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Supreme Court Rejects § 1983 “Class of One” Employment Discrimination Claims
A former employee of the Oregon Department of Agriculture brought an equal protection claim following her termination, claiming that she was fired not because of her race, sex or national origin, but rather for arbitrary, vindictive and malicious reasons. The United States Supreme Court had previously acknowledged that the Fourteenth Amendment’s Equal Protection Clause protects persons, not groups. The Court then recognized a “class-of-one” theory of equal protection. Under that theory, an individual was entitled to claim that his or her constitutional rights had been violated not because of discrimination based on the person’s race or gender, but because he or she had been arbitrarily treated differently than other similarly situated persons and because there was no rational explanation for that differential treatment. Here, the Supreme Court limited when a class-of-one claim could not be brought. The Court explained that there is a crucial difference with respect to the applicable constitutional analysis when a government exercises its power to regulate or license, and when it acts as a public employer. The government, as an employer, has far broader powers in managing its workforce than when it acts as a sovereign in a regulatory capacity. The Court also believed that the recognition of a class-of-one equal protection theory in a public employment context would run contrary to the concept of at-will employment and ultimately lead to the replacement of managerial discretion with judicial supervision of employment decisions. A governmental entity could not function if every employment decision could be turned into a constitutional question. Thus, because employment decisions are frequently based on subjective and individualized factors that can be difficult to articulate, the Court held that the class-of-one theory of equal protection does not apply to § 1983 employment claims. As a result, while public employers cannot base employment decisions on an individual’s race, sex or national origin, the mere fact that an employee was arbitrarily treated differently from other employees will no longer support a § 1983 equal protection claim under a class-of-one theory.
Engquist v. Oregon Dept. of Agriculture, No. 07-474 (June 9, 2008)
Contact for more information: Steven M. Puiszis
Supreme Court: ADEA Does Not Bar Disability Benefits Disparity Based Upon Age
In an effort to provide disability benefits on par with normal retirement benefits, a state pension plan added unearned years of service to actual years of service for workers in certain hazardous duty positions, such as police officers and firefighters, who became disabled before reaching retirement age. The plan did not add any extra years of service to workers who become disabled after having already reached the plan’s minimum retirement age. As a result, some older disabled workers, in light of the plan’s benefit calculations, could receive pension benefits that were less than the benefits a younger disabled individual received. The United States Supreme Court explained that the issue turned on whether the employer was “actually motivated” by age bias in creating the pension benefit disparity. The Supreme Court held that the plan was not actually motivated by an age bias because the disparity was “simply an artifact of Plan rules that treat one set of workers more generously in respect to the timing of their eligibility for normal retirement benefits but which do not treat them more generously in respect to the calculation of the amount of their normal retirement benefit.”
Kentucky Retirement Sys. v. EEOC, No. 06-1037 (June 19, 2008)
Contact for more information: Justin M. Penn
Supreme Court: ADEA Violation May Be Found When an Employer’s Adverse Action Has a Disparate Impact on Older Workers
After being included within a reduction in force (RIF), a group of former employees over the age of 40 sued their former employer under the Age Discrimination in Employment Act (ADEA). The employer argued that the employees’ inclusion within the RIF had nothing to do with age, and was instead based on “reasonable factors other than age,” a defense to ADEA suits. The employees asserted that the method by which employees were chosen for inclusion within the RIF had a disproportionate impact on older workers. In ruling in favor of the employees, the United States Supreme Court held that the “reasonable factors other than age” defense focuses on whether the employment practice constituted a reasonable means to achieve the employer’s legitimate goals, not whether it was a business necessity. Noting that the primary factors affecting the termination decisions at issue were subjective scores awarded to the employees by management, the Supreme Court agreed with the employees that the reduction of their positions was not a business necessity, and suitable alternatives existed which would have less significantly impacted workers over the age of 40. Employers must take care to ensure that all employment decisions are properly designed to minimize the impact on all protected classes.
Meacham v. Knolls Atomic Power Lab., No. 06-1505, (June 19, 2008)
Contact for more information: Daniel Farris
Supreme Court: Greater Scrutiny Required Where Claim Decisions Made by Same Entity That Serves As Third Party Administrator of ERISA Plan
An insurance company served as the third-party administrator of an employer's Employee Retirement Income Security Act (ERISA) long-term disability plan. As the insurer under the plan, the insurance company was also responsible for paying approved claims under the plan. An employee applied for and initially received benefits under the plan. She was also found to be disabled by the Social Security Administration. Despite these findings, when the employee applied for extended disability benefits under the plan, the insurance company denied her claim. The Supreme Court found that the insurance company’s role as both the plan administrator and the payor of claims created a conflict of interest. It ruled that this conflict must be considered in reviewing whether the insurance company's decision as plan administrator was an abuse of discretion. In light of this ruling, plan administrators who decide benefit claims under an ERISA plan should carefully document their reasons for denying a claim, especially where the administrator is also the party who would be responsible for paying that claim.
Metropolitan Life Insurance Co. v. Glenn, No. 06-923 (June 19, 2008)
Contact for more information: Anthony E. Antognoli
Supreme Court: States Cannot Regulate Employer Speech Regarding Unionization
Organizations whose members do business with California sued to enjoin the enforcement of a California statute that prohibited employers which receive state grants or more than $10,000 in state program funds per year from using the funds to "assist, promote, or deter union organizing." The United States Supreme Court ruled that states may not restrict an employer's right to communicate with its employees about unionization, holding that such a state statute is preempted by the National Labor Relations Act (NLRA) because it regulates employer speech about union organizing. The Supreme Court stated that the statute was enacted to stifle employer speech about unions by imposing convoluted record keeping requirements. The Court concluded that this ruling essentially prevents states from circumventing the NLRA.
Chamber of Commerce of the United States of America v. Brown, No. 06-939 (June 19, 2008)
Contact for more information: Kristine E. Kwong
Possible Personal Liability for a Business Owner
The owner of a Missouri corporation that made screen-printed t-shirts created a new corporation to cut and sew fabric for t-shirts. The owner borrowed money from the first corporation to purchase equipment for the second corporation. Neither the second corporation nor the owner made any payments to the first corporation for the loan. Finding that the second corporation illegally fired five employees, the National Labor Relations Board (NLRB) later ordered those individuals reinstated with back pay. The owner transferred the second corporation’s equipment to a third corporation that he created to do business in Mexico. A fourth corporation was created by the owner to do screen printing in Mexico. The United States Court of Appeals for the Eighth Circuit determined that all four corporations were treated by the owner as the same and pierced the corporate veil to hold the owner personally liable for the NLRB order. The court based its decision on the facts that the owner failed to maintain separate corporate identities, that separate records were not kept, that there were not arm’s length transactions among the separate entities, and that the owner controlled all the entities. Although the facts of this case may seem egregious, the decision serves to reinforce the importance of observing corporate formalities and keeping different entities as separate as possible.
NLRB v. Bolivar-Tees, Inc., No. 07-2334 (8th Cir., June 4, 2008)
Contact for more information: Thomas Y. Mandler
Pregnancy Discrimination Act Prohibits Abortion Discrimination
An employee who was fired five days after having an abortion sued her former employer under the Pregnancy Discrimination Act (PDA). The former employer argued that she was fired for not having followed a leave procedure of calling in every day. The United States Court of Appeals for the Third Circuit reviewed the PDA’s language, its legislative history, and United States Equal Employment Opportunity Commission guidelines and held that employers may not discriminate against a female employee because she has exercised her right to have an abortion. In finding that the PDA recognizes a claim for discrimination based on having an abortion, the court pointed out that the Act requires that women affected by pregnancy, childbirth, or “related medical conditions” must be treated the same as other employees in the workplace. The court concluded that the term “related medical conditions” includes an abortion. Employers should be aware that the PDA may be used to assert a wide range of claims involving pregnancy, and that a personnel decision based on an employee’s pregnancy or a related condition may lead to a discrimination claim.
Doe v. C.A.R.S. Prot. Plus. Inc., No. 06-3625 (3d Cir., May 30, 2008)
Contact for more information: Paul J. Cherner
Yawn During Interview Not Evidence of Age Discrimination
After being denied a promotion several times, an employee sued his employer, claiming age discrimination. The employee claimed that the manager’s yawning during the promotion interview showed that the employee’s answers did not matter because the manager had already made a decision to promote a younger person. The employer responded that it did not promote the employee because he was not “professionally mature” and did not express himself with confidence, and because there were other employees better suited for the position. In upholding the dismissal of the employee’s claim, the United States Court of Appeals for the First Circuit held that the manager’s yawning, alone, was insufficient proof of age animus. Employers should take some comfort in knowing that courts will not go so far as to allow an age discrimination claim to proceed based merely on a yawn.
Arroyo-Audifred v. Verizon Wireless Inc., No. 07-1661, (1st Cir., June 4, 2008)
Contact for more information: Aimee E. Delaney
Electrician’s ADA Claim Resurrected to Consider True Cause of Demotion to Janitor
An electrician at a manufacturing plant suffered a stroke that permanently impaired his ability to balance, and led to vertigo. Nevertheless, under restrictions imposed by a medical examiner the electrician was able to adequately perform his job. Concerns for the electrician’s safety emerged when a night shift supervisor asked the electrician to perform tasks outside of his work restrictions. Because of these safety concerns, the electrician underwent additional medical evaluations, one of which recommended that “he seek employment that presents fewer obstacles to his physical safety.” Despite his qualifications to perform any job in the plant, the company demoted the electrician to janitor. The electrician sued under the Americans with Disabilities Act (ADA), alleging discrimination based on a perceived substantial limitation in the major life activity of working. The United States Court of Appeals for the Tenth Circuit concluded that statements and letters made by supervisors demonstrated a belief that the electrician’s balance and vertigo problems precluded him from “employment as an electrician in general.” The employer’s consideration of the electrician only for a janitor’s position was not supported by the medical record. Employers which place restrictions on an employee’s ability to work that exceed those of a medical professional can be subject to a “regarded as” discrimination claim under the ADA.
Justice v. Crown Cork & Seal Co., 07-8036, (10th Cir., June 3, 2008)
Contact for more information: Tom H. Luetkemeyer
Lack of Reasonable Accommodation Brings ADA Interactive Process to a Prompt End
A correctional officer was forced to take time off of work after suffering a stroke. When the officer attempted to return to work, his doctor placed the following restrictions on his ability to work: (1) no physical contact; (2) no physical activity other than sitting in a chair with brief episodes of standing and walking, and; (3) no lifting, kneeling, stooping or running. The employer believed these restrictions prevented the officer from performing the essential elements of his job as a correctional officer, and refused to return him to work. The officer sued under the Americans with Disabilities Act (ADA), arguing that the employer violated the Act by failing to engage in the interactive process normally required to determine whether a reasonable accommodation exists. The United States Court of Appeals for the Seventh Circuit rejected that argument, holding that the officer’s severe limitations were sufficient to bring the accommodation process to a prompt end once they were made known to the employer. While the interactive process need not continue ad nauseam, employers must carefully determine that no reasonable accommodation exists before ending the process.
Dargis v. Sheahan, No. 05-2575 (7th Cir., May 16, 2008)
Contact for more information: Scott M. Gilbert
Protected Activity Taken After Disciplinary Issues Arise Does Not Shield an Employee
A corrections officer complained that a sheriff and undersheriff reorganized a jail in an attempt to eliminate her job. Sometime thereafter, she was disciplined for insubordination, and subsequently filed a gender discrimination and retaliation claim. The officer, however, had performance problems that predated her complaint. In upholding summary judgment for the employer, the United States Court of Appeals for the Eighth Circuit held that protected activity occurring after the rise of disciplinary problems does not shield an employee from the consequences of her actions. Otherwise, employers would be paralyzed and unable to manage their workforces if employees in trouble with supervisors and on the verge of disciplinary action were able to assert retaliation claims arising out of charges of discrimination asserted just prior to disciplinary action. While an employer must be careful when a claim of discrimination is asserted by an employee, it need not forego otherwise justified disciplinary action based on the assertion of a claim under Title VII of the Civil Rights Act of 1964, as amended.
Hervey v. County of Koochiching, No. 06-3891 (8th Cir., June 9, 2008)
Contact for more information: James R. Pirages
Negative Evaluation Supports Discrimination Claim
A human resources professional at a university received a negative evaluation, which precluded her from receiving a four percent merit salary increase. The employee subsequently filed a charge of race discrimination with the Equal Employment Opportunity Commission. While that charge was pending, the university adjusted the employee’s pay grade by one level, and retroactively adjusted her salary by four percent. The employee’s case nevertheless proceeded to federal court, where the university argued that the negative evaluation could not support a discrimination claim since the employee was subsequently awarded the salary increase at issue. The United States Court of Appeals for the Eleventh Circuit disagreed, holding that a negative performance evaluation can serve as an adverse employment action where it is inextricably linked compensation, and that the university’s discriminatory act could not be undone after the fact. Employers must use care in making employment decisions that are directly connected to compensation as the subsequent reversal of a discriminatory decision in this area cannot protect against a discrimination claim.
Crawford v. Carroll, No. 07-11603 (11th Cir., June 3, 2008)
Contact for more information: Clay M. Ullrick
This newsletter has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.
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