.&nbsp; Last month, <i>Caldwell v. UniFirst Corporation</i> became another example, this time in state court, of the importance of focusing on contracts fundamentals &ndash; here, on the language of the arbitration provision itself.&nbsp;</p> The enforceability of an arbitration clause, particularly in the employment context, has become the well-traveled subject of recent litigation.&nbsp; Which begs the question: why all the fuss when so many employers include arbitration clauses, often coupled with delegation clauses, in employment contracts &ndash; aren&rsquo;t these employers well-equipped to draft arbitration clauses and, in fact, don&rsquo;t the employers intentionally include these provisions for the very purpose of <i>avoiding </i>litigation?&nbsp; In other words, why are employers including and administering these routine provisions in ways that provide employees paths to the courtroom?&nbsp; The simplest explanation is that too many employers don&rsquo;t know they&rsquo;re doing it wrong.&nbsp; Notwithstanding these apparent pitfalls, there are relatively simple solutions to tackling arbitration agreement drafting and administration.&nbsp; The BSCR employment &amp; labor law team are willing and able to assist you as you navigate your employment arbitration agreement development and implementation needs. Court Bostock Ruling Confirms Scope of Title VII Includes Protections for Homosexuals, Invalidating Prior Eighth Circuit Precedent Aug 2020Employment & Labor Law Blog<p>In <i>Horton v. Midwest Geriatric Mgmt., LLC</i>, Mark Horton filed a Title VII sex discrimination case against Midwest Geriatric Management, LLC (&ldquo;MGM&rdquo;) following withdrawal of an employment offer, after Midwest Geriatric Management became aware that Horton was gay and had a partner.</p> <p>Horton was the Vice President of Sales &amp; Marketing for Celtic Healthcare.&nbsp;He was recruited by a job search firm for the position of Vice President of Sales and Marketing for a company named Midwest Geriatric Management.&nbsp;After applying for the job, he received an offer of employment pending a background check and further confirmation of his educational history.&nbsp;Horton signed the job offer to work for Midwest Geriatric and resigned from his position at Celtic.</p> <p>Because one of his former colleges no longer existed (it had been sold to another university), the company retained to complete Horton&rsquo;s background check informed him that the background check would take four to six weeks to complete. Horton communicated this delay to all the parties involved including Midwest Geriatric CEO Judah Bienstock and his wife Faye, who was involved in the hiring process. &nbsp;None voiced any concern. In a subsequent email to Bienstock about the status of obtaining his educational records, Mark stated, <i>&ldquo;My partner has been on me about [my MBA] since he completed his PHD a while back.&rdquo;</i> A few days later, Mark received an email stating, &ldquo;<i>Mark&mdash;I regret to inform you that due to the incompletion of the background check of supportive documentation&mdash;we have to withdraw our offer letter for employment at MGM. We wish you much luck in your future endeavors. Judah and Faye.&rdquo;</i>&nbsp;Even after Mark obtained his college records and contacted MGM while the position was still vacant, Faye said, <i>&ldquo;At this time&mdash;we are considering other candidates.&rdquo; </i>&nbsp;</p> <p>Horton filed a Charge of Discrimination with the Equal Employment Opportunity Commission, alleging sex discrimination and religious discrimination under Title VII.&nbsp;After receiving his right-to-sue notice from the EEOC, Horton sued in the U.S. District Court for the Eastern District of Missouri.</p> <p>Horton&rsquo;s lawsuit alleged Midwest Geriatric unlawfully discriminated against him on the basis of sex when his offer of employment was withdrawn after learning he was homosexual.&nbsp;Specifically, Horton argued: 1) they treated him less favorably because of his sexual orientation, or based on his sex; 2) they treated him less favorably because of his association with a person of a particular sex, i.e. the same sex; and 3) they treated him less favorably on the basis of his nonconformity with sex stereotypes and MGM&rsquo;s preconceived definition of how males should behave.</p> <p>In granting Defendant&rsquo;s motion to dismiss, the District Court relied on the Eighth Circuit&rsquo;s 1989 holding in <i>Williamson v. A.G. Edwards &amp; Sons</i> that had concluded &ldquo;Title VII does not prohibit discrimination against homosexuals.&rdquo;&nbsp;<i>Williamson v. A.G. Edwards &amp; Sons, Inc.</i> 876 F.2d 69, 70 (8th Cir. 1989).&nbsp;The District Court further held that sexual orientation is not an explicitly protected characteristic under Title VII.&nbsp;The Court acknowledged numerous federal courts had recently held otherwise, but noted the Eighth Circuit had not changed its position on the issue, so they were bound by <i>Williamson</i>.&nbsp;</p> <p>Additionally, because Horton&rsquo;s claim of sexual stereotyping was admittedly based solely on his sexual orientation, the District Court concluded sexual stereotyping alone could not be the alleged gender non-conforming behavior giving rise to a Title VII&nbsp;claim in Horton&rsquo;s case, because &ldquo;[t]o hold otherwise would be contrary to well-settled law that Title VII does not prohibit discrimination on the basis of sexual orientation.&rdquo;</p> <p>Horton appealed to the Eighth Circuit, but the appeal was stayed pending the United States Supreme Court&rsquo;s consideration of the &ldquo;scope of Title VII&rsquo;s protections for homosexual and transgender persons,&rdquo; in <i>Bostock v. Clayton County</i>, and other related cases.&nbsp;In its <i>Bostock </i><a href=" ]">ruling</a>, the Supreme Court declared plainly that it &ldquo;defies&rdquo; Title VII for &ldquo;an employer to discriminate against employees for being homosexual or transgender,&rdquo; because to do so, it &ldquo;must intentionally discriminate against individual men and women in part because of sex.&rdquo;&nbsp;The Eighth Circuit therefore <a href=" ">reversed</a>, based on the <i>Bostock </i>decision, reasoning that because the Supreme Court has held sexual orientation to be a class protected under Title VII, the <i>Williamson</i> case relied upon by the Eastern District in dismissing Horton&rsquo;s claim, was no longer good law.&nbsp;The case was remanded to the district court for further proceedings in light of the <i>Bostock</i> holding.<br /> &nbsp;</p> <p><i>* Kameron Fleming, Summer Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post.&nbsp;Fleming is a&nbsp;rising 3L student at the Washington University St. Louis School of Law.</i></p> Supreme Court Rules that Title VII Protects LGBTQ Workers Jun 2020Employment & Labor Law Blog<p>In a high-profile and much anticipated ruling, the U.S. Supreme Court held that the prohibition against sex discrimination in Title VII of the Civil Rights Act of 1964 applies to discrimination based on a worker&rsquo;s sexual orientation or gender identity.</p> <p>In a 6-3 <a href="">decision</a> authored by Justice Gorsuch, the Court pointed to the &ldquo;plain meaning&rdquo; of the language of Title VII and held that &quot;Because discrimination on the basis of homosexuality or transgender status requires an employer to intentionally treat individual employees differently because of their sex, an employer who intentionally penalizes an employee for being homosexual or transgender also violates Title VII.&quot;&nbsp;Justices Kavanaugh, Alito, and Thomas dissented.&nbsp;</p> <p>The Court reasoned that &ldquo;Today, we must decide whether an employer can fire someone simply for being homosexual or transgender. The answer is clear. An employer who fires an individual for being homosexual or transgender fires that person for traits or actions it would not have questioned in members of a different sex. Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.&rdquo;</p> <p>The decision covered three related cases.&nbsp;It resolves a long brewing split among the federal circuits and affirms a Seventh Circuit ruling allowing a lesbian professor&rsquo;s wrongful termination lawsuit to move forward.&nbsp;&nbsp; The Justice Department argued against the workers in these cases, in a shift from the previous administration&rsquo;s position supporting the rights of LGBTQ workers.</p> <p>The ruling is of particular importance in those states where state civil rights laws have been held not to apply to discrimination based on sexual orientation or gender identity.</p> Background Reports Concerning Job Applicants May Give Rise to Employer Liability under FCRA Jun 2020Employment & Labor Law Blog<p>The Missouri Court of Appeals recently reversed a trial court&rsquo;s order for summary judgment in favor of an employer in a case brought under the Fair Credit Reporting Act (&ldquo;FCRA&rdquo;) for lack of standing, where the employer withheld an offer of employment based on inaccurate information obtained through a criminal background check.</p> <p>In <i>Courtright, et al. v. O&rsquo;Reilly Automotive, </i>three applicants filed suit asserting, among others, adverse-action claims against O&rsquo;Reilly after their conditional job offers were revoked based upon information obtained from consumer reports and background checks. Plaintiffs alleged that O&rsquo;Reilly committed procedural violations of FCRA by failing to disclose the contents of each applicants&rsquo; background reports and providing them the opportunity to cure any inaccuracies in the reports before taking adverse action against them &ndash; i.e., revoking each of their conditional offers of employment. The trial court entered summary judgment in favor of O&rsquo;Reilly, and the three applicants appealed. The judgments against two of the three applicants were affirmed due to their failure to allege sufficient injuries to establish standing to bring a claim under FCRA, as the allegations in the complaint did not establish that the procedural violations of FCRA were the cause of their alleged harm.</p> <p>However, the Court of Appeals for the Western District of Missouri found that the third applicant, Mr. Bradley, did state sufficient injuries caused by the procedural violation. Bradley demonstrated that he was not provided the background check results before his offer of employment was revoked. He instead had to request the background report from the third party vendor used by O&rsquo;Reilly and to correct the issues directly with that vendor. He learned that the report erroneously stated that Mr. Bradley had been convicted and sentenced for stealing leased or rented property. After Mr. Bradley disputed the report in writing, the vendor corrected the report and provided it to O&rsquo;Reilly. O&rsquo;Reilly then hired Mr. Bradley, but not until after he had gone approximately two months without a paycheck.</p> <p>The trial court had held that the alleged injury was caused by the inaccurate information provided by the third party vendor and entered judgment in favor of O&rsquo;Reilly on that basis. But the Court of Appeals reversed the judgment, reasoning that if O&rsquo;Reilly had furnished the report to Mr. Bradley before revoking the job offer, as required under FCRA, Mr. Bradley would have had the opportunity to resolve the error and avoid his period of unemployment.</p> <p>Based upon this Court of Appeals <a href="">holding</a>, Missouri employers are strongly advised to promptly inform job applicants of any negative, material information found in background checks before taking any adverse action against the applicant, regardless of where and how the information was obtained.</p> the Box Legislation to Take Effect in the City of St. Louis in 2021 Jun 2020Employment & Labor Law Blog<p>Beginning January 1, 2021, employers with ten or more employees, located within the City of St. Louis will be prohibited from inquiring about an applicant&rsquo;s criminal history on the employment application. Once the law takes effect, employers may not base a hiring or promotional decision on the criminal history, or sentence, of an applicant unless(1) the history is found to be reasonably related to, or bearing upon, the duties and responsibilities of the position; and (2) the employer can demonstrate that the decision is based on all available information.</p> <p>Employers will be prohibited from inquiring about an applicant&rsquo;s criminal history until such time as the applicant is otherwise determined to be qualified and has been interviewed for the position. The prohibition extends to employers seeking publicly available information about criminal history during the initial job application stage. Employers remain able to inquire about an applicant&rsquo;s criminal history if all applicants in the final stage of selection will be similarly asked.</p> <p>The prohibition further extends to employment advertisements containing exclusionary language based on criminal history. These prohibitions do not include employers hiring for positions where federal or state laws would otherwise exclude individuals with certain criminal histories. In such circumstances, employers can still publish these requirements and restrictions in advertisements and seek to determine an applicant&rsquo;s compliance with these regulations during the initial application process.</p> <p>The City of St. Louis joins 35 states, and over 150 cities and counties nationwide that have adopted &ldquo;ban the box&rdquo; legislation. This provides a marked change for local employers going forward once the ordinance takes effect. This will provide opportunity for employers in the City of St. Louis to evaluate their hiring procedures in order to determine compliance with the new requirements. Employers will also need to address policies concerning when criminal history inquiries are made of applicants, revise standard applicant paperwork required, and note that the requirements apply to decisions regarding promotions as well as new hires.&nbsp;</p> Circuit Reverses ADA Class Certification in "Fitness for Duty" Challenge May 2020Employment & Labor Law Blog<p>The U.S. Court of Appeals for the Eighth Circuit reversed a ruling of the United States District Court of Nebraska, which granted class certification to a group of Union Pacific employees, past and present, who alleged that the railroad&rsquo;s &ldquo;fitness-for-duty&rdquo; policy violates the Americans with Disabilities Act (&ldquo;ADA&rdquo;), 42 U.S.C. &sect; 12101 <i>et seq.</i> The appellate court granted interlocutory review of the class certification pursuant to Federal Rule of Civil Procedure 23(f), and concluded that plaintiffs failed to meet the cohesiveness, predominance and superiority requirements under Rules 23(b)(2) and (b)(3). This is a potentially important <a href=" ">ruling</a> for companies who consider &ldquo;fitness-for-duty&rdquo; evaluations important for managing their operations and maintaining a safe workplace.</p> <p>Six named plaintiffs moved to certify a class of over 7,000 current and former employees of Union Pacific, under the ADA. The district court granted the hybrid class certification which defined to include all employees who have been or will be subject to a &ldquo;fitness-for-duty&rdquo; evaluation because of a reportable health event used by Union Pacific.&nbsp;Examples of a reportable health event are heart attack, stroke, seizure and eye injury, just to name a few.&nbsp;The &ldquo;fitness-for-duty&rdquo; applies to all 650 position within the company. &ldquo;Fitness-for-duty&rdquo; evaluation is used to determine if the reportable health event in which the employee reports effects their ability to safely do their job or if they need accommodations because of the reportable health event in order to safely do their job.</p> <p>By granting this hybrid class certification under subparts (b)(2) and (b)(3) of Rule 23, the Court allowed the plaintiffs to proceed as a class and then try the case in two phases, consistent with the framework set out in <i><u>International BHD of Teamsters v United States</u></i>, 431 U.S. 324 (1977). In the first phase, the jury would determine whether Union Pacific engaged in a pattern or practice of disability discrimination on a class-wide basis. In the second stage, individual hearings would take place to determine damages as to each individual class member. Union Pacific appealed the class certification on the basis the plaintiffs did not satisfy cohesiveness, predominance and superiority requirements required under Rule 23(b)(2) and 23(b)(3).&nbsp;</p> <p>The Eighth Circuit opinion first focused on whether the class was cohesive, noting that the six named plaintiffs each had different conditions.&nbsp;These conditions, which would be reportable health events, included: a heart condition that required a pacemaker; epilepsy; lightheadedness; cardiomyopathy; post-traumatic stress disorder; and a seizure disorder.&nbsp;The court observed that not only are the conditions different, but that each condition then had to be assessed with respect to the 650 positions within in the company.&nbsp;An accountant with seizure disorder is different from a train engineer with a seizure disorder.&nbsp;To answer the predominant question of whether a policy is unlawfully discriminatory requires asking subsidiary questions of whether the policy is consistent with business necessity.&nbsp;The analysis of business necessity is highly individualized, requiring separate analysis for each different medical condition. And for each such condition, it must be determined how it impacts the affected employee&rsquo;s ability to perform different jobs throughout the company.&nbsp;&nbsp;&nbsp;</p> <p>In the Court&rsquo;s view, the individualized inquiries needed to determine if the fitness-to-work policy is unlawfully discriminatory under ADA is not consistent with Rule 23.&nbsp;Because these individualized questions defeated both predominance and cohesiveness, the lower court abused its discretion by certifying the class under Rule 23(b)(2) &amp; (b)(3).&nbsp;</p> <p>The Eighth Circuit acknowledged, however, that if the plaintiffs&rsquo; claim had focused more narrowly on employees with the same or similar medical conditions, involving the same or similar job categories, a hybrid class could potentially be certified under Rule 23.&nbsp;</p> <p>Companies should, of course, always take care that policies which may limit employees&rsquo; access to certain jobs, based on health and safety concerns, are appropriately tailored to business necessity, and consistent with the ADA and its &ldquo;reasonable accommodation&rdquo; requirements.&nbsp;But the <i>Harris</i> opinion should prove extremely useful to corporate defendants seeking to stave off overly broad class certification demands, in cases challenging company &ldquo;fitness-to-work&rdquo; or other health or safety policies.&nbsp;</p> Supreme Court Holds That Requesting an Accommodation, Standing Alone, Is Not an Activity Opposing a Practice Prohibited by the MHRA Apr 2020Employment & Labor Law Blog<p>On January 14, 2020, an issue of first impression was presented to the Missouri Supreme Court: whether an employee&rsquo;s accommodation request is a protected activity under the Missouri Human Rights Act. In a display of sound statutory construction, the Missouri Supreme Court found that an employee&rsquo;s request to her employer for a work accommodation, standing alone, is not a protected activity under the Missouri Human Rights Act, and that consequently, it cannot provide the basis for a retaliation claim under the MHRA.</p> <p>The Court reversed the circuit court&rsquo;s judgment in favor of an employee, Li Lin, ruling her accommodation request was insufficient to support a retaliation claim under the MHRA and she had therefore failed to submit a cognizable claim.</p> <p>Plaintiff Dr. Lin was a medical researcher at Washington University in St. Louis. During her employment, Dr. Lin began experiencing chronic back pain and was diagnosed with two herniated discs. The University accommodated her requests more than once for a different position, due to her back pain.&nbsp;</p> <p>Dr. Ellis informed Dr. Lin that when the grant funding for her research project expired, her position would be eliminated. &nbsp;After the grant funding ceased later that year, Dr. Ellis was unsuccessful in his efforts to find work for Dr. Lin in another University laboratory that would accommodate her back restrictions.&nbsp;She was let go.&nbsp;</p> <p>Dr. Lin filed a charge of discrimination with the Missouri Commission on Human Rights, claiming that both Dr. Ellis and the University discriminated and retaliated against her because she engaged in a protected activity &ndash; requesting an accommodation. She then sued both Dr. Ellis and the University.</p> <p>At trial, a jury found in favor of Dr. Lin, but not as to Dr. Ellis. The University filed a post-trial motion for judgment notwithstanding the verdict.&nbsp;It argued, in part, that Dr. Lin&rsquo;s sole claim submitted to the jury failed to state a claim under the MHRA because a request for an accommodation is not a protected activity under section 213.070.&nbsp;Therefore, the University asserted, such a request could not serve as the basis for a retaliation claim. The circuit court denied the motion and the University appealed.</p> <p>The Eastern District Court of Appeals reversed the judgment against Washington University, and remanded the case for a new trial.&nbsp;Dr. Lin ultimately filed an Application to Transfer in the Missouri Supreme Court.&nbsp;</p> <p>The Supreme Court granted transfer, and Dr. Lin repeated there her argument that although a request for accommodation does not fall within the literal language of the section, the court should adopt the reasoning from federal courts, which have interpreted an analogous federal provision to provide a cause of action for such requests.</p> <p>Acknowledging the issue was one of first impression, the Court rejected Dr. Lin&rsquo;s argument, holding that it was constrained by the plain language in section 213.070, RSMo.&nbsp;A request for an accommodation, standing alone, is not among the protected activities described in either prong of section 213.070: <b>1)</b> opposition to a practice prohibited by the MHRA; or, <b>2)</b> filing of a complaint, testifying, assisting, or participating in any investigation, proceeding, or hearing conducted under the MHRA. The Court held that where the statute specifically listed a variety of protected activities, and a request for accommodation was not among them, it could not, in effect, add to the statute another activity that the legislature did not include.</p> <p>Some concluding thoughts: First, the facts of this case had to have helped the University. As the Court recites, it accommodated Dr. Lin on more than one occasion without requiring her to obtain a physician&rsquo;s statement about her ability to function. &nbsp;Although that approach may pose a challenge to an employer, it is, at least early on, a better course most of the time and should be implemented if practicable.&nbsp;Second, focusing on a legal point, the Court held that Plaintiff did not plead anywhere in her charge of discrimination or in her circuit court pleadings that her requests for accommodation were &ldquo;in opposition to any unlawful practice&rdquo; by the University.&nbsp;Yet, as the Court observed, this was her attempted characterization on appeal. Thus, the Court, may have been telling the parties, perhaps largely because this was an issue of first impression, that it must take the pleadings at face value. &nbsp;In an earlier time, such a statement may have signaled the Court&rsquo;s willingness to entertain the issue again with different results.&nbsp;However, the facts of this case arose before the 2017 amendments to the MHRA, limiting its scope.&nbsp;And those amendments should operate to close that door. The fact that this opinion was issued &ldquo;Per Curiam&rdquo; may hint at a lack of unanimity here.&nbsp;</p> You Just Can't Compete Apr 2020Employment & Labor Law Blog<p>A recent <a href=" ">decision</a> by the Missouri Court of Appeals, Southern District, demonstrates the importance of specifically crafted non-compete provisions in employment contracts. Missouri courts generally enforce non-compete provisions if they are reasonable in scope and duration, meaning they are enforced if they are no more restrictive than necessary to protect the legitimate interests of the employer.&nbsp;However, what is reasonable depends upon the facts of each case.</p> <p>In <i>MFA Oil Co. v. Martin</i>, MFA Oil filed suit against its former employee Martin, claiming he violated a non-compete provision in his employment agreement.&nbsp;In May, 1999, Martin and MFA Oil entered into the employment agreement wherein Martin accepted a position as plant manager for MFA at its plant in Seymour, Missouri.&nbsp;The agreement, which identified Martin as a &ldquo;MANAGER,&rdquo; contained a non-compete provision that stated in part as follows:</p> <p style="margin-left: 40px;">For a period of three (3) years after MANAGER leaves the employ of MFA OIL, MANAGER agrees not to work for another company engaged in the sale of petroleum products within a thirty five (35) mile radius of the MFA OIL AB7 Seymour plant.&nbsp;For a period of three (3) years after MANAGER leaves the employ of MFA OIL, MANAGER agrees not to individually engage in the sale or delivery of petroleum products within a thirty-five (35) mile radius of the MFA OIL AB7 Seymour plant.</p> <p>Martin held various positions with MFA at various locations in Missouri from 1999 through 2018.&nbsp;Although he was only employed at the MFA OIL AB7 Seymour plant for a year, all of his positions with MFA Oil were situated within 35 miles of the Seymour plant.&nbsp;After his tenure at the Seymour plant, MFA moved Martin to its plant in Hartville, Missouri, where he served as the plant manager.&nbsp;Martin remained as the Hartville plant manager for a short time and then became the plant manager at MFA&rsquo;s plant in Mansfield, Missouri.&nbsp;&nbsp;&nbsp;</p> <p>Martin served as the Mansfield plant manager for the next 15 years. &nbsp;Then, however, during a restructuring process at MFA, Martin lost his managerial title and became a &ldquo;service tech.&rdquo; Although he earned a similar wage as a service tech, he lost his eligibility for a manager bonus.&nbsp;&nbsp; In addition, his interaction with customers was limited as a service tech to the time he set or picked up tanks.</p> <p>A year later, Martin again assumed a managerial position with MFA at the Mansfield plant.&nbsp;He was not reinstated as the plant manager, but instead became the operations manager.&nbsp;MFA then moved Martin to Rogersville, Missouri, to serve as the operations manager at that location.</p> <p>He worked in Rogersville for the next 20 months, then resigned.&nbsp;Two months after resigning from MFA, Martin organized a new business enterprise, Martin Propane LLC, to engage in retail propane sales.&nbsp;Martin Propane competed with MFA and had a large propane storage tank, plant, propane delivery truck and tank trailer located in Mansfield, Missouri.&nbsp;The storage tank and plant and &ldquo;most, if not all, of&rdquo; Martin Propane&rsquo;s customers were within 35 miles of MFA&rsquo;s Seymour plant.</p> <p>MFA filed suit, asking the trial court to prohibit Martin from selling propane within 35 miles of the Seymour plant individually or with another company.&nbsp;The trial court granted injunctive relief to MFA Oil, enforcing the covenant not to compete according to its terms and entered judgment against Martin prohibiting him for three years from selling bulk propane within 35 miles of MFA&rsquo;s Seymour plant.&nbsp;&nbsp; It did, however, limit the phrase &ldquo;petroleum products&rdquo; to bulk propane not sold for recreational use.</p> <p>On appeal, Martin argued that (1) the covenant as enforced was overbroad; (2) his acceptance of a demotion after 15 years as plant manager in Mansfield and subsequent placement in a different managerial position effectively nullified the Manager Agreement he had long ago executed, including the covenant not to compete; and (3) the covenant not to compete is a prohibited restraint of trade in violation of R.S.Mo. &sect; 431.202.</p> <p>The Court of Appeals rejected Martin&rsquo;s argument that the covenant not to compete was overbroad.&nbsp;In so holding, it relied on prior Missouri cases holding that in appropriate circumstances, two and three year non-compete agreements for employees, sales representatives or office managers were reasonable.&nbsp;</p> <p>Further, the Court of Appeals affirmed the trial court&rsquo;s judgment, stating that Martin agreed in the contract not to compete for three years after he &ldquo;left the employ&rdquo; of MFA.&nbsp;Martin did not argue that any of his early transfers to the other MFA locations or his employment as a service technician constituted a termination of his employment.&nbsp;He instead argued that the acceptance of the Mansfield operations manager position, some 17 years after he executed his original employment agreement, terminated that agreement.&nbsp;The Court of Appeals rejected this argument, stating that, because Martin was continuously employed by MFA, he agreed not to compete for a period of time after he &ldquo;left the employ&rdquo; of MFA and was a manager at the time of his resignation, the contract was in effect at the time of Martin&rsquo;s resignation.</p> <p>The Court of Appeals also rejected Martin&rsquo;s claim that the covenant not to compete constitutes a restraint on trade in violation of R.S.Mo. &nbsp;&sect; 431.202 because the statute, by its terms, is limited to covenants &ldquo;not to solicit, recruit, hire or otherwise interfere with the employment of one or more employees.&rdquo;&nbsp;The covenant not to compete in Martin&rsquo;s employment agreement did not promise to do any of those things and, therefore, it was not applicable.</p> <p>Of particular interest in this opinion is that each of the places where Martin worked was located within 35 miles of MFA&rsquo;s Seymour plant.&nbsp;However, for the majority of his employment with MFA, he was located in Hartville, Missouri, which is 23 miles away from Seymour.&nbsp;Despite this change in location, the Court of Appeals did not amend the terms of the non-compete to prohibit his actions within 35 miles of Hartville.&nbsp;Instead, the court strictly enforced the terms of the contract as written and held that Martin could not engage in the prohibited activities within the proscribed distance from the Seymour plant, a location at which he had not been employed since 2000.&nbsp;</p> <p>This opinion serves as a reminder that when crafting non-compete provisions, employers and employees alike should be careful regarding its terms, including how they define the geographical area where competition is prohibited and under what circumstances the agreement is terminated.&nbsp;While defendant Martin had not been employed in Seymour for almost 18 years and had not been a plant manager for nearly two years, the Court of Appeals nevertheless interpreted the contract strictly according to its terms.&nbsp;This case also serves as the most recent reminder to prospective employers that when recruiting a manager or sales representative who has previously worked in the same industry, in the same geographic area, attention must be paid as to whether there is a noncompete agreement that may preclude his competing with his former employer.</p> <p>For a discussion of Missouri Supreme Court case law governing the enforceability of noncompete agreements, see our <a href=";an=16548&amp;format=xml&amp;stylesheet=blog&amp;p=5258">earlier blog post </a>on the Supreme Court&rsquo;s <i>Copeland</i> and <i>Kennebrew </i>decisions.&nbsp;</p> Business Covid-19 Primer Apr 2020Employment & Labor Law Blog<p>Covid-19 has caused stress for both business owners and employees. In the past days, I&rsquo;ve fielded calls from clients who need a general legal lay of the land before asking more specific questions.</p> <p>Two new benefits are in effect from April 1, 2020 through December 31, 2020: emergency paid sick leave (EPSL) and paid FMLA leave (FMLA+).&nbsp;Both were part of the Families First Coronavirus Response Act.&nbsp; There is a flyer to post starting April 1, 2020, available to print on the DOL website <a href="">here</a>.</p> <p>An employee is entitled to FMLRA+ or EPSL leave if he/she is:</p> <ol> <li>subject to a Federal, State, or local quarantine or isolation order related to COVID-19;</li> <li>advised by a health care provider to self-quarantine due to concerns related to COVID-19;</li> <li>experiencing symptoms of COVID-19 and seeking a medical diagnosis;</li> <li>caring for an individual who either is subject to a quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;</li> <li>caring for a child whose school or daycare is closed due to COVID-19; or</li> <li>experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.</li> </ol> <p>Generally, an employer with 50-499 employees must provide:</p> <ul> <li>2 weeks of 100% paid leave (for reasons 1-3),</li> <li>2 weeks of 2/3 paid leave (for reasons 4, 6)</li> <li>10 weeks of 2/3 paid leave (for reason 5).</li> <li>12 weeks of total leave.</li> </ul> <p>None of this leave applies during this government mandated shutdown or for as long as the business is closed due to lack of business.&nbsp; None of this applies if the business has employees work reduced hours.&nbsp; Employees whose hours have been reduced may be entitled to file for unemployment benefits, and the employer must tell the employee he/she is entitled to unemployment.</p> <p>There are additional benefits for the employer as well.</p> <p>The Paycheck Protection Program is a new SBA loan/grant program, which has a maximum loan amount of 2.5 times your average monthly payroll.&nbsp; It is forgiven if the employer can document that all loan proceeds were used in the 8 weeks after receiving the loan for payroll, rent, utilities, and healthcare expenses.&nbsp;&nbsp;The employer must keep the average payroll and average number of employees, or the loan must be repaid.&nbsp; For example, if you reduce payroll by 25%, then 25% of the loan must be repaid.</p> <p>If the employer rehires employees that were previously laid off at the beginning of the period, or restores any decreases in wage or salary that were made at the beginning of the period, the employer will not be penalized for having a reduction in employees or wages, as long as&nbsp;this has been done by June 30, 2020.&nbsp;The SBA has not finalized its regulations on the forgiveness.&nbsp; The Treasury Secretary announced the SBA will have a plan in place by Friday April 3, 2020.</p> <p>Employers may also apply for an SBA disaster relief loan with a $10,000 advance option (once the SBA updates its forms).&nbsp; Keep in mind, the employer can't list the same expenses on the Paycheck Protection Program and the Disaster Relief Loan--so if you apply for disaster relief for payroll, you can't later get a Paycheck Protection Program loan for payroll.</p> <p>Finally, there is a new Kansas City-area small business relief loan fund, maxing out at a $100,000 loan for businesses with fewer than 20 full-time employees and $2.5 million or less in annual revenue that are located in Jackson, Clay, Platte, or Cass counties in Missouri or Wyandotte, Johnson, or Leavenworth counties in Kansas.&nbsp;Businesses may apply <a href="">here</a>. &nbsp;</p> <p>Finally, if the employer must pay FMLA+ or EPSL benefits, the employer will receive a tax credit against payroll taxes.&nbsp; The credit is also refundable. KPMG created a good bulletin on the specifics, which you can view <a href="">here</a>.</p> <p>Provided certain conditions are met, businesses with fewer than 50 employees can exempt themselves from paying benefits for reason 5--when a worker is staying home to care for a child, because the school/daycare is closed.&nbsp; You&nbsp;may claim this exemption if an authorized officer of the business has determined that:</p> <ol> <li>The provision of paid sick leave or expanded family and medical leave would result in financial obligations exceeding available business revenues and cause you to cease operating at a minimal capacity; &nbsp;</li> <li>The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or &nbsp;</li> <li>There are not sufficient workers who are able, willing, and qualified to work as&nbsp;needed for the small business to operate at a minimal capacity.</li> </ol> <p>There is no exemption for reasons 1, 2, 3, 4, and 6, above --if one of your workers is actually sick, quarantined, or caring for a person in quarantine.</p> <p>Finally, businesses in Kansas should keep in mind that their local disaster relief declaration has been superseded by the Kansas Governor&rsquo;s <a href="">Executive Order 20-16</a>, which took effect March 30, 2020 and expires April 19, 2020.</p> Aggrieved Out-of-State Cannot Sue Missouri-based Employers under the Missouri Human Rights Act. Mar 2020Employment & Labor Law Blog<p>On December 24, 2019, the Supreme Court of Missouri issued two opinions concerning claims brought by employees working outside Missouri against their Missouri-headquartered employers for age discrimination.&nbsp; The Court held the Missouri Human Rights Act (MHRA) did not apply to either employee. Specifically, the Court held the express language of the MHRA coupled with the presumption against extraterritorial application of laws precluded the Supreme Court from applying the MHRA to claims in either case.</p> <p>First, in <i>Tuttle</i><a href=";context=1000516"><i> v. Dobbs Tire &amp; Auto Ctrs., Inc.</i>, </a>the Court <a href="">held</a> the MHRA cannot be applied to claims of an employee who is aggrieved by alleged acts outside Missouri even when the employer is headquartered in Missouri.&nbsp;</p> <p>The case was initiated when Dwight Tuttle filed claims for relief under the Missouri Human Rights Act (MHRA) for age discrimination and retaliation against his former employer Dobbs Tire &amp; Auto Centers, Inc., David Dobbs (its president and CEO), and Dustin Dobbs (its director of retail operations).&nbsp;The company operated tire and auto stores in both Missouri and Illinois and employed Tuttle for 28 years in Illinois.&nbsp;Tuttle alleged several acts of age discrimination over a period of three years:</p> <p>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dustin Dobbs informed Tuttle he would never receive another raise during his employment with Dobbs Tire;</p> <p>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dobbs Tire transferred a number of illegitimate expenses to the Shiloh store, which distorted the profit numbers of the Shiloh store, and reflected poorly on Tuttle's managerial abilities;</p> <p>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dobbs Tire transferred Tuttle to its Fairview Heights, Illinois store which had a history of lower sales volume than the Shiloh store;</p> <p>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Tuttle was forced to sign a document accepting his transfer to the Fairview Heights store that also stated Tuttle could be terminated if the Fairview Heights store did not improve its performance;</p> <p>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Younger store managers did not have to sign a similar document when they were transferred to other stores; and</p> <p>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; After the profit and loss statement for the Fairview Heights store had been completed for 2016, Tuttle's regional manager told him, &quot;I hope you have your resume out and are looking for another job.&quot;</p> <p>For these reasons, Tuttle considered himself constructively discharged and tendered his resignation.</p> <p>The Court held that MHRA-prohibited discriminatory practices alone are insufficient to bring a claim.&nbsp;Rather, the practices must result in an adverse impact in Missouri.&nbsp;Tuttle did not dispute that the injuries he alleged occurred in Illinois, those being wage loss, loss of employment benefits, and mental anguish arising from constructive discharge from his Illinois job.&nbsp;In addition, Tuttle&rsquo;s petition suffered a procedural failure. &nbsp;Because Missouri is a fact-pleading state, Tuttle may have received a different judgment had he included exactly where each alleged discriminatory action took place showing even one adverse impact that occurred in Missouri.&nbsp;As it was, Tuttle merely alleged, &ldquo;some of the decisions and actions &hellip; took place in Missouri,&rdquo; which left the Court to divine Tuttle&rsquo;s logic.&nbsp;The Court rejected Tuttle&rsquo;s reasoning that because Dobbs was headquartered in Missouri, the decision-making underlying the discriminatory acts took place in Missouri, which invoked application of the MHRA.&nbsp;The Court held it is the claimant being aggrieved by the prohibited practice that gives rise to the cause of action under the MHRA, not the underlying decision.</p> <p>Dobbs filed a Motion to Dismiss Tuttle&rsquo;s claims because the petition failed to state a claim upon which relief could be granted on the basis that the MHRA does not apply to an Illinois employee who faced alleged discriminatory acts in Illinois.&nbsp;The circuit court dismissed Tuttle&rsquo;s petition with prejudice but did not provide justification for the dismissal.&nbsp;Tuttle appealed the circuit court&rsquo;s dismissal and the court of appeals affirmed the lower court&rsquo;s judgment in an unpublished memorandum.&nbsp;The Supreme Court of Missouri granted transfer of the case and, like the court of appeals, affirmed the circuit court&rsquo;s dismissal.&nbsp;</p> <p>Second, in <i>State ex rel. Anheuser-Busch, LLC v. Moriarty</i>, Iowa resident and employee John Esser alleged Anheuser-Busch (AB) discriminated against him on the basis of age, over a period of several years.&nbsp;Like Tuttle, Esser had been with the Missouri-based company for more than 25 years.&nbsp;Unlike Tuttle, however, Esser included Missouri-specific discriminatory acts of AB in his first amended petition.&nbsp;Of those, Esser alleged AB decision-makers in St. Louis gave Esser lower performance reviews and made ageist comments during a number of in-person meetings in Missouri.&nbsp;</p> <p>As Dobbs did at the circuit court level, AB filed a motion to dismiss Esser&rsquo;s claims because Esser failed to state a claim upon which relief could be granted because he was not a Missouri employee.&nbsp;The circuit court overruled AB&rsquo;s motion to dismiss noting that while Missouri recognizes the presumption against extraterritorial application of laws, &ldquo;the acts alleged did not occur wholly outside of Missouri.&rdquo;&nbsp;The court of appeals denied writ relief at which time AB sought a writ of prohibition from the Supreme Court of Missouri that would direct the circuit court to vacate the part of its order that overruled AB&rsquo;s motion to dismiss.&nbsp;The Supreme Court issued a preliminary writ of prohibition.&nbsp;It was on review of this writ that the Supreme Court analyzed and compared the claims of Tuttle and Esser.&nbsp;In <i>Moriarty</i>, the Court <a href="">held</a> Esser&rsquo;s claims suffered from the same weakness in that the adverse impacts all occurred outside the state of Missouri.&nbsp;The Court reasoned that the lower performance reviews affected his job in <i>Iowa</i> and that, like Tuttle, Esser&rsquo;s wage losses, loss of employment benefits, and emotional distress occurred because of actions and demotions related to his job in <i>Iowa</i>.</p> <p>The <i>Tuttle</i> and <i>Anheuser-Busch</i> decisions make it clear that out-of-state employees who work for Missouri-based companies may not engage in forum-shopping when asserting claims under state anti-discrimination laws. &nbsp;Missouri-based employers will not be liable under the MHRA for practices that affect employees outside Missouri.&nbsp;</p>