Originally published in The Dish, January 23, 2012

Now that 2011 has ended, it's a good time to reflect on the employment law lessons and developments that occurred over the past year.  The following provides what we believe are the Top Ten of some of the major developments from 2011. 

10--Transgender Equal Rights in Massachusetts:  Massachusetts Governor Deval Patrick signed a new transgender equal rights bill, making Massachusetts the sixteenth state to prohibit discrimination based on gender identity. The bill goes into effect on July 12, 2012.

9--New NLRB Poster Requirement:  The NLRB propounded new regulations that would require employers to display a poster setting forth the rights and protections under the National Labor Relations Act for the workers’ right to engage in union activities. Unless the regulations are rescinded or otherwise blocked, all employers must post such notice by April 30,2012.

8--Connecticut Mandates Paid Sick Leave:  Connecticut will become the first state to require certain employers to provide paid sick leave when a billed signed July 5, 2011, goes into effect January 1, 2012. Employers that employ 50 or more individuals in the state will be required to provide certain employees with 1 hour of paid sick leave for every 40 hours worked. Accrued hours may carry over to following calendar years, but may never exceed 40 in any year.

7--Supreme Court Holds States May Require Employers to Use E-Verify:  The U.S. Supreme Court ruled in that states (and in particular Arizona under its new immigration enforcement law) may require employers to use “E-Verify” to determine the legal status of their employees. “E-Verify” is an internet-based federal system that permits employers to check the work status of their employees. The Court rejected the argument that FIRCA impliedly preempts the Arizona statute. See Chamber of Commerce v. Whiting,

6--NLRB rules that some social media comments are protected by law:  The NLRB ruled that employers may not terminate employees criticizing the terms of their employment or their working conditions using Facebook under certain circumstances. But not any posting about an employer constitutes protected conduct. Posting confidential business or client information is not protected conduct, and an employee posting such information may be subject to termination. Employees also may not defame management or the company.

5--Federal law does not require accommodation for “work Life” balance:  The EEOC’s class action claim for sex discrimination against Bloomberg, L.P. failed in the Southern District of New York when Judge Loretta A. Preska dismissed the class action alleging a “pattern of discrimination” and emphasized that “the law does not mandate ‘work life balance.’” As Judge Preska explained, “In a company like Bloomberg, which explicitly makes all-out dedication its expectation, making a decision that preferences family over work comes with consequences.”

4--Retaliation against those in claimant’s “zone of interest” unlawful:  The U.S. Supreme Court extended the anti-retaliation protections of Title VII to third parties within the “zone of interest” of a complaining employee. The Court held in an 8 – 0 decision that the purpose of Title VII is to provide broad protection against discrimination to employees and that this protection extends to third parties who are retaliated against in an effort to injure the party complaining of discrimination. See Thompson v. North American Stainless.

3--Decision in Wal-Mart v. Dukes Defines Commonality Requirement for Class Actions

Although the U.S. Supreme Court held 9-0 that a class of over one and a half million plaintiffs (current and former female employees of Wal-Mart) was improperly certified, the Court was split 5-4 in how it reached this decision. The majority concluded the class lacked commonality under the Federal Rules of Civil Procedure for class certification as the allegation of a “corporate culture” did not provide enough of a common issue of fact to support a class of thousands of employees claimed to have been discriminated by hundreds of different supervisors who were not governed by any discriminatory policy. See Wal*Mart v. Dukes.  By contrast, the Court did uphold a plaintiffs’ class action verdict against the City of Chicago based on the disparate impact of a written examination used to select firefighters for promotion.  See Lewis v. City of Chicago.

2--Supreme Court Upholds Waiver of Right to Class Action:  The U.S. Supreme Court upheld an arbitration agreement and a waiver of the right to class action in AT&T’s consumer agreements. In doing so, the Court held that the Federal Arbitration Act (FAA) not only favors arbitration, but also to disfavors class action proceedings. See AT&T Mobility LLC v. Concepcion.

1--Healthcare Debate Rages on Long Road to Supreme Court:  Whether the mandate for people to purchase health insurance amounts to an appropriate regulation of inter-state commerce or an unconstitutional assertion by Congress of the police power reserved to the states is the essential question that will eventually be answered by the U. S. Supreme Court.  For now, the decisions are split, with the 4^th and 6^th Circuits dismissing challenges to the federal healthcare law while the 11^th Circuit and a single federal district court in Pennsylvania ruling the law an unconstitutional assertion of federal power.

Trolls and the litigation they spawn have become the subject of bipartisan concern in Congress, and have led to the recent passage of the America Invents Actwhich was developed in part to mitigate the negative economic effects patent troll litigation can have on the economy and on innovation generally, This article will review the “patent troll” phenomenon, the developments in the US, patent laws that contributed to its occurrence, and the recent reform enacted to address it. Finally, it shall briefly discuss how a company should respond to a demand from a purported patentee seeking payment of a License fee.

Follow the link below to read the entire article.

Buildings have a significant impact on the environment – and the pocketbook.  Buildings account for around 39 percent of total U.S. energy consumption, including 72 percent of total electricity consumption, and 13 percent of total water use.   This level of energy consumption costs the average U.S. household around $2,000 a year.   Additional costs consist of indoor pollutant levels that are typically two to five times higher than outdoor levels.   Poor air quality results in increased absenteeism and decreased productivity among workers, causing significant losses for employers.  

Given the large impact of buildings on so many aspects of our lives, it is clear that one answer to the U.S.’s environmental, economic, and health problems is to rethink our approach to building.  Green construction practices can alleviate a number of pressing issues, including the deterioration of our environment, resource depletion, and our unhealthy dependence on foreign oil.  And on a broader level, the current fixation with all things “green”   shows that Americans genuinely desire to live and work in more sustainable accommodations, with natural light, natural air, and greater energy efficiency. To read the entire article click the link below. 

Originally published in The Dish, November 1, 2011

There have been some recent employment law developments that may affect employers in New Hampshire, and restaurants in particular. Here are some cases for employers to consider:

• “There are younger people here who can grow with the company”;
•  “You seem older to be applying for this job”;
•  “Do you think you would fit in?”;
•  "That the restaurant was “a younger set environment”;
•  “We are looking for people on the younger side… but you have a lot of experience”; and
• “How do you feel about working with younger people?”

 Originally published in the 2011 URMIA Journal on August 20, 2011

Following several high publicity campus shooting tragedies on college campuses in the United States, institutions of higher education have responded with sound risk management practices, including emergency response plans, new technologies to help notify stakeholders of potential threats, and behavioral threat assessment teams identify potential issues before they escalate to violence. Another response to violent acts on campus could be to begin arming campus police forces. This article addresses some of the risk management questions an institution of higher education should ask in considering whether to arm its campus police force. It also addresses the various risks of both arming and not arming a campus police force. 

 Originally published in New Hampshire Bar News on August 19, 2011

 *     Note:  All statutes cited are New Hampshire statutes

The rising tide of patent litigation is now affecting the hospitality industry in surprising and substantial ways. How? We can list two very real examples: For one, what café or hotel does not offer wi-fi to customers these days? For another, how many restaurant or retail businesses use search locator software on their websites to help customers find them? You may yourself have installed a free wi-fi service for your customers so they can use their laptops and tablets while sitting in your restaurant. Or you may have a service that provides a search engine on your website to help customers find your location. If so, you might be surprised to receive a letter in the mail from a company you’ve never heard of, telling you that your locator service and wi-fi might infringe on their patents. You might be even more surprised when you read the demand for you to fork over a monthly licensing fee or a substantial lump sum payment, or face a lawsuit. In that event, you’ve been snared by the net of a patent troll, and you need to develop a strategy to deal with it.

The United States Supreme Court has busily completed its 2010-2011 term. The Court handed down a number of employment law decisions in just the last several weeks. Here are some for employers to consider:

The Court held 5-4 that a class of over one and a half million plaintiffs (current and former female employees of Wal-Mart) was improperly certified. (The rational for this decision was split, apparently along party lines. The Court otherwise ruled unanimously that, given the differing responsibilities and pay scales involved, the issue of back pay should have been dealt with under a different part of the law. The Court adopted a stricter standard for determining eligibility for back pay in class action lawsuits.)

The plaintiffs alleged that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII by discriminating against women.

Writing for the majority, Justice Antonin Scalia held that, under Federal Rule of Civil Procedure 23, to certify a class, a plaintiff must do more than ask broad questions of the class to satisfy the requirements of the Rule. Instead, a court must perform a rigorous analysis (as stated time and again) and, sometimes, that analysis may require that the court explore the claims of the plaintiffs more than usual. (As the Court stated, “that ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff ’s underlying claim. That cannot be helped.”)

In particular, the plaintiffs did not allege that Wal-Mart had any express corporate policy against the advancement of women; rather, they claimed their local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees. The plaintiffs claimed this discrimination was common to all Wal-Mart female employees. Their theory alleged that “a strong and uniform ‘corporate culture’ permits bias against women to infect, perhaps subconsciously, the discretionary decisionmaking of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.”

The Court stated “the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once.” Rather, “[t]heir claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor.” Moreover, “[t]hat common contention . . . must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

Here, the Court noted the crux of a Title VII inquiry is “the reason for a particular employment decision,” and the plaintiffs wished to sue for millions of employment decisions at once. Without some glue holding together the alleged reasons for those decisions, the Court stated, it would be impossible to say that examination of all the class members’ claims would produce a common answer to the crucial discrimination question.

Scalia’s opinion and Justice Ruth Bader Ginsburg’s dissent reveal fundamental opposing views between the right and left wings of the Court. Scalia, for instance, dismissed the statistical and anecdotal evidence filed by the plaintiffs, arguing that “Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters” was “just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.” Scalia also relied on the fact that Wal-Mart has a written policy of non-discrimination.

Ginsburg took the opposite view. She argued such a policy has a disparate impact: she noted that, at Wal-Mart, women fill approximately 70% of the hourly retail jobs, but only 33% of management positions. The reason, she argues, may be the subjective “tap on the shoulder process” that allows certain subjective standards, influenced by gender bias, to prevail when it comes to selecting employees deemed “management material.” She further wrote, “The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware. The risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes.”

The Court’s decision is good news for employers because it sets a new higher standard for defining a class, which will likely make it difficult in the future for other class action claims against large companies based on discrimination to be certified.

A New Hampshire Superior Court recently ruled that a limitation of liability clause in a design contract violates public policy when the work is “of great importance” to the public. Town of Bow v. Provan & Lorber, Inc., 217-2009-CV-00190 (Merrimack Cty. Superior Court 6/3/11) (Smukler, J.).

The Town of Bow sued two engineering firms and a general contractor for alleged design and construction defects in a culvert and retaining wall. The claims against one engineering firm were dismissed because the culvert and retaining wall were outside its scope of work. The remaining engineering firm sought summary judgment based upon a contractual provision limiting its liability to $50,000, or the amount of its contract, whichever was greater. The Town filed a cross-motion for summary judgment to invalidate that provision. Such provisions appear in many design contracts in the State of New Hampshire and elsewhere.

The Superior Court ruled that the limitation of liability clause violated public policy because engineers on public projects have an overriding responsibility for public safety, and the limitation of liability clause “encourages carelessness” in the construction of improvements such as roads.

This decision potentially calls into question limitation of liability clauses in every design contract related to public projects. If such provisions are invalid, then the cost of public projects may increase as design professionals account for their increased exposure to first-party claims.

Lawyers Prohibited from Utilizing Confidential Client Information to Act as Whistleblowers

Under the Dodd-Frank Act, Pub. L. No. 111-203, § 922(a), 124 Stat. 1841 (2010), whistleblowers may receive significant cash awards for reporting violations of Federal securities law. The SEC recently passed Rule 21F-4(b)(4)(i) and (ii) providing that attorneys are ineligible for these awards when they divulge privileged or confidential information obtained from clients in violation of their ethical obligations. The purpose of this proposed exclusion was to avoid creating monetary incentives for attorney that would conflict with their obligations to maintain client confidentiality.

By: Paul T. Milligan

Arbitration is generally considered a time- and cost-efficient method of resolving disputes.But disagreements about the arbitrability of particular claims can divert time and resources from the merits of the case, potentially thwarting the efficiency of arbitration. Such disputes occur frequently. Indeed, from 2005 to 2007, courts published more than 500 opinions regarding the enforceability of mandatory arbitration clauses. For these reasons, an important consideration in drafting and analyzing arbitration agreements is who decides questions about arbitrability, including whether there is an enforceable agreement to arbitrate and whether a particular claim is arbitrable.

This article reviews who is empowered to determine the validity and enforceability of arbitration provisions. As discussed below, federal and state courts have taken different approaches. A federal “majority rule” has evolved, under which questions concerning arbitrability are determined by the court (unless the parties have “clearly and unmistakably” agreed that such questions be determined by the arbitrator), but questions concerning the validity of the contract as a whole are determined by the court.But there continue to be inconsistent rulings coming from state courts concerning who—the court or the arbitrator decides the “arbitrability” of a particular issue, leading to uncertainty concerning how that issue will be handled in a number of jurisdictions.

To view the related article as it was originally published, please follow the link below:

Many dining establishments encounter difficulty with how to write an employee handbook for restaurants, but, in reality, creating an employee handbook is not all that difficult, nor is a handbook for a restaurant must different conceptually than handbooks for other businesses.  The key is to know what to include in it.

•   Welcome the employee. 
•   Provide a brief history of the company. 
•  Company’s goals, values, beliefs, and philosophy.

• Employee should know it is his/her responsibility to read and understand handbook. 
• Acknowledgment should be at beginning of handbook. 
• Awareness of importance of handbook ensures employees read it. 
• Helps avoid future “I didn’t know about it” conversations. 
• Include a disclaimer that the employee handbook is not an employment contract between the employee and the company.

• Outline of company’s policy regarding equal employment opportunity. 
• No equal employment opportunity statement sends the wrong message. 
• Include reference to affirmative action policy here (if applicable).

• Attendance: a general statement about tardiness and expectations and procedure for requests for time off. 
• Confidentiality: policy regarding protection against disclosure of confidential business information; describe information considered confidential 
• Covenants Not To Compete: make sure the law in your state allows such covenants. 
• Data Privacy: protection of personal information; refer to written comprehensive information security program. 
• Dress Code: description of requirements regarding clothing, uniforms, etc. 
• Employment Categories: outline of varieties of employment categories (full-time vs. part-time) and provide disclaimer (if applicable) that employees are at-will employees and, thus, may be dismissed at any time at the company’s discretion; job descriptions, however, should be set forth in a separate document. 
• Parking: identify any applicable policy or procedure. 
• Performance Reviews: essential if problems ever arise with employee; no need for description of process but should address when reviews occur. 
• Safety & Accidents: refer to relevant documents (safety posters, emergency procedures, etc.) and periodic employee training. 
• Smoking: laws and building rules regarding smoking. 
• Social Media: expectations regarding employee behavior on blogs, message boards, Facebook, Twitter, etc.; all content posted on websites should be subject to company policies
• Substance Abuse: outline of policy, requirements for testing, and disciplinary process. 
• Use of Employer or Company Property: description of reasonable use of company telephones and computers so long as no interference with business; no unauthorized use of Internet. 
• Work schedules (if applicable): define procedures for and information regarding schedules. 
• Additional Policies: outline other applicable policies, including employment verification requests from outside sources, breaks, job posting program, adverse weather instructions, solicitation guidelines, and whistle blower protection

• Payroll: outline of payroll processing options (e.g., direct deposit) and pay periods (weekly, bi-weekly, number of pay periods). 
• Work Hours & Reporting: definition of work day and information regarding overtime. 
• Holidays: list days company recognizes as holidays and define how employees are paid for holidays.
• Vacation & Personal Days: define who is eligible, the rate at which vacation accrues, carry-over policy (if applicable), requirements for requesting vacation and personal days, and unused vacation if employee leaves company. 
• Health Insurance: overview of coverage and who is eligible; refer to separate documentation.
• COBRA: refer to continuation of health benefits; keep full explanation in documentation provided to employee upon leaving company.
• Short-Term Disability: define policy and who is eligible.
• Military Service: define who is eligible, and outline policy and requirements. 
• Retirement Plans: provide brief description of plan; refer to plan documents. 
• Worker’s Compensation: identify whether company has worker’s compensation insurance; refer to separate documentation. 
• Tuition Assistance: define policy, requirements, and who is eligible. 
• Employee Assistance: provide brief description of program and applicable telephone number. 
• Other Benefits: outline other applicable compensation and/or benefits, including information about credit unions, employee referral programs, idea incentives, service awards, employee purchases of company goods/services, and annual physical exams and blood screening.

• Discrimination and Sexual Harassment: describe policy against discrimination and harassment, and outline procedures for company response to complaints.

• Family and Medical Leave Act (if applicable): applies to businesses with 50 or more employees; explain and address benefits and requirements under FMLA and state laws. 
• Maternity Leave: identify who is eligible and amount of time allowed and rate of pay during absence. 
• Sick Leave: outline policy but ensure that it is consistent with vacation, FMLA, maternity leave, and short-term disability policies; there are no legal requirements for sick leave, but 3 to 10 days of paid sick leave per year is common. 
• Funeral Leave: identify type of family member (immediate or extended family) for which whose death leave is allowed and amount of time allowed. 
• Jury Duty: a good idea to include; identify relationship between rate of pay and court compensation and requirement of proof of service.

While McDonald’s may have its own legal defenses, there is another perhaps larger potential defect in the group’s theory against the chain.  Ultimately, it is one of causation.  Or in other words, as some skeptics have argued, it’s called “parenting,” and perhaps those concerned with what their children eat should just do it.  It is one thing if the concern was about children old enough to have their own purchasing power and about advertising that in fact deceives them into purchasing a harmful product.  Think, for example, of Joe Camel, a marketing program allegedly targeted to children who were not legally permitted to use the product but who nevertheless could purchase it with their own money.  Here, however, the customers are parents who presumably can read labels and the nutrition content offered by the chain to anyone who asks.  While toys may entice children to ask their parents for something that is not good for them, parents with access to full information make the final call.  In that context, the defense argument goes, how can the real customer genuinely argue that the chain has been “deceptive” in its marketing?

To view the published article on the New Hampshire Bar News website, please follow the link below.

WEBINAR — Restaurant Industry Class Actions

Take advantage of an important opportunity to learn about the emerging trends in class-action litigation affecting the restaurant industry by attending a live webinar on June 30, 2010. This webinar will focus on two areas of class-action litigation of importance to the industry: food and nutrition-related class actions and employment class actions. We will cover the pending suits against Denny’s (sodium levels in food), Applebee’s (allegedly misleading nutritional information on its “Weight Watchers” menu), and McDonald’s (chicken preparation methods allegedly increasing the risk of cancer). The webinar will also examine the recent rise of employment class actions, including the tip-pooling litigation against Starbuck’s, the EEOC sex discrimination settlement with Outback Steakhouse, and the continued travails of the country’s largest retailer in fending off employment class actions. You will gain timely information on how best to avoid pitfalls which can lead to a major class action, and the negative headlines that surely follow.
 

The massive new healthcare reform law covers more than just what goes into your insurance plan and who has to pay for it. It covers what goes on your menu and to some extent what goes in your mouth. The new law is fundamental and far-reaching, and it likely may be just the beginning of substantial changes for all employers and for restaurants in particular.
LEAN and mean federal menu Labeling Regulations Coming Soon.
 

Although it may appear to be yet another act by the federal government to control daily life, this is one intrusion that has been supported by the hospitality industry for some time. Local communities, such as New York, Philadelphia, and states such as Massachusetts, have begun to enact menu labeling laws requiring certain restaurant chains to post various kinds of nutritional information prominently on their menus. Some require only calorie counts while others require information regarding trans-fats, sodium, carbohydrates and so on. Other states, such as Connecticut, have rejected such laws altogether, although in that case only by a recent governor’s veto. Faced with a patchwork of varying and complicated regulations, the industry supported federal regulation in this area so that businesses can deal with a single, consistent set of rules throughout the country.

How much grape juice is in a “100% Juice Grape Flavored Juice Blend?” How much bran or whole grain is in “Bran Flakes Whole Grain Cereal?” What about strawberries in “Simply 100% Fruit Strawberry?” Or broccoli in “Fettuccine and Broccoli?”

By Warning Letter to Nestle USA released in late December, the Food and Drug Administration (FDA) has called into question common industry label practices that emphasize a key flavor or ingredient. The Warning Letter addresses Nestle’s Juicy Juice All-Natural 100% Juice Orange Tangerine and Juicy Juice All-Natural 100% Juice Grape products that the label Ingredients list shows is predominantly apple juice.

There is great risk that FDA’s position will apply to food products beyond juices, such as breads, cereals, pasta, fruit products, and other products emphasizing one desirable ingredient (e.g., “Whole grain cereal” or “made with broccoli.”). While FDA regulations specify permissible claims about nutrients such as fats,cholesterol, sodium, fiber, vitamins, and minerals, FDA currently does not specifically regulate label statements about ingredients,such as whole grain, broccoli, orange or grape. FDA has not previously
challenged product labels emphasizing one (or not all) ingredients.

The Warning Letter and the Juicy Juice Products FDA asserted that the Juicy Juice products were misbranded under section 403(a)(1)3 of the Food, Drug and Cosmetic Act (FDCA) because their labels misleadingly implied that the products are 100 percent orange/tangerine juice and 100 percent grape juice, respectively.

Click the link below to view the related document.

The Genetic Information Nondiscrimination Act took effect on 9/21/09. GINA outlaws employment discrimination based on one’s genetic makeup, including “family history” or other evidence of tendency toward disease.

9. Congress Strikes Back With The ADAAA

Erasing significant U.S. Supreme Court precedent that had limited the scope of the term “disability” under the Americans with Disabilities Act, Congress amended the ADA effective 1/1/09 to add “rules of construction” meant to expand the reach of the term “disability” to include impairments that substantially limit major life activities when those impairments are not treated medically, regardless of the efficacy of any medical treatment.

8. No EFCA: The Revolution That Never Came

While many expected the employee Free Choice Act to readily pass Congress under the Democratic majority, the EFCA never came to the floor and Congress has not moved it forward. The EFCA would eliminate the right to secret ballot election in union certification votes at the workplace.

7. ARRA Changes COBRA

A portion of the American Recovery and Reinvestment Act passed in 2009 provides for a federal subsidy up to 65% for the health insurance premiums under COBRA for laid off workers for up to 15 months.

6. “Mixed Motive” Analysis Inapt For ADEA Disparate Treatment Claims

The U.S. Supreme Court held in Gross v. FBLFinancial Services, Inc. that a “mixed motive” jury instruction is never warranted in ADEA (age discrimination) disparate treatment claims, and that plaintiffs must prove that a discriminatory animus was the “but for” cause of a negative employment action.

5. Title VII Protects Informants, Not Just Claimants

An employee who responded to her employer’s internal investigation inquiries by disclosing a supervisor’s harassing behavior, such as grabbing his crotch and saying “you know what’s up,” could not be retaliated against for disclosing such information, said the U.S. Supreme Court in Crawford v. Met. Gov. of Nashville.

4. Ledbetter’s Last Laugh

Congress passed the Ledbetter Fair Pay Act of 2009 in yet another spanking of the U.S. Supreme Court, rejecting its Ledbetter v. Goodyear Tires & Rubber Co. opinion from the prior term. The Act makes each pay check issuance an independent act of discrimination if such pay check amount is based on a discriminatory decision or motive, regardless of how long ago the discriminatory decision may have been made.

3. Tip Pool Tidal Wave

Starbucks faced a $100 million class action brought by their baristas in California who claimed the company’s practice that required them to pool and share tips with assistant managers violated state wage laws. The employees won at trial, but lost on appeal. Similar class actions remain pending across the country.

2. Side Work Stick Up

Side work, meal breaks, overtime and time card manipulation abuse resulted in several high stakes class actions or agency actions brought against restaurants and retailers in 2009. Wal*Mart paid $40 million to settle a wage and hour claim action alleging meal break, Overtime and card manipulation abuse. Ruth’s Chris was sued in a class action alleging payment of server wages when servers performed non-server work, and Boston Medical Center was sued by a class of employees alleging that the hospital did not pay for meal breaks even when workers worked through them. The 2009 claims are only the tip of the iceberg, as the DOL has announced its increasing emphasis on wage and hour violations through its purported “We Can Help” campaign.

1. Employers Caught Between A Rock and Hard Place Following Landmark Decision

The U. S. Supreme Court held last year in Ricci v. DeStefano that the Fire Department of New Haven committed unlawful race discrimination under Title VII when it rejected for promotion all those who had past the promotion exam based on the racial demographics of those who had passed and failed, even though the Department’s motive was to avoid disparate impact liability under Title VII. Less than 3 months later, when the Department hired candidates previously rejected based on the Court’s decision, the Department was sued again under the disparate impact section of Title VII as none of the passing candidates for promotion were African American.
 

The EEOC Has Been Busy. Have you cracked your Glass Ceiling yet?                

The French have found what they believe will be a direct line to gender equality according to this morning’s broadcast of NPR News. The national government has proposed a quota requirement for all businesses listed on the Paris stock exchange that would require these companies to have their boards of directors contain at least 40% women within the next 5 years. French companies average 8% women on corporate boards as compared to 15% in the United States. But the French seek to follow Norway, which has a similar law and now boast of over 40% participation of women in board rooms. Some in France believe the quota system at the top will have a trickle down effect for women’s pay down the corporate ladder, as women generally continue to be compensated less than men in the French economy. Others view the proposed law as a clumsy blunt instrument that will do nothing more than promote “yes women” that will support current insiders. Meanwhile, the bill has general support from both the right and left in France and prognosticators expect it to pass by the end of the year

Violators: Expect to be caught between Barack and a Hard Place

President Obama delivered his first State of the Union address to a Joint Session of Congress and to the American people on Tuesday, January 26, 2010. He covered quite a bit of ground about the economy, health care and national security, among other things, but he also specifically discussed his administration’s policy regarding civil rights and wage law enforcement. The president’s strident tone should provide notice to business and other employers that the federal government will be looking to enforce the anti-discrimination and wage laws vigorously and, in some cases, looking to make examples of certain violators. Here is a brief portion of the speech: 
. . . 
My Administration has a Civil Rights Division that is once again prosecuting civil rights violations and employment discrimination. We finally strengthened our laws to protect against crimes driven by hate. This year, I will work with Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are. We are going to crack down on violations of equal pay laws - so that women get equal pay for an equal day’s work. And we should continue the work of fixing our broken immigration system - to secure our borders, enforce our laws, and ensure that everyone who plays by the rules can contribute to our economy and enrich our nations. 

Trouble Brewing at Starbucks

Regardless of who you believe, it is a sordid story that may lead to a tremendous liability for Starbucks, not to mention embarrassment for everybody involved. A teenaged “barista” has alleged that her 24 year old manager sexually harassed her on a regular basis and used his position to obtain sexual favors from her. The company claims that the two concealed a consensual relationship. The manager claimed he never know the employee was only 16 and pleaded guilty to statutory rape charges and served 4 months in jail. The teenagers parents seek to impose responsibility for these events upon the company. 

The following is a brief explanation of the Massachusetts statute, and how it might apply to the Fairleigh Dickinson case:

M.G.L. c. 231, § 85K actually abrogated “charitable immunity” as it is commonly known, and imposed instead a $20,000 cap on the liability of charitable organizations where a “tort was committed in the course of any activity carried on to accomplish directly the charitable purposes” of the organization. Thus, as long as the court agreed that the university was negligent, the Fairleigh Dickinson plaintiff would have recovered $20,000 if the case occurred in Massachusetts (minus any sums for comparative negligence).   

The $20,000 cap does not apply where a tort is “committed in the course of activities primarily commercial in character even though carried on to obtain revenue to be used for charitable purposes.” The “primarily commercial” exception, however, has been construed very narrowly by courts. See In re Boston Regional Medical Center, Inc., 328 F. Supp. 2d 130 (D. Mass. 2004); see also Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, 28 n.37 (1997) (cap applies unless conduct is “entirely disconnected” from charitable purpose). For instance, maintaining dormitories for students, like in the Fairleigh Dickinson case, would almost certainly be considered in furtherance of charitable purposes. On the other hand, if the school stopped putting students in the dorms and instead rented them out to the general public in order to generate revenue, that may be considered primarily commercial. This exception is somewhat akin to the “beneficiary” requirement of the New Jersey law; for example, members of the public renting dorms from the university would not be beneficiaries of the university’s charitable mission. The Orzech court also noted “that the controlling test of beneficiary status is ‘whether the institution pleading the immunity, at the time in question was engaged in the performance of the charitable objectives it was organized to advance.’” Such a test is nearly identical to the Massachusetts requirement that the tort be “committed in the course of any activity carried on to accomplish directly the charitable purposes” of the organization.

The Massachusetts charitable immunity cap has been construed by courts to apply only to claims against charitable organizations themselves (as well as any individual not receiving compensation for services provided to the organization), not claims against the organization’s agents, servants, or employees.  Accordingly, it is well-recognized in Massachusetts that one way to get around the cap is to name the responsible individual employees of an organization in the suit. For instance, if the Fairleigh Dickinson case had been governed by Massachusetts law, the plaintiffs would likely have named an individual employee in addition to the university, perhaps an employee responsible for monitoring dormitories, or a university police officer who “should have been” patrolling the dormitory. In New Jersey, however, the immunity extends to such employees unless they commit willful, wanton, or gross negligence. Sometimes a Massachusetts plaintiff who was injured as a result of institutional negligence is unable to identify a responsible individual from within the charitable organization and is left with only the $20,000 cap; it would be even more difficult for a New Jersey plaintiff who must find an employee who was willful, wanton, or grossly negligent. 

The cap on tort damages recoverable against a Massachusetts charitable entity remains a significant defense and one that inevitably influences the outcome of litigation. For example, plaintiffs’ lawyers who are savvy enough to name individual employees as defendants must calculate the risk that a jury may still only hold the institution liable, thus limiting their recovery to $20,000.

Conclusion

If Massachusetts law applied to the Orzech case, the plaintiff probably would have recovered the $20,000 cap (as long as negligence was found and the university’s negligence was greater than the student’s). The plaintiff may also have been able to name individual employees to subvert the charitable immunity cap. These individuals would only have to be negligent, not willful, wanton, or grossly negligent as they would have to be in New Jersey. Naming individual employees would have given the plaintiff at least a chance of recovering more than the statutory cap. It also puts added pressure on a university’s insurer who will be defending the employees, and could result in a settlement higher than the statutory cap. It would likely be difficult, however, to establish the negligence of any particular employee in this case.

The decedent’s chest pain was diagnosed as anxiety and hyperventilation. After death, an autopsy revealed an aortic dissection. In Lockridge v. Oakwood Hospital, Nos. 283522 & 284664 (Mich. Ct. App. Aug. 20, 2009) the emergency room physician unsuccessfully moved for a directed verdict, claiming the aortic dissection was unforeseeable, and therefore not diagnosable. A verdict in favor of the estate was returned by jury. The estate alleged the decedent’s condition was a spontaneous pneumothorax that required a chest x-ray; and if it had been performed, an aortic dissection would have been seen in time for successful treatment. Affirming the verdict, the appellate court ruled that if the standard of care required a chest x-ray, the physician was liable for any condition that would have been revealed by that test.

Consumer Protection Claim Based Upon Unnecessary Surgery Rejected

A cop who complained about his employer who read his personal text messages that were sent on his official cell phone sued his department and will now have his case heard by the United States Supreme Court. Last week, the Court granted certiorari to review a decision of the U.S. Court of Appeals for the Ninth Circuit in Quon v. City of Ontario, which ruled that the Ontario, California police violated an officer’s “reasonable expectation of privacy” in text messages sent or received on a department-issued pager. In Quon, the department had an explicit policy that electronic communications sent using government equipment were not private, but a mid-level supervisor allegedly stated orally that the officers’ messages would not be read if they paid for any monthly overages.

Beyond the narrower issue of employee privacy in electronic communications, the case could lead to a reevaluation of the constitutional framework for privacy rights of public and private employees in the workplace.

GINA is Out of the Bottle — Are You Ready?

The EEOC has recently issued guidance on Title II of the Genetic Information Nondiscrimination Act of 2008 ("GINA"), which prohibits genetic information discrimination in employment. GINA became effective on November 21, 2009. The law outlaws the use of any “genetic information” in the making of any employment decision whatsoever, and it outlaws “harassment” on the basis of a person’s “genetic information.” GINA defines “genetic information” to include not only results from genetic testing, but also information concerning family medical history. GINA may contain traps for the unwary and the prohibition on disclosure is subject to only a handful of explicit exceptions, such as information collected from publicly available sources (so long as the employer has a non-discriminatory reason for collecting such information). NKMS has provided further analysis on its LegalBites blog as well as a link to the EEOC guidance.

Outback Steakhouse settles EEOC Gender Discrimination Lawsuit for $19 Million

The parent company of Outback Steakhouse, a national casual restaurant chain, agreed to pay $19 million in a settlement agreement with the EEOC to end a gender discrimination lawsuit, and the federal court in Colorado accepted the settlement agreement to dismiss the matter on December 29, 2009. The EEOC had alleged that Outback Steakhouse engaged in systemic gender discrimination by maintaining a glass ceiling to keep female employees from promotion to higher-level profit-sharing management positions, and by denying women job assignments involving kitchen management, which was required at the company for employees to become top-level managers. In addition to the eight-figure settlement, Outback agreed to institute an online application system for employees interested in managerial and supervisory positions, to establish a “Vice President of People,” to employ an outside consultant for two years to determine compliance with the agreement, and to report to the EEOC every six months.

Your cook has the sniffles. Can you require him to tell you his symptoms? Can you send him home even if he says he “feels fine”?   Can you ask him if he has been traveling and where he has been to see if he has recently visited a pandemic “hot spot”?

Or, being a conscientious employer, can you require your employees to take the flu vaccine so that you can reduce sick days in your workplace?

During oral argument in Ricci v. DiStephano this spring, Justice Souter observed that the plaintiffs' interpretation of Title VII could put their employer into a “damned if you do, damned if you don’t” situation under the law. Readers will recall that the Ricci case involved white and hispanic firefighters who sued their employer, the City of New Haven, because the City discarded firefighter examination results which would have made them eligible for a promotion because no African-American candidates passed the exam.

Sure enough, last week an African-American firefighter sued the City of New Haven for reinstating the results of the firefighter’s exam. This plaintiff, Michael Briscoe, alleges that the City has violated -- you guessed it -- the disparate impact provisions of Title VII.

We saw this one coming mile away.  In our coverage of Ricci this spring, we noted: “an employer who uses race to make a decision to avoid liability under the disparate impact provisions of Title VII can find himself liable under the disparate treatment provisions under the same statute.” 

In Ricci, the Supreme Court conceded that the factual predicate existed to create a prima facie disparate impact claim against the City. Briscoe has filed just such a claim. Justice Souter’s words seem more prescient now than they were this spring, and NKMS will be following this case with interest. Stay tuned.

Covenants Not to Compete Remain Enforceable, and Modifiable, in the First Circuit

A district manager of sales who had signed a covenant not to compete with his employer when he started work as a sales person remained bound to his covenant when he left his employer for a new company notwithstanding the fact that the covenant was overly broad and unenforceable as written, says the First Circuit in Astro-Med, Inc. v. Nihon Kohden America, Inc., No. 08-2334 (1st Cir. 2009).  The employee started with Astro-Med in the medical equipment sales business and signed a non-compete that purported to ban him from competing anywhere in North America and Europe for a year after leaving Astro-Med's employ.  When the employee quit years later to join Nihon, Astro-Med sued and prevailed.  While the court agreed with Nihon that the covenant was overly broad, it modified the covenant to cover only the State of Florida and a limited set of customers.  Nihon argued that one could not breach an overly broad covenant until after it was reformed, but the court disagreed on that point, stating that it would enforce the covenant as limited going back to the date of signing because otherwise the court would effectively be making a rule that would allow "one free breach" and eviscerate the parties' entire agreement until after it could issue its ruling.  While some, including Nihon, might have approved of such a rule as a deterrence to overeaching employers, the court decided the more fair approach would be to hold the parties to their bargain to the extent legally enforceable.

In addition, the court considered whether Rhode Island would apply a rule like the one adopted in Massachusetts concerning the potential lapse of a non-compete agreement in the event the employee changes jobs within the employer's corporate structure after the execution of the agreement.  Without ruling that it necessarily would do so, the court determined that the Massachusetts rule simply stands for the "non-controversial proposition" that a change in jobs may present "evidence" that the parties may have abandoned their prior agreement, but that the determination as to whether they had in fact done so had to be based on a finding as to the actual intent of the parties to the extent such could be reasonably understood.  Applying that version of the rule, the court did not find that the employee and Astro-Med had ever "abandoned" their covenant not to compete and that, therefore, the employee remained bound to it to the extent of its modified scope as tailored by the court.

Non-compete agreements remain enforceable in this Circuit, although they may be subject to severe restrictions.  Tread carefully and confer with counsel before engaging employees that purport to be bound to such agreements.

H1N1: Coming to a Workplace Near you.

What do you do with an H1N1 outbreak in your office?  Your response could have implications under the Americans with Disabilities Act.  The EEOC has recently issued guidance on how employers and other entities should proceed.  Guard against the H1N1 and potential liability and see what the EEOC has to say.

Maine Court Limits Cross Examination of Expert.

By Christopher T. Vrountas

Within the last year the Supreme Court of the United States has issued two important decisions in employment law, specifically in the context of actions that may cause a “disparate impact” on a “protected class” of people even where they may be no intent to discriminate. The first case, Meacham v. Knolls Atomic Power Laboratory, 128 S.Ct. 2395, concerned a disparate impact claim in the context of alleged age discrimination, while the second case, Ricci, et. al. v. DeStefano, et. al., No. 07-1428 (June 29, 2009), concerned disparate impact and attempts to correct such impacts in the race discrimination context. In both cases, the Supreme Court ruled in favor of the employees who had sued their respective employers. Yet, it is difficult to glean any further consistent theme from the decisions. Although the Court in both decisions articulated its philosophy of adhering literally to statutory language, literal meaning begged the question in the Ricci case. The Ricci case in particular shows that policy oriented reasoning is inescapable even amongst an alleged “strict constructionist” majority. Meanwhile, it appears that employers have born the brunt of the current Court’s methodology.

Meacham v. Knolls Atomic Power Laboratory, 128 S.Ct. 2395

In Meacham, plaintiff along with some fellow employees brought a disparate impact claim against their employer, Knolls, under the Age Discrimination in Employment Act (ADEA). Knolls had reduced its work force in a process that required managers to score their employees on “performance,” “flexibility,” and “critical skills” to determine who would be laid off. In the end, 30 of the 31 employees let go were at least 40 years old. The apparent disparate impact upon older workers gave rise to the plaintiffs’ age discrimination claim.

The Second Circuit found for Knolls on the grounds that a “reasonableness” test should be used to evaluate the employer’s actions and that the employees had failed to demonstrate that Knolls’s actions were unreasonable. The Supreme Court reversed, however, ruling that the burden lies with the employer, not the discharged employees, to prove that the layoff decisions were reasonable when confronted with claims of disparate impact against older workers.

A traditional textual analysis of the ADEA brought the Court this conclusion. Generally, a party asserting an affirmative defense carries both the burden of production and persuasion. In this case, the Court noted that the ADEA provides for an exception for actions otherwise prohibited by the statute, such as those that cause a disparate impact, when they are based on reasonable factors other than age. The Court also noted that this exception was listed in the statute along with “affirmative defenses.” Accordingly, the Court determined that “reasonableness” amounted to an affirmative defense under the ADEA, leaving the employer with the burden of not only producing evidence of reasonable factors other than age but also persuading the fact finder of their merit.

Ricci, et. al. v. DeStefano, et. al., No. 07-1428 (June 29, 2009)

By contrast, the Court recently divided itself sharply over the issue of disparate impact and remedial measures in the context of race. This case arose out of the City of New Haven’s decision to reject the results of a test designed to determine eligibility for promotion within their fire department. When the results came back, all of the firemen eligible for promotion were white, except for one Hispanic. None were black. The City rejected the test results based on the race of those who passed because it feared it could possibly have been sued under a disparate impact theory by those black candidates who failed the exam. Unfortunately, the City learned that there often is no way to avoid litigation. Upon learning of the City’s rejection of the test results, the firefighters who passed brought a Title VII discrimination claim against the City, alleging that rejection of the test results solely on the basis of race demographics constituted unlawful race discrimination, regardless of the remedial motive behind the action. The Court agreed and found that the City’s rejection of the test results based on the racial makeup of those who passed constituted unlawful race discrimination under Title VII.

As in the Meacham case, the Court justified its decision upon its purported strict adherence to the text of the statute. The Court explained Title VII outlaws employment decisions based on race and that, absent some defense, the City could not simply reject the test results because of the racial backgrounds of those who passed. The Court refused to find a “good faith” exception to race discrimination based on the City’s attempts to avoid disparate impact on minorities where Congress had not provided one. But the purported adherence to the language of the statute does not fully explain this reasoning. The statute, for example, also outlaws employment actions that result in disparate impacts on protected classes, even when those actions that cause such impact are devoid of discriminatory intent. The statute also provides for remedies for those employees who suffer those disparate impacts, including legal claims against their employers for damages and other forms of relief. As the dissenting opinion noted, the plain language of the statute provides for employers to take remedial action so as to avoid potential disparate impacts against protected classes. According to the dissent, rejecting the test scores did nothing other than allow the City to comply with the disparate impact sections of the very same statute the majority purported to interpret literally when ruling against the City.

Bottom line, the “literal” language of Title VII creates a tension in the law. As the Ricci case shows, an employer who uses race to make a decision to avoid liability under the disparate impact provisions of Title VII can find himself liable under the disparate treatment provisions under the same statute. Indeed, the Ricci majority conceded that a prima facie case for disparate impact liability against the City existed after the test results came in, as the winning candidates were nearly all white. However, the Court found that mere fear of litigation alone cannot justify a race based employment decision. Rather, according to the Court, the employer must at least have a “strong basis in evidence” that it in fact would truly be subject to disparate impact liability in the event a lawsuit is filed before it can use race as a basis to reject promotion test results. The Court determined that a lesser standard would simply open the door to race based employment decisions based on potentially specious claims.

What does this mean?

Both these important decisions place employers in difficult positions. Under the ADEA, employers must come close to having to prove a negative while under Title VII the Court has deprived employers with any avenue to avoid litigation, as any action taken to avoid disparate impact claims can now be the basis for disparate treatment claims. For more information on these cases and the issues they present, join the author in a free webinar on these topics on September 30, 2009.

In the wake of corporate scandals like Enron and Tyco as well as similar scandals in the non-profit world, excessive executive compensation became a lightening rod issue. Constant bad press has dogged those corporations that failed to withstand the scrutiny of Congress, the IRS, the SEC, and the public. Corporate America’s self indulgence, lack of discipline, and poor judgment was on display for everyone to see.

The harsh spotlight on fiscal excess is now illuminating the non‐profit world. Colleges and universities, in particular, have come under pressure to account for their pay scales. Where, despite tuition hikes, presidents, provosts, and coaches can command high six – sometimes seven – figure salaries and enjoy a range of perks on the school’s tab, the backlash has been palpable.

Executive Privileges and Compensation Continue To Rise

In the fall of 2005, American University President Benjamin Ladner was forced out of office after an anonymous tip revealed Ladner received $800,000 for travel and personal expenses in 2004 alone, in addition to his $886,750 base salary. The university also supplied him with other personalized services during his tenure. American University, however, was not the only higher education institution that was allowing for extravagant executive privileges. The President of Mercer Community College was fired from his post in Trenton, New Jersey after serving $60/per-pound Kobe beef at school dinners at the same time the school was raising tuition rates. In Tennessee, an internal audit revealed the President of the University, John W. Shumaker, was using the university’s aircraft for personal travel. He eventually repaid the university $25,000 in travel reimbursement fees.

Many jurisdictions including New York, Florida, California, Rhode Island, Pennsylvania, Oregon, Illinois, and Connecticut have held hospitals vicariously liable for the malpractice of independent physicians who appear to be acting on the hospitals’ behalf.  InPurcell v. Griffin a Michigan Court of Appeals (Dec. 11, 2008) reached an opposite conclusion. The court found there was no evidence the hospital did anything to contribute to the patient’s purported belief that radiologists who interpreted his studies were hospital agents.  The patient signed consent forms stating the treating physicians were independent contractors.  The court rejected the patient’s reliance on radiology reports containing the hospital’s logo and address.  Since the reports were created after the x-rays were taken, they could not have resulted in a belief of agency at the time services were rendered.

Adam Prizio is an associate at Nelson, Kinder, Mosseau, & Saturley, P.C. and a member of the firm’s Food & Hospitality Group. Adam is a graduate of Notre Dame Law School. Outside of the law, he has worked as a prep cook, line cook, restaurant supervisor, charcuterie purchaser, and cheese monger. He has written several articles on food policy for the firm and is a regular contributor to the firm’s “Legal Bites” blog on law and the restaurant business.

In Sidoti v. State Bd. For Prof’l Med. Conduct (N.Y. Oct. 2008), the New York Supreme Court affirmed the revocation of a physician’s license because he failed to demonstrate insight or remorse and persistently failed to conform to accepted medical standards of care. Sidoti had been charged with nineteen acts of professional misconduct arising from his failure to physically examine patients, despite indicating in their charts that such examinations were conducted. The Board accepted testimony of witnesses who confirmed his failure to obtain patient histories, perform adequate physical exams, order appropriate diagnostic and laboratory tests, and that he had misdiagnosed life threatening conditions.

In Pennsylvania, Multiple Lawsuits Do Not Prevent License Reinstatement

The Pennsylvania Board of Medicine renewed the license of a Lancaster County orthopedic surgeon who had been named in 26 malpractie suits involving knee or hip replacement surgeries he performed between 2002 and 2005. The majority of the suits claimed he implanted improperly sized prostheses. Of the 26 suits 4 have settled, 10 were dismissed, and 12 remain pending in the Lancaster County Court of Common Pleas. Public Citizen, a national nonprofit public interest group, ranked Pennsylvania 38th among the states in a 2007 ranking of serious disciplinary actions, including revocation of licenses by medical boards.

Lack of Doctor Patient Relationship Precludes Suit against Internist who Interpreted Patient's EKG

The Illinois Appeals Court affirmed a trial court ruling granting an internist’s directed verdict motion at the close of the plaintiff’s case in a wrongful death suit brought by the estate of a 19 year old female who died shortly after being seen in the E.R. for chest pain.Gillespie v. Univesrity of Chicago Hospitals et al., No. 1-07-1962 (Ill. App. Ct. 1st Dist. Dec. 31, 2008). While the plaintiff was in the E.R. an EKG was ordered which was interpreted by an internist who issued a report that could not rule out a heart attack, and which recommended a follow-up examination. The patient never contacted the internist for a follow-up appointment. With the exception of the internist, the other parties settled prior to trial. The Illinois Appeals Court affirmed the directed verdict of dismissal for the internist, on the basis that the interpretation of the EKG occurred after the patient’s disharge, and played no role in the patient's care or treatment and was not adequate to establish a physician-patient relationship.

New Hampshire adopted the “actual innocence” rule in criminal malpractice cases in 1999.  Mahoney v. Shaheen, Cappiello, Stein & Gordon, P.A. Where a criminal plaintiff acknowledged his guilt, but nevertheless sued his attorney for malpractice for allegedly depriving him of the benefits of a reduced sentence by moving to withdraw his plea without his consent, the New Hampshire Supreme Court permitted the action, distinguishing this act from acts of professional judgment, including tactical decisions, which retain the protection of the Mahoney rule.  NKMS represented the attorney.  Hilario v. Reardon (2007-390), November 7, 2008.

Sanctions Order for Alleged Failure of Law Firm to "Vet" Plaintiff Vacated: First Circuit

A sanctions order issued by the United States District Court for Massachusetts against a law firm for “unreasonably and vexatiously” multiplying the proceedings in a class action case was vacated, as inappropriate for any alleged failure on the law firm’s part to “vet” the plaintiff or investigate the bona fides of his claim, and the district court abused its discretion in reaching the sanctions determination as and when it did in the particular phase of the litigation.  NKMS represented the law firm.  Jensen v. Phillips Screw Co., No. 072766, October 29, 2008.

Trying to Uncover Metadata in a Confidential Document is Ethically Impermissible: Maine Board of Bar Overseers

Without authorization from a court, it is ethically impermissible for an attorney to seek to uncover metadata from an electronic document in an effort to detect confidential information that should be reasonably known not to have been intentionally communicated.  Likewise, the attorney providing the documents has an ethical duty to use reasonable care to prevent the disclosure of such metadata.  Professional Ethics Commission of the Board of Overseers of the Bar: Opinion No. 196, October 21, 2008.

In an unanimous opinion in which it sanctioned two attorneys in one of Boston’s largest firms, the Board of Bar Overseers examined the impact of multiple offices and world-wide operations on conflicts searches, and declared that size actually doesn’t matter: the same standards that apply to a two-person firm are to be applied to firms with hundreds of lawyers.  If a firm wants to grow and have multiple offices, the firm has a responsibility to buy computer programs sufficient to the task of checking conflicts.  Implicit in the opinion is a determination that as a case progresses, and more conflicts information becomes available, such information must be added to the system.  Because law firms are not themselves subject to discipline in Massachusetts, the individual lawyers involved in the conflict situation will face sanctions.  Boston Bar Overseers, Admonition Number 08-11, July 14, 2008.

Disciplinary Costs Assessed to the Respondent are Sanctions, Which are Non-Dischargeable in Bankruptcy: First Circuit

The respondent was twice disciplined for violating provisions of the New Hampshire Rules of Professional Conduct, resulting in, first, a suspension, and later, disbarment.  While his second disciplinary proceeding was pending, the respondent filed for Chapter 7 bankruptcy.  The Professional Conduct Committee argued that the cost assessments were excepted from discharge; the respondent argued that the cost awards were dischargeable.  Both the bankruptcy court and the district court sided with the Committee and found the debts non-dischargeable.  The First Circuit affirmed.  Richmond v. New Hampshire Supreme Court Committee on Professional Conduct, C.A.1, 07-2671, September 19, 2008.

Board of Bar Overseers Invites Comments on Rules Permitting Broader Discovery: Massachusetts

Proposed amendments to the disciplinary rules call for more discovery and less delay in disciplinary proceedings.  The provisions are based on a report from a 2005 Massachusetts Bar Association task force, and an ABA review of the Commonwealth’s bar discipline procedures.  Comments should be submitted by November 15, 2008.  Proposed Revisions to the Rules of the Board of Bar Overseers.

Where a law firm successfully settled a $2,250,000 medical malpractice injury for a minor, and took one-third payment with court approval, a subsequent legal malpractice action claiming the law firm overcharged, to the extent its fee exceeded the 25% fee "which is fair, reasonable, standard and customary," needed an expert to show what fee the trial court would likely have awarded and what results another attorney, working on an hourly basis, would likely have obtained.  Plaintiff’s expert discussed lost opportunity in his report, but not causation, and the trial court has no obligation to instruct the plaintiff on the sufficiency of its expert disclosure, especially in light of the existing statute and prior case law.  Estate of Sicotte v. Lubin & Meyer, P.C., N.H. Supreme Court 2007-731, September 12, 2008.

Disciplinary Proceedings Need Meet Preponderance of the Evidence Standard Only – First Circuit

In an opinion examining the burden of proof of misconduct required of bar counsel, the First Circuit imposed discipline on an attorney reciprocal to that imposed by the Massachusetts Supreme Judicial Court (a 2 year suspension) for improper fees and shoddy maintenance of client accounts.  Massachusetts is in the minority of jurisdictions, which only require bar counsel to meet a preponderance of the evidence, while most jurisdictions require clear and convincing evidence to support discipline.  The federal appellate panel, while subtly expressing its disfavor with the Massachusetts standard, nevertheless found that the due process clause only imposes a minimum level of procedure, and does not require state disciplinary actions to reach a peak of perfection.  In Re: Malcolm J. Barach, First Circuit Court of Appeals 06-8033, August 28, 2008.

Trial Court May Summarily Enforce Handwritten Settlement Agreements -- Massachusetts

In yet another case seeking to enforce a settlement, the Massachusetts Supreme Judicial Court found that a signed, handwritten settlement memorandum of understanding, signed during a mediation by all parties and attorneys and the mediator, was an enforceable contract, even though the parties contemplated a more formal agreement.  Because settlement agreements enjoy great favor with courts, where a settlement collapses before dismissal of the action from the court's docket, the parties may file for enforcement with the trial court.  If no genuine disputed question of material fact exists, the court may act summarily to enforce the agreement.  Where a genuine dispute exists, the court should hold a hearing and resolve the disputed facts.  Fidelity and Guaranty Insurance Company v. Star Equipment Corporation, et al., First Circuit Court of Appeals 07-1999, August 27, 2008

 - Mr. Bumble, Oliver Twist

Introduction:

In a back to basics, stick to the language of the statute approach to statutory construction, a conservative Supreme Court recently sided with an employee age discrimination plaintiff in an 8 to 1 decision that will increase the cost to employers defending age discrimination claims. The Supreme Court ruled in Meacham v. Knolls Atomic Power Laboratory that employers must prove that their decision making is “reasonable” to avoid liability under the Age Discrimination Employment Act (“ADEA”) for disparate impact claims. While acknowledging that such allocation of the burden of proof will present significant risks and costs for employers, the Supreme Court aptly noted that such policy concerns are for the Congress to address through amendment of the statute rather than by the judiciary through policy oriented interpretation. 

The case involved Clifford Meacham and twenty nine other plaintiffs, all former employees of Knolls Atomic Power Laboratory, who appealed the dismissal of their age discrimination case against the company to the Supreme Court. Their critical issue: Who has the burden to prove whether the employer’s decision-making process in determining whom to layoff is reasonable? The United States Circuit Court of Appeals for the Second Circuit had ruled that the laid off employees who brought suit had the burden to prove the employer’s decision-making criteria was unreasonable. The Supreme Court disagreed on appeal, saying that the structure of the statute, regardless of the policy ramifications, makes clear that reasonableness constitutes an affirmative defense which the employer must prove in order to prevail. This article will review the issues on appeal to the Supreme Court and how their recent resolution will affect businesses and employees alike in the near future.   It also will discuss best practices for employers to follow to avoid litigation.

Meacham v. Knolls Atomic Power Laboratory

It’s a story that gets told on a cyclical basis. A company, in this case Knolls, was faced with the need to reduce staffing as a result of market demands. Prior to conducting its layoff, Knolls developed and circulated a guide to its “participating managers,” i.e. those who were over-budget, in an effort to ensure that layoffs were made based on legitimate business reasons. The criteria cited in the guide, however, contained what the plaintiff-employees assert were unduly subjective qualities such as “flexibility” and “criticality” as well as “performance.” Specifically, the guide called upon managers to rank their employees’ performance between zero and ten, and then to rank the “criticality” of their skills to the organization as well as the employees’ “flexibility,” meaning the extent to which the employees’ documented skills could be applied in other assignments. In the end, 31 employees were selected for layoff, and 30 were over 40. 

The Appeals Court determined in this case that the plaintiffs had presented a “prima facie” case for age discrimination. This means that, if there was no other evidence presented by any of the parties at trial, a jury would be entitled to find that the defendant-employer, Knolls, had committed age discrimination against employees over the age of 40 because the layoff had an improper disparate impact upon older workers.

But the case does not end with the plaintiffs presenting a “prima facie” case. Rather, the case really just begins. Once the plaintiff-employee has shown that the layoff imposed a disparate impact upon older workers, the burden then shifts to the defendant-employer for it to produce evidence showing that it operated under a legitimate business justification when it pursued its layoff the way it did. Whether the employer’s decision-making at issue had a “legitimate business justification” depends upon whether it was “reasonable,” but the question remains, what does it take to show reasonableness? Equally important, who must prove to the jury that the conduct at issue is reasonable or not reasonable? 

Business necessity v. Reasonableness

Here is where the rubber meets the road in Meacham v. Knolls Atomic Power Laboratory. The Supreme Court treats age discrimination claims under the ADEA differently in the layoff context than it treats those claims for discrimination concerning the characteristics protected under Title VII such as race, color, creed, sex or national origin. 

Under Title VII, courts apply a burden shifting process similar to the one described above to cases concerning discrimination on the basis of race, color, creed, sex or national origin. In these Title VII cases, employers can rebut a plaintiff’s “prima facie” case that a layoff imposed a disparate impact on those of a certain race, color, creed, sex or national origin by showing that the challenged employment action was supported by a legitimate business reason. Plaintiffs in Title VII cases can respond to the employer’s rebuttal by demonstrating that the stated legitimate business reason lacked any “business necessity” with a showing that another practice could have achieved the same result for the employer at a comparable cost without the disparate impact that had in fact occurred. 

The rules are different under the ADEA, the statute that protects older workers. Under the ADEA, it does not matter if there is a less harmful and equally effective alternative, and a business practice will not be found to be discriminatory on the basis of age just because the company could have accomplished the same task at the same cost in a manner that might not have disparately impacted older workers. All that matters under the ADEA is whether the method used by the company to determine whom to layoff was somehow “reasonable.”

Why the difference? Because age is different, and relevance is the key. The Supreme Court explained earlier in Smith v. City of Jackson, that a narrower scope of disparate impact liability under the ADEA as compared to Title VII is justified because “age, unlike race or other classifications protected by Title VII, not uncommonly has relevance to an individual’s capacity to engage in certain types of employment,” and that as a result, “certain employment criteria that are routinely used may be reasonable despite their adverse impact on older workers as a group.” Smith v. City of Jackson, 544 U.S. 228, 240-41 (2005) (emphasis added). 

That means that while subjective criteria that leads to “startlingly skewed” results against a race, color, creed, sex, religious or national origin category could alone subject an employer to liability absent a showing of a “business necessity,” the same level of skewed results that would evidence a similar disparate impact upon older workers would “not itself [be] necessarily probative” of whether age discrimination may have occurred because, according to the court, such a correlation between criteria may, in certain situations, actually be “reasonable.” 

Says Who? The Burden of Proof and its impact on ADEA cases

In light of the above, the answer to the question, “who must prove whether layoff criteria are reasonable or unreasonable” is one of critical importance in an ADEA case. Plaintiffs in Title VII cases retain the burden to prove to the jury that the business justification offered by the employer for layoff criteria are not supported by “business necessity.” See Wards Cove Packing v. Antonio, 490 U.S. 642, 660 (1989). This is because, in the end, a plaintiff must prove the wrongful conduct that he or she has accused the employer of committing, and in Title VII cases that means a plaintiff must prove discrimination. 

While carrying the burden of proof is never light duty, the duty seems fairly designated upon the plaintiff in Title VII cases in light of the specificity of the standard and the onerous nature of the employer’s liability. If a plaintiff in a Title VII case can convincingly show an equally effective, less harmful alternative to the layoff criteria that caused him or her to be selected for discharge, plaintiff should prevail.

The difficulty in ADEA cases concerning age discrimination stems from the ambivalence of the Supreme Court to age discrimination itself. The Supreme Court has essentially ruled that layoff criteria which disparately impact older workers are not necessarily unlawful, or unreasonable, even when less harmful and equally effective and efficient alternatives may exist.

The Supreme Court’s Decision

Hence, the plaintiffs’ appeal to the Supreme Court. The plaintiffs lost on the burden of proof issue at the Second Circuit. Briefly, the Second Circuit reasoned that there is no reason to treat the “reasonableness” standard under the ADEA any differently (in terms of trial process and assignment of the burden of proof) from the “business necessity” standard under Title VII. According to the Second Circuit, the mere fact that the standards differ as to what the plaintiff must prove does not alone justify changing who must carry the burden of proof on this fundamental point. As the Second Circuit further explained, nothing in the Supreme Court’s opinion in City of Jackson suggests changing the assignment of the burden of proof. Meacham, at 16, citing City of Jackson, 544 U.S. at 241-43. In fact, according to the Second Circuit, the Supreme Court by reaffirming that plaintiffs in Title VII cases carry the burden of proof on the issue of “business necessity,” suggested that plaintiffs in ADEA cases must similarly carry their burden of proof on “reasonableness.” Meacham, at 17, citing City of Jackson, 544 U.S. at 233. This result is further justified, according to the Second Circuit, in light of the narrower scope of liability for employers in ADEA cases concerning disparate impact issues because otherwise “it would seem redundant to place on an employer the burden of demonstrating that routine and otherwise unexceptional employment criteria are reasonable” while the law already recognizes that “certain employment criteria that are routinely used may be reasonable despite their adverse impact on older workers as a group.” Meacham, at 17-18.   

The Supreme Court could not have disagreed more. For the most part, as suggested by the Second Circuit’s dissent as well, the Supreme Court got back to basics and started its analysis by referring to the language of the statute itself. The ADEA outlaws age discrimination under §623 (a) – (c), and (e). The statute then separately sets forth five exceptions under §623(f). Each of these exceptions specifically allows under certain specified circumstances for what “otherwise is prohibited” under sections §623 (a) – (c) and (e). As exceptions to what is “otherwise prohibited” can only be understood as “affirmative defenses,” according to the Supreme Court’s interpretation, whatever is listed in §623(f) must be treated as an “affirmative defense,” meaning that the defendant retains the burden to prove that defense in order to prevail. Among those “affirmative defenses” listed in §623(f) is the “reasonable business practice” exception. 

The Supreme Court also looked to its own precedent regarding the other exceptions listed under §623(f) to interpret how to treat the “reasonable business practice” exception listed in that same section. Specifically, the Supreme Court noted that one of the other exceptions listed in §623(f), the “bona fide occupational qualification” exception, has time and again been treated by the Supreme Court in other cases as an “affirmative defense.”  The “reasonableness” exception is listed right along after the bona fide occupational qualification exception. Accordingly, as a matter of the plain language of the statute, the “reasonableness” exception should be treated as an “affirmative defense” because it is listed in the statute in a place where one would expect to find affirmative defenses and because it sits right after another affirmative defense which, as all parties agreed in this case, the defendant has the burden to prove. From the Supreme Court’s perspective, what could be more clear? 

Law v. Policy

While the Court’s decision reflects perfectly reasonable statutory construction, it seems highly unsatisfying to make decisions on issues of policy and fundamental fairness based on the geography of a paragraph. It is the “reason behind the rule” that should govern, rather than hyper-attention to literal translation of a statute.  Yet, the Court was not interested in arguments along policy lines. Justice Souter, writing for the majority, expressly acknowledged and discounted the policy arguments in favor of the employer, stating: 

There is no denying that putting employers to the work of persuading fact finders that their choices are reasonable makes it harder and costlier to defend than if employers merely bore the burden of production; nor do we doubt that this will sometimes affect the way employers do business with their employees. But at the end of the day, amici’s concerns have to be directed at Congress, which set the balance where it is, by both creating the RFOA exception and writing it in the orthodox format of an affirmative defense. We have to read it the way Congress wrote it. Slip Op. at 16

So What? Avoiding lawsuits through best practices

Regardless of where the case goes next now that the Supreme Court has remanded the case back to the trial court for further proceedings, you can bet the employer would rather have avoided the lawsuit altogether. Here are some practices employers should consider when conducting layoffs to help avoid litigation:

-Specify goals: Articulate the specific business need for a reduction in force.

-Standardize: Articulate a plan for how you expect the business to operate after the layoff. 

-Specify skills: Identify precisely the specific skills necessary for your new, continuing operation to work. Try not to use vague categories as “ability to learn new skills” which can be taken as euphemisms for age selection (or selection for any other protected class). Rather, your criteria should speak for themselves, demonstrating the business goals for the organization, the skills needed for the company to achieve those goals, and the employees’ strength and proficiency in those specific skills. 

-Supervise selection: Do not simply hand out a sheet to your managers purporting to give guidance without providing any further follow up. Monitor your managers’ decision-making to ensure judgments are made based on provable, business reasons. Frequently, cases involving discrimination are focused on poorly guided mid-level management rather than the well advised corporate office.

-Audit results: Once the layoff population has been identified, audit the results and determine if any skewed impact has occurred. If a skewed selection has occurred, determine if it is nevertheless supported by legitimate business reasons. Go back to the managers and test their judgments. Insist that relevant comparisons be made so that final decisions are made based on evidence and not on assumptions which can be infected by prejudice, whether intentional or not. 

Be Advised

It is this last point about auditing results that made the most difference for the plaintiffs in the Meacham case. Knolls, the employer, had issued guidelines and reviewed selection results, but allegedly did “nothing to audit or validate the results.” Plaintiffs will inevitably look for any flaws in the selection criteria which, along with a prima facie case, they will use to argue the existence of discrimination. 

In the end, employers should be advised that they need to act like Caesar’s wife, i.e. above reproach, no matter what happens. As the Meacham case alone demonstrates, the law is unclear, subject to interpretation, and one can easily find oneself on the wrong side of a vague line. Indeed, mere compliance with the law will not ensure avoidance of lawsuits from disgruntled laid-off employees and cases never ending on appeal all the way up to the Supreme Court. Evidence based and audited decision-making focused on business needs will not only serve companies best in the courtroom, it will better serve them in the market as well. 

Ms. Feinberg is a member of both the Medical Services and the Employment Counseling & Litigation Groups at NKM.  A graduate of Boston University School of Law, Judith has experience in medical law and litigation, including obtaining defense verdicts in jury trials. Her work on medical credentialing and licensing issues, and on medical malpractice claims, has earned her great respect. In 2007, she was recognized as a “Rising Star” in the legal profession by Boston Magazine.

By Christopher T. Vrountas & Allison C. Ayer

From coast to coast, class action lawsuits have been filed by servers seeking to recapture tip money shared in their employers’ tip pools. In March of this year, a California Superior Court ordered Starbucks to pay more than $100 million to its counter servers, known as baristas, based on its ruling that the company had unlawfully used some of its baristas’ tips to pay shift supervisors. Since then, similar cases have popped up across the country, in­cluding in Massachusetts and New York. The laws differ among the several states, however, and plaintiffs will find it difficult to simply copy the apparently successful formula from California and apply it elsewhere. Neverthe­less, employers should be advised of the now substantial risk of “tip pooling” and learn from the mistakes of others. 

In the recent seminal class action case concern­ing alleged improper tip pooling brought by a class of baristas in California, the counter servers claimed that Starbucks wrongfully forced them to share their counter tips with their assistant managers, even though the assistant managers also made coffee and served the customers, just like the baristas. The court in that case agreed with the baristas and ordered Starbucks to pay more than $100 million, but its order was based solely on the California wage act, which outlaws tip pooling controlled by the employer.

The California class of plaintiffs prevailed in their action against Starbucks because they convinced the court that the assistant managers who managed the tip pool and who shared the tips along with the other baristas were in fact “agents” of the company as that term is used in the Labor Code.

Presumably, had the tip pool been conducted by the baristas themselves or by someone other­wise not an agent of the company, the practice would not have been unlawful.

To read more, click on the link below.

After the judge’s husband, an attorney, was disbarred, the husband was ordered to reimburse the Professional Conduct Committee its costs of investigation and prosecution.  Two days after the Committee’s decision, the Judge and her husband transferred all of their real estate into a real estate trust.  As Trustee, she sold real estate during the same time period the husband was claiming an inability to pay the costs.  While the Judicial Conduct Committee voted to publicly censure the Judge and suspend her for three months, the New Hampshire Supreme Court imposed a three year suspension, finding the Judge was complicit in a fraudulent transfer and that her acts stemmed from selfish motives.  Coffey’s Case, JD-2007-003 (April 18, 2008).

Lawyer Reprimanded for Improper Estate Administration:  Maine

A lawyer failed to confirm the accuracy of the allegations given to him by a client before filing a lawsuit on behalf of an estate.  He then advised the heirs to withhold probate administration to avoid the state’s efforts at recovery.  By agreement, the Board of Overseers elected to publicly reprimand the attorney.  Mitigating the lawyer’s punishment was his acceptance of responsibility.  Board of Overseers v. Watkinson, 07-67 (May 27, 2008).

NKMS Attorneys to Speak at San Francisco ABA Legal Malpractice Gathering

Representing insolvent clients increases both the types and the potential scope of claims exposure for attorneys. In nearly every situation involving a major insolvency, at least one party will consider making a claim against the professionals involved. Disciplinary and criminal proceedings against lawyers on the scene of insolvency are increasingly common. Bill Saturley and Rick Levine of NKMS will present on this topic -- The Elevated Risks Associated with Insolvent Clients -- during the September meeting of the ABA Lawyer’s Professional Liability section.  Joining them on the panel will be Jo Beth Earl, Specialty Claims Director for Hanover Professionals (formerly Professionals Direct Insurance Company).

According to the Boston Globe, the plaintiff’s lawyer literally spoke to the 18 year old plaintiff after hearing of the California decision and went forward with the suit seeking to represent a class of all Massachusetts baristas.

Applicability of the California decision is doubtful.The California tip pooling statute is somewhat different from the Massachusetts statute, as much of the analysis turns on whether the person taking and distributing tips is an “agent” of the employer. By contrast, the Massachusetts law requires that only “service employees” receive the benefit of a “service charge.” This means that the court will look only to whether the shift supervisors who shared in the counter tips are indeed “service employees.”

For more details, including the language of each statute and a discussion about both the California and the Massachusetts cases, please link to our blog, Legal Bites, and view other legal matters as well that may affect the foodservice and hospitality industry.

NELSON, KINDER, MOSSEAU & SATURLEY, P.C.