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.

Stuck in between the investigation phase and the litigation phase, conciliation of a discrimination charge pending before the EEOC is akin to a middle child - often overlooked - but just as important as the other children.  The recent decision in EEOC v. Supervalu, Inc., 2009 U.S. Dist. LEXIS 116718 (Dec. 15, 2009)  demonstrates that conciliation should be given the same rigorous attention that defense counsel give to the investigation and ensuing litigation of an EEOC charge.  Further, if an employer is going to allege that the EEOC failed to conciliate in good faith, that employer must be ready to prove that it approached the conciliation process with a seriousness and good faith that was lacking from the EEOC.

           In Supervalu, Inc. the EEOC brought suit against Supervalu and Jewel-Osco alleging that they failed to provide their employee, Patricia Shied, with a reasonable accommodation in violation of the Title I of the Americans with Disabilities Act of 1990 (”ADA”), 42 U.S.C. § 12101 et seq. and Title I of the Civil Rights Act of 1991, 42 U.S.C. § 1981a.  Before any substantive issues were decided in the case, Supervalu and Jewel-Osco filed a Motion to Dismiss under the Federal Rules of Civil Procedure  on the grounds that the EEOC failed to make a sufficient effort to resolve the parties dispute through informal conciliatory means prior to filing suit.  The EEOC must attempt conciliation with employers when it finds reasonable cause to believe that the have engaged in discrimination under the ADA,  the ADEA,  and Title VII.  See 42 U.S.C. § 200e-5(b).

            U.S. District Judge Elaine E. Bucklo  rejected Supervalu’s argument that the EEOC failed to conciliate in good faith.  In particular, she identified three deficiencies with Supervalu’s position.  First, Judge Bucklo noted that the record before her was factually inadequate so there was no way she could determine whether the EEOC made a good faith effort to conciliate or not.  Second, based on the scant record before her, Judge Bucklo noted that the EEOC invited Supervalu to submit a settlement offer on December 13, 2007, yet Supervalu did not respond to this invitation until nearly two years later on March 17, 2009.

             Finally, Judge Bucklo held that the EEOC was entitled to conclude that further conciliation efforts would be futile since Supervalu’s settlement offer was $10,000 with no equitable relief.  In closing, Judge Bucklo stated: 

Under these circumstances, I cannot say that the EEOC failed to carry out its obligation to engage in good-faith conciliation efforts.  The EEOC invited the defendants to engage in the conciliation process.  However, the defendants responded long after the deadline indicated by the Commission.  And when the defendants finally did respond, their offer was underwhelming.

The takeaway from the Supervalu decision is clear.  If an employer is going to make the argument that the EEOC did not approach conciliation in good faith, it must present the court with: 1) a complete record, 2) evidence that the employer timely responded to the EEOC’s invitation to conciliate, and 3) evidence that any settlement offer made by the employer accounts for non-monetary or “equitable” forms of relief along with monetary relief.  Put another way, before an employer seeks to dismiss or stay a federal case based on the EEOC’s failure to conciliate in good faith, that employer better be able to prove that it approached the process in good faith.

Congress and the President brought a little bit of holiday cheer to unemployed Americans struggling to pay for health insurance.  As predicted by this blog in February, President Obama signed the Department of Defense Appropriations Act of 2010 yesterday which extends the federal COBRA health coverage subsidy for involuntarily terminated employees an additional 6 months.  Readers will recall that the COBRA subsidy allows laid off employees to continue their employer’s group health insurance provided they pay 35% of the monthly premium instead of the 102% that many employees had to pay in the past.

Now, employees involuntarily terminated from their employment will have the COBRA subsidy available to them for up to 15 months.  For example, if an individual was  laid off on July 15, 2009 with their health coverage ending on July 31^st, this individual is eligible for a COBRA subsidy from the period of August 2009 through October 31, 2010.

Under the new legislation, employees who experience a “qualifying event” up through February 28, 2010 will be eligible for the 15 month COBRA subsidy.  Further, the new legislation requires employers to notify former employees who were eligible for the COBRA subsidy on or after October 31, 2009, that they may continue to pay for their health insurance at subsidized rates for up to 15 months,  and that they may reinstate their COBRA coverage if they had stopped paying their COBRA premiums after their subsidy expired.

Putting aside the cost, the COBRA subsidy has been an unqualified success.  According to Hewitt & Associates,  only 19% of eligible employees made use of their COBRA rights before the ARRA.  Now, that figure rests at 38%.   Finally, we expect the Department of Labor and the IRS to have model notices ready for employers before the end of the year.

I wrote in my last blog that the US Supreme Court had confirmed its polarity in a bickering 5-4 decision in which the majority refused to extend a Title VII rule to an ADEA claim. The same appears to have occurred in the more recent 5-4 Title VII decision involving the New Haven firefighters.  A closer reading of the devil in the details of the dissent, however, reveals more agreement than one might expect from its tone.

Most interesting is that footnotes 9 and 10 and the surrounding text of the dissent reveal a de facto 9-0 reversal, despite the actual 5-4 decision. The dissent buried in these footnotes its agreement that summary judgment for the City was improper, which supported reversal with remand to the trial court for further proceedings. But the dissent chose to affirm the lower courts anyway simply because the majority insisted on going too far the other way by entering summary judgment against the City. Only a very close reading of the dissent reveals these truths.

The case involved a conflict under Title VII between taking action to avoid disparate impact liability to minorities and thus incurring disparate treatment liability to whites. The New Haven firefighters took promotion exams, the results of which rendered eligible only whites (and one Hispanic) but no black firefighters. The latter threatened suit for disparate impact if the City certified the test results, noting a minority pass rate that was half that of whites, and showing evidence that the testing might have been outdated and not adequately job-related or consistent with business necessity. Fearing disparate impact liability, the City discarded the test results and the white and Hispanic firefighters who would have been promoted sued for disparate treatment. The trial court entered summary judgment that the City could not be liable and the Second Circuit, then including our newest Supreme Court Justice, Sonia Sotomayor, affirmed in a 1-page en banc (i.e., by the entire court) opinion that merely adopted the trial court’s findings.

Taking this as a case of first impression (i.e., without directly-controlling precedent), the majority reversed the lower courts and announced a new standard: an employer may discard such test results and avoid disparate treatment liability to whites only if it can show a “strong-basis-in-evidence” that it would have been liable to minorities for disparate impact had it kept the results. But rather than remand to the trial court so the case could proceed under this new standard, the majority ignored myriad questions of fact in the record that had to be resolved by a jury and entered summary judgment that the City could not avoid liability under the new standard.

Despite disagreeing on the new standard to apply, the majority and the dissent were right to support reversal. But the majority was as wrong to deprive the City any chance to satisfy the new standard and assert defenses (including reliance on EEOC opinions and guidelines) as the dissent was wrong to affirm the lower courts (particularly for its “tit-for-tat” reasoning) and thus deprive the plaintiffs any chance to prove their case. The dissent should have transcended the majority’s activism by supporting reversal and dissenting only as to the new standard to apply and as to remand to the trial court to proceed under the new standard. Tellingly, the majority and the dissent chided each other for ignoring important facts in the record, yet both did exactly that.

It is often said that hard cases make bad law. And the devil that is in the details of this opinion, most notably the dissent, reveals that this case is no exception.

The US Supreme Court exhibited its polarity in another 5-4 decision, this time refusing to extend a Title VII rule to an ADEA claim. See  Gross v. FBL Financial Servs., Inc., 2009 U.S. LEXIS 4535. The majority noted that Congress used terms in Title VII that impose liability if race, sex, etc. was “a motivating factor” in the employment action. A prior Court decision thus held that if a Title VII plaintiff shows race, sex, etc. played any part in the employment action, the burden of proof shifts so the employer can avoid liability only if it shows the action would have been the same despite the plaintiff’s race, sex, etc. The terms Congress chose in the ADEA, however, impose liability only if the action was taken “because of” (which the majority equated with “not taken ‘but for’”) the employee’s age. The majority held that by amending Title VII to codify the case that created “burden-shifting”, while concurrently amending the ADEA but in different ways, Congress intended burden-shifting only in certain Title VII cases. An ADEA plaintiff’s burden thus never can shift onto the employer, precluding such a jury instruction.

The dissenters claimed the majority: improperly decided a question different from the one certified for review (i.e., whether an ADEA plaintiff can obtain a burden-shifting jury instruction with certain evidence); simply ignored some of the Court’s prior decisions; and incorrectly found “because of” to equate with the exclusivity of “but for.” The majority reasoned that: the question it decided (i.e., whether an ADEA plaintiff’s burden ever can shift onto the employer) was unavoidable and “subsidiary” for deciding the certified question, which the Court often must do; that actions by Congress negated the applicability of any prior cases; and that the instructive nature of Title VII decisions for ADEA cases is inherently limited because Title VII protects all races and both sexes while the ADEA does not protect all ages, only those 40 and over.

The dissenters decried the majority as “activist” for reviving a “but for” test that the Court’s prior cases had vitiated. Yet the dissenters focused more on the prior cases and the result they felt was “not unfair or impractical” than on Congress’ intent in concurrently but differently amending Title VII and the ADEA. Ironically, while the dissenters’ reasoning itself might be a hallmark of judicial activism, their tone confirms that it could become the law with just one future pro-employee judicial appointment. The Democratic Congress also now might amend the ADEA to mirror Title VII. This victory for employers thus could be very short-lived indeed.

The Illinois Supreme Court recently held that employers are strictly liable for the sexually harassing acts of their supervisors, regardless of whether the supervisor in question actually managed the victim.   The Court’s ruling was correct as a matter of law and public policy. 

As a matter of law, the question was not close.  The Court was called upon to interpret 775 ILCS 5/2-102(D)of the Illinois Human Rights Act (”Act”) which is unambiguous on its face.  The Act says that Illinois employers are strictly liable for the sexually harassing acts of their employees unless such employees are: 1) nonemployees, 2) nonmanagers, or 3) nonsupervisory employees, in which case the employer is generally held to a negligence standard.  Put another way, there is nothing in the Act that requires a supervisor to have actual authority over his victim in order for an employer to be held strictly liable.

The Court was right as a matter of policy too.  Although the Court’s decision means that Illinois state law is now out of step with federal law, so what?  Employers have known about the perils of sexual harassment since 1986.    The Illinois Supreme Court’s decision is not catching anyone by surprise.  Further, the costs of training supervisors and managers do not increase as a result of the decision.

Justice Brandeis, in dissent, reminded this nation more than 70 years ago to respect federalism and defer to the laboratory of the states.   There are now two states in the U.S., Illinois and California, State Dept. of Health Services v. Superior Court of Sacramento County, 79 P.3d 556, 31 Cal.4th 1026, 6 Cal.Rptr.3d 441 (Cal. 11/24/2003) that have concluded that employers should be strictly liable for the sexual harassment of their supervisors.  Let us find out whether the bold experiments of Illinois and California will eliminate the scourge of sexual harassment from the workplace.  This would allow us to address the many new and pressing challenges of the 21st century workplace.

Employees terminated during the period of September 1, 2008 through December 31, 2009 are entitled to continue health care coverage under COBRA with a 65% premium subsidy in accordance with The American Recovery and Reinvestment Act of 2009 (ARRA).  See prior blog entries, “Who Cares About Jobs: Let’s Fix Health Care Through COBRA,” and “The IRS Answers Questions For Employers About the New COBRA Subsidy.” 

Yesterday, the U.S. Department of Labor published four separate model notices for employers to use when notifying employees of their ARRA rights. The first notice called the General Notice should be sent to any employee who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. The second notice called the General Notice (abbreviated notice)  may be sent to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.  The third notice called the Alternative Notice applies only to insurance issuers that provide group health insurance coverage under  state law.  Finally, the fourth notice called the Notice in Connection with Extended Election Periods applies to terminated employees who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This fourth notice must be provided by April 18, 2009, which, incidentally, is the birthday of the well known DuPage County, Illinois politician and statesman Henry Hyde.