Employment Law Matters : Employment Lawyer & Attorney : Ogletree Deakins Law Firm : Labor Law, Human Resources

The 7th U.S. Circuit Court of Appeals has ruled that a nursing home’s policy of complying with patients’ wishes to be treated only by white health care workers can form the basis of a racially hostile work environment for non-white employees. Chaney v. Plainfield, 7th Cir., No. 09-3661, 7/20/10.

Brenda Chaney was employed as certified nursing assistant (CAN) by Plainfield Healthcare Center, a nursing home that housed a resident who did not want assistance from black CNAs. Plainfield complied with the resident’s wishes by distributing, on a daily basis, a written schedule for all employees that included a reference that “no black” assistants should enter the resident’s room or provide any care to her. Plainfield admits that the directive “banned” Chaney from providing care to that resident.

In addition to working under this ban, Chaney was subject to racially insensitive and unprofessional remarks from her co-workers, including one comment questioning why Plainfield “keep[s] on hiring” blacks, and adding a particularly unpleasant racial epithet. After Chaney complained about these comments, the epithets stopped, but the racial preference policy remained in place. Instead of epithets, Chaney began to get constant reminders about the policy from her co-workers, mentioning that certain patients were off limits because of her race.

After three months of employment, Chaney was fired after a nurse complained that Chaney used profanity in front of a patient. The complaint was that as Chaney was lifting the patient onto a bedside commode, she (Chaney) supposedly said “she’s shitting.” The complaint was investigated by the unit supervisor, who was skeptical of the allegation, having never before heard Chaney use any profanity. Further, the supervisor found that neither the resident’s roommate nor Chaney’s co-worker heard the alleged profanity. Although the supervisor relayed her findings and her skepticism to the Director of Nursing, Chaney was fired on the same day that the complaint was made.

Chaney ultimately filed suit, alleging racially hostile environment and discriminatory discharge. The lower court granted summary judgment in favor of Plainfield on Chaney’s claims, finding that Plainfield had responded promptly to Chaney’s complaints of her co-workers remarks. The lower court treated the racial preference policy as a separate hostile environment claim, concluding that Plainfield had a good faith belief that ignoring the patient’s wishes would have violated the state’s patient-rights laws. Finally, that court found that Chaney failed to prove that her termination was motivated by race.

The Seventh Circuit reversed the lower court’s decision on all issues. It pointed out that in order to impose liability for a racially hostile work environment, a minority plaintiff must show that the work environment was both objectively and subjectively hostile, and that the conduct was severe and pervasive. The Court stated that it had “no trouble in finding that a reasonable person would find Plainfield’s work environment hostile or abusive.” It pointed out that no single act can more quickly alter the conditions of employment than the use of an unambiguously racial epithet. The Court added that even after the most vulgar of the epithets stopped, Plainfield’s assignment sheet to all workers clearly – and on a daily basis – reminded Chaney and her co-workers that Chaney was restricted in the performance of her job because of her race. Further, the Court found that the circumstances of Chaney’s termination created factual issues that should be decided by a jury.

Courts have widely held that a company’s desire to cater to the perceived racial preferences of its customers is not a defense to a claim of racial discrimination under Title VII. However, Plainfield argued that as a health-care provider, it should be exempted from that prohibition. As support, Plainfield pointed to cases permitting sex discrimination in the health-care setting. In response, the Court pointed out that while gender may be a bona fide occupational qualification for accommodating a patient’s privacy interest, there is no such privacy interest associated with race. Of note to health-care providers is the fact that the Court specifically held that Title VII pre-empts the state regulations pointed to by Plainfield in its defense.

The Court’s summary of its decision provides a directive to health-care provider/employers: “Just as the law tolerates same-sex restrooms or same-sex dressing rooms, but not white-only rooms, to accommodate privacy needs, Title VII allows an employer to respect a preference for same-sex health providers, but not same-race providers.” According to the Court, Plainfield’s exclusion of Chaney from certain residents and work areas solely on account of her race created a racially-charged situation that “poisoned the work environment” and created “fodder” for co-workers’ racially derogatory remarks.
 

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For the second time in as many weeks, a federal appeals court decision rests on the determination that an alleged harasser who makes gender-specific slurs and comments can create a hostile work environment for a female employee, even though the harasser is an “Equal Opportunity Harasser” who makes crass and offensive remarks to “everyone, regardless of gender.” Sharon Kaytor v. Electric Boat Corp., 2d Circ., No. 09-1859-cv, June 29, 2010.

Sharon Kaytor worked for Electric Boat Corporation for nearly 20 years as an administrative assistant, beginning in 1998. During most of that time, Kaytor worked for Daniel McCarthy, one of the managers in the engineering department. Kaytor alleges that in 2004, McCarthy seemed to “undergo a change of character.” Although he didn’t touch Kaytor in a sexual or violent way, McCarthy allegedly began to make inappropriate remarks to Kaytor including references to her body and how she smelled. Further, according to Kaytor, on nearly a dozen occasions, McCarthy threatened to hurt, choke, or kill her. At first, Kaytor ignored the remarks, knowing that McCarthy was going through a divorce. However, in April 2005, Kaytor informed McCarthy that she was going to report certain offensive remarks that he had made regarding Kaytor’s visit to her gynecologist. In response, McCarthy is alleged to have stated “I’ll kill you” if a report was made. Subsequently, for Administrative Assistants’ Day, McCarthy gave to Kaytor a potted plant – a pussy willow – with an arguably sexual message attached to it.

After that incident, Kaytor complained about McCarthy to HR. Immediately following the report, Kaytor was transferred to work for an engineer who reported directly to McCarthy, and who – according to Kaytor – treated her “poorly,” changing her work hours, and screaming at her for the “whole department” to hear.

Although Kaytor continued to work for Electric Boat, she filed administrative charges and, ultimately, in December 2006, a lawsuit alleging retaliation at her job. The lower court granted summary judgment for the company, saying that the incidents complained of by Kaytor were not sufficiently severe and pervasive to constitute a sexually hostile work environment. The court specifically held that “a reasonable jury” could not infer that the multiple threats to kill Kaytor were made “because of Plaintiff’s sex,” and concluded that, absent those threats, the other incidents complained of were not pervasive enough to adversely affect Kaytor’s work environment. The lower court also pointed out that because McCarthy was crass with everyone, regardless of their gender, he was not targeting Kaytor because of her sex.

The Second Circuit disagreed, finding that a rational jury could infer from McCarthy’s sexual comments and inappropriate remarks that the gender neutral threats of violence that he directed toward Kaytor were, in fact, because of her gender. Further, in response to the “Equal Opportunity Harasser” argument, the appellate court pointed out a prior case in which it held that “the inquiry into whether ill treatment was actually sex-based discrimination cannot be short-circuited by the mere fact that both men and women are involved . . . . It would be exceedingly perverse if a male [supervisor] could buy . . . his company immunity from Title VII liability by taking care to harass sexually an occasional male worker, though his preferred targets were female.”

The important issue for employers is that a court’s analysis of whether harassment is “based on sex” will take into account the totality of the circumstances, and will consider both the complainant’s reaction to events and whether a reasonable person would find such events abusive. In addition, evidence that the alleged harasser may have had “designs” on the complainant (as Kaytor alleged that McCarthy had, in this case, based upon his comments about her body and her scent) will add context to other remarks that may not include sexual references or gender-based comment. Importantly, a company must recognize that the fact that an harasser also makes remarks to male employees will not, by itself, serve as a defense to claims for sexual harassment or hostile environment.
 

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The Americans with Disabilities Act defines a disabled individual as a person who suffers from a physical or mental impairment that substantially limits one or more major life activities, or has a record of such impairment, or is being regarded as having such impairment. The “regarded as” provision was established to combat erroneous perceptions that might work to the disadvantage of individuals with impairments that might not rise to the level of an actual disability. The 8th U.S. Circuit Court of Appeals recently upheld summary judgment in favor of an employer who discharged an individual after that person’s physician found that she was not “fit for duty” as an emergency dispatcher. Wisbey v. City of Lincoln, Nebraska, 8th Circ., No. 09-2100, July 6, 2010. There, the court held that if an action taken by an employer is based upon the recommendation of physicians, then it is not based on myths or stereotypes about impaired individuals, and cannot then establish a violation of the “regarded as” provision of the ADA.

Charlene Wisbey began working as an emergency dispatcher for the City of Lincoln, Nebraska in 1979, and successfully held that position until early in 2007. The position requires dispatchers to “think and act quickly and calmly in emergency situations,” and to “function accurately while working under considerable pressure.

On February 27, 2007, Wisbey applied for intermittent FMLA leave on the basis of depression and anxiety. Her FMLA application stated that she had a serious health condition that rendered her unable to perform the essential functions of her job, and was supported by a medical certification from her physician saying that Wisbey suffered from recurring cycle depression and anxiety that interfered with her sleep, energy, motivation, and concentration. The certification included the fact that Wisbey would need to take time off work on an intermittent basis for “6 months or longer.”

In response to the doctor’s evaluation of Wisbey, the City asked Wisbey to undergo a fitness-for-duty examination with a psychiatrist. During her examination, Wisbey described her battle with depression and stated that the emergency nature of her job worsened her condition. After the exam, the psychiatrist submitted a report that stated that Wisbey was not able to fulfill the duties set forth in her job description. The City ultimately terminated Wisbey’s employment, based upon the findings during the fitness-for-duty examination. Wisbey filed suit that included an allegation that her termination was a violation of the ADA. The lower court granted the City’s motion for summary judgment and dismissed the case. That decision was upheld on appeal by the Eighth Circuit.

Because Wisbey conceded that she was not have a disability or a substantially limiting impairment, she brought her claim under the “regarded as” provision of the ADA, arguing that the City perceived her as disabled and fired her because of that. However, in order for an employee to be regarded as disabled, an employer must mistakenly believe that an actual impairment substantially limits that person’s ability to work. Wisbey’s employment was terminated when she was found by a medical provider not to have been fit for duty as an emergency dispatcher. Therefore, the City did not “mistakenly” belive that Wisbey had an impairment that substantially limited her ability to work – she really was unable to do her job due to her condition. Further, while Wisbey argued that the fitness-for-duty exam itself was a violation of the ADA, that law allows employers to require a medical exam if such exam is “shown to be job-related and consistent with business necessity.” The dispatcher job required an ability to focus and concentrate at all times. Wisbey’s own statements regarding her inability to do that was sufficient business justification for the City to ask for an examination to determine whether she could safely continue in that job.

While this decision might seem like a semantic one, it is critical to employers. This case underscores the fact that employers are permitted to use reasonable means to determine whether an employee’s troubling behavior or behavior-related job difficulties limit that person’s ability to do his or her job, and that such reasonable means do not justify an ADA claim. Fitness-for-duty exams typically have been considered by courts to be a reasonable means of making that determination. The reasonableness of an exam will be underscored when the employer can articulate legitimate, non-discriminatory reasons to question the employee’s ability to perform his or her duties.
 

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The 4th U.S. Circuit Court of Appeals has determined that an alleged harasser who makes gender-specific slurs and comments can create a hostile work environment for a female employee, even though the harasser is an “Equal Opportunity Harasser” who makes sexually offensive remarks to “anybody, any time.” EEOC v. Fairbrook Medical Clinic, P.A., 4th Circ., No. 09-1610, June 18, 2010.

Dr. Deborah Waechter was employed at Fairbrook Medical Clinic, which is owned and run by Dr. John Kessel. During her employment, Waechter was the target of a number of remarks by Kessel having to do with her body, her sexual relationship with her husband, and Kessler’s self-label as a “breast man.” In addition, Kessler made crude jokes to both the men and the women in the office, and reveled in being a “shock jock” who made outrageous remarks to both male and female employees. Waechter ultimately resigned her position and filed a lawsuit against Fairbrook. The lower court granted summary judgment for Fairbrook, dismissing Waechter’s claims with a finding that Kessler’s conduct was not based on Waechter’s gender and was not “severe,” and that it was not uncommon in a medical setting to use off-color jokes to “ease the tension.” The Fourth Circuit disagreed with and reversed that determination.

Title VII of the Civil Rights Act prohibits discrimination “because of sex.” The purpose of this prohibition, according to the U.S. Supreme Court, is to “strike at the entire spectrum of disparate treatment of men and women in employment.” In order to establish a violation of Title VII, an employee must show that the complained-of conduct was unwelcome, was based on her sex, was sufficiently “severe and pervasive” to alter the conditions of her employment and create an “abusive work environment” that was attributable to the employer.

In this case, Fairbrook argued that Kessel did not make the inappropriate remarks to Waechter because of her sex, and argued that Kessel was a generally crude person who made vulgar comments to men and women alike. The Fourth Circuit dismissed that contention, stating that although Kessel made offensive remarks to both men and women, his use of sex-specific and derogatory terms indicated that he intended to demean women. Further, the Court pointed out that Kessel’s proposals of sexual activity were not of the type that would have been made to someone of the same sex, as they involved breast pumping and “wild” sex after pregnancy. Based on these remarks, a jury could reasonably conclude that the purpose of Kessel’s comments was to embarrass and discomfit a woman in his employ.

The Court then addressed the issue of whether Kessler’s comments created an objectively hostile environment. In response to Fairbrook’s argument that employees in a medical clinic deal with human bodies every day and therefore have a more casual response to anatomical references and jokes, the Court responded that Kessel’s remarks went beyond merely crude behavior when they “ventured into highly personal territory,” including Waechter’s pregnancy, her body, and her personal life with her husband. The Court refused to accept the argument that because a medical setting deals with human anatomy on a regular basis, it is somehow “liberated from professional norms.” The Court determined that a jury could find that Kessel’s behavior was sufficiently severe and pervasive to establish an objectively hostile work environment.

While Fairbrook attempted to assert the affirmative defense available to employers since the Supreme Court’s decisions in Faragher and Ellerth in 2008, it was unable to show that it “exercised reasonable care to prevent and correct promptly any sexually harassing behavior.” The clinic never conducted an investigation or took any other corrective actions, in spite of the fact that Waechter complained to Kessel – the owner – on several occasions, and to at least one other manager.

This case raises a number of issues of which employers should be aware. First, the “Equal Opportunity Harasser” defense is not applicable if the remarks made by such a person are gender-based and could be interpreted to shock, intimidate, or alienate an individual of that gender. Second, the casual nature of a workplace is not sufficient to support an argument that harassing and humiliating behavior against one gender is okay. Third, with absolutely no attempt to investigate or otherwise exercise reasonable care to stop the harassment, an employer will be unable to provide the affirmative defense available under the prevailing Supreme Court cases. Antidiscrimination training and policies should be developed and implemented to assist employers in dealing with these issues and in avoiding legal liability for claims of hostile work environment.
 

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The Family and Medical Leave Act (FMLA) establishes protected leave for specific circumstances, including the birth or placement of a son or daughter, care of a newborn or newly placed son or daughter, and care for a son or daughter with a serious health condition. On June 22, 2010, the Wage and Hour Division of the Department of Labor issued Administrator’s Interpretation No. 2010-3 in response to requests for guidance regarding whether employees who do not have a biological or legal relationship with a child may take FMLA leave for birth, bonding, and to care for the child.

Under the FMLA, the definition of “son or daughter” includes not only a biological or adopted child, but also a “foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis.” According to the DOL, Congress intended the definition of “son or daughter” to “reflect the reality that many children in the United States today do not live in traditional ‘nuclear’ families with their biological father and mother.” One purpose of the FMLA is to ensure that an employee who has actual day-to-day child-care responsibilities is entitled to leave, even if that employee has no biological or legal relationship to the child.

The regulations associated with the FMLA define in loco parentis to include individuals with day-to-day responsibilities to care for and financially support a child. Whether an employee stands in loco parentis to a child is a fact issue dependent upon the specifics of the relationship and – according to the DOL – depends upon a variety of factors, including the age of the child, the amount of support provided, and the extent to which duties commonly associated with parenting are present. The DOL’s guidance goes one step further, and states that “the regulations do not require an employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child.” Therefore, an employee who provides day-to-day care for an unmarried partner’s child or a spouse’s child from a previous marriage, but does not financially support that child, may still be entitled to FMLA leave to care for the child should that child develop a serious health condition. Further, an employee who will share equally in child care responsibilities with a same sex partner would be entitled to FMLA leave for the birth or placement of that child, even without a biological or specific legal relationship with that child.

The DOL points out that “Neither the [FMLA] nor the regulations restrict the number of parents a child may have under the FMLA.” Therefore, the fact that a child has two biological parents does not prevent a finding that the same child is a “son or daughter” of an employee who provides day-to-day care or financial support to the child. For example, if the biological parents of a child divorce and remarry, it is possible (under the interpretation of the FMLA set forth in the DOL’s opinion letter) that there may be four individuals who may have equal rights to FMLA leave, should the child become seriously ill.

Employers should recognize that no specific legal relationship is required to establish in loco parentis status. However, there are limitations on this designation. For instance, an employee who cares for a child (even on a day-to-day basis) while the child’s parents are vacationing would not be considered to be acting in loco parentis to that child. However, if an employee intends to assume financial or day-to-day parental responsibility for a child on some continuing basis, and requests FMLA leave for that child’s care, the employer should look carefully at the facts before assuming that the employee is not entitled to such leave.

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[With thanks to Hera Arsen, J.D., Ph.D., in our Client Services group - her more detailed explanation of this case can be found on the firm's website at www.ogletreedeakins.com.]

The U.S. Supreme Court has held that a city police department's search of an employee/police officer’s text messages was reasonable, and did not violate the individual’s Fourth Amendment (“search and seizure”) rights. City of Ontario v. Quon, No. 08-1332, U.S. Supreme Court (June 17, 2010). While employers have been anticipating the high court’s opinion on whether employees have a reasonable expectation of privacy related to electronic messages, the Supreme Court did not tackle that issue. Instead, the Court assumed that the officer did have a reasonable expectation of privacy in his personal text messages. However, the Court also found that the search was motivated by a legitimate work-related purpose, and was not excessive in scope. Based upon those factors, the Court held that the city's review of the officer's text messages was reasonable and did not violate the employee’s Constitutional Rights. City of Ontario v. Quon, No. 08-1332, U.S. Supreme Court (June 17, 2010).

Jeff Quon was a police sergeant with the Ontario Police Department (OPD). In 2001, the city of Ontario acquired 20 alphanumeric pagers capable of sending and receiving text messages and contracted with an outside vendor to provide wireless services. Under the agreement with the city, the vendor charged an overage fee if messages exceeded 25,000 characters in a single month.

Before acquiring the pagers, the city adopted a “Computer Usage, Internet and E-mail Policy,” which was applicable to all employees. The policy set forth that the city “reserves the right to monitor and log all network activity including e-mail and Internet use, with or without notice.” The policy further stated that “users should have no expectation of privacy or confidentiality when using these resources” and that the use of inappropriate language in the e-mail system would not be tolerated. Although the policy did not specifically refer to text messaging, the city issued a written memo to employees that it would treat text messages the same way as it treated e-mails, and that text messages would be “eligible for auditing.” Quon signed a statement acknowledging that he had read and understood the city’s policy.

After Quon began to regularly exceed the 25,000-character limit, he was reminded that text messages were “considered e-mail and could be audited.” In October 2002, in an attempt to determine whether the 25,000 character limit was too low for work-related messages, the police department asked its vendor to provide the transcripts of Quon’s last two months of messages to determine if the overages were for work-related or personal messages. The transcripts revealed that many of the messages were personal in nature and that some were sexually explicit. That triggered an investigation of whether Quon was violating Ontario Police Department (OPD) rules by pursuing personal matters while on-duty. It was determined that in August, Quon sent or received 456 messages during work hours, and that less than 60 of those were work-related. The report concluded that Quon had violated OPD rules, for which he could be disciplined.

Quon filed suit in the U.S. District Court for the Central District of California claiming, in part, violation of his Fourth Amendment rights, and arguing that the privacy of personal text messages is protected by the ban on “unreasonable searches and seizures” found in the Fourth Amendment to the U.S. Constitution. The trial judge agreed that Quon had a reasonable expectation of privacy in the text messages, but held a jury trial to determine the intent of OPD’s search. The jury determined that the original purpose of investigation of the text messages was to determine the efficacy of the character limit, and not to determine whether Quon was wasting time while on-duty. Thus, the search was reasonable.

Quon appealed to the Ninth Circuit Court of Appeals, which agreed with the trial judge that the employees had a reasonable expectation of privacy. However, the Ninth Circuit rejected the trial judge’s finding on the reasonableness of the search overall, stating that, while the purpose of the search was to verify the efficacy of the 25,000 character limit, the purpose of the investigation could have been achieved by less-intrusive means (i.e., warning Quon, asking him to count the characters himself, or asking him to redact personal messages and grant permission to the department to review the redacted transcript).

The Supreme Court declined to address the issue of privacy of personal messages on company equipment, opting to dispose of the case on “narrower grounds.” Instead, the Court assumed that Quon had a reasonable expectation of privacy in the text messages, that the city’s review of the transcript constituted a search within the meaning of the Fourth Amendment, and that the principles applicable to a government employer’s search of an employee’s physical office apply to an electronic intrusion of privacy as well.

The Court then turned to the reasonableness of the search, finding that when conducted for a non-investigatory, work-related purpose or for the investigation of work-related misconduct, a government employer’s warrantless search is reasonable if: (1) it is “justified at its inception” and (2) if “the measures adopted are reasonably related to the objectives of the search and not excessively intrusive in light of” the circumstances giving rise to the search. Noting that OPD initiated the search to determine whether the vendor’s character limit was meeting the city’s needs, the Court concluded that the search was justified at its inception. The City and OPD had a legitimate interest in ensuring that officers were not paying for work-related expenses and alternatively, that the city was not paying for officers’ personal communications.

The Court next found that reviewing Quon’s messages was an “efficient and expedient way” to determine if his regular overages were work-related or personal. The Court noted that the review was not “excessively intrusive” since it covered only two months of messages and was limited to on-duty messaging. In addition, given that Quon was told that his messages were subject to auditing, the Court concluded that it would not have been reasonable for Quon to assume that his messages were “immune from scrutiny.” Thus, the Supreme Court held that the search was reasonable and the city did not violate Quon’s Fourth Amendment rights.

Although this case deals specifically with a public employer, private employers should use a similar approach when faced with an issue regarding the privacy of electronic correspondence on company computers and handheld devices, balancing privacy guarantees (based in state law or company policy) against the reasonableness of the employer's search and its purpose.
 

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Non-competition, confidentiality, and non-solicitation agreements all are examples of restrictive covenants that are used to preclude an employee from taking certain proprietary information or customers and using it (or them) in a way that may adversely affect the individual’s previous employer. When a company determines that a former employee may be prepared to violate such an agreement, it often will ask the court for injunctive relief that can include ordering the individual to refrain from taking certain actions over the period of time during which the validity of the restrictive covenant is determined. The 3d U.S. Circuit Court of Appeals recently vacated a district court’s preliminary injunction, finding that the lower court insufficiently evaluated and supported its decision to enforce a noncompetition agreement. PharMethod Inc. v. Caserta, 3d Cir., No. 10-1388, unpublished opinion, 6/2/10.

In that case, Michael Caserta had entered into restrictive covenants with his employer, Rentacom. He then became employed with that company’s successor, PharMethod. He was terminated by PharMethod in 2009 and became involved in activity viewed by PharMethod as competitive with its services. PharMethod filed a lawsuit, asking the federal court for a preliminary injunction to stop Caserta from competing against it until a full analysis of Caserta’s employment activities could be completed. The court granted the injunction, and Caserta appealed to the Third Circuit.

The Third Circuit reversed and remanded, stating that while the applicable federal rule requires a district court to make specific findings of fact and conclusions of law to assist in “meaningful appellate review,” the lower court here simply stated ultimate facts and conclusions without foundation. The appellate court vacated the preliminary injunction and remanded the lawsuit back to the district court with specific instructions on how to properly evaluate the request for injunctive relief.

First, it said, the lower court should evaluate the relationship between Caserta’s original employer, Rentacom, and its successor, PharMethod, to assure that PharMethod can enforce a restrictive covenant in an agreement made between Caserta and Rentacom. Next, the specific restrictions within that agreement must be reviewed to determine whether they are enforceable. In Pennsylvania, post-employment restrictive covenants are enforceable if: (1) they are incident to an employment relationship between the parties; (2) the restrictions are reasonably necessary for the protection of the employer; and (3) the restrictions are reasonably limited in duration and geographic extent. The Court also pointed out that restrictive covenants are “not favored in Pennsylvania and have been historically viewed as a trade restraint that prevents a former employer from earning a living.”

While a restrictive covenant may legitimately protect certain business-related interests, the Third Circuit specifically held that eliminating competition or gaining an economic advantage is not a legitimate business interest. Further, while the courts have discretion to “blue pencil” an agreement by limiting restrictive covenants to terms that are reasonably necessary for the protection of the employer’s business interest, the Third Circuit also pointed out that over-broad restrictions suggest an “intent to oppress the employee and/or foster a monopoly, either of which is an illegitimate purpose,” and could lead a court to invalidate an entire agreement. The Court also pointed out that because some Pennsylvania courts have shown a reluctance to enforce restrictive covenants against an employee who leaves employment involuntarily, the lower court here should have determined whether enforcement of a restrictive covenant against Caserta is appropriate under the specific circumstances of his termination.

The in-depth inquiry directed by the Third Circuit provides a checklist of elements that employers should incorporate into the drafting of restrictive covenants. A covenant-not-to-compete should be limited to the protection of the legitimate business interest of the employer, and should not be overly-broad in either a temporal or geographic respect; a confidentiality agreement should protect proprietary information, including trade secrets, and should not be extended in an attempt to protect information that is otherwise publically available; and non-solicitation covenants should preclude a former employee’s solicitation only of actual or probable customers, and not speculative ones. Because an appropriate court review should include all of these factors, employers should recognize that restrictive covenants that extend beyond those boundaries may be subject to revision or non-enforcement by the courts.
 

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It is generally understood that employees can bring claims for hostile environment, wrongful termination, or even “constructive discharge” – where an employee claims that an employer made working conditions so intolerable that a reasonable employee would feel compelled to resign. What is less clearly understood is the extent of the economic damages for which a hospital or health care system may be liable in an employment-related lawsuit. Because a successful litigant in an employment case often is entitled to compensatory damages, lost wages and, in some instances, front pay, a lawsuit by a physician-employee can create the potential for large monetary damage awards. In a clear example of this fact, a Texas jury recently awarded more than $3.6 Million to an Egyptian-born physician who claimed that he was forced to resign after race-based comments from another employed physician. Nassar v. Univ. of Texas Southwestern Medical Center at Dallas, N.D. Tex., No. 08-1337, jury verdict, 5/26/10.

Naiel Nassar, a U.S. citizen since 1990, was born in Egypt and attended medical school there. He then did a medical residency and a fellowship in infectious diseases at the University of California, Davis. In 2001, Nassar was hired by the University of Texas Southwestern Medical Center (UTSW) as an Assistant Professor of infectious disease medicine. Part of Nassar’s duties required that he provide patient care at the Amelia Court clinic, an outpatient HIV/AIDS clinic affiliated with UTSW.

In 2004, UTSW hired Dr. Beth Levine as the chief of its infectious disease program. In that role, Levine directed that Nassar begin billing for the services he provided to the HIV clinic. Nassar objected to the directive, arguing that his salary for clinical services was fully funded by a federal grant, and stating that billing the patients therefore would be “double dipping.” Nassar claimed that Levine also began to “harass” him, making derogatory statement about his race and his Muslim religion, including one comment that “middle easterners were lazy.” His allegations were supported by a clinical supervisor, whose affidavit described a “disconnect between Dr. Levine’s statements and the reality of Dr. Nassar’s work.” Based on his concerns about Levine, Nassar ultimately applied for employment at Parkland Health & Hospital System in 2006. Parkland made preparations to hire Nassar, even drafting a job offer letter, but never formally hired Nassar. Nassar contended that UTSW retaliated against him by blocking the offer from Parkland. Nassar ultimately filed a lawsuit in federal court alleging discrimination and retaliation. Levine strongly disputed Nassar’s allegations, as did UTSW.

At trial, the jury was presented with only two questions: (1) Whether Nassar was constructively discharged because of his race, national origin, or religious preference; and (2) Whether UTSW retaliated against Nassar by blocking or objecting to his employment by Parkland after Nassar complained about his treatment at UTSW. After one hour of deliberations, the jury answered “Yes” to both questions. Two days after the May 24, 2010 verdict, the same jury awarded $3.2 Million in compensatory damages and $438,000 in lost back pay to Nassar. The court now will determine whether Nassar’s claim for lost front pay – which could range from $200,000 to $4 Million – should be paid as part of the award. In addition, Nassar has made a claim for attorney fees, which also will be heard by the court. UTSW has already stated that it will be appealing the verdict and the resulting judgment.

Hospital and healthcare entities that are contemplating direct hiring of physicians should take the time to read the jury instructions and verdict sheet on which the decision in the jury’s decision was based. (Find a copy on my blog at www.employmentlawmatters.net.) Most notable is the court’s instruction in which it defines “constructive discharge” as a resignation from working conditions “so intolerable that a reasonable employee would feel compelled to resign.” The court goes on to point out that to prove constructive discharge, Nassar “need not show that his race, national origin, or religions preference was the sole or even the primary motivation for [UTSW’s] conduct.” He simply had to prove that his protected characteristics “played a motivating part in [UTSW’s] conduct, even though other factors may also have motivated [UTSW].

Employers, including health care entities, should ensure that supervisors and managers are trained to recognize and remedy discriminatory conduct, to assure that such conduct does not become viewed as a “motivating part” of any adverse employment action taken by the employer.
 

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Unless an individual can prove that she is meeting the expectations of her employer, that individual cannot set forth the prima facie case necessary to support a claim of workplace discrimination. The 7th U.S. Circuit Court of Appeals has found that an employee who was fired for insubordination was not meeting an employer’s legitimate business expectations after she engaged in arguments with her co-workers, the general manager, and the owner of the business. The Court further found that the insubordination was a non-discriminatory reason that overcame the employee’s claim that her termination for insubordination was a “pretext” for discrimination. Everroad v. Scott Truck Sys., Inc., 7th Cir., No. 08-3311, May 10, 2010.

Diana Everroad filed a federal lawsuit against her former employer, Scott Truck Systems, Inc., and against the company’s general manager, who also was the wife of the company’s owner. Everroad claimed that she had been discriminated against because of her age and gender, and that she was retaliated against for reporting that discrimination. The lower court granted summary judgment in favor of the defendants, and that decision was upheld on appeal.

Scott Truck is a family-owned and operated commercial trucking company. Everroad was hired as a dispatcher in 2004 – at the age of 51 – by defendant Hantzis, the general manager and wife of the owner, David Scott. Within the first months of her employment, Everroad experienced conflicts with her co-wrokers, and was complained about by two of the Company’s largest customers. Scott and Hantzis ultimately moved Everroad from the dispatcher position to a newly created “data administrator” job with the same pay and hours, but with a more flexible schedule. In her new position, Everroad worked in close proximity with a younger female employee who, according to Everroad overused the phone for personal calls. She complained to Scott and Hantzis, who called a meeting with Everroad and the co-worker to attempt to resolve the issue. The Court colourfully described the meeting by saying that “Voices were raised, accusations were exchanged, tears were shed, and eyes were rolled.” Apparently, it didn’t go well. Upset by Everroad’s antics, and concluding that Everroad had been insubordinate, Scott and Hantzis decided to terminate her employment. When they informed her of that fact, Everroad told Scott that he and his wife were “nuts, crazy, insane” and “sick” and called Hantzis a derogatory female term, beginning with the f-word as a descriptive adjective. Later that evening, Everroad called Scott, asking for severance pay. Scott declined.

The Company’s motion for summary judgment against Everroad’s ensuing lawsuit was granted, and the case was dismissed. On appeal, the Seventh Circuit found that Everroad’s insubordination undermined the discrimination claims in two ways: first, insubordination precluded Everroad from proving that she “met her employer’s legitimate job expectations,” which is an element of the required prima facie case; second, insubordination is a non-discriminatory reason for termination, which meant that Everroad was unable to show that the Company’s actions were simply a pretext for discrimination. Further, although Everroad claimed that she was treated differently than “similarly situated” male/younger employees, she was unable to show that anyone else had been similarly insubordinate and treated more favourably.

Insubordination is a non-discriminatory reason for termination in most circumstances. The relevant inquiry at the summary judgment level is not whether a reasonable jury would conclude that an employee’s conduct was insubordinate, but whether the employer genuinely believed it to be so at the time of the complained-of adverse action. A jury may disagree with a company’s decision to terminate an employee for insubordination or may think that the decision was in error, but so long as the employer “genuinely believed the truth of their stated reason for the decision,” the reason is not pretextual, and the employee will be unable to prove discrimination. The most effective way to support an employer’s genuine belief is complete, contemporaneous, and objective documentation of the employee actions and statements on which the decision is based.
 

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