Letter from the Editor

I hope everyone enjoys the latest newsletter from the TBA Labor and Employment Section. It covers recent Supreme Court opinions, Circuit Court of Appeals decisions, proposed legislation and innovative mediation solutions. I want to thank this issue's authors: Drew Farmer (a repeat author), John Park, Emily Pera, Mark Travis, Wes Sullenger (a veteran author for newsletters), Deborah Godwin, Christal Key and myself (usually a willing volunteer).

If you have an article, an idea for an article, or even a constructive criticism, please e-mail me (bbuchanan@kingballow.com) or call (615-726-5484). I would love to have articles from attorneys in Knoxville, Chattanooga and other cities in East Tennessee but I don’t have many contacts there. Also, government lawyers are invited to contact me about submitting articles as it would be nice to have other agencies besides the National Labor Relations Board represented (though I greatly appreciate the willingness of my former colleagues at the NLRB to agree to my requests to write articles).

Bruce Buchanan

14 Penn Plaza v. Pyett: What Does the Future Hold?

by Deborah Godwin

Arbitration agreements have received increasing support from courts in recent years. As a result, courts around the country have applied a rebuttable presumption of validity to arbitration agreements. Until recently, numerous courts around the country, relying on Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), were of the opinion that an arbitration agreement within a collective bargaining agreement (CBA) between a union and employer could not require an employee to arbitrate a claim arising under the Age Discrimination in Employment Act of 1967 (ADEA), Title VII, and other statutory rights. However, on April 1, 2009, in a 5-4 decision, the Supreme Court, in 14 Penn Plaza v. Pyett, 129 S.Ct. 1456, an opinion written by Justice Thomas, upheld an arbitration agreement that did just that. The Court held an arbitration agreement in a CBA is enforceable to require an employee to arbitrate ADEA claims so long as the arbitration agreement “clearly and unmistakably” requires arbitration of ADEA claims. This new rule stated in Pyett reflects the Court’s position favoring arbitration; however, with its narrow scope, its long-standing impact on labor law is uncertain.

The case of 14 Penn Plaza v. Pyett arose when three security guards were reassigned to less desirable positions accompanied by a loss of income. The security guards asserted their reassignments were a direct result of their age, in violation of the ADEA. The Union filed grievances against the employer and requested arbitration of the claims, but subsequently withdrew the age discrimination claims. After being issued a right-to-sue notice by the Equal Employment Opportunity Commission, the security guards filed suit in federal court. The employer filed a motion to compel arbitration, which the district court denied. The Second Circuit Court of Appeals agreed with the district court on the basis that Gardner-Denver prohibits the enforcement of a CBA requiring arbitration of ADEA claims. Without overruling Gardner-Denver, the Supreme Court upheld the arbitration agreement.

Following what the Court now terms as “broad dicta” in Gardner-Denver, courts have frequently held arbitration provisions in CBAs are unenforceable to waive statutory rights. Nevertheless, the Pyett court claims its holding is not inconsistent with the narrow holding in Gardner-Denver. Instead the majority labels as dicta the language in Gardner-Denver criticizing arbitration of statutory antidiscrimination claims and attributes the Court’s skepticism in that case to a “misconceived view of arbitration that the court has since abandoned” (Pyett, 129 S.Ct. at 1469). Justice Thomas distinguished the holding in Gardner-Denver by emphasizing the issue in that case was whether the arbitration of a contractual claim would preclude subsequently judicial claims of statutory rights and further comments that if the dissent’s broad view of the holding of Gardner-Denver were correct, it “would appear to be a strong candidate for overruling” (Pyett at 1469, note 8).

Justice Souter’s dissenting opinion, which was joined by justices Stevens, Ginsburg and Breyer, however, disagrees. Justice Souter avers the holding in Gardner-Denver was much broader than the majority admitted and identified Gardner-Denver as providing a “seemingly absolute prohibition of union waiver of employees’ federal forum rights” (Pyett at 1480, quoting Wright v. Universal Maritime Service Corp., 525 U.S. 70 (1998), (Souter, J., dissenting)).

As the exclusive bargaining representative, the Union has the authority to negotiate and contract with the employer on the employees’ behalf. Unless or until legislation removes ADEA discrimination claims from the broad sweep of the National Labor Relations Act, the Court states arbitration agreements that “clearly and unmistakably” require arbitration for ADEA claims will be upheld (Pyett at 1472).

A legislative intervention may not be far away. The Arbitration Fairness Act of 2009 has been introduced into the Senate in response to Pyett. In this bill, Congress finds a series of Supreme Court decisions have corrupted the purpose of Title 9 regarding arbitration when it extended arbitration to “disputes between parties of greatly disparate economic power, such as...employment disputes.” If passed, the Arbitration Fairness Act would effectively overturn Pyett.

The bill also calls into question the courts’ interpretation of Congress’s policy favoring arbitration for employment claims which was relied upon in Pyett. It states Congress finds, “While some courts have been protective of individuals, too many courts have erroneously upheld even egregiously unfair mandatory arbitration clauses in deference to a supposed Federal policy favoring arbitration over the constitutional rights of individuals.” If enacted, the Arbitration Fairness Act will preclude the effect of waiving an employee’s right to seek judicial enforcement under any constitutional provision, a federal or state statute, or public policy arising from such provisions or statutes.

The Pyett holding allows the enforcement of a collective bargaining agreement requiring arbitration of ADEA claims only when the agreement “clearly and unmistakably” requires union members to arbitrate statutory claims (Pyett, 129 S.Ct. at 1474). The applicability of this case to present day collective bargaining agreements may not be widespread. In order to apply to the arbitration of statutory claims, the arbitration agreement must “expressly include statutory claims” and “clearly and unmistakably” require arbitration of such statutory claims. The limited application of this case could be short-lived, in any event, if Congress passes the Arbitration Fairness Act.

Deborah Godwin is a partner with Godwin, Morris, Laurenzi & Bloomfield. She is director of the firm's ERISA law section and her practice includes labor and employment law and workers compensation. She can be contacted at dgodwin@gmlblaw.com.

Courts Split on Enforceability of Two-Member NLRB Decisions
by Christal Key

The validity of more than 400 decisions issued by the two-member National Labor Relations Board (NLRB) since Dec. 31, 2007, have been put into question by conflicting opinions of courts of appeals. On May 1, 2009, the U. S. Court of Appeals for the District of Columbia Circuit held the board, consisting of two sitting members, was not authorized to issue orders or decisions under Section 3(b) of the National Labor Relations Act (NLRA). (Laurel Baye Healthcare of Lake Lanier Inc. v. NLRB, 564 F.3d 469 (D.C. Cir. 2009, petitions for rehearing denied (July 1, 2009).) Conversely, the First, Second and Seventh circuits have issued decisions holding Section 3(b) of the act does authorize a two-member board to issue orders and decisions. (Snell Island Northeastern Land Services v. NLRB 560 F.3d 36 (1st Cir. 2009), rehearing denied (May 20, 2009); SNF LLC v. NLRB, 568 F.3d 410 (2d Cir. 2009); and New Process Steel v. NLRB, 564 F.3d 840 (7th Cir. 2009), petition for cert. filed 77 U.S.L.W. 3670 (May 22, 2009).) Since all board orders are appealable to the D.C. Circuit as well as the circuit where the case originates, all board orders issued since Dec. 31, 2007, have been put into question.

Section 3(b) of the Act provides, in pertinent part:

The Board is authorized to delegate to any group of three or more members any or all of the powers which it may itself exercise... A vacancy in the Board shall not impair the right of the remaining members to exercise all of the powers of the Board, and three members of the Board shall, at all times, constitute a quorum of the Board, except that two members shall constitute a quorum of any group designated pursuant to the first sentence hereof.

The board has taken the position that, pursuant to Section 3(b), the four members of the board, Liebman, Schaumber, Kirsanow and Walsh who held office on Dec. 28, 2007, delegated all of the board’s powers to three members, Liebman, Schaumber and Kirsanow. When Kirsanow’s appointment expired, the two remaining members, Liebman and Schaumber, continued to exercise the delegated powers they held jointly with Member Kirsanow. The board maintains this action is consistent with the express language of Section 3(b) that a vacancy shall not impair the powers of the remaining members and “two members shall constitute a quorum” of any group of three members to which the board had delegated its powers.

The board first points to the plain text of Section 3(b). It points to a 2003 formal opinion in which the U. S. Department of Justice’s Office of Legal Counsel concluded the language of Section 3(b) provided the board authority to issue decisions with only two of its five seats filled where the two remaining members constituted a quorum of a three-member group within the meaning of Section 3(b).

Second, the board points to a history of the Board’s operation and the legislative history of Section 3(b). The Wagner Act of 1935 created a three-member Board and Section 3(b) provided a vacancy on the board would not impair the authority of the two remaining members to exercise the powers of the full board. Thus, during the first 12 years of the board’s existence, it issued hundreds of decisions with only two of its three seats filled. In 1947, when Congress was considering the Taft-Hartley amendments, the House bill would have maintained a three-member board, two members of which, as before, could have exercised all the board’s powers. The Senate bill would have expanded the Board to seven members, four of whom would be a quorum. That same bill further authorized the larger board to delegate its powers “to any group of three or more members,” two of whom would be a quorum. The Conference Committee accepted the Senate bill’s delegation and two-member quorum provisions, but, as a compromise with the House bill, agreed to a board of five members. The board argues Congress’ purpose in giving the Board additional members was to allow three-member groups to act in a manner similar to the original three-member Board and issue more decisions.

Third, the board argues the NLRA was designed to avoid “industrial strife”, and an interpretation of Section 3(b) that allows the board to continue functioning with two members gives effect both to the plain language of the act and its purpose. Finally, the board argues concluding the two remaining members of a three-member group have the authority to exercise properly delegated powers is consistent with established principles of both administrative law and the common law of public entities.

The D.C. Circuit, in rejecting the board’s arguments, acknowledged the issue before them presented a close question and neither the Office of Legal Counsel’s interpretation nor the board’s desire to continue to function was entirely indefensible. (Laurel Baye Healthcare of Lake Lanier Inc. v. NLRB, supra, at 476.) The D.C. Circuit, however, ruled that while a third member of the board can delegate authority to the two members, that delegation cannot survive the loss of a quorum on the Board itself. (Id. at 472.) In reaching its decision, the D.C. Circuit stated, “The quorum provision clearly requires that a quorum of the board is, ‘at all times,’ three members.” (Id. at 473.) The D.C. Circuit further found the board’s interpretation of the statute was contrary to basic tenants of corporate and agency law. An agent’s delegated authority ceases at the resignation or termination of the delegating authority. (Id. citing Fletcher Cyclopedia of Law of Corporations § 504; see Emerson v. Fisher, 246 F. 642, 648 (1st Cir. 1918).)

In the latest decision regarding the two-person board issue, the Second Circuit joined the First and Seventh circuits holding that the two-member board has the authority to issue decisions. (Snell Island SNF LLC v. NLRB.) However, the Second Circuit based its decision on a different rationale than the First and Seventh circuits, which ruled the unambiguous plain text of Section 3(b) granted two members authority to issue decisions. (Northeastern Land Services v. NLRB, supra at 41-42; New Process Steel v. NLRB, supra at 845-846.) Conversely, the Second Circuit found the plain text was ambiguous but deferred to the board’s interpretation of the Act. (Snell Island SNF LLC v. NLRB, supra at 420.) The Second Circuit held because the board’s interpretation of the statute was reasonable, it was required to defer to the agency’s interpretation because the agency is charged with administering the Act. (Id. at 423-424, citing Chevron USA, Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).)

The conflict within the circuits creates likelihood that the Supreme Court will accept New Process Steel’s petition for writ of certiorari. Should the Supreme Court take up the issue, the Second Circuit’s reasoning is persuasive that even if the language of Section 3(b) is ambiguous, the agency’s interpretation is entitled to deference. Furthermore, the D.C. Circuit’s reliance on agency and corporation doctrines makes that decision particularly vulnerable. The board’s attorneys argue “agency” in a corporate context is defined as the fiduciary relationship that arises when one person, “the principal,” manifests authority to another person, “an agent.” There, the agent acts on the principal’s behalf and subject to the principal’s control. It is therefore logical that the agent’s authority ceases when the principal is terminated. However, Section 3(b)’s delegation of institutional powers to a three-member group does not create a fiduciary relationship and does not involve the three-member group acting on behalf of or under the control of the board. Rather, all board members are jointly delegated the board’s institutional powers and are empowered to exercise them, not as board agents, but as the board itself. Thus, the weight of authority, along with the rationale provided by three appellate courts upholding the two-member board’s authority, supports the board’s interpretation of Section 3(b) of the act.

Christal Key is a field attorney for the National Labor Relations Board in St. Louis, Missouri. She can be reached at Christal.Key@nlrb.gov. The views and opinions expressed in this article are strictly those of the author; they have not been approved by the National Labor Relations Board or the United States Government.

Seventh Circuit Finds Oral Complaints Unprotected under the FLSA While Written Internal Complaints are Protected
by Emily Pera

In Kasten v. Saint-Gobain, 570 F.3d 834 (7th Cir. 2009), the U.S. Court of Appeals for the Seventh Circuit, for the first time, directly addressed whether internal complaints are “protected activity” under the Fair Labor Standards Act (FLSA) and, additionally, whether a purely oral complaint to a supervisor constituted a “internal complaint” warranting protection. Saint-Gobain had progressively disciplined Kasten for time-clock violations. Kasten claimed he complained several times to various supervisors and managers about the location of the company's time-clock and his belief that the location was illegal. It was undisputed that Kasten, at no time, submitted a written complaint to Saint-Gobain or to any outside agency regarding any perceived FLSA violation.

The district court granted summary judgment to Saint-Gobain, finding Kasten had not suffered retaliation within the meaning of the statute. Section 215(a)(3) of the FLSA provides, “it shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this chapter” (emphasis added). The district court found while intra-company complaints were protected, unwritten, verbal complaints were not deemed protected activity.

On appeal, the Seventh Circuit considered two issues: (1) whether filing a complaint internally, but not with any judicial or administrative agency, is protected activity under the FLSA; and (2) whether an oral complaint constitutes protected activity. In reaching its answer to the first question – that internal complaints are protected activity – the Seventh Circuit relied on the plain language of Section 215(a)(3). The Court found the statute’s language – “because such employee has filed any complaint” – was broad enough to encompass both internal complaints as well as those filed with an outside agency. The Court’s conclusion was consistent with that of the First, Fifth, Sixth, Ninth and Eleventh Circuits, which had similarly found internal complaints are protected under the FLSA.

In considering the second issue, whether an oral complaint is protected activity under the FLSA, the Seventh Circuit again relied on the statute’s plain language. The Court focused on the definition of “file,” because employees who have “filed any complaint” are afforded protection from FLSA retaliation. Considering the word “file” as defined in both its noun and verb forms, the Court concluded both contemplated the creation and/or submission of a physical writing.

The Seventh Circuit also questioned the persuasiveness of other circuits on the issue. While the Second and Fourth Circuits had declined to offer protection to oral, unwritten complaints, it was unclear as to whether the complaints considered by the Sixth, Eighth, and Eleventh Circuits had been purely oral, and whether those courts gave sufficient consideration to the distinction between written and oral complaints in light of the FLSA’s statutory language.

In declining to offer FLSA protection to oral complaints, the Seventh Circuit noted the FLSA’s retaliation provision could have been drafted more broadly if Congress had so desired. The Court compared the protection afforded by the FLSA to Title VII’s protection from retaliation of any employee who “opposed a practice” made unlawful under that statute. (See 42 U.S.C. § 2000e-3(a).) It acknowledged Title VII’s broader language, which has been interpreted to cover oral complaints, could have been used when drafting the FLSA’s retaliation provision had such broad protection been intended.

Unable to “read words out of a statute,” the Seventh Circuit affirmed the district court’s ruling and agreed that while internal complaints are protected activity under the FLSA, purely oral complaints to a supervisor are not. The Seventh Circuit’s holding affirming the FLSA’s protection of internal complaints simply brings it in line with the majority of other circuits considering that issue. However, the Seventh Circuit’s finding that purely oral complaints are not afforded FLSA protection is of greater significance, as its statutory interpretation of the FLSA retaliation provision will likely guide courts that have not yet considered the question and offer further support to those that have already found oral complaints unprotected by the FLSA without engaging in the same depth of statutory interpretation.

Emily Pera is an associate with Ford & Harrison in its Memphis office. She concentrates her practice on employment discrimination - Title VII, the ADA and the ADEA. Pera can be reached at epera@fordharrison.com.

Although momentum for the Employee Free Choice Act (EFCA) has waned, it continues to be discussed in Congress. In May 2009, President Barack Obama stated the EFCA does not have the votes to pass in the Senate and acknowledged the need to reach a compromise that would preserve the "core idea" of the EFCA. Since then, a group of senators have been meeting to attempt to forge a compromise.

Before discussing a possible compromise, let's look at the key aspects of the originally proposed EFCA:

1. If the National Labor Relations Board (NLRB) finds the majority of an employer's employees have signed union authorization cards, the NLRB will certify the union as the employees' bargaining representative. This is the “card check” recognition;

2. If, after card check recognition, the parties have negotiated for 90 days without reaching an agreement, and another unfruitful 30 days with the assistance of a mediator, the Federal Mediation and Conciliation Service (FMCS) will submit the bargaining dispute to an arbitrator, who shall render a decision as to the terms of the agreement, including wage rates, benefits and other conditions of employment. That agreement will be binding on the parties for two years;

3(a). The backpay remedy for the discharge of an employee during union organizing shall include triple backpay; and

(b) An employer, who willfully or repeatedly violates Section 8(a)(1) or (3) during union organizing, shall be subject to a penalty not to exceed $20,000 per violation.

It was widely anticipated after the 2008 election, when the Democrats increased their majority in the Senate from 51-49 to 60-40 that the original EFCA would pass. However, conventional wisdom seems to have been wrong.

Since the 2008 election, a number of former EFCA supporters have changed their minds. They are Senators Arlen Specter, Blanche Lincoln, Mark Pryor, Ben Nelson and Dianne Feinstein. Sen. Specter stated the "recession made this a particularly bad time to enact" the EFCA. Three other senators, who were previous supporters of the EFCA, Mary Landrieu, Tim Johnson and Jim Webb, have declared themselves undecided.

It now appears the original EFCA only has 51 solid yes votes; thus, EFCA supporters and labor must agree to a compromise or its hopes for favorable labor legislation will evaporate. A small group of senators, including Sherrod Brown, Tom Carper, Charles Schumer, Arlen Specter and Mark Pryor, have been meeting to determine a possible compromise. The rumored EFCA compromise is as follows:

(1) "Quickie" elections: anywhere between five and 21 days from the date that the petition is filed with the National Labor Relations Board (though as a former board attorney, it is hard for me to imagine the board being able to administratively handle a five-day turnaround from petition to election);

(2) Unions have equal access to a company's property to respond to any company-held "captive audience" speeches to employees;

(3) Interest arbitration to resolve first contracts which is an important feature of the original EFCA;

(4) Triple backpay for employees fired in violation of the National Labor Relations Act (NLRA); and

(5) $20,000 per willful or repeated violation of the NLRA.

It is still unclear whether the EFCA supporters and labor can muster 60 votes in the Senate to overcome an anticipated filibuster by the Republicans. A complicating factor is the deteriorating health of Senators Edward Kennedy and Robert Byrd and whether either can be counted on to be present for a vote. However, each one of the senators, who withdrew their support from the initially proposed EFCA, has been previously supported by labor and does not want to oppose all pro-union changes to the NLRA. Thus, these senators have a heavy incentive to find an acceptable compromise. Time will tell on whether, and what kind of, compromise will be passed by Congress.

Bruce E. Buchanan is a partner in the Labor and Employment Section and partner-in-charge of the Immigration Section of King & Ballow. He served as senior trial specialist for the National Labor Relations Board for 20 years. He has also served for 12 years as an adjunct professor at William H. Bowen UALR School of Law in Little Rock, Arkansas. Buchanan represents employers in many areas of labor, employment and immigration law as well as individuals in immigration law. He can be reached at bbuchanan@kingballow.com.

Creative Approaches to Employment Mediation in Today’s Economy
by Mark C. Travis

A period of severe economic uncertainty, such as is being experienced today, brings significant pressures to bear in attempting to resolve employment litigation. Reductions-in-force, mass layoffs, and plant closings are commonplace. Beyond those separations that are based on alleged business considerations, are those “for cause&rdquo,; based on alleged worker misconduct. Unemployed workers, typically without any severance benefits or the real prospect of returning to the workforce in this economy, are increasingly seeking redress through equal employment agencies or the courts. From the employer’s perspective, the economic situation has left many in a precarious position, often times unable to authorize monetary settlement on even a “cost of defense” or “nuisance value” basis. However, all is not lost. In reality, the current economic downturn offers real opportunities for counsel to craft creative options for settlement which might not otherwise be considered in a surging economy. This article will attempt to address some of those opportunities.

Changing Separation Status. In this era, it is hard enough for an unemployed worker to find employment, even with an exemplary prior work record. That ability to find alternative employment is severely limited with an adverse basis for separation from the prior employer. Even in those cases where the prospective employer is not being asked for a reference, the fact that the employee must put down the “reason for leaving” on a subsequent application is not only embarrassing, but indeed, “career limiting.” In those cases where the plaintiff employee has filed a charge of discrimination or lawsuit alleging their involuntary termination, was in fact retaliatory or a pretext for discrimination, the employer’s agreement to revise its records to reflect a voluntary resignation may go a long way toward resolving the case successfully. Along that same line, it is not uncommon for the parties to agree upon language that will be utilized in the event a prospective employer does call regarding reference information (or for internal communications within the company), which is consistent with the voluntary resignation status.

Letter of Reference. Beyond the simple record change, the employer may offer to provide a letter of reference. Although most employers would be reluctant to provide a positively effusive recommendation letter, a neutral letter that simply provides dates of employment, position held, and reason for leaving (e.g. voluntary resignation) may serve as an effective tool in resolving the case. In fact, a “sweetener” is often provided such that the employee was “qualified” for their former job, or was able to perform the requirements of the former position. Admittedly, most employers suggest this is “against standard policy.” However, such an argument is generally overcome by pointing out this option carries no monetary component and may indeed be successful in resolving the case.

Outplacement Services. When employees are out of work, especially in this economy, the inability to find work and provide for one’s family can result in a downward spiral during which the employee is unable to focus on what is necessary to even look for work. Many employers have relationships with outplacement services that can assist the employee in his or her job search, through resume preparation, interviewing skills and networking. The cost for these services is generally insignificant and when an employer pays for this as part of the settlement, it provides added value at minimal cost. Some former employees may also be interested in vocational training or education, which the employer could agree to fund under certain conditions. Along that same line, the employer can agree to reinstate the employee’s voice mail and/or email address in the company’s system to assist in the job search, and may even allow the use of a company cell phone, computer and printer during this period.

Extended Benefits. Many creative options are available when discussing benefits in employment mediations. Although the option to elect COBRA insurance continuation benefits may have long since passed, if the separated employee has COBRA insurance coverage in effect, the employer could agree to pay for that coverage or reimburse the employee for premium payments during the remainder of the coverage period. This insurance reimbursement option could also be available if the employee has obtained alternative coverage outside of COBRA. Additionally, if the employer is self-insured for medical insurance, it may be possible to reinstate the employee to the employee’s plan. (This is unlikely to be available in conventional policies, as the employee would not be “actively employed” with the employer).

Additional creative opportunities exist with respect to disability retirement, if the employer’s benefits package contains that benefit and the employer has some control over its utilization. Beyond medical benefits, the employer may offer additional monetary benefits in the nature of bonuses or pension contributions. For example, if the timing of the termination resulted in the loss of a bonus payment or pension contribution, the employer might agree to otherwise authorize that payment. This payment could be structured in such a way as to avoid a significant monetary contribution, by basing the pension contribution on a percentage of the employee’s earnings during the pension year, by altering the date of termination to allow for vesting, or by calculating the bonus on company profitability.

Stock Options. For mid-level managers and executives, especially those with long-term employment with a growing company, company stock may be important. As part of a settlement, the employer might agree to provide company stock instead of cash, the right to exercise stock options, or on the other hand, an offer to buy back company stock at a premium. Although not directly relevant to the issue of stock, many managers and executives find the concept of a consultant agreement to be attractive. Recognizing that it is easier to obtain alternative employment while still employed, remaining with the company as a “consultant” presents an attractive alternative to the former employee, and may also provide some real benefit to the employer if the relationship has not been left too acrimonious.

Structured Settlement Terms. Last but not least, is the possibility of utilizing a formalized structured settlement, as is often utilized in personal injury cases. Indeed, this would generally be used where liability is over $100,000. The employer gets the benefit of showing an enhanced monetary amount, albeit over time, and the employee gets an increased monetary benefit with deferred tax liability. Obviously, this type of settlement should not be utilized without the assistance of a qualified insurance professional, and will only be successful toward inducing settlement if the plaintiff has some need for a long-term income stream. Beyond this type of formalized settlement structure, the settlement could also be “structured” less formally, simply by paying the settlement amount in installments, which also has some of the same benefits but without the assurance of the insurance company’s solvency.

This article is certainly not intended to summarize all of the myriad methods in which employment litigation can be successfully mediated, but only introduces a few of the tools that have shown to be somewhat effective in this period of economic instability. Indeed, the methods are only limited by the creative resources of effective mediators, advocates, and parties.

Mark Travis is a member of the Labor & Employment Law Section of the TBA, and is the immediate past chair of the TBA's Dispute Resolution Section. He serves as a contract mediator for the Equal Employment Opportunity Commission and the American Arbitration Association. He can be reached at (931) 252-9123 or via e-mail at mtravis@adrspecialists.com.

Association and Advocacy Can Form Basis for Harassment Claims

by John Park

In Barrett v. Whirlpool Corp., 556 F.3d 502 (6th Cir. 2009), the U.S. Court of Appeals for the Sixth Circuit clarified the standard for association and advocacy claims. In such cases, the plaintiffs are not members of a protected class, but allege they were discriminated against because they were associated with, or advocated for, co-workers in the protected class.

In Barrett, three Caucasian plaintiffs brought harassment claims against their employer, each based upon slightly different circumstances. Lynette Barrett claimed she heard Caucasian co-workers make racial slurs or jokes about African-Americans on several occasions. When Barrett told one co-worker she did not like his language, the co-worker allegedly called her a “bitch” and made a threatening comment towards her. Barrett claimed she made two reports about the racist comments to her supervisors, but no action was taken. Next, Barrett claimed to have found racist graffiti in the bathrooms on two occasions, which was subsequently removed after she reported it to her supervisors. Finally, Barrett alleged her manager directed desirable work away from her, and other employees would “snub” her because of her friendship with African-American co-workers.

A second plaintiff, W. T. Melton, also alleged she heard the same co-worker make racial slurs towards African-American employees and he regularly used the phrase “may the Klan be with you,” even though it had never been directed to her. Melton alleged she was asked how she could “stand the smell” of an African-American woman with whom she regularly had lunch. Melton believed she was treated worse than other employees when she returned from medical leave.

Treva Nickens also claimed to have heard employees make racist jokes and use racial slurs regularly. When she complained to her supervisor about his language, the supervisor allegedly laughed at her. After the supervisor was terminated for another offense, he allegedly relayed a message to Nickens, through co-workers, that he would physically assault her for reporting him. Nickens testified other co-workers and another supervisor would tell her to “stay with her own kind,” and when she applied for a promotion, she was told she would never get the job because of her friendship with an African-American co-worker.

The U.S. District Court for the Middle District of Tennessee granted summary judgment to Whirlpool against all three plaintiffs on their harassment and retaliation claims. With respect to the harassment claims, the Court found the plaintiffs failed to show association with African-American employees that rose above the “casual, friendly relationships that commonly develop among co-workers but that tend to be limited to the workplace.”

The Sixth Circuit disagreed, finding each plaintiff had shown a sufficient degree of association with their African-American co-workers. According to the Sixth Circuit, association claims can arise where individuals who, though not a member of a protected class, are “victims of discriminatory animus towards [protected] third persons with whom the individuals associate.” The Sixth Circuit rejected Whirlpool’s argument that only a “significant association – one that extends outside of the workplace – can give rise to an associational Title VII violation against a white employee.”

Under Barrett, it is now clear that “[i]f a plaintiff shows she was discriminated against at work because she associated with members of a protected class, then the degree of association is irrelevant.” As the Sixth Circuit stated further, “[t]he absence of a relationship outside of work should not immunize the conduct of harassers who target an employee because she associates with African-American co-workers. While one might expect the degree of an association to correlate with the likelihood of severe or pervasive discrimination on the basis of that association . . . that goes to the question of whether the plaintiff has established a hostile work environment, not whether he is eligible for the protections of Title VII in the first place.”

With respect to the advocacy claims, the Sixth Circuit held “as with association, severe or pervasive discriminatory harassment is more likely to correlate with more vigorous advocacy, but as long as a plaintiff offers proof that she was, in fact, discriminated against because she advocated for protected employees, she may state a claim under Title VII.”

Harassment Must Still be Directed towards Plaintiffs Themselves
Having determined the plaintiffs could raise associational and advocacy claims, the Sixth Circuit turned to whether the conduct they alleged was severe and pervasive. The Sixth Circuit noted the “only harassment that was directed toward plaintiffs themselves or toward others who associated with or advocated on behalf of African-American employees is relevant to our analysis, and only to the extent that plaintiffs were aware of it.” Conduct that was directed solely toward African-Americans themselves would not be considered in an association claim. Under this standard, the only relevant conduct to support Barrett’s claim consisted of a single comment from one co-worker, and a “cold shoulder” from co-workers, which the Sixth Circuit found not to be severe and pervasive. Similarly, Melton did not “allege hearing a single remark that reflects discrimination directly toward her as a result of her associations with or advocacy on behalf of blacks,” and therefore did not establish actionable harassment.

The Sixth Circuit did, however, find Nickens established a genuine issue of material fact for her harassment claim because she had been threatened with physical violence for reporting racist language. Nickens was also the target of racist language directed towards her relationship with African-American co-workers, and was also told such relationship was the reason why she was not promoted. Nickens had reported such conduct to different supervisors, who failed to take action.

Jury’s Conclusion
Ultimately, a jury found in favor of Whirlpool on Nickens’ remaining harassment claim. The Barrett decision, however, is important because it clarifies the standards for employees who claim association and advocacy discrimination. The fact that an employee is outside of a protected class does not make the employer immune from a discrimination claim. Employers must be aware of the existence of such claims, and treat them with the same seriousness that they treat other claims of harassment.

John Park is an associate with Waller, Lansden, Dortch & Davis. He practices employment law, defending employers concerning allegations of discrimination, harassment, retaliation and wrongful discharge. Park can be reached at john.park@wallerlaw.com.

Supreme Court Says No Pregnancy Discrimination
by D. Wes Sullenger

The U.S. Supreme Court held, in AT&T v. Hulteen, 129 S. Ct. 1962 (2009), pension benefits calculated before passage of the Pregnancy Discrimination Act (PDA) in a way that gave less retirement credit for pregnancy leave than for medical leave generally did not necessarily violate the PDA and was protected against challenge because the benefit calculation rule in question was part of a bona fide seniority system.

The company calculated pension benefits as years of service minus uncredited leave time. In the 1960s and early 1970s, employees who took “disability” leave received full service credit for the entire period of absence while employees who took “personal” leave, such as pregnancy leave, received a maximum service credit of 30 days. In 1977, the company revised its policy to grant up to six weeks of service credit for employees on pregnancy leave. In 1978, after passage of the Pregnancy Discrimination Act prohibited treating pregnancy-related conditions less favorably than other medical conditions, the company changed its policy to give the same service credit for pregnancy leave as for other temporary disabilities. It did not, however, grant retroactive service credit to employees who had taken pregnancy leave under the prior policies.

Four female employees sued to get the additional retirement benefits they would have earned if their pregnancy leave had been treated the same as other disability leaves. The courts of appeal split on whether different benefits for pregnancy prior to the PDA violated the law. The Supreme Court held they did not.

The Supreme Court noted the pension system was a seniority system that granted additional benefits with length of service. The company’s system clearly would violate the PDA today by granting fewer benefits to pregnant women. The system, however, does not necessarily violate current law - the PDA - by giving effect to previous rules that were permissible when they were applied to pregnant employees.

Congress gave seniority systems special protection because stability is essential to their function. Thus, Title VII excludes from liability differentials applied to employees as part of a bona fide seniority system unless the differential results from an intention to discriminate against a protected class of employees. Because providing lesser benefits for pregnant employees had been held non-discriminatory by the Supreme Court before the PDA, the company’s differential treatment did not result from intentional discrimination. The seniority system could only be illegal, the Court said, if Congress had applied the PDA retroactively to behavior occurring before it was enacted, which Congress explicitly did not do.

The lesson of this case is that the law seeks stability. Where, as here, employers followed existing law, they generally will not be held retroactively liable once the law changes so long as they promptly adjust to the new law.

D. Wes Sullenger is an attorney with the Sullenger Law Office in Paducah, Ky. His practice focuses on Fair Labor Standards Act collective actions and representing individuals in discrimination and other employment law matters. He is licensed in Tennessee and Kentucky. He may be contacted at wes@sullengerlawfirm.com.

New Haven Minority Firefighters Lose in Historic Title VII Decision
by Drew Farmer

In a closely divided 5-4 decision touching politics, race, employment opportunity and industrial-organizational psychology, the Supreme Court, in Ricci v. DeStefano, 129 S.Ct. 2658 (2009), has issued a warning. Neither a good faith desire to have a diverse workforce, nor a fear of litigation by minorities, automatically amounts to a “legitimate reason” for making an employment decision.

Title VII on internal collision course
Ricci concerns what many see as two conflicting components of Title VII. Title VII prohibits “disparate treatment” of, or “intentional” discrimination against, an individual, “because of” race, color, religion, sex or national origin. It also forbids some policies that have a “disparate impact” on members of a protected group, even if the policy in question is not devised “because of” any impacted individual’s race, color, religion, sex or national origin. Private and public employers must keep both principles in mind when making policies and individual decisions.

But devising a policy, such as a hiring policy, that does not disparately impact minorities naturally requires the employer to be conscious of such factors as race. Being conscious of the races of both the potentially burdened and the potentially benefited individuals, as the disparate impact provision contemplates, may naturally lead to an employment decision because of race. The Court in Ricci said its “task was to provide guidance to employers and courts for situations when [the disparate treatment and disparate impact rules] could be in conflict absent a rule to reconcile them.”

Main facts in Ricci
A fire department had several vacancies for captain and lieutenant positions. The city contracted with a firm to design a merit-based promotional exam. Instead of an “assessment center process,” the company produced the test by performing job analyses, identifying source materials, drafting multiple choice questions, and developing oral questions. A critical feature of the test was its allocation of 60 percent weight to the written part, as required by the city’s labor contract with the firefighters’ union, which the record suggested may have exacerbated the risk of a disparate impact. The black and Hispanic pass rate for this test fell well-below the Equal Employment Opportunity Commission’s “rule of thumb” for identifying policies with a disparate impact. The test, combined with charter and civil service rules, produced a 10-person initial eligibility list for the lieutenant position that consisted of zero blacks and zero Hispanics, and a nine-person initial eligibility list for the captain position consisting of zero blacks and only two Hispanics.

The “raw racial result became the predominant” focus in the “rancorous” public debate that followed. The burdened black and Hispanic firefighters noted the disproportionate results of the exam, and they threatened to sue under Title VII’s disparate impact provision. But others, including a white, dyslexic firefighter, who had spent more than $1,000 in purchasing materials and had studied between eight and 13 hours per day over a three-month period, threatened to sue under Title VII’s disparate treatment rule unless the results were certified. After numerous meetings and hearings, the civil service board declined to certify the results.

The lower courts ruled the white firefighters who followed through with their lawsuit could not prevail. The Supreme Court not only reversed the lower courts’ decisions, but also ruled there is no need for a trial because the white firefighters have already shown a violation of Title VII’s disparate treatment provision.

The Court’s “guidance” to public and private employers
The Court returned to a theme underlying its recent race jurisprudence: the Court rejected the view, that even if the city had no malicious motive toward the whites, its refusal to certify the test results could not be seen as discrimination against those whites because of their race. Instead, “however well-intentioned or benevolent” the city’s motives, the Court found the refusal to certify the results was an adverse employment decision made because of race. In view of this threshold determination, the Court was required to consider whether a race-conscious reason may ever be a legitimate reason for making an employment decision under Title VII.

In particular, the Court considered whether an employer’s desire to avoid a disparate impact suit, which requires it to be race-conscious, is a legitimate basis to make an employment decision. The Court ruled such a desire is no defense to disparate treatment liability if the decision upsets the settled expectations of majority employees or applicants, unless the employer can meet the heavy burden of demonstrating a “strong basis in evidence that, had it not [made the decision], it would have been liable under the disparate-impact” provision. To be liable under the disparate impact provision, it is not enough that an employer’s policy has a disproportionately adverse impact; it must be shown either the policy cannot be justified by “job-relatedness” and business necessity or that other job-related and equally effective alternatives are available that would not produce the disparate impact.

Under this demanding standard, the Court concluded, the city necessarily had no chance of successfully defending the white firefighters’ suit. Although there was no dispute that the city’s exam produced a statistically significant, substantial adverse impact on blacks and Hispanics, the Court found the evidence likewise undisputed that the tests, however imperfect, were “job-related and consistent with business necessity.” Second, the Court did not believe there was any genuine reason to believe the city had a “strong basis in evidence” at the time of producing the test that there were available, equally effective and less discriminatory alternative testing mechanisms. According to the Court, neither assigning lesser weight to the written exam, nor modifying the city charter to produce a different manner of ranking scores, nor using an “assessment center process,” was an available alternative at the relevant time.

Because the Court believed the city had no “strong basis in evidence” to believe it would be liable under the disparate impact rule if it certified the test results, the Court ruled the refusal to certify the results constituted illegal discrimination because of the white firefighters’ race. The city’s fear it might be liable, even if in good faith, was not justification to upset the successful test-takers’ interest in certification and potential promotion.

Observations
The “strong basis in evidence” standard as “guidance” for reconciling Title VII’s disparate treatment and disparate impact provisions may or may not have “staying power” given the current Congress and President Obama. In the meantime, the Ricci decision could have serious practical consequences for public and private employers. Employers legitimately fear disparate impact lawsuits. Many voluntarily wish to comply with the spirit of Title VII by adopting proactive measures and policies designed to promote opportunity and diversity. Others may simply wish to please an influential political or business constituency by ensuring a certain level of minority representation. An employer in any one or more of these categories must now seek effective legal counsel regarding the implications of Ricci.

While some may scoff, the Court in Ricci did observe that its decision was not intended to discourage voluntary compliance with Title VII or affirmative efforts to achieve diversity. But there can be no doubt that the Court has made it all the more important for employers to do these things in the right manner. Knowing the right way requires understanding Ricci. For example, if the city in Ricci had paid upfront attention to well-known deficiences in standardized testing, such as adverse or disparate impact, it could have opted for a different mechanism. And under Ricci’s rationale, the white firefighters would have had no case whatsoever unless and until they developed a “legitimate expectation” by investing time, money, and commitment to the chosen test. Had the city avoided producing the test altogether, the white firefighters could not have claimed to have been victims of an “adverse action” under Title VII. Careful, well-advised employers, public and private, will thus be able to achieve their litigation-avoidance and diversity goals notwithstanding Ricci, but others may not be so fortunate.