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Handed Down

A review of the 10 legal decisions of 2007 that will have the greatest impact on the workplace in the coming year and beyond

December 13, 2007
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Some activities in life seem ready-made for litigation. Unfortunately, work is one of them. Every day in America, a company and one of its employees (or former employees) are hard at work, not on the production line, or in the cubicle farm, but engaged in the business of duking it out in a deposition or courtroom. Sometimes the decisions tip in favor of the employee; sometimes it's an employer win. But there are cases that go beyond the individual concerns of one company and one worker. They have an effect on all U.S. enterprises, and all employees.

    The following is Workforce Management's list of the top 10 employment law decisions of 2007, as compiled from interviews with attorneys around the country. While such a list is obviously subjective, it does reflect some of the most contentious legal issues currently facing employers—from wage and hour disputes and class actions to employee mental illness and health care benefits. Two cases on the list involve religious expression in the workplace. "We're seeing more of these cases because employees are increasingly seeking to express their beliefs in the course of performing their work duties," says attorney Jeffrey I. Pasek of Cozen O'Connor in Philadelphia.

Ledbetter v. Goodyear Tire & Rubber Co. U.S. Supreme Court 127 S.Ct. 2162 (May 29, 2007)
    In the undisputed blockbuster employment law decision of the year, a 5-4 majority of the Supreme Court held that employees claiming Title VII pay discrimination must file an EEOC complaint within 180 days of an adverse pay-setting decision even if subsequent paychecks are "infected" by discriminatory conduct. "[T]he 180-day EEOC charging deadline is short by any measure," Justice Samuel A. Alito said, but "reflects Congress' strong preference for the prompt resolution of employment discrimination allegations through voluntary conciliation and cooperation."

    Pasek says the decision clarifies the scope of the "paycheck accrual rule" of Bazemore v. Friday, 478 U.S. 385 (1986), by limiting it to "a current violation, not the carrying forward of a past act of discrimination." He also believes the 180-day deadline is "a carefully crafted legislative compromise." But Justice Ruth Bader Ginsburg, writing for the dissenters in Ledbetter, said the majority had ignored the "realities of the workplace," noting that a female employee "may have little reason even to suspect discrimination until a pattern develops incrementally and she ultimately becomes aware of the disparity."

    In July, the House of Representatives passed legislation to overturn Ledbetter by restarting the 180-day deadline with each payment of a discriminatory wage. President Bush has threatened to veto the measure.

Dukes v. Wal-Mart 9th U.S. Circuit Court of Appeals 474 F.3d 1214 (February 6, 2007)
    The gender discrimination case of six female Wal-Mart employees is the largest employment class action to be certified in American legal history. The plaintiffs allege that the discriminatory practices they suffered are common to all 1.5 million women who worked for Wal-Mart in the U.S. during the relevant time period covered by the suit.

    Appealing a trial judge's certification order, Wal-Mart argued that it has a due-process right to present a defense to each individual's claims. But the 9th U.S. Circuit Court of Appeals in San Francisco agreed with the lower court that "it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly. ... Although the size of this class action is large, mere size does not render a case unmanageable."

    Commentators differed on the legal significance of the case, but Pasek says, "The bottom line is that we're living in an age of new-found efforts to have class actions in the employment area."

Noyes v. Kelly Services 9th U.S. Circuit Court of Appeals Case No. 04-17050 (May 26, 2007)
    A former temp agency employee alleged "reverse" religious discrimination, saying she was denied a promotion at Kelly Services because she does not belong to a small religious group, the Fellowship of Friends. A supervisor who is a fellowship member chose another member to fill the position, but Kelly alleged that the selection was based on merit.

    Reversing summary dismissal of the case, the 9th Circuit found the trial judge had put too heavy a burden on Lynn Noyes to show that the reasons Kelly proffered for not promoting her were merely a pretext. "[T]he district court required Noyes to prove the ultimate issue of unlawful discrimination—that `she was passed over for the promotion specifically because she was not a member of the Fellowship,' " the opinion said. "In doing so, the district court erroneously heightened the standard on summary judgment."

    "The case suggests courts will be pretty accepting of reverse discrimination claims if the plaintiff has some evidence, if not direct evidence," says Gregory C. Tenhoff of Cooley Godward Kronish in Palo Alto, California. "You don't see a lot of these cases, but you do see them."

    Another attorney, Teresa R. Tracy of Berger Kahn in Marina del Rey, California, sees Noyes as reminding employers "of the need to ensure that only nondiscriminatory factors are considered when making employment decisions."

Webb v. City of Philadelphia U.S. District Court, Eastern Pennsylvania Case No. 05-5238 (June 12, 2007)
    The Philadelphia Police Department denied a Muslim officer's request for permission to wear a traditional headpiece, or "khimar," while on duty, saying it would violate the department's uniform policy. Summarily dismissing Kimberlie Webb's religious bias claims, U.S. District Judge Harvey Battle accepted the city's "undue hardship" defense.

    The uniform policy "has a compelling public purpose," he wrote. "It recognizes that the Police Department, to be most effective, must subordinate individuality to its paramount group mission of protecting the lives and property of the people living, working and visiting the City of Philadelphia." The prohibition on officers' wearing of religious attire "is designed to maintain religious neutrality ... for the good not only of the police officers themselves but also of the public in general."

    Pasek, who is defense co-counsel in the case, notes that employment cases involving "garb-specific religious requests" are cropping up more frequently, particularly in the public sector. "What do you do if someone shows up for work wearing a burqa?"

    The judge's ruling in Webb, Pasek says, "has given confidence to public employers" that courts will uphold workplace clothing rules if the employee's appearance is "an essential element of the service they provide to the public." Webb has appealed the decision to the 3rd Circuit.

Gambini v. Total Renal Care 9th U.S. Circuit Court of Appeals 480 F.3d 950 (March 8, 2007)
    Courts around the country are disagreeing over how to treat cases of workplace misconduct involving employees with mental illnesses. In Gambini, an office worker with bipolar disorder was fired after she yelled profanities at her supervisor during a manic episode. A jury rejected her wrongful termination case, but the 9th Circuit ordered a new trial because of instructional error.

    Conduct resulting from a disability is considered part of the disability, rather than a separate basis for termination, the court ruled, and "where an employee demonstrates a causal link between the disability-produced conduct and the termination, a jury must be instructed that it may find that the employee was terminated on the impermissible basis of her disability." Gambini's " `violent outbursts' ... were arguably symptomatic of her bipolar disorder."

    Gambini conflicts, for example, with Mammone v. Harvard College, in which the Massachusetts Supreme Judicial Court last year ruled that an employer does not violate discrimination law "by terminating an employee for egregious misconduct stemming from any recognized handicap (as opposed to termination for the handicap itself)."

    "You've got a real split here," Tenhoff says. "From an employer's standpoint, what are your options?"

Prachasaisoradej v. Ralphs Grocery Co. California Supreme Court Case No. S128576 (August 23, 2007)
    A sharply divided California Supreme Court gave employers a big victory by throwing out the proposed class action of a grocery store produce manager who challenged the legality of his employer's incentive compensation plan. Under Ralphs Grocery's formula, a store's profitability is calculated by subtracting expenses, including workers' comp costs, from revenue. The profit figure is then compared with preset targets to determine what, if any, supplementary wages should be paid to employees.

    Justice Marvin Baxter, writing for a 4-3 majority, said employees did not suffer deductions from their regular wages and that the court could not "conclude that such a supplementary incentive compensation system, beneficial to both employer and employees, contravenes the wage-protection policies of the Labor Code." But the dissent warned that the structure of the plan "creates a disincentive for injured employees to file even valid [workers' comp] claims, as well as an incentive for fellow employees to pressure injured workers not to file claims."

    Garry G. Mathiason, an employment law specialist at Littler Mendelson in San Francisco, said, "There has been concern [among employers] that bonus programs are inherently flawed because they allegedly encourage an underreporting of workers' compensation claims." The majority view in the Ralphs case "could impact thinking in many courts beyond California."

American Association of Retired Persons v. EEOC 3rd U.S. Circuit Court of Appeals Case No. 05-4594 (June 4, 2007)
    Under a proposed EEOC regulation, the common employer practice of coordinating retiree health benefits with Medicare would be exempt from the prohibitions of the Age Discrimination in Employment Act. AARP challenged the regulation, citing an earlier 3rd Circuit precedent—Erie County Retirees Association v. County of Erie, 220 F.3d 193 (2000)—which held that Medicare coordination violates the ADEA if the result is that the employer provides lesser benefits to older Medicare-eligible retirees than to younger retirees.

    The Philadelphia-based 3rd Circuit recognized "with some dismay that the proposed exemption may allow employers to reduce health benefits to retirees over the age of sixty-five while maintaining greater benefits for younger retirees." But without overruling Erie, it denied AARP's challenge, finding the regulation is "a reasonable, necessary and proper exercise of [the EEOC's] authority, as over time it will likely benefit all retirees."

    Since Erie, some employers faced with increased health costs have chosen to reduce all retiree benefits to a lower level. Attorneys believe that the AARP case should remove that incentive. "The case impacts almost all health plans in the U.S.," Mathiason says, "since, generally, employees are required to enroll for Medicare benefits if they are eligible."

Arismendez v. Nightingale Home Health Care 5th U.S. Circuit Court of Appeals Case No. 06-40593 (July 23, 2007)
    In explaining to Mariluz Arismendez, a customer service rep for a medical equipment firm, why she had been fired, her immediate supervisor, Veronica Vela, told her she had a "business to run" and "could not take having a pregnant woman in the office."

    A trial judge threw out a jury's $1 million gender bias award to Arismendez, agreeing with her employer that because Vela "did not exercise any authority over [the regional manager's] decision to terminate Plaintiff, Vela's comments amount to nothing more than stray remarks." But the New Orleans-based 5th Circuit ruled that the verdict was reasonable no matter what the "formal hierarchy" of the employer might be.

    "[T]his Court looks `to who actually made the decision or caused the decision to be made, not simply to who officially made the decision,' " it said, and the trial "evidence is sufficient for a jury to find that Vela exerted influence over the decision to terminate Arismendez."

    William D. Deveney, a partner at Elarbee, Thompson, Sapp & Wilson in Atlanta, observes that a similar case was before the U.S. Supreme Court this year in BCI Coca-Cola Bottling v. EEOC, but the employer withdrew its appeal before the case was heard. "The circumstances under which an employer may be held liable for the discriminatory animus of a subordinate manager or supervisor who was not the final decision-maker remains an open question," he said.

Cintas Corp. v. NLRB D.C. Circuit Court of Appeals 482 F. 3d 463 (July 23, 2007)
    Employee rights trumped an employer's confidentiality policy in a case brought against a supplier of workforce uniforms by a labor union. According to its "partner"—or employee—manual, Cintas Corp. protects "the confidentiality of any information concerning ... its partners," and employees may be disciplined for releasing confidential information. Section 7 of the National Labor Relations Act protects the communication rights of employees, and the Union of Needletrades, Industrial and Textile Employees successfully challenged the policy before the National Labor Relations Board as an unfair labor practice.

    Affirming the NLRB, the D.C. Circuit Court of Appeals found the language of the policy was "facially overbroad" and "expansive."

    "[B]ecause the Company has made no effort in its rule to distinguish [S]ection 7 protected behavior from violations of company policy, we find that the board's determination is `reasonably defensible,' and therefore entitled to our considerable deference," it concluded, rejecting Cintas' argument that construing the phrase "any information" literally invites absurdity.

    In light of Cintas, recommends Jill Panagos of Mc Glinchey Stafford in Houston, both union and nonunion employers should examine whether their confidentiality policies "infringe on employee rights [protected] under the NLRA. ... Cintas makes it clear that such policies are unlawful if they result in employer interference with employees exercising their right to engage in activities for the purpose of collective bargaining."

Sprint/United Management Co. v. Mendelsohn U.S. Supreme Court Case No. 06-1221 (pending)
Several attorneys pointed to the age discrimination case of a former employee of the telecom firm Sprint as the one to watch in the Supreme Court's current 2007-08 term. A divided 10th Circuit in Denver ruled that Ellen Mendelsohn could introduce "me too" evidence from other employees who also claimed they were discriminated against during a companywide reduction in force.

    "The outcome will be important in [determining] how cases are litigated, since plaintiffs routinely try to base a significant part of their own case on the experiences and beliefs of other employees who have also been the subject of an adverse employment action," Tracy says.

Workforce Management, December 10, 2007, p. 33-39 -- Subscribe Now!

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