On Nov. 5, the U.S. Supreme Court heard arguments in a case that impacts the burden of proof for employers relying on overtime exemptions under the FLSA. In E.M.D. Sales v. Carrera,[1] three sales representatives sued their employer alleging violations of the FLSA’s overtime provision. The employer’s defense relies on application of the “outside sales” exemption, which requires, in part, that the employee’s primary duty is making sales. While all circuits put the burden on defendant-employers to prove that one of the FLSA’s 34 exemptions apply in any given case, the 4th Circuit alone has held that this proof must be established by “clear and convincing evidence.” Because the statute itself does not articulate a standard, the default standard of proof for civil cases that all other circuits have applied is “preponderance of the evidence.” The Appellant in E.M.D. Sales has argued that the “clear and convincing evidence” standard is applied only when explicitly required by a statute or when the interests at stake are more important and substantial than “mere loss of money”[2] and, thus, that it should not apply here. The respondent employees, on the other hand, have argued that the judiciary has discretion to adopt a standard it determines appropriate and that the heightened standard appropriately effectuates the important public purpose of the FLSA. Given the court’s rejection in 2018 of the principle that “FLSA exemptions are to be narrowly construed” in pursuit of the remedial purpose of the Act,[3] it seems likely the court will order the 4th Circuit to apply the more typical “preponderance of the evidence” standard.

Another upcoming case to watch is Stanley v. City of Sanford, arising out of the 11th Circuit.[4] The plaintiff in that case is a former city firefighter who retired in 2018 after developing Parkinson’s disease. Unfortunately, Stanley discovered only after she retired that the city had changed its post-employment benefits policies, permitting disabled retirees to maintain free health insurance only for 24 months after retiring. (When Stanley was hired, disabled retirees were entitled to free health insurance until age 65.) In affirming summary judgment against Stanley on her ADA discrimination claim, the 11th Circuit relied on precedent holding that “a former employee who does not hold or desire to hold an employment position cannot sue over discriminatory post-employment benefits.”[5] That court doubled down on its reasoning that the definition of “qualified individual with a disability” protects only an individual who presently “holds” or “desires” a position with the employer.[6] The court explained that its position was consistent with decisions from the 6th, 7th, and 9th Circuits and declined to adopt opposite holdings from the 2nd or 3rd Circuits.[7] In deciding this case, the Supreme Court will likely weigh its penchant for a strict-textualist reading of the statute  against a policy that seemingly would allow employers a certain level of impunity to discriminate against former employees and retirees.

The court also will decide this term whether “majority-group” plaintiffs alleging workplace discrimination are held to the same prima facie case as other Title VII plaintiffs. These cases, often referred to as “reverse discrimination” cases, involve plaintiffs who are members of the majority demographic and are alleging that they suffered discrimination because they are not members of a minority group. In Ames v. Ohio Dep’t of Youth Servs.,[8] the plaintiff/appellant is a heterosexual woman who alleges that she was demoted and then fired from her job because she is not gay. In affirming the lower court’s grant of summary judgment against Ames, the 6th Circuit, relying on its own long-standing precedent,[9] held that, in addition to the normal elements of a Title VII prima facie case, Ames must also establish “background circumstances to support the suspicion that the defendant is the unusual employer who discriminates against the majority.”[10] Such “background circumstances” typically include evidence that the decisionmaker was a member of the “relevant minority group” or statistical evidence showing a pattern of discrimination against the majority group.[11] The 6th Circuit has reasoned that the additional proof requirement is appropriate to effectuate the primary purpose of Title VII, which is to “to assure equality of employment opportunities and to eliminate those discriminating practices and devices which have fostered racially stratified job environments to the disadvantage of minority citizens.”[12] Four other circuit courts, in addition to the 6th, have similarly modified the McDonnell Douglas prima facie standard for allegations of “reverse discrimination,” while two circuits have explicitly rejected the different standard, and five other circuits have simply always analyzed “majority-group” plaintiffs’ classes the same as other discrimination cases. Given the split of authority and the current Supreme Court’s textualist and conservative bent, it is not surprising that it granted cert in this case. 

E.M.D. Sales, Stanley, and Ames are just three of the cases before the Supreme Court this term that are likely to have a substantial impact on future employment litigation. Also likely to impact employment litigators is Waetzig v. Halliburton Energy Servs.,[13] which deals with the proper process for seeking to have an arbitration award vacated when the case had previously been filed, and voluntarily dismissed, in court. In Williams v. Washington, the court will decide whether state law may mandate plaintiffs to exhaust state administrative remedies before filing claims against employers pursuant to 42 U.S.C. §1983.  Additionally, in Lackey v. Stinnie,[14] the court will decide whether a plaintiff filing suit against the state can be determined a “prevailing party” for purposes of awarding attorney’s fees after receiving a preliminary injunction but having the case dismissed as moot due to the state repealing the offending law. Although not specifically an employment case, the outcome of this case is likely to impact arguments regarding who is and is not a “prevailing party” entitled to attorney’s fees in employment cases as well.

Maha M. Ayesh is currently the associate dean for academic affairs at the Lincoln Memorial University Duncan School of Law and has represented employees in employment disputes for several years.

In the March edition of this newsletter, attorney Scott Simmons previewed the case of Muldrow v. City of St. Louis, then pending before the U.S. Supreme Court. A few weeks later, the court issued its decision in Muldrow, overturning the 8th Circuit’s holding that the plaintiff alleging a violation of Title VII must, but could not, prove that her allegedly discriminatory transfer caused her a “materially significant disadvantage.”[1] Instead, the Supreme Court held that plaintiffs simply must show “some” harm respecting the terms and conditions of their employment,[2] thereby intentionally lowering the bar Title VII plaintiffs must meet to prove an adverse employment action.[3] 

The Supreme Court’s Decision

To recap, plaintiff Muldrow, a city police officer, sued the city under Title VII, alleging that she was transferred to a less desirable position against her wishes because of her sex. Muldrow’s rank and pay remained the same after the transfer, and she retained a supervisory position.[4] However, she asserted several reasons why the transfer was disadvantageous to her, including that it was less prestigious, more administrative, involved fewer networking opportunities and “important investigations,” had a less regular and desirable work schedule, and did not come with a work-provided car as her old position did.[5] 

Writing for a unanimous (in holding) court, Justice Kagan focused on the text of Title VII and specifically rejected what she considered to be the “heightened standard” that the 8th Circuit and other Courts of Appeal have placed on plaintiffs alleging claims of discriminatory job transfer. Historically, absent a change of pay or rank, it has been difficult for plaintiffs to prove that job transfer or reassignment amounts to an adverse employment action. However, the court noted that Title VII prohibits discrimination with respect to an individual’s “compensation, terms, conditions, or privileges of employment.”[6] Showing “some ‘disadvantageous’ change in an employment term or condition” made because of the employee’s sex is sufficient showing to meet the statutory requirements.[7] Citing sexual harassment precedent, the court reasoned that “[t]he ‘terms [or] conditions’ phrase … is not used ‘in the narrow contractual sense;’ it covers more than the ‘economic or tangible.’”[8]  To dismiss a case because a plaintiff cannot prove that the harm she suffered from the transfer was sufficiently “significant,” as the 8th Circuit did, “[o]r serious, or substantial, or any similar adjective suggesting that the disadvantage to the employee must exceed a heightened bar,” added requirements not borne by statute.[9] 

The court’s decision intentionally lowers the bar for proving the “adverse employment action” element of a disparate treatment claim when the alleged adverse action is transfer. Indeed, the court cites several appellate court decisions involving claims of discriminatory transfer in which the court held that the harm alleged by the plaintiff was not sufficiently significant to amount to an adverse employment action. The court then clarified that the new “simple harm” standard would necessitate different results in those cases.[10] 

Although the holding was unanimous, the three concurring decisions reflect a lack of unanimity on what the required showing of harm actually is or should be. Justice Thomas would require that a plaintiff prove “more-than-trifling-harm,”[11] while Justice Alito disparages the majority opinion for articulating a standard that is different from the Court of Appeals only in its terminology, rather than its actual substance[12]. And Justice Kavanaugh would do away with any “harm” standard; rather, he opines, “[t]he discrimination is the harm,” and the actual injury suffered is relevant only to proving damages.[13]

Impact of the Decision

Since the opinion was released in mid-April, and as of this writing, it has already been cited 49 times by federal courts of appeal and district courts. Despite Justice Alito’s misgivings, Muldrow will undoubtedly alter the way lower courts view discriminatory transfer cases, and likely other types of disparate treatment claims. 

The 6th Circuit, for example, had previously articulated the following standards for proving adverse employment action in a transfer case: “that an employee’s transfer may constitute a materially adverse employment action, even in the absence of a demotion or pay decrease, so long as the particular circumstances present give rise to some level of objective intolerability,”[14] and that “[a]n adverse employment action requires ‘a materially adverse change in the terms and conditions of [a plaintiff's] employment,’ such as a ‘significant change in employment status,’ and not including a bruised ego.’”[15] Both of these statements appear to contradict Muldrow.

In fact, the 6th Circuit has already applied Muldrow to repudiate the “intolerability” standard. In Milczak v. GM, LLC, a case brought under the ADEA, although the court affirmed the district court’s grant of summary judgment, it found that the plaintiff’s involuntary transfers and work reassignments constituted adverse employment actions where the plaintiff alleged that they impacted his opportunity for overtime, involved inadequate training, required him to supervise difficult employees, required working undesirable hours, failed to utilize his skills, and required him to work by himself.[16] Relying on Muldrow, the court held that two inter-departmental transfers constituted adverse employment actions, even while holding his allegation that he received lower raises and bonuses did not. This case demonstrates that, in the aftermath of Muldrow, courts will view discriminatory transfer claims more favorably than they did previously.    

In stating that the burden of proving that an “adverse employment action” occurred should not be onerous, the Supreme Court also likely impacted the way non-transfer discrimination cases will be analyzed in the future. The court specifically distinguished Muldrow’s case from the “materially adverse,” reasonable person standard adopted in Burlington Northern & Sante Fe Railway Co. v. White.[17] In White, the court held that Title VII’s anti-retaliation provision “covers those (and only those) employer actions that would have been materially adverse to a reasonable employee or job applicant,” meaning that “the employer's actions must be harmful to the point that they could well dissuade a reasonable worker from making or supporting a charge of discrimination.”[18] But while the anti-retaliation provisions are designed to prevent employers from taking actions to dissuade employees from asserting their rights under the law, “[t]he anti-discrimination provision ... simply ‘seeks a workplace where individuals are not discriminated against’” based on protected traits, and there is no intent to distinguish “between significant and less significant harms.”[19] It is easy to see how the holding and rationale of Muldrow can be used to establish that other employment actions short of discharge, pay decreases, and even job transfers constitute adverse employment actions giving rise to a federal discrimination claim.  

Of course, the extent of the harm suffered by employees alleging discrimination will still be an important factor in “weeding out” weak employment cases. Not only must employees still articulate “some harm” that disadvantaged them in the workplace, but, perhaps more practically, employees alleging discrimination will still need to effectively demonstrate harm in order to prove that damages are warranted. Still, the court’s decision in Muldrow sends a clear message that, in making out a prima facie case of discrimination under the federal employment statutes, the focus should be more on the discriminatory nature of the acts of the employer than on the extent of the harm suffered by the employee.

Maha M. Ayesh is the associate dean for academic affairs and an assistant professor at the Lincoln Memorial University (LMU) Duncan School of Law. Prior to joining LMU Law in 2020, she worked for several years as a plaintiffs-side employment litigator in Knoxville.

In 2016, Rag-O-Rama, a clothing consignment store, offered Sally Hall a full-time job as an area manager.  This would require her to leave a long-term job she already had, so she needed some convincing.  She says, for example, that the president and owner of the company promised that, if she took the job, she would have use of a company car, receive $5000 for prior work, and oversee a franchising division that may lead to part ownership.  Hall ultimately decided to take the job but insisted, she says, on a guarantee of one year of salary and benefits, which she further claims to have asked it to be put in writing.  When Rag-O-Rama fired her for alleged poor performance before a year had passed, she brought a diversity suit in federal court. 

Language in Question

Here is the written provision (in a document curiously titled “Communication Form”) that Hall says memorialized her one-year term of employment: 

[Hall] is reminded of the non-competition clause guidelines, as well as, obligating associate managers and higher to one full year of employment on the management team at Rag-O-Rama.[i]

Sounds weird, right?  In Hall v. Rag-O-Rama, LLC, Nos. 20-6059, 20-2090; 2021 U.S. App. LEXIS 36535 (6th Cir. Dec. 7, 2021), the Court pointed out and each party agreed, the provision was poorly drafted and “contains awful grammar.” Hall argued that it meant the company was obligated to employ her for a year or that, at least, the provision is ambiguous enough that, in light of the oral representations made to her, it could reasonably be interpreted to mean so.  The trial court and Sixth Circuit disagreed.  Despite being grammatically unsound, the Court held, the provision clearly did not give Hall a one-year term of employment.  

Court’s Analysis

The bedrock of the Court’s analysis is the strong presumption under Kentucky law that favors employment-at-will.  The parties were free to contract out of the presumption, but to do so, their negotiated contract terms would need to clearly state that intention.  The Court concluded that nothing in Hall’s employment contract did so.  Rather, on its face, and despite the misuse of the gerund “obligating” instead of the more grammatically apropos “the obligation of,”[ii] the provision speaks only to Hall’s and other managers’ obligations, not the company’s.  This is made clearer in the sentences that immediately follow the one upon which Hall relies: 

If the one full year is not met, any benefit including but not limited to used [paid time off], will be reversed/paid back to Rag-O-Rama.  If a manager separates from the company, they are prohibited from working for a direct competitor for two years.[iii] 

Moreover, elsewhere in the “Communication Form,” Hall agreed that she had reviewed the Employee Handbook and would “uphold it.” And like most such handbooks, Rag-O-Rama’s contained a general statement that employees worked at-will. 

The Court concluded that the only reasonable interpretation of the Communication Form was that Hall could be fired at the will of her employer but that if she chose to leave the Rag-O-Rama management team before a year, she was subject to certain penalties in the form of lost benefits.  The Court thus refused to consider the contract term “ambiguous,” and, in doing so, refused to consider Hall’s “parol evidence” to justify her alternate interpretation.[iv]

Hall also argued that, even if she had no contract for a term of employment, Rag-O-Rama committed the tort of fraudulent misrepresentation by inducing her to accept the job through false promises.  That tort requires Hall to show that the defendant knowingly made a false representation and that she reasonably relied on that misrepresentation. Not only did Rag-O-Rama fire her before a year, but it also failed to give her a company car, pay her the promised $5000, or put her on the path to part-ownership, as had been promised.  But the Court rejected this claim too, primarily because it held that no reasonable juror would find that Hall acted reasonably in relying on the owner’s promises when there was a written contract that did not include them.

What if Case was Decided Under Tennessee Law

So how would a case like this have fared in Tennessee? As in Kentucky and most states, Tennessee law presumes that an employment relationship is “at will,” absent a clear contract stating otherwise.[v]  Tennessee courts also would likely invoke the parol evidence rule to bar consideration of oral communications in interpreting the written contract to mean something other than what it plainly states.[vi]  The provision that Hall points to, which addresses the obligation of one year of employment, just does not appear to be obligating the company to keep Hall employed, particularly when read with the sentences right after it.[vii] 

However, a 2018 federal district court case from the Middle District of Tennessee may help a Tennessee employee with tort claims similar to Hall’s.  In Kolstad v. Leehar Distribs., LLC,[viii] the plaintiff-employee argued he was fraudulently induced to take a job through false oral promises of future equity in the company. That plaintiff alleged the torts of fraudulent inducement and promissory estoppel, both of which require proof of reasonable reliance on misrepresentations made. The defendant’s primary argument in seeking to dismiss the case was that the plaintiff could not have reasonably relied on any alleged oral promises when he subsequently received a written contract that not only confirmed the at-will nature of the employment but also asserted that the written document integrated the entire agreement between the parties.[ix]  In reversing the dismissal of the plaintiff’s claims, the Kolstad court held there was no per se rule in Tennessee that, for purposes of establishing a fraud-based tort claim, an employee cannot reasonably rely on oral promises made outside of an integrated written employment contract.[x] The Court further emphasized that the question of reasonable reliance is generally one for a jury to decide and that the written contract and its integration clause is a factor among others for the fact-finder to consider.[xi]

Conclusion

It will always be difficult for an employee to prove she has a contractual right to remain employed if there are written employment terms that do not clearly spell that out. When false promises induced the employee to take the job, she may want to consider whether a tort claim can provide relief. As the Hall case indicates, however, it will still be difficult to overcome the at-will employment preference.  Still, all was not lost for Hall, as the Court rejected the defendant’s argument that her claims were so frivolous as to require her to pay its attorneys’ fees.  Rather, the Court found, the defendant’s “poorly written contract” and alleged oral promises gave Hall legitimate bases for her claims, even if not ultimately successful ones.[xii]

Maha M. Ayesh is the Director of Experiential Learning and an Assistant Professor of Law at Lincoln Memorial University School of Law.  She has also practiced plaintiff-side employment law for over a decade with Jennifer Morton Law, PLLC in Knoxville.  Maya earned her JD from the University of Tennessee. She may be reached at 865-545-5322 or maha.ayesh@lmunet.edu.

In Redlin v. Grosse Pointe Pub. Sch. Sys., 921 F.3d 599 (6th Circ. Apr. 16, 2019), reh’g en banc denied, 2019 U.S. App. LEXIS 16748 (June 3, 2019), the Sixth Circuit Court of Appeals held the plaintiff, Debra Redlin, established genuine issues of material facts related to whether she was disciplined more harshly than a male co-worker because of her gender and/or protected activity.  Ms. Redlin was a high school assistant principal when she came under fire for warning a faculty member that another assistant principal, Mr. Flint, intended to “nail her” in his evaluation of the faculty member.  Ms. Redlin then complained to the district’s Deputy Supervisor, Mr. Dean, about gender discrimination and harassment related to the school principal’s treatment of her.  After concluding that no discrimination or harassment took place, Mr. Dean told Ms. Redlin she would be disciplined at the end of the school year unless she found another position.  Ms. Redlin came under fire again later that school year because she was aware of, had discussed with Mr. Flint, and failed to report rumors pertaining to her principal’s potentially inappropriate relationship with another faculty member.  At the end of the school year, Ms. Redlin received a poor performance review because of these incidents, was asked to resign, and ultimately was transferred to work at a middle school in the district.        

A problem for the school district and the crux of Plaintiff’s Title VII discrimination claim was Mr. Flint, the male assistant principal, was not given a negative performance review, told to look for another job, asked to resign, or transferred to another school.  He did not receive the same level of discipline as Ms. Redlin despite having also discussed and failed to report the rumors about the school principal and despite having, earlier in the year, “tipped off” a staff member suspected of being intoxicated at work that Mr. Dean intended to conduct a “spot check” on her.  What is more, Mr. Flint specifically had been told not to tell the suspected staff member and then lied to Mr. Dean about doing so. 

Also problematic for the school district—and good for Ms. Redlin’s retaliation claim—was that the superintendent who made the decision to transfer Ms. Redlin testified that he did so, in part, “because of her gender complaint” against the principal. 

Court’s Analysis

The Sixth Circuit analyzed the elements of a prima facie case of discrimination and retaliation under Title VII, as well as the evidence of pretext put forth by Ms. Redlin.  The Court held both the reassignment and the negative performance review could be considered adverse employment actions under Title VII.  Even though Ms. Redlin’s salary was not decreased as a result of the transfer, evidence showed that the middle school position ordinarily carried less pay and less prestige, and, thus, the forced transfer could be an adverse action.  Moreover, the poor evaluation rating that Ms. Redlin received could result “in serious financial and professional consequences” and therefore also could constitute an adverse employment action.[i]

The bulk of the Court’s analysis related to whether Flint was a proper “comparator” for purposes of establishing a prima facie case and pretext.  The Court compared the conduct of which both Ms. Redlin and Mr. Flint were accused and the different levels of discipline each received, finding that “Plaintiff and Flint were subject to the same standards as Assistant Principals and engaged in similar conduct with no mitigating circumstances existing to excuse or lessen the culpability of Flint’s conduct.”[ii]  The Court clarified that the factors discussed in Mitchell v. Toledo Hosp., 964 F.3d 577, 583 (6th Cir. 1992), as being relevant to determining whether  employees are “similarly situated” are not all required in all cases.[iii] The school district argued the disciplinary actions against Ms. Redlin and Mr. Flint were imposed by different supervisors, thus precluding Flint from being “similarly situated” to Redlin under the circumstances.  The Court rejected this argument, pointing out that Deputy Superintendent Dean was a supervisor over both and had the authority to impose harsher discipline on Flint but did not.           

The Court explained its pretext standard by reference to Chen v. Dow Chem. Co., 580 F.3d 394, 400, n.4 (6th Cir. 2009): “At the summary judgment stage, the issue is whether the plaintiff has produced evidence from which a jury could reasonably doubt the employer’s explanation.  If so, her prima facie case is sufficient to support an inference of discrimination at trial.”[iv]    Ms. Redlin was able to poke enough holes in the district’s explanation of why it treated her differently than Mr. Flint to allow her case to go to trial on her federal and state gender discrimination claims. 

The Court held the same evidence regarding the less favorable way Ms. Redlin was treated as compared to Mr. Flint also bolstered her retaliation claim.  In addition, Mr. Dean admitted he understood Ms. Redlin’s prior complaints about her principal as “a harassment claim based on gender.”[v] Thus, these complaints constituted protected activity for purposes of a Title VII retaliation claim.  The Court easily found evidence of causation between the protected activity and adverse action from the superintendent’s deposition testimony that his decision to transfer her “was due to Plaintiff’s ‘gender complaint’ and her warning [a staff member] about Flint’s evaluation.”[vi]

The Court therefore reversed the district court’s grant of summary judgment on the plaintiff’s gender discrimination and retaliation claims.  The Court upheld summary judgment as to Ms. Redlin’s FMLA retaliation claim.  Although Ms. Redlin alleged, she suffered adverse actions because she had taken FMLA leave for several weeks due to stress, the Court found no adverse actions resulted from her taking leave because she took leave after her poor performance review, after she was asked to resign, and after her transfer.  The Court held the complaints Ms. Redlin had about her treatment after she took leave did not rise to the level of “materially adverse actions.”[vii]

It should be noted that in at least three places in its opinion, the Sixth Circuit points out inferences that the district court impermissibly made in the defendant’s favor, contrary to the well-known dictate to consider the evidence presented at the summary judgment stage “in the light most favorable to the non-moving parties, drawing all justifiable inferences in their favor.”[viii] The district court erred, for example, in inferring from the superintendent’s testimony that he transferred Ms. Redlin “to avoid staff conflict,” when he actually said in his testimony that the transfer was because of her “gender complaint” and her warning to the staff member.  

Takeaways  

Here are a few key takeaways from this case for employment law practitioners:

• Even if an employer can point to conduct on the part of the plaintiff that seems to justify discipline, it still faces potential liability if it did not treat other similarly situated employees (even if just one other employee) the same way. 
• The determination of whether an employee is “similarly situated” to the plaintiff will always be fact and case specific. 
• Employers need to be very careful about how they react to an employee who has made a “protected activity” complaint.  Transferring the complaining employee to a less desirable position because of concerns about her getting along with the person she complained about will expose the employer to liability. 
• When reviewing a summary judgment motion, district courts should take care not to characterize the evidence in the moving party’s favor.  The non-moving party is entitled to all reasonable inferences.