Employee Fired After He Made False Complaints Of Sexual Harassment Is Not Entitled To Jury's Award Of More Than $2 Million

2/6/12

Overview
A Los Angeles police officer is not entitled to a jury's award of more than $2 million in a retaliation case under state law because he did not show that the city acted with retaliatory animus when it fired him after he made complaints of sexual harassment that it concluded were false, a California Court of Appeal ruled January 23, 2012.
 
In overturning the employee's $2,134,762 award under California's Fair Employment and Housing Act, the court relied on federal case law for guidance in deciding the novel question of “whether an employee may be disciplined if his or her employer concludes that the employee has fabricated a claim of sexual harassment, or whether such a complaint is insulated from discipline even where, as here, the employer determines that it was fabricated.” The court noted there was no California case law addressing this unique issue.
 
The court noted that federal case law addressing this issue had held that an employer will not be liable for discriminatory or retaliatory discharge if it honestly believed the fired employee engaged in workplace misconduct, even if that belief later proves to have been wrong.  The court found the reasoning of these federal cases to be sound and adopted it in this case.
 
Court held: 
“We thus conclude that in appropriate circumstances, an employer may discipline or terminate an employee for making false charges, even where the subject matter of those charges is an allegation of sexual harassment,”
 
 (Joaquin v. City of Los Angeles, Cal. Ct. App., 1/23/12)
 
Factual Background:
Terminated and Reinstated
The employee was terminated by the LAPD while in training for promotion to sergeant, after an administrative tribunal—the Board of Rights—found that he initiated a false personnel complaint against his supervisor. The Board of Rights finding followed a similar finding by the department's Internal Affairs division.
 
The complaint by the employee alleged that the supervisor, who had some supervisory authority over the employee in the LAPD's Central Traffic Division (CTD), targeted the employee for retaliation after he rebuffed the supervisor’s sexual advances. According to employee, the supervisor asked him if he would “like to go out some time.” When he declined, the employee alleged, the supervisor asked him not to tell anyone he was gay.
 
The employee further alleged that despite his refusal of the supervisor's advances, the supervisor later approached him in the gym and told him, “You have nice arms.” The employee also alleged that the supervisor would show up for no reason at the employee's traffic stops and attended a CTD basketball game that the employee was participating in. The employee alleged that the supervisor approached him after the game to ask if he was going to take a shower.
 
The employee first challenged his termination in state court. In that first proceeding, a state trial court ruled that the Board of Rights’ findings were against the weight of the evidence and ordered the employee's reinstatement.  According to the appellate court, the state trial court acknowledged that the issue was one of witness credibility and that the board's determination was “entitled to a presumption of correctness.”
 
Retaliation Litigation
The employee then brought a second state court proceeding, charging the city with retaliation in violation of FEHA.  The employee alleged that upon his reinstatement, he was transferred to the LAPD's Valley Traffic Division, making his commute to work longer and that this was in retaliation for his filing of a sexual harassment complaint against the supervisor. 
 
The jury found in favor of the employee on his retaliation claim and awarded him $128,722 in past lost wages and benefits, $706,040 in future lost wages and benefits, $900,000 in damages for past mental and emotional suffering, and $400,000 in damages for future mental and emotional suffering.
 
The city appealed, arguing that the employee did not present substantial evidence on the second element of a FEHA retaliation claim—i.e., that the challenged job action was motivated by a retaliatory intent. Noting the “unusual set of facts,” a unanimous panel agreed.
 
Court’s Decision:
Not Terminated Just Because He Made A Complaint
The court noted the employee was correct in his contention that there was a direct causal connection between his sexual harassment allegations against his supervisor and the decision to terminate him, but that the employee was not fired “merely because” he reported sexual harassment.
 
The court held that the employee was fired because it was concluded that he had fabricated the accounts of sexual harassment.  The court held:
 
“In other words, the Board of Rights recommended termination not because [the employee] reported sexual harassment, but because it concluded that he had done so falsely.”
 
This fact pattern presented a unique scenario that had not been addressed by a California court.  The issue was whether a false report of discrimination or harassment may lawfully be a basis for discipline.  The court looked to federal case law interpreting Title VII of the 1964 Civil Rights Act that had addressed this novel issue, including the 8th Circuit’s decision in Richey v. Independence, (8th Cir. 2008). 
 
In Richey the court held that:
“The normal rule in discrimination cases is that if an employer honestly believes that an employee is terminated for misconduct, but it turns out later that the employer was mistaken about whether the employee violated a workplace rule, the employer cannot be liable for discrimination.”
 
The court cited other federal case authority that rejected the Equal Employment Opportunity Commission's contention that an employer's good faith belief that an employee lied in making sexual harassment allegations is not enough to justify adverse employment action against the employee.
 
Adopting this federal court precedent in this case, the court held the key question then becomes whether the employee can prove that the employer's stated belief that the employee lied was a pretext for retaliation.  The court found the employee in this case could not make such a showing.
 
Evidence Presented
The employee argued that pretext was shown by the following evidence: the supervisor wanted him disciplined for making a sexual harassment complaint; that Internal Affairs decided to investigate his alleged fabrication only after the supervisor threatened to complain to the Inspector General; and, that various persons and bodies that investigated the employee’s alleged fabrication overlooked significant proof in his favor.
 
All of those arguments relied on the premise that the Internal Affairs investigation was biased against him and that bias infected the investigation by the Board of Rights.  The court noted that contrary to the employee’s arguments, the Board of Rights had conducted its own separate investigation in this matter and did not rely on the Internal Affairs investigation.  The court noted that:
 
“Because the Board of Rights hearing is a de novo proceeding, in the absence of direct evidence to the contrary, the jury could not reasonably have inferred that any animus that allegedly infected the Internal Affairs investigation also infected the Board of Rights proceeding. ...And, on the record before it, the jury could not reasonably have concluded that the Board of Rights itself harbored any retaliatory animus towards [the employee].”
 
Furthermore, according to the court, the employee also failed to show that the supervisor had any influence over the Internal Affairs investigation, even though there was evidence that the supervisor threatened to go to the Inspector General if Internal Affairs did not investigate.

Summary and Important Points
1.  What are an employer’s options when an employee makes a false complaint of unlawful harassment against their supervisor or co-worker?  Can you fire them for making such a false complaint? This case addresses this unique issue. 
 
2.  The court ruled in favor of the employer in this case where the evidence supported a finding that the reason for termination was the employee’s false complaint as verse an intent to retaliate against the employee for having made the complaint.
 
3.  This decision stands for the proposition that reporting alleged sexual harassment does not insulate an employee from discipline if the employer has an honest belief that the sexual harassment allegations are fabricated.
 
4.  Although this case is a step in the right direction, all employers should carefully examine the results of their investigation to make sure they can establish they have a good faith basis for discharging an employee for making a bogus discrimination claim or lying during an investigation of such a charge.  You should consult with competent employment law counsel before making such a decision.

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The California Department of Labor Standards Enforcement’s

Modifications And Additions To Its Frequently Asked Questions For Employers On California’s New Wage Notice

1/27/12

NOTE: For those who attended the Milipitas and Santa Maria Breakfast Briefings please review this information closely as it was not available at the time of the Briefings this week.

On January 23, 2012, the California Department of Labor Standards Enforcement (DLSE) announced on its website [1] modifications to two of its Frequently Asked Questions (FAQs), and added 10 new FAQs and answers, concerning the wage notice required by the California Wage Theft Prevention Act (WTPA) in Labor Code section 2810.5.

Overview
California employers may be excused for their frustration at the challenge of complying with a new requirement that mixes statutory and non-statutory provisions (including a provision eliminated in the legislative process, but later imposed by the agency in its template form), and Frequently Asked Questions (FAQs) which include a designated “best practice” not included in the authorizing statute.
 
The key additions, changes, and advice contained in the January 23 modifications to the WTPA’s wage notice provision’s FAQs are:

• The DLSE considers it to be a “best practice” for employers to provide the wage notice not only to new hires and to those employees the information for which as specified in Section 2810.5(a)(1)(A)-(H) has changed, but also to all current employees. (FAQ 2.)
• Compensation data that cannot be included on the notice itself may be set forth on sheets attached to the wage notice, as long as the attachments are clearly described in the notice. (FAQs 12 and 18.)
• A reminder that notice of modifications to information relating to workers’ compensation carrier may be provided by the postings already required by Labor Code sections 3550-3551, if posted within seven days of the change (FAQ 22.)
• In wage notices to new hires, employers need only include rates of pay that are ascertainable in dollar amounts (“known and determinable”) at the time of the notice.  An employee’s eligibility for payment by a “regular rate of pay” (a distinct and important categorization) may be designated on the notice as a rate “which is subject to upward adjustment when other specified forms of wages are earned during the applicable pay period”. (FAQ 19.)
• The DLSE form and FAQs continues to interpret an employment agreement relating to wage information as being either written or oral only, but not both written and oral. (FAQ 21.)

Modified FAQs
The January 23 modifications were made to two existing FAQs (Nos. 2 and 12).

FAQ 2 (“Who is covered by the law?”) was modified to add two sentences to the end of the answer (emphasis added):

“Subject to the foregoing exceptions, as of January 1, 2012, employers are required to provide the written notice to each employee ‘[a]t the time of hiring.’  The notice requirement was intended to apprise employees of basic information material to their employment relationship, and to ensure employees are given up-to-date employment information through notice of any changes to that information; as such, it would be a best practice for employers not only to provide the notice to new hires, but also to current employees.”

This FAQ answer does not clearly distinguish between employees covered by Section 2810.5 and all employees.  This comment is also at odds with the agency’s previous actions on this subject.  In its late December version of the FAQs, the DLSE suggested that the notice should be given to all affected employees by including in its answer to FAQ the sentence: “The notice should be given to all current employees and then to all new employees at the time of hire.”  In reaction to employers’ stated concern about the overreach of this comment, the DLSE on Tuesday, January 3, revised the FAQs to delete the quoted sentence.

FAQ 12 (“What procedures should be followed if an employee has multiple pay rates?”) was modified to add two new sentences to the end of the answer:

“The notice must include ‘[t]he rate or rates of pay and basis thereof whether paid by the hour, shift, day, week, salary, piece commission, or otherwise, including any rates for overtime, as applicable.’ (Labor Code 2810.5(a)(1)(A)).  The Legislature’s inclusion of language referring to ‘the rate or rates of pay’ contemplates that several rates may apply to an employment relationship and thus all applicable rates must be provided in the notice (or may be attached as a separate sheet to the notice with a clear reference in the notice to the attachment, indicated in the space for Rate(s) of Pay’).”

The modified answer is somewhat inconsistent with the response to FAQ 7 (the notice must be on its own form), but indicates that a notice may have attachments at least on this subject, if the attachments are references in the notice itself.

New FAQs
In addition, the DLSE’s January 23 modifications added FAQs 16-25.

FAQ 16 allows an employer paying covered employees on a piece rate basis to revise the form to reflect the piece rates.  Alternatively the employer could attach a sheet to the form providing the piece rate sheets, as long as the attached sheet was clearly referenced in the “Rate(s) of Pay” space on the form.

FAQ 17 requires an employer paying prevailing wages on a public works project to include in the notice “all rates applicable to such work that are known or can be determined at the time the notice is to be provided.” “It would be insufficient to simply state ‘appropriate prevailing wage’ or ‘variable prevailing wage’ when providing the rate(s) of pay for purposes of the notice.” (Emphasis in original.)
 
FAQ 18 and its answer should be reviewed in their entirety.  The answer reviews the meaning of the terms “pay” and “wages.”   The answer directs that “ ... if a rate is fixed by hour, commission, piece rate, or a combination thereof, such rates must be provided in terms of a money value and basis for earning such rate. If the rate is ascertained by some other method of calculation, basic information specifying the calculation must be provided and an employer must include all rates of compensation in the notice. An employer need only nominally and briefly provide each type of the pay and rate an employee will receive. For example, specific detail of formulas need not be included, as long as accurate information stating the basis of pay is provided, e.g. ‘$10.00 per hour, plus commissions of ___% of sales closed during prior month.’ Any additional reference to or incorporation of another document or attachment must be specifically described on the notice.”  (Emphasis in original.)
 
FAQ 19 and its answer should also be reviewed in their entirety.  The answer discusses the significant differences in legal meaning between the terms “rate or rates of pay,” and the “regular rate of pay.”  Its key points:

• “A single fixed pay rate does not constitute a variable rate of pay simply because it results in potentially different amounts of total wages earned over different pay periods. But if an employee is to receive different types of pay (e.g., hourly wage plus commission), the rate for each type and basis of pay must be provided in the notice. If any part of the pay (wage) is ascertained by some other method of calculation, then basic information for calculating that rate must be provided in the notice.”  (Emphasis in original.)
• “Section 2810.5 also requires inclusion of ‘any rates for overtime, as applicable.’ Simply stating the multiplier for overtime (e.g., 1½ and/or double the regular rate) does not specify an overtime rate.”  (Emphasis added.)
• “When providing information regarding applicable overtime rates, only rates known and determinable must be specifically provided to the employee.”  (Emphasis added.)
• “If the employee receives other types of pay (other than the hourly pay such as supplementary commissions, bonuses, or piece rates), such other pay must be included in determining “the regular rate of pay” for purposes of overtime compensation. In such cases, it is sufficient that an employer provide the minimal overtime rate based upon a multiplier of 1½ or double times the hourly rate and also indicate that such specified overtime rate is subject to upward adjustment when other specified forms of wages are earned during the applicable pay period. This is allowable because statutory overtime is based upon a
• “regular rate of pay” which includes all wages earned during the period of time for which overtime compensation is determined as applicable under statute. Only in this context may an overtime rate vary and not be subject to ascertainment for a specific overtime rate.”  (Emphasis added.)

FAQ 20 (“When does a ‘hire’ occur for purposes of providing the required notice to an employee?”) explains when the notice must be provided to new employees.  The FAQ answer states that if an employee’s contract of employment commences on the employee’s first day of work, with the employee first providing services that day (a unilateral employment contract), the notice may be given that day.  However, for those employees hired under a bilateral employment contract (an offer of employment is made by the employer and the employee accepts it), according to the DLSE, the obligation to provide the notice arises at the time of hire which, in this circumstance, the DLSE deems to be on the employee’s acceptance of the employer’s offer, which will frequently be days or longer before the employee actually commences providing services.  The advice on the time by which notice must be given concludes with: “Thus, the employer must provide the notice to new hires reasonably close in time to the inception of the employment relationship, whether it is created under a unilateral contract (commencing only upon performance by an employee) or a bilateral/executory contract (commencing upon acceptance of an offer of employment made by an employer).” (Emphasis added.)  The answer provides no explanation of the term “reasonably close in time.”
 
The answer to FAQ 20 concludes with a paragraph that notes:  “...even where an employment contract in fact does not exist, an obligation to pay wages (minimum wages and overtime) may still exist if the employment is otherwise established under statute or regulation under applicable definitions contained in the Labor Code and/or Industrial Welfare Commission orders.”  The answer then refers to a 2010 California Supreme Court case (Martinez v. Combs).  The Martinez case disallowed claims for unpaid minimum or overtime wages of strawberry farm workers whose employer – the grower – had declared bankruptcy.  The farmworkers had also sued individuals and business entities with whom their now-defunct employer had contracted for strawberries.  The Supreme Court held that the farmworkers’ claims against the third-party individuals and entities were barred, as those persons and entities were not the farmworkers’ employers, as defined by the Industrial Welfare Commission’s Wage Order No. 14.  By citing Martinez in this FAQ answer, the DLSE seems to be suggesting it will renew the arguments of the unsuccessful plaintiffs in that case to expand aggressively the scope of an “employer” who may be held liable for unpaid minimum and overtime wages.
 
FAQ 21 (“Why does specification of a written agreement require that a box be checked to indicate whether it is written or oral? Does this information affect the employment at-will doctrine?”), in its answer, suggests that the contract of employment (which is included in the “WAGE INFORMATION” section of the DLSE template) can be only either written or oral, and cannot be both written and oral (“...either a written agreement or oral agreement exists.”).  Employers may wish to indicate on their notice form that, as far as the initial rate of pay is concerned, the employment agreement may be both written and oral (by checking both boxes), and that, to the extent the communication regarding the employee’s original rate of pay may be deemed to be an agreement to pay the employee that rate, the employer reserves the right, at its discretion, to modify that rate.
 
The answer to FAQ 21 also contains the DLSE’s comment that the requested employment agreement information “has nothing to do with ‘at will’ employment.”  However, for those employers employing at will, their wage notice provides another opportunity to remind the employee of that standard.

FAQ 22 and its answer note that changes to information about an employer’s worker’s compensation carrier are required by Labor Code sections 3550 and 3551 to be posted and to be given to new employees.  Accordingly, if these statutes are complied with within seven days of any change to that information, no separate wage notice is required, per 2810.5(b)(2) (“another writing required by law”).
FAQ 23 explains why an employer representative is required to sign the wage notice.
 
FAQ 24 and its answer clarify that the “regular pay day” information need not be given by reference to specific pay dates,  but should be expressed as “regular day(s) of the month when wages will be paid ... in addition to the measure of time between pay days (e.g., semi-monthly, monthly, bi-weekly, weekly, etc.). Examples include: 1st and 15th of every month; 1st and 2nd Friday of every month, each Friday of every month.”
 
FAQ 25 and its answer confirm that the California wage notice need not be given annually, as is the requirement of the New York wage theft law.
 
Are the FAQs enforceable?
The FAQs, first provided less than two business days before the January 1, 2012 effective date of the new statute, have been a source of continuing aggravation to affected California employers because of their late promulgation, and their uncertain status as enforceable administrative directions.  The FAQs are not regulations adopted after the comprehensive review and comment process for rulemaking required by the California Administrative Procedure Act (Cal. Gov’t Code § 11340 and following).  Hence, one view of the consequences of a failure to comply with the FAQs (including following what they term as the “best practice of providing notice to all current employees”) is that it constitutes a violation only of advice from the agency responsible for administering the new law, not a violation of a validly adopted regulation, or a statute.

[1] http://www.dir.ca.gov/dlse/Governor_signs_Wage_Theft_Protection_Act_of_2011.html
 
Summary and Important Points
What’s A California Employer To Do?
 
Recommendations based on the January 23 updated FAQs:
 
1.     Make sure the responsible persons in the enterprise know what wage information must be included in wage notices to new hires, and in what form the information must and may be presented.
 
2.     Ensure either that the enterprise’s payroll department, or its outside payroll processing service, is thoroughly familiar with the wage information that must be provided on itemized wage statements (pay stubs).
3.     Confirm that the enterprise’s methods of electronic service and acknowledgement of notices are state-of-the-art, and that proof of receipt and acknowledgement can be produced to an agency or court, if required.

4.     Consider asking temporary agencies with whom the enterprise contracts to provide advance written confirmation that the agency (not the enterprise) will provide timely and complete wage notices for agency employees provided to the enterprise by the agency.

5.     When in doubt as to the interpretation or enforceability of the WTPA, or if an employee challenges the enterprise’s compliance with the Act, consult with experienced employment law counsel.

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Increasing Levels of Workplace Retaliation Reported in National Survey

The following article is by Littler attorney Mr. Kevin O’Neill. 
Please see my Summary and Important Points below.

1/20/12

The 2011 National Business Ethics Survey® was published last week by the Ethics Resource Center. Over the last two decades this biannual report has become a mainstay for tracking trends, assessing data and gathering research on the state of ethics in the American workplace. It has also served as an effective gauge for monitoring hot-button issues in the employment law field. This year's survey continues that trend.
The Survey, which asked nearly 4,700 U.S. employees about the culture of their workplaces, presented a mixed bag of ethical findings. The good news:

• The overall percentage of observed ethical misconduct went down (45% of respondents stated they had witnessed misconduct in 2011, compared to 49% in 2009 and 55% in 2007).
• The percentage of employees who reported ethical misconduct that they witnessed increased to a record high of 65%.
• Employees working for organizations that have implemented effective ethics and compliance programs feel less pressure to compromise standards, see less misconduct, report misconduct more frequently, and are not as likely to suffer retaliation for reporting.

However, other data reflect ominous trends that may portend a gathering storm of liability exposure in the employment context. Among negative indicators outlined in the report:

• Retaliation against employee whistleblowers rose sharply. More than one in five employees (22%) who reported misconduct say they experienced some form of retaliation in return, up from 15% in 2009 and only 12% in 2007.
• The percentage of employees who perceived pressure to compromise standards in order to do their jobs rose from 8% to 13%.
• 34% of employees said their managers do not display ethical behavior, up from 24% in 2009.

These are alarming statistics, when viewed in light of the recent expansion of whistleblower protections afforded through such legislation as the Dodd–Frank Wall Street Reform and Consumer Protection Act (providing monetary awards for whistleblowers who provide incriminating information to the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC)) and U.S. Supreme Court decisions such as Thompson v. North American Stainless, LP, 131 S. Ct. 863 (2011) (whistleblower protection provided to third party considered to be within the "zone of interests" sought to be protected by Title VII). Indeed, the variety of ways in which the NBES respondents perceived retaliation reads like a top ten list of conduct that gives rise to actionable claims of retaliation. Included in the list of examples of retaliatory conduct were the following:

• 64% of respondents said they had been excluded from decisions and work activity by a supervisor or management;
• 64% allegedly suffered verbal abuse by a supervisor or someone else in management;
• 46% perceived a cut in hours or pay; and
• 32% believed they had been demoted.

What does this suggest in the employment law context? A perfect storm – workers are witnessing violations of company rules but they are feeling pressure not to say anything. Coming on the heels of an economic meltdown in the U.S., this combined tension between increased reporting and widespread perceived retaliation presents an environment ripe for disaster. According to Patricia Harned, president of the Ethics Resource Center, which conducted the survey, "There's every reason to believe . . . that things will take a bad turn." In order to combat the increased risk of liability that invariably accompanies such growing areas of concern, organizations will need to remain vigilant in their commitment to ethical practices and compliance.
 
Summary and Important Points
1.  The number of retaliation claims filed by employees continues to rise every year.  The Last available EEOC statistics indicate that over 36% of all charges of employment discrimination filed include an allegation of retaliation.  As this article highlights, this growth in retaliation claims does not appear to be ending anytime soon.  We will be discussing two very significant 2011 U.S. Supreme Court decisions at the Breakfast Briefings that have further expanded an employee’s ability to make retaliation claims against employers.  
2.  Training supervisors and managers on what retaliation is and how to respond when an employee makes a complaint has never been more important.  The following is a list of issues to train managers and supervisors on how to avoid a retaliation claim:

• Know the right response. Beyond "knowing what not to do," managers must know how to react when they receive a complaint, report or serious expression of concern from an employee. The actions taken in those crucial, first few moments can dramatically affect every subsequent step in the process. Train managers in how to react to a complaint in the way that best responds to a given employee concern, while still also protecting the long term interests of the employer.
• Do not tolerate poor management. As many other studies have shown, how direct supervisors act and behave will determine how employees perceive the organization's ethical culture. Employees who see supervisors breaking the rules, treating people unfairly, being abusive, etc., will take those observations and conclude that the entire organization operates in a similar unethical manner. Studies indicate that when the perception of the employer’s ethical culture is weak, misconduct is much more prevalent. Supervisors and managers who do not abide by the employer's values must be quickly reformed or exited from the organization.
• Conduct fair investigations before reacting. Make sure that performance management practices remain fair and based solely on fact, especially after an employee has made a complaint.  Remember, an employee that has engaged in protected activity by making a complaint is not immune from discipline.  However, if an employee is having performance issues after making a complaint, it is critical that you train supervisors to ensure they are creating detailed and accurate documentation about the performance problems taking place.
• Stay cool. Avoid any expression of hurt, anger, or resentment about an employee's complaint. If a complaint is directed at you, remain professional and above the fray. Do not argue, fight back or try to dissuade them from their version of events. Attempt to clarify any perceived misunderstandings, but be just as vigilant in seeking out your human resources staff and letting them know what has transpired.
• Establish, post and publicize strong internal reporting procedures. The more transparent and visible these procedures are, the less likely is it that they will be disregarded or unfulfilled. Push hard at all levels to ensure employees have confidence in the organization's internal reporting systems.

3.  Finally, just a reminder, the three elements of a retaliation claim are:

(i)  The employee engaged in protected activity;
(ii)  The employer subjected the employee to an adverse employment action; and
(iii)  A causal link existed between the protected activity and the adverse action.

4.  Although the filing of a charge of discrimination is an obvious example of “protected activity,” there are many other types of protected activity you need to be aware of, including but not limited to, the following:

• Filing a workers compensation claim
• Alleging harassment or discrimination
• Speaking out against harassment or discrimination against other employees
• Taking or requesting protected leave, such as family or medical leave
• Filing a claim with a state or federal agency
• Acting as a spokesperson on behalf of other employees regarding terms and conditions of employment
• Attempting to organize a union
• Participating as a witness on behalf of another employee’s claims of violations before a state or federal agency
• Requesting workplace accommodations based on the employee’s disability status
• Raising issues regarding workplace safety
• Whistle blowing variety activity

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Employees Must Be Given Clear, Actual Notice of FMLA Policies

2/13/12

The following article is by Littler attorney Eric Stevens.
Please see my Summary and Important Points below.

Ambiguity and confusion can be costly. In Thom v. American Standard, Inc., the Sixth Circuit Court of Appeals awarded liquidated damages in a case "arising from confusion as to when an employee should return to work after his leave."1
 
The plaintiff, an employee who had worked for American Standard for 36 years, went on medical leave under the federal Family and Medical Leave Act (FMLA) to undergo surgery for a non-work related injury. The company granted his leave request and informed him, in writing, that his leave would extend until June 27. Following his surgery, the plaintiff began recovering faster than expected by his doctor. His doctor provided him with a note releasing him to light duty beginning May 31 and to full duty on June 13. As a result, the plaintiff attempted to return to work on May 31, which was before the expiration of his approved FMLA leave. He was not allowed to return to work at that time because the company did not permit employees with non-work related injuries to perform light duty work temporarily after FMLA leave.
 
On June 14, the company contacted the plaintiff to ask why he had not returned to work the previous day. The plaintiff explained that he was suffering from increased pain and would return to work on June 27, as originally scheduled. The plaintiff received a doctor's note explaining his condition and delivered it to the company on June 18. When he delivered the doctor's note, he was informed that each day between June 13 and June 17 was as an unexcused absence and, consequently, his employment was terminated.
 
The FMLA makes it unlawful for an employer "to interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided" by the FMLA.2 The plaintiff's complaint alleged that the company interfered with his FMLA rights by terminating his employment. The company argued that, based upon the method by which it calculated FMLA leave eligibility, the plaintiff actually exhausted his FMLA leave eligibility on June 13.
 
The FMLA allows an employer to select one of four methods for calculating leave. One such method is the "rolling” method, which calculates an employee's leave year “backward from the date an employee uses any FMLA leave." The "calendar" method is another way to calculate leave, and provides for 12 work weeks of leave per calendar year. In this case, under the calendar method, the plaintiff's FMLA entitlement would have run through June 27, as the company originally instructed him. However, the company's position was that it used a "rolling" method and, therefore, the plaintiff's FMLA leave was exhausted before his employment was terminated.
 
The district court granted summary judgment for the plaintiff on his FMLA interference claim and awarded him $99,960 in attorney's fees, $2,732 in costs, and $104,354 in back pay.
 
The company appealed the district court's decision, contending it had the right to decide which method of FMLA calculation would apply to its employees and that notice of the method should be imputed to the plaintiff because the union that represented him was aware of the calculation method. The appellate court found no merit in this argument and, agreeing with the district court that the company never actually informed the plaintiff of this policy, held that "employers should inform their employees in writing of which method they will use to calculate the FMLA leave year."3 The court went on to say that clear written notice ". . . is consistent with the principles of fairness and general clarity."4
 
It was not helpful that in this case the company originally informed the plaintiff that his leave would expire on June 27 (under the calendar method) and did not notify the plaintiff of the change in the calculation method to the rolling method until it was defending the lawsuit.
 
Yet, the appellate court did more than just affirm the district court's ruling – it also granted the plaintiff liquidated damages, finding that the company did not establish that it acted both reasonably and in good faith – two elements that must both be proven to avoid liquidated damages. The court noted that there is "a strong presumption in favor of awarding liquidated damages that are double the amount of any compensatory damages."5

1 Thom v. American Standard, Inc., Case No. 09-3507, 2012 U.S. App. LEXIS 1166, at *1 (6th Cir. Jan. 20, 2012).
2 29 U.S.C. § 2615(a)(1).
3 Thom, 2012 U.S. App. LEXIS 1166, at *9.
4 Id.
5 Id. at *17.
 
Summary and Important Points
Background Information:
1. The FMLA permits a prevailing party to recover liquidated damages equal to the amount of damages awarded for lost compensation, plus interest, unless the defendant can prove that it had acted in good faith in believing that its act or omission was not a violation of the FMLA. See 29 U.S.C. § 2617(a)(iii).
2. Employers may select one of four options for determining the 12-month period in which an employee may use their twelve weeks of FMLA leave:
· the calendar year;
· any fixed 12-month "leave year" such as a fiscal year, a year required by State law, or a year starting on the employee's "anniversary" date;
· the 12-month period measured forward from the date any employee's first FMLA leave begins; or
· a "rolling" 12-month period measured backward from the date an employee uses FMLA leave.
 
Comments On This Case
1. Although the decision does not make new law, it serves as a good reminder to employers of several important lessons. Employers must clearly communicate, in writing, the method used to calculate FMLA leave. If your current FMLA LOA policy does not clearly address which method you are using you need to address this issue immediately.
 
2. An employer may change the method of calculation, but it must promptly and clearly notify its employees of such a change and that change should not result in employees being deprived of accrued FMLA eligibility. Additionally, employers must make sure they accurately calculate an employee's FMLA eligibility before advising the employee.
 
Changes For 2012
1. All employers, whether covered by the FMLA or not, need to at least review yearly their leave of absence policies in the employee handbook to ensure they are up to date and comply with applicable state and federal law.
 
2. Effective January 1, 2012, California’s S.B. 299, prohibits employers from refusing to maintain and pay for health insurance coverage (HIC) for the duration of pregnancy disability leave (PDL) which may last up to four months (17.3 weeks). Employer must continue HIC on same terms as if the employee is still at work for the full period of PDL. If the employee does not pay their share of the premium (if applicable) they can be provided COBRA.
 
3. All FMLA covered employers need to revise and update their FMLA related LOA policies and medical leave of absence policies for employees who are not eligible for FMLA to address the S.B. 299 mandated changes.
 
4. All Employers with less than 50 employees, but more than 5 employees will also need to revise your medical leave of absence policies to address the S.B. 299 mandated changes.

NLRB Strikes Down Arbitral Class Action Waiver

The following article is by Littler attorney Henry Lederman. 
Please see my Summary and Important Points below.

1/13/12

In D.R. Horton, Inc., 357 NLRB No. 184 (Jan. 3, 2012), the National Labor Relations Board, by a 2-0 vote, found that an arbitration agreement requiring "as a condition of employment" all employees to agree to waive the right to bring class or collective actions in any forum violated Section 8(a)(1) of the National Labor Relations Act (NLRA), which guarantees the rights of employees to engage in concerted, protected activity. The decision was issued by Board Chairman Mark Pearce and Member Craig Becker on January 3, 2012, the final day of Member Becker's controversial recess appointment. Republican Board Member Brian Hayes was recused and did not participate in deciding the merits of the case. The decision has potentially wide-ranging implications for employers who have required employees to agree to arbitrate their disputes and at the same time waive the right to pursue their claims on a class or collective basis. The decision, however, also leaves open the possibility that agreements that are not "imposed" on employees may yet be enforceable, even if those agreements ban class or collective actions in any forum.

The D.R. Horton case involved a home builder with operations in more than 20 states that compelled each new and current employee to enter into an agreement requiring that an arbitrator hear only an employee's individual claims without any authority to fashion a proceeding as a class or collective action or to award relief to a group or class of employees in one arbitration proceeding.

The decision held that "an individual who files a class or collective action regarding wages, hours, or working conditions, whether in court or before an arbitrator, seeks to initiate or induce group action and is engaged in conduct protected by [the NLRA]." Thus, according to the decision, by requiring employees as a condition of employment to forego their rights to such concerted activity, D.R. Horton violated the NLRA, for as the Board stated, "When, as here, employers require employees to execute a waiver as a condition of employment, there is an implicit threat that if they refuse to do so, they will be fired or not hired."

Deciding that the D.R. Horton agreement violated the NLRA, the Board then addressed whether its decision was consistent with the language and goals of the Federal Arbitration Act, which, as the decision noted, "manifests 'a liberal federal policy favoring arbitration agreements.'" Ordinarily, arbitration agreements must be enforced in accordance with their terms. Nonetheless, the Board held that its decision did not conflict with the goals of the Federal Arbitration Act because, principally, the right to bring a class or collective action was not merely a procedural right, but rather was a substantive right guaranteed by the National Labor Relations Act as a form of concerted protected activity. Thus, the Board purported to distinguish the United States Supreme Court's recent decisions in Stolt Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010) and AT&T Mobility v. Concepcion, 131 S. Ct. 1740 (2011), which held, respectively, that arbitrators do not inherently have the right to preside over class proceedings and that it was permissible for arbitration agreements to ban such proceedings because arbitration is designed to provide an informal, simple mechanism for the resolution of bilateral disputes and is ill-suited to "bet the company" class proceedings.
The Board's decision suggested that employment class actions, as distinguished from those involving consumers (as in the AT&T Mobility case), are limited in scope, and thus, "class-wide arbitration . . . is far less cumbersome and more akin to an individual arbitration proceeding." As to the Federal Arbitration Act's goal to provide a speedy, inexpensive alternative dispute resolution mechanism, enforcement of the Board's rule, the decision states, would have limited effect in employment cases because in employment cases, "the class is so limited in size." The Board decision, however, did not address the many national and even state-wide class proceedings that involved hundreds, thousands, or even millions of employees. For example, the recent highly publicized United States Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), involved a certified class of approximately 1.5 million employees, a matter overlooked in the D.R. Horton decision.

In closing, the Board purported to "emphasize the limits of our holding and its basis," suggesting that very few arbitration agreements would actually be affected by its decision and that its ruling only applies to "employees" as defined by the National Labor Relations Act, a definition that in many instances applies to a more narrow range of workers than the entire employee population of any company. Thus, for example, individuals who may be entitled to overtime because they do not hold an "exempt" position still may be considered non-employee supervisors under the NLRA.

Also, expressly not addressed is the effect of clauses in arbitration agreements that allow employees to opt out of the program without fear of retaliation. Repeatedly in the decision, the Board made clear that it was addressing arbitration agreements that required a waiver of the right to engage in concerted activity as a mandatory condition of employment. Many arbitration agreements, however, contain clauses allowing employees to "opt out" of the program. Under such agreements, employees may choose to refrain from participation in the arbitration process, leaving them with the right to go to court, file or participate in a class action and avoid arbitration entirely. Thus, the decision states:

Rather, we hold only that employers may not compel employees to waive their NLRA right to collectively pursue litigation of employment claims in all forums, arbitral and judicial. So long as the employer leaves open a judicial forum for class and collective claims, employees' NLRA rights are preserved without requiring the availability of class-wide arbitration. Employers remain free to insist that arbitral proceedings be conducted on an individual basis. (Emphasis added.)
 
Accordingly, so long as employees have the right to opt out of the arbitration agreement, it may be argued that their decision not to do so was not imposed upon them as a condition of employment, much less would opting out be a ground for termination of their employment.

The Board expressly stated that it was not reaching the "more difficult question[] of . . . whether, if arbitration is a mutually beneficial means of dispute resolution, an employer can enter into an agreement that is not a condition of employment with an individual employee to resolve either a particular dispute or all potential employment disputes through non-class arbitration rather than litigation and court." As a result, employers that have permitted employees to opt out of arbitration may be advantaged by the purported narrowness of the Board's holding.

It seems unlikely that the Board's 2-0 decision on this important arbitration question will be the last word on the issue. The employer in this case has a right to seek review by the U.S. Court of Appeals. Likewise, any other employers who are found guilty of an unfair labor practice by the Board on the same grounds would have a similar right to seek review by the Court of Appeals. Meanwhile, however, it appears likely that the precedent established in this case will be followed by the Board's acting general counsel and administrative law judges in similar cases.

In addition to the unusual last-minute timing of the Board's decision, which issued just prior to Member Becker's exit, the case is attracting considerable criticism as a result of the 2-0 vote by an agency that by law is comprised of five members. This might raise an issue under the Supreme Court's recent decision in New Process Steel v. NLRB, 130 S. Ct. 2635 (2010), where the Court held that the NLRB needs a quorum of three members to rule on a case. In addition, the decision appears contrary to a firmly-established tradition of the NLRB against establishing Board precedent without the votes of at least three members of the Board. This principle was reaffirmed by two Democratic members of the Board as recently as 2010 in Hacienda Resort Hotel and Casino, 355 NLRB No. 154 (Aug. 27, 2010).

Summary and Important Points
1.  There have been several very important court decisions regarding the use of arbitration in the employment context in the last year.  The H.R. Horton decision is another case employers must consider in drafting and revising their arbitration provisions.  We will be reviewing these important arbitration decisions from 2011 as part of the upcoming Breakfast Briefing series. 
2.  This is an important and disturbing decision that will certainly not be the last word on the impact of the National Labor Relations Act (NLRA) on the use of arbitration agreements requiring "as a condition of employment" all employees to agree to waive the right to bring class or collective actions in any forum.  The important point to be drawn from this controversial decision in the short run, pending its appeal to the court system, is the limitations of the Board’s holding in H.R. Horton.
3.  Employers with current class arbitration waiver agreements or those considering such agreements should evaluate the effect of this new legal development.  While more litigation on the issue is sure to follow, employers will immediately need to consider the risk of creating, maintaining and applying current arbitration agreements under the NLRA.
4.  Employers need to evaluate the current terms and language used in their arbitration agreements to determine the impact of the H.R. Horton decision and U.S. Supreme Court decision in AT&T Mobility v. Concepcion, on their continued use of class action arbitration waiver agreements.  In some instances, an employer may decide to hold its position and await further judicial proceedings on the arbitration waiver issues, but such an employer should take that step only after evaluating the comparative risks with the help of knowledgeable counsel.