Employee’s Termination After FMLA Leave Not Retaliation
A payroll clerk with a history of favorable performance reviews began receiving unsatisfactory marks due to errors in her work and increased absences. The employee missed 25 percent of her scheduled hours one June, and 40 percent in July. The employer traced several errors to the clerk, and the following September the employee was counseled by her supervisor regarding her work performance. Later that month, the employer advised the employee that she could use FMLA leave for her absences. The employee took intermittent FMLA leave through January. By January, the employee’s work performance had not improved, and her supervisor had discovered significant additional errors in the employee’s work. The supervisor recommended to the employer’s director of human resources that the employee be terminated. After being informed of the situation by the director of human resources, the employer’s executive director conducted his own review and decided to terminate the employee. The employee sued the employer for retaliatory discharge under the FMLA. The U.S. Court of Appeals for the Seventh Circuit held that the employee’s discharge did not violate the FMLA because the employee’s poor work performance predated her FMLA leave, and there was no evidence that the executive director, as the final decision maker, was aware of the employee’s FMLA leave. The employee argued that because her direct supervisor recommended her termination, the alleged retaliatory motive of the supervisor should be imputed to the employer. The court rejected this “cat’s paw” theory (i.e. that a biased subordinate influenced a nonbiased decision maker) because the employer’s executive director consulted with multiple sources, and conducted an independent review of the information he received before deciding to terminate the employee. This case illustrates the importance of properly documenting employee performance deficiencies in a timely manner in order to address claims of discrimination or retaliation that may arise at a later date.
Long v. Teachers’ Retirement Sys. of Illinois, No. 08-3094 (7th Cir. Oct. 23, 2009)
Contact for more information: Clay M. Ullrick
Clarifying Amendment Limiting Lump-Sum Distributions Was Not a Cutback in Benefits
A traditional defined benefit pension plan maintained by a trade association was significantly underfunded. When a pension plan such as this is underfunded, the applicable law requires that the plan prohibit lump sum distributions of pension benefits to retired participants who were highly compensated employees at the time of their termination of employment. Consistent with this requirement and with its own past practice, the plan sponsor adopted a clarifying amendment that explained the plan's limitation on lump sum distributions to highly compensated employees when the plan is underfunded. After the amendment was adopted, a participant who had been a highly compensated employee before retiring requested a lump sum distribution from the underfunded plan. When this request was denied, the participant sued, claiming that the plan’s amendment violated ERISA’s “anti-cutback” provisions. In affirming the lower court, the U.S. Court of Appeals for the Seventh Circuit held that the plan’s clarifying amendment did not eliminate or affect any lump-sum option that was previously available to plan members. Instead, the amendment gave the plan a way of correcting a distribution that was not allowed under applicable law at the time it was made. Therefore, because highly compensated participants were not entitled to a lump-sum distribution, the amendment did not eliminate an “optional form of benefit” and did not violate ERISA’s anti-cutback provision.
Wetzler v. Illinois CPA Soc’y & Found. Retirement Income Plan, No. 08-2923, (7th Cir. Nov. 10, 2009)
Contact for more information: Anthony E. Antognoli
Treating Intermittently-Impaired Employee As Disabled May Create Liability Under ADA
After telling his employer, a home-delivery food service company, about his plans to undergo testing and treatment at the Mayo Clinic for various medical issues, a route manager was issued a disciplinary notice for failure to run a rescheduled route. The day before the route manager left for the clinic, his supervisor wrote him up for several deficiencies: writing a check with insufficient funds to a co-worker, depositing a post-dated check from a customer too early, and violating the dress code. The supervisor also told the route manager to get his route books in order before leaving. Upon returning to work two weeks later, the supervisor fired the route manager, writing “unsatisfactory performance” and “unable to perform essential job functions” on the discharge form. The supervisor backdated the termination to the day that the route manager left for the medical clinic. The employee sued for disparate treatment and denial of reasonable accommodation in violation of the Americans with Disabilities Act (ADA). The U.S. Court of Appeals for the Seventh Circuit reversed a trial court’s grant of summary judgment for the employer, holding that while the employee was not actually disabled, there was sufficient evidence that his employer regarded him as being disabled in the major life activities of walking, caring for himself, and speaking. On the other hand, the court held that the route manager did not prove that his employer failed to reasonably accommodate him, stating that the employer was not required to provide the employee’s “ideal” accommodation, but only a reasonable one. Employers should remember that, even when an employee is not “disabled” under the ADA, whether the employer treats him or her as such is a separate question. While an employer is not required to provide an employee his or her “ideal” accommodation, it must participate in the interactive accommodation process, and should not discriminate against employees on the basis of actual or perceived disabilities.
Brunker v. Schwan’s Home Service, Inc., No. 07-3183 (7th Cir. Oct. 22, 2009)
Contact for more information: Andrew B. Cripe
Benefits Plan Need Not Say ‘Discretion’ to Warrant Deferential Review of Benefits Claim
Within a month of learning that her employment contract would not be renewed, an employee filed a claim under her employer’s long-term disability (LTD) policy claiming her aortic aneurysms and high blood pressure prevented her from working. The employee’s claim was denied and she sued seeking to have the denial of benefits overturned. The employee argued that the court should review the plan administrator’s denial without deference to the administrator’s decision because the plan language did not vest the administrator with discretion to shape the application, interpretation and content of the plan’s rules. Absent such discretion, the administrator’s decision would be held to a higher standard of review and not provide deference to the administrator’s decisions. The U.S. Court of Appeals for the Seventh Circuit held that the language of the LTD policy contained language sufficient to warrant a deferential review of the administrator’s decision because it provided that the administrator retained full and exclusive authority to administer the policy, to interpret the group policy and resolve all questions arising in the administration, interpretation and application of the group policy with the authority to determine entitlement to benefits. Therefore, the administrator’s benefit determination was entitled to deference on review despite the fact that the plan language did not expressly state that the administrator retained discretion in administering the plan. Employers should ensure that their employee benefit plans contain clear language providing the plan administrator with discretion to shape the application, interpretation and content of the plan’s rules. However, even where the plan doesn’t expressly state that discretion is provided to the administrator, the administrator’s decisions may nevertheless be entitled to discretion where the clear intent of the plan’s language is to provide the administrator with such discretion.
Black v. Long Term Disability Ins., No. 07-3550 (7th Cir. Sept. 18, 2009)
Contact for more information: Daniel K. Ryan
Professional Exemption of the FLSA Requires a College Degree
An employee at an engineering firm designed engineering plans and specifications for hydraulic power units (HPU) according to industry and government standards. Although the employee had 20 years of experience in the field, he did not have a college degree or other engineering training. The employee’s engineering work was key to taking a HPU from conceptualization through development. Based on the employee’s skill and experience, and his importance to the company, the employer treated him as an exempt engineer under the Fair Labor Standard Act (FLSA) professional exemption. After a dispute arose, the employee sued his employer for unpaid overtime under the FLSA. The U.S. Court of Appeals for the Second Circuit ruled in favor of the employee, holding that his lack of a college degree disqualified him for the professional exemption, despite his advance skills and experience. Under the exemption that existed under the 2002 regulations, the professional exemption applied to those individuals whose “primary duty consists of the performance of: work requiring knowledge of advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, as distinguished from a general academic education and from an apprenticeship, and from training in the performance of routine mental, manual or physical processes.” The employer argued that the term “customarily” meant that there could be some situations where a college degree was not required where the employee performed duties that required advanced knowledge in a field of science or learning. In other words, the employer argued that there were two ways to meet the requirement of advanced knowledge—either by looking at the college degree of the employee or his actual job duties. The U.S. Court of Appeals for the Second Circuit disagreed, and held that with no college degree, the exemption was inapplicable regardless of the employee’s actual job duties. The court also found that the employer willfully violated the FLSA by initially offering the employee a lower level position that was nonexempt and, when the employee rejected it, offering him the higher-paying engineering job which it categorized as exempt even though the position’s duties were no different from the non-exempt job he had rejected. Employers must take care in categorizing employees as exempt under the FLSA to ensure that all applicable requirements are met.
Young v. Cooper Cameron Corp., 2009 WL 3763848 (2d Cir. Nov. 12, 2009)
Contact for more information: Linda K. Horras
SOX Whistle Blowing Does Not Cover Leaks of Non-Financial Confidential Information
A movie production company employee was responsible for reading books and attending theater productions, and then reporting to executives about the possibility of developing the works into movies. The employee began to suspect that a company vice president in New York was leaking the content of her memos to competing motion picture companies. After the employee sent one version of her memos to the subject vice president, and different versions to executives in Los Angeles, she was instructed to circulate only a single memo on each work. The employee e-mailed a co-president of production to express concern that the subject vice president was leaking confidential company information. After meeting with an in-house lawyer, who investigated the matter, the employee was ultimately terminated for insubordination and attempts to cover up her own misconduct. The employee filed a complaint with the U.S. Department of Labor (DOL) claiming that she was fired for reporting the vice president’s alleged wrongdoing, in violation of the Sarbanes-Oxley Act (SOX). A DOL Administrative Review Board disagreed, and held that the employee had not engaged in whistle blowing activity protected by SOX, because the “mere possibility” that the alleged wrongdoing might affect the movie company’s stock price was “too attenuated” to be protected by SOX. While SOX prohibits employer retaliation against an employee who has complained to company representatives, a federal agency, or to Congress about a suspected violation of federal mail, wire, bank, or securities fraud laws, or SEC rules, SOX does not protect all employee complaints. SOX is intended to protect employees who expose material misrepresentations made by a company or its employees concerning the financial condition of the company, upon which an investor would ordinarily rely. Because this employee’s complaint did not implicate any sort of financial or securities fraud, SOX did not apply. Although SOX does not protect complaints of “ordinary” employee misconduct, employers should be careful to take allegations of employee misconduct seriously, to investigate them, and not to retaliate against employees who are legitimately acting in the company’s best interest.
Lewandowski v. Viacom Inc., DOL ARB, No. 08-026 (Nov. 4, 2009)
Contact for more information: Daniel L. Farris
Non-Renewal of an Employment Contract May Be an Adverse Employment Action
A non-tenured faculty member at a New York university worked at the institution’s Ithaca campus, but resided in the New York City metropolitan area. The professor received an allowance for her travel costs, which became the source of a dispute between the professor and the dean of the university. The dean took issue with the fact that, at least three times, the professor formally complained that the amount of her travel allowance, which peaked at $30,000, was inadequate. Shortly after her last expression of disapproval, the professor was informed by letter that her contract would not be renewed because of “budgetary exigencies.” The professor sued the university for gender and age discrimination under Title VII of the Civil Rights Act of 1964, as amended, and the Age Discrimination in Employment Act (ADEA). The U.S. Court of Appeals for the Second Circuit reversed the lower court’s order granting summary judgment for the university. The trial court had granted summary judgment on the basis that the university did not take any adverse employment action against the professor when it decided not to renew her contract. The appellate court, in a matter of first impression in the circuit, held that the lower court’s holding would produce inconsistent protections under the discrimination laws in that an employee could bring a discrimination lawsuit if an employer refused to hire her based on her age and/or gender, but not if the same employer failed to renew an employment contract for the same discriminatory reasons. According to the court, a reasonable jury could also find that the alleged facts raised an inference of gender and age based discrimination because the school’s layoffs were all women at least 50 years of age, and the professor’s former duties were primarily re-assigned to male instructors. Employers should be aware that the failure to renew a fixed-term employment contract may be the basis of a discrimination lawsuit in the majority of federal circuits.
Leibowitz v. Cornell University, No. 07-4567-cv (2nd Cir. Oct. 23, 2009)
Contact for more information: Alex Breland
State Prohibition of Discretionary Decision-Making in Insured Employee Plans Upheld
A common clause in employer sponsored benefit plans, including group health and disability plans funded by an insurance policy, is that the claims administrator (usually the employer or the insurer) has discretionary authority to determine the amount of benefits and to construe and decide the meaning of all of the terms of the plan. Interpreting these clauses in light of the common law of trusts, the federal courts over the last 20 years have developed a body of case law which has afforded substantial deference to many of the decisions made by plan claims administrators. This substantial deference has resulted in streamlined processes for benefit plan litigation, curtailed pretrial discovery, and a significant hurdle for a plaintiff plan participant. Using its authority to approve the forms used for insurance policies issued in his state, the Montana Commissioner of Insurance consistently refused to approve insurance policy forms for employee benefit plans that vested such discretionary decision-making authority in an insurer as claims administrator, thus preventing insurers from relying on federal court legal precedents that give substantial deference to a claims administrator’s decision. In considering a challenge to the Commissioner’s practice of disapproving insurance policies with such discretionary clauses, the U.S. Court of Appeals for the Ninth Circuit found that the practice was not preempted by the federal Employee Retirement Income Security Act (ERISA). The Ninth Circuit thus concluded that the Commissioner was permitted to prohibit the inclusion of discretionary clauses in insurance policies funding employee benefit plans. This case will likely accelerate actions by state insurance commissioners to prohibit discretionary decision-making by insurers under employee benefit plans, possibly resulting in either better insurer decision-making or increased benefit claims litigation and, in any event, an increase in insurance premiums for employee benefit plan insurance policies.
Standard Insurance Co. v. Morrision, No. 08-35246 (9th Cir. Oct. 27, 2009)
Contact for more information: James D. Harbert
Teacher Advocating on Behalf of Disabled Students Has ADA Retaliation Claim
A teacher of students with disabilities voiced concerns about a county office of education’s compliance with requirements of federal and state law regarding the delivery of educational services to disabled students. The teacher and a co-worker filed suit with the U.S. Department of Education’s Office of Civil Rights (OCR), claiming that disabled students were being denied an appropriate education. Thereafter, the teacher also claimed that her supervisors engaged in a campaign of retaliatory acts, which prompted her to file her own claim with the OCR on the grounds that she was retaliated against for advocating on behalf of disabled students on issues relating to their civil rights. The OCR found merit in her claims and deemed her activities to be “protected activities” under both the Rehabilitation Act of 1973 and the Americans with Disabilities Act (ADA). After quitting her job, and based upon the outcome of her complaint with the OCR, the teacher sued her employer. The district court dismissed the teacher’s claims of retaliation, declaring that she had no standing to maintain the action under the anti-retaliation provisions of the Rehabilitation Act or Title II of the ADA. In reversing the district court, the U.S. Court of Appeals for the Ninth Circuit considered the broad statutory language of the two acts, specifically the provisions prohibiting retaliation. The court ultimately concluded that there was no evidence that Congress intended to limit standing to maintain a retaliation claim to those with disabilities only. Broad statutory language, as well as courts willing to interpret statutes liberally, means more ambiguities and greater potential liability for employers. This case is but one example where laws designed to protect discrimination and retaliation against disabled persons can be construed to apply to non-disabled persons.
Barker v. Riverside County Office of Ed., No. 07-56313 (9th Cir. Oct. 23, 2009)
Contact for more information: Amy K. Jensen
Insults Undermine Same-Sex Harassment Claim
A female manufacturing employee believed that a female co-worker was directing implicit proposals for sex towards her. The employee admitted, however, that the co-worker never explicitly sought sexual activity. Further, she acknowledged that co-worker frequently made derisive comments towards her, such as calling the employee a “fat cow,” “disgusting” and a “sorry excuse for a woman.” Ultimately, it was the derisive nature of the relationship that led the U.S. Court of Appeals for the Fifth Circuit to uphold summary judgment against the employee. In same-sex sexual harassment cases based on allegations of sexual attraction, such as the allegations at issue here, a plaintiff must establish an actual sexual interest on the part of the alleged harasser. Here, the court held that the alleged harasser’s consistent insults towards the employee were more indicative of bullying behavior than of sexually harassing conduct. Without evidence of sexual attraction, the court held the employee could not establish that the co-worker’s treatment was “because of sex” rather than general rude conduct. While same-sex sexual harassment claims can present interesting questions of proof, employers should take steps to stop any harassment before it leads to a claim, even if that claim would ultimately be unsuccessful.
Love v. Motiva Enterprises LLC, No. 08-30996 (5th Cir. Oct. 16, 2009) (unpublished)
Contact for more information: Scott M. Gilbert
U.S. Supreme Court Declines Review of EEOC's Continuing Subpoena Authority Over Employers
A former parcel service employee filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC). He subsequently requested a right-to-sue letter, which was provided by the EEOC. Instead of closing the file, the agency indicated its intent to continue investigating the charge. The EEOC then issued an administrative subpoena for information to the employer, which challenged it on the grounds that the employee’s case was closed, that the employer had just responded to an identical subpoena in another EEOC matter (and thus had complied), and that the subject matter of the subpoena was irrelevant. The U.S. Court of Appeals for the Ninth Circuit ruled against the employer on all three bases, holding that: (1) the EEOC retains the authority to issue an administrative subpoena against an employer even after a charging party has been provided a right-to-sue notice and has instituted a civil action; (2) compliance with a similar subpoena was not sufficient; and (3) the EEOC’s general request for information was relevant in that it sought to uncover a pattern and practice of discrimination. The employer then sought review of the ruling by the U.S. Supreme Court, which recently denied this request, thereby confirming that the EEOC’s administrative authority is broad, and that the EEOC’s jurisdiction does not end simply by virtue of the issuance of a right-to-sue letter or the institution of litigation by the charging party. Employers should be careful to comply with requests for information from the EEOC and other governmental agencies.
EEOC v. Fed. Ex. Corp, No. 06-16864 (9th Cir. Mar. 3, 2009)
Contact for more information: Angeli C. Aragon
Congress Introduces Legislation to Overturn Another Supreme Court Decision
Congress passed legislation in 2008 to broaden the scope of the Americans with Disabilities Act (ADA). The ADA Amendments Act was expressly designed to address U.S. Supreme Court decisions that limited the ADA’s scope and application. On October 6, 2009, members of Congress introduced the Protecting Older Workers Against Discrimination in Employment Act (POWADEA). POWADEA seeks to overrule the Supreme Court’s recent decision in Gross v. FBL Financial, in which the Court held that a plaintiff alleging age discrimination under the Age Discrimination in Employment Act (ADEA) must show that an adverse employment action would not have occurred “but for” the plaintiff’s age. Essentially, the high court in Gross imposed a higher burden of proof for those claiming age discrimination than for those claiming discrimination on the basis of race, sex, national origin and religion under the Title VII of the Civil Rights Act of 1964, as amended. Under Title VII, a plaintiff need only show that the protected basis was a motivating factor for the adverse employment action. POWADEA would allow an age discrimination plaintiff to use the same motivating factor framework, instead of the higher “but for” burden of proof.
H.R. 3721 / S. 1756
Contact for more information: Paul J. Cherner
Hinshaw Spotlight
One of Hinshaw & Culbertson LLP's employer clients was recently confronted by a National Labor Relations Board petition filed by a large international union, which sought to represent approximately 70 employees. After an NLRB hearing and the client's forceful initial campaigning, as successfully counseled by Thomas Y. Mandler and Scott M. Gilbert, the union withdrew its petition. The client remains union-free, and will now focus on maintaining the positive work environment that it believes would have ultimately lead to the employees voting to reject the union.
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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