Ohio Appeals Court: Employee’s Speculation Does Not Convert a Lateral Transfer Into a Constructive Discharge.

Late last month, Montgomery County Court of Appeals affirmed the dismissal of wrongful, constructive discharge claim against an employer which arose out of the plaintiff’s transfer to a similar job at a location 15 miles from his former job. Lookabaugh v. Spears, 2008-Ohio-1610. The court also dismissed defamation claims against the employer’s customer whose complaints about the plaintiff motivated his transfer because the customer had a qualified privilege to complain. Although the plaintiff speculated that the new job would not be reliable and prevented him from regularly checking on his ill wife during lunch, the court noted that a "[p]art of an employee's obligation to be reasonable is an obligation not to assume the worst, and not to jump to conclusions." Farris v. Port Clinton Sch. Dist., 2006-Ohio-1864, ¶64. Moreover, a lateral ‘transfer without a change in benefits, salary, title, or work hours is usually not an adverse employment action. Policastro v. Northwest Airlines, Inc.,” 297 F.3d 535, 539 (6th Cir 2002).

The plaintiff accepted the job in part in order to obtain health insurance because his wife had been ill. Although the job regularly required him to travel, he could often check on his wife during his lunch break. After a customer (who had long-standing conflicts with the plaintiff) complained and threatened to move his business if the plaintiff continued to work there, the employer transferred the plaintiff to the same job 15 miles away. The plaintiff rejected the transfer. After filing suit, the plaintiff claimed that the transfer was an adverse job action which forced him to resign because (1) there had not been a job previously available at the new location (i.e., it was a “ghost job” which had been created for him as a pretext), (2) the offered job was not comparable, and (3) his was no longer the decision-maker regarding his employment.

As noted by the court, an adverse employment action generally “occurs when it results in a material change in wage or salary, a less distinguished title, a material loss in benefits, significantly diminished material responsibilities, or other indices that might be unique to the particular situation. Hollins v. Atlantic Co., 188 F.3d 652, 662 (6th Cir. 1999). A significant increase in the employee's commute may be a factor in whether a transfer is an adverse employment action. Keeton, 429 F.3d at 264-65 . . . . In determining whether the transfer is an adverse employment action, courts generally employ an objective test. See Mauzy, 75 Ohio St.3d at 588-89; Policastro, 297 F.3d at 539, citing Kocsis v. Multi-Care Mgmt., Inc., 97 F.3d 876, 886 (6th Cir. 1996). An employee's subjective belief that one position is more desirable is irrelevant to whether the transfer is an adverse employment action. E.g., Policastro, 297 F.3d at 539; Tessmer v. Nationwide Life Ins. Co.,” Franklin App. No. 98AP-1278 (9/30/99).
The court rejected the plaintiff’s argument that the transferred job was not comparable. Although the plaintiff complained about the employee turnover rate at the new location, the seasonal downturns in working hours, and the new manager’s temper, the plaintiff “assumed that he would be fired from” the new location. The plaintiff “cannot base a constructive discharge claim based on an unsubstantiated assumption that his worst fears would come true. ‘Part of an employee's obligation to be reasonable is an obligation not to assume the worst, and not to jump to conclusions.’" Farris v. Port Clinton Sch. Dist., 2006-Ohio-1864, ¶64.

The fact that the plaintiff” would no longer be able to visit his wife during lunchtime does not render the position at [the new location] incomparable to the [former] position. Although [the plaintiff] benefitted from living close to the [former] facility by being able to check on his wife at lunchtime, that benefit was a subjective reason for [the plaintiff] preferring the [former] position. However, being able to go home at lunchtime was not a benefit of employment offered by Landmark to its employees. [The plaintiff] was not promised that he could go home at lunchtime, and he indicated that he did not go home every day because he was not always in the area during lunchtime. His position with Landmark . . . . . required him to travel to customers' properties throughout the day. Although [the plaintiff] would have preferred to work at the facility within a mile of his home, the addition of a ten to fifteen mile commute did not constitute a material change in the terms of his employment.”

Because there was no evidence that the plaintiff had been constructively discharged, he also could not prevail on his claim that his "discharge" had violated public policy.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/2/2008/2008-ohio-1610.pdf.

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: Controller’s Objection to Corporate Misfeasance and Breach of Fiduciary Duty Cannot Support Wrongful Discharge Claim.

Late last month, the Holmes County Court of Appeals reversed a jury verdict in favor of a discharged controller on the grounds that the trial court should have entered summary judgment in favor of the defendant employer on the claim of wrongful discharge in violation of public policy. Schwenke v. Wayne-Dalton Corp., 2008-Ohio-1412 (3/27/08). In that case, the plaintiff controller alleged that he had been terminated for complaining about corporate officer misfeasance and misappropriation. However, the court determined that the plaintiff had failed to identify a specific source of public policy which was violated by the alleged corporate misfeasance and misappropriation. The defendants had claimed that the plaintiff had been fired because of “his inability to work with his direct supervisor and with senior management, his negative and arrogant attitude and "the on-going degenerative nature of [his] work performance.” Accordingly, the judgment of $72,000 and $148,000 in attorneys fee was reversed.

The plaintiff had alleged that the CFO and president of the privately-held corporation had engaged in misappropriation and malfeasance in engaging in the following actions for over three years:
* The “corporate office would `issue' credits for expenses incurred in Europe (France was facility location). The driver of the amount of the credit would be based on the financial deficit reflected on Europe's financials that the executives were looking to conceal. Credits would be issued against the Mt. Hope manufacturing facility and possibly other facilities;”
* The American “facilities would as a matter of business sell products to [the company]. As such the US had an ongoing receivable for which Europe would have to issue payments to the US. These `credits' would be used to offset legitimate receivables. The credit would reduce [corporate] expenses, and the offset to A/R would allow for no exchange of cash for this specific issue, [r]esulting in overstated [corporate] Europe profits; [r]esulting in fictitious [corporate] cash flow; [r]esulting a stronger appearing [corporate] Europe balance sheet; [f]avorable credit terms from vendors for the [corporate] entity; and [r]esulting in overstated costs in the USA and if the Credit was treated as a return, an understatement of revenues (same P & L effect but in different areas of the income state).”
* “[C]orporate accounting personnel, under the direction of the executives, would write-up manual journal entries to decrease costs in Europe and increase costs in the US. On occasion there would be no credits issued, just a transfer of costs on paper that would inflate US costs while masking costs and losses in Europe.”
* The defendant corporate officers “misused company assets for personal gain. Specifically, [one] defendant . . . received massive personal loans (to fund personal assets such as homes) from [the corporation] at interest rates significantly below the Fair Market Value (i.e. 2.5%) while earning large interest rates on their deferred compensation (i.e. 13%-17%). This occurred over a 3 1/2 year period between January 2001 and July 2004. The inappropriate moving of costs across [corporate] facilities allowed for inaccurate bonus accruals, rewards, and deferred compensation accruals for [the individual corporate officer defendants]. Numerous employee (management, supervisory and non-supervisory) bonus awards (and sometimes departments) were subjectively lowered, with no basis, to decrease lower ranking employees' annual bonus payouts allowing for inflated executive . . . . bonus and deferred compensation awards;”
* The corporate individual defendants “were engaged in inappropriate accounting procedures and misappropriation of corporate assets. Specifically, defendants implemented the `3-B Plan', which allowed major shareholder . . . . to receive undisclosed commissions in the amount of millions of dollars by selling products in Europe below costs (i.e. `dumping').”

The plaintiff controller denied that his claims were governed by Ohio’s Whistleblower statute, and thus, he had not been required to prove that he had put his concerns in writing to his supervisors or complained to a government agency. Rather, he claimed that his protests were protected as a matter of public policy and that his retaliatory discharge violated public policy.

In order to prevail on such a claim, a plaintiff must demonstrate: "1. That clear public policy existed and was manifested in a state or federal constitution, statute or administrative regulation, or in the common law (the clarity element); 2. That dismissing employees under circumstances like those involved in the plaintiff's dismissal would jeopardize the public policy (the jeopardy element); 3. The plaintiff's dismissal was motivated by conduct related to the public policy (the causation element); and 4. The employer lacked overriding legitimate business justification for the dismissal (the overriding justification element)."

The court determined that, notwithstanding the detailed allegations, the plaintiff controller could not prevail because he had failed to satisfy the clarity element by identifying a public policy existed. “Nor did [the controller] cite or present the trial court with any legal authority in support of his argument that his termination violated public policy. [The controller] merely alleged that he questioned [the individual corporate officer defendants] about alleged inappropriate accounting practices and misappropriations of corporate assets and was fired and that his firing violated public policy. [The controller], . . . merely alleged that his firing violated public policy. In short, . . . [the controller] never offered any legal authority suggesting that [appellant's] conduct and alleged reaction from or by his employer forms a basis for a "public policy' exception to Ohio's at will relationship."

While the concurring judge was willing to consider that fiduciary duties may have been violated, the judge was unwilling to believe that breach of fiduciary duty constitutes a source of public policy sufficient to override the employment at will doctrine.

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/5/2008/2008-ohio-1412.pdf.

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.

EEOC Announces that Wal-Mart Will Pay $300K to Applicant with Cerebral Palsy

The EEOC announced last week that “Wal-Mart Stores, Inc. will pay $300,000 to a Hardin, Mo., man to settle a disability discrimination lawsuit.” The EEOC alleged in its lawsuit (EEOC v. Wal-Mart Stores, Inc., No. 04-cv-0076 (W.D. Mo)) “that Wal-Mart refused to hire Steve Bradley, who has cerebral palsy and uses crutches or a wheelchair for mobility, when he applied for employment at its Richmond, Mo., store in 2001. At the time, the retail giant was preparing to open a new 24-hour Supercenter and was conducting mass hiring. Bradley applied for any available job, but during his interview he was questioned about his ability to work using his wheelchair and was told he was “best suited” for a greeter position. Ultimately, the company refused to hire him,” which the EEOC alleged violated the ADA.

In the proposed consent decree, which still requires court approval, the EEOC explained that “Wal-Mart agreed to pay $300,000 to Bradley, provide ADA training to managers at its Richmond store, notify job applicants about the decree and inform several Kansas City-area job service agencies that that the company seeks to employ qualified individuals with disabilities.”

“The settlement followed a February 2007 decision by the U.S. Court of Appeals for the Eighth Circuit (EEOC v. Wal-Mart Stores, Inc., No.06-1583 [8th Cir.]) that reversed a district court ruling dismissing the case. Wal-Mart had claimed that Bradley would pose a safety risk to himself or customers if he worked at the store using a wheelchair or crutches. In addition to finding that the EEOC presented sufficient evidence for the case to go to trial, the appeals court also held, . . . that an employer bears the burden of proof if it claims that a disabled employee or applicant poses a “direct threat” to the health or safety of himself or others.”

Insomniacs can read the full press release at http://www.eeoc.gov/press/4-17-08.html.

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.

Affirmative Action Employer Agrees to Pay $1.5M to Settle OFCCP Allegations of Discriminatory Hiring Process

Today, the U.S. Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) announced that Dallas-based Vought Aircraft Industries Inc. would be settling “allegations of hiring discrimination based on race and gender and agreed to pay $1.5 million in back wages to 1,045 applicants. . . . OFCCP investigators found that Vought's hiring process disproportionately eliminated African American and Asian males, as well as all females, applying for the assembly trainee/aircraft assembly beginner jobs. OFCCP concluded that two steps in Vought's hiring process — an application screening and a test — were primarily responsible for the discrimination. Under the terms of the consent decree, Vought will pay the 1,045 rejected applicants $1,377,500 in back pay with interest. The company also will pay about $70,000 for applicants interested in participating in a four-week aircraft assembly training program, and from that program 35 applicants will be hired into assembly trainee/aircraft assembly beginner positions. Additionally, in lieu of retroactive seniority salary, the new hires will be paid $1,500 each.”

According to the OFCCP, “Vought, a manufacturer of aircraft parts and auxiliary equipment contracts with the U.S. Department of Defense, has discontinued its use of the test and modified its screening procedures, and will undertake extensive self-monitoring measurements for two years to ensure that all hiring practices fully comply with federal law. Additionally, the company will ensure compliance with recordkeeping requirements.”

The OFCCP is an agency within the United States Department of Labor's Employment Standards Administration and enforces Executive Order 11246 and other laws that prohibit employment discrimination by federal contractors. The agency monitors contractors to ensure that they provide equal employment opportunities without regard to race, sex, color, religion, national origin, disability or veteran status.

Insomniacs can read the OFCCP’s full press release at http://www.dol.gov/opa/media/press/esa/esa20080418.htm.

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.

EEOC Settles Race Discrimination Case for $250K When HR Fires Employee Based on Racial Bias of Employee’s Supervisor.

The EEOC announced this week that it had settled “a race discrimination lawsuit against BCI Coca-Cola Bottling Company of Los Angeles (BCI) for $250,000 on behalf of an African American former worker in Albuquerque, N.M. The resolution follows a favorable ruling by the U.S. Court of Appeals for the 10th Circuit, which established an important legal doctrine known as “subordinate bias” theory. . . . The EEOC had charged BCI with committing race discrimination against Stephen B. Peters, a black merchandiser, when a supervisor fired him in 2001 for not working his scheduled day off, even though Peters had called in sick and provided medical documentation. Additionally, the EEOC found that the supervisor made racist remarks about blacks generally.”

In initially dismissing the EEOC’s lawsuit on summary judgment, “the district court had said that the BCI official who actually terminated Peters was unaware of his race. However, the 10th Circuit [reversed and] found that a jury might reasonably conclude that Peters’ termination was based on his race because there was evidence that one of his supervisors, Cesar Grado, treated African Americans more harshly than other employees. The EEOC asserted that Grado made racial remarks about African Americans. In a published opinion, 450 F.3rd 476 (10th Cir. 2006), the appeals court observed, “In making the decision to terminate...the human resources official relied exclusively on information provided by Mr. Peters’ immediate supervisor, who not only knew Mr. Peters’ race but allegedly had a history of treating black employees unfavorably and making disparaging racial remarks in the workplace.” . . . Under this legal doctrine, called the “subordinate bias” theory, an employer may be liable for discrimination when it relies on comments from a biased subordinate supervisor when taking adverse employment action against an employee.”

Interestingly, “[a]fter the 10th Circuit ruling, BCI asked the U.S. Supreme Court to hear the case via a petition for a writ of certiorari. The high court accepted the case, and it was fully briefed and set for oral arguments. However, less than a week before the oral argument, BCI withdrew its appeal with no explanation and, subsequently, settled the case with the EEOC.”
“In addition to $250,000 for Peters, the EEOC’s two-year consent decree contains significant injunctive relief which applies to BCI and its managing agents at the Albuquerque facility. The injunctive measures require BCI to:

• Carry out policies and practices that promote a work environment free from race discrimination -- including a review of its existing policies on race discrimination and making any necessary changes so that those policies comply with Title VII of the Civil Rights Act;


• Distribute its policies to current employees and to new employees hired during the duration of the decree;


• Provide its employees with written policy statements regarding reporting and preventing racial bias;


• Post a Notice with a statement that Title VII prohibits race discrimination, and provide employees EEOC’s contact information; and


• Hold training sessions with managers, supervisors and employees of the Albuquerque facility on Title VII and race discrimination.

“The consent decree also prohibits BCI from retaliating against Peters or any witness in this case, and converting the official status of Peters’ firing to a voluntary resignation.”
Insomniacs may read the EEOC’s full press release at http://www.eeoc.gov/press/4-15-08.html.

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: Employee Handbook is Not a Binding Non-compete Agreement.

Last month, the Lake County Court of Appeals affirmed the dismissal of a fraud lawsuit brought by an employer against an employee after the plaintiff-employer incurred substantial litigation expenses in an earlier case brought by the employee’s former employer. Freedom Steel, Inc. v. Rorabaugh, 2008-Ohio-1330 (3/21/08). The employee salesperson left his long-time employer and was hired by the plaintiff-employer after assuring it that he had never signed a non-competition agreement with his long-time employer. However, he did not inform the plaintiff-employer that he had signed an employee handbook acknowledgment because it was not a non-compete agreement and he did not think that handbook’s non-competition provision was enforceable. The court ultimately ruled that the employee was correct.

When the employee resigned his long-time employment, he did not reveal the identity of his new employer. When the long-time employer asked him to not call on any of their customers, he responded that he did not have a non-compete and would do what he had to do to get and keep a job. In response, the long-time promised that it would sue him if he competed against it.

Not surprisingly, the employee generated sales by means of his prior customer relationships. In “March of 2005, [the employee] was served with a lawsuit filed by [his long-time employer] in Summit County. In the complaint, [the long-time employer] alleged violations of Ohio's Trade Secrets Act, interference with contractual business relations, conversion, and breach of contract. Shortly after being served, [the employee] notified [the plaintiff-employer] of the pending lawsuit [and was] questioned . . . again regarding whether he had signed anything "that would drag us into a lawsuit." [The employee] again denied signing such a document insisting "I will prove it to you, and you're going to apologize to me ***." Based on these assurances, the plaintiff-employer did not fire the employee at that time.

“Eventually, however, [the plaintiff-employer] was served with a subpoena from [the long-time employer] seeking disclosure of . . . . the names of ‘customers, where they are located, their addresses, who they are, what they buy, what you're selling them price wise, everything about the customers, it's an open book in other words.’ [The plaintiff-employer] fought the subpoena by filing a motion for protective order; however, the trial court overruled the motion. The trial court rendered the ruling a final appealable order and appellant subsequently filed an appeal with the . . . Court of Appeals. Before the appeal was heard,” the employee settled the lawsuit with his long-time employer.

On April 4, 2006, after the dismissal, [the plaintiff-employer] filed suit against [the employee] in the Lake County Court of Common Pleas alleging fraud. [The plaintiff-employer] asserted [the employee] defrauded [the plaintiff-employer] by concealing relevant information regarding his past employment which caused it to expend over $18,000.00 in attorney's fees to defend against the subpoena issued by [the long-time employer] in the Summit County case. . . . In February of 2007, the matter proceeded to jury trial. After deliberating, the jury returned a verdict” in favor of the employee.

During the trial, the trial court had instructed the jury that as a matter of law the employee handbook signed by the employee was not a binding non-compete or trade secrets agreement. Therefore, the employee had truthfully denied ever signing a non-compete agreement. On appeal, the Court of Appeals agreed that the employee handbook could NOT constitute a binding contract because the Acknowledgment page signed by the employee contained the following disclaimer:

"NOTHING CONTAINED IN THIS HANDBOOK IS INTENDED AS A CONTRACT AND THE POLICIES, RULES AND BENEFITS DESCRIBED IN IT ARE SUBJECT TO CHANGE AT THE SOLE DISCRETION OF FAMOUS ENTERPRISES WITHOUT NOTICE AT ANY TIME."

“Although the document indicates, by signing the receipt, [the employee] agreed to be bound by the statements contained within it, the document does not mention and thus does not bind [the employee] (or any acknowledging employee) to a non-compete clause. Moreover, although the document indicates that, by signing the document, [the employee] would not disseminate or use confidential information "CRITICAL TO THE SUCCESS OF FAMOUS ENTERPRISES" (emphasis sic), it does not use the term nor set forth any general trade secrets any current or past employee must not publish. The document merely states that confidential information, e.g., customer lists, pricing policies or other sensitive information, shall not be disseminated or used "OUTSIDE OF COMPANY PREMISES." As this statement appears in an employee handbook and, moreover, is vague as to what it specifically relates, it is reasonable to conclude that it simply reflects a policy requiring current and past employees not to disclose the information it stipulates as confidential.”

Not discussed by the Court is the fact that the plaintiff-employer likely would have been subpoenaed regardless of the arguable existence of a non-compete agreement because the trade secrets claim does not require the existence of an underlying breach of contract. However, the court of appeals incorrectly noted in a footnote that the use of the customer information from memory (as opposed to taking a list) was not actionable under Ohio's Trade Secret Act. (This issue was previously the subject of an earlier Ohio Supreme Court opinion on February 6, 2008 in Al Minor & Assoc., Inc. v. Martin, 2008-Ohio-292).

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/11/2008/2008-ohio-1330.pdf .

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.

Sixth Circuit: Title VII Protects Family and Friends of Employees who File EEOC Charge.

[Editors' Note: This decision was reversed by the Sixth Circuit en banc on June 5, 2009.]

On March 31, 2008, the a divided Sixth Circuit recognized associational claims for retaliation after an employer fired the fiancé of an employee about three weeks after it received notice of her EEOC Charge. Thompson v. North Am. Stainless LP, No. 07-5040 (6th Cir. 3/31/08).

“According to the complaint, Regalado filed a charge with the EEOC in September 2002, alleging that her supervisors discriminated against her based on her gender. On February 13, 2003, the EEOC notified [the employer] of Regalado’s charge. Slightly more than three weeks later, on March 7, 2003, the [employer] terminated [the] employment of” Thompson, Regaldo’s fiancé. “Thompson alleges that he was terminated in retaliation for his then-fiancée’s EEOC charge, while [the employer] contends that performance-based reasons supported the plaintiff’s termination.” The employer successfully argued to the trial court on summary judgment that it was not a violation of Title VII to terminate Thompson on account of Regalado’s EEOC Charge.

The Sixth Circuit found the public policy of Title VII supported recognizing a cause of action under these circumstances. ““The anti-retaliation provision seeks to secure [a non-discriminatory workplace] by preventing an employer from interfering (through retaliation) with an employee's efforts to secure or advance enforcement of the Act's basic guarantees.” Clearly, Regalado would have been deterred from filing her EEOC Charge if she had known that it could result in the termination of her fiancé.

The dissent argued that the Court should leave it to Congress to amend Title VII to include within the scope of the anti-retaliation provisions individuals other than the employee who filed the EEOC Charge.

Insomniacs can read the full decision at http://www.ca6.uscourts.gov/opinions.pdf/08a0129p-06.pdf.

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.

Cuyahoga Court Affirms Denial of Unemployment Compensation to Employee Who Was Fired for Excessive Absenteeism.

Last month, the Cuyahoga County Court of Appeals affirmed the denial of unemployment compensation to a phlebotomist who was fired in December 2004 after missing 10 days of work in 2003 and 10 days of work in 2004. Although the employee claimed that the employer was prohibited from firing him by federal and state statutes, he never returned (or produced) his FMLA certification forms to show that his unexcused absences were caused by his alleged migraine headaches and never produced a copy of the subpoena to show that he had been subpoenaed to testify in juvenile court (which was the justification he gave for his last unexcused absence). Therefore, he could not show that his absences were protected by the FMLA or state law. Because the employer followed its progressive disciplinary process in addressing the employee’s excessive absenteeism, he had been on warning that he could lose his job if his attendance did not improve or he failed to provide a legitimate reason (such as a doctor’s excuse or subpoena). Bemak v. Ohio Job & Family Servs., 2008-Ohio-906 (3/6/08).

Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/8/2008/2008-ohio-906.pdf.

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.

Trade Secrets Claim Reinstated But Not Franchisor’s Non-competition Claims Because Franchisee Was Real Party in Interest

Last month, the Lucas County Court of Appeals affirmed the dismissal of claims (for breach of noncompetition agreements and common law unlawful competition) brought by a special event photography franchisor against several former employees who formed a competing business. The trial court found that the party actually harmed by the breach of the non-competition agreement was the franchisee in exclusive territory, not the franchisor, and dismissed the lawsuit. IPI, Inc. v. Monaghan, 2008-Ohio-975 (3/7/08). However, the Court of Appeals found that the franchisor adequately pled a claim for theft of trade secrets and that it had an adequate interest in bringing that claim in its own name. Therefore, the appellate court reinstated the trade secrets claim.

By way of background, the plaintiff, “IPI, is a company that developed a plan for ‘event’ photography, e.g., Santa Claus programs, golfing events and youth sporting events, which involves not only the taking of the photographs at a special event, but also the production and sale of the photographs on site.” IPI entered into a franchise agreement with Visual Marketing giving it the exclusive right to the Ohio territory. In exchange, Visual Marketing paid IPI a $20,000 fee and a percentage of its profits. IPI employed the three defendants, until one of them (Aaron) went to work directly for Visual Marketing. While working with IPI, all three defendants allegedly signed non-compete agreements. When Aaron became employed by Visual Marketing, he likewise signed a non-compete agreement with Visual Marketing.

The three defendants allegedly formed a competing special event photography business in Ohio and Visual Marketing brought suit (which was mediated to a settlement). IPI then filed suit. However, the trial court found that IPI could not prove that it had a non-compete agreement with the second defendant and could not prove the third defendant had breached her agreement with IPI or was involved with the competing business. As a result, the trial court dismissed all claims against the second two defendants.

As for the first defendant (Aaron), the court found that, notwithstanding the franchise agreement and profit-sharing, the party actually harmed by the alleged breach of the non-competition agreement and theft of trade secrets was Visual Marketing, not IPI. As a result, it found that the lawsuit was not being prosecuted in the name of the real party in interest as required by Ohio Rule of Civil Procedure 17(A) and dismissed the lawsuit.

“The purpose of Civ.R. 17(A) is to allow a defendant to avail himself of evidence and defenses that he has against the real party in interest, and to secure the finality of the judgment so that he is protected against a second suit brought by the real party in interest on the same matter.” While an intended third-party beneficiary of a contract may be a real-party-in interest, “[i]t was Visual Marketing, not IPI, that directly benefited from this agreement; there is no evidence in the record of this cause to establish that the parties to that agreement entered into that contract with any intent to benefit IPI. Therefore, IPI is not a third-party beneficiary/real party in interest and lacks the right to bring suit against on the same matter, that is a non-compete agreement, that was the subject of the contract between and Visual Marketing.”

However, the appellate court agreed that IPI could be the real-party-in-interest for its trade secret claim. “In the present case, IPI alleged that it developed, inter alia, "confidential and specialized techniques for event photography, a business marketing plan for its franchisees, a training program, and proprietary and confidential software that it makes available to its franchise systems." IPI alleged that appellees/cross-appellants misappropriated these systems, techniques, etc., that is, its alleged trade secrets. If it is shown that these are truly trade secrets and that appellees/cross-appellants misappropriated the same, IPI would be directly injured by that misappropriation. Therefore, IPI is the real party in interest on this claim.”

Insomniacs may read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/6/2008/2008-ohio-975.pdf.

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.

EEOC Announces $505K Settlement for Sexual Harassment of Teenagers by Restaurant Supervisor.

Yesterday, the EEOC announced that a Colorado “McDonald’s restaurant franchise will pay $505,000 and provide significant remedial relief to settle a sexual harassment lawsuit” brought by the EEOC “on behalf of a class of young female employees, including teens.”

“The EEOC’s suit, Civil Action No. 06-cv-01871-MSK-CBS, was filed in U.S. District Court for the District of Colorado against JOBEC, Inc., a management company, and the interrelated corporations Colorado Hamburger Company, Inc. and Farmington Hamburger Company, Inc., who operate McDonald’s franchises in Durango and Cortez, Colo., and Farmington and Aztec, N.M. “ The Commission’s suit alleged that Tiawna Shenefield, now known as Tiawna Jacobson, Brandi Michal and a class of females, many of whom were 15 to 17 years old, were subjected to egregious sexual harassment in the workplace by their male supervisor. The harassment allegedly included the supervisor biting the breasts and grabbing the buttocks of the class members, making numerous sexual comments, as well as offers of favors in exchange for sex. Such alleged conduct violates Title VII of the Civil Rights Act of 1964.”

“Under the terms of the consent decree resolving the case, the defendants will pay the two named victims and their attorney, Lynne Sholler, of Durango a total of $450,000 for compensatory damages and attorney fees. An additional $55,000 will be distributed to two other class members represented by the EEOC. The decree also provides for significant non-monetary relief, including letters of apology to the victims; training on sex discrimination in the defendants’ Colorado and New Mexico facilities; posting notices of non-discrimination in all of the defendants’ workplaces; and an injunction prohibiting discrimination and retaliation.”

Insomniacs can read the EEOC’s full press release at http://www.eeoc.gov/press/4-7-08.html.

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.

EEOC Obtains $904K Settlement on Behalf of 10 Employees Fired in a RIF Who Alleged Age Discrimination and/or Retaliation.

Yesterday, the EEOC “announced the settlement of its age discrimination lawsuit against Lockheed Martin Global Telecommunications for $773,000 for a class of eight older employees” in addition to the severance pay already received by the eight employees. In addition, “through a separate consent decree filed last year to settle retaliation claims brought in the same lawsuit, “Lockheed Martin has paid $131,000 in damages to two former employees whose severance was withheld because they had pursued administrative complaints with the EEOC.”

"In its suit (05-cv-00287-RWT), filed in the U.S. District Court for the District of Maryland, Southern Division, the EEOC charged that the . . . employer violated the Age Discrimination in Employment Act (ADEA) when it discriminated against the employees, ages 65, 62, 61 (three), 53 and 47. The eight workers were fired during a reduction in force implemented in the COMSAT Mobile Communications Division in October 2000. The back pay remedies received by the claimants are in addition to severance pay already received.”

“In Fiscal Year 2007, the EEOC received 19,103 age discrimination charge filings, a 15% increase from the prior year and the biggest annual increase in five years. Allegations of age bias account for 23% of the agency’s private sector caseload.”

Insomniacs can read the EEOC’s full press release at http://www.eeoc.gov/press/4-7-08a.html.
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.

Unanimous Supreme Court: OCRC Must Issue Subpoena Requested by Employer During Preliminary Investigation.

In late March, a unanimous Ohio Supreme Court ruled that Ohio Revised Code § 4112.04(B) requires the Ohio Civil Rights Commission to issue a subpoena requested by an employer during the OCRC’s preliminary investigation. In doing so, the Court invalidated OCRC Rule, Ohio Administrative Code 4112-3-13(B), for conflicting with the controlling statute. State ex rel. Am. Legion Post 25 v. Ohio Civ. Rights Comm., Slip Opinion No. 2008-Ohio-1261 (3/26/08).

The case arose because an American Legion Post was notified by the OCRC that a former employee had filed a Charge claiming to have been sexually harassed and then fired for complaining. The Post asserted that the Claimant had been fired after it received an anonymous letter alleging that the Claimant was a convicted felon. The Post requested the OCRC to issue a subpoena to the Claimant’s parole officer so that it could inspect her criminal and probation records to prove a non-discriminatory/retaliatory reason for firing her. The OCRC declined to issue a subpoena on the Post’s behalf, and instead, issued a subpoena on its own behalf and reviewed the records itself. The OCRC declined to permit the employer to review the subpoenaed records and issued a probable cause finding that the Post had probably committed an unlawful discriminatory practice. When conciliation failed, the OCRC instituted formal proceedings against the Post.

In the meantime, the Post initiated mandamus proceedings in court against the OCRC for refusing to issue the requested subpoena. The trial court granted the OCRC’s motion to dismiss. However, that decision was reversed on appeal. As mentioned, the Supreme Court affirmed the reversal on the grounds that the OCRC was required by statute to issue the requested subpoena.

Insomniacs may read the decision in full at http://www.supremecourtofohio.gov/rod/docs/pdf/0/2008/2008-Ohio-1261.pdf

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.