Franklin County Court: Summary Judgment Reversed When Peer Review Privilege Might Not Apply to Protect Hospital

Last month, the Franklin County Court of Appeals reversed summary judgment in favor of Mount Carmel Hospital on a wrongful discharge claim brought by an Emergency Room physician on the grounds that the trial court improperly assumed that relevant evidence which the hospital refused to produce during discovery was protected by Ohio’s peer review privilege.

Thus, documents created by a peer review committee or exclusively for a peer review committee would be protected by the privilege. However, the Court concluded that a hospital could not shield documents it created itself by simply circulating them among the peer review committee.

If a health care entity itself is the original source, it cannot shield documents from disclosure just by circulating them during peer review proceedings. In other words, a health care entity must produce documents responsive to a document request if it created the document, the document was not generated by and/or exclusively for a peer review committee, and the document is available outside of any peer review committees' records (i.e., employees, affiliates, officers, or directors of the health care entity can access the document for non-peer review purposes).

Ultimately, the Court concluded that the trial court had failed to analyze whether the withheld documents were created by the hospital or the peer review committee and whether they would be covered by the privilege. “Absent evidence that the requested documents were created by and/or exclusively for a peer review committee, or generated by an original source and produced or presented to a peer review committee, the party asserting the R.C. 2305.252 privilege has not met its burden.” Therefore, the case was remanded to the trial court to evaluate the hospital’s privilege claim and to permit the plaintiff physician to complete discovery and revise his response to the hospital’s summary judgment motion if the hospital ultimately produced additional relevant evidence.


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.

Franklin County Appeals Court Affirms Discovery Sanction Against Employer to Produce Copies of Computer Hard Drives.

Discovery sanctions are in the news a lot these days. There were two notable discovery abuse decisions last week. In both, the appellate court affirmed the trial court’s sanction against the uncooperative defendants who failed to comply with their obligations to produce information requested by plaintiffs before trial. First, the Washington Supreme Court affirmed entry of an $8M default judgment plus attorney fees against Hyundai Motor Company for its “willful efforts to frustrate and undermine truthful pretrial discovery.”
The parties continued to argue about their discovery obligations, including the location and timing of depositions and whether the defendants had produced all responsive documents which had been requested. Although defendants had asserted that it has responded fully to the discovery requests, it did not respond to the Plaintiff’s second motion to compel discovery and did not seek a protective order to protect confidential information encompassed by the Plaintiff’s discovery requests. Not surprisingly, the trial court granted the second motion to compel, suggested that defendants submit a protective order for consideration and directed defendants to produce the requested documents or face sanctions. However, defendants again insisted that they had already fully complied with the discovery requests and produced no further documents. Therefore, in November 2007, Plaintiff moved for a default judgment as a discovery sanction. In response, the defendants, “[t]o the extent that they might have withheld any documents, defendants blamed their failure to produce on Plaintiff’s refusal to explain what documents were missing from defendants' response.”

The trial court referred the discovery dispute to a magistrate. Defendants submitted an affidavit in support of their position, but then the information was contradicted by the testimony of their witness, who admitted that the defendants had not produced relevant documents in discovery because of, among other things, confidentiality concerns and the breadth of the discovery requests. Unfortunately, the defendants had never sought a protective order to protect the confidentiality of the information or submitted any objections based on the overbreadth of the discovery requests. Thus, the magistrate found the defendant’s failure to comply with the prior court orders to be willful.

Nonetheless, the magistrate did not order a default judgment for the defendants’ willful disregard of court orders. Instead, he ordered the defendants to produce the documents within 20 days, to pay the Plaintiff’s discovery expenses (i.e., attorney fees) and to “provide, at their own cost: (1) a forensic copy of the computer hard drives of Martin, Citynet's Chief Financial Officer ("CFO"); and Citynet's Chief Operating Officer ("COO"); and (2) any schedule, calendar, .pst file, Outlook application, or PDP application utilized by Martin.” The parties then agreed upon a mutually satisfactory protective order. The trial court then affirmed most of the magistrate’s recommendations over the defendant’s objections:

In sum, the trial court approved and adopted the magistrate's decision with a few relevant caveats. First, the trial court allowed defendants to redact from the forensic copies of the hard drives any privileged material. Second, the trial court permitted defendants to designate personal information contained on the forensic copies for "attorneys' eyes only." Finally, the trial court required Bennett to execute an affidavit confirming that, to the best of his knowledge, he is engaged in no professional activity that is in any way competitive to the business activity of the Citynet entities, that he does not encounter any of the Citynet entities competively in the course of his professional life, and that he otherwise does not engage in competition with any of the Citynet entities. Apparently, the trial court ordered such an affidavit to ensure that Bennett would not use the confidential business information contained in the forensic copies to achieve a competitive advantage over defendants.

The defendants immediately appealed and the Court of Appeals found the discovery order to be a final and appealable order. “[A]ppellate courts have reasoned that as long as an appellant presents a "colorable claim" that the documents subject to a discovery order are privileged and/or confidential, the proceeding that resulted in that order qualifies as a "provisional remedy." Moreover, “[b]ecause information is no longer confidential after dissemination, defendants would not have an effective remedy if forced to delay appeal until after final judgment.”

The Court affirmed the trial court’s sanction in part because of the defendants’ deliberate flaunting of its discovery obligations and of the court’s discovery orders.

A forensic image, or "mirror image," of a hard drive " 'replicates bit for bit, sector for sector, all allocated and unallocated space, including slack space, on a computer hard drive.' " . . . Generally, courts are reluctant to compel forensic imaging, largely due to the risk that the imaging will improperly expose privileged and confidential material contained on the hard drive. Because allowing direct access to a responding party's electronic information system raises issues of privacy and confidentiality, courts must guard against undue intrusiveness. . . .

In the case at bar, [Plaintiff] has demonstrated that defendants repeatedly represented that they had disclosed all responsive documents, when, in fact, they had not. As the magistrate found, such obfuscation displays a willful disregard of the discovery rules and the trial court's orders. Moreover, defendants' last-minute discovery of certain responsive documents indicates that when not outright defying the trial court's orders, defendants adopted a lackadaisical and dilatory approach to providing discovery. Given this background of noncompliance, we cannot conclude that the trial court abused its discretion in ordering defendants to produce forensic copies of the hard drives of Citynet's CEO, CFO, and COO.

In arguing to the contrary, defendants first contend that trial court's order impermissibly allows [Plaintiff] to discover vast amounts of irrelevant information which cannot possibly relate to [Plaintiff’s] age discrimination, retaliation, and breach of contract claims. While defendants may be correct, they fail to appreciate that their own intransigence in the course of discovery justifies the scope of the trial court's order.

Nonetheless, even though the trial court permitted the defendants to redact privileged matters and to designation confidential information “for attorneys’ eyes only,” the Court was still sympathetic about producing confidential and trade secret information directly to Plaintiff, who now worked for one of defendants’ direct competitors. In such cases, sometimes

courts adopt a protocol whereby an independent computer expert, subject to a confidentiality order, creates a forensic image of the computer system. The expert then retrieves any responsive files (including deleted files) from the forensic image, normally using search terms submitted by the plaintiff. The defendant's counsel reviews the responsive files for privilege, creates a privilege log, and turns over the non-privileged files and privilege log to the plaintiff. . . . .

[Plaintiff] deserves a remedy for the prejudice caused by defendants' misconduct, but that remedy should not require defendants to sacrifice highly-sensitive, confidential information that has no bearing on [Plaintiff’s] claims. Additionally, private information of the computers' users—such as personal financial information and communications with friends and family—should not be subject to disclosure. Therefore, we conclude that the trial court abused its discretion in devising the procedure for the forensic imaging. We urge the trial court to adopt a protocol similar to the one described above. We believe that such a protocol would allow [Plaintiff] sufficient access to the computer systems to recover useful information, while also providing defendants with an opportunity to identify and protect privileged and confidential matter.

The discovery sanction and forensic imaging was otherwise affirmed.

Insomniacs can read the full court opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-6195.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.

Franklin County Appeals Court: Nothing is Reasonably Reliable In a RIF or Public Litigation.

Last month, the Franklin County Court of Appeals affirmed the dismissal of a defamation and wrongful discharge suit brought by the former head of security for Capital University whose job was eliminated in 2006 during a budget crisis. Woods v. Capital Univ., No. 2009-Ohio-5672. Although the 54-year old plaintiff had been told in writing during his exit interview that his performance played no role in the elimination of his position (and he had received nothing but promotions prior to his termination), the university’s attorney was quoted in two local newspapers as attributing part of the termination decision to “job performance issues.” His responsibilities were divided and his public safety management responsibilities were given to a 28-year old safety officer. Nonetheless, the Court affirmed dismissal because the allegedly defamatory statements related to a matter of public concern, which required proof of actual damages or actual malice, and the redistribution of duties to existing employees cannot support an inference of age discrimination. Finally, his promissory estoppel claims were dismissed because the three verbal promises of continued employment were contracted by the terms of his written contract with the university.

According to the Court’s opinion, the plaintiff was eight years away from retiring from another college when he was hired by Capital to reorganize its public safety department. When he expressed reluctance to leave a secure position so close to his retirement age – particularly with friction that was likely to develop during the planned reorganization, he was assured by the VP/Treasurer that he would be employed at least eight years to retire at Capital. However, his offer letter only promised one year of employment. He was promoted the following year and given two more one-year appointments. When rumors surfaced about a possible budget deficit, he again sought reassurance about his job security and was again assured by the VP/Treasurer that his job was safe. When the VP/Treasurer was then fired, he sought and obtained similar assurance from the President, who then shortly thereafter left.

When an impending $12.5M deficit was revealed, a committee examined all positions and recommended the elimination of 72 positions, including that of the plaintiff. His termination letter informed him that his job was eliminated because of the budget difficulties and not because of his job performance. His public safety duties were reassigned to a 28-year old officer and his auxiliary duties to other employees. He then filed a lawsuit for $4.6M against Capital for age discrimination and promissory estoppel. The lawsuit received publicity in the local media and Capital’s attorney was quoted in two newspapers as stating that the plaintiff had been let go because of the budget difficulties and “job performance issues.” The plaintiff amended his claims to include the allegedly defamatory statements by the attorney. The trial court granted summary judgment to the defendants and the plaintiff appealed.

Defamation Claim

The Court of Appeals addressed the defamation claim first and found the attorney’s statement about the plaintiff being fired in part because of his job performance to be defamatory on its face (or defamation per se) since it had the tendency to hurt plaintiff’s career and ability to find another job. The Court rejected the defense attempt to

characterize this statement as vague and contend that if it is defamatory at all, it is only defamatory per quod. We disagree. No employer fires an employee for good job performance. The only reasonable reading of [the attorney’s] statement is that Capital terminated [the plaintiff’s] employment for two reasons, and one of those reasons was [the plaintiff’s] poor job performance. Thus, the statement in and of itself tends to injure [the plaintiff] in his occupation as any employer would hesitate before hiring a potential employee who underperformed in his previous job. Such a statement is defamatory per se.

Typically, damages in such situations are presumed without proof or pleading. However, in this case, the Court found the statement to also have limited protection from the First Amendment. Because the plaintiff worked for a private college, he was not a general public figure. Moreover, the fact that he filed a lawsuit – by itself – did not render him a limited purpose public figure. However, the fact that he sought $4.6M in damages from a significant private institution which was having very public budget difficulties rendered the issue of the reduction in force and his lawsuit a matter of public concern – as evidenced by the significant media coverage. Therefore, the claim was governed by the United States Supreme Court’s decision in Gertz v. Robert Welch, Inc. (1974), 418 U.S. 323, 345-46, which concluded that:

in such cases, the states could define for themselves an appropriate standard of liability, so long as they did not impose liability without fault. Gertz, 418 U.S. at 347. Subsequently, Ohio adopted the ordinary negligence standard as the standard of liability for actions involving a private individual defamed in a statement about a matter of public concern. Landsdowne v. Beacon Journal Publishing Co. (1987), 32 Ohio.St.3d 176, 180. In addition to requiring an element of fault, the Gertz court also limited the type of damages recoverable in defamation cases involving private individuals and statements regarding a matter of public concern. Given the constitutional command of the First Amendment, . . . the states could no longer permit recovery of presumed or punitive damages, at least when liability was not based upon a showing of actual malice. Gertz, 418 U.S. at 349, . . . Thus, in Ohio, a plaintiff must prove either: (1) ordinary negligence and actual injury, in which case he can receive damages for the actual harm inflicted; or (2) actual malice, in which case he is entitled to presumed damages.

Thus, the plaintiff was required to show actual malice or actual injury (i.e., “out-of-pocket loss, impairment of reputation and standing in the community, personal humiliation, and mental anguish and suffering”). However, the plaintiff’s testimony that he felt that his job hunt was impaired by “google searches” of the attorney’s statement was too speculative to support proof of actual injury. Moreover, he failed to introduce any evidence that the attorney knew that his statement was false at the time it was made. Therefore, summary judgment on his defamation claim was upheld.

Retaliation

The plaintiff also claimed that the attorney’s defamatory statement was made in retaliation for the plaintiff’s consultation with an attorney following his termination. However, the Court refused to infer causation (i.e., the defamatory statement from the consultation with counsel) based on the passage of two months between the demand letter from the plaintiff’s attorney and the newspaper accounts repeating the defamatory statement. Because there was no other evidence of causation or proving a link between the two events, the Court affirmed summary judgment.

Age Discrimination

Typically, a discrimination claim requires that the plaintiff show that he was replaced by someone outside the protected class. The Court noted that this is extremely difficult, if not impossible, to show when the plaintiff was fired in a reduction in force:

When a discharge results from a work force reduction, an employee is not replaced, instead his position is eliminated. Barnes v. GenCorp Inc. (C.A.6, 1990), 896 F.2d 1457, 1465. Logically, then, a plaintiff discharged as part of a work force reduction cannot offer evidence that he was replaced by a substantially younger person to satisfy the fourth element of the prima facie case. Moreover, even if such a plaintiff demonstrates that his discharge permitted the retention of substantially younger persons, no inference of discriminatory intent can be drawn. Id. In the context of a work force reduction, the discharge of the plaintiff and retention of a substantially younger employee is not "inherently suspicious" because a work force reduction invariably entails the discharge of some older employees and the retention of some younger employees. Brocklehurst v. PPG Industries, Inc. (C.A.6, 1997), 123 F.3d 890, 896. Permitting an inference of intentional discrimination to arise from the retention of younger employees "would allow every person age 40-and-over to establish a prima facie case of age discrimination if he or she was discharged as part of a work force reduction." Barnes at 1465.

{¶57} Consequently, when a plaintiff's position is eliminated as part of a work force reduction, courts modify the fourth element of the prima facie case to require the plaintiff to " 'com[e] forward with additional evidence, be it direct, circumstantial, or statistical, to establish that age was a factor in the termination.' " Kundtz v. AT & T Solutions, Inc., 10th Dist. No. 05AP-1045, 2007-Ohio-1462, ¶21 . . . The purpose of this modified requirement is to ensure that, in work force reduction cases, the plaintiff has presented evidence to show that there is a chance that the work force reduction is not the reason for the termination. Asmo v. Keane, Inc. (C.A.6, 2006), 471 F.3d 588, 593 . . .

Nonetheless, the plaintiff can also show discrimination if he was in fact replaced instead his duties being eliminated, consolidated or distributed among a number of different people:

An employee is not eliminated as part of a work force reduction when he or she is replaced after his or her discharge. However, a person is not replaced when another employee is assigned to perform the plaintiff's duties in addition to other duties, or when the work is redistributed among other existing employees already performing related work. A person is replaced only when another employee is hired or reassigned to perform the plaintiff's duties.

In this case, the plaintiff’s 2004 promotion involved him assuming certain duties outside the public safety department. When his position was eliminated in 2006, those duties were reassigned and only his public safety duties were given to the 28-year old officer. The reassignment of his auxiliary duties were more than cosmetic or superficial duties. Thus, there was sufficient evidence to show that his position was eliminated and his duties distributed in a genuine reduction in force. Therefore, without additional evidence or direct evidence of age discrimination, summary judgment on this claim was affirmed.

Promissory Estoppel.

Plaintiff brought this claim based on the three separate promises of job security which he received both before and after he was hired by Capital. As explained by the Court:

Promissory estoppel provides an equitable remedy for a breach of an oral promise, absent a signed agreement. Olympic Holding Co. v. ACE Ltd., 122 Ohio.St.3d 89, 2009-Ohio-2057, ¶40. In order to succeed on a claim for promissory estoppel: "The party claiming the estoppel must have relied on conduct of an adversary in such a manner as to change his position for the worse and that reliance must have been reasonable in that the party claiming estoppel did not know and could not have known that its adversary's conduct was misleading." . . . The elements necessary to prove a claim for promissory estoppel are: (1) a clear, unambiguous promise, (2) the person to whom the promise is made relies on the promise, (3) reliance on the promise is reasonable and foreseeable, and (4) the person claiming reliance is injured as a result of reliance on the promise.

The fatal flaw in his argument, however, is that he signed written contracts which promised him only employment for a year at a time. Therefore, his reliance on the oral promises was not reasonable under the circumstances:

[C]ourts cannot enforce an oral promise in preference to a signed writing that pertains to exactly the same subject matter, but has different terms. Ed Schory & Sons at 440. Thus, "[p]romissory estoppel does not apply to oral statements made prior to the written contract, where the contract covers the same subject matter.

The Court rejected the plaintiff’s argument that his employment letters were not binding contracts, but only acknowledgment of certain terms. The Court also rejected the argument that the plaintiff’s reliance on promises made during the budget crises were reasonable under the circumstances. In any event, the plaintiff did not provide any evidence that he relied on the promises to his detriment since there was not evidence that he rejected a job offer in reliance on the promises. On the contrary, despite the promises being made to him during the budget crises, he promptly began searching for another job and submitting his resume to other employers.

Insomniacs can read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5672.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.

Franklin County Appeals Court: Structure of Employment Agreement Implied Non-Compete Clause Into Founder’s Retirement Clause.

Last month, the Franklin County Court of Appeals affirmed summary judgment in favor of an east-side dental practice in a declaratory judgment action involving its obligation to make retirement, or deferred compensation, payments under an employment agreement to its founder who retired after a serious illness and then opened up a competing dental practice after his recovery. Drs. Kristal & Forche, D.D.S., Inc. v. Erkis, 2009-Ohio-5671. The dispute centered on the meaning of “retirement,” which was not defined in the agreement. The Court implied the non-competition obligation from the fact that the Professional Services Agreement signed by the defendant dentist contained a resignation clause which permitted him to leave the practice for any reason upon 90 days notice, but, unlike the retirement clause, did not obligate his remaining partners to provide him with deferred income during his retirement. Therefore, the Court concluded that “retirement” meant from the profession, not just the dental practice, or the resignation clause would be rendered superfluous.

According to the Court’s opinion, the defendant dentist formed the practice, which was ultimately joined by two additional dentists. They formed a professional corporation and each signed professional services agreements. The agreements provided that each dentist could resign upon 90 days notice. The agreement also provided that the defendant dentist could retire at any time and at any age and be entitled to over $1.1M in deferred compensation paid out in monthly installments of $40,000. Retirement was not defined in the agreement. The only other clauses where a dentist was entitled under the agreement to deferred compensation was when the dentist died or became disabled, which also involved leaving the profession, rather than just the practice.

In early 2003, the defendant dentist became seriously ill, accepted disability payments under the agreement and retired in May 2003. The practice purchased back his shares and paid him $306,000 in retirement compensation through May 2005. He then made a remarkable recovery and opened his own competing practice in October 2004, which involved soliciting some of his former employees and clients. The practice then filed a declaratory judgment action in August 2005 concerning its obligation to continue making retirement payments to the defendant dentist on the grounds that the defendant dentist had breached his agreement by competing against it and, by soliciting clients and referral sources, had decreased its revenue to the point that it could no longer afford to fund his “retirement.”

The practice argued that “retirement” meant from the profession, not just the practice. As a result, by the defendant-dentist’s competition against them, he breached the agreement by returning to the profession and relieved them of their obligation to make retirement payments to him. Thus, under the practice’s interpretation, the agreement’s retirement clause imposed an implied non-compete obligation upon the defendant dentist. In turn, the dentist argued that “retirement” meant any and all retirements and did not require him to remain unemployment or to leave the profession permanently.

The Court agreed with the practice’s argument because (1) the voluntary and involuntary termination provisions permitted the dentist to leave the practice without requiring the practice to provide deferred compensation and (2) deferred compensation was only required if the dentist left because of death, disability or retirement. Therefore, the Court could infer the parties’ intent from the structure of the agreement to define “retirement” as meaning from the profession, rather than just the practice.

Insomniacs can read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5671.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.

Franklin County Court of Appeals: Whistleblower Protection Is Not Available When Employee Submitted Complaint to OIG Which She Did Not Write Herself.

Yesterday, the Franklin County Court of Appeals affirmed the dismissal of a civil service proceeding where an administrative assistant was placed on 30-day suspension for submitting a complaint to the Office of Inspector General about an incident in her workplace because her husband wrote it for her and she was less than honest about the circumstances during the investigation. Ressler v. Ohio Dept. of Transp., 2009-Ohio-5857. The Court agreed that she was not entitled to protection under Ohio’s Whistleblower statute because her husband wrote the complaint instead of her even though she was the person who admittedly submitted the complaint to the OIG.

According to the Court’s opinion, ODOT’s chief inspector chewed out a number of employees about a missing computer hard drive. The employee heard about the incident after the fact, told her husband about it and later faxed an anonymous complaint about the incident (written by her husband) to the OIG. The complaint said that the investigator twice “threatened employees by saying he was going to drop a bomb on District 5” if the hard drive did not appear by quitting time on Friday. The investigator allegedly "said it he was acting like a mad man. He was shaking his finger in the employees [sic] faces. He would ask a question but before you could answer he would start yelling again." The complaint also indicated that employees were afraid and did not want to return to work unless the investigator was removed. Remarkably, the OIG treated this as a bomb threat.

In its subsequent investigation, the employee initially denied any involvement in the complaint, but later admitted that she faxed it without reading it or knowing its contents. The OIG’s office found her to be evasive and uncooperative and subsequently wrote the ODOT Director to report that she "committed acts of wrongdoing by sending false statements to this office and providing false testimony under oath." Accordingly, ODOT suspended her for 30 days for failure of good behavior and failing to cooperate in an official investigation. She appealed the suspension to SPBR and claimed protection as a whistleblower under R.C. 124.341. The SPBR dismissed both claims for lack of jurisdiction. The SPBR did not have jurisdiction over a suspension or over whistleblower claims where the employee was not the author of the complaint. On appeal, the trial agreed.

R.C. 12.341 prohibits retaliation against employees who file reports. The relevant portion of the statute provides:

If an employee in the classified or unclassified civil service becomes aware in the course of employment of a violation of state or federal statutes, rules, or regulations or the misuse of public resources, and the employee’s supervisor or appointing authority has authority to correct the violation or misuse, the employee may file a written report identifying the violation or misuse with the supervisor or appointing authority. In addition to or instead of filing a written report with the supervisor or appointing authority, the employee may file a written report with the office of internal auditing created under section 126.45 of the Revised Code.

. . . If an appointing authority takes any disciplinary or retaliatory action against a classified or unclassified employee as a result of the employee’s having filed a report under division (A) of this section, the employee’s sole and exclusive remedy, notwithstanding any other provision of law, is to file an appeal with the state personnel board of review within thirty days after receiving actual notice of the appointing authority’s action.

The clear language of the statue only requires an employee to file a written report. The Court has recognized that “the primary objective of R.C. 124.341 is to protect state employees who report violations or misuse from retaliation." However, notwithstanding this fact, the Franklin County Court of Appeals has refused to protect employees who file reports under this statute unless they also wrote the report. According to the Court:

retaliation based on the mere transmission of a report is tenuous at best, explaining "the statutory scheme clearly contemplates that the employee making the report play a bigger role than that of mere courier . . . We thus concluded an employee's responsibility for delivering the writing is not sufficient to comply with the statute's reporting requirements.

In this case, the employee was indisputably suspended in part for her role in sending the complaint to the OIG. However, she “did not author the letter on which she now relies for whistleblower protection. Although [she] was responsible for the letter's transmission to the appropriate authority, her being a "mere courier," . . . is not sufficient. Simply causing the letter's transmission, without any part in the letter's authorship, does not meet the written report requirement under R.C. 124.341.” Moreover, her suspension was based on more than faxing the complaint to OIG; it was also based on her evasive and uncooperative behavior during the subsequent investigation.

It would be a more interesting case if the employee had claimed to be more than a “mere courier” and had, instead, admitted knowledge and agreement with the contents of the complaint as being the basis for her faxing it to the OIG.

Insomniacs can read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-5857.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.

Franklin County Court of Appeals Affirms Dismissal of Age and Disability Claims Brought by Fire Fighter

Last week, the Franklin County Court of Appeals affirmed the dismissal of disability and age discrimination claims brought by a fire lieutenant who was passed over for a promotion to captain. Sheridan v. Jackson Twp. Div. Fire, 2009-Ohio-1267. In short, the court agreed that plaintiff’s foot/ankle impairment was not “substantially limiting” when it did not preclude him from performing his firefighting duties. The age discrimination claim was dismissed because the successful candidate was only seven years younger than the plaintiff and the law does not require the employer to promote the oldest candidate.

According to the court’s opinion, the plaintiff claimed to have a disability “based on the fact that he has undergone several foot/ankle surgeries. Although he stated that these medical problems prevent him from running, mowing the lawn, or walking long distances without pain, the fact remains that he can still perform the duties of his job with the fire department. . .. Mere difficulty in standing or walking is not sufficient to establish a substantial limitation on the major life activity of walking . . . Even moderate difficulty in walking may not establish a substantial impairment . . . . Because [the plaintiff] is able to perform his occupational duties—fighting fires—it is difficult to conclude that he has a disability of the substantially limiting variety. This precludes relief under the ADA.”

Insomniacs can read the full court opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-1267.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. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Franklin County Court of Appeals Affirms Removal of Civil Service Employee Because of Misuse of Employer’s Laptop Computer.

Last month, the Franklin County Court of Appeals affirmed the removal (i.e., termination) of a civil service employee on account of, among other things, failing to sufficiently protect sensitive information on his laptop computer, and failing to cooperate truthfully with the internal investigation. Long v. Ohio Dept. of Job & Family Servs., 2009-Ohio-643. However, the SPBR agreed that the employee had not violated policy by downloading AOL software in order to access his personal email or abused his telephone privileges by making personal telephone calls.

According to the court’s opinion, the employee was an audit manager and was issued a desktop and laptop computer in order to perform his duties. His “position and job responsibilities exposed him to sensitive client-based information related to Medicaid services, including Medicaid recipients' names and Social Security numbers, as well as dates and types of services provided. This information could be accessed via [his] desktop and laptap computers. All employees, including [him], were required to abide by [the employer’s] written work policies, including, as pertinent here, the ‘Standards of Employee Conduct,’ the ‘Computer and Information Systems Usage Policy,’ and the ‘Telephone Usage Policy.’” After the Ohio Inspector General received a complaint that the employee was engaged in fraud, an internal investigation was conducted. When questioned, the employee admitted “that he often permitted his staff to borrow his laptop computer while conducting field audits; however, he did not keep a written record showing to whom he loaned it. At the time of the interview, he was unsure if he had the laptop or if he had loaned it to a staff member.”

In examining the employee’s laptop, it was discovered that he had downloaded personal software onto the computer in order to access his personal email account and that pornography had been viewed. The employee also admitted that his cousin “used his laptop without his permission in early spring 2002; when he realized it was missing, he told [his cousin] to return it. He admitted that he had not properly secured the laptop, even though he suspected [his cousin] may have utilized his AOL account to send pornographic e-mails to women. [The employee] also acknowledged that he made personal long distance and local calls from his office telephone and failed to reimburse the state for those calls.” The cousin corroborated this explanation, although he contended that he sometimes had permission and did not know that the laptop computer was not the employee’s personal property. In reviewing the employee’s desktop computer, it was discovered that “e-mails with attachments containing pornographic photographs had been sent to and opened from the desktop and that at least one pornographic website had been accessed.”

The employer’s “standards of employee conduct and computer usage policies prohibited the downloading or viewing of non-work-related material, including pornographic websites, on state-issued computers.” The employee also argued that “unauthorized downloading of AOL software onto his laptop computer violated [the employer’s] computer usage policy. . . . . [which] prohibited use of computers by persons not employed by [the employer] and mandated that employees secure their computers to prohibit access by nonemployees.” In addition, the employer argued that the employee’s “personal local and long distance telephone calls from his office phone violated [the employer’s] telephone usage policy.”

The Administrative Law Judge did not agree that the employee violated the employer’s policy by downloading AOL software, accessing his personal email or making personal telephone calls. However, the ALJ agreed that the employee should be removed from his state civil service job because, among other things, he violated the employer’s policies in being evasive and providing implausible explanations during the employer’s internal investigation, in permitting and/or causing pornographic websites and other non-work related documents to be accessed on his laptop and desktop computer, in failing to take necessary precautions to prevent his laptop from being used by non-government employees when the laptop contained sensitive client information and was misused by his cousin in accessing and sending pornography, and in violating R.C. 124.34, as he engaged in dishonest and immoral conduct and neglected his duty by engaging in questionable financial dealings, being dishonest during the investigation, and engaging in the conduct described above.

The Court rejected the employee’s arguments that he was treated more harshly than similarly situated employees: “The issue of whether employees are similarly situated sufficiently to merit consideration as evidence of disparate treatment is for the trier of fact, i.e., the SPBR . . . Although the SPBR has discretion to consider evidence of disparate treatment in evaluating the appropriateness of discipline, the Ohio Administrative Code does not mandate absolute uniformity of discipline. 'An employee's discipline must stand or fall on its own merits.' " In any event, one of the allegedly comparable employees was not similarly situated because he was a non-supervisory bargaining unit employee who reported to a different supervisor, and not an exempt manager of ten people. In addition, that employee committed different rule infractions. The only other arguably comparable employee engaged in very different conduct by sending a single email falsely complaining about a subordinate.

Insomniacs can read the full court opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-643.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. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Franklin County Court of Appeals Denies Unemployment Compensation to Non-Profit Employee for Failing to Properly Supervise Client While on Cell Phone.

Last week, the Franklin County Court of Appeals affirmed the denial of unemployment compensation to the former employee of a non-profit organization after the employee disregarded the employer’s interests by taking a personal cell phone call while on duty and while a client youth sitting next to the employee then injected himself with an epipen. Brooks v. Ohio Dept. of Job & Family Servs., 2009-Ohio-817. The court rejected the employee’s arguments that other employees engaged in similar misconduct without being disciplined or terminated, that he had not violated any established policy and that he was treated more harshly than the new employee who was responsible for the epipen being unsecured.

According to the court’s decision, the employee had taken a number of youth clients to a camp when one of the youths returned to the van and sat in the front passenger seat. The employee joined him, chatted a while and then took a brief personal cell phone call. Another, new employee was responsible for the epipen being left out on the front seat console. The youth apparently opened the epipen and injected himself, requiring a trip to the hospital. Only the employee was fired. The ODJFS initially granted his application for benefits, but the hearing referee and, on appeal, the trial court, denied benefits:

“While claimant testified that he was not formally trained by UMCH [the employer] on the use of an EpiPen, he admitted that he knew that an EpiPen contains a spring-loaded needle to quickly deliver a dose of medication to someone who goes into shock as a result of severe allergies. He admitted that he knew that an EpiPen had been left resting on a console within the youth's reach. He admitted that he knew that he was not permitted to take personal cell phone calls while on duty, yet still turned his head for approximately thirty seconds to speak on his personal cell phone while he was supervising this youth. He admitted that the youth opened the EpiPen and injected it into finger while claimant was talking on his personal cell phone.”

The employee had argued that the Referee’s “just cause determination is unreasonable because the employer did not have a rule or policy prohibiting staff members from accepting or initiating personal calls while supervising youths.” However, the Court noted that the employee’s “own testimony belies his assertion, as he acknowledged that the employer had such a policy and that he knowingly violated it. Moreover, Ms. Roper testified that the employer ‘[has] a policy that the staff should not actively be supervising the kids while they're on their personal cell phone.’ Furthermore, ‘the critical issue is not whether the employee has technically violated some company policy or rule, but whether the employee by his actions [or inactions] demonstrated an unreasonable disregard for his employer's interests.' Here, the employer's best interests were served by appellant performing his duty to adequately supervise the youths in his charge and shield them from danger.” The employee “admitted that he was aware that an EpiPen containing potent and potentially harmful medication lay within reach of the youth; nonetheless, he did not confiscate the EpiPen and averted his attention from the youth to answer a personal telephone call. Appellant's actions and inactions potentially subjected the employer to liability had the youth suffered serious injury stemming from the injection of the medication. Thus, the [Referee] reasonably could view appellant's actions and inactions as detrimental to the employer's interests.”

The Court also rejected the claimant’s arguments that he was treated more harshly than the new employee who was responsible for the medications in the van and who was given only a written warning instead of being terminated. However, the Court agreed with the employer that he was treated differently because he had not received as much training as the claimaint and was not present to directly supervise the client youth at the time of the incident. As the most senior employee, the claimant also could have directed the newer employee to remove the epipen from the console, but he did not.

Finally, the court rejected the claimant’s testimony that other employees who had injured or placed client youths in danger were treated less harshly because he offered no evidence to support the other incidents aside from his own testimony.

Insomniacs may read the full court decision at http://www.sconet.state.oh.us/rod/docs/pdf/10/2009/2009-ohio-817.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. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Franklin County Ohio Court of Appeals: Inevitable Disclosure Doctrine Is No Substitute for a Non-Compete Agreement.

Just before Christmas, the Franklin County Court of Appeals reversed a six-month injunction precluding an employee from working for the competitor of his former employer when he signed a confidentiality agreement, but was never requested and never signed a non-compete agreement. Hydrofarm, Inc. v. Ordendorff, 2008-Ohio-6819. The Court held that it was an abuse of the trial court’s discretion to enter the injunction because the employer failed to show by clear and convincing evidence that the employee’s working for a competitor – 18 months after he had left his prior job -- would necessarily or inevitably result in the disclosure of the trade secrets of his former employer. Accordingly, the Court held that this situation was distinguishable from other cases when an Ohio appellate court has precluded – in the absence of a non-compete agreement -- an employee from working for a competitor because it would inevitably result in the disclosure of trade secret information.

According to the Court’s opinion, the employee worked for the plaintiff employer for approximately 14 years in the area of sales. During his employment, the employee necessarily became aware of trade secrets, as well as confidential and proprietary information that belonged to the plaintiff employer. The parties executed a Separation Agreement on November 30, 2005 “which, among other things, prohibited [the employee] from disclosing confidential information, unless compelled by legal process, but did not require [the employee] to forego employment with any competitors . . . Approximately one and one-half years later, on May 14, 2007, [the employee] was hired by . . . a direct competitor of [the plaintiff employer], for a position that was substantially similar to his” last position with the plaintiff employer.

The plaintiff employer filed suit for compensatory damages and injunctive relief “[a]lleging, among other things, breach of contract; unfair competition; misappropriation of trade secrets, a violation of the Ohio Uniform Trade Secrets Act, R.C. 1333.61, et seq.; disclosure of confidential information without [the plaintiff employer’s] consent, a violation of R.C. 1333.81; breach of a confidential relationship; breach of fiduciary duty; and conversion.” The employee counterclaimed, “[a]lleging breach of contract; tortious interference with a business relationship; tortious interference with a contract; and malicious prosecution.” Over objections from both parties, the common pleas court accepted the magistrate’s recommendation that the employee be enjoined from working for any competitor for six months. Both parties appealed and the employer was initially required to post a $25,000 bond in the event that the employee prevailed on appeal. However, the trial court reconsidered, stayed in the injunction and required the employee to post a $10,000 bond in the event that the employer prevailed on appeal.

As noted by the Court, different courts have evaluated the inevitable disclosure doctrine differently. “The rule against inevitable disclosure "holds that a threat of harm warranting injunctive relief exists when an employee with specialized knowledge commences employment with a competitor." Berardi's Fresh Roast, Inc. v. PMD Ent., Inc., Cuyahoga App. No. 90822, 2008-Ohio-5470, at ¶27. ‘[T]his doctrine is applied when a former employer seeks `injunctive' relief when a former employee begins work with a competitor while the noncompetition clause has not expired.’ Id. (Emphasis added.) Cf. Dexxon Digital Storage, Inc. v. Haenszel, 161 Ohio App.3d 747, 2005-Ohio-3187, discretionary appeal and cross-appeal not allowed, 107 Ohio St.3d 1682, 2005-Ohio-6480 (applying the "inevitable disclosure" doctrine to enjoin a former employee in the absence of a noncompetition agreement).”

The Court found that the inevitable disclosure doctrine may rarely substitute for a non-compete agreement to preclude an employee from working for a competitor only in different circumstances. “Although in Dexxon, the Fifth District Court of Appeals applied the "inevitable disclosure" doctrine to enjoin a former employee in the absence of a noncompetition agreement, Dexxon is factually distinguishable because in Dexxon both entities were engaged in the highly technical business of large-scale electronic data storage. Moreover, Dexxon does not reveal what sort of trade secrets the former employee possessed, or how these former employees afforded the rival entity an irreparable competitive advantage over the plaintiff.”

“In cases in which courts have enforced the "inevitable disclosure" doctrine in absence of a noncompetition agreement, the former employee possessed timely, sensitive strategic and/or technical, or both, information that, if it was proved, posed a serious threat to his former employer's business, or a specific segment thereof. See PepsiCo, Inc. v. Redmond (C.A.7, 1995), 54 F.3d 1262; Barilla Am., Inc. v. Wright (S.D.Iowa, 2002), No. 4-02-CV-90267; Proctor & Gamble Co. v. Stoneham (2000), 140 Ohio App.3d 260. On the record before us, the present case is distinguishable from those cases.”

Ultimately, the Court held that the employer failed to support its burden of proving entitlement to injunctive relief under its legal theory about the inevitable disclosure doctrine. “When resolving a matter involving trade secrets, "[a] court must balance `* * * the conflicting rights of an employer to enjoy the use of secret processes and devices which were developed through his own initiative and investment and the right of employees to earn a livelihood by utilizing their personal skill, knowledge and experience.' . . . Neither this court nor the Supreme Court of Ohio has applied the "inevitable disclosure" doctrine in a case that did not involve an enforceable noncompetition agreement. An employee possessed of his former employer's trade secrets ‘[has] the right to take employment in a competitive business, and to use his knowledge (other than trade secrets) and experience, for the benefit of the new employer[.]’ . . . . Although Ohio passed its version of the Uniform Trade Secrets Act after B.F. Goodrich, see, generally, R.C. 1333.61 et seq., the Act did not so much alter the common law as codify it. Consistent with common law, Ohio's version of the Uniform Trade Secrets Act provides that threatened misappropriation of trade secrets may be enjoined. See R.C. 1333.62. If the General Assembly had intended to permit injunction of competition or employment under the Act, it easily could have so specified. Instead, it left the law substantially intact; that is, employers or employees are free to, and frequently do, enter into noncompetition agreements, while the state has an interest in promoting morality in business affairs and innovation.”

In this case, the Court found that the fact that the employee both possessed knowledge of trade secret and confidential information and held substantially similar jobs with the plaintiff employer and, 18 months later, its competitor was insufficient to justify precluding the employee from working for the competitor in the absence of a non-compete agreement. Rather, the plaintiff employer would be required “to demonstrate by clear and convincing evidence not only that [the employee] possesses [plaintiff employer’s] trade secrets, but, also, that [the employee] will inevitably disclose them to [the direct competitor], or will utilize those trade secrets in his competitive work on behalf of [the direct competitor], and that those trade secrets will enable [the competitor] to achieve a substantial competitive advantage over [the plaintiff employer]. In other words, [the plaintiff employer] must demonstrate that the danger of misappropriation in this case threatens irreparable harm. ‘Actual irreparable harm is usually not presumed, but instead must be proved.’ Levine, supra, paragraph four of the syllabus.”

“Although the Ohio Trade Secrets Act permits injunction of threatened misappropriation of trade secrets, the usual elements for an injunction must be proved by clear and convincing evidence, even where the plaintiff seeks to invoke the "inevitable disclosure" doctrine to enjoin a former employee's employment with a competitor.” In this case, the plaintiff employer’s “executive vice president, testified that the information involved includes [the plaintiff employer’s] price lists and sales goals, but these are created annually, and it is unclear how 2-year-old price lists and sales goal information would produce a competitive advantage for [the competitor]. [He] testified that defendant [employee] possesses production information related to [plaintiff employer’s] "private label" sales, but because defendant [employee] was a salesman and not involved in the actual production of such products, it appears that his knowledge was limited to pricing and marketing efforts. Such information is hardly static. “

The executive “also testified that [the employee] possessed consumer research analysis; that is, the results of customer polling conducted in advance of each trade show, which was used to determine the product selection and display for each particular show. According to [the executive], there are numerous trade shows in North America every year. Thus, it is difficult to imagine, and [the executive] did not explain, how two-year-old customer polling results for shows that have already occurred poses the threat of an unfair competitive advantage. [The executive] also testified that [the employee] possessed information about new product concepts. However, he also testified that it was [the employee] who would suggest new products based on his conversations at trade shows and with customers. This information seems more the product of [the employee’s] own 14 years of sales and marketing experience than technical information posing a threat of misappropriation.”

The executive “further testified that [the employee] possessed information about [the plaintiff employer’s] marketing and advertising strategies. More specifically, this meant sales leads, pricing information, decisions as to which trade shows to attend, and information about the way in which [the plaintiff employer’s] products would be displayed and marketed at each trade show. Again, the pricing, sales leads and trade show selection information is out-of-date, and product displays would have been visible to anyone attending the same trade shows attended by [the plaintiff employer]. Finally, the record contains no evidence that the employee has misappropriated or disclosed any of [the plaintiff employer’s] trade secrets or other confidential business information, or that he engaged in any nefarious activities or attempts to circumvent any of the parties' agreements. In fact, [the executive] testified that he has no reason to believe that [the employee] has shared any confidential information with [the competitor].

Insomniacs may read the full opinion at http://www.sconet.state.oh.us/rod/docs/pdf/10/2008/2008-ohio-6819.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 Court of Appeals Expands Right to Sue for Discriminatory Constructive Discharge and Demotion.

Last month, a unanimous Franklin County Court of Appeals reversed summary judgment previously entered in favor of an employer in an age discrimination case. Coryell v. Bank One Trust Co., 2008-Ohio-2698 (6/5/08). The Court made several significant holdings. First, the Court held that a plaintiff could show under certain circumstances that s/he had been discharged even if the employee voluntarily chose a severance pay option instead of remaining employed for an indefinite period of time. Second, the Court concluded that a plaintiff could pursue a claim for discriminatory job conditions -- such as a lesser job title and/or decreased responsibilities -- which fell short of a constructive discharge, even without a commiserate decrease in pay. Finally, the Court found sufficient evidence which the jury could use both to disbelieve the Bank’s non-discriminatory explanation for its conduct and to base a finding of discriminatory intent.

The Background

Plaintiff had been the Senior Vice President for the group “which handled the administration and servicing of institutional accounts involving assets subject to trust or other custody requirements. During his tenure, [the plaintiff] was active in direct client relationships and assumed full responsibility for all relationships that were threatening litigation due to problems predating [his] hire. In 2000, despite his experience handling direct client relationships, his supervisor directed him to no longer “maintain direct, selective account responsibilities” and he ”transitioned his accounts to individuals within his organization.” Following a reorganization and change in group leadership, the plaintiff became responsible for managing 28 employees. When discussions began about moving Plaintiff’s team to another group shortly thereafter, Plaintiff supported the move, outlined his suggestions for his role in the new group, and suggested that his management role be eliminated and he transition to a player-coach. However, because Plaintiff had no clients of his own and had been performing only as a manager for a few years, the new group declined to offer him a position after the move. Instead, Plaintiff’s duties were distributed between three other managers (one of whom assumed his former job title, received an increase in compensation and received a 300% increase in his bonus the following year).

Plaintiff continued on the payroll of his former supervisor at the Bank and was rejected for two open positions for which he applied. He was then offered severance and the option of remaining on payroll for an unspecified period of time or risking a six-month reduction in severance payments under the Bank’s new severance plan if he did not act quickly. After suffering a heart attack, Plaintiff accepted the severance option with a one-year salary continuation period and continued to search for another job within and outside the Bank. After finding a position outside the Bank, he filed suit and claimed he had been discriminated against on account of his age.
The common pleas court found factual dispute existed as to whether Plaintiff was qualified for the management position with the new group (which existed after his position was allegedly eliminated) and whether he was replaced by someone substantially younger than himself. Nonetheless, the common pleas court found, as a matter of law, that Plaintiff “was neither directly nor constructively discharged because he chose between meaningful options when he accepted the severance package” and, therefore, Plaintiff was unable to establish that he suffered from an adverse employment action as required to carry his prima facie case.

Existence of Constructive Discharge

In prior Supreme Court cases, the court has held that the prima facie case cannot be satisfied when the plaintiff chose severance instead of other options which would have preserved the plaintiff’s employment. For instance, in Barker v. v. Scovill, Inc., 6 Ohio St.3d 146, 147 (1983). the plaintiff had been “offered both termination with severance pay and layoff options, but was also given the opportunity to transfer to another plant.” She also “confessed that her refusal to accept the transfer was not based on the inherent undesirability of the offered employ; it was predicated on her belief that she " * * * could duplicate * * * [her] salary some place else." As a result, because she “made a conscious, well-informed, uncoerced decision, [s]he should not now be allowed to cry foul” later.

“When a plaintiff chooses termination in lieu of other options, courts will not construe his decision as an actual discharge. Rather, the plaintiff must show that he was constructively discharged, i.e., that his or her choice of termination was involuntary or coerced. . . . . Courts generally apply an objective test to determine whether a plaintiff was constructively discharged, asking "whether the employer's actions made working conditions so intolerable that a reasonable person under the circumstances would have felt compelled to resign."

The Supreme Court has explained that “In applying this test, courts seek to determine whether the cumulative effect of the employer's actions would make a reasonable person believe that termination was imminent. They recognize that there is no sound reason to compel an employee to struggle with the inevitable simply to attain the "discharge" label. No single factor is determinative. Instead, a myriad of factors are considered, including reductions in sales territory, poor performance evaluations, criticism in front of coemployees, inquiries about retirement intentions, and expressions of a preference for employees outside the protected group. Nor does the inquiry change solely because an option to transfer is thrown into the mix, lateral though it may be. A transfer accompanied by measurable compensation at a comparable level does not necessarily preclude a finding of constructive discharge. * * * A sophisticated discriminating employer should not be permitted to circumvent the statute by transferring an older employee to a sham position as a prelude to discharge.”

The Court of Appeals concluded that Plaintiff produced sufficient evidence to create a question for the jury about whether his discharge was imminent. The Bank “stripped him of his title, position, responsibilities, functions, supervisory role, and involvement in day-to-day operations and management, leaving him with no real position. [The new group leader] informed [Plaintiff] that he would not retain him as Managing Director of the National Accounts Group and informed the National Accounts Group that Kozak would immediately assume management responsibilities. [The new group leader] also told [Plaintiff] that he would not provide him another position in the National Accounts Group. Additionally, [the former supervisor] told [Plalintiff] that [the new group leader] was not amenable to [Plaintiff] obtaining any internal position related to institutional investment management. [Plaintiff] applied for two internal positions prior to accepting the severance package, but he was rejected for both positions. [the former supervisor] "highly recommended" that [Plaintiff] accept a severance package because [he] "did not have a position" and because [the supervisor] believed that [Plaintiff] would not be able to secure another position within” the bank. Plailntiff “understood that [his former supervisor] saw his own future with Bank One as "uncertain" and that he did not know how long he would be able to maintain [him] on the payroll. . . . Moreover, the severance package specifically provided that [plaintiff] could continue to seek a new internal position and, thus, simply guaranteed [Plaintiff] a continued salary and benefits while searching for a new position within the organization.”

Even though the Bank did not transfer Plaintiff, it “stripped him of all attributes of his former position, essentially leaving him in a non-existent position.” While Plaintiff remained on the payroll of his former supervisor’s group, Plaintiff “had no title, responsibilities or duties.” In that Plaintiff’s understood the tenuous nature of his former supervisor’s “own continued employment and Natsis's recommendation that [Plaintiff] accept the severance package, [Plaintiff] could reasonably have believed that termination was imminent should he reject the severance package. The record contains ample evidence that [he] desired to continue working for the Trust Group and made attempts to find another position within the organization both before and after accepting the severance package, but, in light of comments” by the leaders of the new and former groups, Plaintiff “could have reasonably believed that he would not be successful in obtaining a new internal position. ‘[T]here is no sound reason to compel an employee to struggle with the inevitable simply to attain the `discharge' label.’ Ultimately, viewing the evidence in the light most favorable to Coryell, we find that genuine issues of material fact remain as to whether Coryell was constructively discharged.”

Age Discrimination Without Discharge from Employment

In addition, the Court acknowledged that an age discrimination claim is not limited to wrongful discharge claims. Even where the employee is unable to show that s/he was constructively discharged, employees may pursue claims for age discrimination whenever they have suffered an adverse employment action in connection with discharge, hire or other terms and conditions of employment. “Whether a specific action constitutes an adverse employment action is determined on a case-by-case basis. . . . Generally, an adverse employment action is defined as a material adverse change in the terms and conditions of employment. . . . . Employment actions that result only in inconvenience or an alteration of job responsibilities are not disruptive enough to constitute adverse employment actions.”

“[A] job transfer resulting in a less distinguished title or significantly diminished responsibilities can constitute an adverse employment action. * * * As well, an employer's decision to transfer an employee to a different department, remove her from her management position, place her under the supervision of the person who took her former management position, assign her less job responsibilities that do not comport with her qualifications and give her negative comments on surprise performance evaluations can be classified as adverse employment actions despite no loss of wages or benefits.” For instance, in Bhat v. Univ. of Cincinnati, Ohio Ct. of Cl. No. 2000-04723, 2003-Ohio-5623, “the Court of Claims determined that the plaintiff demonstrated an adverse employment action where the University of Cincinnati removed her titles of director of cardiac transplantation and director of the heart failure program, despite maintaining her as a full professor with no loss of pay or benefits. The court found that the loss of the "director" titles had a significant effect on the plaintiff's status; "[s]he lost not only the prestige associated with the director's title, but also the level of responsibility and the perception of her professional capabilities associated with those roles." Likewise in Tessmer v. Nationwide Life Ins. Co. (Sept. 30, 1999), Franklin App. No. 98AP-1278, actionable discrimination was found “where the employer abolished the plaintiff's job-share arrangement, stripped the plaintiff from her position and title, reassigned her job duties to younger male employees, and initiated a salary audit that resulted in her position being reclassified to a lower pay band.”

In this case, the Court concluded that Plaintiff could pursue an age discrimination claim even if he had not arguably been discharged. The decision to not “retain [Plaintiff] as Managing Director of the National Accounts Group, to reassign [his] management and supervisory responsibilities” to a significantly younger manager who formerly reported to him, and “to not provide [him with] another position within the National Accounts Group had a materially adverse effect on the terms and conditions of [his] employment. Although [Plaintiff] technically remained employed, with no loss of salary or benefits, after Abunassar removed him from his position as Managing Director, Abunassar's actions left [Plaintiff] with no title, no authority, no responsibilities, and limited prospects of continued employment. At a minimum, [the Bank] contends that [it] eliminated [Plaintiff’s] position. Such an action had an adverse effect on the terms of Coryell's employment.”

Evidence of Pretext

"The factfinder's disbelief of the reasons put forward by the defendant (particularly if disbelief is accompanied by a suspicion of mendacity) may, together with the elements of the prima facie case, suffice to show intentional discrimination. Thus, rejection of the defendant's proffered reasons will permit the trier of fact to infer the ultimate fact of intentional discrimination. . . . . A fact finder's disbelief of the employer's articulated reason does not compel judgment for the plaintiff. Before a plaintiff is entitled to judgment, the fact finder must not only disbelieve the employer, but must also believe the plaintiff's explanation of discrimination. Reeves at 147, citing Hicks at 519. However, "[i]n appropriate circumstances, the trier of fact can reasonably infer from the falsity of the [employer's] explanation that the employer is dissembling to cover up a discriminatory purpose." Reeves at 147. Thus, a plaintiff need not always introduce independent evidence of discrimination to show pretext where there is sufficient evidence to reject the employer's explanation.”

The Court found there was sufficient evidence for the jury to disbelieve the Bank’s explanation for Plaintiff’s treatment and to infer the existence of age discrimination. ”First, only months before Abunassar removed [Plaintiff] from his position, [he] was selected to create and lead the National Accounts Group, based on his relevant experience and knowledge. All evidence suggests that [he] was successfully performing his role of Managing Director, and Abunassar admitted that he had no issues with Coryell's performance.” In his own affidavit, Plaintiff stated that his former supervisor stated that he “should manage the [National Accounts Group under Abunassar], as I was the most qualified." Plaintiff’s former supervisor ”testified that [Plaintiff] had been successful at Bank One, demonstrated technical knowledge, and was liked and supported by his subordinates. Second, while Abunassar desired the National Accounts Group manager to maintain a book of business, there is no dispute that Coryell's experience qualified him to resume direct client relationships. Until shortly before embarking on the creation of the National Accounts Group, Coryell successfully maintained a book of business, which he gave up at the direction of his former supervisor who, in direct contrast to Abunassar's business model, prohibited managers from maintaining books of business. Moreover, Coryell was willing and qualified to resume direct client relationships and suggested to Abunassar that he resume direct relationships and serve as a "player-coach," the very term Abunassar uses to describe his vision of the Managing Director role. The record contains evidence that certain accounts had not yet been transitioned to National Accounts Group employees, and the National Accounts Group organizational chart shows open Institutional Client Advisor positions, suggesting the availability of accounts for which Coryell could have assumed direct responsibility. Abunassar also admitted that, if he had wanted to assign Coryell accounts, he could have done so through the open investment relationship manager position for which Coryell interviewed, but was rejected. Such evidence discredits Abunassar's refusal to assign Coryell a book of business based on his reluctance to transition clients where unnecessary. Viewing the evidence in the light most favorable to Coryell, we find that a fact finder could reasonably disbelieve appellees' purported non-discriminatory reason for their actions relating to Coryell's position and employment.”

“Because the fact finder's disbelief of [the Bank’s] proffered non-discriminatory reason, coupled with evidence satisfying Coryell's prima facie case, would permit (although not compel) the fact finder to infer the ultimate fact of intentional discrimination, we find that [the Bank is] not entitled to judgment as a matter of law on Coryell's age discrimination claim. We do not suggest that Coryell will or should ultimately prevail on his age discrimination claim, but conclude only that the evidence, viewed in the light most favorable to Coryell, creates genuine issues of material fact, which preclude summary judgment. Accordingly, we find that the trial court erred in granting summary judgment in favor of [the Bank] , and we sustain Coryell's first assignment of error.

Insomniacs can read the decision in full at 2698 http://www.sconet.state.oh.us/rod/docs/pdf/10/2008/2008-ohio-2698.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.

Franklin County Court of Appeals Reads Geographic Restriction Out of Non-Compete Agreement.

Late last month, the Franklin County Court of Appeals reversed a trial court and enforced a non-competition agreement against a hair stylist who did not solicit, but did continue to serve, customers of her former employer – outside the geographic scope of the non-competition clause. Penzone, Inc. v. Koster, 2008-Ohio-327. The court also extended the term of the non-compete by the amount of time which the stylist had continued to serve customers who sought her out at her new salon.

In that case, the stylist was hired directly from beauty school and worked for Penzone’s for 11 years until her resignation in 2006. When she was hired and when she was subsequently promoted, she signed a non-competition clause which prohibited her for eight months from serving any current or former customers of Penzone’s whom she had personally served during her employment “without regard to where those customers or the Employee's post-employment competition may be situated.” The agreement also contained a nine-mile geographic scope against competing against Penzone’s after her employment.

The stylist set up shop in Pickerington -- outside the nine-mile geographic radius of the non-competition agreement. Although she denied soliciting any former Penzone customers, about 95 former customers sought her out. (She had previously served about 200 customers each year). Approximately six months later, Penzone’s filed suit, alleging a breach of the non-competition agreement and theft of trade secrets. After discovery and a hearing, the trial court denied injunctive relief to Penzone’s and the salon appealed.

The contract term at issue is neither a non-solicitation clause nor a pure non-compete clause. Because the stylist’s new shop was outside the agreement’s nine-mile radius (which the court found to be reasonable), she could continue to work as a hair stylist in competition with Penzone’s as early as the day after her resignation. Non-solicitation clauses are typically not subject to a geographic limitation, but there was no evidence that the stylist had solicited any former Penzone clients. However, even though she did not solicit former Penzone customers, she did serve almost 95 of them -- in violation of the clear terms of the agreement – but outside the nine-mile geographic limitation on competition. According the agreement, there was no geographic limitation of any kind on this restriction to serve former clients, but there was a temporal restriction of only eight months. Apparently confused, the trial court found this restriction to be unreasonable (since she was required to screen her appointments as they arrived) and/or treated it as a non-solicitation clause which she had not violated.

The Court of Appeals seemed to be oblivious to the real issue in the case. While, on one hand, it paid lip service to the fact that the nine-mile restriction on competition was reasonable on its face, on the other hand, it provided absolutely no analysis as to why it was reasonable to prohibit the stylist from serving customers outside that nine-mile radius. For instance, the court noted that the “agreement allows Penzone a time period and a distance restriction to allow Penzone to retain clients as loyal Penzone customers.” (emphasis added).

What’s troublesome about the court’s decision is that the clause at issue is more akin to a non-compete clause than a non-solicitation clause because its violation does not depend on the employee misusing the employer’s customer information against its financial interest. Rather, the employee can violate the agreement by passively serving whatever customer comes through her door. “[W]hen faced with a covenant not to compete that imposes restraints that exceed what is necessary to protect the employer's legitimate business interests, the courts are empowered to modify the terms to create a reasonable covenant between the parties.” Nonetheless, there was no finding by the Court of Appeals that it was reasonable to restrict the hairstylist from serving customers beyond the nine-mile radius of the non-compete clause. There was not even a discussion by the court of its intent to enforce the agreement as written despite any reasonableness requirement.

Rather, the Court focused on a lack of harm to the public because the agreement did not materially affect the availability of hairstylists in the area. Moreover, the court found the potential harm to the stylist was minimal in light of the short eight-month restriction. Finally, the court found that Penzone’s invested significant sums in developing and promoting relationships between its stylists and its customers. While it could not be quantified how long any of the lost customers would have remained with Penzone’s or how many services they would have purchased from Penzone’s if they had not followed the stylist to Pickerington, the court was satisfied that Penzone’s had shown irreparable harm.

So, your happiness with this decision will depend on whether you are an employer which is considering enforcement of a non-compete clause against a former employee with a loyal customer base or whether you are an employer which is considering whether it can accept new, unsolicited customers from a competitor after hiring a new employee from that same competitor. Employers who hire employees subject to such a non-compete clause will need to take extraordinary steps for the duration of the non-competition period to ensure that unsolicited customers were never served by the new employee during his or her prior employment.

Insomniacs may read the decision in full at: http://www.sconet.state.oh.us/rod/docs/pdf/10/2008/2008-ohio-327.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.