Federal Appeals Court Finds That Title VII Prohibits Sexual Orientation Discrimination

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.

Workplace Investigations and Privacy of Electronic Communications

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

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

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

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

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.

Developments in Title VII and Sexual Orientation Discrimination

Many state anti-discrimination laws, such as those in Maine, Massachusetts and New Hampshire, specifically prohibit employers from discriminating against individuals on the basis of sexual orientation. To the surprise of many employers, this explicit prohibition is absent under federal law. However, recent activity in the federal courts may be changing that.

For a number of years now, the EEOC has taken the position that Title VII of the Civil Rights Act prohibits sexual orientation discrimination because it is discrimination based on “sex.” The EEOC even has a webpage summarizing the published decisions where it has taken this position in enforcement actions, including its decision in Baldwin v. Department of Transportation (July 15, 2015) where it concluded that an allegation of sexual orientation discrimination necessarily states a claim for discrimination on the basis of sex. The EEOC’s position has generally been at odds with decisions from federal courts, including the First Circuit Court of Appeals, which held in Higgins v. New Balance Athletic Shoe, Inc. (1st Cir. 1999) that sexual orientation is not a protected class under Title VII.

Now, it appears that the EEOC’s position may be gaining traction in the federal courts. For example, in October 2016, the Seventh Circuit Court of Appeals announced that its entire panel of judges would rehear arguments in a case decided earlier in the summer, in which a three-member panel held that sexual orientation was not a protected class under Title VII. Oral argument in that case, Hively v. Ivy Tech Community College, was held in November 2016. More recently, in January 2017, the Second Circuit Court of Appeals heard oral argument in Christiansen v. Omnicom Group, Inc., where questions from the Court suggested that it might be willing to reconsider whether Title VII’s prohibitions encompassed discrimination based on sexual orientation. These two appellate court developments followed activity at the district court level, where courts in Pennsylvania (EEOC v. Scott Medical Health Center, P.C. (November 2016)) and Nevada (Roberts v. Clark County School District (October 2016)) extended Title VII’s protection to discrimination based on sexual orientation and gender identity.

Obviously, the outcome of these cases remains to be seen, and it is unclear how the new Trump administration will affect the EEOC’s activities. Employers will therefore want to stay tuned in 2017 for new developments in this area of discrimination law.

Some Thoughts for Maine Employers on Marijuana Legalization

[The following comments were originally delivered at a breakfast briefing on December 7 in Portland sponsored by Clark Insurance and KMA Human Resources Consulting.]

If we assume that the Question 1 referendum recount does not change the outcome, Maine’s 128th Legislature will begin the process of hammering out a new statutory regime to accompany legalization in 2017.

At the present time, no one can reasonably predict how the post-referendum statute is going to read and whether it is going to provide clear guidance so Maine employers can navigate risk management issues and adequately address legal compliance questions.

It’s a trap to think that here in Maine we can look at how things are being handled in Colorado, for example, and use employers’ experiences there for determining how best to proceed.

Governor’s Panel Supports Maine Human Rights Commission

In response to concerns about the Human Rights Commission, Governor LePage, by Executive Order, established the Maine Human Rights Commission Review Panel on October 14, 2015. The Panel issued its Findings on September 27, 2016. The Review Panel consisted of eight members including an attorney who represents respondents before the MHRC, an attorney who represents complainants before the MHRC, a person recommended by the National Federation of Independent Businesses, a person recommended by the Maine Apartment Owners and Managers, a person recommended by Pine Tree Legal, a person with working knowledge of and familiarity with best administrative investigative practices and one person recommended by the Maine Human Rights Commission. The purpose of the Review Panel was to conduct a review of the structure and operation of the Maine Human Rights Commission to identify factors which may cause the perception of prejudice against respondents and bias in favor of complainants and to identify rules and practices that are unduly burdensome or unfair and to issue a report with recommendations.

After the Review Panel met thirteen times and did an extensive review of the Commission itself, its rules and regulations and interviewed Commissioners and staff, the Panel “unanimously agreed that the MHRC, its Commissioners and its staff are not actually prejudiced, biased or unfair towards respondents of complainants”. It went on to find that the vast majority of cases were heard or decided in favor of respondents and that there is no evidence that there is a bias or prejudice against either complainants or respondents. The Panel found that the MHRC was “devoted to its mission and desired to be fair and unbiased to all its parties”. The Panel agreed that the powers and duties of the Maine Human Rights Commission under the Maine Human Rights Act should be sufficient, well-staffed, well-funded and well-trained. The Panel made a series of recommendations including:

1. Hire a management consultant/efficiency expert. 
2. Hire more investigators to investigate. 
3. Use intake specialists. 
4. Increase education and training for MHRC staff and Commissioners. 
5. Increase number of administrative staff. 
6. Modernize computer and technology systems. 
7. Expand mediation program. 
8. Establish a dual track system and consider changing state law to require 180 days before right to sue letter issued. 
9. Improve and streamline requests from the MHRC for information, discovery and document requests. 
10. Increase and improve public relations and outreach. 
11. Commissioners should be appointed in a timely fashion. 
12. Filing fees. 
13. Increase the MHRC’s budget. 

All in all, this report established what the attorneys practicing in this area know to be the case. The Human Rights Commission does the best that it can on a very limited budget and is fair to the parties that appear before it, even though the process takes far too long.

Employees Find “Cat’s Paw” Theory to be the Cat’s Meow

Employees are continuing to find success with the “cat’s paw” theory to prove employment discrimination, evidenced by two recent federal court decisions.

The “cat’s paw” theory references an old Aesop’s fable in which a monkey tricks a cat into doing work for his own benefit: the monkey puts the cat to work pulling chestnuts from a fire, which rewards the monkey with a hot meal, but which rewards the cat with only burnt paws. In the employment law context, the theory holds that an employer may get its paws burnt – i.e. be liable for discrimination – where it is manipulated into taking adverse action against an employee based on information from a supervisor who harbors discriminatory animus towards the employee. The theory, which the Supreme Court addressed in 2011 in a USERRA case, Staub v. Proctor Hospital, therefore gives employees a tool to show that discrimination was a proximate cause for an adverse action—even where the ultimate decision-maker was not aware of a supervisor’s discriminatory intent and the supervisor did not participate in the decision.

For example, in a recent case from the federal district court in Kansas, Canfield v. Rucker, an employee escaped summary judgment on her Title VII discrimination claim where there was conflicting evidence as to whether a superior influenced her termination. The employee had alleged that the superior – who was the assistant secretary of state for the State of Kansas – showed discriminatory animus by telling the employee’s relative that she was being fired for not going to church. The Secretary of State’s Office argued, however, that the assistant secretary had merely rubber-stamped the employee’s termination and that the decision had actually been made by one of the employee’s direct supervisors, who had allegedly conducted an independent investigation into the employee’s conduct and was therefore unbiased. Echoing Staub, the court found that there was sufficient evidence in the record to show that the assistant secretary was a proximate cause for the termination – including evidence that the assistant secretary had discussed the termination with the employee’s supervisor – and rejected the notion that the alleged independent investigation by the supervisor necessarily precluded a cat’s paw claim, particularly where there was a question as to whether the assistant secretary had influenced the termination in some way.

Similarly, the Second Circuit Court of Appeals recently held in Vasquez v. Empress Ambulance Service, Inc. that an employer may be liable under a cat’s paw theory if it negligently gives effect to the retaliatory intent of a non-supervisory co-worker. In this case, the plaintiff filed an internal complaint about sexually graphic text messages that she had received from a co-worker. After the complaint was filed, the co-worker manipulated certain text messages to make it appear as though he and the plaintiff had been involved in a consensual sexual relationship, and he provided the manipulated texts to management. The committee investigating the complaint relied on the doctored messages to conclude that it was the plaintiff who was engaging in sexual harassment and terminated her employment – notwithstanding the plaintiff’s insistence that the co-worker was lying and her offer to show her own cell phone as proof, which the committee declined to view. Vacating the judgment of the district court, which had held that the co-worker’s retaliatory intent could not be attributed to the employer, the Second Circuit held that liability may be imputed to the employer if it “negligently allows itself to be used as a conduit for even a low-level employee’s discriminatory or retaliatory prejudice.” 

In the First Circuit, the cat’s paw theory has met with mixed success. For example, in 2004, the Court held in Cariglia v. Hertz Equipment Rental Corporation that an employer may be liable when a neutral decision-maker takes adverse action against an employee based on information that is manipulated by a supervisor with discriminatory animus. More recently, however, the Court held in Ameen v. Amphenol Printed Circuits, Inc. that an employee’s retaliation claim under a cat’s paw theory was “effectively declawed” where the employee failed to demonstrate any evidence of discriminatory animus.

For employers, these decisions highlight the importance of conducting thorough internal investigations and ensuring that such investigations take into account possible retaliatory or discriminatory motives of supervisors and co-workers who provide information, especially if the investigation results in an adverse action against an employee. As the above cases make clear, an employer’s failure to do so may result in it being the moral of a very unpleasant story.

The Beat Goes On: D.C. Circuit Upholds NLRB View That Orchestra Musicians Are Employees

Last week, a federal appeals court enforced a ruling by the NLRB that orchestra musicians are employees, not independent contractors. The import of the decision in Lancaster Symphony Orchestra v. NLRB is sure to reverberate in concert halls throughout the country – particularly those with small to medium-sized orchestras, which often rely on contracted players – but it also holds lessons for employers outside the music industry.

The case began in 2007, when a local chapter of the American Federation of Musicians filed a petition seeking to represent the musicians of the Lancaster (Pennsylvania) Symphony Orchestra. The Orchestra challenged the petition on the grounds that its musicians were independent contractors, not employees covered under the NLRA, but the Board disagreed. Applying a multi-factor test derived from the common law of agency, the Board found the balance of factors pointed toward employee status.

On appeal, the U.S. Court of Appeals for the District of Columbia noted that it would adopt a “middle course” in reviewing the Board’s decision and uphold it as long as it was supported by substantial evidence. In other words, the Court did not decide how it would “classify the musicians in the first instance, but only whether the Board confronted two fairly conflicting views.”

After reviewing the evidence, the Court found that several factors pointed toward employee status. For example, the Court agreed that the Orchestra exerted extensive control over the means and manner of the musicians’ performance, including controlling the musicians’ posture and limiting their conversations during rehearsals and performances. The Court also found that the Orchestra’s conductor exercised “virtually dictatorial authority” over the manner in which the musicians performed and circumscribed their independent discretion. Further pointing toward employee status, the Court noted that the musicians were in the business of performing music and their work therefore comprised a part of the Orchestra’s regular business. Although the musicians were free to perform with other symphonies, the Court found that provided only limited entrepreneurial opportunity, as the musicians could increase their income only by taking a job with another orchestra.

At the same time, the musicians’ high degree of skill, coupled with the short amount of time they were engaged by the Orchestra (approximately 140 – 150 hours per year), pointed toward the musicians’ status as independent contractors. The Court also noted that the musicians provided most of their critical tools, i.e. their instruments, but it also noted, as the Board had found, that the Orchestra supplied other necessary tools, such as music stands, chairs, and the concert hall.

Faced with these “two fairly conflicting views,” the Court deferred to the Board’s conclusion that the musicians were employees, not independent contractors. Because of the Court’s standard of review – and because the outcome of the case rested on standards that the Court admitted were “decidedly unharmonious” – the Lancaster decision is by no means a coda on the issue of employee classification. Other courts and agencies, for example, have found orchestra members to be independent contractors for purposes of anti-discrimination laws (Lerohl v. Friends of Minnesota Sinfonia), state unemployment laws (Portland Columbia Symphony v. Oregon Employment Department), and state labor laws (Waterbury Symphony Orchestra v. AFM, Local 400). Still, the Lancaster decision shows that the NLRB does not intend to slow the tempo of its pro-employee agenda.

Second Circuit Upholds NLRB’s Views on Employee Social Media Use

Last year, the National Labor Relations Board held for the first time that “liking” a comment on a Facebook page may qualify as protected activity if it relates to comments that are otherwise protected under Section 7 of the NLRA.  For a brief overview of this case, Three D, LLC, see our previous blog post here.

Now, the Second Circuit Court of Appeals has affirmed the Board’s decision. Although the Second Circuit issued its ruling as an unpublished summary order, which means that it does not have precedential effect, employers should not discount the effect that this ruling will have on the Board’s aggressively pro-employee agenda.

Three D argued on appeal that the Board incorrectly ruled that a discussion by a group of employees on Facebook was protected under the NLRA.  Although the discussion ostensibly related to the terms and conditions of employment, because it involved the issue of taxes and wages, the company argued that the employees crossed the line by incorporating obscene and disloyal comments into their discussion.  According to the company, the Board ignored the company’s legitimate interest in preventing the disparagement of its reputation, particularly where the employees’ Facebook discussion was viewable – and was in fact viewed – by customers.

The Second Circuit disagreed, however, finding that almost “all Facebook posts by employees have at least some potential to be viewed by customers” and that, even though customers did see the Facebook discussion at issue, the “discussion was not directed toward customers and did not reflect on the employer’s brand.”  Consequently, the employees’ comments – including the act of “liking” the comments – were protected and precluded the company from disciplining the employees.

The decision raises an important question for employers in the area of social media, which is:  when does an employee’s post “reflect on the employer’s brand?”  Here, even though the employees’ posts referenced the name of the company and alleged it had mismanaged its employees’ taxes, the comments were not found to reflect on the company’s brand.  The Second Circuit’s decision therefore suggests than an employee’s disparaging comments will have to be far more specific before losing protection under the Act, particularly where the comments arguably relate to terms and conditions of employment.  In other words, an employee’s online post does not become unprotected simply because it contains obscenities and is viewed by the company’s customers.  According to the Second Circuit, this conclusion simply reflects “the reality of modern-day social media use.”

Avoiding a Severance Agreement Trap

This is a true and cautionary tale and one that can be readily avoided.  You have finally completed negotiations with a problem employee you have wanted to get rid of and a severance agreement has been signed.  The terms are generous, with full salary for a number of months, plus health insurance benefits, but it was worth it to get that release signed.  No need to worry about unemployment, because surely the employee will find a new job sometime before a month’s of severance payments run out.

One small problem with the plan.  To get things over, you decided to pay the severance payment in one lump sum.  Much to your surprise, after receiving the severance payment, the employee files for unemployment.  Lo and behold it is granted for all but the week that the severance payment was made.  You say to yourself, “How can that be?”  The severance agreement explicitly states that he’s receiving x months of pay and benefits.  No matter, the Unemployment Insurance Division of the Department of Labor has a rule which states that severance payments are credited to the week that they are paid, only, no matter the amount or the period covered.  The law says that an employee should not receive unemployment for the period of time when he/she is receiving severance payments.  The State says that means only when that payment is paid, not the period of time that it covers, even if there is an explicit written agreement.

The solution is to pay the severance payments over time on the regular pay dates.  Unemployment will then be deferred until all payments have been made.  A difference that is hard to understand?  You bet.

Employer Ownership of Social Media Accounts

If you have a business with a social media footprint (and what business doesn’t, these days), ask yourself this question: "How confident are you that you own the social networking accounts through which you are building your customer base and brand recognition?"  If your answer is “confident,” you may want to think again.  A recent decision from a federal district court in Illinois shows that norms around ownership of business-related social media accounts are still evolving and remain murky at best.

In this case, Maremont v. Susan Fredman Design Group, Ltd., Jill Maremont was the director of marketing for a design firm, SFDG.  Maremont worked on social media campaigns for SFDG and established a blog that was hosted on SFDG’s website.  Maremont also created Twitter and Facebook accounts for herself, which she used for SFDG’s social media campaigns as well as for personal purposes. Often, Maremont would use her Twitter and Facebook accounts to post links to SFDG’s website and blog. At SFDG’s request, Maremont also created a Facebook page for the company, which Maremont accessed and administered through her own Facebook page.  Maremont kept all the log-in information for these social media accounts on a spreadsheet that she created on an SFDG-owned computer and saved on an SFDG-owned server.

Maremont was involved in a car accident that left her hospitalized.  While Maremont was on leave, employees at SFDG used the log-in information from her spreadsheet to access the social media accounts and continue SFDG’s social media campaigns.  SFDG was transparent about Maremont’s absence and even used Twitter to broadcast a blog entry explaining that a guest blogger would be filling in until her return.

Chagrined that SFDG was using her “personal” Twitter and Facebook accounts without her permission, Maremont filed suit against SFDG claiming violations of the Stored Communications Act (SCA).  The SCA is a federal law that prohibits unauthorized access to sites (like Facebook and Twitter) where electronic communications are stored.  SFDG argued that it had the right to access Maremont’s accounts and that it properly acquired and used the log-in information from Maremont’s spreadsheet.  However, the court found there were factual issues as to whether SFDG did, in fact, have sufficient authority to access the accounts and so ruled against SFDG on its motion for summary judgment.
 
Given the Maremont case and others like it, businesses should take affirmative steps to protect their rights with respect to business-related social media accounts.  Although companies with effective social media policies and proprietary information agreements with employees may still run into ownership issues around social media, they can likely be more “confident” of their ability to prevail should a dispute arise.

Interpreting The Scope of Protected Activity: New Guidance From the Law Court

Controlling precedent interpreting Maine's Whistleblower Protection Act tends to be infrequent, so the Law Court's decision in Hickson v. Vescom Corporation, 2014 ME 27, Docket No. WAS-13-214, issued Tuesday, makes for interesting and instructive reading.

Richard Hickson was a shift supervisor employed by Vescom Corporation, a contractor that provided private security services at the Woodland paper mill in rural Baileyville.  Hickson's termination by Vescom followed a series of events that occurred after a visit to the mill by former Maine Governor John Baldacci, State Representative Anne Perry and a party of staffers.
 
Domtar, which owned the mill at that time, enforced specific safety policies pertaining to all employees and visitors.  Hickson alleged that he was terminated after reporting violations of those policies by the visiting group and for sending an email to Governor Baldacci expressing his concerns about the safety violations he observed during the visit.  Vescom claimed that his termination was driven by a couple of non-retaliatory factors, including Hickson's failure to follow Vescom's chain of command before he sent the email, as well as two previous instances of misconduct.

Vescom appealed a Washington County Superior Court jury’s decision in Hickson’s favor, which included a substantial punitives damages component.  The central issue on appeal involved portions of a jury instruction that treated the doctrine of protected activity and the lower court's ruling on a post-verdict motion for judgment as a matter of law.  At trial, Vescom argued that Hickson's report involved no violation of law or unsafe work condition or practice that implicated them.  Vescom unsuccessfully sought to obtain an instruction that would have defined protected activity in a limited fashion, that is, under circumstances in which Hickson reported what he reasonably believed to be a violation, condition or practice created by Vescom rather than by Domtar or the visitors themselves.
 
In an opinion authored by Chief Justice Leigh Saufley, the Law Court rejected Vescom's arguments with respect to the jury instruction and affirmed the lower court's denial of Vescom's motion following the jury's verdict, which was intended to set aside the verdict based upon an interpretation of whether Hickson's conduct met the statutory standard for "protected activity."
 
Elaborating upon its holding in a prior whistleblower decision, the Law Court clarified that "neither our [earlier] opinion nor the statute limits a whistleblower claim to those reports that are exclusively related to an affirmative action of the employer."  The Court's reasoning makes clear that a plaintiff-employee's report need only involve conduct that "bears a relationship to his employment," such that it "must be connected to the employer in such a way that the employer could take corrective action to effectuate a relevant change" in the conduct.  Among the evidence introduced at trial was the fact that Vescom had adopted Domtar's safety polices at the mill verbatim, and Vescom's employees, including Hickson, were required to enforce them.

One takeaway from the Hickson decision is that recent interpretations of "protected activity" are trending in favor of a broader rather than narrower scope.  Not only is this trend appearing in connection with Maine's statute, but several federal courts have also recently interpreted the doctrine broadly in the context of whistleblower claims brought pursuant to the Sarbanes-Oxley Act of 2002.  Another takeaway, of a more general nature, is that defending adverse employment actions involving whistleblowers is usually fraught with peril. The fact that an employee need only act "in good faith" in connection with the exercise of protected activity, with a "reasonable belief" concerning the subject of his or her complaint or report, often renders it difficult to challenge an employee's status as a whistleblower through pre-trial motion practice.  Once a dispute reaches a jury, legal arguments fall by the wayside and jurors rely more and more on what they already know and how they feel to evaluate gray areas presented in the testimony and in applying the court's instructions during their deliberations.

The complete decision in Hickson v. Vescom Corporation can be read here.

Maine Human Rights Commission Changes Process to Weed Out Weak Cases

In response to significant concerns about the timeliness of handling claims and the often unnecessary drain of going through the full process of responding to meritless Human Rights Commission claims, the Commission has become more aggressive about administratively dismissing cases.  Typically, the Human Rights Commission process has been routine.  A charge comes in and it takes up to two months for that charge to be sent to the Respondent while the Commission initially processes it and drafts a document and information request to the employer.  That causes a lot of work for the employer.  In cases that appear to be particularly without merit, the Commission has concluded it simply is not fair to require that work from the employer.  As a result, we have started to see cases where rather than drafting the document or information request to the employer, the employer is receiving a copy of the complaint and a copy of a request for more information to the employee.  If the employee is unable to provide additional information to support the claim, the claim will be administratively dismissed without the employer ever doing anything.  This is a significant potential upgrade to the process, and hopefully, it will be used extensively by the Commission.

In my recent discussions with the Chief Investigator, it is clear that this is being done because of the recognition that the vast majority of cases are not meritorious and the Commission needs to focus its limited resources on cases which truly need to be investigated.

NH Court Provides Guidance on Title VII Third-Party Retaliation Claims

The U.S. Supreme Court has made clear that a third party may bring a retaliation claim against an employer under Title VII, broadly interpreting the law’s prohibition of any employer conduct that might dissuade a reasonable worker from making or supporting a charge of discrimination.  It can be difficult for an employer to anticipate when disciplinary or other adverse action against a third party may lead to a retaliation claim, because the Court could not draw a line demarking who is in and out of this protected group.  The Court has provided some guidance, offering that termination of a close family member will almost always meet the standard while a lesser action against a mere acquaintance will almost never suffice, which leaves a wide swath in the middle.   A recent decision of the District of New Hampshire illustrates the difficulty of knowing when a third party is permitted to bring a retaliation claim.

In EEOC v. Fuller Oil (2014 DNH 20, decided 1/31/14), the Court permitted a retaliation claim to go forward where the terminated employee was within “the gray area between a close friend and a casual acquaintance.”  The employee was terminated within a few weeks after her co-worker served notice on the company of an intent to file a sexual harassment claim, which the employee claimed was retaliatory.  The two women had worked together at another company, the co-worker helped the terminated employee get her job at Fuller Oil, they exchanged cards on special occasions, socialized together outside of work, displayed photos of them together outside work, and were viewed by the employer as being friends.  As a result, the Court declined to dismiss the case at an early stage in the proceedings.

When taking adverse action against an employee who is connected to someone involved in a discrimination claim, employers must be mindful of the potential retaliation claim.  As it depends on the circumstances, employers must carefully examine the nature of the relationship between the two employees and consider whether the adverse action could be viewed as dissuading a reasonable worker from making or supporting a charge of discrimination.  If it could, extra care must be taken to ensure the legitimacy of the adverse action.

Are Employment Contracts Always Terminable At the Will of Either Party?

In states where employment is generally considered “at-will,” many employers take it as a foregone conclusion that employment contracts are terminable at the will of either party.  But is this conclusion always correct?  The answer is no – sometimes, an employer can unwittingly defeat the presumption of “at-will” employment by incorporating language into its employment policies and manuals that restrict the ability to discharge an employee.

A recent case from the Federal District Court in Massachusetts highlights this issue and provides helpful guidance to employers on drafting effective personnel manuals.  In Ray v. Ropes & Gray, LLP, an associate at a law firm argued that a personnel manual created an implied employment contract and rebutted the presumption that his employment was at-will.  In assessing the associate’s claim, the court noted that, under Massachusetts law, a personnel manual may create an implied employment contract.  However, the court explained that a personnel manual does not create an implied contract where:

1. The employer retains the right to unilaterally modify the manual’s terms;
2. The terms of the manual are not negotiated;
3. The manual states that it provides only guidance regarding policies;
4. The manual does not specify a term of employment; and
5. The employee does not sign the manual to “manifest assent.”

In this case, the court found that the personnel manual contained nothing more than the “customary blandishments about fair treatment and equal opportunity.”  The manual did not specify a term of employment and included a disclaimer that it did not amount to a contract.  In addition, the manual explained that its terms were non-negotiable and that the law firm retained the right to modify or withdraw its policies at any time.  Given these disclaimers, the court concluded there was no reasonable basis to regard the manual as an enforceable contract.

For employers, the Ray decision serves as a good reminder to review all existing personnel policies and manuals to make sure they are consistent with the expectation – and presumption – that employment is at-will.

A Rocky Rollout for the Individual Mandate

It should be news to no one that the implementation of the Affordable Care Act (“ACA”) requirement that individuals without employer sponsored health insurance must be covered by minimum essential coverage (the individual mandate) has been anything but seamless.  Both federal and state health insurance exchanges have experienced dramatic crashes that have severely limited the ability of individuals to evaluate and apply for online coverage.  Although improvements are reported daily, along with additional difficulties, it is clear that those responsible for the implementation of health care reform are well into Plan B, which includes increased reliance on in-person and written applications for coverage.

Even as enrollment numbers improve, other hurdles loom ahead. Will insurers receive the information needed to enroll a successful applicant into the correct coverage option? Will the system of subsidies and credits be properly applied to the individual’s premium? Will sufficient numbers of younger, and presumably healthier, individuals sign up for coverage so that their premiums will help offset the higher costs of covering older or less healthy individuals, who are eagerly taking advantage of the opportunity to obtain coverage that might not previously have been available.

As a result of this muddled rollout, the deadlines facing those without employer-sponsored coverage have been softened. Originally, such individuals had to sign up for coverage by March 31, 2014. No penalty would be assessed so long as an individual did not have coverage for three consecutive post-2013 months. In other words, an individual who lost employer sponsored coverage had three months within which to find coverage under another employer’s plan or sign up through an exchange. An individual without employer sponsored coverage on January 1, 2014, who signed up for coverage that did not go into effect until after March 2014, would face a penalty for exceeding this short coverage gap exception.

More recent HHS guidance changes this rule. Now, no penalty will be assessed if the individual just signs up for individual coverage by March 31, 2014, even if the individual did not have coverage for January, February, and March 2014.  Remember, however, signing up for coverage by the March 31, 2014 deadline does not mean that the coverage itself is retroactive.  If the individual decides to wait until March to sign up for coverage but then incurs medical expenses in January or February 2014, those medical expenses will not be insured. They will remain the individual’s responsibility.

FMLA: Discipline Unrelated to Leave Is Not Retaliatory

The New Hampshire Federal Court issued a recent decision affirming that an employer may take disciplinary action against an employee who has taken FMLA leave, provided the information is accurate and unrelated to the leave.  The Court in Ameen v. Amphenol Printed Circuits, Inc. (Opinion No. 2013 D.N.H. 177) granted summary judgment for the employer against an employee claiming he was terminated in retaliation for taking FMLA leave, and noted “an employee may not immunize himself from being discharged for reasons unrelated to the FMLA simply by taking leave under that statute.”

The employee had taken approved leaves following the birth of his child, but upon his return it was reported that he had been violating the company lunch and break policy by the manner in which he had punched in and out for breaks.  An investigation determined he was receiving a fifteen minute paid break per day in violation of company policy and it had been occurring for two years.  The supervisor who decided to terminate the employee had no knowledge of the FMLA leave.  The Court declined the plaintiff’s invitation to apply the cat’s paw theory of imputing motive up the chain to that decision maker because the individuals who made the initial report and reported the results of the investigation produced accurate information.  The Court concluded that if it allowed accurate reporting of employee misconduct unrelated to the FMLA conduct to count as evidence of retaliatory animus, an employer’s ability to discharge an employee for reasons unrelated to the protected FMLA conduct would be “significantly constrained.”

Had the facts been different – for example, if the information reported to the decision maker was inaccurate – the result would likely have been different.  While this opinion affirms an employer may discharge an employee for legitimate reasons unrelated to protective FMLA activity, the decision maker must take care to ensure the accuracy of the information that serves as the basis for the adverse employment action and that it is truly unrelated to the leave.