October 2012 - Page 2 of 2

U.S. Supreme Court to Define Who is a Supervisor Under Title VII

In a development that could have far reaching implications for employers, the U.S. Supreme Court has agreed to hear a case, Vance v. Ball State University, in which the central issue is the definition of “supervisor” for purposes of determining an employer’s liability for harassment under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”). Under Title VII, if the alleged harasser is a supervisor, liability is generally imputed to the employer (unless the employer can show they it had an effective anti-harassment policy that the plaintiff unreasonably failed to utilize). On the other hand, if a hostile work environment is created by co-workers, not supervisors, the employer is liable only if the plaintiff proves that the employer failed to take reasonable measures to stop the harassment, a considerably more difficult standard for plaintiffs.

Although determining whether an employee is a “supervisor” is important in many cases, neither Title VII nor Supreme Court case law specifically defines the term. However, various circuit courts have crafted their own definitions of “supervisor” and two primary definitions have emerged. The First, Seventh and Eighth Circuits define a “supervisor” as an employee who possesses the power to make “consequential employment decisions” such as decisions about hiring and firing, promotions and demotions, and disciplinary actions. In contrast, the Second, Fourth, and Ninth Circuits (as well as the Equal Employment Opportunity Commission) have adopted a broader definition, holding that an individual qualifies as an employee’s supervisor if the individual: (1) has authority to undertake or recommend tangible employment decisions affecting the employee; or (2) has authority to direct the employee’s daily work activities. Under this broader definition, far more employees are “supervisors” and, as a result, may potentially subject their employers to vicarious liability.

In Vance, the plaintiff worked in Ball State University’s catering department. She alleged that another employee, Davis, subjected her to racially discriminatory remarks. According to the plaintiff, Davis directed her work and was, therefore, a “supervisor.” The district court granted summary judgment to Ball State, holding that Davis was not a supervisor because she did not have the power to hire, fire, or discipline Vance. The Seventh Circuit affirmed.

Whether the Supreme Court, in deciding Vance and resolving the split among the circuit courts, adopts a narrow or expansive definition of “supervisor” will have a significant effect on employer exposure in harassment suits. If the Supreme Court adopts a broader definition, the pool of employees who can potentially subject their employers to vicarious liability will be significantly greater, likely resulting in more suits against employers. Moreover, it will be more difficult for employers to prevail at the summary judgment stage of litigation, because a more fact-based inquiry will be needed to determine whether someone is a supervisor. While it is relatively straightforward to show whether an employee is responsible for hiring, firing, promotions and the like, the broader standard requires a more detailed examination of the employee’s role.

Oral argument is scheduled for November and a decision is expected early next year.

Would Your Wage and Hour Practices Withstand Scrutiny?

These are real headlines from the last four days:

Holiday Inn at LA Airport Hit with Wage Class Action
Bath & Body Works Will Pay $1.3M to End Managers’ Wage Suit
Texas Sales Managers Hit Gold’s Gym with Overtime Suit
FedEx to Pay $10M to Settle OT, Meal Break Suit
Kraft Paying $1.75M to Settle Sales Workers’ OT Suits
ZipRealty Pays $5M to Settle California Agents’ Wage Claims

Similar headlines from the last two weeks would fill this screen. And these headlines do not reflect a new trend – rather, they are just examples of the many similar headlines featured almost daily in Labor and Employment publications. In fact, a record number of wage and hour lawsuits have been filed in the last 18 months. And there’s no sign that they will be dwindling any time soon.

Why are these suits here to stay? For one, with the availability of attorneys’ fees and liquidated damages, they’re a boon for plaintiffs and their lawyers. For another, given economy-driven layoffs, potential plaintiffs may end up in lawyers’ offices more often, looking for ways to strike back. And don’t think you’re protected just because the former employee signed a severance agreement. Employees cannot release wage and hour claims, even if your agreement says otherwise. Perhaps most compellingly, the Fair Labor Standards Act is not the easiest law to comply with. Ever try to compute the regular rate when non-discretionary bonuses are paid every week and the amount varies? Do you really know what “independent discretion and judgment” is? Do you know if you need to count the time employees spend at home checking their email as “time worked”?

What are the most popular practices targeted by plaintiffs?

Failure to pay overtime – either because the employer doesn’t like paying overtime or because employees are misclassified as exempt.
Failure to pay overtime at the proper rate.
Paying workers less than the minimum wage, especially tipped workers.
Failure to provide uninterrupted meal breaks of the appropriate length.
Retaliation against workers who complain.

What should you do? Short of making everyone non-exempt and prohibiting overtime, ask yourself how confident you are that your classifications are correct. If you’re not confident, call your lawyer and schedule an audit. Review a sampling of time and pay records to ensure that overtime was properly calculated and paid. Not sure? Call your lawyer. Don’t have time records? Groan.

Finally, don’t think you’re safe because your company is not big enough to be on anyone’s radar screen. Ever heard of 888 Consulting Group? Savvy Car Wash? Geosite Inc.? Quicksilver Express Courier Inc.? ZipRealty? Me either. But all of these companies have been hit with wage and hour suits. You may not be able to avoid being sued, but an FLSA audit before that happens could help you minimize the damages.

Seventh Circuit Joins Ranks of Courts Holding that Internal Grievances about Employer Fiduciary Duty Breaches is Actionable Under ERISA Section 510

In Victor George v. Junior Achievement of Central Indiana Inc., decided September 24, 2012, the Seventh Circuit joined the Fifth and Ninth Circuits in holding that Section 510 of ERISA applies to unsolicited, informal grievances to employers. The courts of appeals have disagreed about the scope of §510, and the Second, Third and Fourth Circuits have permitted Section 510 retaliation claims only where the person’s activities were made a part of formal proceedings or in response to an inquiry from employers (i.e., §510’s language does not protect employees who make “unsolicited complaints that are not made in the context of an inquiry or a formal proceeding.”). Concluding that the language of Section 510 of ERISA was “ambiguous” and “a mess of unpunctuated conjunctions and prepositions,” the Seventh Circuit concluded that, “an employee’s grievance is within §510’s scope whether or not the employer solicited information.” The court did, however, reiterate the high threshold to prevail on a Section 510 claim: “It does ‘not mean that §510 covers trivial bellyaches—the statute requires the retaliation to be ‘because’ of a protected activity…. What’s more, the grievance must be a plausible one, though not necessarily one on which the employee is correct.”

Section 510 of ERISA prohibits retaliation “against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this [Act].” Remedies for violation of that section are limited to “injunctive and other ―appropriate equitable relief,” which would not include back pay typically, but could include an injunction and reinstatement. Attorney’s fees are also possible. In the case, Victor George was a former vice president of Junior Achievement who sued his former employer alleging he was terminated after complaining that money withheld from his pay was not being deposited into his retirement and health savings accounts. He complained to management, outside accountants, the board, the Department of Labor (although he did not file a complaint). The District Court dismissed the case on summary judgment, holding George’s informal complaints to his employer did not constitute an “inquiry” under ERISA. The appellate court reversed holding that George’s informal proceedings do trigger the statute’s protections.

The Birth of Dodd-Frank Whistleblower Actions

In what many are calling the first Dodd-Frank retaliation suit to survive a Rule 12(b)(6) motion to dismiss, the United States District Court for the District of Connecticut issued a ruling permitting a terminated Human Resources manager’s retaliation claim to proceed. In Kramer v. Trans-Lux Corp. (to read the full opinion click here), the plaintiff’s Dodd-Frank retaliation claim is based on his termination allegedly caused by his written complaints – one to the company’s CEO, another to the Board’s audit committee and, finally, a complaint to the SEC – that the company was violating its pension plan.

Much of the argument in the case hinged on whether Kramer’s method of reporting to the SEC – sending a letter to the SEC via regular mail – was sufficient to trigger Dodd-Frank’s anti-retaliation provisions. Specifically, the defendant employer insisted that a “whistleblower” under Dodd-Frank’s statutory definitions must report violations to the SEC through the Commission’s website or by mailing or faxing a Form TCR (Tip, Complaint or Referral). The court rejected this construction, finding that such an interpretation would defeat a key goal of the Dodd-Frank Act to “improve the accountability and transparency of the financial system” and create “new incentives and protections for whistleblowers.” Like two other federal courts in Maryland and New York, the federal court in Connecticut specifically noted that the term “whistleblower” should be given broader construction in the retaliation provision of the statute than in other portions.

This decision opens the door for more whistleblower lawsuits under Dodd-Frank – an option that is appealing to many potential plaintiffs. Notably, a Dodd-Frank retaliation claim offers different remedies than a Sarbanes-Oxley claim. Further, Dodd-Frank offers a significantly longer statute of limitations. Yet another bonus: Dodd-Frank claims can be brought directly in federal court whereas Sarbanes-Oxley claims must be brought through a U.S. Department of Labor administrative process.

For more background on Dodd-Frank retaliation claims click here to read “Dodd-Frank: Picking Up Where SOX Fell Short”, authored by Lynne Anne Anderson and Meredith R. Murphy in the New Jersey Labor and Employment Law Quarterly, Vol. 33, No. 4 – May 2012.