The Lawletter Vol 38 No 8
Dora Vivaz, Senior Attorney, National Legal Research Group
It appears to be well settled—in fact, there appears to be uniform consensus in the circuits—that Title VII can be applied to impose liability only on "employers," not on individuals, supervisory or otherwise, who are not themselves employers. What appears to remain unsettled, however, is whether Title VII claims may be brought against individual supervisory employees "in their official capacities" when the employer is a governmental entity, as is generally possible under 42 U.S.C. § 1983. In general, suing a public official or employee in his or her "official" capacity is tantamount to suing the governmental entity itself.
The court addressed this exact question in a very recent case. Stallone v. Camden County Tech. Schs. Bd. of Educ., Civ. No. 12-7356 (RBK/JS), 2013 WL 5178728 (D.N.J. Sept. 13, 2013) (not for publication). The court started with the language of Title VII, which imposes on employers, as defined, and on any agent of an employer the prohibition against discrimination. The court noted that it is settled that Title VII does not subject individual supervisory employees to personal liability but that the issue of whether Title VII permits claims against such employees in their official capacities remains unsettled. Not only are the circuits split on the issue, but the courts within the Third Circuit are also split.
The court noted that the Third Circuit has stated, in dicta and in the context of qualified immunity, that the doctrine of qualified immunity is inapplicable under Title VII—even though there was no Title VII claim before it—since public officials may be held liable only in their official capacities. After reviewing cases that had involved Title VII claims, the Stallone court found the reasoning of those cases holding that official capacity claims against individuals are not permitted was the more persuasive.
The court explained that Title VII provides for the liability of employers, not supervisors. It further explained that, therefore, naming a supervisor in his or her official capacity would be redundant, particularly where the employer has already been named as a defendant. Finally, the court explained that disallowing an official capacity claim in such a circumstance does not in any way prejudice the plaintiff. The question left unanswered is whether a claim brought against a public official in his or her official capacity should be dismissed even when the governmental employer is not named as a defendant. Clearly, the better practice would appear to be to name only the governmental employer as a defendant.
The Lawletter Vol 38 No 6
John Buckley, Senior Attorney, National Legal Research Group
The increasingly complex statutory and regulatory requirements imposed upon employers require that written policies be promulgated and maintained in order to avoid fines for noncompliance, exposure to liability from lawsuits, and punitive damages. Many federal laws, and an increasing number of state laws, require that employers promulgate and maintain written policies. Furthermore, it is no longer sufficient to simply pass out cookie‑cutter policies; to be effective, workplace policies must be precisely tailored and contain specific provisions required by the location of the workplace, the type of business involved, the number of individuals employed, and a host of other considerations.
A properly drafted and implemented written policy can be a valuable tool for employers. For
example, in EEOC v. AutoZone, Inc., 707 F.3d 824 (7th Cir. 2013), the court noted the rule that an employer may avoid liability for punitive damages based on the actions of managerial employees by simply showing that it had implemented an antidiscrimination policy. Because the employer in that case had not made the modest investment in an adequate antidiscrimination policy, the court upheld an award of $200,000 in punitive damages. See also Dunlap v. Spec Pro, Inc., No. 11‑cv‑02451‑PAB‑MJW, 2013 WL 1397294 (D. Colo. Apr. 5, 2013) (to avail itself of the good‑faith compliance standard, and avoid vicarious liability for punitive damages in a Title VII action, an employer must (1) adopt antidiscrimination policies; (2) make a good-faith effort to educate its employees about these policies and the statutory prohibitions; and (3) make good-faith efforts to enforce an antidiscrimination policy).
In addition to insulating employers from potentially devastating punitive damages, properly drafted policies can help employers avoid liability entirely. In the following cases, employers were able to avoid liability for discrimination claims: Zakrzewska v. New School, 598 F. Supp. 2d 426 (S.D.N.Y. 2009); Chaloult v. Interstate Brands Corp., 540 F.3d 64, 74 (1st Cir. 2008); McPherson v. City of Waukegan, 379 F.3d 430 (7th Cir. 2004); Salazar v. U.S. Dep't of Justice, 98 F. App'x 623 (9th Cir. 2004); Talamantes v. Berkeley County Sch. Dist., 340 F. Supp. 2d 684 (D.S.C. 2004). In each of these cases, the employers had properly drafted, written policies prohibiting discrimination and setting out grievance procedures for resolving discrimination claims. Although a properly drafted policy can enable an employer, in many cases, to obtain summary judgment in its favor, a deficient policy may negate certain defenses and enable a plaintiff to survive summary judgment. Smith v. First Union Nat'l Bank, 202 F.3d 234, 245 (4th Cir. 2000).
In addition to policies prohibiting discrimination and harassment, employers should have written policies that include provisions covering wages and hours, benefits, leave, workplace safety, workplace conduct, and discipline. Most employers should also consider policies covering Internet and email use, recordkeeping, drug and alcohol use, and immigration law compliance.
Do your clients have appropriate and effective employment policies? The National Legal Research Group will provide a complimentary review and consultation regarding an existing employment policy, or an assessment to determine what policies are needed for your clients. To take advantage of this offer, you may contact us by email at email@example.com or by phone at 1‑800‑727‑6574. You can also fax an existing policy to us at 434‑817‑6570. You will receive a complimentary initial consultation with John F. Buckley IV, a nationally known author and authority on Human Resources and Employment Law.
The Lawletter Vol 38 No 1
Charlene Hicks, Senior Attorney, National Legal Research Group
One of the legal arenas in which individual rights are pitted directly against business interests comes into play when an individual employee signs an employment contract containing a covenant not to compete. Not surprisingly, state courts are often called upon to referee disputes concerning the enforceability of such contracts. In a recent proemployer decision, a Florida appellate court ruled that an individual's change in status from an "employee" to an "independent contractor" did not affect the terms of the noncompete agreement that the individual had previously signed.
In Anarkali Boutique, Inc. v. Ortiz, 104 So. 3d 1202 (Fla. Dist. Ct. App. 2012), the Anarkali Boutique ("Boutique") sought a temporary injunction against Nahomi Ortiz for violating a noncompete agreement that Ortiz had signed when she began employment in 2008. This agreement stated, in relevant part:
In consideration for my at-will employment or continued at-will employment by [the company] and the compensation now and hereafter paid to me, I hereby agree as follows:
. . . .
I will not either during my employment with the Company or for a period of two (2) years after I am no longer employed by the Company, engage, as an employee, independent contractor, officer, director, or shareholder, in any employment, business, or activity that in any way competes with the business of the Company within a one-hundred (100) mile radius of any store, office, or facility of the Company. . . .
. . . .
Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.
Id. at 1203.
In 2009, the Boutique began treating Ortiz as an independent contractor so that she would have the opportunity to earn more money through sales commissions. In 2011, Ortiz left the Boutique and began operating her own business, performing the same services, within the restricted area. In response, the Boutique filed a complaint for injunctive relief and a motion for temporary injunction against Ortiz.
As a defense against the motion, Ortiz argued that when the Boutique changed her status from employee to independent contractor in 2009, she ceased to be employed by the Boutique and the two-year restricted period set forth in the covenant not to compete began to run at that time. The trial court agreed with Ortiz and denied the Boutique's motion for temporary injunction.
On appeal, the appellate court reversed. In so doing, the appeals court relied upon the principle of contract construction that requires a court to examine the contract as a whole and to attempt to give effect to every provision. According to the appeals court, the trial court contravened this principle by failing to give effect to the final sentence of the noncompete agreement quoted above.
Under the circumstances, the Boutique's change of Ortiz's status from employee to independent contractor had the practical effect of changing her "duties, salary or compensation" in the manner contemplated by this final sentence. Id. at 1205. In order to give effect to this sentence of the contract, the appeals court ruled that the "mere changing of the worker's status from an employee to an independent contractor did not cause the two-year non-compete period to begin running. Instead, the two-year non-compete provision did not begin running until the worker left the company." Id.
Ultimately, the appeals court remanded the case back to the trial court to determine whether the Boutique had satisfied its burden of establishing the statutory requirements for the issuance of a temporary injunction. Even so, the decision represents a clear victory for the Boutique as an employer. Although the law carefully differentiates between an "employee" and an "independent contractor" in other contexts, the court did not allow such distinctions to subvert the contractually agreed-upon covenant not to compete. Because the covenant not to compete by nature favors the employer's business interests over the employee's right to pursue his or her livelihood, the decision indicates that Florida courts may tend to weigh the balance of interests in favor of the employer in any close case.
The Lawletter Vol 37 No 11
John Buckley, Senior Attorney, National Legal Research Group
In a major development affecting all employers, the House of Representatives on January 1, 2013 approved the American Taxpayer Relief Act of 2012 ("the Act"), H.R. 8, Pub. L. No. 112-240, 126 Stat. 2313, passed by the Senate earlier in the day. The President signed the Act on January 3, 2013. The Act made permanent the "Bush era" tax cuts for most Americans. Although the tax cuts technically expired just after midnight on December 31, 2012, the legislation was made retroactive. Significantly, the legislation did not extend the 2% reduction in the employee portion of the Social Security tax that had been in place for the past two years under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and subsequent legislation.
The Act permanently extended the Bush‑era tax rates for all incomes up to $400,000 for individuals and $450,000 for joint filers. The tax rates that applied to incomes above those levels expired. Specifically, the top rate rose from 35% to 39.6%. The legislation also permanently adjusted the income exemption levels for the Alternative Minimum Tax for inflation. On January 3, 2013, the IRS published revised 2013 percentage‑method withholding tables in IRS Notice 1036, Early Release Copies of the 2013 Percentage Method Tables for Income Tax Withholding, www.irs.gov/pub/irs‑pdf/n1036.pdf.
Effective for wages paid on and after January 1, 2013, employers must also withhold Social Security tax at a rate of 6.2% from all wages up to $113,700. As noted above, this represents a 2% increase from the 2011 and 2012 tax rate, which was 4.2%.
The Act also makes permanent the tax credit for employer‑provided child-care facilities and services. Additionally, it extends permanently the exclusion from income and employment taxes of employer‑provided education assistance of up to $5,250. The employer may also deduct up to that amount annually for qualified education expenses paid on an employee's behalf.
The increase for the exclusion for employer‑provided transit and carpool benefits was also extended permanently. The exclusion had been increased to $240 a month through 2012 but had been scheduled to fall back to $125 at the beginning of 2013.
For businesses, the legislation extended for two years several tax breaks, including a production tax credit for developers of wind projects, the research and development tax credit, and a measure allowing for bonus depreciation. The Work Opportunity Tax Credit, which rewards employers for hiring individuals from certain disadvantaged groups (such as unemployed veterans), was revived and extended through 2013. The employer wage credit for activated military reservists was also revived and extended through the same time period.
The Act extended for one more year the federally funded unemployment compensation benefits available to unemployed workers who have exhausted their initial period of state benefits (typically 26 weeks). Without the extension, it was estimated that more than two million of the long‑term unemployed would have run out of benefits.
Since June 2008, a series of federal legislative measures have extended the period for such benefits. These measures included the American Recovery and Reinvestment Act of 2009 and, most recently, the Extended Benefits, Reemployment, and Program Integrity Improvement Act of 2012.
The Lawletter Vol 36 No 3
John F. Buckley IV, Senior Attorney, National Legal Research Group
The National Labor Relations Board ("NLRB") has promulgated a new rule, 76 Fed. Reg. 54006 (Aug. 30, 2011) (to be codified at 29 C.F.R. pt. 104), requiring employers to post and maintain a notice of employee rights under the National Labor Relations Act ("NLRA"), 29 U.S.C. §§ 151–169. The rule takes effect November 14, 2011. Pursuant to this rule, an employer who falls under the NLRB's jurisdiction must post a notice of employees' rights to organize a union and bargain collectively with the employer. The rule also sets out the size, form, and content of the notice and contains enforcement provisions. According to the NLRB, the rule is needed because employees are not aware of their union rights under the NLRA, and the rule will increase awareness to allow employees to effectively exercise those rights. See 76 Fed. Reg. at 54006.
The rule applies to any employer covered by the NLRA. As to retail businesses, including home construction, the NLRB will assert jurisdiction over employers that have a gross annual volume of business of $500,000 or more. For nonretail businesses, jurisdiction attaches to an employer that has an annual interstate inflow or outflow of at least $50,000. The rule also sets out a table categorizing certain employers and the required amounts of annual gross volume of business required to meet NLRB jurisdiction. See 29 C.F.R. § 104.204 tbl.
The rule sets out the content that must be included in the notice, informing employees that they have the right to organize a union to negotiate with the employer concerning wages, hours, and other terms and conditions of employment; to form, join, or assist a union; to bargain collectively with the employer for wages, benefits, hours, and other working conditions; to discuss wages and benefits and other terms and conditions of employment or union organizing with coworkers or with a union; to take action with one or more coworkers to improve working conditions; to strike or picket, depending on the purpose or means of the strike or picketing; and to choose not to do any of the activities, including joining or remaining a member of a union.
An employer's failure to post the notice may be considered interfering with, restraining, or coercing employees in the exercise of the rights guaranteed under the NLRA. 29 C.F.R. § 104.210. Furthermore, the six-month statute of limitations under the NLRA may be tolled in other unfair-labor-practice actions if the employer has failed to post the notice. Id. § 104.214(a). Significantly, if an employer's failure to post the notice is deemed to be knowing and willful, it may be used as evidence of motive in cases in which motive is an issue. Id. § 104.214(b).
The rule is controversial, and employer groups and members of Congress have questioned the NLRB's statutory authority to enact it. The Society for Human Resources Management, who opposed the rule, maintains that the NLRB exceeded its authority and that it has created a new unfair labor practice for failure to post the notice, a task that should be left to Congress through legislation. Because the six-month statute of limitations may now potentially be tolled by the NLRB in any unfair-labor-practice charge against an employer where the employer has failed to post the notice, such tolling could subject employers to unfair-labor-practice claims that were previously barred. Legislation has been proposed that would reverse the NLRB's August 30 decision. H.R. 2833, 112th Cong. (Sept. 1, 2011); see http://thehill.com/blogs/floor-action/house/179513-quayle-bill-would-reverse-nlrb-requirement-to-post-employee-rights.
The Lawletter Vol 36 No 4
Dora Vivaz, Senior Attorney, National Legal Research Group
The decisions by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1951 (2009), established that in order to state a claim for relief, a complaint must include sufficient nonconclusory factual allegations to nudge the claim "across the line from conceivable to plausible." The lower courts are now grappling with just what is required, as a practical matter, in order to sufficiently support a claim. In a recent case, the U.S. District Court for the District of Maryland addressed that question in the context of a wage-and-hour claim for overtime compensation.
The court first noted the elements of a claim for overtime compensation: (1) that the employee had worked overtime hours without compensation, and (2) that the employer knew or should have known that the employee had worked overtime, but failed to compensate him for it. Butler v. DirectSat USA, LLC, Civ. Act. No. DKC 10-2747, 2011 WL 2669349, at *4-5 (D. Md. July 6, 2011). The court then noted that in the wake of the Supreme Court's recent decisions in Iqbal and Twombly, courts across the country have articulated different views as to the level of factual specificity required to sufficiently plead the claim. Id.
The court noted that many courts have required that at a minimum, a plaintiff should allege the approximate number of hours worked for which overtime compensation was not paid. Id. at *4 (citing cases). It noted that many courts, on the other hand, have found sufficient the bare allegation that the plaintiff had worked more than 40 hours per week and not been compensated for the overtime. Id. (citing cases). The court determined that in the case before it, the more lenient approach was appropriate because there were sufficient other allegations, including details of the types of work activities performed during overtime hours, to provide the defendant with enough information to form a response. Id. at *5. This is important because not all "work time" is compensable—travel time to and from work, for example, and time spent on other preliminary and postliminary activities are not generally compensable under the Fair Labor Standards Act.
The issues of how much and what factual specificity is required for wage-and-hour overtime compensation claims will undoubtedly be further addressed and eventually resolved by the courts in the future. In the meantime, it is clearly to everyone's advantage for the plaintiff to include as many nonconclusory factual allegations as s/he has knowledge of, including not only the number of overtime hours worked but the nature of the activities, the relationship of the overtime to the plaintiff's regular hours, and the period during which the failure to compensate occurred.
The Lawletter Vol 36 No 8
Dora Vivaz—Senior Attorney , National Legal Research Group
The Rehabilitation Act, first passed in 1973, was the initial law prohibiting discrimination, and it applied only in the context of federal employment and programs. In a recent case, the court discussed an apparent split in the circuits as to the proper scope of two sections of the Act. Ward v. Vilsak, No. 2:10-cv-00376 KJM KJN PS, 2011 WL 6026124 (E.D. Cal. Dec. 2, 2011).
The first section is § 501, 29 U.S.C. § 791, which governs the employment of disabled individuals by federal agencies and creates a private right of action for federal employees suing for disability discrimination. The second is § 504, 29 U.S.C. §§ 794 and 794a, which prohibits discrimination against disabled individuals by recipients of federal funds. Although the latter section does not, on its face, apply to federal employers, a number of circuit courts have concluded that § 501 and § 504 overlap, such that federal employees would be able to sue under either or both. 2011 WL 6026124, at *13. On the other hand, a number of other circuit courts have concluded that § 501 is the exclusive remedy for federal employees suing under the Rehabilitation Act. Id.
The issue becomes important for federal employees and employers because which section governs determines the elements of the plaintiff's prima facie case. As the court noted, § 501 requires a plaintiff to show only that he or she was discriminated against "because of" his or her disability—rather than "solely because of" his or her disability as is required under § 504. Id. at *14.
In Ward, the defendant argued that the plaintiff could not prove her case because she could not prove that she had not been hired solely because of her disability. Id. at *11. The court concluded that the case was governed by § 501, not § 504, and that, therefore, the plaintiff's burden was only to show that disability discrimination was a motivating factor in the adverse employment action. Id. at *13-14. The court further concluded that, on the facts before it, there was at least a question of fact on the issue. Certainly, given the burdens imposed under the two sections, it makes sense for plaintiffs/employees to bring their claims under § 501, even in circuits that allow claims under either.
The Lawletter Vol 37 No 4
Dora Vivaz, Senior Attorney, National Legal Research Group
Generally, a Title VII plaintiff is required to exhaust his or her administrative remedies by filing a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC") or its state counterpart before bringing a claim in federal court. This requirement serves the dual purposes of giving the employer some warning of the allegedly discriminatory conduct and of affording the employer an opportunity to settle the dispute with the aid of the EEOC. Therefore, as a general matter, allowing a plaintiff to include in a federal action matters not alleged in the administrative charge of discrimination would frustrate the statutory purposes of providing notice to the employer and of providing the opportunity for settlement. An exception to the exhaustion requirement has been allowed, however, when the alleged discrimination consists of retaliation for the very act of having filed a charge in the first instance.
In National Railroad Passenger Corp. v. Morgan, 536 U.S. 101 (2002), in addressing the related question of the circumstances under which a plaintiff may file suit based on events falling outside the statutory limitations time period, the Supreme Court held that each discrete act of discrimination starts the clock over for purposes of filing charges alleging that act. In other words, discrete acts that are time-barred are not actionable, even when they are related to other timely filed acts. Since the decision in Morgan, the circuit courts have split over whether that decision abrogated the exception to the exhaustion requirement for claims of retaliation against a plaintiff for having filed an administrative claim.
In Fentress v. Potter, No. 09 C 2231, 2012 WL 1577504 (N.D. Ill. May 4, 2012), the court addressed that very issue. The defendant had moved to dismiss, arguing that the plaintiff had failed to exhaust his administrative remedies on the claim that he had been retaliated against for having filed a charge of discrimination. It was undisputed that the plaintiff had not filed a charge complaining about that retaliation, and the defendant argued that the exception for such retaliation claims had been abrogated by Morgan. After reviewing the cases on the question, acknowledging the split in authority, and noting that the issue had not yet been directly addressed by the Seventh Circuit, the Fentress court, based on post-Morgan "tea leaves" from that Court, concluded that the exception remains valid. In part, the Fentress court relied on the fact that the exception's continuing validity appears to be the unanimous view of the circuit's district judges who have addressed the issue.
The court, furthermore, rejected the defendant's argument that the claim in this case did not fit within the exception in any case because of the length of time between the filing of the charge and the claimed discrimination, which was almost two years. The court noted that the exception had been applied to cases involving periods even longer than that. Moreover, the court found that nothing in the Seventh Circuit precedents recognizing the exception hinted at an exception to the exception for cases in which the retaliation occurs well after the administrative charge. The court therefore denied the defendant's motion to dismiss for failure to exhaust. Given that the weight of lower court authority appears to support the continuing validity of the exception, it is likely that it will eventually be upheld by the Supreme Court. In the meantime, it will be important to check the law of the circuit.