Sherman & Howard

By Rose McCaffrey

An employer avoided $3.5M in punitive damages by proving it took sufficient steps to stop and prevent harassment. Otto May Jr. v. Chrysler Group, LLC, Nos. 11-3000 & 11-3109 (7th Cir. May 14, 2013). In this case, the plaintiff was subjected to dozens of threats and derogatory graffiti messages, from 2002 until 2005, based on his race, religion, and national origin. He complained to his employer about the co-worker harassment. He specifically asked the employer to install cameras near his work station; the employer did not. He provided a list of nineteen employees that he suspected of involvement in the harassment, but the employer never formally interviewed the employees. Still, the employer did take multiple steps to ameliorate the harassment, including hiring a forensic document investigator to help identify the source of the harassment, and the harassing conduct did eventually cease. The court reasoned that, “while far from perfect, [the employer’s] actions did have a positive effect on the harassment” and held there was no evidence in the record to support the jury’s finding that the employer acted with the requisite “malice” or “reckless indifference” to uphold an award for punitive damages.

This employer’s “far from perfect” response to a harassment claim may have been enough to avoid punitive damages, but it takes something close to perfection to avoid a verdict in the first place.

By Mike Grubbs

Another federal circuit court has struck down one of President Obama’s recess appointments to the National Labor Relations Board. In N.L.R.B. v. New Vista Nursing and Rehabilitation, the Third Circuit Court of Appeals held that the recess appointment of Craig Becker in March 2010 was invalid because the Senate was not actually in a recess when the President appointed Becker to the Board. Because the Senate was not in recess, the President lacked the authority to unilaterally appoint Becker, according to the court of appeals. And, because Mr. Becker’s appointment was invalid, the NLRB was operating without a quorum and lacked authority to issue orders. The Third Circuit’s decision corresponds with the D.C. Circuit’s well-publicized Noel Canning decision, which held that the President lacked authority to make two recess appointments to the Board because the Senate was not truly in recess at the time of the appointments.

By Ted Olsen

An employer lawfully required an employee to undergo a psychiatric/psychological fitness-for-duty examination because of his obstreperous conduct with management and Human Resources personnel and because an independent psychologist recommended such an examination due to safety concerns. The facts satisfied the Americans with Disabilities Act’s dual requirements that medical testing of an employee be “job-related” and “consistent with business necessity.” Owusu-Ansah v. Coca-Cola Co., No. 11-13663 (11th Cir. May 8, 2013).

The employee had become agitated while complaining to his supervisor of alleged on-the-job discrimination and harassment, banged his hand on the table, and shouted that someone was “going to pay for this.” Later, the employee refused to discuss his alleged discrimination concerns with his second-level manager. The employer sent the employee to an independent psychologist specializing in crisis management and threat assessment, but the employee would not cooperate with the psychologist. The psychologist recommended further testing and the employer sent the employee to a psychiatrist for an MMPI, but the employee resisted taking the test. Proclaiming that “statutory interpretation requires judges to use a little common sense,” the Eleventh Circuit Court of Appeals ruled that the employer had reasonable, objective concerns about the employee’s mental stability, which affected his job performance and could have threatened the safety of other employees, and the concerns justified the medical examination.

The employee was right when he threatened that someone would pay for this—he did.

By Rose McCaffrey

An employer was unable to protect the confidentiality of its customer list, because it failed to present any evidence that the list was worthy of trade secret protection. Calisi v. United Financial Services, Inc., No. CV 2010-000795 (Ariz. App. April 11, 2013). A customer list may qualify as a trade secret when the list contains valuable customer information that the company reasonably attempts to keep secret, “such as [the client’s] particular needs, preferences, or characteristics” or if the company expended substantial effort and resources to acquire its customer information so that a competitor could not easily duplicate the customer information.

In this case, the employee worked as a financial advisor. After leaving his first employer, the employee went to work for a different employer, but as a CPA. The two employers had maintained a mutual referral arrangement, and the new employer sent out a mass email to its clients, and some clients of the prior employer. The original employer sued, arguing that the mass mailing unlawfully relied on its own confidential client list. The court rejected the original employer’s suit for theft of a trade secret because the employer failed to identify unique information acquired in the course of its business or to show that substantial effort and resources were invested to capture information unknown to its competitors.

The case is a strong cautionary reminder that information does not rise to the level of a trade secret or confidential business information just because an employer says so. Wise employers take aggressive, and well-documented steps to imbue their business information with trade secret or confidential status. It is the documentation of those steps, and the documentation of the value of the information, that ultimately wins the day in many of these cases.

By John Doran

The NLRB exceeded its authority when it adopted its August 2011 rule requiring employers to post a new Notice informing employees of their rights under the National Labor Relations Act. In August 2011, the NLRB finalized a rule that required all employers to post a Notice to all employees specifically describing employee rights under the NLRA. Not surprisingly, given the composition of the NLRB at the time, the Notice did not include the employee rights to decertify unions, to refuse to pay dues in right-to-work states, or to object to dues that exceed the amount necessary for purely representational purposes. The 2011 Notice rule established penalties for employers who failed to post the one-sided notice.

The D.C. Circuit Court has held that the Notice rule violated Section 8(c) of the NLRA because it punished employers that refused to post the Board’s ideological view of NLRA rights, while Section 8(c) of the NLRA makes clear that employers cannot be punished for posting information about the NLRA unless the information contains threats of reprisal or force, or promises some benefit. National Association of Manufacturers v. NLRB.  This temporarily resolves the poster issue. We say “temporarily” because the Fourth Circuit Court of Appeals will soon be ruling on the very same question. While we await the Fourth Circuit’s ruling on the issue, we remind employers that the Notice rule is currently on hold due to an injunction.

This poster war seems much ado about nothing, particularly given the time employees actually spend perusing employer bulletin boards already overburdened with state and federal employment notices. But the case goes to the heart of the NLRB’s rulemaking authority at a time when many argue that the NLRB has, simply put, gone wild.

By Sarah Peace

An employer recently lost a trial on an age discrimination claim arising from a reduction in Force (“RIF”). The employer lost because the manager involved unilaterally failed to follow the company’s policies: First, the employer’s policy gave managers discretion to group and force rank employees, but here the manager attempted to fix a budget shortfall in his division by eliminating a job that was not charged to his budget in the first place. Second, the employer’s policy was to search “every corner of the earth” and “exhaust[] all opportunities to place the individual” before releasing an employee in a RIF, but the manager told the selected employee not to apply for jobs in his former division and he was not selected for multiple alternative positions he applied for, despite evidence of his qualifications. Miller v. Raytheon Co., No. 11-10586 and 11-10988 (5th Cir. May 2, 2013).

It is tough these days to conduct a useful adverse impact analysis, but the business reason for a job elimination has to fit the business facts.

By Mike Grubbs

The NLRB took an unjustified “interpretive leap” when it found that a hospital president’s statement about union negotiations conveyed a threat and violated federal labor law. Flagstaff Med. Ctr. Inc. v. NLRB, D.C. Cir., No. 11-1326 (April 26, 2013).

In this case, the hospital president told employees that if they voted to unionize they would no longer be negotiating with him directly. The NLRB held that the statement constituted a threat that the medical center would stop negotiating entirely. However, the D.C. Circuit Court of Appeals reversed, stating that it was “baffled by the Board’s interpretation” of the president’s statement. In context, the statement was not about the hospital’s “willingness to negotiate” with the union, but was instead “a statement about [the president’s] own attendance at whatever meetings occur.”

Although employers may be hard pressed to find success at the NLRB level, employers may find more balance taking the case to an appellate court.

By Rose McCaffrey

Just as the employer had to make a decision about an employee’s request for an accommodation of a religious practice, the employee failed to complete his IRS Form I-9. In a recent case, the employer hired a sales representative, but the new employee wanted to keep his second job as a church pastor. The employer generally prohibited outside paid employment that required more than five hours per week, but the employee refused to resign his pastorate. Just then, the employer discovered the employee (a native Italian) had not shown employment eligibility as required by the Immigration Reform and Control Act of 1986 (“IRCA”). The employer discharged him, and the employee sued claiming the failure to complete the I-9 was pretext for religious discrimination. The court disagreed: without evidence that the employer treated similarly situated employees more favorably either under the outside employment policy or under the IRCA requirements, the coincidental timing between the discussion of religion and the discharge was not enough for the plaintiff to show discrimination. Martino v. Western & Southern Financial Group, No. 12-1855 (7th Cir. April 25, 2013).

Disciplinary decisions often coincide with discussions of protected status, but employers’ hands are not tied. Here, different people were responsible for the different issues, and the two decision trees did not intersect. Of course, the fact the employer applied its policies and the IRCA consistently was fundamental.

By Sarah Peace

A family member might not be a Title VII “employee” of a closely held family business. The Third Circuit U.S. Court of Appeals recently dismissed a Title VII claim against a family-owned business for religious discrimination. Mariotti v. Mariotti Building Products, Inc., No. 11-3148 (3d Cir. April 29, 2013). The plaintiff served as vice-president and secretary of the company. His siblings discharged him, allegedly “for cause,” after they were upset by his comments about his own religious beliefs at their father’s funeral. Applying the Supreme Court’s test from Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440 (2003), the Third Circuit determined that the plaintiff was not an “employee” of the business, because he was a shareholder, director, and a corporate officer, and he had the right to control the enterprise and to participate in fundamental decisions of the business.

Even the fact that the plaintiff had a written employment agreement did not make him an employee for purposes of Title VII. Instead, the plaintiff’s participation in the governance of the business made him either more or less than an “employee” – he was an owner.

By Brooke Colaizzi

Title VII does not prohibit all favoritism in the workplace. Recently, a sister discovered that her complaints to the family business about her brother’s affair with a company employee were not protected by Title VII.

The sister was the company’s human resources manager. Her two brothers were vice presidents. When one brother began an affair with an employee, the sister complained that the workplace became “permeated with sexual favoritism” toward the employee. The sister sued the company and her brothers for hostile work environment and retaliation. The Second Circuit Court of Appeals affirmed dismissal of both claims: the sister did not have a reasonable, good-faith belief that this kind of favoritism was discrimination prohibited by Title VII. Kelly v. Howard I. Shapiro & Assoc. Consulting Engineers, P.C., et al., No. 12-3489-cv (2d Cir. April 26, 2013).

Not all unequal treatment in the workplace is illegal, and not all complaints about unequal treatment are legally protected. This family feud is a good example.