Federal Appeals Court Finds That Title VII Prohibits Sexual Orientation Discrimination

Friday, April 21, 2017

In a groundbreaking decision, the Seventh Circuit Court of Appeals ruled earlier this month that Title VII of the Civil Rights Act prohibits discrimination on the basis of sexual orientation. The Seventh Circuit’s decision in Hively v. Ivy Tech Community College of Indiana is significant because it is the first decision by a federal appeals court to hold that sexual orientation discrimination is prohibited under Title VII.

Hively v. Ivy Tech Community College of Indiana

The fundamental question at issue in Hively was whether Title VII’s prohibition against discrimination “because of sex” encompasses discrimination on the basis of sexual orientation.  As noted in our previous posts on this topic (here and here), federal courts have historically answered “no” to that question and excluded sexual orientation discrimination from the protections of Title VII.   Indeed, last summer, a three-member panel of the Seventh Circuit concluded that its prior precedent precluded Hively’s claim for sexual orientation discrimination under Title VII and affirmed a lower court ruling dismissing her case.  In reaching that conclusion, however, the three-member panel questioned the continuing vitality of its previous decisions, particularly given the evolution of the law since Title VII was first passed in 1964, including the Supreme Court’s 2015 decision in Obergefell v. Hodges, which extended constitutional protections to the right of same-sex couples to marry.  As the three-member panel observed, its prior precedent created a “paradoxical legal landscape in which a person can be married on Saturday and then fired on Monday for just that act.” 

Given this landscape, the full panel of the Seventh Circuit voted to rehear argument in Hively and, in its 8-3 decision this month, reversed its position.  The court gave two reasons for its decision.  First, applying a “comparative” method, the court explained that Hively’s primary allegation was that she would not have been terminated if, instead of being a woman, she were a man married to a woman,.  According to the court, this allegation described “paradigmatic sex discrimination” because it alleged differing treatment “because she is a woman.”  The court went on to explain that the line between gender stereotyping claims (which the Supreme Court recognized in Price Waterhouse v. Hopkins) and claims based on sexual orientation is not only “gossamer-thin,” it “does not exist at all.”  Second, the court explained that its decision was guided by a line of cases beginning with the Supreme Court’s 1967 decision in Loving v. Virginia, which prohibited discrimination against a person because of the protected characteristic of the one with whom he or she associates.  According to the Seventh Circuit, because a change in the sex of one partner would change the alleged outcome in this case, that change revealed that the alleged discrimination rested on impermissible “distinctions drawn according to sex.”

The Seventh Circuit’s decision provides new critical context for actions at the Eleventh and Second Circuits, both of which recently held that their prior decisions barred claims for sexual orientation discrimination under Title VII.  Should one or both of those circuits rehear argument and affirm their positions, it will create a circuit split that will certainly find its way to the Supreme Court.

Following Maine's Minimum Wage & Tip Credit: An Update for Employers

Thursday, April 6, 2017

The evolution of Maine wage payment laws continues apace, and a raft of legislative bills are currently undergoing scrutiny in Augusta.   Back in November, Maine voters increased the state minimum wage to $9 per hour and approved phasing-out the “tip credit” by increasing the minimum direct service wage for tipped employees to $5 per hour in 2017 and increasing it by an additional $1 per hour each year until it reaches the state minimum wage.   On Wednesday, April 5th, the Joint Standing Committee on Labor, Commerce, Research and Economic Development held public hearings on a list of bills seeking to modify -- or reverse recent changes to -- Maine’s minimum wage law.

Even though voters ultimately cast their ballots and approved changes to the minimum wage by referendum, fierce debate continues in Augusta as to how Maine businesses ought to be impacted and what modifications, if any, should be made.  High attendance at the April 5 hearing served to demonstrate the contentiousness of the topic.   Representatives from Maine People’s Alliance and Maine Small Business Coalition lined the halls in support of upholding the referendum, while the Maine Restaurant Association, Maine Chamber of Commerce and others business groups rallied members in opposition.   State House metal detectors got a workout – the Legislature saw its busiest public hearing of the year, with testimony extending into the morning hours on Thursday.

During the hearing, the committee heard testimony on the following bills:

  • LD 774, "An Act To Create a Training Wage." This bill provides a minimum hourly training wage of $1 above the federal minimum wage for a person who is 20 years of age or under and is a student at a secondary or postsecondary school.
  • LD 775, "An Act To Prohibit the Minimum Wage from Exceeding the New England Average." This bill provides that the minimum wage may not exceed the average minimum wage paid in the New England states, as determined by the Maine commissioner of labor.
  • LD 778, "An Act To Eliminate the Indexing of the Minimum Wage to Inflation." This bill eliminates the indexing of the minimum wage to inflation, which under current law is scheduled to begin on January 1, 2021.
  •  LD 831, "An Act To Base the Minimum Wage on a New England State Average and To Restore the Tip Credit." This bill provides that starting Jan. 1, 2018, the minimum hourly wage is the average minimum hourly wage in the New England states of New Hampshire, Vermont, Massachusetts, Connecticut and Rhode Island on July 1 of the previous year, as determined annually by the Maine commissioner of labor. It also restores the tip credit.
  • LD 971, "An Act To Exempt Certain Employees from the Minimum Wage Laws." This bill exempts from the minimum wage laws an employee who has not attained 18 years of age, is claimed as a dependent on the income tax return of another person or is employed by a seasonal employer.
  • LD 991, "An Act To Establish a Minimum Wage for Minors." This bill establishes a minimum hourly wage for minors that is 75% of the minimum hourly wage established for persons who are 18 years of age and older.
  • LD 1005, "An Act Regarding Minimum Wage Increases." This bill eliminates the $1 per hour increases in the minimum wage scheduled for each of the next three years and eliminates increases in the minimum wage based on the increase in the cost of living starting in 2021. It also restores the tip credit to the minimum wage laws.

In addition, testimony was heard on the following bills all seeking to restore the "tip credit" used by Maine’s restaurateurs:

  • LD 673, "An Act To Restore the Tip Credit to Maine's Minimum Wage Law." This bill restores the tip credit to the minimum wage laws
  • LD 702, "An Act To Restore the Tip Credit to Maine Employees." This bill also restores the tip credit in the minimum wage laws.
  • A third bill, LD 1117, "Resolve, To establish the commission to study the phase-out of sub-minimum wage," seeks to study the phase-out of the tip credit and have the commission report back to the full Legislature with recommendations in 2019.

Any business operating in the state with at least one employee, including all public and private employers, is automatically covered by Maine labor laws and needs to comply with the updates. The new minimum wage laws went into effect on January 1, 2017, although employers were given a one month grace period to comply with changes in the tip credit or the minimum salary requirement for overtime-exempt workers.

Ultimately, the committee did not vote on the issue on Wednesday, April 5. Still, with further changes inevitably on the horizon, employers should remain attentive to the fate of all bills pending in Augusta. We will offer updates as things progress between now and the end of the legislative session.

Workplace Investigations and Privacy of Electronic Communications

Tuesday, March 28, 2017

The situation is common enough: an employee is alleged to have engaged in misconduct and, as part of its investigation, the employer decides to search the employee’s company-issued computer for any relevant documents and communications.   One might expect that because the company owns the computer, anything discovered on the computer would be fair game.  That expectation, however, can sometimes lead employers astray – and straight into a claim under electronic privacy and anti-hacking statutes like the Stored Communications Act (SCA) and Computer Fraud and Abuse Act (CFAA).

Federal Statutes

The SCA and CFAA are federal statutes that protect against the unauthorized access of electronic communications and information. Under those statutes, employers have considerable room to monitor and access communications on their own networks and equipment.  The SCA, for example, generally exempts communications that are transmitted or stored on an employer’s proprietary electronic communications system.  That exemption does not apply, however, to communications that are stored outside of the company’s system, such as emails stored in an employee’s Gmail or Yahoo! account. Consequently, an employer that accesses an employee’s private email account risks violating the law – regardless of whether a company-issued computer allowed the employer to do so (for example, because the password for the employee’s private email account was stored in the computer’s internet browser).

Cases to Discuss

As a case in point, in Lazette v. Kulmatycki (N.D. Ohio 2013), a supervisor used a former employee’s smartphone to access the employee’s personal email account after her employment ended. The employee had been issued a smartphone during her employment and had been told that she could use it for personal matters.  When the employee left, she returned the smartphone and believed that she had deleted her Gmail account from the phone.  In fact, the Gmail account was still accessible on the phone and the supervisor, rather than deleting the account, used it to read the employee’s opened and unopened email—a total of 48,000 emails over an eighteen-month period.  After becoming aware of the supervisor’s actions, the employee changed her Gmail password and then sued claiming violations of the SCA, among other things.  The employer sought to dismiss the complaint, but was unsuccessful. The court found that the mere fact that the supervisor had used a company-owned device to access the employee’s email account did not grant him the authority to do so.  It also found that the employee’s inadvertent failure to delete the account from the phone did not mean she had given implied consent to access the account, particularly where she believed she had deleted the account and was unaware of the possibility that others might be able to access it. On the issue of consent, the court also noted that even if she had been aware that her emails might be monitored, that implied consent would not have been unlimited, given that “random monitoring is one thing; reading everything is another.”

More recently, in Owen v. Cigna (N.D. Ill. 2016), a court held that an employee had a viable claim under the SCA where her employer allegedly used her work computer to access emails from her personal email account. The employee had left her job and had filed a charge of discrimination for sexual harassment.  In responding to the charge, the employer attached emails that it had obtained from the employee’s personal email account, but which the employee claimed had been obtained without her consent. The employer argued that it was authorized to access the emails, but the court dispensed with this argument quickly and found that although the employer had the undeniable authority to access the employee’s work computer after she stopped working, it was not authorized to access the employee’s personal email account.

Both of these cases serve as important reminders for employers to consider the potential privacy of electronic communications when performing workplace investigations. Although there are certainly steps that employers can take to reduce any expectation of privacy that employees may have in their electronic communications at work, employers must also recognize that mere ownership of a computer, tablet, smartphone, or other electronic device does not provide carte blanche access any account an employee accessed on the device.

Maine Law Court charts Different Course for Age Discrimination

Friday, March 24, 2017

It is not often that the Law Court interprets the Maine Human Rights Act (MHRA) differently from its federal counterparts.  In a recent decision, though, the Law Court did exactly that – it held that the standard for evaluating claims of disparate impact age discrimination under the MHRA is different from the standard under the federal Age Discrimination in Employment Act.

Scamman v. Shaw's Supermarkets, Inc.

Unlike disparate treatment claims, which are based on an employer’s alleged intentional discrimination against an individual based on a protected status, disparate impact claims arise where an employee alleges that he or she is a member of a protected class that is disproportionately affected by a practice of the employer.  In  Scamman v. Shaw’s Supermarkets, Inc., several employees filed a charge of discrimination with the Maine Human Rights Commission alleging that they were terminated by Shaw’s as part of a reduction in force that disproportionately affected older employees.  

Shaw’s explained the reduction in force was necessitated by cost-cutting business imperatives.  The investigator analyzed the employees’ claim using a burden-shifting framework that federal courts apply to disparate impact claims under Title VII and which requires an employer to produce evidence that its practice is justified by “business necessity.”  Ultimately, the Commission determined that there were reasonable grounds to believe that Shaw’s discriminated against the employees based on a disparate impact theory, and the Commission voted unanimously to adopt the investigator’s analysis and recommendation. The employees then sued in Superior Court, but Shaw’s removed the case to the U.S. District Court.  

Once there, Shaw’s raised a threshold issue: is the “business necessity” framework the correct standard to apply to disparate impact age discrimination claims under the MHRA, or does the “reasonable factor other than age” (RFOA) standard from the ADEA apply instead?  This was a threshold issue because the parties agreed that if the RFOA standard applied, Shaw’s would be entitled to judgment as a matter of law.  Unlike the “business necessity” framework, the RFOA standard does not inquire into whether an employer’s practice constitutes a business necessity; rather, once an employee shows evidence of a policy or practice with a disparate impact, an employer simply must show that the challenged practice is based on a reasonable factor other than age.  The result is that the scope of disparate impact liability is narrower under the ADEA than it is under Title VII. 

Because there was no controlling precedent, the District Court certified to the Law Court the question of which standard applies to disparate impact age discrimination claims under the MHRA.  After reviewing the text of the MHRA and finding it unclear, the Law Court deferred to the Commission’s interpretation of the statute and its conclusion that the “business necessity” standard is the applicable standard.  The Law Court found that this was a reasonable interpretation based on the legislative history of the MHRA and the fact that, despite being amended multiple times, the statute has never contained an RFOA provision like the ADEA.  And, while the Law Court acknowledged that it often looks to federal law to interpret the MHRA, it observed that it has done so only when the “federal and state laws are substantially identical,” which the Law Court found was not the case here given the absence of any RFOA provision in the MHRA.

Take home for Employers

Where policies are challenged under the MHRA on the grounds that they disproportionately affect older workers, it is now clear that employers seeking to justify those policies will not be able to do so simply by showing that the impact is based a reasonable factor other than age.  What remains to be seen is the effect that this decision may have on other potential differences between the MHRA and the ADEA, such as the applicable standard for causation – “mixed-motive” or “but-for” – in cases of intentional age discrimination.  The take-home for employers is that claims for disparate impact age discrimination under the MHRA will now be evaluated using a burden-shifting “business necessity” framework, not the more generous “reasonable factor other than age” standard under the ADEA. Stay tuned.    

Third Circuit Court Offers Employers Insight into FMLA and ADA

Wednesday, March 22, 2017

The Third Circuit Court of Appeals recently waded into the waters of the Family Medical Leave Act of 1993 (FMLA) and the Americans with Disabilities Act (ADA), finding that an employer did not violate the FMLA or ADA where it legitimately believed an employee was misusing FMLA leave, and terminated the employee as a result.

In this case, Capps v. Mondelez Global, LLC, the employee had a medical condition that caused arthritis in his hips. The employee had hip replacement surgery and afterwards he was approved for intermittent FMLA leave to address residual pain and occasional flare-ups.  After the employee returned from one of his intermittent leaves, the employer discovered through an anonymous source that the employee had been convicted for DUI on one of the days that he had been out on leave. The employer terminated the employee for violating its dishonesty policy after he failed to provide sufficient documentation supporting his FMLA leave.

The employee sued claiming violations of the FMLA and ADA. As for the employee’s FMLA retaliation claim, the court found that the claim failed because the employer was able to establish that it terminated the employee for misusing his FMLA leave and for being dishonest about it, and because the employee could offer no evidence to suggest that the employer did not honestly hold that belief.  The court also noted that there was no evidence showing that the employee had ever been denied intermittent FMLA prior to the employer’s discovery of his DUI conviction, nor was there any evidence of discriminatory animus on the part of the employer prior to that time. As for the employee’s FMLA interference claim, the court found that claim failed as well where there was no evidence showing that FMLA benefits had actually been withheld from the employee.

Turning to the ADA, the employee argued that his request for intermittent FMLA leave was protected by the ADA and that his employer failed to accommodate his disability.  The court acknowledged that, under some circumstances, a request for FMLA leave may also qualify as a request for a reasonable accommodation. However, in this case, the court found that even if the employee’s request for intermittent FMLA leave could be construed as a request for a reasonable accommodation, there was still no evidence to suggest that he was denied requested leave at any point.

So what insights does this case offer to employers?  

First, it highlights the importance of distinguishing between an employee’s request and utilization of FMLA leave, and an employee’s conduct or activities while on leave.  An employee clearly may not be disciplined for the former, but this case confirms that the FMLA does not provide an absolute shield for the latter, particularly where misuse of FMLA leave is concerned. Second, the decision highlights the interplay between the FMLA and the ADA and underscores the importance of evaluating leave requests individually and in context.

First Circuit Revives Class-Action Overtime Lawsuit over Absent Comma

Friday, March 17, 2017

Sometimes, small things can turn out to be very big.  Take punctuation, for instance.  Just recently, the First Circuit Court of Appeals issued a decision that proves the point: finding that an absent comma created an ambiguity in Maine’s overtime law, the court reversed summary judgment against several truck drivers and revived their class-action lawsuit against Oakhurst Dairy for unpaid overtime.

At issue in the court’s decision is the meaning of an exemption in the overtime law that covers employees whose work involves the “canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution” of certain food products.  The specific issue revolves around the meaning of “packing for shipment or distribution,” which the parties had disputed during summary judgment proceedings at the District Court. The drivers argued that the phrase refers to the single activity of “packing,” which may be done for either “shipment” or “distribution.”  Because the drivers were not involved in “packing” goods, the drivers argued that they did not fall under the exemption and were therefore entitled to overtime. Oakhurst argued, however, that the phrase “packing for shipment or distribution” encompasses two distinct activities – “packing for shipment” and “distribution” – each of which is a stand-alone exempt activity.  Because the delivery drivers were engaged in the “distribution” of goods, Oakhurst argued that the drivers were exempt and therefore not entitled to overtime. After considering these dueling interpretations, the District Court agreed with Oakhurst’s interpretation and granted summary judgment in its favor.

The drivers appealed and presented the First Circuit with a single question, which was: what does the phrase “packing for shipment or distribution” really mean?  To resolve this question, the court looked first to Maine precedent construing the exemption.  Although Oakhurst pointed to a Superior Court decision construing the exemption in its favor, the First Circuit declined to give it any weight as it was not binding authority.  So, the court turned to the text of the exemption and addressed several canons of interpretation offered by the parties.

For its part, Oakhurst argued that its interpretation was supported by the rule against surplusage, which treats each word in a statute as having an independent meaning so as to eliminate redundancies.  Explaining that “shipment” and “distribution” are synonyms, Oakhurst argued that its interpretation was the only way to avoid making the words “shipment” and “distribution” redundant.  Oakhurst also pointed to the convention of using a conjunction to indicate the last item in a series and argued that the lack of a conjunction before “shipment,” and the presence of one before “distribution,” indicated that “distribution” was the last item in the series. Finally, Oakhurst argued that, although a serial comma before “distribution” and after “shipment” would have conclusively established its interpretation, the serial comma was missing because the drafting manual for the Maine Legislature expressly advises drafters not to use it (advice that certainly did not come from E.B. White or his Elements of Style).

Countering Oakhurst’s interpretation, the drivers argued that “shipment” and “distribution” are not synonyms and that their use in connection with “packing” creates no redundancies.  Digging further into the text of the exemption, the drivers pointed out that it is comprised of a series of verbal nouns that ends with “packing” and that, because “shipment” and “distribution” are the only non-verbal nouns in the series, the doctrine of parallel usage implies that those terms serve the same grammatical role by modifying “packing.” As for the missing serial comma, the drivers argued that the Legislature’s drafting manual is not “dogmatic” and that, if the Legislature had actually intended “distribution” to be a distinct activity, the missing comma would give rise to the very ambiguity that the drafting manual was intended to avoid.

Acknowledging  that there was “no comma in place to break the tie” between the parties’ interpretations, the First Circuit turned to the exemption’s purpose and legislative history. However, the court found these provided no more clarity than the text. Finding itself back where it began, the court fell back on yet another rule of construction, which instructs that where a provision in the state’s wage and hour laws is ambiguous, the provision should be construed liberally to further the remedial purpose of the statute.  Applying that rule of construction in this case, the court concluded that the ambiguity favored the drivers’ more narrow interpretation of the exemption.

Update on Title VII and Sexual Orientation Discrimination

Thursday, March 16, 2017

Updating our previous post on this issue, the Eleventh Circuit Court of Appeals recently affirmed the dismissal of a complaint alleging sexual orientation discrimination under Title VII.   In its 2-1 decision in Evans v. Georgia Regional Hospital, the court explained that its prior precedent foreclosed the ability to bring a claim for sexual orientation discrimination under Title VII.   The court looked specifically to its decision from 1979 in Blum v. Gulf Oil Corp., where it held that Title VII did not prohibit the discharge of an employee based on his homosexuality.  Although the plaintiff in Evans argued that Blum was not binding, the court concluded otherwise and further noted that every other circuit that has addressed the issue so far has also found sexual orientation discrimination not actionable under Title VII (including the First Circuit in Higgins v. New Balance Athletic Shoe).

In affirming the dismissal, the court distinguished between sexual orientation discrimination and discrimination based on an individual’s failure to conform to a gender stereotype.  The court acknowledged that, in the latter case, discrimination based on gender non-conformity is sex-based discrimination.   This so-called sexual stereotype theory was first articulated by the Supreme Court in its 1989 decision in Price Waterhouse v. Hopkins.  However, the Eleventh Circuit found that while Price Waterhouse confirmed that gender non-conformity claims may be brought under Title VII, that decision did not squarely address whether Title VII prohibits sexual orientation discrimination.  As a result, the Eleventh Circuit found that Price Waterhouse did not justify departing from its prior precedent in Blum.

The majority opinion in Evans was accompanied by a strong dissent, which essentially argued that when an employee alleges discrimination because of sexual orientation, the employee necessarily alleges that he or she has been discriminated against for failing to conform to the employer’s image of what men or women should be, and that this is discrimination “because of sex.”

Given the split decision in the Evans case, there is a chance it may be reviewed by the entire panel of the Eleventh Circuit.  And, in light of recent developments in other circuits, it very well may be that the issue is headed for the Supreme Court.