Many non-union employers labor under the impression that the National Labor Relations Act (”Act”) does not apply to them. The decision of Loparex LLC v. NLRB  is a reminder of the Act’s broad reach.  In Loparex, the Seventh Circuit Court of Appeals upheld the National Labor Relations Board’s (”NLRB”) determination that a company violated the National Labor Relations Act (”Act”) by restricting union organizing activity at the workplace when it took the following actions: (i) after union supporters posted material on company bulletin boards, the company issued a policy that required employees to obtain approval before placing any material on the boards; (ii) stopping employees from distributing pro-union flyers in the company’s parking lot; (iii) informing employees that passing out union buttons on work premises violated company’s policy; (iv) informing all of the shift leaders that they qualified as supervisors under the Act and that therefore, they were prohibited from participating in union activities; and (v) discouraging employees from talking about any union organizing activities during working hours.  Loparex LLC v. NLRB, Case Nos. 09-2187, 09-2289, 2009 U.S. App. LEXIS 28754 (7th Cir. Dec. 31, 2009).  

Loparex is a reminder that non-union employees may commit unfair labor practices under the Act if their human resource policies discriminate against union activities.  Employers’ handbooks must be neutrally drafted and neutrally applied.  If they are tilted against union activity, an employer risks the result which occurred in Loparex.

After a three-day bench trial in Nashville, Tennessee, U.S. District Court Judge John T. Nixon found in favor of a female African-American plaintiff on her race and sex harassment claims and entered a judgment of $1,073,261.00 against her former employer, Whirlpool Corporation.  EEOC v. Freeman, Case No. 3:06-0593, 2009 U.S. Dist. LEXIS 118624 (M.D. Tenn. Dec. 21, 2009).   This case is a useful reminder that Title VII plaintiffs may be entitled to not only back pay but substantial front pay awards as well.  

In this case, Judge Nixon determined that as a result of the ongoing harassment, Plaintiff “suffer[ed] from chronic posttraumatic stress disorder rendering her unable to work.” Plaintiff’s expert witness, Dr. Mark Cohen, testified that, adjusted for present day value, Plaintiff experienced a range of wage loss between $415,772.00 (through age 57.6) and $623,541.00 (through social security retirement age).  In all, Dr. Cohen calculated Plaintiff’s net loss in earning capacity to be $773,261.00 to age 67.  Dr. Cohen’s testimony proved persuasive because this was the exact amount of Judge Nixon’s back pay and front pay award.  The remaining $300,000.00 of the award was for Plaintiff’s non-pecuniary losses, i.e., emotional injuries.   This amount was the statutory maximum that any Title VII plaintiff could recover for their compensatory and/or punitive damages.  See 42 U.S.C. § 1981(b)(3). 

Interestingly, the last sentence of Plaintiff’s post-trial brief read as follows: “Defendant’s Fourth-Quarter 2008 net earnings were $44 million dollars, and Defendant expects to generate free cash flow between $300 and $400 million in 2009.”  While the facts of the case were certainly egregious, Whirlpool’s size and financial earnings may also have played a role in the judge’s decision to generously compensate the Plaintiff with a high front pay award.

Could an employer find a noose hanging in the workplace, receive a complaint from its only African American employee that a coworker has threatened him and his family, conduct an investigation without uncovering the identity of the perpetrators of either incident and still avoid Title VII liability?  The answer is YES so long as the employer takes prompt and reasonable action to prevent the coworker harassment from recurring.   See Porter v. Erie Foods Int’l Inc., 7th Cir., Case No. 08-1996 (Aug. 7, 2009).

The Porter decision demonstrates that in order to avoid Title VII liability for coworker harassment, the employer’s managers/human resources personnel should at least take the following steps:  (1) inform their own supervisors of the harassment allegations; (2) conduct a prompt and diligent investigation to find out who is responsible; (3) remind all employees of the company’s anti-discrimination policies; (4) follow up with the complainant on a regular basis in efforts to obtain additional information and attempt to shield the complainant from any future harassment (e.g., by offering him/her to work a different shift).  In reaching its decision, the Seventh Circuit Court of Appeals emphasized that “a prompt investigation is the hallmark of a reasonable corrective action,” which based on the facts of this case translated into a 24-hour rule.  

Furthermore, the Court noted that in assessing the reasonableness of the employer’s corrective action, “the focus is not on whether the perpetrators were punished by the employer, but whether the employer took reasonable steps to prevent future harm.”  Needless to say, those “reasonable steps” will vary based on the specific facts of the situation being addressed.

The Court’s decision also illustrates that in determining whether a plaintiff is constructively discharged on the basis of one of the protected categories under Title VII, the courts not only consider the egregiousness of the harasser’s conduct but also the reasonableness of the employer’s response.  In Porter, the Court indicated that the plaintiff’s allegations of repeated use of a noose combined with implied threats of physical violence were egregious but that because the employer had “a means in place for remedying complaints of workplace harassment” and conducted a diligent investigation, the employer was able to defend itself successfully against the plaintiff’s constructive discharge claim.

In Ricci v. DeStefano, the U.S. Supreme Court ruled that the City of New Haven, Connecticut (”City”) improperly discriminated on the basis of race when it set aside the results of a firefighters’ promotion test on which white and Hispanic candidates significantly outperformed their black colleagues.  The decision is scholarly and sober.  Unfortunately, however, it gives employers very little guidance as to what to do when faced with an employment test that produces racially disparate results.

 The City’s defense in Ricci was that it disregarded its test results in order to avoid violating Title VII of the Civil Rights Act of 1964 (”Title VII”).  Title VII prohibits not only intentional acts of employment discrimination based on race, color, religion, sex, and national origin, i.e., disparate treatment discrimination, but also policies or practices that are not intended to discriminate but in fact have a disproportionately adverse effect on a protected group, i.e., disparate-impact discrimination.  Thus, the City was worried about a possible disparate-impact lawsuit by the black firefighters.

However, once it set aside the test results, the City was sued by the candidates whose test scores would have likely entitled them to a promotion.  The Plaintiffs, seventeen white firefighters and one Hispanic firefighter, alleged that by discarding the test results, the City violated Title VII’s prohibition against disparate treatment based on race as well as the Equal Protection Clause of the United States Constitution.  The U.S. Supreme Court agreed and reversed the Second U.S. Circuit Court of Appeals’ decision in favor of the City.  In addition to highlighting the tension between Title VII’s disparate treatment and disparate impact provisions, the U.S. Supreme Court’s 5-4 ruling has received a significant amount of media attention because the current Supreme Court nominee, Judge Sonia Sotomayor, cast a deciding vote in the Court of Appeals’ decision. 

Justice Kennedy wrote the opinion of the Court and attempted to resolve the apparent conflict between the disparate treatment and disparate impact provisions of Title VII by allowing employers to make race-based decisions in instances in which “there is a strong basis in evidence of disparate-impact liability.”  Applying this standard to the facts before it, the Court concluded that there was “no evidence-let alone the required strong basis in evidence-that the tests were flawed because they were not job-related or because other, equally valid and less discriminatory tests were available to the City.” 

Although it was undisputed that had the black firefighters sued they would have been successful in making out a prima-facie case of disparate-impact discrimination against the City, the Court did not consider this to be enough to absolve the City of any disparate treatment liability.  In short, the Court ruled that “[f]ear of litigation alone cannot justify an employer’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions.” 

While the fear of litigation alone should not justify a race-based decision,  employers must be allowed to make decisions on the basis of race or any other protected classification under Title VII when faced with a prima-facie case of disparate-impact discrimination.  The Equal Employment Opportunity Commission has set a rule which provides that a selection rate that is less than 80% of the rate for the group with the highest selection rate will generally be regarded by the federal enforcement agencies as evidence of a disparate impact.  See 29 C.F.R. § 1607.4(D) (2009).  This means that if 50% of white candidates receive a passing score on a test, but only 30% of Hispanics pass, the relevant ratio would be 30/50, or 60%, which would violate the 80% rule. 

If an employer notices that a particular test violates 29 C.F.R. § 1607.4(D) it should be allowed to discard the test results without fear of disparate treatment liability.  Without such a bright-line rule, the Court’s decision has left employers and their attorneys with minimal guidance as to what “a strong basis in evidence” standard really means.