Publications
RECENT DEVELOPMENTS IN EMPLOYMENT LAW
April 2007
Janet C. Ampe
Most businesses have employees, and a business with at least one employee has employment problems. Therefore, most businesses will likely be affected by recent developments in employment law during the past year. The courts have made significant changes to the way employers pay separated employees' earned but unused vacation, what actions may be deemed as retaliatory when an employee makes a protected report, and many more. As these areas impact most employers, this summary provides an overview of what employers should lookout for when dealing with their employees. It is not meant to be an in-depth analysis of each development, but rather a general guide to assist employers in spotting important legal employment issues to discuss with their attorney.
WHAT IS RETALIATION, AND WILL I KNOW IT WHEN I SEE IT?
The United States Supreme Court recently changed the face of retaliation law in the Eighth Circuit,[1] making it more important than ever for employers to be aware of potential retaliation claims. A retaliation, or reprisal, claim arises when an employee engages in some "protected conduct,"[2] suffers an "adverse employment action" and there is a causal connection between the two.[3] The Burlington Northern case did not affect the "protected conduct" and causal connection prongs, but had a dramatic impact on what may be considered an "adverse employment action," particularly in the Eighth Circuit.
The Burlington Northern Claims
In Burlington Northern, the employee, White, was employed as a track laborer, and her duties included cutting brush, clearing litter, transporting track material, and forklift operation. As White had prior forklift experience, she was assigned to mainly forklift operation soon after her hire, although her title and job description did not change. Forklift operation was considered by many employees to be more desirable work, as it was cleaner and less strenuous. After a short period, White complained that her supervisor made sexually discriminatory comments and insulting and inappropriate remarks in front of her male coworkers; the supervisor was disciplined. Burlington subsequently reassigned White to her original track laborer duties, as some employees had complained that the "less arduous and cleaner" forklift job should be given to a "more senior man." White filed a retaliation complaint. She filed an additional complaint a few weeks later claiming she was subjected to increased monitoring and surveillance after her first complaint. A few days after the second complaint, White and her supervisor had a disagreement, which resulted in White being suspended without pay pending an investigation into possible insubordination. Thirty-seven days later she was reinstated to her former track laborer duties, with full back pay. White filed an additional complaint with the EEOC based on her suspension.
When White sued, her lawsuit included a charge that Burlington's actions in changing her job duties and suspending her without pay were retaliation for her complaints. The district court found retaliation and awarded White $43,500 in compensatory damages. A Sixth Circuit panel reversed. The Sixth Circuit decision was vacated and heard en banc, wherein the full Sixth Circuit affirmed the lower court's ruling on the retaliation claim. Burlington appealed the decision to the Supreme Court.
THE CHANGE IN RETALIATION STANDARDS
The Court, in Burlington Northern, resolved a split between the stricter Fifth and Eighth Circuits, and the more lenient Seventh, Ninth and District of Columbia Circuits, regarding the standard to be applied in retaliation cases. Prior to the Burlington Northern decision, the standard was relatively high for a plaintiff to make out a retaliation claim in the Eighth Circuit. The previous standard required the employee suffer "a material employment disadvantage" reflecting "a tangible change in duties or working conditions."[4] While the standard prevented retaliatory termination, it did not clearly prohibit changes in job duties or schedules.[5] If there were a change in duties or schedule, the employee would need to prove this change led to an "ultimate employment decision," which was limited to such acts as hiring, granting leave, discharge, promotion and compensation.[6]
The Supreme Court held that conduct not necessarily related to ultimate employment actions, or even actions confined to the workplace, could constitute retaliation under Title VII. The rationale is based on the broader objectives and language of the anti-retaliation provisions in Title VII as compared to the anti-discrimination provisions. Since the anti-retaliation provisions seek to protect employees' conduct, the protection was not limited to actions an employer could take related to employment conditions. Therefore, the anti-retaliation provisions extend beyond the workplace and outside of the context of employment.
The new standard for retaliation is whether a particular action is "harmful to the point that [it] could well dissuade a reasonable worker from making or supporting a charge of discrimination." Therefore, a plaintiff must show that a reasonable employee would have found the challenged action "materially adverse." The Court provided that courts and employers would have to wrestle with the difference between "trivial harms," such as petty slights, minor annoyances, personality conflicts, ostracism, and poor manners, and "materially adverse" actions. As applied to White, the Court held her reassignment to the more arduous, and less prestigious, track laborer duties was retaliation, even though those duties were part of White's job description. The Court explained that the particular circumstances of the case must be considered, and that reassignment of duties would not always be considered retaliation.
APPLICATION BY THE LOWER COURTS
Although the Eighth Circuit has yet to interpret the Burlington Northern decision, many other Circuits, as well as the district courts, have issues opinions that define the terms "trivial" and "material" in a variety of ways. At least one Minnesota District Court has interpreted Burlington Northern to mean that a harm "clearly falls within the category of 'trivial' harms [where] there is no indication that [the plaintiff] suffered any disadvantage" from the challenged action.[7] The courts are also applying Burlington Northern to a variety of other statutory anti-retaliation provisions.[8]
APPLICATION FOR EMPLOYERS
Retaliation, or revenge, is a commonplace reaction when a co-worker or subordinate's claims wreck havoc in the work place or with an employer's reputation. As such, employers must be particularly vigilant when an employee makes a report or takes part in an investigation to prevent retaliation from occurring. Employers should train all employees on an annual basis on discrimination and anti-retaliation policies. Employers must have anti-retaliation policies in force, and inform employees of those policies at annual training events and whenever an investigation or report is active in the workplace. Employers must also remind supervisors to be on the lookout for any potential retaliatory conduct after a complaint has been raised, as this is the crucial time to prevent behavior that may result in liability. Employers are not prohibited from reassigning employees who bring claims or who file reports, or from taking other legitimate employment actions, but the prudent employer will engage in an interactive process, such as asking the employee if he or she would like to be reassigned. And, of course, employers should follow up on all claims and complaints, and document the resulting investigation, anti-retaliation notices, and employee responses.
DO EMPLOYERS HAVE TO PAY FOR UNUSED VACATION TIME, EVEN WHEN THEY HAVE A POLICY AGAINST PAYMENT?
Payment of earned but unused vacation time upon employee termination has long been a matter of contract, or agreement, with the employee.[9] Employers wishing to limit employee vacation payout at termination have been able to do so, provided they uniformly applied the provisions as set forth in the employee handbook or other similar policy. For example, employers have limited payment of vacation when an employee fails to give 2 weeks notice before quitting, or when an employee is terminated for misconduct. These policies are no longer viable, under a new Minnesota Court of Appeals decision that came down on August 8, 2006, Lee v. Fresenius Medical Care, Inc., 719 N.W.2d 222 (Minn. App. 2006).
In Lee, the employer had a policy that did not allow payment for earned but unused vacation if the separated employee failed to give "proper notice" or was terminated for misconduct. The employer terminated Lee, and did not pay her for her earned but unused vacation.[10] The district court granted the employer's motion for summary judgment, and Lee appealed. The appellate court explained that earned wages, which by statute must be paid out upon termination,[11] include earned but unused vacation.[12] The court then stated, "a party cannot provide by contract what is prohibited by statute."[13] The court ultimately concluded that because the statute required payment of earned vacation time, employers could not contract around the requirement, regardless of legal precedent to the contrary.
For the time being, employers must pay all earned but unused vacation time upon termination, regardless of any provisions in their employment handbooks providing for nonpayment. The Lee case is currently on appeal to the Minnesota Supreme Court,[14] so employers may hope for a return to the previous, employer-friendly, standard.
IS ANYTHING NEW AT THE ADMINISTRATIVE LEVEL THAT EMPLOYERS MIGHT LIKE TO KNOW ABOUT?
EO SURVEY RESCINDED
Government contractors received a bit of good news this year from the Office of Federal Contract Compliance Programs ("OFCCP"). Most human resources professionals working for employers contracting with the government dreaded the semi-annual Equal Opportunity Survey ("EO Survey"). The EO Survey was enacted by the Clinton Administration to improve deployment of scarce federal resources to those companies most likely to be out of compliance with affirmative action requirements, and to increase self-awareness and encourage self-reporting by government contractors. The EO Survey required government contractors to submit extensive personnel data, including applicant flow, new hire, promotion, termination, work force incumbency, compensation and tenure data, broken down by race, ethnicity, and gender. Since the relevant EO-1 race categories were recently expanded, the reporting process became even more burdensome. Companies were particularly unhappy with the time and efforts required of the EEO Survey given that the OFCCP admitted, years before its elimination, that the EO Survey provided little to no benefit.
Finally, in September 2006, the OFCCP rescinded the EO Survey requirement. The OFCCP's decision was based on a report from a private consulting firm hired to evaluate the Survey. That evaluation concluded that the Survey's predictive value was "only slightly better than chance" and that the Survey "fails to provide value to either OFCCP enforcement or contractor compliance." In the final rule rescinding the Survey, the OFCCP concluded "the lack of utility of the EO Survey, the contractors' burden of completing the EO Survey, and the burden to the OFCCP to collect and process EO Survey data that will yield such a poor targeting system are too significant to justify its continued use."
EEOC TO FOCUS ON INVESTIGATION AND LITIGATION OF SYSTEMIC DISCRIMINATION
The Equal Employment Opportunity Commission ("EEOC") enforces federal laws prohibiting employment discrimination, including investigating discrimination in the workplace. On certain occasions, the EEOC will also litigate discrimination cases against employers on employees' behalf. Traditionally, the EEOC has focused its enforcement efforts on individual allegations raised in discrimination charges. However, in April 2006 the EEOC indicated its intent to alter its focus to systemic cases of discrimination. "Systemic" cases are "pattern or practice, policy and/or class cases where the alleged discrimination has a broad impact on and industry, profession, company or geographic location."
An independent task force was formed to make specific recommendations regarding systemic discrimination. This task force suggested that the EEOC increase effectiveness in addressing systemic discrimination claims by changing the way it staffs and investigates cases. In addition, the task force recommended creating incentives for field representatives to successfully identify, investigate and litigate systemic cases; using the proper technology to ensure that staff in different offices who work together on systemic cases can communicate and share information effectively; enhancing systemic expertise among staff; creating an internal Advisory Committee to help ensure that the systemic investigation program is effective nationwide; and educating employers and employees about their rights and responsibilities under the federal anti-discrimination laws.
Employers should be aware of the change in focus to systemic litigation, be particularly aware of the potential for systemic discrimination, and monitor their systems accordingly. For example, employers should audit their payroll practices and policies to ensure there are no unexplained wage disparities between employees in protected classes and to monitor whether there is a concentration of employees in a protected class in any area of the business. Employers should maintain best practices of applying neutral and consistent discipline and salary programs among all employees. Employers should also have effective discrimination policies and conduct anti-discrimination and anti-harassment training. Employers should be aware that documentation regarding these steps may be discoverable, and may wish to work with counsel to protect any sensitive documents.
Although there does not appear to be a significant increase in class action cases to date, employees' attorneys may attempt to capitalize on these changes to find and bring charges of systemic discrimination to the EEOC. They may draft charges to the EEOC in such a fashion as to raise the spector of systemic discrimination to encourage broader investigations. In litigation, plaintiffs' attorneys are likely to include additional discovery requests to fish for systemic claims, increasing both the initial burden and the overall risk to employers.
WHAT EMPLOYMENT LAW DEVELOPMENTS AT THE SUPREME COURT WILL AFFECT EMPLOYERS?
Most employers, and their attorneys, would likely agree than an employer would not be liable under Title VII discrimination laws if the individual making the employment decision was completely unaware that the affected employee was a member of a protected class. This might change, depending on the decision rendered by the Supreme Court later this year.[15] The case raising the issue is a Tenth Circuit decision[16] wherein the employer was found potentially liable in a race discrimination case for an employment decision made by a human resources manager who was located in a different state from the employee, and who had no knowledge of the employee's race. The employer argued there could be no liability because the undisputed facts showed the individual making the employment decision was completely unaware of the terminated employee's race. However, the Tenth Circuit held that the EEOC could show the employer's proffered reason for termination was pretextual by using evidence that the manager's decision was influenced by a biased subordinate. Specifically, the Tenth Circuit stated:
It should go without saying that a company's organizational charts do not always accurately reflect its decision making process. A biased low-level supervisor with no disciplinary authority might effectuate the termination of an employee from a protected class by recommending discharge or by selectively reporting or even fabricating information in communications with the formal decision maker. Recognition of subordinate bias claims forecloses a strategic option for employers who might seek to evade liability, even in the face of rampant race discrimination among subordinates, through willful blindness as to the source of reports and recommendations.
Thankfully, the employer is not held accountable for every statement made by subordinate employees in the employment context. According to the Tenth Circuit decision, the affected employee must show more than mere input or influence in the decision making process. "Rather, the issue is whether the biased subordinate's discriminatory reports, recommendation or other actions caused the adverse employment action." In the case at bar, the EEOC was able to meet its burden based on evidence that "the human resources official relied exclusively on information provided by [the employee's] immediate supervisor, who not only knew [the employee's] race but allegedly had a history of treating black employees unfavorably and making disparaging racial remarks in the workplace."
This is the general state of the law in the Eighth Circuit, which includes Minnesota. Other Circuits have all reached similar decisions, although there is a split as to the level of control the biased subordinate must exert over the employment decision.
Employers should be aware that they cannot escape liability by merely funneling all employment decisions made by company managers through a human resources employee. Best practices dictate that all employment decisions, particularly those that may rise to the level of an adverse employment action, be reviewed for possible bias by a senior level human resources employee.
CONCLUSION
The changes in employment law in the past year illustrate the aphorism "everything old is new again." For years, employment defense attorneys believed they had safety in advising clients on such matters as retaliation claims and vacation time. Last year proved the law is anything but static. The courts in the past year have raised more questions than given answers, and the legislature has mandated new employer obligations. Hopefully, the court will provide some answers to the remaining questions in 2007. Stay tuned.
[1] Burlington Northern & Santa Fe Ry. Co. v. White, 126 S.Ct. 2405 (2006).
[2] Protected conduct includes such actions as refusing to perform duties that the employee thinks are illegal, Phipps v. Clark Oil Refining Corp., 408 N.W.2d 569 (Minn. 1987), taking part in an investigation, as either a complainant or witness, or making a "report" with a governmental agency or the employer.
[3] Thompson v. Campbell, 845 F.Supp. 665 (D. Minn. 1994).
[4] Baucom v. Holiday Cos., 428 F.3d 764, 767 (8th Cir. 2005).
[5] See, e.g., Ledergerber v. Stangler, 122 F.3d 1142, 1144 (8th Cir. 1997).
[6] Manning v. Metro. Life Ins. Co., 127 F.3d 686, 692 (8th Cir. 1997).
[7] Devin v. Schwan's Home Serv., Inc., Civ. 2006 WL 2590611 (D. Minn. 9/8/06)
[8] See e.g., Zelnik v. Fashion Inst. of Tech., 464 F.3d 217 (2nd Cir. 2006) (Section 1983 case); Freeman v. Potter, 2006 WL 2929952 (7th Cir. 2006) (Americans with Disabilities Act case).
[9] Brown v. Tonka Corp., 529 N.W.2d 474 (Minn. App. 1994).
[10] Lee v. Fresenius Med. Care, Inc., 719 N.W.2d 222, 223 (Minn. App. 2006).
[11] See Minn. Stat. § 181.13(a) (2006).
[12] See Brown, 529 N.W.2d at 475.
[13] Lee, 719 N.W.2d at 225.
[14] Oral argument was scheduled to be heard on March 12, 2007.
[15] BCI Coca-Cola Bottling Co. v. EEOC, 127 S.Ct. 852 (2007).
[16] EEOC v. BCI Coca-Cola Bottling Co, 450 F.3d 476 (10th Cir. 2006).
[13] Lee, 719 N.W.2d at 225.
[14] Oral argument was scheduled to be heard on March 12, 2007.
[15] BCI Coca-Cola Bottling Co. v. EEOC, 127 S.Ct. 852 (2007).
[16] EEOC v. BCI Coca-Cola Bottling Co, 450 F.3d 476 (10th Cir. 2006).
