Tuesday, December 10, 2019

OCRC Issues Guidance on Service Animals in Employment

In August, the Ohio Civil Rights Commission issued an updated Technical Policy to provide guidance concerning the use of service animals by employees with disabilities.  In it, the OCRC reflects that employers could be required to permit service animals, such as dogs and monkeys to enable an employee to perform the essential functions of his or her position.  The employer is permitted to ask questions about the nature and extent of the employee's disability and animal's assistance.  Employers can also prohibit service animals when they are not housebroken or are out of control, are threatening, hostile, aggressive,  unusually disruptive, etc. and cannot be restrained, etc.   It is up to the employee to control his or her animal and the parties should engage in the interactive process to establish parameters, etc. 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Ohio Appeals Court Rejects Successor Liability Based on S-Corp Election

Last week, the Ohio Court of Appeals reversed judgment in favor of the Ohio Department of Job and Family Services concerning whether an entity constituted a successor in interest for unemployment compensation liability merely because it elected S-Corp status for three jointly owned subsidiaries which otherwise satisfied the statutory test to be an employer.   Employer’s Choice Plus, Inc. v. Ohio Dept. of Job & Family Servs., 2019-Ohio-4994.  Even though the Internal Revenue Code deemed the S-Corp election of the subsidiary corporations to constitute a liquidation of the subsidiaries for purposes of calculating income taxes, Ohio law only imposes successor liability when there has been an actual transfer or conveyance of possession or control of some legal interest in property.  Because the legal fiction of “deeming” a liquidation for income tax purposes was not equivalent to a transfer of ownership or possession, the statute was not satisfied and the parent company was not a successor employer.

According to the Court’s opinion, the parent company and the subsidiary companies were all owned by the same individual and their separate payrolls were paid out of the same bank account.  That sole shareholder elected S-Corp status for the subsidiary companies.  The IRS regulations provide that "[i]f an S corporation makes a valid QSub election with respect to a subsidiary, the subsidiary is deemed to have liquidated into the S corporation."  Further, "[a] corporation that is a QSub shall not be treated as a separate corporation" and that "[a]ll assets, liabilities, and items of income, deduction, and credit of a QSub shall be treated as assets, liabilities, and items of income, deduction, and credit of the S Corporation."  Following an audit, the ODJFS determined that – even though each of the subsidiaries employed and paid at least one employee each year more than $1500 – that only the parent corporation was a statutory employer for unemployment purposes and that it constituted a successor employer following the S-Corp election.  The appeal followed.

The Court noted that an employer can only become a successor employer for unemployment purposes if it (1) voluntarily seeks and obtains from ODJFS that status after substantially all, or a clearly identifiable portion,  of the employer’s assets have been transferred to it or (2) involuntarily if all of the employer’s trade or business has been transferred to it.   In this case, ODFJS “effectively concluded the QSub election constituted a transfer of the trade or business,” but the Court disagreed because the plain meaning of “transfer” did not include or encompass the legal fiction employed in the IRS regulations.

Although the method or mode of a transfer may encompass a broad range of possibilities, there still must be a conveyance of possession or control of some legal interest in property.  Here, the conveyance of possession or control must be a legal interest in a trade or business.  That concept is not a broad one.

 . . . . Given the common, everyday meaning of the verb form of the word "transfer," we do not find any ambiguity in the express statutory requirement that there be a conveyance of some trade or business from one employer to another to trigger successor-in-interest status under R.C. 4141.24(F) or (G).  Although a QSub election may be deemed a liquidation of a subsidiary corporation into the parent for purposes of federal taxation, such election does not effectuate any conveyance of a trade or business under either state or federal law.  The fact that federal tax law and Ohio tax law are co-extensive does not change the express requirements of unambiguous statutes. Without some conveyance of possession or control of a trade or business from one employer to another, there can be no successor-in-interest liability under the express terms of R.C. 4141.24(F) or (G).  

Relying on the Supreme Court’s opinion in Chevron, the Court refused to grant any deference to an agency interpretation which conflicted with the plain meaning of the statute: “courts grant no deference to an administrative agency's interpretation of a statute when that interpretation conflicts with the express terms of an unambiguous statute.”

In addition, ODJFS also erred in concluding that none of the subsidiaries could qualify as statutory employers.  Ohio Revised Code § 4141.01(A)(1) “sets forth the definition of the term "employer" for purposes of unemployment compensation law.”

In relevant part, the statute defines an "employer" as follows: "Employer" means * * * any individual or type of organization including any partnership, limited liability company, association, trust, estate, joint-stock company, insurance company, or corporation, whether domestic or foreign, * * * who  . . . .

 (a) Had in employment at least one individual, * * * in either the current or the preceding calendar year whether or not the same individual was in employment each such day; or  

(b) Except for a nonprofit organization, had paid for service in employment wages of fifteen hundred dollars or more in any calendar quarter in either the current or preceding calendar year[.] 

The Court found that the undisputed evidence presented at the hearing showed that each of the subsidiaries during the relevant time period “had at least one employee receiving wages of $1,500 or more. . . . . Based on this undisputed evidence, and applying the definition of "employer" set forth in R.C. 4141.01(A)(1),” it was an abuse of discretion to conclude that none of the subsidiaries  constituted “employers under that statutory definition.”

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Wednesday, December 4, 2019

Sixth Circuit Revives ADA Claims

Yesterday, the Sixth Circuit reversed an employer’s summary judgment in an ADA failure-to-accommodate/constructive discharge/retaliation dispute where the employer allegedly had a policy of never accommodating non-work related disabilities (i.e., chronic conditions or off-work injuries) and apparently never requested the employee to produce updated medical documentation of her need for her requested accommodation before denying the requested accommodationsMorrissey v. Laurel Health Care Co., No. 18-1704 (6th Cir. 2019).  The Court also rejected a “de minimis” exception to failure-to-accommodate claims where the employer only twice rejected the employee’s allegedly requested accommodation before she quit.  The Court also reversed dismissal of her constructive discharge and retaliation claims on the grounds that she produced enough evidence of a factual dispute to show a jury.  Importantly, the most recent medical statements provided by the employee to the employer indicated that she had no medical restrictions, but the employer also failed to require her to provide updated medical restrictions when she allegedly again raised the issue.  Rather, the employer seemed to deny that she ever made the requested accommodations.

The Background.

According to the Court’s opinion, a long-time employee produced three medical statements in 2012 indicating that she could not work more than 12 consecutive hours per day and the last such statement indicated that the restriction was only in place until her next appointment.  No other medical documentation was provided by the employee or apparently requested by the employer. Following her 2015 carpal tunnel surgery, she was released to work without any medical restrictions, but the employee alleges that she told the employer that her former 12-hour work restriction remained.   (The court found the existence of the 12-hour medical restriction to be a factual dispute because the plaintiff argued that it continued to the present and the employer argued that it expired no later than March 2012 or August 2015).  Several witnesses and documents indicate that in February 2012, the employer announced a policy of no longer accommodating non-work related medical restrictions, but the employer denied this.

In December 2015, the employer implemented 12-hour shifts in most of its units.  The plaintiff alleged that she requested to transfer into positions where she would work no more than 8 hours/shift, but claims that she was denied.  The employer denies that she made any such request and points out that she had seniority to transfer into 8-hour positions.   Nonetheless, the Court agreed that there was no indication prior to January 30, 2016 that that she had ever been required to work more than 12 hours because at worse she clocked out within 15 minutes of the end of a 12 hour shift on only 8 different occasions.

She contacted the EEOC and corporate on February 1 after she was – for the first time—required to work 13.5 hours on January 30 over her alleged protest about her alleged 12-hour medical restriction.   The manager allegedly told her that she knew nothing about any medical restrictions in her file and had “no control” over the scheduling.  However, when the employer’s corporate officer returned her call, she did not call him back.  There is no discussion about any failure of the interactive process by her refusal to return this call.  Four days later, the plaintiff was required to work a 16 hour shift (even though it was alleged not her turn on the mandatory overtime rotation list) and, when her protest about her alleged medical restriction was allegedly ignored, she quit.

Court’s Analysis

Failure to provide a requested accommodation constitutes direct evidence of discrimination under the ADA, but the trial court analyzed the claim under an indirect burden of proof.   The trial court also analyzed the existence of a disability under pre-ADAA law by requiring the plaintiff to provide a specific diagnosis and disputing that an inability to work overtime was a disability.   The Court found that the alleged medical restrictions on the plaintiff’s ability to walk, stand, bend, etc. was sufficient to satisfy her burden of proving that she was disabled without her also having to prove that she was limited in her ability to work.  

Moreover, she did not have to tell [the employer] about her specific diagnoses.  Morrissey told [the employer] that she could not work more than twelve-hours per shift because she suffered from a disability as defined by the ADA.  That was enough.

Although hindsight is 20/20, the plaintiff in this case did have plenty of medical records supporting her claimed disability if she had ever been asked for medical documentation and, as previously indicated, the Court found it to be a factual issue for the jury whether the employer was sufficiently put on notice of this by her requests for an accommodation and the two medical statements indicating that she had no medical restrictions.   In any event, the medical and other evidence satisfied the plaintiff’s burden of proving at the summary judgment stage that she had a disability so that the jury could resolve any disputed issues of fact.

The Court also found sufficient evidence to show that she had a record of a disability based on her allegations of frequently raising the 12-hour work restriction and the employer’s previous accommodation of that restriction before 2012.  It also found sufficient evidence that she was regarded as disabled because she was allegedly constructively discharged when the employer refused to accommodate her alleged medical restriction. This makes no sense to me under the facts as explained in the Court’s decision, but there it is.

The Court also found sufficient evidence to get to a jury about whether the employer failed to provide a reasonable accommodation.  As mentioned, there is the dispute about two medical statements, so the Court did not issue judgment in favor of the plaintiff.   Importantly, the plaintiff produced evidence about the employer’s (disputed) policy and practice of refusing to accommodate non-work related injuries or chronic medical conditions, the (disputed) refusal to transfer her into an 8-hour position, and the employer requiring her on two occasions within one week to work beyond her alleged medical restrictions.

The record shows that Morrissey asked [the employer] for an accommodation due to her disability, and [it] did not accommodate her.  She was not required to establish anything more for her claim to ripen. . . . This satisfies Morrisey’s burden under the direct evidence test applicable to a claim of failure to accommodate.

The Court rejected the trial court’s ruling that the employer’s actions were de minimis and did not constitute an actionable employment action:

First, however, the de minimis standard arises in the context of an adverse employment action, not a failure to accommodate.  Compare Arndt, 716 F. App’x at 527 with Bowman v. Shawnee State Univ., 220 F.3d 456, 462 (6th Cir. 2000).  Second, and more importantly, under the district court’s logic, an employer would be free to contravene a disabled employee’s restrictions a certain number of times or with an unspecified amount of regularity before the employer is liable.  Such a rule would be not only cruel, but it would also contravene our previous precedent and the ADA.

There was no discussion in the Court’s decision about the failure of the interactive process, which is interesting.  Employers who have prevailed on such claims in other cases were able to point to the employee’s failure to cooperate with permissible medical inquiries or to consider alternative accommodations, etc.

The Court also remanded the constructive discharge claim for the same reasons: “For the reasons described above, a dispute of material fact remains over whether Morrisey is disabled.  This claim is properly analyzed under the direct evidence test because Morrisey’s constructive discharge was premised on [the employer’s] failure to accommodate her.” A constructive discharge claim “requires a finding that ‘working conditions would have been so difficult or unpleasant that a reasonable person in the employee’s shoes would have felt compelled to resign.’”

In Talley, we stated that “a complete failure to accommodate, in the face of repeated requests, might suffice as evidence to show the deliberateness necessary for constructive discharge.’”   . . .  This case presents precisely that scenario.  Morrissey informed Coldwater numerous times of her twelve-hour restriction from 2012-2016, but Coldwater mandated Morrissey to work 13.5 hours on January 31, 2016.  When Morrissey told her manager that she had a disability that prevented her from working beyond twelve-hours, the manager told Morrissey that she had “no control” over the situation.  Five days later, Morrissey was informed that she was being mandated to work sixteen hours, even after Morrissey, again, told her supervisor that she was under a medical restriction.  When she complained to Hayes, Hayes stated there was nothing she could do.  In the face of Coldwater’s repeated failures to honor Morrissey’s accommodation requests, a reasonable plaintiff in her position would have felt compelled to resign.  Because Morrissey has shown that a reasonable juror could have found that she was constructively discharged, she has satisfied the adverse employment element.  Her claim for disability discrimination proceeds to trial.

The Court rejected the employer’s argument that its purported policy of accommodating only work-related injuries was legal: The employer “cannot refuse to provide Morrisey with a reasonable accommodation and then conclude that she is not qualified for her position because she cannot meet her job’s requirements without an accommodation.”

Finally, the Court reversed the dismissal of the retaliation claim on the basis that she satisfied her burden of showing constructive discharge, which can constitute an adverse employment action.  Her allegedly repeated requests for a 12-hour shift restriction constituted protected conduct under the ADA.   While the Court did not hold that every failure to accommodate will also constitute retaliation, the plaintiff satisfied her burden of showing retaliatory motive in this case because the assignment that she work 16 hours on her final shift was made out of order when another employee was allegedly due to be assigned mandatory overtime before her on the alleged overtime rotation list.  (The employer denied the existence of any list).

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Tuesday, November 26, 2019

Sixth Circuit Affirms Dismissal of Religious Discrimination and Harassment Claims

On Friday, a divided Sixth Circuit affirmed an employer’s summary judgment on a religious discrimination and harassment claim, but reversed the 12(b)(6) dismissal of a similar First Amendment retaliation claim where the employee had alleged that his supervisor held him to a higher standard than his co-workers and had previously indicated that he was tired of the plaintiff’s complaints. Hudson v. City of Highland Park, No. 19-1036 (6th Cir. 2019).  The Court’s majority found that the comments made by his co-workers which disparaged his faith were insufficiently severe or pervasive and did not interfere with his job performance.

According to the Court’s opinion, the plaintiff regularly criticized over a five-year period the perceived immorality of his co-workers and the administration of his department and in 2014 filed an OSHA complaint about neglected safety issues.  His co-worker responded with disrespectful comments about his faith and his supervisor allegedly stated that he was tired of the plaintiff’s complaints.   In 2015, his supervisor reported that the plaintiff had overreported his working hours and the plaintiff claimed that it had been an honest mistake, but he was suspended pending investigation.  In meeting with the union during the investigation, the city also added an allegation that the plaintiff had claimed to work for two different employers during the same hours.  Taking the union’s advice to assert his Fifth Amendment rights, the employer immediately terminated the plaintiff for refusing to respond to the new allegation.   At that point, a union dispute led to new union officers who decided to not proceed with the plaintiff’s grievances.  The EEOC dismissed his charge and this litigation ensued.

The trial court dismissed the First Amendment retaliation claim on the pleadings on the basis that they were conclusory and failed to alleged specific facts to support such a claim.  The Court found sufficient factual allegations in the complaint to support a retaliation claim despite the passage of a year between the OSHA complaint had been filed and the plaintiff’s firing and the plaintiff had been complaining for five years without retaliation.

While a short passage of time between the protected speech and the adverse action sometimes helps a retaliation claim, the opposite is not necessarily true.  Our conventional view is to be skeptical that timelines alone prove anything.  [The supervisor] does not point to any case in which the mere passage of time dooms a retaliation claim.  More to the point, [the plaintiff] has more than a timeline, short or long, to show causation.  He alleges that [the supervisor] expressed frustration with his complaints—“he was tired of [the plaintiff’s] complaints”—and knew that [the plaintiff] reported the firefighters to a government agency for their misbehavior.
When the employer pointed out that similar claims were dismissed on summary judgment based on the actual evidence (and plaintiff’s lack of knowledge to prove his case), the Court refused to consider evidence produced during discovery to evaluate the dismissal of a claim at the pleading stage (even though it seems obvious that summary judgment will be granted to the employer on this claim as it was for the other claims).  It also rejected an implied procedural wavier argument.

The Court affirmed summary judgment on the remaining claims.  His due process claims were rejected because he had several state-provided post-termination proceedings available to him with state agencies and courts that he never pursued concerning the irregularity and perceived mishandling of his union grievances.

Similarly, his religious retaliation claims were dismissed on the grounds that he failed to produce evidence of pretext that another firefighter had similarly falsified his time sheet without being fired. There was nothing in the

record that establishes anyone ever reported [the co-worker] for double-dipping or that any city employee even believed [the co-worker] had overreported his hours.  The closest [the plaintiff] comes to offering something concrete on the second point is testimony from a payroll director who had to determine whether [the co-worker] should be paid for time he spent on military leave.  The payroll director admitted that [the co-worker] should not have been paid while on leave, but the director never stated [the co-worker] had done anything wrong.  

The Court rejected the plaintiff’s allegations that the co-worker was never similarly investigated because the supervisor conspired with the co-worker to inflate his time sheets.  The plaintiff testified that the co-worker had full time-sheets for days when he was on military leave and the supervisor reviewed all of the time sheets.  The Court found it dispositive that the plaintiff never saw the co-worker complete those time sheets and did not know how the logs were processed and never asked questions about it.

Nonetheless, the Court rejected some of the employer’s arguments about how the plaintiff “started it” by openly criticizing his co-workers morality (regarding, among other things, pornography and extra-marital affairs, etc.).

Employees are free to speak out about misconduct in the workplace without subjecting themselves to discharge for rocking the boat.   . . . Employees are no less free to root legitimate criticisms about the workplace in their faith than in any other aspects of their worldview.  For many people of faith, their religion is not an abstraction.  It has consequences for how they behave and may require them to be witnesses and examples for their faith.  That reality does not permit differential treatment of them because they criticize behavior on moral grounds stemming from religious convictions as opposed to moral grounds stemming from secular convictions.

The Court also affirmed dismissal of the hostile work environment claim on the grounds that the co-worker comments were not severe or pervasive enough.

“[T]easing, offhand comments and isolated incidents (unless extremely serious) will not amount to discriminatory changes in the terms and conditions of employment.”   . . . .  All [the plaintiff] can show are periodic rude comments from his co-workers, which generally do not suffice. . . . . the reality remains that Title VII does not serve as a “general civility code for the American workplace.”

[The plaintiff] has not presented sufficient evidence that these remarks unreasonably interfered with his work performance.  [He] admits that he never received fewer assignments or worse assignments because of his religious beliefs.  Nor did he ever stop going on fire runs because of the way his colleagues treated him.  [He] never complained to [his supervisor], his supervisor, about the harassment, even though he was plenty willing to tell the leaders of the station about other conduct of the firefighters—namely their intimate affairs.  [His] confidante at the station, Eric Hollowell, also a religious man, heard similar comments directed at him but interpreted them as a joke.  Hollowell noted, too, that the firefighters had a practice of saying grace together before meals, a practice that hardly conveys hostility based on faith.  While Hudson’s colleagues at times did not extend to him the civility and respect that should be the norm in the workplace, that doesn’t mean their conduct violated Title VII.

The other judges did not agree with everything. One would have affirmed dismissal of the First Amendment retaliation claim.  Another took issue with dismissal of the hostile work environment claim on the grounds that the evidence showed the comments were sufficiently severe and pervasive to create a jury question.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Tuesday, November 12, 2019

Ohio Appellate Court Rejects Most of Employee’s Incentive Compensation Claims

Last month, the Ohio Court of Appeals mostly affirmed an employer’s summary judgment in a case where a former employee challenged the amount and payment of his incentive compensation.   Bollman v. Lavery Automotive Sales, 2019-Ohio-3879.  The employee never signed an incentive compensation agreement and, instead, relied on a chart that the employer distributed each year summarizing its compensation plan. The court found that the employer was free to change that chart and incentive plan at will.  Further, the court found that sales commissions do not constitute wages under Ohio’s prompt payment statute.  However, the court agreed with the employee that the employer had been unjustly enriched when it deducted $20/per car more from the bonus pool than it was being charged by GM for its incentive compensation system.

According to the Court’s opinion, the employee was employed at will as a sales consultant.  He was paid a salary plus a commission for every car he sold over 10 each month based on a bonus chart provided by the employer when he was hired.  After 6 years, the employee began participating in a GM incentive program that paid $100/car sold and required the employer to pay $25/car into the bonus pool.   This GM program was in addition to the commissions he received from his employer.  The employer informed its sales staff that it would deduct the GM $25/car charge from their bonus pool.  When GM increased the charge to $30/car, the employer began deducting $50/car from the bonus pool.  When the employees objected, the employer told them that they could resign.   The employee resigned a few years later and brought suit.

The Court rejected the employee’s breach of contract claim based on its deduction of the GM charge from the bonus pool.  The chart did not contain any explicit terms and he conceded that other incentive compensation plans were not documented either.  Further, employee admitted that the employer orally informed him that it would be deducting the GM charge from the bonus pool and that the employer continued to pay his base salary.  The employee objected, but continued to cash his paychecks.   The employer was free to change the compensation plans at will.

The Court also rejected the employee’s claim that the bonus deduction violated Ohio’s prompt wage payment statute: “The per vehicle dealer contribution charges Appellee withheld were deducted from Appellant’s commission. This Court has held the definition of the word “wage” as used in R.C. 4113.15 does not include commissions, which are not guaranteed pay or reimbursement for expenses.”

The Court, however, agreed with the employee that the employer may have been unjustly enriched by deducting $50/car from the bonus pool when GM was only charging it $30/car.

The doctrine of unjust enrichment “applies when a benefit is conferred and it would be inequitable to permit the benefitting party to retain the benefit without compensating the conferring party.” Garb–Ko, Inc. v. Benderson, 10th Dist. No. 12AP–430, 2013–Ohio–1249, ¶ 25 (Citation omitted). The elements of an unjust enrichment claim are: (1) the plaintiff conferred a benefit on the defendant, (2) the defendant knew of the benefit, and (3) it would be unjust to allow the defendant to retain the benefit without payment to the plaintiff.

While the Court had no problem with the employer offsetting the amount it was charged by GM from the employee’s sales commissions/bonus pool, it concluded that the employer “was unjustly enriched by deducting amounts which exceeded the per vehicle dealer contribution charge it paid to General Motors . . . “

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.