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

In February of this year, the U.S. Equal Employment Opportunity Commission (EEOC) held a public meeting to examine the practices by employers of considering only currently employed candidates for job vacancies and excluding currently unemployed persons from job applicant pools. A recent follow-up report by the National Employment Law Project , a national advocacy organization for employment rights of lower-wage workers, focused on what it called “the persistent practice” of excluding candidates based on their employment status. In response to this report and others like it, a bill was introduced in the House of Representatives  in June that will make it illegal for employers and employment agencies to screen out unemployed job seekers. On August 2, the Senate followed suit with an as-yet unpublished bill with the same purpose. The proposed legislation has been named the “Fair Employment Opportunity Act” and prohibits consideration of an individual’s status as “unemployed” in screening for or filling positions.

The Act would make it illegal for an employer to: (1) refuse to consider for employment or refuse to offer employment to an individual because of the individual’s status as unemployed; (2) publish in print, on the Internet, or in any other medium, an advertisement or announcement for any job that includes any provision stating or indicating that an individual’s status as unemployed disqualifies the individual for a job (“must be currently employed”) and (3) direct or request that an employment agency take an individual’s status as unemployed into account in screening or referring applicants for employment.

An employer or employment agency that is found to have violated the Act would be liable to the affected individual for any wages, salary, benefits, or other compensation denied or lost to the individual; or, in a case in which wages, salary, benefits, or other compensation have not been denied or lost to the individual, any actual monetary losses sustained as a direct result of the violation, or a civil penalty of $1,000 per violation per day, whichever is greater. In addition, there are provisions in the proposed Act for liquidated damages, interest, and attorney fees.

However, there is a somewhat vague and contradictory exception to the prohibitions set forth in the proposed Act. The wording of the House bill states that it is illegal to discriminate against an unemployed individual, “except where a requirement related to employment status is a bona fide occupational qualification reasonably necessary to successful performance in the job, and to eliminate the burdens imposed on commerce by excluding such individuals from employment.” In other words, an exception to the prohibitions of the Act is established if an employer can show that an individual’s employment in a similar job, during a time proximate to the hiring, is necessary to successful performance of the job for which the person is being hired. Without additional parameters, that exception could be applied to nearly every job, where it is almost always advantageous (“reasonably necessary to successful performance in the job”?) to have proximate experience in the field prior to starting a new job. It remains to be seen as to whether that exception would over-shadow the overall purpose of the proposed law, and whether it would have the ultimate result of creating increased and unnecessary litigation on the issue.
 

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The Worker Adjustment and Retraining Notification (WARN) Act requires a 60-day notice to employees before a “mass layoff” can take place. A mass layoff is a reduction in force which is not the result of a plant closure, but which results in an employment loss of at least 50 full-time employees at a single site. While the WARN Act does not specifically define “workforce reduction,” federal courts have determined that an employee is part of such reduction when that employee is not replaced after layoff or discharge. The 8th U.S. Circuit Court of Appeals relied on that interpretation of the term “workforce reduction” when it determined that 111 replacement workers - who ultimately were fired to allow a company’s original employees to return from strike - were not entitled to a 60-day mass layoff notice prior to their firings. Sanders v. Kohler Co., 8th Cir., No. 10-1848, June 8, 2011.

In 2006, Kohler Company shut down its Searcy, Arkansas plant after collective bargaining negotiations with the United Auto Workers Local 1000 broke down and the plant’s 247 union workers went on strike. Three months later, the company hired 123 replacement workers to help restart the plant. In March 2007, Kohler informed the replacement workers that if the strike was determined to be an unfair labor practices strike (as the union claimed), Kohler would release these replacement workers to the extent that any strikers would want to return to their old jobs. In November 2007, Kohler revised that message, and emailed its supervisors that strike settlement would not affect the fact that the replacement workers were considered to be Kohler employees.
In March 2008, Kohler and the Union settled their dispute, and Kohler agreed to reinstate certain strikers. In order to do that, Kohler then fired 123 of the replacement workers, and returned 103 of the original strikers to their former positions. Within weeks, 111 of the fired replacement workers filed a complaint, alleging that Kohler had failed to provide the required 60-day notice under the WARN Act. The complaint included a number of state law claims, including breach of contract, promissory estoppel, and unjust enrichment. The district court grated summary judgment to Kohler on the WARN Act claim, and dismissed the state law claims without prejudice (meaning that the plaintiff’s could pursue those claims in state court, should they choose to do so).

On appeal, the Eighth Circuit upheld the lower court’s decision, based largely upon the interpretation of the term “reduction in force,” which is undefined in the WARN Act. The Court pointed out that the statute defines mass layoff as a reduction in force “which results in” the requisite number of employment positions lost. Here, Kohler fired 123 people, but replaced 103 of those, with a net loss of 10 positions. Based on that fact, the Court held that employees who are fired but replaced are not part of a reduction in force and do not count toward the 50-employee threshold to trigger the required 60-day notice under the WARN Act, because their loss does not “result in” a net loss of employment positions.

While this issue is somewhat esoteric, and applies only within a limited fact scenario, it is important to understand that courts are willing to put parameters around the WARN Act’s requirements, based upon a reasonable reading of that statute. Companies who may face a scenario which includes the hiring and firing of replacement workers during a strike should keep this case in mind when making decisions related to the layoff of strike replacement workers. Similarly, groups who supply or assist such replacement workers should assure that those workers understand that they may not be entitled to a particular amount of notice prior to layoff or termination.
 

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In one of the most dramatic and convoluted scenarios ever seen in a whistle-blower case, a doctor has been disciplined by a medical board; a hospital administrator has been jailed; two nurses have been fired, criminally charged, acquitted, and then awarded $750,000; and a local sheriff has been removed from office and sentenced to jail, with a subsequent lengthy felony-probation. Employers who do not believe that recent legislative changes related to whistle-blower claims (Dodd-Frank Act, Sarbanes-Oxley, and state-based whistle-blower statutes) have begun to change the landscape of employment-related cases should take the time to read this story.

In April of 2009, two nurses in a county-owned hospital in Kermit, Texas filed an anonymous complaint with the Texas Medical Board, expressing concerns related to patient care being provided by Dr. Rolando Arafiles, Jr. Based on the information in the complaint, the Board issued formal charges against Arafiles.

After receiving notice of that complaint, Arafiles approached his friend, Winkler County Sheriff Robert L. Roberts, Jr., asking for his help to determine who had made the report. Roberts then used the power of his office to launch an investigation, and ultimately determined the identity of the two nurses. Soon after that, the county hospital administrator fired both women, each of whom had been employed at the hospital for over 20 years. In addition, in June 2009, the two women were indicted by the County Attorney on charges of “misusing official information,” a criminal felony carrying a penalty of up to 10 years in prison and up to $10,000 in fines.

In August 2009, the two women filed a civil action in federal court against Dr. Arafiles, Sheriff Roberts, the hospital administrator, the hospital itself, the County Attorney, and Winkler County, claiming constitutional violations, malicious prosecution, and violations of laws related to whistle blowers.  In February 2010, while that civil case was pending, a trial was held on the criminal charges against the nurses. One of the women was dropped from the prosecution, and the other was found not guilty.  Although the jury was out for an hour before rendering the not-guilty verdict, the foreman has said that the actual decision took less than 5 minutes – but that since the lawyers had worked “so hard” during the trial, the jurors felt that it would be more courteous to wait for a little while before going back with the verdict. Hear a more detailed explanation of this incident and of other aspects of the situation in an archived installment of the “This American Life” radio program.  

In January 2010, a grand jury returned indictments against Dr. Arafiles, Sheriff Roberts, the county attorney, and the hospital administrator, charging that each of them misused his power to retaliate against the nurses. In February, the county settled the civil case brought by the nurses, agreeing to pay them $750,000.  In March, the hospital administrator acknowledged that he improperly terminated the nurses’ employment, and pled guilty to charges against him. He was sentenced to 30 days in the county jail.

The trial against Sheriff Roberts, which was moved to a location outside of Dallas rather than proceeding locally, went forward this month on two sets of charges (one set for each nurse). Each set of charges was made up of two felony charge - retaliation and misuse of official information - and a misdemeanor charge.  That trial ended this week with a conviction against Roberts on all counts. In an agreement reached at the close of the trial’s penalty phase, Roberts was sentenced to 100 days in prison on the felony counts, with a four year felony probation to follow that. He also will pay fines of $6,000. Charges against Dr. Arafiles and the County Attorney still are pending.

While this case presents an extreme version of the consequences of an employer’s reaction to whistle-blower activity, it certainly provides a template of how not to react to these situations. Most employers are taking the time to get up to speed on the new developments in federal laws related to such circumstances, and all employers should be aware of the applicable laws within the states in which they do business, in order to avoid unanticipated consequences.
 

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The 8th U.S. Circuit Court of Appeals has upheld summary judgment against a bank teller who claimed that she was constructively discharged when she left her job on the last day of her pregnancy-related medical leave. Trierweiler v. Wells Fargo bank, 8th Cir., No. 10-1343, April 8, 2011.

An individual can support a claim of constructive discharge by demonstrating that a reasonable person would have found the employment conditions intolerable, and that the employer either intended to force that person to quit, or could reasonable have foreseen that she would do so. Kimberli Trierweiler began working for Wells Fargo Bank in October 2006 as a teller in the bank’s Watertown, South Dakota branch. The handbook that Trierweiler received at the outset of her employment indicated a “regular and dependable attendance” was an essential function of her job, and that excessive absences from work would lead to discipline, up to and including termination. The handbook also provided methods for reporting employment issues, including concerns related to accommodations for medical issues.

Bank employees received 160 hours (20 days) of paid time off (PTO) each year, and could exercise that time off after 30 days of employment. Between her start date and the end of 2006, Trierwetler used her pro rata allotment of PTO, along with four and a half unpaid additional days of absence.

In December 2006, Trierweiler informed her supervisors that she was pregnant. Although she was not eligible for Family and Medical Leave (not having worked for the Bank for the requisite one year), she would have been entitled to maternity leave under a short-term disability plan, which had a 5-day “waiting period” during which Trierweiler would have had to use PTO days or unpaid leave.

By mid-April 2007, Trierweiler had used eleven and a half days of PTO, with three additional days scheduled before the end of April, amounting to 120 hours of her available 160 hours of PTO for 2007. None of that time was related to her pregnancy. During a meeting with her supervisor at that point, Trierweier was warned about her frequent absences.

On May 9, Trierweiler took another PTO day to stay home with a sick child. Following that, Trierweiler was told that if she had another absence, she would receive a written warning. On May 14, Trierweiler left a phone message for her supervisor, stating that her doctor had prescribed a week of pregnancy-related medical leave. According to Trierweiler, her supervisor responded with a message that said that “This isn’t going to work, you taking time off.” Trierweiler did not have any further direct contact with her supervisor or any HR person on the issue, but testified in her subsequent lawsuit that she felt that the message meant that she no longer had a job.

While Trierweiler was on her medical leave, her supervisor sought advice from HR. It was decided that Trierweiler should receive a written warning for her previous absences (not including the current leave), but that a company program, called “WorkAbility” would be explored for temporary accommodations for the current and any future pregnancy-related leaves. Two days later, on the final day of her week-long leave, Trierweiler drove through the bank’s drive-through lane, handed her keys to the teller, and stated that she was “done.” She followed this with a phone message to her supervisor that she had done so, and asked for her personal office items.

Trierweiler brought a federal court action under Title VII’s Pregnancy Discrimination Act, claiming that she had been constructively discharged. The lower court granted summary judgment in favor of the Bank, and that decision was upheld by the Eighth Circuit. In spite of Trierweiler’s argument that an alleged statement by her supervisor - that she couldn’t miss additional work without being fired – was designed to force her to quit, the Eighth Circuit pointed to the company’s decision to seek assistance from WorkAbility to explore possible accommodations for the situation. According to the Court, this showed an intent to maintain an employment relationship with Trierweiler, not an attempt to force her to quit, or to create an intolerable condition that would make it impossible for her to continue to work there.

Trierweiler never spoke with HR, utilized any resources provided in the handbook for problem resolution, or asked for clarification of any of the phone messages left for her about her absences. As such, Trierweiler failed to provide an opportunity for the company to remedy the issues of which she was complaining. The lesson here is that Court’s are hesitant to find constructive discharge when an employee does not allow the employer a reasonable chance to work out the problem. Further, the Bank’s efforts to find a resolution to the problem, and its documentation of that effort, helped to successfully defend against this claim.
 

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The U.S. Supreme Court has held, by unanimous opinion, that an employer may be held liable for employment discrimination under the Uniformed Services Employment and Reemployment Rights Act (USERRA) based on the “discriminatory animus” of an employee who influenced, but did not make, an ultimate employment decision. In interpreting the so-called "cat's paw" theory of liability, the Court declined to adopt the approach suggested by the employer: that a decision-maker's independent investigation and rejection of an employee's allegations of discriminatory animus should negate the effect of any prior discrimination in subsequent actions against that employee. Instead, the Court held that "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." Staub v. Proctor Hospital, No. 09-400, U.S. Supreme Court (March 1, 2011).

Vincent Staub was employed by Proctor Hospital as an angiography technologist, and is a veteran member of the U.S. Army Reserve. Staub's immediate supervisor (Mulally), allegedly was hostile to Staub’s military obligations, often scheduling Staub to work on the weekend rotation, which created conflicts with his military drill schedule. According to Staub, Mulally also scheduled him for extra shifts so he could “pay back” his co-workers for making everyone else having to “bend over backwards” to cover his Reserve absences. Staub reported the problem to his department head (Korenchuk), without success. In fact, Korenchuk also allegedly made similar comments about Staub’s reservist duties, characterizing them as a “waste of taxpayers money."

In January of 2004, Staub received a Corrective Action form from Mulally. In April, Korenchuk informed Proctor Hospital's vice president of human resources Linda Buck, that Staub had violated the January Corrective Action. Relying on Korenchuk's accusation, Buck fired Staub. Staub filed suit against the Hospital claiming that his discharge was motivated by hostility to his military status, in violation of the USERRA. Specifically, Staub argued that while Buck was not hostile to his military obligations, Mulally and Korenchuk (who were hostile) influenced Buck's ultimate employment decision. A jury found in Staub's favor. The Seventh Circuit Court of Appeals reversed, ruling that Buck was not wholly dependent on the advice of Korenchuk and Mulally and, therefore, that the decision was not based upon Staun’s military status.

The issue before the Supreme Court was under what circumstances an employer may be held liable if the company official who makes an adverse employment decision has no discriminatory animus, but is influenced by previous company action that is the product of discriminatory animus in someone else. In deciding this issue, the Supreme Court pointed out that under the USERRA, employers are prohibited from engaging in certain employment actions if an employee's membership in the uniformed services "is a motivating factor in the employer's action." Staub argued that although Buck was not motivated by discriminatory animus in firing him, Proctor Hospital should be responsible because Mulally and Korenchuk acted with discriminatory animus in placing an unfavorable entry on his personnel record. Proctor Hospital argued that an employer is not liable unless the de facto (or actual) decision-maker has a discriminatory animus.

The Court held that Mulally’s and Korencuck’s discriminatory intent was sufficient for liability against the Hospital under the USERRA. In rejecting Proctor Hospital's interpretation of USERRA as "implausible," the Court noted that the employer's view would lead to the “improbable consequence that if an employer isolates a personnel official from an employee's supervisors, vests the decision to take adverse employment actions in that official and asks that official to review the employee's personnel file before taking the adverse action, then the employer will be effectively shielded from discriminatory acts and recommendations of supervisors that were designed and intended to produce the adverse action."

Based upon that rationale, the Court concluded that the presence of an independent investigation does not shield an employer from liability where the investigation took into account a supervisor's biased report. According to the Court, in such circumstances, the employer is at fault “because one of its agents committed an action based on discriminatory animus that was intended to cause, and did in fact cause, an adverse employment decision." Because there was evidence that Mulally's and Korenchuk's actions were motivated by hostility toward Staub's military obligations, and because there was evidence that Mulally's and Korenchuk's actions were causal factors underlying Buck's decision to fire Staub, the U.S. Supreme Court reversed and remanded, asking the Seventh Circuit to determine whether a new trial was warranted.

Employers should recognize the importance of this case in the disciplinary/decision-making process. When supervisors act in ways that might suggest discriminatory motives, those actions create unnecessary risks of litigation and possible liability for employers. Of note is the fact that in this case, the decision-maker did not do an independent investigation but instead, relied upon information provided by individuals with ulterior motives. Additional investigation or review of the circumstances could have provided a layer of “good faith” between the ultimate decision-maker and the discriminatory animus of Staub’s supervisors. According to the Court, “if an employer's investigation results in an adverse action for reasons unrelated to the supervisor's original biased action . . . then the employer will not be liable."
 

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The Worker Adjustment and Retraining Notification (WARN) Act states that an employer cannot order a plant closing or mass layoff that will affect 50 or more employees without a 60-day written notice to each affected employee. An “affected employee” is someone who is expected to experience an employment loss as a result of the closure or layoff. For purposes of the WARN Act, an employment loss is “an employment termination, other than a discharge for cause, voluntary departure, or retirement. . . .” The 9th U.S. Circuit Court of Appeals has held that a group of employees who stopped reporting to work after the owner of the automobile franchise for whom they worked informed them that he would be “closing its doors” in two weeks did not fall within the “voluntary departure” exception to the WARN Act and, therefore, were not provided with the requisite 60-day notice of business closure. Collins v. Gee West Seattle LLC, 9th Cir., No. 09-36110, January 21, 2011.
Prior to September 26, 2007, Gee West Seattle LLC employed approximately 150 employees at its franchise locations. On that date, Gee West informed its employees, in a written memo, that it was actively pursuing sale of the business, but that it would be closing its doors on October 7, 2007. The memo also stated that if Gee West had not found a buyer by October 7, it would be terminating all of its employees other than Accounting and Business Office personnel. Following that memo, employees began to stop reporting to work. By October 5, only 30 Gee West employees reported to work. Because the business could not operate with that few employees, Gee West ceased doing business on that date.
In February 2008, Gee West’s employees filed a lawsuit in federal court, claiming that the Company violated the WARN Act by not providing 60 days of notice regarding the business closure. In November, 2009, the district court granted Gee West’s motion for summary judgment, holding that the 120 employees who left Gee West between September 26 and October 7, 2007 left of their own free will, and therefore, did not suffer an “employment loss” because they fell within the “voluntary departure” exception. According to the district court, because fewer than 50 employees suffered an employment loss, the situation was not covered as a plant closure by the WARN Act.
On appeal, the Ninth Circuit rejected the lower court’s analysis and reversed that determination. Instead, the Court found that the starting point in an analysis of this situation was whether 50 or more individuals would reasonably have been expected to experience an employment loss as a consequence of the closure. The Court found that in the Gee West scenario, all 150 employees fell within that parameter. The second step was to determine whether those individuals suffered “employment loss” when the business closed. While Gee West argued that all employees who stopped coming to work departed from their employment voluntarily, the Court disagreed, finding that such argument would allow an employer to escape responsibility under the WARN Act’s 60-day notice requirement in every situation in which a group of employees left the company based upon that company’s imminent closure, and took the number of remaining employees under 50.
This was an “issue of first impression” for the Ninth Circuit, meaning that the factual scenario has not been addressed by that Court before now. However, until the economy stabilizes further, this scenario is one that companies may be experiencing with more frequency than in the past. Therefore, employers should be aware of the provisions of the WARN Act, and should comply with the 60-day notice of closure to employees, should 50 or more individuals be expected to experience an employment loss because of that closure.
 

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The Internal Revenue Service has developed a form (Form W-11) for use by employers to confirm that an employee is a qualified employee under the Hiring Incentives to Restore Employment (HIRE) Act. While it is acceptable to use a similar statement, such alternate statement will only be acknowledged by the IRS if it contains the information set forth in Form W-11, and the if employee signs it under penalties of perjury. As set forth in the version of the Act signed by President Obama last month, an employer may not claim HIRE Act benefits, including the payroll tax exemption or the new hire retention credit, unless the newly hired employee completes and signs an affidavit or statement under penalties of perjury, and is otherwise a qualified employee.

According to the Employer Instructions that accompany Form W-11, a “qualified employee” is an employee who:

• begins employment with the employer after February 3, 2010, and before January 1, 2011;

• certifies by signed affidavit, or similar statement under penalties of perjury, that he or she has not been employed for more than 40 hours during the 60-day period ending on the date the employee begins that employment;

• is not employed to replace another employee unless the other employee separated from employment voluntarily or for cause (including downsizing); and

• is not related to the employer. An employee is considered to be “related” if he or she is the employer’s child or a descendent of the employer’s child, a sibling or stepsibling, a parent or an ancestor of a parent, a stepparent, niece or nephew, aunt or uncle, or in-law of the employer. An employee also is related to the employer if he or she is related to anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company, or is a dependent either of the employer or of anyone who owns more than 50% of the outstanding stock or capital and profits interest of the company.

The text of the IRS’ affidavit simply states: “I certify that I have been unemployed or have not worked for anyone for more than 40 hours during the 60-day period ending on the date I began employment with this employer.” The affidavit must be signed, dated, and a Social Security Number must be indicated, as well as the first date of employment. The signature line should follow a statement that “Under penalties of perjury, I declare that I have examined this affidavit and, to the best of my knowledge and belief, it is true, correct, and complete.” The form is not submitted to the IRS, but must be kept by the employer to document the information.

As has been stated on other occasions, employers should realize that the HIRE Act does not excuse them from complying with existing anti-discrimination and employment-related laws, and should be aware that the increased hiring generated by the Act also will require increased diligence in compliance with those existing laws.
 

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On March 18, 2010, President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act, which contains more than $17 Billion in tax credits aimed to stimulate employment, and includes $20 Billion for highway and transit infrastructure programs. One of the most important provisions for businesses is a tax credit for hiring from the ranks of the unemployed.
Under the HIRE Act, the employer of a “qualified employee” is excused from paying the employer match for the 6.2% Social Security portion of that employee’s wages in 2010. A qualifying employee is one who is hired after Feb. 3, 2010 and before Jan. 1, 2011, is not hired to replace another employee, is not related to the employer, and certifies under penalty of perjury that he or she has not been employed for more than 40 hours during the 60-day period ending on the date that employment begins with the new employer. This incentive can save the employer up to $6,621.60 for each qualified employee hired (6.2% of the maximum Social Security withholding for 2010), with increased savings for hiring qualified veterans, whose maximum Social Security withholding amount is higher. Employers also can receive a tax credit on their 2011 return for each new employee hired and retained for 52 weeks under certain criteria; that credit is the lesser of $1,000 or 6.2% of the wages paid to the employee for those 52 weeks.
These tax incentives are meant to spur job creation, especially for small businesses who are undecided about whether to begin to ramp up company-building efforts in light of recent economic difficulties. In addition, the Act includes a one-year extension of expensing thresholds so that small businesses may elect to write-off up to $250,000 of certain capital expenditures (subject to a phase-out once those expenditures exceed $800,000) in 2010 in lieu of depreciating those costs over time. The goal of that provision is, of course, to provide an incentive to businesses to invest immediately in equipment and inventory to jump-start economic activity.
The Act also extends current federal aid for certain highway programs, saving existing jobs associated with that work. Further, it establishes a new Build America Bonds program that will provide an optional direct subsidy for bonds issued for certain school and energy projects.

One key revenue source for the Act’s programs is a limitation on the ability of multinational corporations to shift assets among foreign institutions in order to minimize withholding tax. In 2004, Congress provided to certain taxpayers an election to take advantage of a rule for allocating interest expense between U.S. sources and foreign sources for purposes of determining that taxpayer's foreign tax credit limitation. The phase-in of that rule previously was delayed a number of times. The HIRE Act further delays the implementation to 2021, which is estimated to raise nearly $10 Billion over the next ten years.

Congressional leadership has called the HIRE Act the “first of several” laws intended to stimulate job creation. Employers should make themselves aware of the opportunities that are becoming codified in new laws, and should maximize on those opportunities for employing and re-employing qualified individuals. However, employers also must recognize that these new laws do not excuse employers from complying with existing anti-discrimination laws, and should be aware that increased hiring may also call for increased diligence in compliance with those laws.

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In an unpublished opinion, a federal district court in New Jersey has upheld a jury verdict in which a company was found liable for violating the federal Stored Communications Act (SCA). The violation occurred when the company’s managers intentionally accessed a “chat group” on an employee’s MySpace account without having received authorization from the MySpace member to join the group. Further, the court upheld the jury’s finding of malicious conduct, which supported an award of punitive damages. Pietrylo v. Hillstone Restaurant Group d/b/a Houston’s, D.N.J., No. 06-5754, unpublished, Sept. 25, 2009.

Brian Pietrylo and Doreen Marino filed suit against their employer, Houston’s Restaurant, after two of the restaurant’s managers accessed a MySpace chat group maintained by Pietrylo during his non-work hours. The chat group, called the “Spec-Tator,” was accessed via an electronic invitation from Pietrylo. If the user accepted that invitation, he or she could access the site only by using a personal password. The site included language that indicated that the group was private, and that it was a place in which Hillstone employees could talk about the “crap/drama/and gossip” related to their workplace. No Hillstone upper manager was invited to join the group, and members accessed the site only during non-work hours and on non-company computers.

One employee/chat group member, Karen St. Jean, made a Houston’s manager aware of the site. St. Jean later provided her password to another manager, Robert Anton, who shared the information with a regional manager, Robert Marano. In spite of the privacy warning on the page, Anton and Marano accessed the site on multiple separate occasions. After determining that the content of the postings in the chat group were “offensive,” Anton and Marano fired Pietrylo and Marino.

Pietrylo and Marino then sued Houston’s, alleging, in part, that the company violated the SCA and a parallel New Jersey statute, the New Jersey Wiretapping and Electronic Surveillance Control Act. A jury found in favor of the employees, awarding modest compensatory damages, but adding punitive damages after finding that the company acted maliciously. Houston’s challenged the verdict in a motion for judgment, and requested a new trial. Both motions were denied by the district court, which found that the verdict and the damages were supported by the evidence.

Under the SCA, the plaintiffs had to prove that Houston’s managers accessed the chat group “knowingly, intentionally, or purposefully,” and without authorization. Although Houston’s argued that St. Jean willingly volunteered her password to Anton, St. Jean’s trial testimony included the fact that she would not have provided that information to Anton if he had not been a manager. Interestingly, the court’s decision turned partly on the fact that there was no documentary evidence concerning the authorization, and so the jury had to rely on the testimony and demeanor of the witnesses. The court held that the jury could infer from St. Jean’s testimony – specifically her statement that she felt that she “would have gotten in trouble” if she hadn’t provided her password – that the purported authorization was coerced. In addition, the court cited that particular testimony, in conjunction with the fact that the restaurant’s managers viewed the site on several different occasions, even though the site specifically contained warnings that it was “private” and accessible to “members only,” to support its decision to deny Houston’s motions.

While this decision is a district court case and therefore open to appeal, the decision is one of which employers should be aware. The lack of documentation regarding how the company obtained the password, the use of a self-designated “private” chat room by individuals without an actual invitation, and the continued use of the site with specific knowledge of its invitation-only status all provided a basis for the court to support the jury’s findings against the company. While employers have certain rights and obligations with respect to company-related computer equipment and electronic sites, this case points out the pitfalls of an attempt to extend that authority to non-work-related equipment and sites. This area of the law is developing quickly, and employers should be attuned to the ways in which courts are addressing the issues that arise in that area.
 

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Litigation often ends when one party files a motion for summary judgment, asking the court to determine that there is no issue of material fact for the jury, and asserting that a decision can be made in its favor based solely on the legal issues. In reviewing a motion for summary judgment, a court must view the record in the light most favorable to the non-moving party. Recently, the 2d U.S. Circuit Court of Appeals reversed summary judgment for an employer in an age discrimination case, holding that the lower court “failed to construe the evidence in the light most favorable to [the employee] and to draw all permissible inferences in [his] favor.” Weiss v. JPMorgan Chase & Company, 2d Circ., No. 08-0801, June 5, 2009.

David Weiss alleged that he was terminated from his position at JPMorgan Chase & Company in violation of the Age Discrimination in Employment Act (ADEA) after he was replaced, at age 56, by an individual 16 years his junior. The parties agreed that Weiss presented a prima facie case of discrimination, and that JPMorgan introduced evidence that it had a legitimate non-discriminatory reason for firing Weiss. At the final stage of the now-familiar McDonnell-Douglas analysis, Weiss was required to satisfy the ultimate burden of proving that JPMorgan’s proffered reasons actually were a pretext for age discrimination. The district court reviewed the evidence, and found in favor of JPMorgan. On appeal, the Second Circuit reversed that decision, and held that based upon the available facts – when viewed in a light most favorable to Weiss – a jury may have been able to infer pretext regarding JPMorgan’s reasons for Weiss’ termination. The Second Circuit addressed each of the arguments asserted by Weiss in response to the reasons proffered by JPMorgan, and found each to have created such an inference.

JPMorgan’s asserted reasons for Weiss’ termination centered around complaints by Weiss’ sales team regarding his leadership style, and included the subjective determination (made by a supervisor who only had known Weiss for four months) that “the team had lost confidence in Weiss.” Weiss argued that his team was dissatisfied with their bonuses, over which he had little or no control; that the defection of his top sales person was not due to any action on Weiss’ part, but on JPMorgan’s refusal to match an offer to that individual made by a competitor; and that Weiss never had been put on notice regarding his failure to “cover” certain accounts, which ultimately led to his firing.

Importantly, the Court went into detail about the company’s “shifting explanations” for Weiss’ termination, stating specifically that “[i]nconsistent or even post-hoc explanations for a termination decision may suggest discriminatory motive.” After characterizing JPMorgan’s explanations as “vaguely formulated and technically inaccurate,” the Court pointed out that a jury can infer pretext from the company’s failure to present those termination reasons to Weiss initially, especially in light of an HR employee’s testimony that the company advocated “giving true reasons” to employees who are fired. Further, the Court pointed out that JPMorgan acted outside of its normal termination procedures by failing to allow Weiss an opportunity to correct his filings prior to the termination decision. While the company asserted that urgent business circumstances justified the deviations from its customary procedure, the Court stated that “Whether Weiss’ superiors were persuaded by a sense of business urgency or [by] age discrimination to contravene normal procedures to terminate Weiss is a question for the jury.”

This case is a strong reminder to employers to: (1) act consistently with company policies and procedures; (2) train supervisors and managers to effectively conduct termination meetings; (3) base employee discharge decisions on business-related, fully-documented reasons. To do otherwise may be to create a circumstance in which the company is forced to rely on subjective assessments and incomplete rationales, which can, as in this case, lead a court to find sufficient issues of material fact to allow the matter to be decided by a jury.
 

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An employee alleging a violation of the Sarbanes-Oxley Act (SOX) must file a complaint within 90 days from the date of that alleged violation. That 90-day period begins to run from the date on which the complainant knows or reasonably should know that the complained-of act has occurred. In whistleblower cases under SOX, the 90-day statute of limitations runs from the date on which the employee receives “final, definitive, and unequivocal notice” of an adverse employment decision. As defined in SOX, the term “unequivocal” means that the notice is not ambiguous, and is free from misleading possibilities.

On April 30, 2009, a Department of Labor Administrative Review Board (ARB) determined that an employer’s notice to its employee was ambiguous and did not trigger the 90-day statute of limitations, because the letter included language that indicated that the company was willing to review and consider any evidence from the employee that could refute the termination decision. Snyder v. Wyeth Pharmaceuticals, DOL ARB, No. 09-008 (4/30/09, released 5/7/09). Based on that fact, the employee’s complaint to OSHA was timely, even though the complaint was filed more than six months after the employee received the letter which ostensibly indicated that the company had decided to terminate his employment.

Gregg Snyder was employed by Wyeth Pharmaceuticals as an Engineer IV, responsible for all Building System functions at the company’s Cambridge, Massachusetts facility. In September 2007, Wyeth’s HR director informed Snyder that he was being suspended with pay pending an investigation of allegations that he had improperly accessed confidential information. On October 1, while suspended, Snyder sent an e-mail to Wyeth, alleging certain Code of Conduct violations by Wyeth officials, and alleging that his suspension was part of a continuing course of retaliation by Wyeth. On October 17, Snyder received a letter from Wyeth’s HR Director (Lingen) which stated that prior to Snyder’s October 1 e-mail, the company already had made a decision to terminate Snyder’s employment. However, the letter also stated that “if you would to provide me with specific information in writing as to why you think your termination is not justified or specific details of the ‘harassment’ you feel you have received, I would be happy to review it.” Snyder responded on October 19 by again alleging retaliation and harassment.

On February 11, 2008, Wyeth sent a letter to Snyder stating that the company “has concluded that the decision to terminate your employment is appropriate,” and informed Snyder that the termination was effective as of that date.

On May 8, 2008, Snyder filed a SOX complaint with the Occupational Safety and Health Administration (OSHA). OSHA found that the complaint was untimely because it had not been filed within 90 days of October 17, when Snyder received Lingen’s letter regarding the pre-October decision to terminate him. Upon review, that decision was upheld by an Administrative Law Judge. However, the ARB subsequently reversed the decision, finding that the wording of Lingen’s letter offered to allow Snyder to provide information that might change the termination decision, injecting an element of ambiguity into the communication. Therefore, the letter did not constitute a final, definitive, and unequivocal notice of termination sufficient to commence the running of the statute of limitations.

This decision tells employers that threats of termination that include either an opportunity for performance improvement or a mechanism for avoiding the threatened firing do not actually constitute the “final, definitive, and unequivocal notice” necessary to start to 90-day statute of limitation running under SOX for a whistleblower claim. While this should not preclude employers from allowing individuals to avoid employment termination by improving performance, it does provide a warning that once a termination decision is made and appropriately substantiated, it should be implemented without delay, unless there is a legitimate business-related reason for that delay.

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As you plan for 2009, every employer should take steps to address the amendments to the Americans with Disabilities Act (ADA), the new Family and Medical Leave Act (FMLA) regulations, and the anticipated passage of the Employee Free Choice Act (EFCA). The following is a suggested "to do" list.

www.ogletreedeakins.com/publications/index.cfm

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