Missouri Supreme Court: There Must be Sufficient Evidence at Trial to Support Each Alternative of a "Disjunctive" Jury InstructionMarch 7, 2019 | Noemi Donovan
The Missouri Supreme Court's recent holding in Kader v. Bd. of Regents underscores the importance of ensuring that each alternative of a disjunctive verdict directing instruction is supported by sufficient evidence at trial. Because the Court found there was not substantial evidence to support each alternative of the circuit court's disjunctive instructions, the instructions were erroneous and prejudicial. As a result, it reversed the $2.5 million verdict in favor of plaintiff Kader, a former Harris-Stowe State University ("HSSU") professor, who filed claims of national origin discrimination and retaliation against HSSU under the Missouri Human Rights Act.
Kader, an Egyptian national, came to the United States in 1999 to pursue her graduate education. After working on the faculty at HSSU while completing her doctorate, she was promoted to assistant professor upon completion of her studies when she received her degree. In a performance review several years later, Kader believed she received lower ratings because of her race, religion and national origin and filed a discrimination complaint with HSSU.
Plaintiff worked at HSSU under a J-1 visa, which is a non-immigrant visa for individuals approved to participate in work and study based exchange visitor programs. A J-1 visa requires an employer sponsor and the facility where she attended graduate school originally sponsored her visa from 2007 until 2010. HSSU supplied information needed to maintain her visa while she was on the HSSU faculty and indicated it would assist her with obtaining a new visa when her J-1 expired. Typically, exchange visitors on J-1 visas return to their home countries for at least two years when their visas expire and then apply for a new visa if they decide to return. Kader did not want to return to Egypt so she filed for a waiver of the two year waiting period to obtain an H1-B visa and continue teaching at HSSU.
While waiting to learn if she received a waiver of the two year waiting period, she applied for an O-1 extraordinary person visa as an alternate means to obtain work authorization. She requested HSSU provide documentation to supplement her O-1 application, which HSSU supplied. When Kader had not heard about whether her visa was granted, she contacted the United States Citizenship and Immigration Services and learned it had requested additional information from HSSU, but had not received a response. Two days before her J-1 visa expired, plaintiff contacted HSSU about her O-1 application and the request for additional information. HSSU denied receiving the request. The O-1 application was then denied and HSSU did not appeal the denial.
Kader then did not receive the waiver she sought in conjunction with her H1-B visa request before her J-1 visa expired. Because she no longer had J-1 status, she was required to leave the U.S. within 30 days unless she obtained another visa. HSSU notified her that her contract for the next academic school year would not be renewed because she lacked a valid visa.
Kader filed suit against HSSU, alleging race and national origin discrimination and retaliation under the MHRA. The jury returned a verdict in plaintiff's favor on retaliation and national origin discrimination for $750,000 in actual damages and $1.75 million in punitive damages. HSSU appealed, asserting that two disjunctive jury instructions were erroneous and prejudicial. Specifically, HSSU argued that the instructions permitted the jury to find HSSU liable for conduct that is not actionable under the MHRA.
During trial, the court instructed the jury to rule in plaintiff's favor on her national origin discrimination claim if: (1) the jury found HSSU failed to do one or more of five listed acts, including HSSU did not appeal the denial of the O-1 visa petition; (2) plaintiff's national origin or discrimination complaints were a contributing factor to HSSU's failure to do any of those acts; and (3) such failure damaged plaintiff.
Similarly, the other disjunctive jury instruction at issue on the retaliation claim also instructed the jury that it must return a verdict for plaintiff if (1) plaintiff made complaints of discrimination; (2) HSSU failed to do any one of five acts, one of which was not appealing the denial of the O-1 visa petition; (3) plaintiff's complaints of discrimination were a contributing factor in defendant's failure to do one of the five acts; and (4) defendant's actions directly cause or contributed to plaintiff's damages.
The Missouri Supreme Court emphasized that for disjunctive verdict directing instructions to be appropriate, each alternative must be supported by substantial evidence. Such an instruction is prejudicial when substantial evidence does not support each disjunctive alternative because there is no way to determine which theory the jury chose. Therefore, there must have been substantial evidence at trial that HSSU's failure to appeal the denial of plaintiff's O-1 visa application constituted an unlawful employment practice under the MHRA. Because there was no evidence, the circuit court erred by including a disjunctive instruction that HSSU's failure to seek an appeal of the O-1 visa application in its disjunctive jury instructions.
The outcome in this case serves as an important reminder to defendants that if the plaintiff has failed to introduce sufficient evidence at trial of some element of claimed unlawful conduct, any disjunctive jury instruction proffered by the plaintiff that includes the unsupported claim should be challenged.
Missouri Supreme Court Compels Arbitration, Finding Adequate Consideration for Arbitration Agreement with At-Will EmployeeMarch 4, 2019 | Lisa Larkin
In Soars v. Easter Seals Midwest, 563 S.W.3d 111 (Mo. banc 2018), the Missouri Supreme Court ordered that at-will employee’s case be arbitrated and denied the employee’s challenge to the validity of the arbitration agreement as a whole.
As a condition of employment with Easter Seals Midwest (ESM), a charitable organization, each new, at-will employee is required to sign an arbitration agreement. The arbitration agreement provides that, as consideration for employment, the employee will submit all disputes and claims arising out of the employment to binding arbitration. In turn, ESM also agrees to submit all disputes and claims arising out of the employment to binding arbitration. The ESM arbitration agreement also included a delegation clause providing that the arbitrator and not any court had the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of the arbitration agreement.
Plaintiff Lewis Soars signed the arbitration agreement as a condition of his at-will employment with ESM, and three months later. ESM terminated his employment after he refused to participate in an internal investigation involving accusations against him of abuse or neglect of ESM’s clients. In response, he filed suit against ESM in circuit court for wrongful discharge and race discrimination. ESM filed a motion to compel arbitration. Plaintiff argued the arbitration agreement and delegation clause lacked consideration and mutuality and were unconscionable. The circuit court denied ESM’s Motion to Compel Arbitration, and the Court of Appeals affirmed.
The Supreme Court, however, reversed. It held that arbitration must be compelled if the parties signed an arbitration agreement that contains a valid delegation clause mandating that the arbitrator has “exclusive authority to decide threshold issues of interpretation, applicability, enforceability, or formation.” Whether or not the arbitration agreement as a whole is valid is for the arbitrator to determine so long as the delegation provision, standing alone, is valid. In this case, the Court found that in the delegation provision both parties mutually agreed to arbitrate all threshold questions of arbitrability. “Because neither ESM nor Soars retains any unilateral right to amend the delegation clause nor avoid its obligations, the delegation clause is bilateral in nature and consideration is present.”
Significantly, and surprisingly, this is the Missouri Supreme Court’s first opinion holding that referral to an arbitrator should occur, notwithstanding a party’s challenge to the validity of the arbitration agreement as a whole. While the United States Supreme Court has made this same ruling numerous times over many decades, this was the Missouri Supreme Court’s first occasion to consider the issue.
Notably, the Court found that an initial offer of at-will employment was sufficient consideration for the contractual promise to arbitrate claims. This was a major point of disagreement for the dissenting justice, who would have concluded that the arbitration agreement was unenforceable because at-will employment, which by its very nature is no employment contract at all, can provide no legal consideration for the arbitration agreement. According to the dissent, because a fundamental component of the at-will employment relationship is the ability for either party to terminate the relationship at any time, there was no valid contract to support the arbitration agreement or the delegation provision.
Going forward, the majority’s decision should provide comfort to employers that, under Missouri law, their arbitration agreements with at-will new-hires are enforceable and may include provisions placing all claims and controversies into the hands, in the first instance, of the arbitrator, including all objections to the existence, interpretation, application, and enforceability of the arbitration agreement itself.
In New Prime, Inc. v. Oliveira, petitioner New Prime Inc. was an interstate trucking company, and respondent Dominic Oliveira was one of its drivers. Oliveira worked under an operating agreement that called him an independent contractor and contained a mandatory arbitration provision. When Oliveira filed a class action alleging that New Prime denied its drivers lawful wages, New Prime asked the court to invoke its statutory authority under the Federal Arbitration Act to compel arbitration.
Oliveira countered that the court lacked authority, because §1 of the Act excepts from arbitration disputes involving “contracts of employment” of certain transportation workers. New Prime insisted that any question regarding §1’s applicability belonged to the arbitrator alone to resolve, or, assuming the court could address the question, that “contracts of employment” referred only to contracts that establish an employer-employee relationship and not to contracts with independent contractors. The District Court and First Circuit agreed with Oliveira, and the Supreme Court affirmed, holding that a court should determine whether a §1 exclusion applies before ordering arbitration.
A court’s authority to compel arbitration under the Act does not extend to all private contracts, no matter how clearly the contract expresses a preference for arbitration. In relevant part, §1 states that “nothing” in the Act “shall apply” to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”
For a court to invoke its statutory authority under the Act to stay litigation and force arbitration, it must first know if the parties’ agreement is excluded from the Act’s coverage by the terms of §1. This sequencing is significant, because it means the court and not the arbitrator decides this issue, unlike other issues, which may be delegable to the arbitrator.
The issue for the Supreme Court thus became whether the Act’s term “contract of employment” referred to any agreement to perform work or applied strictly to contracts of employment. The Court held that Oliveira’s agreement with New Prime falls within §1’s exception.
The unanimous opinion relied on the Act’s original meaning for its decision. Citing dictionaries, statutes, and rulings from the era, Justice Gorsuch concluded that “contract of employment” was understood to encompass “work agreements involving independent contractors.” At the time of the Act’s adoption in 1925, the phrase “contract of employment” was not a term of art, and dictionaries tended to treat “employment” more or less as a synonym for “work.” Contemporaneous legal authorities provide no evidence that a “contract of employment” necessarily signaled a formal employer-employee relationship. Evidence that Congress used the term “contracts of employment” broadly can be found in its choice of the neighboring term “workers,” a term that easily embraces independent contractors.
New Prime also made a policy argument that the Court should order arbitration to further Congress’ effort to counteract judicial hostility to arbitration and establish a favorable federal policy toward arbitration agreements. Justice Gorsuch stated that courts, however, are not free to pave over bumpy statutory texts in the name of more expeditiously advancing a policy goal. Rather, the Court should respect “the limits up to which Congress was prepared” to go when adopting the Arbitration Act.
Finally, the Court declined to address New Prime’s suggestion that it order arbitration anyway under its inherent authority to stay litigation in favor of an alternative dispute resolution mechanism of the parties’ choosing.Justice Ginsburg, in a concurring opinion, explicitly agreed with the Court’s unanimous opinion that words should be interpreted as taking their ordinary meaning at the time Congress enacted the statute. However, she also reasoned that Congress may design legislation to govern changing times and circumstances, perhaps foreshadowing future disputes between judicial philosophies.
Eighth Circuit Refuses to Punish Employer for History of Granting Special Treatment to Disabled Employee with Poor Attendance RecordJanuary 8, 2019 | Douglas Hill
While the Americans with Disabilities Act requires employers to make reasonable accommodations for the mental and physical limitations of otherwise qualified employees with a disability, it does not require employers to set aside their established attendance policy to accommodate disabled employees who simply cannot reliably and regularly make it to work. The recent Eighth Circuit case of Lipp v. Cargill Meat Solutions Corporation demonstrates this principle.
Sheena Lipp worked for 19 years at a Cargill meat processing facility in Ottumwa, Iowa, until she was terminated for absenteeism in November 2014. For most of her employment, she suffered from an incurable lung disease known as eosinophilic granuloma. For the final two years of her employment, this condition limited her ability to work in several ways. She required lifting assistance, limited working hours, and a clean working environment. But most notably also suffered from “flare-ups” that would require her to take off work for a few days at a time, two to four times a year.
Cargill accommodated all of Ms. Lipp’s needs, despite its written attendance policy allowing only six “unplanned” absences (i.e. sick days, personal business, etc.), if reported via an automated call-in system. After those six unplanned absences, a progressive disciplinary system existed, which culminated with termination after the ninth unplanned absence. In the case of medical absences, Cargill’s policy was that employees “may be required” to provide a doctor’s note or other verification upon their return to work.
Ms. Lipp’s ability to satisfy the attendance requirements of her job was further compromised in early 2014, when she was forced to take a nine-month leave of absence (originally planned to be only a few weeks) to care for her ailing mother. The first twelve weeks of leave were protected under the Family and Medical Leave Act. Beyond that, Cargill voluntarily accommodated Ms. Lipp’s request for additional leave, during which time she called the automated phone system daily to report her absences.
When she returned to work in October 2014, Ms. Lipp was presented with a series of written disciplinary notifications, indicating that she had accumulated 194 unplanned absences and was being placed on a “Last Chance” attendance policy. “Employee needs to understand,” the notices stated, “that any call-ins, lates, or leave early without authorization will violate this last chance agreement and will terminate her employment.” Ms. Lipp refused to sign any of the notifications but was allowed to return to work anyway.
Two weeks later, Ms. Lipp called the automated phone system and reported that she would be absent for “vacation.” Her testimony was that she must have mistakenly keyed the wrong entry on the phone system, because her absence was actually due to a “flare-up” of her lung condition. When she returned to work, she was terminated, despite explaining that her absence was for medical reasons, not vacation. Although she eventually provided medical documentation of her flare up, she did not do so until about three months after her termination.
She filed suit for disability discrimination under the ADA, but the Northern District of Iowa granted summary judgment in Cargill’s favor. Although the parties agreed that Ms. Lipp qualified as a disabled employee under the ADA, only “qualified individuals” can assert a claim for disability discrimination. A “qualified individual” is one “who, with or without reasonable accommodation, can perform the essential functions” of his or her job. 42 U.S.C. § 12111(8). An employer’s written policies—including attendance policies—are relevant guidance as to what constitutes an essential function of employment. Cargill insisted Ms. Lipp not a “qualified individual” under the Act, because she could not “regularly and reliable attend work, an essential function of her employment.” On appeal, the Eighth Circuit agreed.
The appellate court relied on a long line of ADA cases holding that “regular and reliable attendance is a necessary element of most jobs,” and that “the ADA does not require employers to provide an unlimited absentee policy.” Ms. Lipp argued that her 195 unplanned absences in 2014 were not excessive, since they were authorized by the employer. The court was unconvinced, noting that “persistent absences from work can be excessive, even when the absences are with the employer’s permission.”
Ms. Lipp also argued that Cargill was required to grant her additional time off for “flare-ups” after her return from the extended leave of absence, as a reasonable accommodation under the ADA—pointing out that Cargill had always been willing to do so in the past. The court rejected this argument, holding that even though medical leave of absence “might, in some circumstances, be a reasonable accommodation,” an accommodation is not reasonable if it requires the employer to set aside the essential functions of the job, including regular and reliable attendance (emphasis supplied by the court).
As for the past pattern of granting Ms. Lipp leave for “flare-ups,” the Court was unwilling to punish Cargill for its history of accommodating Ms. Lipp’s condition: “If an employer bends over backwards to accommodate a disabled worker, it must not be punished for its generosity by being deemed to have conceded the reasonableness of so far-reaching an accommodation.” “To hold otherwise,” the opinion concluded, “would punish Cargill for giving Lipp another chance instead of terminating her employment” earlier.
This case offers lessons for employers facing requests for disability accommodations or potential ADA claims. First, there is a limit to what is a reasonable accommodation for absenteeism. There is no bright-line rule for how much leeway a disabled worker must be given, but if an employee’s disability keeps her away from work so often that she cannot meet the basic requirements of her employment, she is not legally “qualified” for the job under the ADA. Second, employers should not live in fear that they will be punished for good behavior. As this case demonstrates, past acquiescence to a disabled employee’s request for special treatment should not be used to set some new standard for what accommodations are “reasonable” under the ADA.
The Tenth Circuit was tasked with evaluating whether or not an adverse employment action is an essential element of a failure to accommodate action under the American Disabilities Act (ADA). In a divided opinion, the court said Yes.
In Exby-Stolley v. Board of County Commissioners, plaintiff worked as a county health inspector and her job required her to inspect restaurants, bars, other places that handle food, interview employees and observe safety practices. While on the job, plaintiff broke her arm and required two surgeries. Because of her injury, plaintiff had to use makeshift devices to assist her and she could not complete the number of inspections required for her position.
The court noted there were two very different versions of the efforts to accommodate plaintiff. Plaintiff alleged that she suggested various accommodations that were rejected by her supervisors. This resulted in her supervisor telling her to resign. The County alleged that plaintiff requested that a new position be created for her piecing together various tasks from her job and other positions. The County considered it unfair to take tasks from fellow employees to create a new job for plaintiff. Plaintiff resigned when she was told the County would not provide job she requested.
Plaintiff filed suit alleging that the County violated the ADA by failing to reasonably accommodate her disability. The Court of Appeals recited the familiar proposition that “failure to accommodate” claims are actionable under the ADA, but then turned to the question of whether proof of an adverse employment action is an essential element of such claims; and whether the plaintiff in this case had in fact suffered an adverse employment action. The court explained at length that although the language “adverse employment action” does not appear in the ADA, it is well established in judicial opinions. Furthermore, the court will not consider a mere inconvenience to accommodating an individual, there must be a material alteration in a term, condition or privilege of employment.
The Court rejected the dissenting judge’s view that an “adverse employment action” was not essential, as having relied on dicta “of the weakest sort”, which it viewed as contrary to the weight of authority on this subject. The majority further concluded that the record showed Plaintiff had permission to continue to perform her job with some minor inconveniences or alterations in how she performed the work, but that she declined to do so, and insisted on more substantial accommodations. The Court thus held that the “inconveniences and minor alterations” of job responsibilities required of the plaintiff did not rise to the level of an adverse employment action
This ruling from the Tenth Circuit ups the ante for plaintiffs asserting a failure to accommodate claim. There must be a material and significant impact on the employee. Inconveniences and minor alterations of job responsibilities will not suffice.
Recently, the Southern District Court of Appeals affirmed the trial court’s determination in a bench tried case on an employee’s claim for what he described as unpaid commissions. In affirming the trial court’s Judgment, the court of appeals made clear that Missouri law allows an employer to unilaterally modify the terms of an at-will employee’s compensation. However, the facts of this case show that the employer did not fail to pay earned commissions, but rather, due to the specific compensation arrangement, plaintiff had drawn against any commissions he had earned.
Plaintiff began working for Dennis Oil in January 2010, on a trial basis and had specific terms of compensation which involved 8% commission on profit from new sales plus a $550 per week salary. He also was to be paid 5% commission on profit from existing sales, and provided a company truck and phone. Employee did not dispute the amount or calculation of his compensation during the trial period.
Effective June 1, 2010, and after the trial had expired, the employer unilaterally changed the terms such that the employee received a guaranteed draw of $2,333.33 per month, which was to be drawn against the employee’s commissions to be earned. The employee also was to receive commissions of 5% on profits earned by employer on existing customer accounts, as well as commissions of 8% on profits earned by employer on newly-acquired customer accounts. During the bench trial, the employer’s manager explained this to be “draw against commissions”, which meant that if the employee earned commissions that exceeded the guaranteed draw amount of $2,333.33 per month, then he would be paid the excess. However, if the employee did not clear that guaranteed amount, only that amount would be paid. The employer made no attempt to recoup payments to the employee for months where his commissions fell short of the guaranteed draw amount.
It is well settled that where sales have been fully consummated, commissions are considered due and owing, even if the employee is terminated before the scheduled payout date. Earned commissions, like salary or hourly pay, are “wages” that must be paid, even if the employee is an employee-at-will. Here, however, the Southern District Court of Appeals had to enlighten plaintiff that his simply was not a case in which his employer had failed to pay commissions he had earned.
This case demonstrates the potential confusion which can arise if counsel retained does not have the experience needed in the area of employment law. At Baker Sterchi we pride ourselves in providing clients with experience in all the areas of law in which we practice. Employment, labor, and wage-hour law are certainly no exceptions.
Adding to a Circuit Split, the Tenth Circuit Rules that Arbitrators May Determine Whether Classwide Arbitration is AllowedSeptember 13, 2018
In August 2018, the Tenth Circuit Court of Appeals decided Dish Network L.L.C. v. Ray, an important ruling in the field of arbitration clauses and their effect on potential class action litigation. The Tenth Circuit specifically addressed the question of who should determine whether an arbitration clause allows classwide arbitration: a court or an arbitrator?
While the contract at issue and its accompanying arbitration clause did not expressly grant the right or ability to apply arbitration on a classwide basis, the Court concluded that the arbitrator appropriately interpreted the broad language of the contract as authorizing classwide arbitration. The Tenth Circuit cited the contract’s adoption of American Arbitration Association rules, granting arbitrators the power to determine their own jurisdiction and scope of authority. The Court reasoned that this explicit adoption of the AAA rules was clear and unmistakable evidence that the parties intended to empower an arbitrator to determine whether classwide arbitration of a dispute is permitted.
Through the Ray decision, the Tenth Circuit cast its vote in a growing circuit split. Now, the Tenth, Second, and Eleventh Circuits have ruled that an arbitrator may determine whether or not an arbitration clause permits classwide litigation. The Third, Fourth, Sixth, and Eighth Circuits have reached opposite conclusions. The Circuits that reject an arbitrator’s authority to determine whether classwide arbitration is allowed have held that adoption of AAA rules within the underlying contract is not sufficiently clear or unmistakable so as to bind the parties to class arbitration. The developing circuit split has turned largely upon the tension between explicit contract language, and the intent that can be implied from the adoption of AAA rules and the explicit content of those rules.
As a growing number of circuits reach opposite conclusions on the availability of classwide arbitration through the adoption of AAA rules, it is imperative that parties entering arbitration agreements be aware of whether or not the circuit governing the agreement has ruled on the issue. Parties should also consider spelling out their intent that classwide arbitration either is or is not permitted under the contract, thus removing any uncertainty. Clear and unequivocal language remains the best medicine to prevent against the unintended consequences of seemingly innocuous provisions within an arbitration agreement or clause. While this circuit split continues to grow, it seems only a matter of time before the Supreme Court of the United States fully considers and resolves this growing issue.
While we regularly report to our readers on significant case law developments in the labor and employment field, the most dramatic developments in Missouri, over the past year, have played out in the legislative arena.
Last year, with a Republican governor and Republican-majority legislature, two major pieces of labor and employment law legislation were passed. One enacted major changes in the Missouri Human Rights Act, revising its terms to largely parallel those of their equivalent federal anti-discrimination statutes. (Over the years, Missouri courts had held that the MHRA had considerably broader reach than federal statutes like Title VII, the ADEA, and the ADA.) The other was the enactment of a right-to-work law that was signed by former Governor Greitens, which would have made Missouri the 28th right-to-work state. The latter result was short-lived, as union supporters gathered enough signatures to keep it from going into effect pending the results of a statewide referendum.
The rejection of so-called “Proposition A” became a major national priority for organized labor, which contributed substantial funds to the cause. And Missouri voters, by a 2-to-1 margin, have effectively blocked the right-to-work law.
In a right-to-work state (like Kansas), employees in unionized workplaces are permitted to opt out of both union membership and the payment of union fees of any kind. In states without right-to-work laws, employees at unionized workplaces don’t have to be dues-paying union members, but are required to pay “agency fees.” to cover the union’s cost of negotiating employment contracts that affect all bargaining unit workers.
U.S. Supreme Court, in a 5-4 Ruling, Upholds Employers' Use of Class Action Waivers in Employment AgreementsMay 21, 2018 | David Eisenberg
In a closely watched and long-awaited ruling, the U.S. Supreme Court on May 21st held that it is lawful for an employer, in an agreement with an employee, to provide that all disputes be resolved through one-on-one arbitration between the company and the employee. Accordingly, an employee may waive his right to bring his claims in a class action or collective action.
The decision, in a case titled Epic Systems Corp. v. Lewis, resolved a split in authority between Circuit Courts of Appeal, and actually resolved three recent separate appellate court cases with very similar facts. (The other two cases involved employers Ernst & Young, and Murphy Oil USA.) In each instance, the employee had entered into an employment agreement with his employer, which referred disputes to arbitration, and which contained a class action waiver clause. In the Murphy Oil case, the Court of Appeals had upheld the arbitration/class waiver clause. In Epic Systems and Ernst & Young cases, the Courts of Appeal had denied enforcement of those clauses.
At issue was the friction between, on one hand, a consistent line of recent Supreme Court cases upholding arbitration clauses with class waivers, under the Federal Arbitration Act (e.g. Concepcion, Italian Colors, Kindred Nursing); and a doctrine first espoused by the National Labor Relations Board in 2012, in the D.R. Horton case, holding that an agreement purporting to waive class action rights was unenforceable, because it encumbered the fundamental right under Section 7 of the National Labor Relations Act for employees to engage in concerted activity for their mutual aid or protection.
The majority opinion, written by Justice Gorsuch, rejected the employees’ argument about Section 7 rights, holding that the NLRA “does not express approval or disapproval of arbitration. It does not mention class or collective action procedures. It does not even hint at a wish to displace the Arbitration Act—let alone accomplish that much clearly and manifestly, as our precedents demand.” The opinion further observed that unlike the NLRA, various other federal statutes contain very specific language about the manner in which disputes should be resolved, and “when Congress wants to mandate particular dispute resolution procedures it knows exactly how to do so.”
This is a very important ruling for employers. An employer considering whether to resolve disputes with its employees through arbitration might take be tempted to take a narrow view in weighing whether arbitration is worth the bother, compared to having disputes resolved in court. The arguments against arbitration go roughly as follows: It is no longer cheaper than court. Discovery is allowed in arbitration. Cases take a long time to resolve. Arbitration fees can be substantial. And arbitrators are more likely to “split the baby”, and issue a compromise ruling in a case, even where the employer’s position is meritorious.
But this type of analysis overlooks an important additional factor. For it is now established law that an employment agreement containing an arbitration clause can preclude a wage-hour claim or discrimination claim from being brought in court as a collective action or class action. Employers who have been “on the fence” about whether to utilize arbitration agreements with class waiver clauses, because of the legal uncertainty about their enforceability, now have their answer. And if avoidance of class actions is a high priority for the company, now would be a good time to take action.
In Lovelace v. Van Tine, the Missouri Court of Appeals, Eastern District, applied the “intra-corporate immunity” rule, and upheld the dismissal of a defamation claim filed by a medical assistant against a physician at the hospital where both worked.
Plaintiff Lovelace worked for the Washington University School of Medicine for 12 years, but was terminated after the Defendant, Dr. Van Tine, reported to her supervisors that Lovelace said a certain job candidate should not be hired because that job candidate, as quoted in the opinion, “doesn’t like working with white people.” After being confronted by her supervisors about this allegation, Lovelace called in sick for several days, allegedly due to her distress. She was first placed on administrative leave, but her employment was later terminated. Her lawsuit against Dr. Van Tine followed, asserting that his report to her supervisors was false and defamatory.
A claim for defamation requires a Plaintiff, such as Lovelace, to plead and prove the following elements:
1) a publication,
2) of a defamatory statement,
3) that identifies the plaintiff,
4) that is false,
5) that is published with the requisite degree of fault, and
6) damages the plaintiff’s reputation.
At issue with Lovelace’s Petition was the element of “publication” -- the communication of the defamatory matter to a third person. The pivotal question was whether Dr. Van Tine’s communication was made to a third person, or whether, in the eyes of the law, it was a protected internal communication, within the hospital’s management group, and subject to intra-corporate immunity.
The idea behind this long-standing rule, as it applies to a defamation case, is that when a false statement is made and/or repeated in the context of a business, this generally does not constitute a publication when the business is merely communicating with itself.
The rule, however, does not offer protection to all communications within the corporate entity. The Missouri Supreme Court, in Rice v. Hodapp, has held that defamatory statements made by company supervisors or officers to non-supervisory employees constitute publication for purposes of a defamation action. However, communications between company supervisors or officers, or made by a non-supervisor to a supervisor or officer, are a different matter.
The public policy behind the intra-corporate immunity rule is to promote responsible reporting of issues within the work place from the bottom to the top or, in certain situations, along the same, linear supervisory lines, without fear of reprisal against the person making the report. The rule encourages reporting of inappropriate work place actions or comments to those in the business who are responsible for addressing those issues - i.e. those who handle the hiring or discipline decisions. Those who receive the reports are expected to take reasonable steps to investigate the report to ensure the report was made in good faith.
Conversely, per the Rice decision, communications made to non-supervisors - who have no need to know the information, and no responsibility for acting on inappropriate conduct – are not protected.
Without the intra-corporate immunity rule, there could be a chilling effect on responsible reporting to management by employees, for fear they could face a lawsuit for reporting the issue. However, the intra-corporate immunity rule apparently is alive and well in Missouri. Indeed, in the case of Lovelace, it was used to affirm the dismissal of a defamation complaint where the information in question was reported only to company management, and no outside publication of the alleged defamatory statement occurred.
A recent ruling by the Court of Appeals for the Eastern District of Missouri illustrates the perils of using disjunctive verdict directing instructions. In Kader v. Bd. of Regents, the court reversed a $2.5 million verdict against Harris-Stowe State University (“HSSU”) and remanded the case for a new trial based upon instructional error in the disjunctive verdict directing instruction.
Plaintiff Kader sued under the Missouri Human Rights Act, alleging that the Board of Regents of HSSU discriminated against her based upon several factors, including race and national origin, and retaliated against her for opposing the university’s discriminatory practices. Kader, originally from Egypt, came to the United States on a visa for individuals involved a work and study based program. After completing her studies, she worked at HSSU for three years under her original visa. HSSU then appointed a new dean to the program where Kader worked, and Kader alleged she received poor reviews from the new dean based upon her national origin. She reported this to the president of the university.
When Kader’s visa was about to expire, she sought assistance from HSSU to obtain a new visa. HSSU agreed to submit the paperwork she needed for this new visa and did provide the initial information needed. When Kader had not heard about whether her visa was granted, she contacted the United States Citizenship and Immigration Services and learned it had requested additional information from HSSU, but had not received a response.
When Kader contacted HSSU to inquire about the additional information requested, it denied receiving any such request. HSSU further informed Kader that her visa application had been denied and she had to leave HSSU within 30 days. Kader requested a work leave of absence, which HSSU did not provide. Three days later, Kader again requested a leave of absence from HSSU but received no response. Thereafter, Kader received a letter from HSSU that it would not appeal the denial of her visa application.
During the trial, the court gave the jury disjunctive verdict directing instructions, instructing them to rule in Kader’s favor if: (1) the jury found HSSU failed to do one or more of five listed acts, one of which was whether HSSU denied Kader a work leave of absence; (2) Kader’s national origin or complaints of discrimination were a contributing factor to HSSU’s failure to do any of those acts, and (3) such failure damaged Kader. The jury returned verdicts in Kader’s favor on her claims of national origin discrimination and retaliation.
In reversing the trial court, the appellate court relied on authority holding that “[i]n order for disjunctive verdict directing instructions to be deemed appropriate, each alternative must be supported by substantial evidence.” The court held that the denial of a work leave of absence was not supported by substantial evidence “because the record shows that, at the time she was denied leave, Dr. Kader did not have a valid visa authorizing her to work in the United States, and, therefore, HSSU could not legally employ her.” Therefore, the court declined to find that the denial of employment or a work leave of absence to one who no longer has a valid visa is discriminatory or retaliatory conduct.
“[A]s there is no way to determine upon which disjunctive theory the jury chose, we cannot rule out the possibility that the jury improperly returned its verdict upon a finding that HSSU discriminated against Dr. Kader by denying her a work leave of absence, which misdirected or confused the jury,” explained the court. Accordingly, the judgment was reversed and remanded for a new trial.
For more on this subject, see our earlier blog post titled “Employers Know That Instructions Matter.”
After Reilly Company terminated his employment, Plaintiff Jeff Reed brought claims against Reilly in Jackson County, Missouri Circuit Court. Reilly moved to dismiss the claims based upon an employment contract provision stating that all disputes between the parties calling for interpretation and enforcement of the contract must be brought in Johnson County, Kansas. Plaintiff argued that: (1) because he was not seeking to enforce the contract, the forum selection provision had no applicability to his common-law and statutory tort claims, (2) the forum selection clause, and the contract as a whole, were unenforceable because his employment was “at-will” and no additional consideration was given for the forum selection clause, and, finally, (3) the forum selection clause was unfair and unreasonable because it was procured by fraud and concealment and therefore unenforceable. The dismissal was affirmed by the Court of Appeals, and the Supreme Court affirmed, rejecting all of plaintiff’s arguments.
Reed sued in Missouri, seeking declaratory and injunctive relief based on his employment contract with Reilly, damages for alleged fraud including a Missouri Merchandising Practices Act claim of fraud in procuring the contract, and damages for wrongfully withholding commissions. Reilly moved to dismiss the claims, asserting that Reed’s lawsuit could only be brought in Johnson County, Kansas. The motion to dismiss was granted, and the Court of Appeals further affirmed the validity and enforcement of the forum selection clause. The Missouri Supreme Court accepted the case for review.
The Forum Selection Clause Was Enforceable Despite Allegations of Non-Contract Disputes
Reed argued that the trial court erred in enforcing the forum selection clause in the employment contract because the contract lacked precise language requiring him to bring his non-contract claims in Kansas. The provision at issue stated:
“In the event of a dispute, jurisdiction and venue to interpret and enforce any and all terms of the Agreement shall be the District Court of Johnson County, KS.”
The Court ruled that whether a forum selection clause applicable to contract actions also reaches non-contract claims depends upon whether resolution of the claims is dependent upon interpretation of the contract. The resolution of plaintiff’s claims in this matter necessarily required an inquiry into the terms and enforceability of the employment contract, and accordingly, the non-contract claims were subject to the forum selection clause. Plaintiff’s claims for injunctive and declaratory relief clearly sought determinations regarding the enforcement and validity of the contract as a whole, and therefore the forum selection clause was enforceable.
The Trial Court Was Not Required to Determine Whether the Employment Contract Was Wholly Enforceable and Supported By Appropriate Consideration, Before Ruling on the Forum Selection Provision
The Supreme Court held that the trial court was not required to determine whether the contract was valid and enforceable, before ruling on the enforceability of the forum selection clause. Such a determination would be absurd, particularly if the matter was sent to a different jurisdiction for the same analysis to be conducted. Also, assuming that additional consideration was required in exchange for the forum selection clause and no additional consideration was given by Reilly, as long as the contract terms were not arrived at under terms deemed “adhesive” the forum selection clause would be enforceable. Plaintiff Reed did not argue that the contract was adhesive.
Because resolution of Reed’s arguments that (1) at-will employment does not create an enforceable employment relationship and (2) Reilly breached the agreement were issues that could be addressed in the new venue, they did not void the forum selection provision.
The Forum Selection Clause Was Not Void Due to Unfairness, Fraud, or Misrepresentation.
The Court rejected Plaintiff’s assertion that the forum selection clause was void because the employment agreement, as a whole, was void due to fraud. Although a forum selection clause may be voided if procured by fraud, there was no evidence in the record concerning negotiation of the forum selection provision, and plaintiff’s arguments that the employment agreement was procured by fraud did not void the forum selection clause because plaintiff did not argue that the forum selection clause was specifically procured by fraud.
The Court likewise rejected plaintiff’s argument that the forum selection clause was unfair and unreasonable, because there was no evidence submitted that the contract was adhesive. Finally, the Court found that the chosen venue in the contract was a neutral forum for the parties’ dispute which cut against plaintiff’s fairness and reasonableness arguments.
Forum selection clauses that are not adhesive will be interpreted independently of the court’s determination of the enforceability and validity of the contract as a whole. When, as in this case, a contract specifies a forum for all disputes concerning the contract’s interpretation and enforcement, and the dispute between the parties involves those matters, the forum clause will be enforced. Parties drafting forum selection clauses should exercise care to avoid contracts that are adhesive – i.e. agreements reached without a realistic opportunity for bargaining – and to choose forums which will be considered “neutral” and not overly advantageous to the party drafting the agreement.
Despite an uptick in advocacy, support, and inclusion of the LGTBQ community over the past several decades, as of today, discrimination based on sexual orientation remains an invalid claim under the Missouri Human Rights Act (“MHRA”). However, in a recent decision by the Western District of the Missouri Court of Appeals, disparate treatment of a gay male employee because he did not conform to traditional or stereotypical notions of masculinity warranted a claim of sex discrimination; which is a cognizable claim under the MHRA.
In Lampley, et al. v. Missouri Commission on Human Rights, plaintiff Lampley alleged that his employer discriminated against him based on sex because his behavior and appearance deviated from the stereotypes of “maleness” held by his employer and managers. Lampley claimed the stereotypes surrounding masculinity encouraged his employer to harass him and treat him differently from similarly situated employees who conformed to gender stereotypes. Subsequently, a close friend and co-worker of Lampley’s named Frost also filed charges with the alleging retaliation based on her close association and support of Lampley. The two employees “dual-filed” their charges of discrimination with both the EEOC and the Missouri Commission on Human Rights. The MCHR dismissed the state administrative proceedings, stating it lacked jurisdiction over the claims because they were based on sexual orientation. Both complainants then petitioned the trial court for administrative review arguing that sex, and not sexual orientation, serves as the basis of their claims. The trial court consolidated the cases and granted summary judgement in favor of the MCHR.
On appeal, Lampley and Frost argued that the trial court erroneously construed their claims to be based on sexual orientation, while in fact, they were based on sex, and therefore actionable under the MHRA. Lampley and Frost further contented that the sex discrimination was based upon sex stereotyping. The Missouri Court of Appeals agreed. Relying on federal case law under Title VII, the Court held that sex stereotyping can form the basis of a sex discrimination claim allowable under the MHRA. The Court of Appeals also cited R.M.A. v. Blue Springs R-IV School Dist., another recent Missouri Court of Appeals decision, which held “discrimination on the basis of sex means the deprivation of one sex of a right or privilege afforded the other sex, including a deprivation based on a trait unique to one sex, or a deprivation based on traits perceived as unique to one sex.”
In sum, the Court held that under the MHRA, “evidence an employee has suffered an adverse employment decision based on stereotyped ideas of how a member of the employee’s sex should act can support an inference of unlawful sex discrimination.” Thus, employers must be wary of company managers who might try to dictate what is masculine or feminine enough to meet accepted company norms. Just like ideas of gender identity have become more fluid and inclusive over the years, so has the applicable law.
Court of Appeals Affirms that At-Will Employment Is Not Sufficient Consideration for an Arbitration Agreement, Refuses to Change LawDecember 14, 2017 | Robert Chandler
In Wilder v. John Youngblood Motors, Inc., the trial court had denied the employer’s motion to compel arbitration of its former employee’s claim for wrongful termination, and the employer appealed. The Circuit Court ruled that at-will employment was the only consideration given for the agreement to arbitrate, and Youngblood therefore failed to demonstrate sufficient consideration for the agreement between the parties to arbitrate. Youngblood subsequently appealed this ruling arguing that mutual consideration between the parties existed, and, regardless, the Court should find that at-will employment is sufficient consideration for an agreement to arbitrate in accordance with federal policy favoring arbitration agreements and a tension in Missouri law providing that at-will employment provides sufficient consideration for non-arbitration provisions. The Court of Appeals affirmed the Circuit Court’s ruling.
Plaintiff Stephanie Wilder filed a Petition alleging wrongful termination for reporting alleged wire fraud by her employer, Youngblood. Wilder was an at-will employer, but at the time of hiring she executed an “Agreement for Binding Arbitration” as a condition of her employment. The Agreement bound Wilder and Youngblood to pursue arbitrations to resolve any claims or disputes arising in the course of her employment, with some exceptions.
Wilder worked for Youngblood for approximately 18 months but was terminated after reporting alleged wire fraud by Youngblood. Wilder subsequently filed her lawsuit for wrongful termination and Youngblood filed an answer and motion to compel arbitration, citing the Agreement. Wilder argued that the Agreement was “unconscionable,” lacked consideration and was therefore unenforceable. Youngblood subsequently appealed.
The Arbitration Agreement Lacked Mutuality of Consideration
Youngblood argued that the trial court erred in denying its motion to compel arbitration because the Agreement was properly supported by mutual consideration. The Court of Appeals sided with the Circuit Court’s assessment that at-will employment is insufficient consideration for the Agreement.
Additionally, the Court of Appeals agreed with the Circuit Court’s finding of a lack of mutuality with respect to the claims that were exempted from arbitration. Employer Youngblood had the opportunity to exempt certain potential claims from arbitration (“breach of trust, use or dissemination of confidential information, unfair completion, disclosure, or use of trade secrets”), but Wilder was prohibited from avoiding arbitration except where arbitration was forbidden by law. The Court noted that claims for unemployment benefits and workers’ compensation benefits, exempted from arbitration under the Agreement, were areas already prohibited from arbitration by law as jurisdiction for these areas is vested with specialized administrative tribunals.
The Court was not swayed by Youngblood’s argument that, as consideration for the Agreement, it was foregoing its ability to bring common law tort claims. The Court noted that Youngblood, in bringing the causes exempted from arbitration in the Agreement, could also bring these common law claims in the event they “relate” to the potential claims exempted from arbitration. Wilder did not have the same opportunity, and therefore mutual consideration was absent.
Youngblood also pointed to conditioning Wilder’s employment upon execution of the Agreement, a provision in the Agreement calling for it to pay the costs of arbitration if invoked, and Wilder’s continued employment and salary all as independent consideration sufficient to meet the mutuality requirement. The Court rejected all three arguments: 1) reiterating that at-will employment is insufficient consideration for an agreement to arbitrate, 2) the agreement to pay arbitration costs was obviated by a provision calling for costs to be awarded to the prevailing party, and, 3) although continued employment could be sufficient consideration for a restrictive covenant such as an agreement not compete, agreements to arbitrate are fundamentally different restrictive covenants, and enforced differently.
Accordingly, the Court found Youngblood’s arguments on mutual consideration unavailing and affirmed the Circuit Court’s ruling denying the motion to arbitrate.
The Court Refused Youngblood’s Federal Policy Argument
Youngblood pointed out that at-will employment was sufficient consideration in some employment agreements, but, under Missouri law is insufficient for arbitration agreements. Youngblood argued that, because at-will employment is sufficient consideration for non-arbitration provisions, Missouri law should be changed to allow at-will employment to be sufficient consideration for arbitration agreements as well. The Court refused to change the law, noting that the Court of Appeals should not “make the law” but should only “correct errors” and an argument to change the law should be addressed to the Supreme Court.
Agreements to arbitrate based upon at-will employment will continue to be found unenforceable by the Court as lacking sufficient consideration despite at-will employment providing sufficient consideration for other non-arbitration provisions. This tension in Missouri contract law is notable.
In Yerra v. Mercy Clinic Springfield Communities, the Missouri Court of Appeals for the Southern District of Missouri held that the trial court erred in giving the jury a whistleblower verdict-directing instruction, reversed the jury’s verdict for the whistleblowing doctor, and directed that the trial court enter a verdict in favor of the defendant employer.
Dr. Yerra, an internal medicine physician, treated a Medicare patient in her 60’s who had been hospitalized several times for heart issues and other conditions. After the patient was stabilized, Dr. Yerra referred the patient to Dr. Cavagnol for a gall bladder removal procedure. Dr. Cavagnol accepted the referral and asked a cardiologist to consult as to whether the patient could tolerate anesthesia and surgery. Upon learning of the cardiac consult order, Dr. Yerra canceled it because she deemed it an unnecessary cost. Dr. Cavagnol re-ordered the cardiac consult and the cardiologist cleared the patient for the procedure.
Dr. Yerra complained to Mercy’s Medical Staff Services, stating that the cardiac consult was inappropriate, an unnecessary cost, and disrespectful to her. She threatened to report the conduct to Medicare if it continued. Mercy investigated the matter and determined that the consult was appropriate, within the standard of care, and not an unnecessary cost.
Dr. Yerra, who had previously been put on “improvement plans,” was put on a new “improvement plan.” However, following subsequent incidents, including one involving an ICU patient, Mercy terminated Dr. Yerra.
Dr. Yerra brought a whistleblower suit against her former employer, citing R.S.Mo. 334.100 and 197.285, asserting that public policy considerations supported her wrongful termination claim. While generally, an at-will employee may be discharged for any reason, Missouri law protects employees by a very narrowly-drawn public policy exception. An employee may bring a whistleblower claim against his or her former employer if it is based on a public policy consideration specifically recognized in a statute, regulation, or rule. Any vagueness is fatal to the at-will wrongful termination claim.
R.S.Mo. 334.100 identifies a physician’s duty not to willfully and continually perform inappropriate or unnecessary treatment, diagnostic testing, and/or medical or surgical services. R.S.Mo. 197.285 requires designated healthcare facilities to off protection to employees who report certain matters, such as facility mismanagement, fraudulent activity, or violations of applicable laws related to patient care.
Although the trial court was skeptical that Dr. Yerra’s cited statutes were “nonspecific” and did not identify a clear public policy that was not vague or general, it agreed to give Dr. Yerra’s requested whistleblower verdict-directing instruction. The jury returned a verdict for Dr. Yerra and Mercy appealed.
The Missouri Court of Appeals for the Southern District of Missouri was tasked with determining whether the statutes reflected a clear and specific public policy mandate. Ultimately, it held that Dr. Yerra was not entitled to a whistleblower instruction for reporting what Dr. Cavagnol did because the record did not demonstrate that the pre-surgery cardiac consult violated any provision of the cited statutes and did not amount to serious misconduct contrary to well-established, clearly-mandated public policy reflected in the statutes. The Court held that Dr. Yerra’s reasonable belief that Dr. Cavagnol’s conduct violated public policy was not relevant to her wrongful termination claim. Rather, the whistleblower instruction is only proper when the former employee demonstrates that public policy actually forbade the conduct complained of.
Whistles Here, Whistles There, Whistles Everywhere - 8th Circuit Allows Airline Whistleblower to Proceed with State Law Wrongful Discharge ClaimOctober 3, 2017 | John Patterson
In Watson v. Air Methods Corp., No. 15-1900 (8th Cir. en banc, Aug. 31, 2017), the Eighth Circuit Court of Appeals reversed its own precedent and held that a former employee may bring a state law wrongful discharge claim against an “air carrier,” notwithstanding the pre-emption provision contained in the Airline Deregulation Act (“ADA”).
Plaintiff in Watson was an in-flight air medic employed by defendant. Over the course of his career, he made a number of complaints to his employer, alleging violations of various federal aviation safety regulations, including: a pilot making cell-phone videos during flight; members of a medical crew text messaging during critical phases of flight; a pilot attempting to take off with frost and ice on the aircraft; and another pilot making unnecessary “run-on landings.” After he was fired by the air carrier, Plaintiff claimed he was dismissed in retaliation for making these complaints, and filed suit in Missouri state court for the common-law tort of wrongful discharge in violation of public policy.
The air carrier removed the case to federal court and then moved to dismiss the state law claim based on the pre-emption provision of the ADA. The district court, relying on the Eighth Circuit’s decision in Botz v. Omni Air International, 286 F.3d 488 (8th Cir. 2002), dismissed plaintiff’s wrongful discharge claim. Plaintiff appealed, and a Court of Appeals panel upheld the district court. Plaintiff then sought en banc review, by the full Court. Somewhat surprisingly, the full court overturned its own decision in Botz and held that a state law claim for wrongful discharge was not preempted by the ADA, despite the existence of a federal whistleblower protection scheme for airline employees.
Defendant argued that if plaintiff’s claims were not pre-empted by the ADA, then state courts would need to adjudicate the meaning of the federal regulations, thus creating a patchwork of differing regulatory standards for air carriers to deal with. The Eighth Circuit disagreed, noting that state courts do not have federal regulatory enforcement power, that not all claims related to air “safety” are preempted by the ADA anyway (e.g. personal injury claims), and that the federal aviation whistleblower protection program acted in conjunction with state whistleblower claims, rather than superseding such claims. The Eighth Circuit stated that the Third, Ninth and Eleventh Circuits had reached the same conclusion.
As a result of the holding in Watson, “air carriers” (as defined in the ADA) doing business in the Eighth Circuit may now have to defend whistleblower-style claims from ex-employees, on both state and federal fronts.
In Bierman v. Violette,the Missouri Court of Appeals for the Eastern District, reestablished that yes, employees, you may owe duties to your co-employees that are separate and distinct from those duties the employer owes to its employees. The Court of Appeals reversed trial court’s dismissal of a negligence claim against a co-worker, citing this distinction.
Plaintiff Bierman and Defendant Violette were co-workers at a bar and grill, who were working together when the Plaintiff was injured. Specifically, Plaintiff alleged that she was injured after entering “a lofted space accessible only through the use of a twelve-foot, A-frame ladder” that was locked into place, which the Defendant knew or should have known the Plaintiff was doing. Then, while the Plaintiff was still within the lofted space, the Defendant unlocked, closed and moved the ladder for a time and then returned the ladder to the place where it was accessible again to Plaintiff. Plaintiff alleged that the Defendant failed to properly secure and lock the ladder in its previous position when it was moved, causing it to collapse as Plaintiff descended down the ladder. This resulted in injuries to Plaintiff after she fell, struck a concrete countertop and landed on the ground.
The Defendant argued that the claim against her was legally insufficient, because Plaintiff’s allegations did not “establish an independent duty of care owed by Defendant, which is separate and distinct from their Employer’s non-delegable duty to provide a safe workspace.” The trial court agreed and dismissed the Petition, and Plaintiff appealed. The Court of Appeals postponed oral argument, because then pending before the Missouri Supreme Court were two cases - Peters v. Wady Industries, Inc. and Parr v. Breeden, both of which involved the legal standards for pleading co-employee liability.
In both Peters and Parr, the Missouri Supreme Court affirmed the decisions in favor of the defendant/co-employees where the plaintiffs failed to establish that the defendants owed duties to the plaintiffs that were separate and distinct from the respective employer’s nondelegable duty to provide a safe workplace. Although the Peters and Parr cases were, on their face, unfavorable to Plaintiff Bierman, both Plaintiff Bierman and the Court of Appeals relied on aspects of the Missouri Supreme Court decisions to differentiate and ultimately reverse the trial court’s decision in favor of the Defendant/co-employee; thus, resulting in a different outcome that the Peters and Parr decisions.
The Bierman Court, citing Peters and Parr, first noted that the 2005 amendments to the Workers’ Compensation Law gave immunity against tort claims for work-related injuries only to employers; thus, co-employees are not immune and remain at risk for such liability (i.e. plaintiff can pursue a common law negligence claim against her co-employees if her allegations are adequately pled).
In Missouri, a plaintiff asserting allegations of negligence must establish that:
- the defendant had a duty to the plaintiff;
- the defendant failed to perform that duty; and
- the defendant’s breach was the proximate cause of the plaintiff’s injury.
In Bierman, the Court of Appeals analyzed whether the first element, “duty,” had been adequately pled. This question turned on what Missouri recognized as a duty owed by a co-employee to another at common law, versus what duty is owed by an employer to its employees. “An employee is liable to a third person, including a co-employee, for breaching a legal duty owed independently of any master-servant relationship.” An employer, on the other hand, owes its employees certain non-delegable duties with respect to safety and the employer, by itself, is liable for the breach of such a non-delegable duty. Thus, a co-employee cannot be held liable for breach of an employer’s non-delegable duty, which the employer alone owes. The duty owed by the co-employee must be separate and distinct from that of the employer.
What are an employer’s non-delegable duties, which cannot be separately imposed upon a co-employee? The Bierman court set forth the following, based on Peters and Parr:
- the duty to provide a safe workplace, including a duty to ensure that instrumentalities of the workplace are used safely;
- the duty to provide safe work appliances, tools, and equipment;
- the duty to give warning of dangers of which an employee might be reasonably expected to be ignorant of;
- the duty to provide a sufficient number of fellow employees; and
- the duty to make and enforce rules for the conduct of employees to ensure the work is safe.
When does an employer not have a duty to protect its employees and, therefore, when can a co-employee’s duty(ies) arise? As set forth in Bierman, “[e]xcept in the cases in which the employer is itself directing the work in hand, its obligation to protect its employees does not extend to protecting them from the transitory risks which are created by the negligence of a co-employee carrying out the details of that work.” In other words, the distinction revolves around how the co-employee is carrying out the details of his or her own work. For example, is a co-employee misusing equipment, such as a hose, where the co-employee uses the equipment in a manner that is not approved by the employer and causes injury to a co-employee? Or is the employer allowing defective equipment to remain on the property that results in injury to its employees?).
The Bierman Court determined that the Plaintiff’s injury was alleged to have occurred because of the Defendant/co-employee’s negligent use and manner of handling the ladder (i.e. how the co-employee was carrying out the details of his or her own work) and not because the employer allowed a defective product to remain in use on the property (i.e. the workplace was not unsafe). As a result, the duty alleged in Plaintiff’s Petition was found to be a separate and distinct duty owed by the Defendant/co-employee from that of an employer’s non-delegable duties to provide a safe workplace. The Bierman Court further held that the negligence of the Defendant did not need to be the sole cause of plaintiff’s injury, “as long as it is one of the efficient causes thereof, without which injury would not have resulted.” Therefore, the Court of Appeals reversed and remanded the case back to the trial Court, allowing Plaintiff to attempt to prove her negligence claim against her co-worker.
The Bierman case’s final outcome is presently unknown. However, this case does teach some simple, but important lessons for plaintiffs, defendants, and those in the business world:
- When a workplace negligence claim is asserted, language matters. The wording of a claim by a plaintiff, or a defense by a defendant, needs to adhere to the case law recently articulated by the Missouri appellate courts.
- Workplace safety is not just the employer’s concern. Co-workers must pay attention and take reasonable, precautionary action to ensure the safety of those around them.
An Ounce of Prevention is Worth a Pound of Cure: A Practical Guide to Reducing the Risk of a Data BreachDecember 19, 2016
- Access to confidential and sensitive information should be restricted: Limit access to sensitive data or protected information to those employees whose job function requires access to the information.
- Vendors must be screened: A vendor may have access to or handle an organization’s sensitive data as part of the service it provides. The organization must ensure that the vendor: (a) has security measures in place to protect that data, and (b) is using the organization’s data for no other purpose than to provide the services for which the vendor was retained.
- Employee training and restrictions: Organizations should implement policies and practices to ensure data security, and train all employees, so they are aware of the organization’s rules and expectations. For example, employees of each organization should be trained on:
- the types of information considered sensitive or private;
- correct procedures for storing and deleting sensitive information;
- reporting of suspicious emails;
- passwords (they should be strong, never duplicated, and changed frequently).
- Mobile Devices: Organizations that permit employees to use personal mobile devices for business-related purposes should consider restricting the manner in which the devices are used to access the organization’s data. For example, software can be downloaded on a personal mobile device which separates the business-related data from the personal data, and permits an organization to scrub the device remotely in the event the device is lost or stolen.
- Secure Networks and Encryption: Organizations should encrypt sensitive or private data, utilize firewall protection in their networks, and ensure that Wi-Fi access is always secure and password-protected.
Three years ago, the Missouri Supreme Court, in Farrow v. St. Francis Med. Ctr., 407 S.W.3d 579 (Mo. banc 2013), handed down a decision concerning when and how an employer had to challenge an employee’s alleged untimely filing of a complaint under the Missouri Human Rights Act. (See our 2013 post on Farrow here.) Seemingly, the message of that case was that if the MHRA did not specifically rule on the timeliness of the administrative complaint, it was incumbent upon the employer to race to the courthouse, and seek review of the agency’s action, under Mo.Rev. Stat. 213.075. Ever since, that decision has created consternation and confusion for practitioners, who hoped that this issue might be clarified in a Court of Appeals, Western District case titled Tivol Plaza v. Mo. Comm’n on Human Rights.
Alas, it was not to be. Instead of tackling the issue of when and how a defendant in a discrimination case must challenge the timeliness of a charging party’s claim, the Court of Appeals, sitting en banc, reviewed procedural issues that arose in the circuit court and decided it did not have jurisdiction to hear the appeal.
In Tivol, a former employee brought a sex and age discrimination claim against Tivol Plaza in the Missouri Commission of Human Rights (“Commission”). Pursuant to the Missouri Human Rights Act (“MHRA”), a plaintiff has 180 days to bring its claim of the alleged act of discrimination to the Commission. After the Commission receives a complaint, it has 180 days to investigate the merits and issue a right to sue letter allowing the plaintiff to pursue a civil action in circuit court. Upon expiration of the 180 days, and upon request by the plaintiff, the Commission must issue a right-to-sue letter even if the Commission has not completed its investigation.
The defendant, Tivol Plaza, argued that the plaintiff’s MHRA claim was not timely and asked the Commission to first dismiss all untimely aspects of the complaint prior to issuing the right-to-sue letter or alternatively to make factual findings for the circuit court’s review in deciding whether the right-to-sue letter was appropriately issued. Instead the Commission issued the right-to-sue letter indicating that they had not yet completed their administrative review and made no determination as to jurisdiction. Tivol Plaza then filed a petition for preliminary and permanent writ of mandamus in the Circuit Court of Cole County. The circuit court issued a summons rather than a preliminary order in mandamus and later dismissed Tivol Plaza’s petition.
The majority in Tivol held that the court did not have the authority to hear the appeal because the circuit court’s failure to issue a preliminary order in mandamus, pursuant to Missouri Rules of Civil Procedure Rule 94, prior to dismissing the case and instead issuing a summons, meant the petition was not determined on the merits and thus not appealable. Thus, the petitioner’s proper course of action would have been to file the writ in a higher court.
The majority relied on the Court’s 2013 decision in U.S. Dept. of Veterans’ Affairs v. Boresi, a case with a similar procedural history, where the Supreme Court exercised its discretion to consider an appeal even though the circuit court issued a summons instead of a preliminary order. The court noted that since Boresi, both the Eastern and Western Missouri Court of Appeals have decided the issue of whether the court has the authority to entertain an appeal in cases where the circuit court issued a summons instead of a preliminary order and both courts have dismissed the appeal.
Two dissenting opinions, by Chief Judge Alok Ahuja and by Judge Thomas H, Newton, argue that the appellate court should have heard the appeal. Judge Ahuja disagreed that the petition was not decided on the merits and suggested that Farrow had been wrongly decided and created procedural inefficiencies but states that the court is still “bound by the Missouri Constitution to follow Farrow unless and until it is modified or overruled by the Supreme Court.” Newton said that the dicta in Farrow is misdirecting andthat the case should be remanding to allow an evidentiary hearing in the circuit court.
As a result, there is still little guidance on when a defendant must challenge the timeliness of a claim made to the Missouri Commission of Human Rights and only seems to muddy the water surrounding procedural issues relating to petitions for writ of mandamus and when appeals from such petitions are warranted. However, as it stands now, Rule 94 does not provide for the issuance of a summons after the filing of a petition for writ of mandamus and, if the circuit court issues summons, appeal from the judgment is subject to dismissal.
Constructive Discharge Claims: When Does the 45-Day Period for Initiating Contact with the EEOC Begin to Run?June 8, 2016
On May 23, 2016, the U.S. Supreme Court decided the case of Green v. Brennan in order to resolve a split among the Circuits on whether, in an action for constructive discharge, the 45-day limitation period for the employee to initiate contact with the EEOC begins to run after the employer’s last discriminatory act, or at the time of the employee’s resignation. In the 7th and 10th Circuits (which include Illinois and Kansas), the limitation period had been measured from the time of the last discriminatory act. In the 8th Circuit (which includes Missouri), it had been measured from the time of the employee’s resignation. The Supreme Court in Green held that the period runs from the time of the employee’s resignation.
Marvin Green is a black man who worked for the U.S. Postal Service for 35 years. In 2008, Green was passed over for a promotion and later complained to his supervisors that he was denied the promotion because of his race. Following his complaint, Green’s supervisors accused him of the criminal offense of intentionally delaying the mail but agreed to pursue no criminal charges against Green if he agreed to leave his current post at the Postal Service to either retire or take a lesser position for less pay effective March 2010. The parties signed this agreement on December 16, 2009. Green submitted his resignation on February 9, 2010.
On March 22, 2010, Green first contacted the EEOC to report his alleged unlawful constructive discharge. Green claimed that his supervisors threatened him with criminal charges and negotiated the resulting agreement as retaliation for his original complaint. Green contends these actions effectively forced his resignation and were in violation of Title VII. Green’s first contact with the EEOC was 41 days after submitting his resignation paperwork to the Postal Service on February 9, but 96 days after signing the settlement agreement on December 16.
In 2010, Green filed suit in federal court in Colorado alleging that the Postal Service constructively discharged him. The District Court granted the Postal Service’s Motion for Summary Judgment on the grounds that Green had failed to make timely contact with an EEOC counselor within 45 days of the “matter alleged to be discriminatory,” as required by 29 CFR §1614.105(a)(1). The Tenth Circuit affirmed the District Court’s ruling, holding that the “matter alleged to be discriminatory” encompassed only the Postal Service’s discriminatory actions and not Green’s resignation on February 9, 2010.
The U.S. Supreme Court, however, held that “the ‘matter alleged to be discriminatory’ in reference to the elements required in a constructive-discharge claim necessarily includes the employee’s resignation”, for three reasons.
1. For a constructive-discharge claim, the limitations period requires a “complete and present cause of action” which only occurs when the employee resigns. A claim of constructive-discharge requires that the plaintiff employee prove two elements: first, that the employee was “discriminated against by his employer to the point where a reasonable person in his position would have felt compelled to resign” and second, that the employee actually resigned. The limitations period can only begin to run at the point when a plaintiff can file suit for a constructive discharge after there is a “complete and present cause of action” which occurs only after the plaintiff resigns. Thus, the term “matter alleged to be discriminatory” under §1614.105 in reference to the elements of a constructive-discharge claim include the employee’s resignation.
2. There is nothing in the language of regulation §1614.105 that indicates the standard rule for limitations periods should be displaced. The standard rule dictates that a limitations period should commence after a claim accrues and there is only an exception if the text creating the limitations period clearly indicates otherwise. Citing Dodd v. United States, 545 U.S. 353, 360 (2005). Nothing in the text of Title VII or regulation §1614.105 indicate that the standard rule should be displaced.
3. Applying the standard rule for limitations periods to constructive-discharge claims makes practical sense. As discussed, a plaintiff can only bring a constructive-discharge claim once the claim accrues which requires the employee to actually resign. “Starting the limitations clock ticking before a plaintiff can actually sue for constructive-discharge serves little purpose in furthering the goals of a limitation period – and it actively negates Title VII’s remedial structure.” If the limitations period began to run at the employer’s last discriminatory act and before the employee’s resignation, the employee would be forced to file a discrimination complaint and then later amend the complaint after he resigns to allege a constructive-discharge claim.
Going forward, the limitations period for constructive-discharge claims for federal and private employees to make contact with the EEOC will begin to run at the employee’s resignation, as a constructive-discharge claim does not exist until the employee resigns.
U.S. Department of Labor Raises the Minimum Salary Threshold to Qualify for the FLSA "White Collar Exemption"May 18, 2016 | David EisenbergOn May 18th, the U.S. Department of Labor issued its final overtime exemption rule, raising the minimum salary threshold to qualify for the Fair Labor Standards Act's white collar exemption to $47,476 per year. The regulation takes effect on December 1st. Between now and then, employers have an important decision to make for their white collar employees whose earnings are near the new threshold. Be prepared to reclassify the employee as non-exempt and start paying overtime for hours worked in excess of 40 per week; or increase the employee’s salary to $47,476 or more, to keep the employee exempt. The DOL’s “white collar” exemption applies to an employer’s executive, administrative, and professional workers.
Access the DOL fact sheet here.
On April 11th, Missouri Governor Jay Nixon signed an executive order requiring that state departments, agencies, and boards and commissions under the executive branch remove questions about criminal history from the initial job applications of prospective employees. Missouri joins 22 other states that have already implemented such policies, and similar policies have previously been in place for government job applicants in Kansas City, Missouri and St. Louis. The city of Columbia has gone even one step further and banned the box not only for municipal jobs, but for private sector jobs as well.
As we discussed in an earlier post, where ban-the box laws apply, it is expected that an employer will make a conditional job offer to an applicant, without having inquired about his or her criminal past. The inquiry can then be made later in the hiring process, and if a criminal conviction is disclosed, it will then be up to the employer to decide if the conviction disqualifies the candidate for the position.
Some easy examples: a convicted embezzler need not be hired as a bookkeeper; a convicted child abuser need not be hired at a day care center; but someone convicted of assault in a bar-room brawl should not be disqualified from a job as a warehouse worker. How long ago an applicant’s conviction occurred will also be a relevant factor for an employer to consider.
The underlying legal concern with the use of arrest and conviction records in the hiring process is that use of criminal history that is not truly and directly job-related may result in the disproportionate exclusion of minority candidates. These concerns are reflected in the EEOC’s 2012 “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII.”
The full text of Missouri Executive Order 16-04 is available here.
A plaintiff’s attorney asked the Legal Ethics counsel, “Does [Missouri Ethics] Rule 4-4.2 prohibit Attorney from contacting unrepresented former managerial employees of Defendant without the consent of Defendant’s counsel?” In short, the answer is No, unless the ex-manager is represented by counsel. The attorney must ask about whether he is represented. If so, any contacts must be made through counsel. If not, the contact is permissible.
Rule 4-4.2 contains the time-honored prohibition against attorney contact with represented parties.
When a client is concerned about Plaintiff’s counsel contacting a current or former manager, there are some important considerations to bear in mind:
- Current managers: Always inform current managers who have worked with the Plaintiff that if they are contacted by Plaintiff’s counsel, they should answer no questions and direct the caller to the company’s attorneys.
- If a former manager is only a witness: The company may contact the former manager, and let her know that a dispute is brewing with an employee she used to work with. And that while it is her choice whether or not to do so, she is under no obligation whatsoever to speak with either the employee or his attorney. Clients should be advised accordingly.
- If a former manager is named as a co-defendant: In Missouri, especially in employment cases, it is all too common for plaintiffs to name not only the company, but the plaintiff’s supervisor(s) and managers as well, as defendants. Case law under the Missouri Human Rights Act often permits this. In cases involving current managers, Comment 7 to Ethics Rule 4-4.2 says they cannot be contacted by opposing counsel; and in many circumstances, the company will be providing a defense for the manager, which likewise means he is a “represented” person who cannot be directly contacted. On the other hand, for managers no longer employed by the company, whether plaintiff’s counsel can contact the individual may turn on whether the company is providing a defense for the manager. If the company provides a defense, contact can only occur through company counsel, and the ex-manager should deflect any calls from plaintiff’s counsel, to the company attorney. Likewise, if the former manager has his own counsel, contact can only occur through that attorney.
In the case of Sharpe Holdings, Inc., et. al. v. U.S. Department of Health and Human Services, the U.S. Circuit Court of Appeals for the Eighth Circuit upheld a preliminary injunction issued by the U.S. District Court for the Eastern District of Missouri, which enjoined the government from enforcing certain provisions of the Affordable Care Act against two nonprofit religious organizations that offer health care coverage to employees through a self- insured plan.
CNS International Ministries, Inc. (CNS) and Heartland Christian College (HCC) are nonprofit religious organizations offering health care coverage to employees through a self-insured plan. Both organizations strive “to promote certain moral and ethical standards in their employees including …a belief in the sanctity of life which precludes abortion on demand.” In accordance with their sincerely held religious beliefs, CNS and HCC oppose abortion on demand. The two organizations contended that certain contraceptives required under the contraceptive mandate of the Affordable Care Act were functionally equivalent to abortion on demand.
They filed suit against the government, claiming that the Religious Freedom Restoration Act of 1993 (RFRA) prohibited the government from imposing a substantial burden on their exercise of religion. The District Court, had granted a preliminary injunction in favor of the two religious organizations, on their claim that the government was coercing them to violate their religious beliefs by threatening to impose severe monetary penalties unless they either directly provided coverage for objectionable to them contraceptive methods or indirectly provided the objectionable coverage through a Health and Human Services notice accommodation process.
The Eighth Circuit first noted that the district court has broad discretion when ruling on a request for a preliminary injunction, and that an appeals court could reverse the decision only on an abuse of discretion. The Court of Appeals utilized the substantial-burden test identified in Burwell v. Hobby Lobby, 134 S. Ct. 2751 (2014) and determined that the government requirement that the two religious organizations fill out notification forms to opt out of providing insurance coverage imposed a substantial burden on their exercise of religion. It should be pointed out, however, that the Court of Appeals itself said that only a minimal record had so far been developed because of the procedural stage at which the case had been appealed.
The case has been sent back to the District Court for further proceedings.
Missouri Supreme Court Grants New Trial for Former Kansas City Chiefs Employee in Age Discrimination CaseNovember 2, 2015
On October 14, 2010, 61 year old Steven Cox was fired from the Kansas City Chiefs. He was replaced with a 37 year old.
Trial Court Proceeding
He filed a petition in Jackson County Circuit Court alleging a single act of age discrimination. He did not allege a “pattern-or-practice” or a “company-wide” policy of age discrimination.
1. Mr. Cox sought to introduce evidence of firings of other older employees, often with younger employees replacing them, as circumstantial evidence of the Chiefs’ discriminatory intent in terminating his employment. His request was denied by the trial judge because he did not plead “pattern and practice” discrimination and thus evidence that the Chiefs fired older employees was not relevant to Mr. Cox’s claim. It was also denied because the firings were not directed by the same decisionmaker.
2. Mr. Cox also tried to introduce evidence from a former employee who overheard Scott Pioli, the team’s former general manager, say that major changes in the organization are needed because so many employees are over the age of 40. The testimony was excluded by the trial judge because Mr. Pioli was not involved in Mr. Cox’s firing.
3. Furthermore, Mr. Cox sought to depose and subpoena for trial Clark Hunt, Chiefs’ chairman and CEO, who allegedly told another staffer that he “wanted to go in a more youthful direction.” The trial court denied Mr. Cox’s request because he did not plead “pattern and practice” discrimination.
Ultimately, the jury returned a verdict for the Chiefs.
Supreme Court Decision
On appeal, the Missouri Supreme Court held that the trial court abused its discretion in excluding circumstantial evidence of other employees allegedly fired based on age, in excluding the former employee from testifying that he heard Mr. Pioli say that major changes in the organization are needed because so many employees are over the age of 40, and in excluding Mr. Hunt from being deposed.
First, the Supreme Court held that under these circumstances, “me too” evidence – the other employees testimony - was relevant to Cox’s claim, regardless of whether he pleaded that the Chiefs engaged in systematic discrimination. The court stated “whether Mr. Cox pleaded a hostile work environment claim should not affect the trial court’s analysis as to whether evidence of “me too” firings of other persons over the age of 40 by the Chiefs is relevant as circumstantial evidence supporting Mr. Cox’s individual discrimination claim.” The Supreme Court further stated that “the trial court erred in its belief that evidence of the firing of other employees is not admissible if not directed by the same decisionmaker.”
Second, the Supreme Court chided the lower court for barring the former employee from testifying that he heard Mr. Pioli say that major changes were needed because so many employees are over the age of 40. The Supreme Court stated “the fact that Mr. Pioli did not directly supervise Mr. Cox or order his firing does not mean that his comments are irrelevant when the theory of the case involves a company-wide policy.”
Third, the Supreme Court held that the trial court abused its discretion in not permitting Mr. Hunt to be deposed. The Court noted that a key part of Mr. Cox’s theory was that there was a company-wide discriminatory policy instituted by Mr. Hunt and thus his testimony was clearly relevant and discoverable.
Going forward, the Supreme Court of Missouri has given a strong indication that an employee will be permitted to introduce “me too” evidence, regardless of whether a “pattern or practice” claim is pursued and regardless of whether the firing of other employees was conducted by the same decisionmaker. Furthermore, an employer will not be permitted to bar a former employee from deposing a high ranking official on the theory that that person was not involved in the firing process, if that official was alleged to have implemented a policy that resulted in discrimination against the plaintiff.
On March 9, the U.S. Supreme Court granted certiorari at the request of the University of Notre Dame on another matter arising from the Affordable Care Act, and remanded the case to the U.S. Court of Appeals for the Seventh Circuit, with instructions to reconsider its ruling in light of the Supreme Court’s 2014 decision in Burwell v. Hobby Lobby.
The Hobby Lobby case established the principle that where sincerely held religious beliefs of for-profit corporations which were substantially burdened by a provision of the Affordable Care Act, for which there was a less restrictive alternative, such provisions could be disallowed, even in the face of a compelling government interest. Just a few days later, the Supreme Court issued an order at the request of Wheaton College, a religious, not-for-profit liberal arts college, which limited the amount of paperwork Wheaton could be made to fill out in order to opt out of the requirement that it pay for mandatory contraceptive coverage for its employees.
University of Notre Dame v. Burwell involves the federal government’s offer of so-called “accommodations” allowing objecting non-profit employers to shift the obligation to paying for contraception coverage to third parties such as insurers. Notre Dame contended that the “accommodation” violated its religious convictions by still sponsoring contraception coverage, albeit through a third party. The Seventh Circuit, in a decision that predated Hobby Lobby had denied Notre Dame’s effort to have its employees excluded from the mandatory contraception coverage.
Clearly, the Hobby Lobby decision is alive and well, and the courts have yet to fully sort out its repercussions. Stay tuned for further updates.
The Eighth Circuit Court of Appeals was recently asked to decide an issue of first impression in the circuit: What constitutes a valid waiver of claims in a Fair Labor Standards Act (“FLSA”) case?
Adams v. ActionLink, LLC arose from a U.S. Department of Labor determination that ActionLink had misclassified its brand advocates as exempt under the FLSA. Based on that determination, ActionLink agreed to re-classify these employees as non-exempt and issue checks for back wages. When ActionLink s issued the checks, they contained a disclaimer stating that the checks represented “full payment from Actinlink [sic] or [sic] wages earned, including minimum wage and overtime, up to the date of the check.”
A group of brand advocates filed suit and a motion for summary judgment which asked the court to confirm their non-exempt status and award them additional back-wages. ActionLink likewise moved for summary judgment, first asserting that the employees actually were exempt under the FLSA, and second, that those employees that cashed their back-wages checks had waived their rights for additional remuneration under 29 U.S.C. § 216(b). The district court held that the brand advocates were non-exempt, but agreed with ActionLink that the plaintiffs who cashed their checks waived their right to any further back-wages. Both parties appealed.
The Eighth Circuit first addressed ActionLink’s contention that the brand advocates were “outside salesmen” within the scope of 29 C.F.R. § 541.500. While brand advocates were “customarily and regularly engaged away from the employer’s…place of business,” the Court disagreed with ActionLink that the brand advocates’ primary duty was “making sales.” ActionLink conceded that the brand advocates did not actually make their own sales, but argued that the brand advocates’ work nevertheless was included in the FLSA definition of “sale” which includes any “sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U.S.C. § 203(k) (emphasis added). ActionLink argued that the “or other disposition” provision exempted the brand advocates’ activities, as their duties were designed to drive sales at retail outlets.
The Court disagreed and found that the brand advocates’ work was more akin to non-exempt “promotional work” under 29 C.F.R. § 541.503(b). In so finding, the Court noted that the Department of Labor’s example of non-exempt promotional work accurately described the brand-advocates’ job duties: “a company representative who visits chain stores, arranges the merchandise on shelves, … [and] sets up displays … but does not obtain a commitment for additional purchases.”
The Court further disagreed with ActionLink’s contention that the brand advocates were exempt under the FLSA’s administrative exemption. 29 C.F.R. § 541.200. The Court found that the brand advocates did not exercise the requisite “discretion and independent judgment with respect to matters of significance” to fall under this exemption.
ActionLink next argued that the language present on the back-wages checks constituted a waiver of any further claims for any brand advocate that cashed the check. While the issue of what constitutes a valid settlement was an issue of first impression in the Eighth Circuit, the Court followed well-established law in other circuits that “simply tendering a check and having the employee cash that check does not constitute an ‘agreement’ to waive claims; an agreement must exist independently of payment.”
The Court held that the language on the checks was inadequate to notify employees of the rights they were waiving or even to suggest the employees were waiving any statutory claim. ActionLink further contended that a letter, sent at least two weeks prior to the checks, met the notice requirements. The Court, noting that a key page of the letter was inadvertently left out of the record on appeal, declined to consider the letter in its decision. However, the Court indicated that even if the complete letter had been included in the record, it still would have been insufficient as it failed to mention any additional recovery rights that brand advocates might have had and that by accepting payment, the brand advocates were waiving those rights.
The Eighth Circuit reversed the district court’s grant of ActionLink’s partial summary judgment motion and remanded to the district court for further proceedings.
Conclusion: The “other disposition” provision of the FLSA generally will not operate to broaden the definition of “outside salesmen” to include those employees whose primary duties focus on promotional work intended to drive sales made by other individuals or stores. Further, any valid settlement of a FLSA claim for back-wages should be accompanied by either a Department of Labor form, or a waiver including comparable language that apprises the employee of the legal claims and any other additional damages the employee may be waiving.
Eighth Circuit Court of Appeals Reaffirms Requirement of Substantial Evidence of Pretext in Employment Retaliation ClaimsMarch 24, 2015
The Eighth Circuit Court of Appeals recently upheld a Western District of Missouri Court’s grant of summary judgment on an employee’s retaliatory termination claim against the Internal Revenue Service. The plaintiff employee was hired as a full-time season tax examiner in Kansas City, Missouri, and his employment with the IRS was subject to the completion of a one-year probationary period. During his probationary period, the plaintiff was observed having claimed other employees’ work as his own, and putting forth work product in which more than 50% of the tax documents were processed incorrectly. The plaintiff was advised that he would be removed from his position unless he chose to resign. The plaintiff then delivered a letter to his local union representative alleging that his first-level supervisor would constantly tell him how good she looked because she worked out at the gym and would put down other women at the IRS for being overweight. The letter was entitled “Sexual Harassment, Retaliation, Harassment, and Creating a Hostile Environment.” A follow-up investigation of the plaintiff’s claims by the IRS concluded that the claims were unfounded. The IRS then terminated the plaintiff for the singly stated reason that he failed to attain a fully successful level of performance during his probationary period. The plaintiff subsequently sued in federal district court alleging, among other things, race and sex discrimination, and retaliation with regard to his termination. The district court granted summary judgment on all claims, and the plaintiff appealed the ruling on his retaliatory termination claim.
In order to survive a motion for summary judgment, even after a plaintiff in a retaliatory termination claim establishes a prima facie case, once the employer articulates a legitimate reason for its actions, the employee must further show that the proffered non-retaliatory reasons for his termination were pretextual. As stated by the Eighth Circuit, proof of pretext “requires more substantial evidence” than a prima facie case “because unlike evidence establishing a prima facie case, evidence of pretext. . . [and retaliation] is viewed in light of the employer’s justification. Logan v. Liberty Healthcare Corp., 416 F.3d 877, 881 (8th Cir. 2005). To demonstrate the presence of a material question of fact, a plaintiff may succeed indirectly by showing the proffered explanation has no basis in fact; or, second, a plaintiff can directly persuade the court that a prohibited reason more likely motivated the employer. As noted above, the IRS offered poor job performance as the reason for termination. In response, the plaintiff argued that the IRS did not actually have concerns about his performance, in that the allegations of claiming credit for others’ work were removed from his personnel file. Accordingly, the plaintiff argued, the allegations against him should be taken as pretext because they changed over time. The Eighth Circuit recognized that although such “shifting justifications” can be used to show pretext, the plaintiff failed to show the justification actually shifted. Indeed, the court recognized that merely knowing the IRS had two concerns and only listed one in the termination letter was not enough to find pretext based on shifting explanation.
The plaintiff further argued that the proximity of time between when he made his allegations of harassment and when he was terminated was sufficient to establish pretext. The Eighth Circuit rejected this argument, noting that the timing of the discharge should be evaluated in light of other evidence, or lack of other evidence in the record. Because the plaintiff failed to put forth any other evidence to support pretext the Eighth Circuit upheld the grant of summary judgment in favor of the IRS.
Unfortunately, it is not all that uncommon for an employee to make unsupported allegations of discrimination and harassment immediately, after being advised of his termination for poor performance. The Eighth Circuit’s ruling properly concludes that employee claims must have proper evidentiary support, if the plaintiff is to avoid summary judgment.
[Case citation: Gibson v. Geithner, 776 F.3d 536 (8th Cir. 2015).]
Employers Beware: The Missouri Court of Appeals Strikes Another Blow Against Enforcement of Employee Arbitration AgreementsMarch 16, 2015
It is time for Missouri employers to re-evaluate their employment agreements to see if the arbitration clauses, or the agreements as a whole, are still enforceable. Notwithstanding the U.S. Supreme Court’s repeated endorsement of the enforceability of arbitration agreements, the Missouri Court of Appeals for the Eastern District has elevated to a whole new level the Missouri courts’ hostility toward arbitration clauses in employment agreements, in the case of Jimenez v. Cintas Corporation.
The main issue stems from a common practice in employment agreements. Employment agreements routinely contain arbitration clauses wherein the employee and employer have mutual obligations to seek arbitration in lieu of court action. The same agreements often contain non-compete provisions allowing the employer to seek injunctive relief in the courts for violations. The rationale is simple: if an employee leaves and begins to compete directly in contravention of the agreement, injunctive relief is the best and fastest method to stop the prior employee’s actions, and prevent irreparable harm. Arbitration would be too slow to address the problem before damage is done to the employer. The Jimenez court found these two clauses may result in the arbitration clause being unenforceable. Going even further, the Jimenez court chose to address the issue of consideration based upon promises of at-will employment and expanded the Supreme Court’s definition, again continuing the trend of other Missouri courts in restricting arbitration clause and employment agreement enforceability in general.
In Jimenez, Cintas (the employer) sought to compel arbitration of Kathryn Jimenez’s employment discrimination claim. The employment agreement signed when Jimenez was hired contained an arbitration clause, which the court noted, “on its face…plainly states that both parties must arbitrate…” Nevertheless, the court refused to compel arbitration on the basis that there was no “mutuality” in the agreement and more significantly, that there was no “consideration” for Jimenez’s agreement to arbitrate based upon the promise of new at-will employment.
Missouri law requires mutuality of obligations to enforce an agreement to arbitrate. In Jimenez the court found the arbitration clause itself did contain mutual promises to arbitrate. However, the court looked at other terms in the agreement, and specifically the non-compete clause. Within the non-compete clause was an exception to arbitration solely for the benefit of the employer. The employer retained the right to seek enforcement through injunctive relief in the courts rather than through arbitration. The Jimenez court, reading the two clauses together, held that since the employer could sue in the courts to enforce the most common claim they would have against the employee, but the employee did not retain the same right, there was no mutuality of agreement and the arbitration clause was void.
The court could have upheld the trial court’s decision not to enforce the arbitration clause solely on the basis of mutuality; however, the court took one step further, finding the promise of new at-will employment did not constitute consideration sufficient to create a binding agreement.
In August of 2014, the Missouri Supreme Court in the case of Baker v. Bristol Care, Inc., held that the promise of continued at-will employment does not constitute valid consideration to form a binding arbitration agreement. Where an employee has already been hired and the employer later asks or requires that employee sign an arbitration agreement in order to keep his job, there is no consideration because there is no promise to do anything the employer was not already doing. The Supreme Court did not address the question or whether or not a promise of new at-will employment could constitute adequate consideration.
As noted in Judge Odenwald’s concurrence in Jimenez, “no Missouri case has held that an initial offer of at-will employment is illusory or lacks the requisite mutuality of promise to provide consideration for the agreement.” Consideration requires either a promise to affirmatively do or refrain from doing something or the transfer or giving up something of value. Since a promise of new employment is a promise to do something the employer is not legally required to do, the promise should constitute sufficient consideration according to Judge Odenwald. This opinion is consistent with the Missouri Supreme Court ruling in Baker which only addressed a continued promise and not a new promise of at-will employment.
The majority in Jimenez disagreed. In the opinion of the court “a promise of at-will employment does not qualify as consideration, regardless of whether it is characterized as ’new,’ ’future,’ or ’continued‘ at-will employment.” In reaching this decision, the court makes it clear that there is no form of “at will” employment which can result in a valid arbitration agreement (or non-compete agreement for that matter) without additional consideration. This holding distinguishes Missouri from the overwhelming majority of other states that have addressed this issue, and deals a significant blow to the rights of the employers in the state of Missouri.
Cintas is seeking review of the case by the Missouri Supreme Court. But meanwhile, in the wake of Jimenez, Missouri employers must consider the impact on employment agreements where the terms of the arbitration clause and the non-compete clause do not match. Unless the Supreme Court accepts this case for review and modifies the Court of Appeals’ ruling, Missouri courts are likely to strike down any arbitration clause whose obligations of the employer and employee are not identical in all regards in every clause of the agreement. The Jimenez decision affects not only arbitration clauses, but has implications for all agreements with employees such as non-compete and non-solicitation agreements if the only consideration was a promise of at-will employment, whether new, future, or continued. A review of employee agreements is essential along with a consideration of whether or not it would be appropriate to offer at-will employees some form of payment or something of value to constitute consideration for executing arbitration agreements, non-compete agreements, or any other employment agreements.
View the full opinion here.
On January 21, 2015 the Supreme Court decided the case of Department of Homeland Security v. Robert J. MacLean, involving a former federal air marshal’s 2003 disclosure that the TSA had cancelled certain missions to save costs, although it was aware of and had disclosed to air marshals the existence of a potential plot to hijack flights. MacLean believed that cancelling the missions was dangerous and illegal. He disclosed the cancellations to an MSNBC reporter who subsequently published the story. Following the TSA’s discovery that MacLean was the source of the information, MacLean was terminated for disclosing sensitive security information without authorization. MacLean challenged his termination, arguing that his disclosure constituted whistleblowing and was therefore protected.
MacLean first challenged his termination before the Merit Systems Protection Board, which determined that the disclosure was specifically prohibited by law and therefore not protected by the whistleblower statute. The Court of Appeals for the Federal Circuit vacated the Board’s decision, finding that for MacLean’s disclosure to be specifically prohibited by law it had to be prohibited by a statute, not simply a TSA regulation. The Supreme Court granted certiorari and affirmed the Court of Appeals.
Federal law provides a general protection to whistleblowers – persons who disclose information that reveals the “violation of any law, rule, or regulation,” or “a substantial and specific danger to public health and safety,” but an exception exists for disclosures that are “specifically prohibited” by law. 5 U.S.C. §2302(b)(8)(A). The Government argued that MacLean’s disclosure was specifically prohibited by law in two ways. First, it argued that MacLean’s disclosure was specifically prohibited by the TSA’s regulations on the unauthorized disclosure of sensitive security information. Second, the Government argued that the disclosure was prohibited by 49 U.S.C. §114(r)(1), which authorized the TSA to promulgate those regulations.
The first issue before the Court was whether the TSA’s regulations constituted laws. Finding that Congress intentionally used only the word “law” to identify prohibited disclosures – as opposed to the phrase “law, rule, or regulation” – the Court found that Congress meant to exclude rules and regulations. Additionally, to interpret the word “law” so broadly would defeat the purpose of the whistleblower statute – i.e. an agency could insulate itself by simply promulgating a regulation that specifically prohibited whistleblowing. The Court noted that “Congress passed the whistleblower statute precisely because it did not trust agencies to regulate whistleblowers within their own ranks.” Thus, the Court held that the TSA’s regulations did not qualify as laws for purposes of the whistleblower statute.
The second issue before the Court was whether 49 U.S.C. §114(r)(1) itself prohibited the air marshal’s disclosure. Section 114(r)(1) provides that the TSA “shall prescribe regulations prohibiting the disclosure of information obtained or developed in carrying out security…[if the disclosure of such information would]…be detrimental to the security of transportation.” The Court summarily dismissed the Government’s argument that MacLean’s communication could be prohibited under this section because it specifically authorizes the promulgation of regulations, and prohibits nothing. In other words, Section 114(r)(1) only gives the TSA power to prohibit the disclosure of information. Standing alone, it does not create a prohibition against any disclosure.
The Government also raised a public policy argument. Providing whistleblower protection to individuals like MacLean might endanger public safety and could make the confidentiality of security information subject to the judgment of the TSA’s 60,000 employees. The Court identified these concerns as “legitimate” but held that only Congress or the President could properly address them.
Conclusion: Some may be tempted to view the MacLean case as a broad embrace by the Supreme Court of whistleblower claims. But we think it should be read more narrowly as a lesson in statutory construction, in which the Court carefully parsed what the statute did and did not say, considered the statute’s purpose, and rendered its judgment accordingly.
ADEA Claim Failed for Employee's Failure to Refute Employer's Legitimate and Non-Discriminatory Reasons for TerminationJanuary 13, 2015
76-year old Carlyn Johnson sued under the Age Discrimination in Employment Act after he was fired from his position with Securitas Security Services USA, Inc. The district court granted Securitas summary judgment, finding that Johnson failed to submit sufficient evidence to show that a genuine question as to age discrimination remained for trial. The Eighth Circuit affirmed.
Johnson worked for Securitas as a utility security officer, a position that permitted him to fill in for other security guards as needed, rather than working regular shifts or posts. Johnson had a reputation for being very dependable and never refusing a shift. One of Johnson’s managers, Hesse, even referred to him as “Superman.” Hesse, however, also expressed concerns to Johnson and other supervisors about Johnson’s ability to work long hours and multiple consecutive shifts. Hesse compared Johnson to Hesse’s retired father who worked beyond his capabilities and often told Johnson that he was “too old” and that it was “time to hang up his Superman cape and retire.”
Johnson was working a 4pm to 8am shift when the Securitas vehicle he was driving collided with a stationary semi-trailer. Securitas’ policy required that Johnson report the accident as soon as possible, but Johnson did not have access to a cell phone or radio at the job site. Johnson continued to patrol the site until about 7am, when he left it to return the damaged vehicle to the Securitas office. At the direction of Securitas manager, Charlie Bunch, Johnson returned the damaged vehicle and went home. Bunch later learned that Johnson’s shift actually ended at 8am and included information about Johnson’s early departure from the job site in his report. Bunch informed Sherri Parker, Securitas’ HR manager, of the accident and of Johnson’s early departure as well. The Securitas Security Officer Handbook listed an unauthorized departure as an offense that could result in immediate termination.
The following morning, Hesse called Johnson and again told him that it was “time to hang up his Superman cape and retire.” Johnson then received a call from Parker, who gathered information about the accident and Johnson’s age. She informed Johnson that his employment with Securitas had been terminated. Johnson made several complaints to the Securitas in-house hotline, claiming that his firing was the result of mistake and age discrimination. Ultimately, Johnson filed suit.
Where there is no direct evidence of discrimination, age discrimination claims are considered under the burden shifting analysis of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). A plaintiff who presents sufficient evidence of age discrimination 1) creates a presumption that the employer engaged in unlawful discrimination, and 2) shifts the burden to the employer to show a legitimate and non-discriminatory reason for its actions. If the employer shows a legitimate and non-discriminatory reason, the presumption is eliminated and the burden then shifts back to the employee to show that age was the “but-for” cause of termination. Gross v. FBL Financial Services, Inc., 557 U.S. 169 (2009).
Securitas articulated a legitimate and nondiscriminatory reason for terminating Johnson by showing that Johnson made an early and unauthorized departure from the job site and delayed reporting the accident. This shifted the burden to Johnson to show that Securitas’ articulated reasons were merely pretext for age discrimination. The only possible evidence of age discrimination in this case was Hesse’s age-related comments. However, there were three decision makers who determined that termination was proper – Hesse, Bunch, and Parker – and the Eighth Circuit declined to speculate that Hesse prevailed over the decisions made by Parker and Bunch.
Johnson also argued that, because Securitas had not fired any other employee for similar reasons, his situation merited an inference of disparate treatment. But the test for disparate treatment is rigorous. A plaintiff must show that he and the employees outside of the protected group were similarly situated in all relevant aspects – including having dealt with the same supervisor, being subject to the same standards, and having engaged in the same conduct. The Court declined to find that a material question for trial remained where Johnson presented no evidence to show that Securitas had not fired any other employee for the reasons it fired Johnson.
Johnson also failed to demonstrate a material issue for trial when he argued that Securitas’ articulated reasons were pretext because Securitas repeatedly changed the reasons it gave for Johnson’s termination. But a change in an employer’s reason for termination is probative of pretext only if the discrepancy is substantial. Securitas maintained that the primary reason for Johnson’s termination was his unauthorized early departure from the job site.
The Court thus concluded that after Johnson established a prima facie case of age discrimination, and Securitas articulated a legitimate and non-discriminatory reason for termination, Johnson’s evidence failed to show that his age was the but-for cause of his termination. Accordingly, the Eighth Circuit affirmed the district court’s decision to grant summary judgment.
“Ban-the-Box” laws are those that prohibit an employer from asking about a job applicant’s criminal convictions, on a job application. These laws have been enacted in 13 states, and almost 70 cities. Some apply to public employees only; others apply to both the public and private sectors
The theory behind these statutes is that they reduce unfair barriers to employment for those with criminal records, and that an employer’s unwillingness to hire anyone with a criminal record may tend to have a disparate impact on minority applicants.
Where ban-the box laws apply, it is expected that an employer will make a conditional job offer to an applicant, without having inquired about his or her criminal past. The inquiry can then be made later in the hiring process, and if a criminal conviction is disclosed, it will then be up to the employer to decide if the conviction disqualifies the candidate for the position.
Some easy examples: a convicted embezzler need not be hired as a bookkeeper; a convicted child abuser need not be hired at a day care center; but someone convicted of assault in a bar-room brawl should not be disqualified from a job as a warehouse worker. How long ago an applicant’s conviction occurred will also be a relevant factor for an employer to consider.
The Columbia ordinance, which was enacted on December 1st, is the first in the state of Missouri to apply to both public and private employers. (St. Louis and Kansas City ordinances apply to public employers only.) It makes Columbia one of only 11 counties or cities in the country that “ban -the-box” for private employers. Six states have similar laws.
Employer's Stated Concern over Health Costs for its Older Employees Can Serve as a Proxy for Age DiscriminationDecember 3, 2014
The Eighth Circuit recently addressed the question of whether an older employee’s termination, motivated by a desire to reduce the company’s health insurance costs, may constitute unlawful age discrimination. Answering in the affirmative, the Court of Appeals reversed a district court’s grant of summary judgment for an employer, Associated Underwriters, Inc., finding that its former employee, Marjorie Tramp, established genuine issues of material fact as to what her employer considered when making the decision to terminate her employment.
In 2008, facing economic difficulties, Associated Underwriters solicited bids from various health insurers in hopes it could reduce costs. Learning that employees over the age of 65 are usually not included in an insurance quote because they are Medicare eligible, and believing that a substantial saving in health insurance premiums would benefit the company’s bottom line, the company encouraged Tramp and another employee over the age of 65 to utilize Medicare instead of the company’s healthcare plan. The employees declined to do so.
Subsequently, the employer, eight years after Tramp had been hired, began documenting her alleged poor performance, uncooperative attitude, and insubordination. She was formally reprimanded and subsequently placed on a 90-day probationary period. In 2009, Associated Underwriters underwent a second round of layoffs, and terminated four employees, including Tramp. The company asserted that the reason for Tramp’s termination was not her age or refusal to utilize Medicare, but her historically poor job performance.
Tramp sued Associated Underwriters under the Age Discrimination in Employment Act and other statutes, claiming she was harassed, retaliated against, and terminated based on her age, race, disability and sex. Discovery revealed that Tramp’s employer had communicated with health insurance companies – specifically stating that its “oldest and sickest employees” were no longer with the company – and that it requested a rate decrease “from the group becoming younger and healthier.”
The district court granted summary judgment for the employer, finding that Tramp did not establish that age was the “but-for” cause of her termination, as required under the ADEA. Rather, it found that Associated Underwriters terminated Tramp to reduce health care costs, which the district court found to be analytically distinct from a decision to terminate based on age. The Eighth Circuit reversed and remanded the trial court’s grant of summary judgment on this issue.
The Court held that a question of material fact remained as to whether Associated Underwriters’ communications with health care providers provided necessary evidence for a fact-finder to deduce that there was a direct correlation between Tramp’s age and the employer’s decision to terminate. Certain considerations, including health care costs, could be a proxy for age discrimination if the employer supposes a connection between one and the other. Thus, Tramp raised a genuine issue as to what Associated Underwriters supposed about age in making its employment decision.
The important lesson to be drawn from this decision is that an employer decision which appears to be based on purely economic factors, may in appropriate circumstances be viewed as discriminatory, if it produces negative consequences for the company’s older workers.
Court of Appeals Affirms Denial of Sigma-Aldrich's Request for Injunctive Relief Against Former EmployeeNovember 20, 2014
The Court of Appeals for the Eastern District of Missouri affirmed a St. Louis County judge’s denial of Sigma-Aldrich Corporation’s (“Sigma”) request for injunctive relief against a former employee who had accepted a position at one of Sigma’s competitors, Alfa Aesar (“Alfa”). The request sought to enforce a non-compete provision between Sigma and the former employee.
As discussed in a previous blog post, the Missouri Supreme Court has twice discussed in detail the principles governing the enforceability of non-compete agreements, first in Healthcare Servs. Of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610 (Mo. banc 2006); then in Whelan Sec. Co. v. Kennebrew, 379 S.W.3d 835, 842 (Mo. banc. 2012). In Missouri, such agreements are enforceable if they are able to effectively strike a balance between the former employee’s freedom to compete, and the former employer’s right to utilize non-compete agreements to protect itself from unfair competition by misuse of its trade secrets or misuse of the employee’s customer contacts developed at the former employer’s expense. Accordingly, for a non-compete agreement to be enforceable, it must be narrowly tailored geographically and temporally, and must seek to protect legitimate employer interests beyond “mere competition” by a former employee. A non-compete agreement will not rise above protecting against “mere competition” if it does not protect the employer’s trade secrets or customer lists.
Here, Sigma conceded that the agreement did not specify a geographic territory, but argued that it should nonetheless be enforceable because it restricted the former employee from working for companies that sell products that complete with Sigma research products, and only in locations where Sigma “markets or sells” its products. Thus, Sigma argued that it struck a balance because the agreement only targeted companies that could exploit Sigma’s trade secrets, albeit on a global basis. The Appeals Court rejected Sigma’s argument, however, for although its failure to include a geographic limitation did not in and of itself render the agreement unenforceable, it nonetheless was so because it also failed to include a limitation on the class with whom contact was limited. Thus, the court held that because the agreement attempted to ban Sigma employees from working for any of its competitors globally in any capacity, it was an unlawful restraint on the former employee’s right to compete.
Sigma also argued that because the former employee possessed Sigma’s confidential information, his role at Alfa would involve more than “mere competition” with Sigma, because Alfa sells products that compete with products about which he had confidential information. The confidential information that Sigma stated it possessed related to, among other things, his work on the “user experience” on sigmaaldrich.com, and the implementation of “Science Place,” an online, “Amazon-like” marketplace for selling thousands of products. The court rejected Sigma’s argument that the information could not be considered trade secret, ruling that the implementation of Science Plan resulted in “publication” of the ideas, and the evidence showed that the former employee’s website knowledge came from his former employer and Sigma competitor, VWR.
Importantly, it does not appear that Sigma’s non-compete provision would be unenforceable in all instances. Rather, it would be necessary to reevaluate Sigma’s provision in light of the responsibilities of the specific employee against whom the provision would sought to be enforced. Such was evident from the extended analysis by the court of the former employee’s job responsibilities at Sigma compared with Alfa, as well as the nature of the Sigma information known by him. Thus, as is the case with any non-compete provision, Sigma’s provision would need to be evaluated on case-by-case basis.
The signs are to be conspicuously posted at each entrance, at eye level and not more than 12 inches to the right or left of entrance. If a patron violates a business owner ‘s gun policy, the new bill allows the business owner to deny access to its business or remove the person from the premises. However, within the bill there are no specific criminal charges for someone violating a business owner’s policy on open carry/concealed carry. Rather, if someone were to refuse to leave the premises the business owner can request that the person be charged with criminal trespass or other related misdemeanors.
This is a new gun bill for the State of Kansas. It generally broadens gun rights in the State (especially in Kansas City, KS), but it does codify a restriction of the open carry rights that some Kansas gun-rights supporters are unhappy about. Accordingly, a constitutional challenge to this restriction may be forthcoming.
There is some gray area as it relates to the signage requirement when dealing with employees. The Kansas AG’s office states that this has been a source of numerous questions, but did not have an official answer to the problem. The new law does not specifically address an employer’s right to restrict access of its employees from carrying a firearm during work. However, there is a provision within the Kansas Conceal and Carry Law that may be helpful. According to K.S.A 2014 Supp. 75-7c10(b), “Nothing in this act shall be construed to prevent: (1) Any public or private employer from restricting or prohibiting by personnel policies persons licensed under this act from carrying a concealed handgun while on the premises of the employer’s business or while engaged in the duties of the person’s employment by the employer, except that no employer may prohibit possession of a handgun in a private means of conveyance, even if parked on the employer’s premise.” This appears to be the best provision to rely on when enforcing a policy prohibiting employees’ firearms in the workplace.
As this is a new law, the interpretation of the law remains a gray area and is evolving.
On October 27, the U.S. Equal Employment Opportunity Commission filed a Petition for a Temporary Restraining Order and Preliminary Injunction against Honeywell International, seeking to prevent the company from implementing its employee wellness plan. A week later, U.S. District Court Judge Ann Montgomery denied the EEOC’s request. This is the third such suit challenging company wellness programs that has been filed by the EEOC in the past two months. The EEOC characterized the company’s wellness plan as providing for “penalties” if employees or their spouses declined to undergo biometric testing. The biometric test includes a blood draw that will evaluate employees’ and their spouses’ blood pressure, HDL and total cholesterol, glucose, and height, weight and waist circumference (BMI), and will also check for nicotine. The EEOC contends that the plan violates the Americans With Disabilities Act and Genetic Information Nondiscrimination Act by imposing penalties upon employees who do not elect to undergo biometric testing, and by imposing penalties to obtain medical information from the employees' spouses.
The EEOC’s main ADA concern with the program is that it does not consider participation in the plan to be voluntary. The ADA restricts against “medical examinations” unless the examination is used to determine whether the employee can perform the essential functions of the job or can do so without posing a direct threat due to a medical condition. The exception to this rule is for voluntary medical examinations that are part of an employee health program. In addition, certain other types of testing are exempt from the ADA under the safe harbor provision of the ADA. The safe harbor provision states that the ADA "shall not be construed" as prohibiting a covered entity "from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law." 42 U.S.C. § 12201(c)(2). In Seff v. Broward County, 691 F.3d 1221 (11th Cir. 2012), the Eleventh Circuit interpreted an employer’s wellness program which called for the imposition of a biweekly charge for refusing to undergo biometric screening to be a “term” of the employer’s plan, and thus to be within the safe harbor position. The EEOC addressed Seff in its pleadings, rejecting that holding as inconsistent with the purpose of the safe harbor provision.
In response, Honeywell rejected the EEOC’s characterization of the testing as involuntary, pointing out that Honeywell employees and their spouses independently decide whether to participate in the biometric screening. Honeywell further responded that its employees are not subject to any discipline or loss of coverage for choosing to participate in the screening, and that choosing to participate results in a company-provided Health Savings Account contribution ranging from $250 to $1,500. Responding to the EEOC’s assertion that Honeywell’s plan does not fall under the safe harbor provision, Honeywell pointed out that the program is a “term” of its health plan because only employees who are in the Honeywell group health plan are eligible to participate in the wellness program; and that as in Seff, the wellness plan’s biometric screening results are used to identify and assess health risks, and ultimately to reduce claims costs by reducing its employees’ health risks. Honeywell notes that grouping tobacco users under an adjusted premium accounts for the well-established increased health risks and costs associated with tobacco use.
The EEOC’s GINA claim stems from its characterization of the biometric testing that an employee’s spouse may undergo as “genetic information” within the meaning of GINA. The EEOC claims an employee’s genetic information includes all information relating to the manifestation of a disease or disorder in a family member, regardless of whether it is possible for the family member’s medical history (in this case the spouse) to have any predictive value with respect to an employee’s propensity to acquire any disease. Honeywell counters by referring the District Court to case law that opposes such reasoning. The company also noted that the biometric testing, which records blood pressure, HDL cholesterol level, total cholesterol, and nicotine level among other things, cannot be said to be a genetic test involving an analysis of “DNA, RNA, chromosomes, proteins or metabolites” or “detect genotypes, mutations, or chromosomal changes.” See 29 U.S.C. § 1191b(d)(7).
There are many company-sponsored wellness programs like Honeywell’s, which are designed to provide incentives to employees who voluntarily engage in awareness programs that include an assessment of their personal health and risk factors. Although it is disconcerting that the EEOC has chosen to challenge Honeywell’s program, Honeywell’s success on this stage (and perhaps going forward) may provide companies with much-needed guidance and a clearer path for designing and implementing their wellness programs in a manner that does not run afoul of the ADA or GINA.
Are FedEx Delivery Drivers Employees or Independent Contractors? The Kansas Supreme Court Applies the "20-Factor Test", and Rules They Are EmployeesNovember 6, 2014 | David Eisenberg
For years, courts have grappled, in a variety of contexts, with the question of whether a company’s workers are employees of the company, or independent contractors. While virtually all courts have agreed that the characterization of someone as an independent contractor in a written agreement is not determinative, and that the “economic reality” of the relationship and extent of an employer’s “right of control” are more important, various approaches have been taken on how to decide on the true nature of the relationship.
Several class action lawsuits were filed around the country on behalf of drivers working for FedEx Ground Package System, Inc. (FXG), alleging that the workers, who had signed agreements “acknowledging” they were independent contractors, were really employees, and that they accordingly had improper deductions taken from their earnings for costs and expenses, and were denied overtime pay.
The lawsuits were consolidated and transferred to a federal district court in Indiana, and the Kansas class action was designated as the lead case. The Kansas claimants asserted that under the Kansas Wage Payment Act (KWPA), improper deductions had been taken from their pay for expenses incurred on FXG’s behalf; and that they were also entitled to overtime pay. The Indiana district court ruled in FXG’s favor, holding that the workers were independent contractors, and hence not covered by the KWPA. The Seventh Circuit, however, stated that it was unsure what legal standard the Kansas Supreme Court would use to determine whether the workers were employees or contractors, and referred the case to the Kansas Supreme Court to decide what test applies and whether the drivers were employees under the KWPA.
After discussing various legal standards that had been applied in earlier Kansas appellate cases, and other court cases, the Kansas Supreme Court turned to an oldie-but-goodie, and decided that the IRS “20-factor test”, first applied by the IRS in a 1987 revenue ruling, provided the applicable framework for analysis in Kansas, and is now “the tool to be used in Kansas to determine whether an employer/employee relationship exists under the KWPA”.
Making slight modifications to previous articulations of the 20 factors, “to eliminate the ambiguous or duplicative descriptions”, the factors are as follows:
- the employer’s right to require compliance with instructions;
- the extent of any training provided by the employer;
- the degree of integration of the worker’s services into the business of the employer;
- the requirement that the services be provided personally by the worker;
- the extent to which the worker hires, supervises, and pays assistants;
- the existence of a continuing relationship between the worker and the employer;
- the employer’s establishment of set work hours;
- the requirement that the worker devote full-time to the employer's business;
- the degree to which the work is performed on the employer’s premises;
- the degree to which the employer sets the order and sequence of work;
- the requirement that the worker submit regular or written reports to the employer;
- the manner of payment to the worker, e.g., by the hour, day, or job;
- the extent to which the employer pays the worker’s business or travel expenses;
- the degree to which the employer furnishes tools, equipment, and material;
- the incurrence of significant investment by the worker;
- the ability of the worker to make a profit or suffer a loss;
- whether the worker can work for more than one firm at a time;
- whether the worker makes his or her services available to the general public on a regular and consistent basis;
- whether the employer has the right to discharge the worker; and
- whether the worker has the right to terminate the relationship at any time without incurring liability.
Applying each of these 20 factors one-by-one, and then considering the overall picture, the Kansas Supreme Court concluded that even though some factors pointed toward a finding that the drivers were independent businesspersons, “[v]iewing the factors as a whole leads to the conclusion that FedEx has established an employment relationship with its delivery drivers but dressed that relationship in independent contractor clothing”, especially in light of the company’s “control and micromanaging” of its drivers.
Conclusion: Whether workers who are treated by a company as independent contractors are in fact employees has become a fertile ground for litigation. Kansas employers who are contemplating the use of independent contractors should carefully consider whether those workers would in fact be entitled to that status under the 20-factor test, as explained by the Supreme Court in the Craig case.
Craig v. FedEx Ground Package System, Inc., case no. 108,526 (Oct. 3, 2014).
The Missouri Supreme Court Invalidates an Employment Contract Arbitration Clause for Lack of ConsiderationOctober 30, 2014 | Robert Chandler
On August 19, 2014, the Missouri Supreme Court sustained the trial court’s denial of an employer’s motion to compel arbitration in the case of Carla Baker v. Bristol Care, Inc. d/b/a Bristol Manor, et al., No. SC93451. The Court ruled: 1) that because the arbitration agreement did not specifically call for arbitration of agreement “formation” issues determination of these issues was not limited to arbitration, and, 2) because continued at-will employment and mutual promises to arbitrate were insufficient consideration to support formation of the arbitration agreement the Court properly denied the motion to compel arbitration.
Employers in Missouri seeking to arbitrate employment disputes should be aware that if all aspects of the dispute are to be submitted to arbitration, including whether an agreement to arbitrate has been legally formed, language to this effect needs to be included in the agreement with the employee. Additionally, “continued at-will employment” and “mutual promises to arbitrate” may not be sufficient consideration to support an arbitration agreement if issues of contract formation are determined by Missouri state courts.
Employee Baker was promoted by employer Bristol from an hourly position to a salaried managerial position. In conjunction with this promotion, the employer drafted and the parties executed both an Employment Agreement and an Arbitration Agreement. Importantly, the Employment Agreement could be terminated by the employee with 60 days’ notice or by the employer: 1) at the employer’s sole option with five days’ notice, 2) without notice if the employer paid the employee five days’ compensation, 3) without notice if, in the employer’s opinion, the employee violated certain conditions of the employment agreement, or 4) without notice for “dishonesty, insubordination, moral turpitude or incompetence.”
The Arbitration Agreement called for all legal claims between the employer and employee to be subject to binding arbitration. The Arbitration Agreement indicated that consideration for the Arbitration Agreement consisted of “continued employment” and “mutual promises to resolve claims through arbitration.”
Interestingly, the Arbitration Agreement also contained the following language:
“This Agreement is not, and shall not be construed to create, a contract of employment, express or implied, and does not alter Employee’s status as an at-will employee. Notwithstanding this Agreement, either Employee or Company can terminate the employment . . . at any time, for any reason, with or without cause at the option of the Employee or the Company.”
Lastly, but perhaps most importantly, the Arbitration Agreement contained language that the employer could “amend, modify or revoke” the Arbitration Agreement upon 30 days’ written notice to the employee.
Shortly thereafter, employee Baker was terminated from her position. She subsequently joined a class action for payment of unpaid overtime. Employer Bristol filed its motion to compel arbitration and the Circuit Court denied the motion resulting in the appeal.
Contract Formation Issues Which Are Not Stipulated for Arbitration In an Arbitration Agreement Are Not Preempted by Federal Law
As an initial matter, the Court ruled that the Circuit Court, rather than an arbitrator, properly decided issues of the “formation” of the Arbitration Agreement. Employer, relying upon Rent-A-Center v. Jackson, 130 S. Ct. 2772 (2010), argued that the Arbitration Agreement stipulated exclusive authority to decide issues of “applicability and enforceability” by an arbitrator. The Court distinguished the Arbitration Agreement from the agreement in Rent-A-Center, noting that the agreement in the U.S. Supreme Court case additionally included language granting the exclusive authority to resolve not only issues of interpretation, applicability and enforceability of the agreement, but also issues of formation of the agreement at issue in that matter. The Bristol Arbitration Agreement, significantly, did not contain this language.
The Court found that employee Baker’s argument that there was no consideration supporting the Arbitration Agreement raised issues of contract formation, rather than issues of applicability or enforceability, and “State courts are permitted to apply state law defenses to the formation of the particular contract at issue,” Brewer v. Missouri Title Loans, 364 S.W.3d 486, 492 (Mo. banc 2012); Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 510 (Mo. banc 2012), without running afoul of Federal preemption.
“Continued At-Will Employment” and “Mutual Promises to Arbitrate” Are Insufficient Consideration to Support an Arbitration Agreement
Noting that consideration “consists either of a promise (to do or refrain from doing something) or the transfer or giving up of something of value to the other party,” Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15, 25 (Mo. App. 2008), the Court observed that Missouri appellate courts, unlike various other state and federal courts, have ruled that continued at-will employment is insufficient consideration to support an agreement to arbitrate because the employer is not making any legally enforceable promise that it is not already legally obligated to perform. See, e.g., Whitworth v. McBride & Son Homes, Inc., 334 S.W.3d 730, 741 (Mo. App. 2011); Frye v. Speedway Chevrolet Cadillac, 321 S.W.3d 429, 438-439 (Mo. App. 2010); Morrow, 273 S.W.3d at 26.
Additionally, the Court ruled that the employment and arbitration agreements at issue in this matter did not convert employee Baker’s status from an employee at will, noting that the key factors for determining whether an employee remains “at-will” are whether the agreement at issue contains an indefinite duration and an employer option to terminate employment at any time without cause. The Court ruled that the clauses in the employment agreement allowing employer Bristol to terminate employee Baker for any reason with five days’ pay evidence these key indicators of an employment at-will relationship. In the event this wasn’t enough, the Court also noted the specific clause in the Arbitration Agreement noting that the relationship between Baker and Bristol remained “at-will.”
Additionally, the Court ruled that, because the bilateral agreement to arbitrate was “illusory” no agreement to arbitrate was formed. Citing Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15, 25 (Mo. App. 2008), the Court noted that a promise is “illusory” when one party retains the unilateral right to amend or change the agreement. Because Bristol retained the right to amend the agreement and this apparently included the right to amend the agreement retroactively, the mutual promise to arbitrate was deemed illusory and insufficient as consideration to support an agreement to arbitrate.
This ruling is notable in part because it may provide an avenue to distinguish federal law preempting state laws which invalidate arbitration agreements on public policy grounds. Employers wishing to rely upon arbitration agreements to settle disputes will need to carefully mirror the language in Rent-A-Center calling for the exclusive authority of arbitration to determine not only issues of interpretation, applicability and enforceability, but also issues of formation.
The Missouri Supreme Court Rules That Parties May Have a Duty as a "Joint Employer" With Its Contractors Pursuant to the Missouri Minimum Wage LawSeptember 19, 2014 | Robert Chandler
On August 19, 2014, the Missouri Supreme Court overturned a summary judgment in the case of Andro Tolentino v. Starwood Hotels & Resorts Worldwide, et al., No. SC93379, ruling that a hotel chain may be liable to a non-employee plaintiff as a “joint employer” pursuant to the Missouri Minimum Wage Law (MMWL), Missouri Revised Statutes § 290.500, et seq. 2007. This ruling is a potential pitfall to individuals and businesses engaging contractors that do not comply with State and Federal law.
Individuals and businesses in Missouri looking to insulate themselves from the potential burdens of employing labor forces by contracting with other parties for these services need to be aware of their role as a potential “joint employer” for purposes of the MMWL. As the Andro case points out, contractors that do not properly comply with the provisions of the MMWL could expose these individuals and businesses to liability to the contractor’s employees if the contractor does not comply with the MMWL, even when these individuals and businesses may exercise reasonable good faith efforts themselves to comply.
The Missouri Minimum Wage Law
Plaintiff Tolentino argued that, along with his employer, Giant Labor Services Inc. (GLS), Respondents Starwood Hotels & Resorts Worldwide, Inc., and Westin Hotel Management, LP (collectively “Hotels”) were his “joint employers” requiring compliance with the MMWL. Significantly, what constitutes a “joint employer” is not defined by the MMWL.
The MMWL requires “employers” in Missouri to pay “employees” a minimum wage, all as defined by the statute. “Employers” are defined broadly in the statute as “any person acting directly or indirectly in the interest of an employer in relation to an employee.” § 290.502(4), RSMo 2007. An “employee” is defined in relevant part as any individual employed by an employer. § 290.502(3), RSMo 2007.
The Hotels contracted GLS to provide one of its hotels with housekeepers. The Hotels paid GLS $5 for every room cleaned by a GLS housekeeper. GLS then paid each of the housekeepers $3.50 per room cleaned. The contract between Hotels and GLS called for GLS to comply with applicable law.
GLS was subsequently investigated by Federal law enforcement for a number of crimes. Respondent Hotels cooperated with the investigation and subsequently terminated its contract with GLS. Andro Tolentino was one of these housekeepers, working at Respondent’s hotel from February 2008 to the termination of GLS’s contract in April 2008.
During the last two-week period that he worked at the hotel, Tolentino earned $427 prior to deductions. This equaled an hourly rate of $7.76 per hour, an amount in excess of the minimum wage threshold. The decision does not discuss how the hourly rate was calculated. Tolentino’s net pay after deductions was taken by GLS for supposed “visa fees,” zeroing Tolentino’s pay and taking it below the minimum wage threshold. GLS and its principals were subsequently indicted on Federal charges, and GLS’s principals were convicted, in part upon the withholding of wages for “visa fees.” Tolentino was awarded restitution in this action of $3,150.00.
Tolentino subsequently alleged in a class-action against the Hotels filed in Jackson County, Missouri that both the Hotels and GLS were his statutory employers pursuant to the MMWL, and, as his statutory employers, had failed to comply with provisions of the MMWL by paying him based upon the number or rooms cleaned instead of on an hourly basis, and, additionally because the “visa fees” were deducted from his check.
The Hotels moved for and were granted summary judgment. The Hotels argued that the unforeseen criminal acts of GLS in illegally deducting the “visa fees” from Tolentino’s pay were contrary to the purpose of the MMWL, the common law of agency and strict liability. Tolentino argued that the Hotels were not being held responsible for GLS’s criminal acts, but were merely being held to their statutory duty to comply with the MMWL as “joint employers.”
The Supreme Court agreed with Tolentino, overturning the summary judgment and remanding the matter back to the trial court for further proceedings. The Supreme Court stated that the facts of the case indicated the Hotels and GLS either directly or indirectly acted in one another’s interest with respect to Tolentino. See § 290.502(4), RSMo 2007. Accordingly, disputed questions of fact existed for determination as to whether hotel Respondents were joint employers of Tolentino with GLS.
The Supreme Court identified five factors for determining whether a particular work relationship qualifies as an employer-employee relationship for purposes of compliance with the MMWL. These factors are outlined in Fields v. Advanced Health Care Mgmt. Servs., LLC, 340 S.W.3d 648, 654 (Mo. App. 2011). These factors include: 1) who has the power to hire and fire the worker, 2) who supervises and controls the worker’s work schedule and conditions of work, 3) who determines the rate and method of payment of the worker, 4) who maintains work records, and 5) whether the alleged employer’s premises and equipment were used for the plaintiff’s work. Id.
According to the ruling, there were facts in the case that a jury could find satisfied each of the first four factors of the Fields analysis (identified as the “formal factors” derived from the FLSA definition of “employ,” 29 U.S.C. § 203(g)), and, accordingly, summary judgment was not appropriate for this matter. The court pointed out that: 1) the Hotels interviewed housekeepers prior to allowing GLS to assign them to the hotel for work; 2) the Hotels provided quality oversight to work done by the housekeepers and required housekeepers to correct deficient work; 3) the rate and method of pay was determined by the Hotels; and, 4) the Hotels maintained time sheets and productivity records for the housekeepers. Accordingly, there were genuine disputes regarding the material facts necessary and relevant to the analysis of whether Hotels were “joint employers.”
The Court noted in its decision that the MMWL is a remedial statute, intended to level the playing field between employers and employees, and remedial statutes are to be interpreted broadly. The Court addressed the Hotels’ argument that one of the purposes of the MMWL is also to protect employers that exercise reasonable, good faith efforts to comply with the law, but noted that the central purpose of the MMWL is to ensure that “employers” pay a minimum wage and, as a possible “joint employer,” the Hotels may have to act where GLS failed to do so or even acted criminally. The Hotels’ duty to comply with the MMWL is not contingent upon the acts of its “joint employer,” in this case, GLS.
When contracting with parties for labor services, individuals and businesses need to be aware that they are potentially exposing themselves to liability pursuant to the MMWL as a potential “joint employer” should the contractor fail to pay its employees performing the services pursuant to prevailing minimum wage laws.
On July 14th, the EEOC, over the dissent of two of its five members, issued new Enforcement Guidance that expand an employer’s duty to provide “reasonable accommodation” to pregnant workers.
It has long been the law under the Pregnancy Disability Act (PDA) that an employer cannot fire or take other adverse employment action against a woman if pregnancy, childbirth, or a related medical condition is a “motivating factor” in that employment action. While the Americans with Disabilities Act (ADA) excludes pregnancy as a disability, it has likewise been established law under the ADA Amendments Act (ADAAA) that temporary ailments related to pregnancy (e.g. high blood pressure, deep-vein thrombosis, or gestational diabetes) may qualify as “disabilities” that an employer must reasonably accommodate.
But the new EEOC guidelines break new ground: they state that just as employers are required to offer “reasonable accommodations” to employees with disabilities, they are also required to offer such accommodation to a pregnant employee, even if she is experiencing a normal pregnancy with no associated complications or disabilities.
More specifically, the EEOC guidance states that if an employer offers light duty for work-related conditions, it is required to offer light duty to any pregnant employee who needs it. While a number of courts have disagreed with the position now espoused by the EEOC, the agency’s position is that injured employees and pregnant employees who may feel limited in their ability to perform all the functions of their job are “similarly situated”. During its coming term, the U.S. Supreme Court will be reviewing a ruling of the Fourth Circuit court of appeals, concerning employers’ duty to accommodate pregnant employees under the PDA. It remains to be seen if the Supreme Court will offer some degree of deference to the newly stated views of the EEOC.
Guidance on the Guidance: Until such time as the courts may choose to rein in the new Guidance from the EEOC, employers will be well advised to adhere to the EEOC’s new interpretation, and provide reasonable accommodation, including appropriate “light duty” opportunities, to pregnant employees, even in a normal pregnancy in which there are no associated disabilities.
The new EEOC Enforcement Guidance on Pregnancy Discrimination and Related Issues can be found at: http://www.eeoc.gov/laws/guidance/pregnancy_guidance.cfm
An Employee Who Refuses to Comply With the Employer's Legitimate Requests for Information and FMLA Leave Policies May Forfeit FMLA ProtectionAugust 12, 2014
Generally, the FMLA entitles eligible employees to take up to 12 work weeks of family or medical leave in a 12-month period, and strictly prohibits an employer from attempting to or actually interfering with, restraining, or denying an employee’s exercise of his or her FMLA rights. An employer may not retaliate or discriminate against an employee for exercising or attempting to exercise FMLA rights, or complaining about any unlawful practice under the FMLA.
Although the statute and case law provide strong protections for employees, the Tenth Circuit held that an employee must still comply with his or her employer’s legitimate requests and employment policies during FMLA leave. Dalpiaz v. Carbon County, et al. 2014 U.S. App. LEXIS 14165 (10th Cir. July 25, 2014).
Plaintiff was the Carbon County Benefits Administrator from 1995 until her termination, in 2009. Injuries resulting from an April 3, 2009 car accident required Plaintiff to be away from work entirely until July 13, 2009. Due to her extended absence, the county asked Plaintiff to submit a request for FMLA leave. About seven weeks after her injury, Plaintiff’s supervisor sent her an FMLA form and requested that she complete and return it as soon as possible. After three weeks passed and Plaintiff had not responded, Plaintiff’s supervisor sent her an email stating that her FMLA time would begin to run as of the date the form was mailed to her and made another request for the return of the completed form. Following Plaintiff’s continued failure to return the FMLA form, the county’s attorney sent Plaintiff a letter requiring that she return the form by July 10, 2009. Plaintiff returned the form at 4:22pm on July 10, 2009.
On July 13th, Plaintiff returned to work but only on a limited basis – two days a week and for two hours each day – in accordance with work restrictions prescribed by her spine specialist. She continued this work schedule until August 24, 2009, the date of her suspension.
Co-workers provided eight written reports to Plaintiff’s supervisor regarding the observance of Plaintiff engaging in physical activities inconsistent with her claimed injuries. Based on the reports, the supervisor requested Plaintiff to submit to an independent medical examination (IME) to confirm that she was, indeed, entitled to FMLA leave. The county attorney’s letter of July 15, 2009 instructed Plaintiff to make an appointment with one of three doctors listed, to inform the attorney of the date of the appointment, and to call with questions or concerns. A second letter, sent July 27, 2009, followed as Plaintiff had neither scheduled an IME nor contacted the county attorney. The second letter again instructed plaintiff to schedule an IME and informed Plaintiff that failure to provide information as to the date of the exam might subject her to formal disciplinary proceedings. Plaintiff then attempted to schedule an IME, but was unable to do so because she was told that she needed a referral. Plaintiff did not attempt to obtain a referral from her primary care physician or her spine specialist. Rather, she sent an email to the county attorney informing the attorney of her two attempts to schedule an exam and requesting a copy and effective date of the policy requiring employees taking FMLA leave to go to additional doctors. The county attorney did not respond to this email and Plaintiff never submitted to an IME.
Plaintiff was discharged on August 24, 2009, on several grounds: (1) failure to timely comply the employer’s request for FMLA forms; (2) failure to schedule an IME; (3) significant evidence of untruthfulness regarding the extent of her injuries and ability to work; (4) abuse of sick leave; and (5) personal use of a camera belonging to the county.
Plaintiff’s action in district court raised six causes of action relating to her termination, but the County was granted summary judgment in its favor on all of Plaintiff’s claims. On appeal, only Plaintiff’s fifth cause of action, alleging interference with her FMLA rights, was taken up.
To establish a claim of FMLA interference under § 2615(a)(1), an employee must show:
1) That he or she was entitled to FMLA leave,
2) That some adverse action by the employer interfered with the right to take FMLA leave, and
3) That the employer’s action was related to the exercise or attempted exercise of the FMLA rights.
Although Plaintiff argued that the County’s reasons for termination related to her taking FMLA leave, the Dalpiaz court rejected this argument. The County successfully established that Plaintiff would have been terminated regardless of her request for leave, and that the termination resulted from Plaintiff’s failure to comply with her supervisor’s direction to submit paperwork, not the fact that the paperwork included a request for FMLA leave. The County could have reached the same decision in a context entirely separate from FMLA.
The facts in Dalpiaz were rather egregious: Plaintiff was a Benefits Administrator for the County, and as such, should have known well that employees should cooperate with their employer in submitting leave requests, and that requests for FMLA leave may require substantiation. And there was substantial evidence from multiple employees that Plaintiff may have been misrepresenting her claimed injuries, which properly led to the employer’s request for an IME.
But the Dalpiaz case does stand for the more general proposition that an employee is required to comply with legitimate directions and requests of supervisors with respect to FMLA leave requests, and that the FMLA does not shelter an employee who is given every opportunity to comply and fails to do so.
NRLB General Counsel Authorizes Complaints against McDonald's Franchisees, also naming McDonald's USA as a Joint EmployerJuly 30, 2014 | David Eisenberg
On June 29th, the General Counsel’s office of the National Labor Relations Board announced that it had authorized the issuance of 43 separate complaints against McDonald’s franchisees, as a result of activities surrounding employee protests; and that the parent company, McDonald’s USA, LLC, would also be named in the complaints as a “joint employer”.
The announcement immediately drew the wrath of retail industry representatives. Angelo Amador, Vice President of Labor and Work Force Policy for the National Restaurant Association, said the General Counsel’s decision to issue complaints “overturns 30 years of established law regarding the franchise model in the United States, erodes the proven franchisor/franchisee relationship, and jeopardizes the success of 90 percent of America’s restaurants who are independent operators or franchisees."
David French, Senior Vice President of the National Retail Federation called the decision “outrageous”, and said “It is just further evidence that the NLRB has lost all credibility as a government agency established to protect workers and is now just a government agency that serves as an adjunct for organized labor, which has fought for this decision for a number of years as a means to more easily unionize entire companies and industries.”
Micah Wissinger, an attorney who filed some of these cases, stated that the McDonald’s parent company “is an employer, plain and simple”, and that “McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge.”
The implications of the General Counsel announcement will likely extend well beyond these individual complaints, and spill over into union organizational campaigns in which unions are likely to seek bargaining units covering multiple McDonald’s restaurants. Other franchisors may face similar challenges.
It can safely be assumed that McDonald’s will aggressively defend the current complaints at the NLRB, and subsequently in the federal court system. This is undoubtedly the first round in what is likely to be a lengthy battle.
In Hwang v. Kan. State Univ., 2014 U.S. App. LEXIS 9949 (10th Cir. Kan., May 29, 2014), the Tenth Circuit offered its view of what constitutes a reasonable accommodation in the context of a leave of absence. The Tenth Circuit’s previous decision in Robert v. Board of County Commissioners of Brown County, 691 F.3d 1211, 1218 (10th Cir. 2012), had held that while an employer need not provide an employee with an indefinite leave of absence as an accommodation under the ADA, leave can be a reasonable accommodation where the employee can provide the employer with an estimated return-to-work date and that date is in the “near future.” The court’s holding in Hwang sheds light on the length of leave that may constitute a reasonable accommodation.
In Hwang, the plaintiff, a highly respected professor, fell ill shortly before the university’s fall semester. Plaintiff requested and received a six month paid leave of absence. At the end of her six-month leave of absence, plaintiff was advised by her physician to seek additional time off. Plaintiff asked the school to extend her leave through the spring semester, but the university denied her request for additional leave citing the university’s policy prohibiting more than six months’ sick leave under any circumstances. Plaintiff brought suit pursuant to the § 504 of the Rehabilitation Act of 1973, claiming that the university’s failure to extend her sick leave, and the university’s inflexible six-month leave policy amounted to disability discrimination. While acknowledging the fundamental proposition that a disabled plaintiff can establish a claim for discrimination by showing that she can perform essential functions of the position with reasonable accommodation and that the employer failed to provide such an accommodation, the Court concluded that: (1) in nearly all cases, an employee who cannot return to work for a period as long as six months is not capable of performing the essential functions with a reasonable accommodation; (2) requiring an employer to keep a job open for such an extended period of time does not qualify as a reasonable accommodation; and (3) reasonable accommodations such as adding ramps or allowing more flexible working hours are “all about enabling employees to work, not to not work.”
The court’s holding in Hwang permits employers to develop inflexible leave policies with a limited duration, so long as the duration is of sufficient duration and makes room for the possibility of a longer leave period if such an accommodation is required by law. However, employers are advised to keep in mind that developing a strict leave policy compromises an employer’s ability to exercise discretion in circumstances in which an employee request leave beyond the time-period provided in the policy. Should an employer chose to disregard the policy and permit a longer leave than provided by the policy for one employee, the employer may open itself to a claim of discriminatory treatment by other employees who are not granted similar extensions.
Employers should also be aware that appellate court rulings on this subject vary among judicial circuits, and while Hwang is binding precedent within the Tenth Circuit (Kansas, Oklahoma, New Mexico, Colorado, Wyoming, and Utah); the law in other states may vary.
The Supreme Court majority is wasting little time in granting relief to organizations holding religious objections to aspects of the Affordable Care Act.
In light of the Hobby Lobby decision, Wheaton College, a religious, not-for-profit liberal arts college, (Hobby Lobby, by comparison was forprofit) obtained an injunction from the Supreme Court limiting the nature and extent of the notice Wheaton needed to give to the government in order to opt out of the employer-paid, mandatory contraceptive coverage specified by the Affordable Care Act. Wheaton College v. Burwell, (No. 13A1284).
According to the one and a half-page Order, Wheaton need only notify the Secretary of Health and Human Services (HHS) in writing that it holds itself out as religious and has religious objections to providing coverage for contraceptive services but need not do so on the Government-prescribed form (EBSA Form 700) and need not send copies to health insurance issuers or third-party administrators. The Court was quick to add that this was not a decision on the merits and was only in effect pending a final decision.
Reacting at length to the Court’s concise order, Justice Sotomayor, joined by Justices Ginsburg and Kagan, issued a 17-page dissent. The female justices accused the Majority of expanding the scope of the Hobby Lobby holding, one week after the Majority had described their decision as a limited one.
Further complicating the subject, there is another order, issued back on January 24, 2014, apparently without dissent, which is very similar to the Wheaton College order, but which, depending upon which group of justices is describing, is very different from or very similar in impact to the Hobby Lobby decision. (See, Little Sisters of the Poor v. Sebelius, 571 U.S. _____ (2014)
Under regulations promulgated by HHS before the Hobby Lobby decision, religious not-for-profit organizations could, if based on religious beliefs, avoid bearing the cost of some or all otherwise required contraceptive services in their insurance coverage by certifying their religious status on an EBSA Form 700 and notifying their insurance carriers of their objections.
So far, the only constants in these three decisions have been that each organization has had undisputed, genuine, religious objections to some or all contraceptive coverage and that none have been publicly traded, for-profit corporations.
One thing is undeniable about the 5-4 decision of the U.S. Supreme Court in the case of Burwell v. Hobby Lobby Stores, Inc.: it was handed down on Monday, June 30, 2014. There are one or two other areas of agreement in connection with the significance of the decision as described in the Majority, Concurring and Dissenting opinions, but the vast majority of the 89 pages of opinions is spent by the authors in trying to suggest that the decision is or is not a significant change in the law.
According to the Majority, the principal points of the decision are that:
1) Where sincere religious beliefs of the owners of a closely-held or family-owned, for-profit, corporation are
2) substantially burdened by a provision of the Affordable Care Act;
3) that provision may be struck down if there is a less-restrictive alternative,
4) even though there is a compelling government interest in the restriction in its current form.
According to the Dissent, authored by Justice Ginsberg, the decision has “startling breadth” and allows all commercial enterprises including corporations to opt out of any law other than tax laws that “. . . they judge incompatible with their sincerely held religious beliefs.” The Concurring Opinion of Justice Kennedy and the Majority Opinion of Justice Alito go to great lengths to ascribe a limited scope to the decision and to specifically deny the criticisms of Justice Ginsberg to the decision having any wider significance.
What the decision does not Affect
The decision does not apply to publicly held corporations at all;
The decision only applies to sincere religious beliefs of the owners of closely-held or family owned, for-profit corporations;
The decision assumed without discussion that the contraceptive methods specified by the Department of Health and Human Services furthered a legitimate and compelling governmental interest in the health of female employees;
The decision does not permit employers to specify what methods of contraception their employees may use;
The decision does not impose any greater expense or charge on employees of closely held or family owned, for-profit corporations.
The Affordable Care Act (ACA) requires employers of 50 or more full-time employees to offer group health insurance that provided certain “minimum essential coverage”. As interpreted by the Department of Health and Human Services, employers subject to the ACA were required to purchase insurance coverage which provided, among other things, all FDA-approved contraceptive methods free of charge to employees.
While many of these contraceptive methods would act to prevent fertilization of the egg, four of the twenty methods (two “morning after” pills and two Intrauterine Devices (IUD)) could in some instances have the effect of preventing an already fertilized egg from further developing. Hobby Lobby and an affiliated company which operates 35 Christian bookstores and Conestoga Wood Specialties are exclusively family-owned corporations. Two families own and operate the three businesses and each family strives to operate the businesses in accordance with the family’s devout religious beliefs which include that life begins at conception. Although the families had no objection to 16 of the 20 approved contraceptive procedures they objected to the other 4 as potentially terminating already-existing life.
Analysis of the Supreme Court’s Decision
The Religious Freedom and Restoration Act of 1993 (RFRA) prohibits the Government from imposing a substantial burden on a person’s exercise of religion unless the Government is able to show that the burden (a) is in furtherance of a compelling governmental interest; and (b) is the least restrictive means of furthering that governmental interest. 42 U.S.C. §§2000bb-1(a), (b).
The Majority found that the RFRA included in the term “person” a closely-held, for-profit, corporation in which the owner had sincere, religious beliefs. As a result the Court majority concluded that the family-run corporations did not have to pay for coverage for the 4 out of 20 contraceptive methods which could prevent the development of an already fertilized egg.
The Court found that for those specific, closely-held corporations there were less religiously restrictive means of providing these four contraceptive methods free of charge to the employees. The Majority noted that the Department of Health and Human Services had already implemented a system which exempted religious non-profit corporations from having to pay for their employees to have free access to contraceptive methods the organizations found to be objectionable on religious grounds.
The Majority thus concluded that contrary to the claims of the dissent, its ruling did not permit denial by the closely-held, for profit corporations of any method of free contraception to the employees—only that the family owners could not be compelled to pay for the methods of contraception they found to be religiously objectionable. The Majority took pains to reject any suggestion that its decision could be used to provide cover for racial or other kinds of discrimination in the name of religious beliefs.
On its face, the Opinion of the Majority in Burwell v. Hobby Lobby is narrowly drawn to limit its application in the immediate future.to very similar fact situations. As with almost any Supreme Court decision, this does not mean that others will not try to expand its scope over time.
Employers need well-drafted contractual agreements to compel arbitration with their employees for sexual harassment and discrimination claims. In Baier v. Darden Restaurants, et al., 420 S.W.3d 733 (Mo. App. W.D. 2014), a Missouri appellate court held that an arbitration agreement was not enforceable when an employee signed a document stating that all employment disputes would be arbitrated, but the employer did not sign.
The plaintiff received and acknowledged the arbitration materials.
When Defendant Darden Restaurants (doing business as Olive Garden) hired the plaintiff, it gave her a booklet detailing its alternative dispute resolution (ADR) procedure. The final step of the procedure was binding arbitration. The booklet stated that ADR was the sole means for employment-related disputes, and that those disputes would not be heard by a judge or jury.
The plaintiff signed an acknowledgement form when she received the booklet. The acknowledgement form stated that the employee was required to submit all eligible disputes to Darden’s ADR program, including harassment and discrimination claims. The form had a signature line for management, but the line was left blank.
The Court refuses to compel arbitration.
When the plaintiff left her employment with Darden, she filed suit for harassment and discrimination. Darden moved to dismiss, or in the alternative, stay the proceedings and compel arbitration. The trial court denied Darden’s motion, and the Court of Appeals affirmed.
The Court held that the ADR booklet and the signed acknowledgement form did not constitute a valid, enforceable arbitration agreement. An arbitration agreement is a bilateral contract because there are mutual promises to forego litigation. Bilateral contracts are not enforceable unless both parties assent (“mutual assent”). Darden argued that there was mutual assent: Darden assented by preparing and offering the arbitration materials; Plaintiff assented by signing the acknowledgement. The Court disagreed.
The Court found insufficient evidence to establish Darden’s intent to create a mutually binding contract. In fact, the Court found contrary evidence because no Darden employee signed the “management” signature line. The existence of the signature line implied that Darden intended for the management signature to be a condition on the contract.
Without mutual assent, there was no valid contract. The plaintiff was not compelled to arbitrate her harassment and discrimination claims, even though she signed a form that stated those claims fell under Darden’s ADR program.
What Baier v. Darden Restaurants means for employers.
Missouri employers who seek to arbitrate disputes with their employees need well-crafted contracts. Mere “acknowledgement forms” should not be the sole documentation for an arbitration agreement. The arbitration agreement should be a contract that describes with particularity the types of disputes that it covers. The employer should also ensure that the agreement is signed by both the employee and a person with the authority to bind the employer. The arbitration agreement should also be separate from the employee handbook, especially if the handbook is not a contract. See Johnson v. Vatterott Educational Center, Inc., 410 S.W.3d 735 (Mo. App. W.D. 2013.)
Workers' Compensation + Retaliation + Missouri Supreme Court adopts the "contributing factor" standardApril 22, 2014
On April 15th, the Missouri Supreme Court abandoned the “exclusive factor” test and replaced it with the “contributing factor” test in cases under Section 287.780 R.S.Mo., in which former employees claim they were fired due to the fact that they filed a workers’ compensation claim. In Templemire v. W&M Welding, Inc., No. SC93132, the plaintiff (a painter and general laborer) suffered a severe foot injury while on the job, was restricted to light-duty, and filed a workers’ compensation claim. He was subsequently fired during a heated exchange with his employer, who claimed plaintiff failed to wash a railing as instructed.
Plaintiff filed a retaliation claim under section 287.780 and submitted a verdict director that included the following element: “plaintiff’s filing of the workers’ compensation claim was a contributing factor in such discharge.” The circuit court relied on Hansome v. Northwestern Cooperage Co., 679 S.W.2d 273 (Mo. banc 1984)and Crabtree v. Bugby, 967 S.W.2d 66 (Mo. banc 1998) in rejecting this instruction. Hansome required an exclusive causal connection between plaintiff’s actions and defendant’s actions, and this holding was reaffirmed in Crabtree.
In Templemire, the Court found that the holdings in Hansome and Crabtree “are clearly erroneous and that stare decisis should not be applied to prevent their repudiation.” In its analysis, the Court looked to Fleshner v. Pepose Vision Institute, P.C., in which the public policy exception to the at-will employment doctrine was explained by the Missouri Supreme Court in detail, changing existing law on wrongful termination cases. In Fleshner, the Court found that the exclusive causation standard would discourage employees from reporting their employers’ violations of the law or for refusing to violate the law.
In Templemire, the Court stated that “the plain language of 287.780 prohibits an employer from discharging or in any way discriminating against an employee for exercising his or her workers’ compensation rights” and that “the imposition of an exclusive causation standard effectively deprives an employee’s right to remedy the evil of being discriminated against or discharged for exercising workers’ compensation rights.” In addition, the Court noted that the MHRA provides greater protection to employees than do the federal standards.
Employers need to take heed of this decision and be aware that the same relaxed standard of proof that applies to employee terminations in anti-discrimination cases now applies to cases alleging wrongful termination in violation of public policy.
Supreme Court holds that the whistleblower protections of the Sarbanes-Oxley Act apply to employees who work for contractors of public companiesMarch 5, 2014 | David Eisenberg
In Lawson v. FMR LLC, - U.S. - (case no. 12–3, decided March 4, 2014), the Supreme Court held that the “whistleblower” protections of the federal Sarbanes-Oxley Act extend not only to employees of public companies who are retaliated against for having exposed fraudulent activity by the company, but to employees of privately held contractors that render services to public companies, as well.
The plaintiffs in Lawson worked for private companies that provided investment advisory and management services to a major public mutual fund company. The two plaintiffs (who had filed separate cases) alleged that they had been terminated, respectively, for raising concerns about the mutual fund’s accounting methodologies; and for questioning the accuracy of a draft of an SEC registration statement that was being prepared by the public fund company.
At issue was the “whistleblower” provision of SOX, 18 U.S.C. § 1514A, entitled “Whistleblower Protection for Employees of Public Companies”. It provides that: “No [public] company . . . , or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of [whistleblowing or other protected activity].” Does this language protect only employees of public companies? Or does it protect employees of their contractors, too?
The First Circuit in Lawson had ruled that this applied only to employees of public companies, not those of contractors. The U.S. Department of Labor’s Administrative Review Board held the opposite view, having ruled in a case entitled Spinner v. David Landau & Assoc. LLC that a contractor’s employee who blew the whistle on financial fraud would also be protected by SOX’s anti-retaliation provisions.
In reaching its opinion, the Supreme Court majority concluded that SOX’s statutory text, its legislative history, and its statutory purpose favored a broader reading of the anti-retaliation provision. Justices Sotomayor, Alito, and Kennedy dissented.
Tenth Circuit Reinstates Chemical Worker's Disability and Family Medical Leave Act Retaliation ClaimsJanuary 23, 2014 | David Eisenberg
Plaintiff Steven Smothers was an 18-year employee of Solvay chemicals, who worked as a surface maintenance mechanic in Defendant Solvay Chemicals’ trona mine in Sweetwater County, Wyoming. Smothers suffered a neck injury in 1994, and developed degenerative disk disease in his spine. This caused him significant pain, loss of sleep, and periodic absences from work, caused by his condition, for which he was granted FMLA leave.
In 2008, with no prior incidents of workplace safety violations on his record, Plaintiff was found to have violated the company’s safety rules by failing to properly follow company “line break” remediation procedures, in connection with a hydrochloric acid leak. In the course of attempts to stop the leak, Plaintiff and a co-worker argued about the proper procedures to be followed.
Smothers was terminated for failing to comply with company safety policies. He sued in federal court, claiming retaliation for his having taken medical leave from work, in violation of the FMLA; discrimination on the basis of his medical disability, in violation of the Americans with Disabilities Act; and breach of implied contract, under state law. The federal district court granted summary judgment on all counts. The Tenth Circuit reversed, and reinstated Plaintiff’s FMLA and ADA claims.
Applying the Mc Donnell Douglas factors for analyzing employment-related claims based on circumstantial evidence, the court found sufficient evidence that Solvay’s articulated reason for Smothers’ termination was a pretext for discrimination, to avoid summary judgment on the federal law claims. In particular, the court cited evidence showing that other employees who were not disabled and had not taken FMLA leave were not terminated for similar safety violations; that Defendant did not adequately investigate the dispute between Plaintiff and his co-worker about the proper procedures to follow; and that Plaintiff’s superiors had previously given him a negative performance rating and denied him a promotion because of his FMLA-protected absences.
Smothers v. Solvay Chemicals, Inc., - F.3d – (no. 12-8013, decided January 21, 2014)
Available at: http://www.ca10.uscourts.gov/opinions/12/12-8013.pdf
The U.S. Supreme Court has granted certiorari in two cases challenging the so-called “contraceptive mandate” of the Affordable Care Act. That provision requires employers with group health insurance programs to cover health services that include contraceptive methods, sterilization procedures, and related counseling services.
The companies challenging the statute are two secular privately held for-profit corporations, Hobby Lobby and Conestoga Wood Specialties, whose owners object to the ACA’s contraceptive coverage mandate on religious grounds. More specifically, they argue that under the Religious Freedom Restoration Act of 1993, the business owners’ free exercise rights have been “substantially burdened” by the ACA provision. In Conestoga Wood Specialties v. Sebelius, 724 F.3d 377 (3d Cir. 2013), the Third Circuit held that the plaintiffs were unlikely to succeed on the merits of their claim that their RFRA rights had been violated, and denied injunctive relief. But in Sebelius v. Hobby Lobby Stores, Inc., 723 F.3d 1114 (10th Cir. 2013), the Tenth Circuit held that plaintiffs had successfully demonstrated a likelihood of success on their claims.
The two cases have been consolidated for argument, and are expected to resolve a circuit split, in which the Seventh, Tenth and D.C. Circuits have held that a corporation (under a “pass-through” theory) may assert the free exercise religious rights of its owners; and the Third and Sixth Circuits have held that business owners’ free exercise rights are not burdened because it is the corporation, not the owners, which is funding the insurance coverage.
Oral argument is expected to take place in March.
Two Recent Decisions Threaten to Erode Protections for Employers Against Negligent Hiring, Training and Retention ClaimsOctober 30, 2013 | John Watt
In McHaffie v. Bunch, 891 S.W.2d 822, 824 (Mo. banc 1995), the Missouri Supreme Court held that once an employer has admitted to respondeat superior liability for an employee driver’s negligence, it is improper to allow a plaintiff to proceed against the employer on any other theory of imputed liability, such as negligence in employee hiring, retention, or training. This has often allowed trucking companies and others who employ drivers to resist discovery on subjects such as company background checks on its drivers, training procedures, and driving tests: information plaintiffs’ attorneys sought in the hope of painting the company in an unfavorable light, even where industry standards and governmental regulations were met or exceeded. However, in dicta, the McHaffie Court alluded to the possibility that an employer or an entrustor may be liable for punitive damages that would not be assessed against the employee entrustee, based on facts which could arise from the hiring, training and/or supervision of said employee. 891 S.W.2d at 824. This “punitive damages” exception has been seized upon in two recent rulings, one from the Missouri Court of Appeals, Western District; the other from the U.S. District Court for the Eastern District of Missouri.
A. Court of Appeals of Missouri, Western District – Wilson v. Image Flooring
On March 19, 2013 the Missouri Court of Appeals, Western District found that under the exception cited in McHaffie, the plaintiff had proffered sufficient facts in support of his claim for punitive damages on theories of negligent hiring, training, supervision and entrustment, to permit the issue to go to the jury. Thus, the Court of Appeals reversed the trial court’s grant of partial summary judgment in Plaintiff’s favor. Wilson v. Image Flooring, 400 S.W.3d 386 (Mo. App. W.D. 2013).
B. U.S. District Court, Eastern District of Missouri – Harris v. Decker Truck Line
Soon thereafter, the U.S. District Court for the Eastern District of Missouri denied a Motion to Dismiss filed by defendant trucking company, holding that the Plaintiff’s pleadings for punitive damages based on negligent hiring, retention, training and supervision were legally sufficient to avoid dismissal at the pleading stage. Harris v. Decker Truck Line, Inc., 2013 WL 1769095 (E.D. Mo. Apr. 24, 2013).
C. Policy Considerations.
The reasoning in McHaffie limiting the use of such evidence is sound, and is based on good public policy. Litigation over driver negligence should be about the driving behavior, not about events that occurred long ago with respect to hiring or training, which had no real causal relationship to the accident. Allowing the plaintiff to get into these issues under the guise of a punitive damage claim in a civil case is somewhat akin to a prosecutor in a criminal case arguing that he wants to get into the accused’s prior crimes to show causation for the current charge.
Companies who employ drivers must now be very mindful of recent case law citing this exception, which threatens to swallow the fundamental rule of McHaffie. Counsel for plaintiffs are likely to argue that the entire file for each driver from application through the date of an accident will now be subject to scrutiny.
The Missouri Supreme Court has repeatedly interpreted the Missouri Human Rights Act in a manner that makes it easier for plaintiffs to pursue claims, and harder for employers to defend them, than under similar federal anti-discrimination statutes. (See our March 20, 2013 report titled Burden of Proof in Retaliation Cases.) Here, once again, the Missouri Supreme Court diverges both from federal precedent and prior Missouri precedent, making it more difficult for employers to dismiss untimely discrimination complaints that are filed under the MHRA
In Farrow v. St. Francis Medical Center, - S.W.3d – (no. SC92793, Mo. banc Aug. 27, 2013), the plaintiff, a hospital nurse, had filed a discrimination complaint with the Missouri Human Rights Commission on July 27, 2009, challenging her termination by the hospital 230 days earlier, on December 19, 2009. The Missouri Human Rights Act, Section 213.075, requires that anyone aggrieved by an unlawful discriminatory practice must “. . . file with the Commission a verified complaint in writing, within one hundred eighty days of the alleged act of discrimination. . .” (In contrast, federal law allows the filing of a charge of discrimination within 300 days of the discriminatory conduct.)
Farrow sued in state court, in an eight-count petition, the first four counts of which alleged MHRA violations for sexual harassment and retaliation. Defendants moved to dismiss the MHRA counts as untimely, under Section 213.075. The Circuit Court dismissed the MHRA counts; the Supreme Court reversed.
Plaintiff had argued that the Commission’s issuance of a right-to-sue letter meant it implicitly found it had jurisdiction over her claims, because MHRA regulations require the Commission to dismiss or close a complaint at any stage, if the Commission lacks jurisdiction. Remarkably – because it is hard to envision under what circumstances Plaintiff’s late-filed claim could have been found timely – the Supreme Court agreed with Plaintiff. The Supreme Court took defendant to task for failing to challenge the timeliness of the complaint at the MHRC, and ruled that if they intended to contest the timeliness of the complaint, Defendant’s options were to (1) persuade the MCHR to dismiss the complaint as untimely, or (2) if the Commission failed to dismiss the complaint and issued a right to sue letter, Defendant could proceed to court within 30 days thereafter, challenging the Commission’s action.
Practical implications: In Missouri, all discrimination charges are dual-filed with the MHRA and the EEOC. Some are processed by the EEOC; others by the MHRA. If an employer believes that an MHRA discrimination complaint has been untimely filed, and the case has been assigned to the MCHR, it is essential that the employer take a very pro-active approach with the agency, and insist that they rule upon the question of timeliness. If the MCHR fails to dismiss the case and issues a right to sue letter, the employer should be fully prepared to immediately run to state court and seek review of the agency’s action, under RSMo 213.075. (If an employer dawdles, and plaintiff “beats” defendant to the courthouse and files an MHRA lawsuit, it is unclear whether a court could act on the employer’s later-filed action.)
If a dual-filed charge has not been filed within 180 days of the adverse employment action, and is assigned to the EEOC for investigation, an employer should nevertheless address the untimeliness issue with the MCHR, and formally demand that it dismiss the complaint for lack of jurisdiction. If the MCHR fails to dismiss the charge as untimely, and issues a right to sue letter, the employer should immediately proceed to court under Section 213.075, no matter what the EEOC does with the charge.
Another possible approach that has been suggested is that an employer, upon receipt of an untimely charge under the Missouri 180-day time limit, file a writ of prohibition in the state circuit court in which the employee worked, requesting an order prohibiting the MCHR from issuing a right-to-sue letter. It remains to be seen, however, whether a court would be loath to grant such a writ, without permitting the MCHR an opportunity to first consider the timeliness issue.
Wrongful Termination in Missouri: "Whistleblower" Claims and the Public Policy Exception to Employment-at-WillSeptember 11, 2013 | Hal Meltzer
Missouri adheres to the rule prevailing in most jurisdictions that in the absence of a contract between an employer and employee for a definite term or a contrary statutory provision, an employee can be terminated at any time with or without cause or for any reason, provided the termination does not run afoul of a federal or state anti-discrimination statute. Amaan v. City of Eureka, 615 S.W.2d 414 (Mo. 1981). Under these circumstances, no action can be maintained for wrongful discharge. Id. at 415.
Missouri, however, recognizes exception to the at-will employment relationship based on public policy. The Supreme Court of Missouri addressed the breadth of such exception in three cases decided on the same day: Fleshner v. Pepose Vision Inst., P.C., 304 S.W.3d 81 (Mo. banc 2010), Margiotta v. Christian Hospital, 315 S.W.3d 342 (Mo. banc 2010), and Keveney v. Missouri Military Academy, 304 S.W.3d 98 (Mo. Banc 2010). In Fleshner, the court stated:
[T]his Court expressly adopts the following as the public- policy exception to the at-will employment doctrine: An at-will employee may not be terminated (1) for refusing to violate the law or any well-established and clear mandate of public policy . . . or (2) for reporting wrongdoing or violations of law to superiors or public authorities. If an employer terminates an employee for either reason, then the employee has a cause of action in tort for wrongful discharge based on the public-policy exception.
Fleshner, 304 S.W.3d at 96 (internal citations omitted). In regards to application of this rule, the court stated:
[P]ublic policy must be found in a constitutional provision, a statute, regulation promulgated pursuant to statute, or a rule created by a governmental body. But . . . a plaintiff need not rely on an employer’s direct violation of a statute or regulation. Instead, the public policy must be reflected by a constitutional provision, statute, regulation promulgated pursuant to statute, or a rule created by a governmental body.
Id. (internal citations omitted).
In Margiotta v. Christian Hospital, 315 S.W.3d 342 (Mo. banc 2010), however, the Supreme Court of Missouri discussed the limits of the public policy exception to whistleblowing. The court held that “not every statute or regulation gives rise to an at- will wrongful termination action,” and that a “vague or general statute, rule or regulation,” or one unrelated to plaintiff’s claim, cannot form the basis of a wrongful termination action. Id. at 348-50. The plaintiff based his allegations of wrongful termination on his report of unsafe patient practices based on one federal regulation that provided “[t]he patient has the right to receive care in a safe setting” and a second that required hospitals to develop procedures to remedy building safety hazards. Id. at 348. The court held that the first regulation was “too vague to support [plaintiff’s] wrongful discharge action” and the second was irrelevant to his claim. Id. at 347-348.
For the public policy exception to at-will employment termination based on whistleblowing to apply, the whistle must actually be blown. In Faust v. Ryder Commercial Leasing & Services, 954 S.W.2d 383 (Mo. App. 1997), an employee was terminated after he informed his supervisor that he had witnessed the supervisor stealing company property. The employee also threatened to tell corporate officials if it happened again. The court determined that the plaintiff’s conduct did not amount to whistle-blowing, but was merely a courtesy warning. “While such a courtesy warning may be viewed as compassionate and in some instances may have the intended effect of stopping future criminal activity, it does not expose wrongdoers and their past wrongdoing.” Id. at 391. Plaintiff needed to have had “blown the whistle” to proper authorities, such as the employer or a third party.
When a public policy concern exists under the rule handed down in Fleshner, a plaintiff alleging employment discrimination need only prove that the illegitimate purpose was a contributing factor in the employment decision, rather than the exclusive or “but for” cause of that decision. Fleshner, 304 S.W.3d at 94. See also Missouri Approved [Jury] Instruction (MAI) 31.24.
Finally, it should be noted that punitive damages are recoverable in wrongful discharge claims brought under the public policy exception at common law. See Kelly v. Bass Pro Outdoor World, LLC, 245 S.W.3d 841 (Mo. App. 2007).
Recent Suit by the EEOC Makes Clear that the Genetic Information Discrimination Act (GINA) Applies Whenever an Employer Asks For Employees' Family HistorySeptember 4, 2013
The EEOC recently filed a lawsuit against The Founders Pavilion, Inc., alleging that the company violated the Genetic Information Discrimination Act (GINA). In the suit, the EEOC charges that a New York nursing and rehabilitation center violated federal law when it asked for applicants’ family medical history as part of a post-offer, pre-employment medical exam. The Founders suit is the second ever GINA lawsuit filed by the EEOC.
Although the most publicized portions of GINA tend to deal with a more “modernized” definition of genetic information, such as information about an individual’s genetic tests or the genetic tests of a family member, the Founders lawsuit makes clear precisely how all-encompassing GINA’s definition of genetic information can be. For instance, the knowledge that an individual’s family member suffers from breast cancer can give rise to an inference that the individual would be predisposed to acquiring the condition in the future.
However, the definition of genetic information is not so all-encompassing that an inadvertent disclosure of genetic information would give rise to a violation. Indeed, the EEOC addresses the “water cooler problem” whereby a manager or supervisor learns of genetic information by overhearing a discussion between co-workers about their health or the health of their family members. Had Founders acquired this information in such a manner it would not have constituted a violation.
The take-home lesson of the Founders suit as it applies to GINA is that employers should be aware of how extensive the definition of genetic information is. A discussion or employer request for information that does not delve into technical information about an employee’s or applicant’s genetic history, or his specific medical data, can still give rise to a violation.
Tenth Circuit Applies U.S.Supreme Court Dukes and Comcast Decisions, and Decertifies Class Actions Based on Lack of CommonalityAugust 13, 2013 | David Eisenberg
XTO Energy is an oil and gas company that produces natural gas and its constituent products from wells. In Wallace B. Roderick Trust v. XTO Energy, Inc., - F.3d - , 2013 U.S. App. LEXIS 13842 (10th Cir. July 9, 2013), the U.S. District Court for the District of Kansas had certified a class comprised of “[a]ll royalty owners of [XTO] . . . from wells located in Kansas that have produced gas and/or gas constituents (such as residue gas or methane, natural gas liquids, helium, nitrogen or condensate) from January 1, 1999 to present.” The lawsuit made claims for breach of contract, unjust enrichment, and an accounting, all of which turned on the central allegation that XTO systematically underpaid royalties by improperly deducting costs associated with placing gas (and its constituent products) in marketable condition. In Chieftain Royalty Co. v. XTO Energy, Inc., - F.3d - , 2013 U.S. App. LEXIS 13837 (10th Cir. July 9, 2013) (unpublished), a federal district court in Oklahoma had similarly certified a class of royalty owners who were allegedly underpaid royalties, for the same reason.
In both cases, decided the same day, the Tenth Circuit decertified the class actions, based mainly on the lack of commonality. Both lower courts had found commonality, based on XTO having employed a uniform methodology for the payment of royalties to the plaintiffs. But the Tenth Circuit stated, citing Dukes, that:
“the mere raising of a common question does not automatically satisfy Rule 23(a)’s commonality requirement. Instead, the common contention must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”
The Tenth Circuit found error in the district courts’ commonality analysis, finding that while the trial courts had accepted plaintiffs’ contention that all leases contained an “implied duty of marketability”, there appeared to be variations among different class members’ leases, and the courts did not require plaintiffs to affirmatively demonstrate that this duty was in fact common to all class member leases. In Roderick, the Tenth Circuit held the Kansas district court may have impermissibly “altered the burden of proof” by assuming that the implied duty of marketability was in all leases, because XTO had failed to point to any lease provision unambiguously negating the existence of any implied duty of marketability. The burden is on plaintiffs to show commonality; it is not upon defendant to show the lack thereof. In the Chieftain Royalty, the Tenth Circuit cited Comcast for the proposition that “. . . the district court must address the lease language issue as it relates to Rule 23 before certifying the class.”
The lesson in these cases for class action defendants, both in pending and in newly filed cases, is clear. The rules of the game for class certification have changed. In newly filed cases, plaintiffs face a high burden of proof, per the U.S. Supreme Court holdings in Dukes and Comcast, that “commonality” and the other elements required by Rule 23 have been met. District Courts must engage in “rigorous analysis” to make this determination, and plaintiffs must be put to their proof. Absent such proof from plaintiffs, a class should not be certified in the first instance. In cases where a class has already been certified, defendants should consider whether a motion for decertification is appropriate.
U.S. Supreme Court rules on burden of proof in Title VII retaliation cases, and "supervisory" status for purpose of determining potential employer vicarious liabilityJune 25, 2013 | David Eisenberg
The U.S. Supreme Court has just handed down two important and much-anticipated employment law rulings. In University of Texas Southwestern Medical Center v. Nassar, - U.S. – (no. 12-484, decided June 24, 2013), the Court ruled on a plaintiff’s burden of proof on retaliation claims, holding (5-4) that Title VII retaliation claims - like federal age discrimination claims, see Gross v. FBL Financial Services, Inc., 557 U. S. 167 (2009) - require proof of “but for” causation. Under this standard, an action “is not regarded as a cause of an event if the particular event would have occurred without it”. (Slip op. at 6.) Plaintiff had argued, and some courts had held, that an employer would be liable for retaliation if plaintiff’s complaint about discriminatory treatment had been a “contributory factor” in his termination.
In Vance v. Ball State Univ., - U.S. – (no. 11-556, decided June 24, 2013), the Court answered the long-simmering question of who, exactly, is a “supervisor” for purposes of determining vicarious employer liability under Title VII, holding (5-4) that a company employee is a “supervisor” for purposes of vicarious liability under Title VII only if he or she is empowered by the employer to take tangible employment actions against the victim. Under the “Faragher/Ellerth” doctrineTitle VII, an employer generally is liable for workplace by a victim’s co-worker only if the employer was negligent in controlling working conditions. But if the harasser is a “supervisor,” and the supervisor’s harassment culminates in a tangible employment action (e.g., firing, failing to hire, failure to promote, reassignment to less favorable position, loss of benefits), the rules change, and the employer is strictly liable. Where no tangible adverse employment action is taken, the employer may escape liability by establishing, as an affirmative defense, that(1) the employer exercised reasonable care to prevent and correct any harassing behavior and (2) that the plaintiff unreasonably failed to take advantage of the preventive or corrective opportunities that the employer provided.
Both Nassar and Vance are extremely helpful to employers who are defending Title VII claims, in that they impose reasonable restrictions on (respectively) the burden of proof in retaliation cases, and how broadly the term “supervisor” is interpreted for purposes of imposing strict liability on an employer. Both decisions were long-awaited, not unexpected, and good for employers.
However, practitioners in Missouri need to be aware that this good news may be of limited application to cases brought in the Missouri courts under the Missouri Human Rights Act. The Missouri Supreme Court has repeatedly held that the protections afforded employees under the MHRA are more extensive than those afforded under federal-law counterparts, such as Title VII and the ADEA. Most problematic for employers is the Missouri Supreme Court decision in Hill v. Ford Motor Co., 277 S.W.3d 659, 664-65 (2009), where the Court specifically held that in retaliation cases, the relevant inquiry is whether an employee’s complaint about discrimination was a “contributing factor” to an adverse employment action. The Court explicitly rejected the argument that a federal-law standard of proof should be applied to a claim brought under the MHRA. So, it is unlikely that the Nassar decision would change the Missouri Supreme Court’s view of the burden of proof in MHRA retaliation cases.Whether the Vance ruling on who is a “supervisor” can get better traction in cases brought under Missouri law is a more complex question. Though the U.S. Supreme Court majority opinion in Vance makes some compelling arguments as to why the term supervisor should not be interpreted in an overly broad manner, the language of Title VII differs from that in the MHRA, and in Hill, the Missouri Supreme Court ruled that under the language of the MHRA, the term “Employer” includes “… any person employing six or more persons within the state, and any person directly acting in the interest of an employer …”, which means that an employee of the company who is “acting directly in the interest of” the company may be individually liable for acts of discrimination in the workplace, even if he was not specifically named as a respondent in the charge of discrimination. 277 S.W.3d at 669-70. While Hill makes it clear that in some circumstances, a supervisor may face individual liability under the MHRA, it does not delve into the issue of what level of authority a putative supervisor or manager must have, in order for a company to be held liable for his actions, which is the specific issue in the U.S. Supreme Court Vance case. This may prove fertile ground for debate in future cases, and employers seeking to avoid potential liability for acts of nominal “supervisors” should be prepared to argue in favor of the standard articulated by the Court in Vance (i.e., empowered by the employer to take tangible employment actions against the victim), while keeping in mind the differences between federal and state statutory language.
Supreme Court Narrows "Supervisor" Standard - and Employer's Liability - for Title VII Work Place Harassment ClaimsJune 24, 2013 | Paul Venker
VANCE V. BALL STATE UNIVERSITY, — S.CT. —, 2013 WL 3155228 (U.S., JUNE 24, 2013)
In this 5-4 decision, the United States Supreme Court resolved a split among the circuits as to when an employee qualifies as a “supervisor” such that their conduct can impose liability on the employer. In so doing, the Court relied on its seminal decisions – Ellerth and Faragher – in determining that it must be a person whom the employer has authorized to take “tangible employment actions” with respect to the alleged victim. The Court also criticized and rejected the EEOC’s broader position on this issue.
Ms. Vance was an African-American catering department worker at Ball State University (“BSU”). She alleged that Caucasian fellow employee, Saundra Davis, harassed her to the point of creating a hostile environment. Vance had complained that Davis, among other things, “gave her a hard time at work by glaring at her, slamming pots and pans around her, and intimidating her.” Vance, at *3, citing 646 F.3d 461, 467 (7th Cir. 2011). Despite BSU’s attempt to deal with the situation, Vance’s workplace problems continued. In her district court complaint, Vance alleged Davis was her supervisor and that BSU was liable for Davis’ creation of a racially hostile environment. Id. at *4.
The district court granted BSU’s summary judgment Motion on the grounds that BSU could not be held liable for Davis’s conduct because she was not, as a matter of law, Vance’s supervisor under Seventh Circuit precedent. That is, she could not hire, fire, demote, promote, transfer, or discipline Vance. Id. The court also determined that BSU had responded reasonably and so could not be held liable in negligence. Vance appealed to the Seventh Circuit Court of Appeals, which affirmed on the two key points: a) Davis was not Vance’s supervisor; and, b) BSU had reasonably responded. Id. Vance filed a Petition for Writ of Certiorari, which the United States Supreme Court granted, later stating that it did so to resolve the obvious disagreement in the circuit courts between two views about “the meaning of the concept of a supervisor in this context [hostile environment claims under Title VII]”. Id. at *7.
The Court, referring to the framework it set out in Ellerth and Faragher, stated that an employer may be vicariously liable only when the employer has empowered that employee to take tangible employment actions against the victim, i.e., to effect a “significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.” Id. The Court took ownership and control of the term “supervisor” in this context, pointing out that it is not a statutory term and that it adopted it in Ellerth and Faragher. Id. at *9. The Court also expressly rejected the “nebulous definition of a supervisor” used in the EEOC’s Enforcement Guidance and substantially adopted by several courts of appeals. Id. at *7. The Court made clear it was relying on both its Ellerth and Faragher decisions, as well as other sources, to label the approach of Vance and of the EEOC’s Guidance as “a study in ambiguity,” [Id. at *12] “which would make the determination of supervisor status depend on a highly case-specific evaluation of numerous factors.” Id.
Judge Clarence Thomas wrote a very brief concurring opinion, reaffirming his view that Ellerth and Faragher were incorrectly decided. Judge Ruth Bader Ginsburg wrote a lengthy dissenting opinion, expressing her view that the Court was clearly heading the wrong way on the main issue under scrutiny. It is noteworthy that both the Seventh and Eighth Circuit Courts of Appeals were among the circuits which the United States Supreme Court included in the 14 jurisdictions following the chosen approach. [Parkins v. Civil Constructors of Ill., Inc., 163 F.3d 1027, 1032 (7th Cir. 1998); Weyers v. Lear Operations Corporation, 359 F. 3d 1049, 1057 (8th Cir. 2004)]. The Court also expressed its expectation that under the clarified standard, a contested issue of supervisor status could very often be resolved as a matter of law before trial. Vance, at *13. By contrast, it also stated that the “alternative approach” would have made cases far more complicated and difficult, and would impede the resolution of this issue before trial. Id. at *14.
Clearly, this opinion is significant because it resolves a core issue in Title VII harassment cases – how to determine whether an employee is a “supervisor” for purposes of vicarious liability for the employer. More importantly for employers is that the Court endorsed the tighter and more logical of the two main approaches. The Court certainly seems to have correctly assessed that its clarification should lead to many more cases being resolved at the dispositive motion phase. That is a much better alternative, as opposed to being forced to defend a jury trial with the standard proposed by petitioner Vance and the EEOC, which the Court described as a “remarkabl[y]” ambiguous concept. Id. at *12.
New Supreme Court Ruling on "Chevron deference" may impact future labor and employment law developmentsMay 30, 2013 | David Eisenberg
The recent U.S. Supreme Court decision in City of Arlington v. FCC, - U.S. - , No. 11-1545 (U.S. May 20, 2013) involved the validity of a Federal Communications Commission ruling on the regulation of wireless towers and antennas – more specifically, whether the agency’s interpretation of what constituted a “reasonable period of time” under the Telecommunications Act for state and local authorities to act on siting applications was permissible and enforceable.
In a 6-3 ruling, the Court upheld the agency’s interpretation of the statute, with the majority applying the holding of Chevron, U.S.A., Inc. v. Natural Resources Defense Counsel Inc., 467 U.S. 837 (1984), that if an agency’s interpretation of its authorizing statute is a “permissible” one, it is entitled to deference from the courts. (For those who think it’s always easy to guess how the Supreme Court’s majority and dissenting votes lined up: Justice Scalia wrote for the Court, joined by Thomas, Ginsburg, Sotomayor, and Kagan; Breyer concurred; Chief Justice Roberts wrote the dissenting opinion, joined by Kennedy and Alito.) The Arlington majority declined to adopt the dissenting justices’ view that Chevron deference should not be afforded to those agency interpretations that involve the scope of that agency’s own jurisdiction.
The majority observed that Chevron involves a two-step process: A court must first determine if the statute is ambiguous on the issue in dispute, and if it is not, then Congress has clearly spoken on the subject, and “that is the end of the matter.” But if the statute is silent or ambiguous, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” (Slip op. at 4-5)
As to the dissenters’ concern that an agency might always have a tendency to over-reach as to the extent of its own authority, the majority held that “Where Congress has established a clear line, the agency cannot go beyond it….[W]here Congress has established an ambiguous line, the agency can go no further than the ambiguity will fairly allow”.
Why should labor and employment practitioners care about this decision interpreting telecommunications law? Simply, because the Arlington holding is not limited to FCC interpretation of its authority, and should, on its face, apply with equal force to the interpretations of agencies applying federal labor and employment laws.
Your author was once asked by a non-labor practitioner how the NLRB views the doctrine of stare decisis (i.e., the need to apply past precedent when the same issue arises again in litigation). My response was, and is: “Not only does the NLRB not believe in the stare decisis doctrine;they apply the ‘new sheriff in town’ doctrine. Every time an administration changes from Democratic to Republican or vice versa (dating back at least to the Eisenhower administration), a new set of Board members comes in, throws out most of the major precedents of the predecessor Board, and changes the law dramatically. In Democratic administrations, the pendulum swings in the pro-employee direction; in Republican administrations, in the pro-employer direction.”
To a somewhat lesser extent, the same has held true for EEOC and U.S. Department of Labor interpretations.
U.S. Courts of Appeal in the past have not hesitated to overturn federal labor/employment agency decisions that they felt did not adequately comport with the authorizing statute and existing case law. This has had some moderating effect on agency interpretations that have been prone to shift too readily with the political winds. The “permissible construction” standard, however, presents a rather low hurdle for an agency to clear. And the Arlington decision may make it easier for an agency to have its interpretation of its statute withstand a court challenge, even if it departs from past precedent, so long as the agency’s view raises one plausible reading of that statute, which “goes no further” than any ambiguity in the statutory language may allow.
Decision available here.
Eighth Circuit Disallows New Evidence from FLSA Plaintiffs, First Proffered in their Summary Judgment Opposition Papers, and Grants Summary JudgmentMay 10, 2013 | David Eisenberg
In Carmody v. Kansas City Board of Police Commissioners, - F.3d -, 2013 U.S. App. LEXIS 8128 (8th Cir. Apr. 23, 2013), Plaintiff police officers had filed a complaint under the Fair Labor Standards Act, alleging that the Kansas City Police Department’s “flextime” pay system for its officers was improperly administered, resulting in under-payment of statutorily required overtime compensation by the Department.
The city had issued interrogatories to plaintiffs about the particulars of their claims, and, in response, plaintiffs confirmed the flextime practice that was the subject of their complaint, and described occurrences when it was used; but did not suggest the number of uncompensated hours or the amount of money owed. Plaintiffs stated that they would need access to department documents, such as daily activity sheets and other records, in order to formulate more accurate responses.
The city furnished nearly 13,000 activity sheets, after action reports and other documents to plaintiffs by January 27, 2012, and another 165 documents by February 16th. The city deposed the officers between February 21 and March 2, 2012, and discovery closed on March 2nd. Plaintiffs did not update their Rule 26 disclosures, or their discovery responses.
On March 30, 2012, the city moved for summary judgment, asserting among other things that the officers could not, as a matter of law, satisfy their evidentiary burden. The officers attempted to defeat summary judgment by attaching affidavits to their response. These affidavits contained precise estimations, week by week, of hours owed. The city moved to strike the affidavits, and the federal district court struck the officers’ affidavits and granted the city’s motion for summary judgment, deciding the officers unjustifiably failed to comply with their discovery obligations and that, without the affidavits, the officers failed to satisfy their burden of production by showing “the amount and extent of their alleged overtime work.”
The Eighth Circuit affirmed, emphasizing that the Federal Rule of Civil Procedure 26(a)(1)(A)(iii) requires parties to make initial disclosures, including a computation of damages, which under Rule 26(e)(1)(A) must be supplemented when new information comes to light. The district court has discretion under Rule 37(c)(1) to apply sanctions against a party who has failed to satisfy initial or supplemental disclosure requirements; for example, excluding the evidence or testimony entirely.
Thus, the Court concluded that the district court had not abused its discretion by barring plaintiffs’ affidavits on the grounds they had “unjustifiably failed to comply with Rule 26(e)(1)(A),” and that without any admissible evidence from plaintiffs showing “the amount and extent of their alleged overtime work,” summary judgment was properly granted.
The Carmody decision should serve as a reminder to employers of an important part of their summary judgment “toolkit.” If the plaintiffs have been vague about the exact nature of their claims and how they have been damaged, and they attempt for the first time to present new information in their papers opposing summary judgment, the defendant should be ready to pounce. Information that should have been but was not made part of plaintiffs’ Rule 26 disclosures, or supplements thereto, may be excludable in a motion to strike, and this may make the difference between defendant winning or losing its summary judgment motion.
Kansas Supreme Court Clarifies Standard for Determining if an Injury Arose "Out of and in the Course of Employment", for Purposes of Workers Compensation BenefitApril 17, 2013 | David Eisenberg
In Douglas v. Ad Astra Info. Sys., 293 P.3d 723 (Kan. 2013), Danny Douglas was awarded benefits under the Workers Compensation Act for an injury he sustained while operating a go-cart at an event sponsored by his employer, Ad Astra Information Systems, L.L.C. The Workers Compensation Board granted benefits to Douglas, and his employer and its insurer appealed, arguing that Douglas’s injury was sustained during a recreational or social event that he was not required to attend, and that he was therefore not entitled to benefits.
The Court of Appeals upheld the award of benefits, citing to factors set forth in a well-known treatise (Larson’s Workers’ Compensation Law), for determining whether the injury arose out of and in the course of employment. The Kansas Supreme Court reversed and directed the Board to review the facts and reconsider its decision based upon the factors that really count: those contained in the statute. The Supreme Court ruled that the language of the statute setting forth criteria for making this type of determination was plain and unambiguous, and that the court below erred in applying the factors set forth in Larson. “A legal treatise may be utilized to explain and interpret Kansas law, but it cannot serve to supplant or alter the actual text of a statute.”
The Court ruled that K.S.A. 2006 Supp. 44-508(f) sets forth the circumstances in which an employee injury sustained during a recreational or social event will be held not to “arise out of and in the course of employment”. An employee's injuries will be excluded from coverage under the Workers Compensation Act where either (1) the employee was under no duty to attend the recreational or social event, or (2) the injury resulted neither from the performance of tasks related to the employee's normal job duties nor from performing tasks that he was specifically instructed to perform by his employer.
In Owen v. Bristol Care, Inc., 702 F.3d 1050 (8th Cir. 2013), the Eighth Circuit recently held that an arbitration agreement which included a class action waiver provision was enforceable under the Fair Labor Standards Act. A Mandatory Arbitration Agreement (“MAA”) between plaintiff Owen and Bristol Care provided that the parties agreed
"to the resolution by binding arbitration of all claims or controversies for which a federal or state court or other dispute resolving body otherwise would be authorized to grant relief whether arising out of, relating to or associated with ... any ... legal theory that Employee may have against the Company or that the Company may have against the Employee."
The MAA further provided that it applied to "claims for wages or other compensation," as well as "claims for violation of any federal ... statute ... including but not limited to ...the Fair Labor Standards Act .... " The agreement also contained a waiver prohibiting the parties "from arbitrating claims subject to [the] Agreement as, or on behalf of, a class" (the "class waiver"). The MAA, however, expressly did not waive “… the right to file a complaint with the U.S. Equal Employment Opportunity Commission ... or any other federal, state or local agency designated to investigate complaints of harassment, discrimination, other statutory violations, or similar claims." 702 F.3d at 1051.
In reaching its decision, the Eighth Circuit rejected the National Labor Relations Board’s holding in D.R. Horton, 357 N.L.R.B. No. 184, 192 LRRM 1137 (Jan. 3, 2012), which had held that a class waiver of this type was unenforceable in an FLSA case because it conflicted with employee rights protected by Section 7 of the NLRA. The Eighth Circuit concluded that the Board’s D.R. Horton ruling was directly contrary to a long line of U.S. Supreme Court cases favoring the enforcement of arbitration agreements, and the provisions of the Federal Arbitration Act. 702 F.3d at 1054-55.
If you, like me, get to read a number of employment law blogs from around the country, you have undoubtedly noticed the great fanfare accorded the U.S. Supreme Court’s agreement to decide the burden of proof standard to be applied to retaliation claims, in cases brought under Title VII. University of Texas Southwestern Medical Center v. Nassar, 674 F.3d 448 (5th Cir. 2012), cert. granted, 133 S.Ct. 978 (U.S. 1/18/13).
Pop quiz: if you are a Missouri employer, or an attorney who represents companies whose workforce is in Missouri, what should your reaction be to this much-heralded legal development?
Answer: a polite yawn. Why?
Under Title VII and other federal anti-discrimination statutes, the U.S. Supreme Court and other federal courts have found that different standards of proof apply to different types of cases. In Price Waterhouse v. Hopkins, the Supreme Court held that a Title VII plaintiff alleging sex discrimination needed only to prove that gender was a “motivating factor” in an adverse employment decision. In a “mixed motive” case, the burden then shifts to the employer to show that it would have made the same decision regardless of this motivating factor. In Gross v. FBL Financial Services, the Court held that under the Age Discrimination in Employment Act, the statute does not recognize mixed motive claims, and a different standard of proof applied: a plaintiff must prove that plaintiff’s age was the “but for” cause of the adverse employment decision. Federal appellate courts have divided on the standard of proof applicable to Title VII retaliation claims.
But in Missouri, none of this really matters, because experienced plaintiffs’ employment counsel ALWAYS file their clients’ discrimination claims in state court, under the Missouri Human Rights Act (MHRA), rather than under a counterpart federal statute. The Missouri Supreme Court has held that federal law has little bearing on MHRA standards of proof, and a plaintiff’s burden of proof is always the same under the MHRA, no matter what type of discrimination is involved: that age/sex/race/national origin/religion/etc. was a “contributing factor” in the adverse employment decision. This standard applies to retaliation claims, as well as other discrimination claims. See Fleshner v. Pepose Vision Inst., 304 S.W.3d 81 (Mo.banc 2010); Hill v. Ford Motor Co., 277 S.W.3d 659 (Mo.banc 2009); Daugherty v. City of Md. Heights, 231 S.W.3d 814 (Mo.banc 2007).
The reasons plaintiffs in Missouri shun federal court, and file under the MHRA in state court, are several: (1) The “contributing factor” standard is generally easier for a plaintiff to meet than any counterpart federal standard; (2) the Missouri Supreme Court has cautioned trial courts that “summary judgment should seldom be used in employment discrimination cases because such cases are inherently fact-based and often depend on inferences rather than on direct evidence”, which makes it difficult for corporate defendants to keep even weak cases from proceeding to trial; (3) the MHRA does not have the same strict damages caps that appear in counterpart federal anti-discrimination statutes; (4) under the MHRA, corporate supervisors/managers who were directly involved in an adverse employment decision can almost always be added as defendants (which, among other things, usually prevents an employer with an out-of-state principal place of business from removing the case to federal court); and (5) plaintiffs’ counsel tend to prefer state court jury selection procedures to those in federal court.
So: if you or your company are likely to encounter a discrimination case brought in a state other than Missouri, by all means, you should closely monitor the progress of the Nassar case at the U.S. Supreme Court. Outside of Missouri, it is a big deal. But in Missouri state court discrimination cases, the answer to the burden of proof question is always the same: the “contributing factor” test.
There is, however, one important caveat. In each of its past two sessions, the Missouri General Assembly has passed legislation that would change the burden of proof in employment discrimination cases, and bring it more closely in line with federal law. Each time, the legislation was vetoed by Governor Jay Nixon.
In the current legislative session, House Bill 320 has passed the Missouri House of Representatives by a vote of 94-55. The most significant provision of the bill would require workers who bring MHRA lawsuits to prove discrimination was a "motivating factor,” not simply a contributing factor in the employer's adverse employment action. The bill would also cap noneconomic damages (which include pain and suffering, inconvenience, mental anguish, loss of enjoyment of life, and other nonpecuniary losses) at five times the amount of economic damages awarded by the court. Further, in a new set of provisions called the “Whistleblower’s Protection Act”, the bill would codify existing common law “whistleblower” exceptions to the employment-at-will doctrine, while at the same time limiting further judicial expansion of those exceptions.
A similar bill (Senate Bill 353) introduced in the state Senate would replace the “contributing factor” standard with “motivating factor”, except in adverse impact cases, where the courts are directed to follow federal anti-discrimination law. The Senate bill contains damage caps which more closely track those under federal law. And instead of containing a new whistleblower statute that codifies and freezes the status quo, SB 353 accomplishes the same result by stating that all case law on exceptions to employment-at-will is abrogated, except for the following currently recognized exceptions that bar an employer from discharging an employee who: reports an unlawful act of the employer or its agent to governmental or law enforcement agencies, officer, or the employee's human resources representative employed by the employer; reports serious misconduct of the employer or its agent that violates a clear mandate of public policy as articulated in a constitutional provision, statute, regulation promulgated pursuant to statute, or a rule created by a governmental body; refuses to carry out a directive issued by an employer or its agent that, if completed, would be a violation of the law; or engages in conduct otherwise protected by statute or regulation.
The legislation is currently in committee in the state Senate. It may reasonably be assumed that if a bill passes the General Assembly, it will again be vetoed by the Governor. With the Republican majority in both houses of the state legislature having increased in the 2012 elections, it is possible (albeit uncertain) that such a veto would be over-ridden, by a required two-thirds vote of both legislative chambers. Republicans currently control 109 of 163 House seats (66.87%), and 24 of 34 Senate seats (70.6%).
Punitive Damages Exception Recognized to General Rule Precluding Direct Liability Against Employers Who Admit Vicarious Liability for Employees' NegligenceMarch 19, 2013 | Lisa Larkin
ROBIN J. WILSON V. IMAGE FLOORING, LLC AND BRANDON RAPP, — S.W.3D —, 2013 WL 1110878 (MO.APP. W.D. MARCH 19, 2013)
The Court of Appeals for the Western District of Missouri has answered in the affirmative a question left open by the Missouri Supreme Court almost two decades ago: whether a claim for punitive damages can in fact serve as an exception to the general rule that once an employer had admitted respondeat superior liability for an employee’s negligence, it is improper to allow a plaintiff to proceed against the employer on any other theory of imputed liability.
A plaintiff who brings suit against an alleged tortfeasor and his employer can assert against the employer both a vicarious liability theory based upon the doctrine of respondeat superior and direct liability theories based upon claims of negligent hiring and supervision of the employee. The Supreme Court adopted the majority view “that once an employer has admitted respondeat superior liability for an employee’s negligence, it is improper to allow a plaintiff to proceed against the employer on any other theory of imputed liability.” Id. at 826. The Court reasoned that where the direct negligence claims against the employer are necessarily based upon a finding that the employee’s conduct was negligent and the employer has already admitted vicarious liability, the evidence submitted to establish other theories serves no real purpose and would needlessly allow into the record potentially inflammatory evidence that was irrelevant to any contested issue. Id.
The McHaffie opinion noted the possibility that there might be an exception to this general rule where an employer is potentially liable for punitive damages. Id. However, because punitive damages were not alleged in that case, the Court held a decision on such a possibility would have to wait for another day. Id. Since McHaffie, no Missouri appellate court had addressed this possible exception until this current opinion from the Western District.
In the current case, Plaintiff Wilson alleged negligence arising from an accident wherein a box truck, owned by Image Flooring and driven by employee Brandon Rapp, rolled away from a loading dock, causing Plaintiff to fall to the concrete surface below. As against Image Flooring, Plaintiff alleged it was vicariously liable for Rapp’s conduct as his employer and that it was also directly liable for negligent hiring, training and supervision and negligent entrustment. Before trial, Image Flooring moved for and was granted partial summary judgment on Plaintiff’s direct liability negligence claims on basis of the McHaffie rule. After a verdict in his favor on the remaining claims, Plaintiff appealed the partial summary judgment ruling. The Western District reversed.
The Court began its analysis with McHaffie and the punitive damages question hinted to but left open by that opinion, noting that since that 1995 opinion many federal courts have addressed and largely split on the question of whether there exists a punitive damages exception. “Although the Court’s mention of punitive damages as a possible exception to the general rule announced in McHaffie was dicta, we find that dicta persuasive and believe that, if faced with the issue now, our Supreme Court would determine that such an exception exists.”
The Western District noted the rationale behind the McHaffie rule was that, where vicarious liability is admitted, none of the direct liability theories could prevail in the absence of proof of the employee’s negligence, making the employer’s liability necessarily fixed by the negligence of the employee. “Thus, any additional evidence supporting direct liability claims could serve only to waste time and possibly prejudice the defendants.” According to the Court, however, the same cannot be said when a claim for punitive damages based upon the direct liability theories is raised. “If an employer’s hiring, training, supervision, or entrustment practices can be characterized as demonstrating complete indifference or a conscious disregard for the safety of others, then the plaintiff would be required to present additional evidence, above and beyond demonstrating the employee’s negligence, to support a claim for punitive damages.” This evidence, unlike the extraneous, potentially prejudicial evidence which was of concern in McHaffie, would have a relevant, non-prejudicial purpose.
The Western District cautioned, however, that to avail oneself of the exception to the McHaffie rule, it is not enough simply to make a demand for punitive damages in the petition. Rather, a party must also allege sufficient facts to support the claim for punitive damages. It is already the law in Missouri that when making a claim for punitive damages generally, a party is required to plead facts supporting that claim. According to the Western District, the need for a plaintiff to allege sufficient facts to support a punitive damages claim is arguably greater when the reason for doing so is to meet the exception and allow the plaintiff to proceed on claims that would otherwise be barred. “Thus, to invoke the punitive damages exception to the rule in McHaffie, a plaintiff must plead sufficient facts to support a claim for punitive damages.”
In the wake of the Chiefs’ recent courtroom setback in which their arbitration agreement with employees was held unenforceable (see post Kansas City Chiefs Start the Season 0-2), the Chiefs recently went to trial in an age discrimination case filed by a 61-year old maintenance manager with 12 years of service. The employee claimed he was fired because of his age; the Chiefs asserted he was fired for insubordination and poor performance. Plaintiff sought $400,000 in compensatory damages, plus punitive damages. The Chiefs made a $75,000 offer of judgment before trial. The jury returned a defense verdict.
Cox v. The Kansas City Chiefs Football Club, Inc., case no. 1116CV14143 (Jackson Co. Circuit Court)
What, you ask? It’s only March, so how can the Chiefs already be at no wins and two losses?
Not on the football field, dear reader, but in the Missouri Court of Appeals.
On February 26, 2013, the Missouri Court of Appeals, Western District ruled on the cases of two former Kansas City Chiefs employees who had been terminated, and had filed complaints of age discrimination. In one case, the day after she was hired, the employee (a Community Relations Director) was directed to sign an agreement requiring that any dispute between the employee and the Chiefs be referred to the NFL Commissioner for binding resolution. In the other, the employee (a Controller) was directed to sign the agreement two years after he began work.
When these individuals filed separate lawsuits in Circuit Court, Jackson County, the Chiefs moved to dismiss and to compel arbitration, claiming that the agreement with the Chiefs constituted a binding arbitration agreement.
In each instance, the Circuit Court denied the Chiefs’ motion, and the Chiefs appealed, arguing that there were two forms of consideration that supported an agreement to arbitrate: a “mutual promise” to be bound by the Commissioner’s decision; and a promise of continued employment with the team. The Court of Appeals, in separate opinions, held that Missouri law governed whether a valid arbitration agreement existed, and that in both cases, there was no consideration for the agreement. Regarding “mutual promises” to arbitrate, the Court held that the employee gave promises to be bound by league rules, to have disputes decided by the Commissioner, and to release various parties upon the Commissioner’s decision; and that the Chiefs promised nothing. The Court likewise rejected the Chiefs’ argument that the employee’s continued employment long after the agreement was signed was consideration, observing that the employee could have been fired fifteen minutes after signing the agreement, and that under the Court’s prior decisions in Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15 (Mo.App. 2008) and Whitworth v. McBride & Son Homes, Inc., 344 S.W.3d 730 (Mo.App. 2011), the fact that the employee continued to work for the team did not constitute consideration.
Missouri law contains significant pitfalls for employers who seek to have their employees’ discrimination claims referred to arbitration. Employers who seek to utilize arbitration agreements should work closely with their legal counsel, to ensure that the agreements are enforceable under the Morrow-Whitworth-Clemmons-Sniezek line of cases.
Clemmons v. Kansas City Chiefs Football Club, Inc., - S.W.3d -, case no. WD75329 (Mo. App. W.D. Feb. 26, 2013), available here.
Sniezek v. Kansas City Chiefs Football Club, Inc., - S.W.3d -, case no. WD75206 (Mo. App. W.D. Feb. 26, 2013), available here.
SNIEZEK V. KANSAS CITY CHIEFS FOOTBALL CLUB — S.W.3D —, 2013 WL 661632 (MO.APP. W.D. FEBRUARY 26, 2013)
This decision underlines the importance of observing the contractual nature of an agreement to arbitrate. It is also another case which warns of the dangers of an employer: a) relying on the mention of, or reference to, outside or ancillary agreements as a substitute for explicitly being bound by specific terms of the agreement at issue; and, b) not signing the agreement.
In 1982, the Kansas City Chiefs hired Sniezek as their Community Relations Director. After she accepted her job on March 8, 1982, and on her first day at work, she was presented with numerous documents for signing. These included one entitled, “Agreement” and included language whereby Sniezek agreed to be bound by the Constitution and By-Laws of the National Football League and that she agreed “that all matters in dispute between [her] and the [Chiefs] shall be referred to the Commissioner and that his decision shall be accepted as final, binding and conclusive on me and on the [Chiefs]…”. The agreement did not contain any specific statement by the Chiefs of its being bound, nor did anyone sign the Agreement on behalf of the Chiefs.
In January 2011, the Chiefs terminated Sniezek’s employment. She filed a charge of discrimination with the Missouri Human Rights Commission and filed an age discrimination action in state court after receiving a right to sue notice. The Chiefs filed Motion to Compel arbitration, asserting that Sniezek signed the Agreement on her first day of work, and that it contained a valid and enforceable arbitration agreement. Sniezek opposed the Motion; the trial court denied it; and the Chiefs appealed.
On appeal, the appellate court observed that the burden to prove the existence of a valid and enforceable arbitration agreement was on the Chiefs. This meant the Chiefs had to show essential elements of a contract – offer, acceptance, and bargained for consideration. The Chiefs argued that the arbitration agreement was supported by two forms of consideration: their mutual promise to arbitrate and their initial offer of at-will employment.
The appellate court found no mutuality of obligation in the Agreement because it contained no promise by the Chiefs to arbitrate. The language on which the Chiefs continued to rely showed that only Sniezek had agreed to be bound: “[n]owhere did “the Club” i.e., the Chiefs, agree to do anything….[they] are asking us to find that Sniezek could bind the Chiefs, by her signature, to the same promises she made in the Agreement. The plain language of the Agreement contains no promises by the Chiefs.” The court rejected the Chiefs’ argument that the NFL constitution and bylaws requiring arbitration in all employee disputes provided the necessary mutuality. The Court also rejected the Chiefs related argument that this fact of obligation was incorporated into the Agreement by reference: “The mere mention of [those documents] in the Agreement…did not incorporate…[their]… terms …into the Agreement. (citation omitted)”.
The court also found there was no consideration in Sniezek’s continued employment as of the day she signed the Agreement. This was because the Chiefs presented the arbitration contract to her after they had offered, and she had accepted, the offer of employment. Therefore, she was in the same position both before and after they presented the contract to her. The court also found that since Sniezek’s at-will employment relationship with the Chiefs was not enforceable at law, then any obligation she may have had during her employment ended when the Chiefs terminated its employment relationship with her.
This decision reinforces that employers interested in arbitration agreements for disputes with their employees-at-will are safer if they: 1) make signing an arbitration contract or agreement a pre-condition to employment; 2) make sure the agreement to arbitrate makes clear both the employee and employee are bound by it; 3) include the terms to be relied upon in the agreement itself or perhaps attached as an exhibit and specifically incorporated by a statement to that effect; and, 4) have a representative of the employer sign the agreement to acknowledge its binding the employer. Of course, each case may be different, but these basic steps can help an employer carry its burden of proving the existence of a valid and enforceable agreement to arbitrate.
Those of us who practice employment law find ourselves, with increasing frequency, dealing with the preparation and negotiation of employee non-compete agreements, and the handling of disputes concerning such agreements. A “non-compete agreement” is any restrictive covenant entered into between employer and employee that restricts post-employment activities of the employee. This includes both non-competition and non-solicitation clauses.
Six years ago, in Healthcare Svcs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 609-10 (Mo. banc 2006), the state Supreme Court articulated the following principles for determining whether a non-compete agreement is valid and enforceable:
- The law seeks to balance the competing concerns between employer and employee. On one hand, employers have a legitimate interest in engaging a highly trained workforce without the risk of losing customers and business secrets after an employee leaves his or her employment. On the other hand, employees have a legitimate interest in having mobility between employers to provide for their families and advance their careers. Further, although the law favors the ability of parties to contract freely, contracts in restraint of trade are unlawful.
- A non-compete agreement will be enforced if it is demonstratively reasonable, i.e. “if it is no more restrictive than is necessary to protect the legitimate interests of the employer.”
- A non-compete agreement must be narrowly tailored temporally and geographically and must seek to protect legitimate employer interests beyond mere competition by a former employee. Accordingly, it is enforceable “only to the extent that the restrictions protect the employer's trade secrets or customer contacts.”
- The employer bears the burden of proof that the non-compete agreement protects its legitimate interests in trade secrets or customer contacts and that the agreement is reasonable as to time and geographic space.
This year, in Whelan Security Co. v. Kennebrew, 379 S.W.3d 835 (Mo. banc 2012), the Supreme Court took the occasion of reviewing in detail another non-compete agreement (actually, two separate agreements with the same company), in which the Court applied the principles set forth in Copeland.
Whelan Security provides security guard services nationwide, with 38 branches in 23 states. Whelan hired W. Landon Morgan as a branch manager for its Nashville, Tennessee, office, under an employment agreement. Morgan was responsible for operations, sales, and marketing, which required him to meet with clients and gave him access to client records and employee files. Whelan hired Charles Kennebrew as the director of quality assurance for Whelan's Dallas office, also under an employment agreement. Kennebrew's duties included managing the operations, clients, and customers of the office, which gave him access to employee and financial records of the company. He was in contact with Whelan's customers in various parts of Texas. Both employment contracts contained non-competition and employee non-solicitation clauses.
Kennebrew's employment agreement prohibited him from:
(1) For a period of two years, soliciting Whelan customers, or prospective customers whose business was being sought during the last 12 months of Kennebrew’s employment.
(2) Soliciting any Whelan employees.
(3) Working for a Whelan competitor within 50 miles of his Whelan work location(s).
(4) Working for a Whelan customer or prospective customer whose business was being sought during the last 12 months of Kennebrew’s employment.
Morgan’s agreement had the same restrictions, except that his employee non-solicitation clause contained a one-year prohibition, rather than two.
After Kennebrew and Morgan left the company and took other jobs, Whelan sued to enforce the restrictions in their non-compete agreements. The trial court ruled in favor of Kennebrew and Morgan, granting them summary judgment on the grounds that the non-competition and non-solicitation clauses were overbroad and unenforceable.
The Supreme Court reversed, and held:
(1) The “existing customer” non-solicitation clauses were overbroad, in that they prohibited contact with any customer of Whelan, anywhere in the nation, regardless of whether the employee knew it was Whelan’s customer or previously dealt with that customer. Both Kennebrew and Morgan served customers in geographically limited areas. However, courts in Missouri have the authority to give effect to an overly restrictive non-compete clause by refusing to give effect to its unreasonable terms, or modifying the terms of the contract to be reasonable. In this case, the existing customer non-solicitation clause was modified so that Kennebrew and Morgan were only prohibited from soliciting customers they had dealt with during their employment with Whelan.
(2) The “prospective customer” non-solicitation clauses were overbroad, because this could include any business in the country that could potentially benefit from increased security services, and would encompass solicitation of prospective customers, no matter how tenuous the relationship between Whelan and the prospect, or how detached Kennebrew and Morgan were from Whelan’s solicitation. This clause was held unenforceable.
(3) The clauses prohibiting Morgan from soliciting Whelan’s employees was held enforceable. In Morgan’s case, there was a one-year restriction, and R.S.Mo. 431.202 is a “safe harbor” provision which says that an employee non-solicitation covenant of up to one year is presumed reasonable when its purpose is to protect confidential or trade secret business information, relationships with customers or suppliers, goodwill, or company loyalty. In Kennebrew’s case, the restriction was two years, and the court held that there were triable issues of fact as to whether the longer restriction was reasonable under the circumstances; thus, it vacated the trial court’s grant of summary judgment on this point, and remanded for further proceedings.Conclusion
Missouri courts have long recognized that non-compete agreements are enforceable, but only to the extent they are reasonable as to geographic scope and duration, and are reasonably designed to protect the company’s legitimate business interests. Anyone who is drafting or reviewing a Missouri non-compete agreement should become well familiar with the Supreme Court rulings in the Copeland and Kennebrew cases, as well as the provisions of section 431.202.
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The BSCR Employment & Labor Law Blog examines topics and developments of interest to employers, Human Resources professionals, and others with an interest in recent legal developments concerning the workplace. This blog will focus on Missouri and Kansas law, and on major developments under federal law, and at the EEOC and NLRB. Learn more about the editor, David M. Eisenberg, and our Employment & Labor practice.
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