Category Archives: New Mexico

September 12, 2017

Employer May Keep Tips As Long As Employees Are Paid Minimum Wage, According To 10th Circuit

By Brad Cave

By invalidating a U.S. Department of Labor (DOL) regulation that states that tips are the property of employees, the 10th Circuit Court of Appeals (whose opinions apply to Wyoming, Colorado, Utah, Kansas, Oklahoma, and New Mexico) rejected an employee’s wage claim based on her employer’s practice of keeping all tips. But employers in states with an analogous state law governing ownership of tips, such as Wyoming, need to be aware that the 10th Circuit’s ruling may not change how they handle tips.

Caterer Kept Tips But Paid More Than Minimum Wage

Relish Catering regularly receives tips from its customers in the form of a gratuity added to their final catering bill at the end of an event. Relish retains those tips for itself rather than passing them along to its employees who work at the events. However, it pays its employees at or above the federal minimum wage of $7.25 per hour as well as time and a half for overtime and does not rely on any sort of tip credit to meet the minimum wage.

Bridgette Marlow believed Relish was required to turn over her share of the catering tips under the Fair Labor Standards Act (FLSA). Despite making $12 per hour (and $18 per hour for overtime), she sued Relish and Brett Tucker, a manager and part owner of the company, alleging they violated the minimum wage provisions of the FLSA by retaining the tips.

FLSA Restrictions Apply Only When Tip Credit Taken

Marlow argued that by retaining all of the tips, Relish was essentially paying employees below minimum wage. For example, she suggested that if she received her $12 hourly wage but Relish retained $11 in tips for each hour she worked, the result was the same as if Relish turned over all of the tips to her and paid her a $1 hourly wage. In essence, she argued that the company could be paying less than the required amount for tipped employees.

The 10th Circuit didn’t bite on Marlow’s rationale. The Court stated that it doesn’t matter where the money to pay wages comes from so long as the company paid at least the minimum wage required under the FLSA. The Court rejected Marlow’s argument that the FLSA’s tip-credit provision applied to her case because Relish doesn’t take a tip credit.

The FLSA tip-credit provision allows employers of “tipped employees” to pay a reduced hourly wage of $2.13 per hour so long as employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. But this provision applies only if the employer counts tips toward the minimum wage, said the Court. The tip-credit provision does not apply if the employer doesn’t count tips toward the minimum and instead pays the full hourly minimum wage.

The Court stated that the FLSA tip-credit provision does not require that employers turn over all tips to employee in all circumstances, as Marlow urged. Instead, when an employer doesn’t take the tip credit, the tip-credit provision imposes no restrictions on what it may do with tips as long as it pays an hourly wage above the $7.25.

DOL’s Tip-Ownership Regulation Invalid

Marlow relied extensively on a 2011 DOL regulation that provides:

Tips are the property of the employee whether or not the employer has

taken a tip credit under section 3(m) of the FLSA. The employer is

prohibited from using an employee’s tips, whether or not it has taken a tip

credit, for any reason other than that which is statutorily permitted in

section 3(m): As a credit against its minimum wage obligations to the

employee, or in furtherance of a valid tip pool.

From the language of that regulation, it would seem that Marlow had a valid claim. But the 10th Circuit said not so fast and looked at whether the DOL had the authority to implement the regulation in the first place.

Relying on U.S. Supreme Court precedent, the 10th Circuit pointed out that federal agencies may create rules only to fill “ambiguities” or “gaps” in statutes. In a “friend-of-the-court” brief, the federal government argued that the FLSA is silent on the issue of who “owns” tips when an employer does not take the tip credit, and therefore, the DOL had the authority to create a tip ownership rule to fill in that gap.

Despite the Ninth Circuit’s acceptance of that argument, the 10th Circuit disagreed with it, finding that nothing in the FLSA directs the DOL to regulate the ownership of tips when the employer doesn’t take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the DOL lacked the authority to regulate otherwise.

The Court invalidated the DOL’s tip-ownership regulation, finding it was beyond the DOL’s authority, and affirmed the lower court’s judgment in favor of the employer. Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017). Read more >>

August 31, 2017

Court Invalidates Overtime Rule That Increased Exempt Salary Levels

By Mark Wiletsky 

The Department of Labor (DOL) exceeded its authority when it doubled the minimum salary levels for exempt executive, professional, and administrative employees under the Fair Labor Standards Act (FLSA), ruled federal judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas today. Granting summary judgment in favor of the states and business plaintiffs who challenged the new overtime rule last November, Judge Mazzant determined that the DOL’s new overtime rule “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”

Exempt Duties Are Part Of The Analysis

Judge Mazzant wrote that although Congress delegated authority to the DOL to define and delimit the white-collar exemptions, Congress was clear when enacting the FLSA that the exemption determination needs to involve a consideration of an employee’s duties, rather than relying on salary alone. He stated that the Obama-era overtime rule that significantly increased the minimum salary levels would result in entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties being denied exempt status simply because they didn’t meet the salary threshold. Consequently, the elimination of an analysis of duties for those who failed to meet the new high salary level was inconsistent with Congressional intent.

A Minimum Salary Level Still Acceptable

When issuing a preliminary injunction last November, Judge Mazzant’s ruling raised the question as to whether any salary threshold could be used as part of the white-collar exemption tests. In his summary judgment order, Judge Mazzant appears to leave the salary-level part of the test stand, writing “[t]he use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional capacity duties.” He notes that even though the plain meaning of Section 213(a)(1) does not provide for a salary requirement, the DOL has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt. Citing to a report on the proposed regulations, Judge Mazzant seems to approve of setting that salary level at “somewhere near the lower end of the range of prevailing salaries for these employees.”

No Automatic Increase Mechanism

The ruling also strikes down the mechanism in the DOL’s overtime rule that provided for automatic updates to the exemption’s salary levels every three years. In a cursory paragraph, Judge Mazzant wrote that having found the rule unlawful, the automatic updating mechanism was similarly unlawful.

Back To Square One

Now that the existing, never-implemented rule has been invalidated, the DOL is starting over with revising and updating the overtime exemption rule. The DOL recently published a request for information seeking public input on what the new salary levels should be, how updates should be made, whether duties tests should be changed, and other issues affecting the white-collar exemptions. We will have to see what new proposals the DOL puts out in the months to come. But in the meantime, employers can abandon plans to address the doubled salary thresholds under the Final Rule.

On Another Note, No Pay Data To Be Collected With EEO-1 Reports

In another development, on August 29, 2017, the Office of Management and Budget (OMB) directed the Equal Employment Opportunity Commission (EEOC) to immediately stay the requirement that certain employers provide pay data as part of a new EEO-1 report. The controversial pay-data rule would have required companies with 100 or more employees (and federal contractors with 50 or more employees), to submit the wage and hour information for employees according to race, gender, and ethnicity, with the information being used by the EEOC to analyze pay discrepancies and identify possible Equal Pay Act violations. Because of the stay, covered employers should use the previous EEO-1 form, which still collects data on employee race, ethnicity, and gender by occupational categories. Despite the reprieve for employers on the pay-data rule, EEOC Acting Chair Victoria Lipnic states that her agency remains committed to strongly enforcing federal equal pay laws.

If you have any questions about these new developments, be sure to reach out to the employment counsel with whom you typically work.

June 22, 2017

U.S. DOJ Files Brief Supporting Arbitration Agreements That Bar Employee Class Actions

By Emily Hobbs-Wright

Last September, the U.S. Office of the Solicitor General urged the U.S. Supreme Court to rule that arbitration agreements that prohibit employees from pursuing work-related claims on a class action basis are unlawful because they violate the National Labor Relations Act (NLRA). On June 16, 2017, however, the federal government filed a brief taking the exact opposite position, namely that class-action waivers in arbitration agreements should be enforced. This flip-flop in position is quite extraordinary, even with the change in administrations, making this important case one to watch next term. Here are the issues at stake for employers.

NLRB Appeal of Murphy Oil Case

With its controversial 2012 decision in the D.R. Horton case, the National Labor Relations Board (NLRB) has advocated that arbitration agreements between an employer and its employees that ban employees from pursuing work-related claims as a class or group are unenforceable as they violate employees’ rights to engage in concerted activities for their mutual aid and protection under the NLRA. In 2013, the Fifth Circuit Court of Appeals overturned the NLRB’s ruling in D.R. Horton, holding that the use of class action procedures is not a “substantive right” of employees under the NLRA and therefore, arbitration agreements with class-action waivers should be enforced under the Federal Arbitration Act (FAA).

The Fifth Circuit rejected the NLRB’s view on class-action waivers a second time when it ruled that Murphy Oil, which operates more than 1,000 gas stations in 21 states, did not commit an unfair labor practice when enforcing its arbitration agreements that required employees to resolve work-related claims on an individual basis. Two other appellate circuits – the Second and Eighth – have agreed with the Fifth Circuit’s position that class-action waivers are enforceable. Other circuits, however, including the Ninth and Seventh, have ruled in favor of the NLRB on this issue, creating inconsistencies concerning whether such agreements are lawful.

In the closing days of the Obama administration in September 2016, the Office of the Solicitor General (which is tasked with conducting government litigation before the Supreme Court) filed a petition with the Supreme Court asking it to decide the validity of class-action waivers in arbitration agreements through appeal of the Murphy Oil case. The government argued on behalf of the NLRB that such agreements were unlawful. Employers Ernst & Young and Epic Systems also sought Supreme Court review of their adverse decisions from other circuits on this same issue. In January 2017, just days before President Trump’s inauguration, the high court agreed to hear all three consolidated cases in its next term.

The NLRB Left To Go It Alone

When the United States filed its brief with the Supreme Court last week changing positions, it did so as a “friend of the court.” The June 16th brief is signed by lawyers from the Solicitor General’s office but not by any NLRB lawyers – although both offices were signatories to the original petition seeking review.

Under the Court’s briefing schedule, briefs from the NLRB and the employee-petitioners are due on August 9, 2017. According to a short statement on the NLRB’s website, the Solicitor General’s Office “authorized the National Labor Relations Board to represent itself” in the Murphy Oil case before the Supreme Court. This sets up a unique situation for oral arguments this fall when a lawyer from the Solicitor General’s office may argue against a lawyer for another federal agency, the NLRB.

What It Means For Employers

The change in position by the Solicitor General’s Office could lend additional weight to the employers’ arguments in favor of upholding class-action waivers in arbitration agreements. It is a business-friendly position that reins in the extensive reach of the NLRB in recent years. If the Supreme Court rules in favor of employers and against the NLRB, businesses will be able to enforce arbitration agreements containing class action waivers nationwide. We will keep you posted as this case proceeds to a ruling, which could be published about this time next year. Stay tuned!

June 20, 2017

No-Recording Policies: May Employers Ban All Worker Recordings?

By Steve Gutierrez

With a smartphone in almost every pocket, workers have high definition video and audio recording capabilities at their fingertips. It may be easier than ever before for employees to record workplace operations, meetings, disciplinary discussions, picketing, and other conditions and happenings in the workplace.

Some employers see potential worker recordings as detrimental to open and honest workplace dialogue and as well as potentially undermining a company’s protection of its proprietary or confidential information. These concerns may lead employers to adopt a policy to limit or prohibit employees from making recordings at work. After all, it seems inherently reasonable to require that employees get prior management approval before recording anything at work, or to limit what employees may do with video or audio recordings after they are made. So what’s the problem? Broad recording bans may infringe on employees’ rights under the National Labor Relations Act (NLRA).

How Policies May Violate The NLRA

Section 7 of the NLRA guarantees employees the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” This means that employees, whether unionized or not, have the right to take actions to help protect, enhance, or improve the terms and conditions of employment for themselves and their co-workers. Employers who interfere with or restrain employees’ Section 7 rights may be found to have committed an unfair labor practice (ULP) under the NLRA.

So how does a no-recording policy interfere with such rights? Even when a policy or rule does not expressly restrict protected Section 7 activities, mere maintenance of a policy can constitute a ULP in three scenarios: (1) if employees would reasonably construe the language in the policy to prohibit protected activity; (2) if the policy was implemented in response to union activity; or (3) if the policy has been applied to restrict the exercise of protected rights.

Overly Broad Restrictions May “Chill” Section 7 Rights 

Typically, it is the first scenario that gets employers in trouble. You see, the National Labor Relations Board (Board) has held that in certain circumstances, employee recordings in the workplace can itself be a protected Section 7 activity. Generally, the Board finds that employee photographing, videotaping, and recording is protected by Section 7 when employees are acting in concert for their mutual aid and protection and there is no overriding employer interest. For example, employees recording images of employee picketing, or documenting discussions about unsafe working conditions, inconsistent application of work rules, or other terms of employment could be concerted activities protected under the NLRA.

When employers implement an overly broad policy that prohibits employees from making any workplace recordings, or permits recordings only with advance management approval, the Board takes the position that employees would reasonably construe that language as prohibiting protected Section 7 activities. As such, broad no-recording policies are seen as “chilling” employee rights, and therefore, a violation of the NLRA.

Second Circuit Recently Upheld ULP On Broad No-Recording Policy

In December of 2015, the Board ruled that Whole Foods had violated the NLRA by maintaining an overbroad no-recording policy. The company’s policy prohibited all recording without management approval. Whole Foods stated that its purpose for the policy was to promote employee communication in the workplace. The Board saw it differently, ruling that the policy’s overly broad language could “chill” an employee’s exercise of Section 7 rights because it was not limited to controlling those activities in which employees are not acting in concert.

Whole Foods appealed the Board’s decision to the Second Circuit Court of Appeals which recently issued its summary order affirming the Board’s 2015 decision. The appellate court wrote that the Board’s determination was supported by substantial evidence and was decided in accordance with law.

In a footnote, however, the Court noted that not every no-recording policy will necessarily infringe on employees’ Section 7 rights. But a lawful policy would have to be drafted narrowly so that it protects the company’s interests without interfering with employees’ protected activities.

Practical Policy Pointers

Employers generally have the right to control what goes on in their workplaces, so long as their policies do not violate specific employee rights. Legitimate business concerns, such as protecting confidential and proprietary information and fostering open and honest communications in the workplace, may justify a policy that limits employees from recording what goes on at work. In order to craft an enforceable policy that would likely avoid NLRB scrutiny, consider implementing the following practical tips:

  • Tailor the policy narrowly – identify those areas, activities, and/or times when employees are prohibited from recording, leaving non-problematic areas, activities, and times open to recording. An outright ban will likely be struck down.
  • Identify the legitimate reasons for the policy – by stating the strong business reasons for not allowing recording at certain times or places, employers help dispel the argument that the policy infringes on employee rights.
  • Be consistent – if your business permits visitors to your plant to take video or audio recordings of your operation, it will be difficult to argue a legitimate business reason for denying employees to make recordings in the same areas. Similarly, if your business has surveillance cameras throughout the workplace, it may be difficult to argue that employee recordings will harm your business interests. Also, be consistent in policy enforcement because allowing some employees to record while denying that ability to other similarly situated employees will lead to trouble.
  • Include a disclaimer – the policy should state that it is not intended to infringe on any employee’s right to engage in protected concerted activity.

Like most employment policies, a no-recording policy should reflect your specific business interests and industry and be narrowly tailored to achieve your end goal. If in doubt about whether you need or should revise a no-recording policy, please consult with your employment attorney.

June 7, 2017

DOL Withdraws Obama-Era Interpretations On Independent Contractors and Joint Employment

By Brad Cave

On June 7, 2017, the U.S. Department of Labor (DOL) announced that it was withdrawing two informal guidances, namely a 2015 administrator interpretation on independent contractors and a 2016 administrator interpretation on joint employment, effective immediately. The DOL’s short announcement states that the removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” Here’s an attempt to read between the lines and determine the DOL’s position on these two issues.

Withdrawal of Independent Contractor Interpretation

When we wrote about the July 15, 2015 independent contractor interpretation here, we noted that then-Wage and Hour Division Administrator David Weil stressed that most workers meet the criteria to be deemed employees under the FLSA, and therefore, should not be treated as independent contractors. Although noting that multiple factors are used to determine independent contractor status, former administrator Weil stated that the DOL would focus primarily on whether the worker runs his or her own independent business or if instead, the worker is economically dependent on the employer.

Withdrawal of the 2015 interpretation guidance does not change the fact that to “employ” is broadly defined in the FLSA as “to suffer or permit to work” and consequently, most individuals hired to perform work fall within that definition as an employee. In addition, the long-standing  multi-factor “economic realities” test used by courts to determine whether a worker is an employee or an independent contractor will continue to apply.

That said, the withdrawal of the 2015 administrator interpretation may be a signal that the DOL will no longer focus on misclassifications of independent contractors with the same fervor as it previously did. A more business-friendly DOL may choose to rely on certain factors, such as an independent contractor agreement setting forth the business relationship and the comparative degree of control over the work exerted by the two parties, over those factors that were highlighted in former administrator Weil’s interpretation, such as whether the worker runs his or her own independent business. The distinction between employees and independent contractors remains, but query whether this DOL, under the direction of new Secretary of Labor Alexander Acosta, will change the balance in determining independent contractor status.

Joint Employment Interpretation Withdrawn 

When the DOL issued its administrator interpretation on joint employer status in February 2016, we wrote here that the DOL made it clear that the agency planned to examine dual employer relationships very closely, with an apparent intent to find joint employer status in more circumstances under both the FLSA and the MSPA. By withdrawing that interpretation, the DOL may be suggesting a contraction of its efforts to find joint employer status. If that is the case, employers who utilize workers employed by a staffing agency or other workers provided by a third-party may face less scrutiny (and potentially, less liability) for wage and hour violations as a potential joint employer. In addition, companies that use the same workers across different subsidiaries or among other legally distinct entities may see a relaxation of the DOL’s emphasis on joint employer status.

The Tea Leaves Say . . .

Employers should stay vigilant about ensuring that workers they treat as independent contractors meet the multi-factor tests for independent contractor status. Similarly, organizations that could be subject to the joint employer analysis should examine their status under the applicable tests and are urged to review their third-party staffing arrangements to ensure compliance with wage and hour (and other DOL-enforced) laws. But, with the withdrawal of some of the more proactive enforcement approaches of the past administration, the DOL may be signaling its more business-friendly stance. Perhaps the National Labor Relations Board (NLRB) will be next to announce a less aggressive view towards finding joint employer status and a retraction of other arguably expansive positions taken in past years. We’ll keep you informed as new developments arise.

May 3, 2017

Is Comp Time Coming To The Private Sector?

By Mark Wiletsky

Employees in the private sector may have the option of earning compensatory time off in lieu of overtime pay for hours worked in excess of forty hours per week. The U.S. House of Representatives recently passed the Working Families Flexibility Act of 2017, H.B. 1180, which would amend the Fair Labor Standards Act (FLSA) to permit employees in the private sector to receive compensatory time off at a rate of not less than one and one-half hours for each hour of overtime worked. The bill now heads to the Senate for consideration.

Eligibility For Comp Time

Under the FLSA, compensatory time in lieu of overtime pay has long been permitted for public sector government employees. But non-government, private sector employees have not had the option of accruing comp time as the FLSA requires that private sector employers compensate overtime only through pay. Under this bill, private sector employees who have worked at least 1,000 hours for their employer during a period of continuous employment with the employer in the previous 12-month period may agree to accrue comp time instead of being paid overtime pay.

Employee Agreement For Comp Time

Under the bill, an employer may provide comp time to employees either (a) in accordance with the provisions of an applicable collective bargaining agreement for union employees, or (b) in accordance with an agreement between a non-union employee and the employer. In the case of non-union employees, the agreement between the employee and the employer must be reached before the overtime work is performed and the agreement must be affirmed by a written or otherwise verifiable record maintained by the employer.

The agreement must specify that the employer has offered and the employee has chosen to receive compensatory time in lieu of monetary overtime compensation. It must also specify that it was entered into knowingly and voluntarily by such employee. Requiring comp time in lieu of overtime pay cannot be a condition of employment.

Limits On And Pay-Out Of Accrued Comp Time

The bill specifies that an employee may not accrue more than 160 hours of comp time. No later than January 31 of each calendar year, the employer must pay out any unused comp time accrued but not used during the previous calendar year (or such other 12-month period as the employer specifies to employees). In addition, at the employer’s option, it may pay out an employee’s unused comp time in excess of 80 hours at any time as long as it provides the employee at least 30-days’ advance notice. An employer may also discontinue offering comp time if it provides employees 30-days’ notice of the discontinuation.

The bill provides that an employee may terminate his or her agreement to accrue comp time instead of receiving overtime pay at any time. In addition, an employee may request in writing that all unused, accrued comp time be paid out to him or her at any time. Upon receipt of the pay-out request, an employer has 30 days to pay out the comp time balance. Upon termination of employment, the employer must pay out any unused comp time to the departing employee. The rate of pay during pay-out shall be the regular rate earned by the employee at the time the comp time was accrued, or the regular rate at the time the employee received payment, whichever is higher.

Employee Use of Comp Time

Under the bill, employers must honor employee requests to use accrued comp time within a reasonable period after the request is made. Employers need not honor a request if the use of comp time would unduly disrupt the operations of the employer. Employers are prohibited from threatening, intimidating, or coercing employees either in their choice in whether to select comp time or overtime pay, or in their use of accrued comp time.

Will It Pass?

The bill passed the House 229-197, largely along party lines with all Democrats and six Republicans voting against it. Reports suggest that although Republicans hold 52 seats in the Senate, they will need at least eight Democrats to vote in favor of the bill to avoid a filibuster. Supporters of the bill urge that it offers workers more flexibility and control over their time off. Those who oppose the bill say it could weaken work protections as it offers a promise of future time off at the expense of working overtime hours for free. This is not the first time that federal comp time legislation has been proposed, so we will have to see if the Senate can line up sufficient votes to pass it this time around. Stay tuned.

April 19, 2017

Retroactive Leniency Is Not A Reasonable Accommodation

By Brad Cave

Is an employer required to excuse misconduct that was the result of the employee’s disability? The Tenth Circuit Court of Appeals recently looked at this issue and came to an interesting conclusion.

Janna DeWitt has Type I diabetes and is insulin dependent. Beginning in 1997, DeWitt worked for Southwestern Bell Telephone Company (SW Bell) as a customer service representative in its Wichita, Kansas call center. Recognizing that DeWitt had a disability covered by the Americans with Disabilities Act (ADA), SW Bell permitted her to take breaks as needed to eat or drink in order to raise her blood sugar level. SW Bell also granted DeWitt FMLA leave which she took intermittently for health issues related to her diabetes.

Last Chance Agreement

In 2010, DeWitt made an error by failing to shut down service on a customer’s account after the customer cancelled service. Failure to remove a service plan after cancellation was known as a cramming violation under SW Bell’s Code of Business Conduct and was a terminable offense. DeWitt was suspended following her cramming incident until she could address the issue with her supervisors in what the company called a “Day in Court.” Her Second and Third Line Supervisors decided to place DeWitt on a Last Chance Agreement under which any additional failure to perform satisfactorily could lead to further discipline, up to and including termination.

Terminated For Hanging Up On Customers

Two months after the cramming incident, DeWitt suffered a severe drop in blood sugar at work which she stated caused her to experience disorientation, confusion, and lethargy, making her unable to communicate with anyone. After DeWitt found that she was locked out of her computer, she contacted her First Line Supervisor, Tom Heumann, for assistance. Heumann did not address her locked computer but instead told the Center Support Manager, Beth Kloxin, that  he had been monitoring De Witt’s calls and found that she had hung up on at least two customers. Kloxin responded by saying “I finally got that bitch” and did a little dance.

Later that day, Heumann and Kloxin met with DeWitt for a suspension meeting because of her two customer hang-ups. A union steward also attended the meeting. DeWitt explained that she did not remember taking the dropped calls and that she had been experiencing very low blood sugar levels at the time. Although they reviewed recordings of the dropped calls, DeWitt still did not remember them and asked if they were sure that the calls were hers. Heumann then told DeWitt that she was suspended and that a “Day in Court” would be held at a later date. In response to a request from Kloxin and the union steward, DeWitt provided her blood sugar levels for that afternoon.

About a week later, SW Bell held DeWitt’s “Day in Court.” DeWitt again explained that she did not remember taking the calls due to a severe drop in her blood sugar. Five days later, SW Bell terminated DeWitt for hanging up on two customers in violation of the company’s Code of Business Conduct and her Last Chance Agreement.

ADA and FMLA Claims

DeWitt filed discrimination charges with the Equal Employment Opportunity Commission (EEOC) and after receiving her notice of right to sue, filed a lawsuit against SW Bell in federal court. She alleged that the company failed to accommodate her disability and terminated her because of her disability in violation of the ADA, and retaliated against her for taking FMLA leave. After the district court ruled in favor of SW Bell on all of her claims on summary judgment, DeWitt appealed to the Tenth Circuit Court of Appeals (whose decisions apply to Colorado, Utah, Wyoming, Oklahoma, Kansas, and New Mexico).

Employer Need Not Excuse Or Overlook Misconduct 

DeWitt asserted that SW Bell failed to accommodate her disability by not excusing her dropped calls which she says were caused by her disability. The Court disagreed, stating that the ADA does not require employers to reasonably accommodate an employee’s disability by overlooking past misconduct, even when the misconduct is caused by the disability. Instead, the Court cited the EEOC’s ADA Enforcement Guidance which states that reasonable accommodations are “always prospective.”

The Court found that DeWitt had not requested a reasonable accommodation to address concerns that her diabetes could cause her to drop calls. Using a disability as an “after-the-fact excuse” for workplace misconduct is unreasonable and employers need not ignore or overlook past misconduct. Therefore, because asking for retroactive leniency is not a reasonable ADA accommodation, DeWitt’s accommodation claim failed.

Decision-Maker’s Honest Belief In Termination Reasons

On DeWitt’s ADA termination claim, the Court assumed (without deciding) that DeWitt had established that she was a disabled person under the ADA, and was qualified to perform the essential functions of her job. The Court also accepted that SW Bell had provided a legitimate, non-discriminatory reason for terminating DeWitt, namely that she had hung up on at least two customers while on a Last Chance Agreement. To prevail, DeWitt needed to show that SW Bell’s stated reasons for her termination were pretext for discriminating against her.

DeWitt argued that dropping the calls was not intentional but instead, was a result of her disability – her severely low blood sugar at the time. The Court said that didn’t matter. Instead what mattered was whether the decision-maker, Kimberly Baskett-McEnany, who was DeWitt’s Third Line Supervisor, honestly believed that the hang-ups were intentional and acted on that belief in good faith. Finding no evidence to undercut Baskett-McEnany’s belief, the Court ruled that DeWitt’s ADA discrimination claim failed.

FMLA Retaliation Claim Also Fails

DeWitt also argued that SW Bell terminated her in retaliation for her use of FMLA leave. She offered evidence from a former manager at the call center who stated that employees who used FMLA leave were targeted as employees that should be terminated and that the company would look for other reasons to terminate such employees. DeWitt also pointed to Kloxin’s response to Heumann’s revelation that DeWitt had hung up on customers, saying “I finally got that bitch,” as evidence that SW Bell terminated her for using FMLA leave.

Again, the Court rejected DeWitt’s arguments and her FMLA retaliation claim. The Court stated that the former manager’s comments about the company targeting employees who used FMLA leave was no more than speculation, as that person had no knowledge of and was not involved in the company’s decision to terminate DeWitt. In addition, the Court determined that Kloxin’s subjective beliefs were irrelevant as she was not the person who decided to terminate DeWitt. Finding no evidence to send DeWitt’s claims to a jury, the Court upheld the grant of summary judgment in favor of SW Bell on all claims.

Key Lessons

This case highlights some significant management practices that can help defeat discrimination and retaliation claims. First, hold all employees accountable to your standards of conduct. SW Bell terminated DeWitt for violating its code of conduct, providing the necessary legitimate, non-discriminatory reason for actions. In addition, because DeWitt could not provide evidence that other employees who similarly violated the conduct rules were treated more favorably than she was treated, she was unable to show pretext. Second, if a supervisor has a potentially unlawful animus or bias against an employee, take that person out of the decision-making process. Although Kloxin appeared to express animosity against DeWitt (although it is not clear that her animosity was driven by an unlawful motive), she was not involved in the decision to terminate DeWitt and that distinction drove the Court to reject DeWitt’s claims. Finally, remember that a reasonable accommodation applies prospectively. You need not excuse poor performance or misconduct for which no accommodation was requested. That said, when dealing with an employee with a known disability, weigh all employment decisions very carefully and make sure your actions are well supported by your policies and past practices.

April 6, 2017

Seventh Circuit: Title VII Prohibits Sexual-Orientation Discrimination

By Dustin Berger

Sexual orientation discrimination is discrimination on the basis of sex for the purposes of Title VII. So ruled the majority of federal judges for the Seventh Circuit Court of Appeals on April 4, 2017. This groundbreaking ruling is the first time that a federal appellate court has held that Title VII protects workers against discrimination due to their sexual orientation. Hively v. Ivy Tech Cmty. Coll., No. 15-1720 (7th Cir. April 4, 2017).

Title VII Prohibits Discrimination Because of Sex

Title VII of the Civil Rights Act of 1964 makes it unlawful for employers to discriminate on the basis of a person’s “race, color, religion, sex, or national origin … .”  The question before the Seventh Circuit was whether discrimination on the basis of sexual orientation is a form of discrimination on the basis of “sex,” and, therefore, prohibited by Title VII.

In 2015, the Equal Employment Opportunity Commission (EEOC) began to assert the position that Title VII does indeed prohibit sexual orientation discrimination. But, the EEOC’s position is not binding law. The U.S. Supreme Court has not ruled on this question, but all eleven federal courts of appeal, including the Seventh Circuit, had previously ruled that Title VII does not protect employees against sexual orientation discrimination. The full panel of regular judges on the Seventh Circuit, however, agreed to address this issue anew, with the majority concluding that sex discrimination includes discrimination on the basis of a person’s sexual orientation.

Lesbian Professor Claimed Discrimination Based on Her Sexual Orientation

To put a face to the case before the court, we look to Kimberly Hively, a part-time adjunct professor at Ivy Tech Community College in South Bend, Indiana. Hively is openly gay. She began teaching at Ivy Tech in 2000. Between 2009 and 2014, she applied for at least six full-time positions but was not selected for any of them. In late 2013, Hively filed a charge with the EEOC, alleging that she was being discriminated against on the basis of her sexual orientation in violation of Title VII for being denied a full-time position. Then, in July 2014, Ivy Tech did not renew Hively’s part-time contract.

After receiving her right to sue letter, Hively filed her discrimination lawsuit in federal district court. Ivy Tech sought to dismiss the lawsuit on grounds that Title VII did not protect against sexual orientation discrimination. The district court agreed, and dismissed Hively’s lawsuit. On appeal to a three-judge panel of the Seventh Circuit, the dismissal was upheld, but the panel wrote that it was bound by earlier Seventh Circuit precedent to so rule. That panel, however, criticized the circuit’s precedent as inconsistent and impractical and opined that the “handwriting was on the wall” to recognize that sexual orientation discrimination was a subset of sex discrimination under Title VII.

The full panel of Seventh Circuit judges then agreed to hear Hively’s case en banc. They concluded that Title VII’s prohibition on sex discrimination also prohibited sexual orientation discrimination for two reasons. First, discrimination on the basis of sexual orientation is impermissible “sex stereotyping.” Second, discrimination on the basis of sexual orientation is a form of associational discrimination based on sex.

Ultimate Case of Sex Stereotyping

In its discussion of “sex stereotyping,” the Court relied on the Supreme Court’s 1989 ruling in Price Waterhouse v. Hopkins, 490 U.S. 228, which recognized that discrimination based on an employee’s failure to act in a manner that was stereotypical of his or her sex was prohibited as sex discrimination under Title VII. In that case, Hopkins had alleged that her employer was discriminating only against women who behaved in what her employer viewed as too “masculine” by not wearing makeup, jewelry, and traditional female clothing. The Seventh Circuit stated that Hively “represents the ultimate case of failure to conform to the female stereotype (at least as understood in a place such as modern America, which views heterosexuality as the norm and other forms of sexuality as exceptional): she is not heterosexual.”  Finding that Hively was not conforming to a stereotype based on the sex of her partner, the Court ruled that employment discrimination based on Hively’s sexual orientation is actionable under Title VII.

Associational Discrimination

Hively also argued that discrimination based on sexual orientation is sex discrimination under the associational theory. After Supreme Court cases, including the Loving case in which the Court held that laws restricting the freedom to marry based on race were unconstitutional, it is accepted law that a person who is discriminated against because of the protected characteristic of a person with whom he or she associates is being disadvantaged because of her own traits. In Hively’s case, if the sex of her partner (female rather than male) led to her being treated unfavorably in the workplace, then that distinction is “because of sex.” The Seventh Circuit stated: “No matter which category is involved, the essence of the claim is that the plaintiff would not be suffering the adverse action had his or her sex, race, color, national origin, or religion been different.”

What This Ruling Means For Employers

For employers located in Indiana, Illinois, and Wisconsin, the Seventh Circuit’s decision is binding precedent. Employers with fifteen or more employees (and hence covered by Title VII) in those states should update their policies and practices immediately to ensure that they do not permit discrimination, harassment, or retaliation on the basis of sexual orientation.

For employers located outside of those three states, existing court rulings denying application of Title VII to sexual orientation employment discrimination claims still apply. That said, the tide is turning. Indeed, as Judge Posner explained in his concurrence, as the courts have continued to grapple with the scope of Title VII’s prohibition on sex discrimination, they have failed “to maintain a plausible, defensible line between sex discrimination and sexual-orientation discrimination” and begun to realize that “homosexuality is nothing worse than failing to fulfill stereotypical gender roles.” Other courts are beginning to reach the same conclusion. The Chief Judge of the Second Circuit Court of Appeals, in a recent concurrence, noted significant merit to the arguments that sexual-orientation discrimination was a form of impermissible sex discrimination and invited his court to reconsider the issue: “I respectfully think that in the context of an appropriate case our Court should consider reexamining the holding that sexual orientation discrimination claims are not cognizable under Title VII.” Christiansen v. Omnicom Group, No. 16-748 (7th Cir. Mar. 27, 2017).

Beyond the judicial realm, many state and local anti-discrimination laws explicitly cover sexual orientation discrimination and the EEOC continutes to take the position that Title VII prohibits sexual-orientation discrimination. Should the U.S. Supreme Court take up the issue or Congress pass legislation amending Title VII, we may get a uniform nationwide interpretation of “sex discrimination” under Title VII. Until that occurs, employers are on notice that they cannot safely rely on existing case law to conclude that sexual-orientation discrimination is permissible under Title VII.

April 3, 2017

Supreme Court Confirms That EEOC Subpoena Enforcement Decisions Must Be Reviewed Under Abuse of Discretion Standard

By Mark Wiletsky

When reviewing a district court’s decision on whether to enforce or quash a subpoena issued by the Equal Employment Opportunity Commission (EEOC), appellate courts should determine if the district court abused its discretion, rather than conducting a new review of the subpoena enforcement, according to the U.S. Supreme Court. All eight justices agreed that the proper standard of review of an EEOC subpoena enforcement decision is abuse of discretion, not de novo review. McLane Co., Inc. v. EEOC, 581 U.S. ___ (2017).

EEOC Subpoena Sought “Pedigree Information”

In the case before the Court, the EEOC was investigating a gender discrimination charge filed by a female distribution center employee named Damiana Ochoa. Ochoa had worked for eight years as a cigarette selector which required her to lift, pack, and move large bins of products. After Ochoa took three months of maternity leave, her employer required that she undergo a physical evaluation that tested her range of motion, resistance, and speed. The company required such tests of new employees as well as all those returning from medical leave. Despite attempting to pass the physical evaluation three times, Ochoa failed. The company fired her.

Ochoa filed a discrimination charge alleging, among other things, that she had been terminated on the basis of her gender. As part of its investigation, the EEOC asked the company to provide the agency with information about the physical evaluation test and individuals who had been asked to take the test. The company provided a list of anonymous employees who had been evaluated, providing each individual’s gender, role at the company, reason for the test, and evaluation score. The company refused, however, to provide what it called “pedigree information,” including the individual’s name, social security number, last known address, and telephone number.

When the EEOC learned that the company used its physical evaluation nationwide, the EEOC expanded the scope of its investigation, asking for information not only on gender but on potential age discrimination, and not only for the Arizona division where Ochoa worked but also for all of the company’s grocery divisions nationwide. The EEOC issued subpoenas requesting pedigree information related to its expanded investigation. The company refused to comply, so the EEOC sought to enforce its subpoenas in the Arizona district court.

District Court Quashed EEOC’s Subpoenas, But Ninth Circuit Reversed

The district court determined that the pedigree information was not relevant to the charges, as “an individual’s name, or even an interview he or she could provide if contacted, simply could not shed light on whether the [evaluation] represents a tool of . . . discrimination.” The district court refused to enforce the EEOC’s subpoenas.

The EEOC appealed to the Ninth Circuit Court of Appeals, where the applicable precedent indicated that the appellate court must review the district court’s decision to quash the subpoenas de novo (i.e., a completely new review). Concluding that the district court was wrong to quash the subpoenas, the Ninth Circuit reversed, finding that the pedigree information was relevant to the EEOC’s investigation.

The U.S. Supreme Court agreed to resolve a dispute among the Circuit Courts of Appeal on whether the proper standard of review is de novo, as was applied by the Ninth Circuit, or an abuse of discretion review, which other Circuits applied.

Supreme Court Decides Deferential Appellate Review Applies

The Supreme Court decided that a district court’s decision whether to enforce an EEOC subpoena should be subject to a deferential review, namely whether the district court had abused its discretion, rather than a de novo review. Recognizing that the Title VII provision that grants the EEOC subpoena power is the same as the authority granted to the National Labor Relations Board (NLRB) to issue subpoenas, the Court looked to the standard of review used when considering NLRB subpoena enforcement decisions. The Court found that every circuit that had considered that question had ruled that a district court’s decision whether to enforce an NLRB subpoena should be reviewed for abuse of discretion. In addition, almost every circuit other than the Ninth had applied the same deferential review to a district court’s decision whether to enforce an EEOC subpoena. Consequently, this “long history of appellate practice” carried weight with the justices for adopting an abuse of discretion standard in this case.

In addition, the Court focused on the case-specific nature of each EEOC subpoena enforcement decision. A district court must consider whether the evidence sought by the EEOC is relevant to the specific charge at issue and whether the subpoena is unduly burdensome in light of the circumstances. Believing that the district court is better suited than the courts of appeals to address these kinds of “fact-intensive, close calls,” the Court stated that the abuse of discretion standard of review was appropriate. Read more >>

March 21, 2017

Supreme Court Rules That NLRB Acting GC Became Ineligible To Serve After Nomination To Permanent Role

By Steve Gutierrez

Once a President nominates a candidate for a Senate-confirmed office, that person may not serve in an acting capacity for that office while awaiting Senate confirmation, pursuant to a ruling today by the U.S. Supreme Court. In a 6-to-2 decision, the Court ruled that Lafe Solomon, who had been appointed by President Obama to serve as acting general counsel for the National Labor Relations Board (NLRB) during a vacancy, could no longer serve in that acting role after the President later nominated him to fill the position outright.

NLRB General Counsel Appointment

The position of general counsel of the NLRB must be filled through an appointment by the President with the advice and consent of the Senate – a so-called “PAS” office. When a vacancy in a PAS office arises, the President is permitted to direct certain officials to serve in the vacant position temporarily in an acting capacity. Under the Federal Vacancies Reform Act of 1998 (FVRA), only three classes of government officials may become acting officers. The FVRA,  however, prohibits certain persons from serving in an acting capacity once the President puts that person forward as the nominee to fill the position permanently.

In Lafe Solomon’s case, he was directed by President Obama in June 2010 to serve temporarily as the NLRB’s acting general counsel when the former general counsel resigned. Solomon had worked for ten years as the Director of the NLRB’s Office of Representation Appeals and was within the classes of officials who could be directed to serve in an acting capacity under the FVRA. In January 2011, President Obama nominated Solomon to serve as the NLRB’s general counsel on a permanent basis. Solomon continued to serve as acting general counsel for an additional two-plus years as the Senate failed to act on his nomination. In mid-2013, the President withdrew Solomon’s nomination, putting forward another candidate whom the Senate confirmed in late October 2013.

Company Facing ULP Argued Solomon Couldn’t Be Acting GC After Nomination

In January 2013, while Solomon was acting general counsel, SW General, Inc., a company that provides ambulance services, received a complaint alleging it committed an unfair labor practice (ULP) for failing to pay certain bonuses to employees. After an administrative law judge and the NLRB concluded that SW General had committed the ULP, the company argued in court that the complaint was invalid because Solomon could not legally perform the acting general counsel duties after the President had nominated him for the permanent position. The company pointed to wording in the FVRA restricting the ability of acting officers to serve after being nominated to hold the position permanently. Whether the FVRA prohibits all classes of acting officials or only first assistants who automatically assume acting duties from continuing to serve after nomination was the issue before the Supreme Court.

Once Nominated, Official Is No Longer Eligible To Serve In Acting Capacity

The Court ruled that once a person has been nominated for a vacant PAS office, he or she may not perform the duties of that office in an acting capacity. The Court rejected the NLRB’s position that the FVRA restricted only first assistants who were in an acting capacity, rather than restricting all classes of officials directed to serve in an acting capacity who are later nominated for the permanent position. In applying its ruling to Lafe Solomon, the Court ruled that Solomon’s continued service as the NLRB acting general counsel after he had been nominated to fill that position permanently violated the FVRA. NLRB v. SW General, Inc., ___ 580 U.S. ___ (2017).

Solomon’s Actions “Voidable”

So what does this mean for all of Solomon’s actions taken during the over two-year period in which Solomon improperly served as the acting general counsel after his nomination for the permanent position? For example, what happens to the ULP complaints filed by, or at Solomon’s direction, during that period?

The Court noted in a footnote that the FVRA exempts the general counsel of the NLRB from the general rule that actions taken in violation of the FVRA are void ab initio (i.e. from the beginning). The Court of Appeals had ruled that Solomon’s actions during that period were “voidable.” Because the NLRB did not appeal that part of the lower appellate court’s ruling, it was not before the Supreme Court to decide. Consequently, the Court of Appeals’ decision that Solomon’s actions are voidable stands. Accordingly, each action taken by Solomon during the time that he improperly served as acting general counsel would need to be challenged on an individual basis.