Franklin County Appeals Court Remands Incentive Compensation Claim and Dismisses Whistleblower and Reverse Discrimination Claims

Last week, a unanimous Franklin County Court of Appeals affirmed the dismissal on summary judgment of whistleblower and reverse race discrimination claims, but remanded the highly-compensated plaintiff’s equitable claims for a six-figure profit bonus on the grounds that the written bonus plan was unenforceable to bar his equitable claims because there was no evidence that the plaintiff knew about or had agreed to its terms and because the employer’s “promises” to award a bonus in its unfettered discretion were illusory. Pohmer v. JPMorgan Chase Bank, N.A., 2015-Ohio-1229 (3-31-15).  In affirming the dismissal of the race discrimination claim, the Court agreed that the plaintiff had not shown that the defendant employer was unusual in discriminating against the majority, that he was similarly situated to his supervisor, or that the explanation for his termination (violating the employer’s technology policy by inappropriate and personal use of his blackberry and email) was pretextual.  He could not prevail on his whistleblower claim because he could not prove that he had ever made any relevant complaints to his employer in writing and the trial court did not abuse its discretion in refusing to compel additional electronic discovery that was unlikely to reveal additional relevant evidence without exorbitant costs. 

According to the Court’s opinion, the plaintiff had received very favorable performance evaluations for over a decade, the most recent of which was in December 2011.  He had been assured in writing that he would be receiving a 4.5% profit bonus for 2011.  However, in a random review of his text messages and emails, the employer discovered that he had been sending inappropriate sexual-themed emails and messages to his children’s babysitter and co-workers in violation of the employer’s technology code of conduct.  He was soon terminated in mid-January 2012.  A few days later, the employer set the amount of discretionary incentive compensation and awarded bonuses to remaining employees a few weeks later.  The plaintiff filed suit and alleged, among other things, that he was subjected to reverse race discrimination because his supervisor also sent inappropriate emails and was not fired.  Second, he claimed that he had actually been fired in retaliation for reporting to his supervisor that one of the employer’s financial product campaigns was an illegal scam.  However, he could not produce any written evidence that he had ever made such an allegation prior to his termination despite the employer’s production of thousands of pages of emails and texts messages.  He also claimed that he was entitled to his profit bonus since he had earned it prior to his termination.

Incentive Compensation.  The trial court had dismissed his claim for his incentive compensation on the grounds that the employer’s Performance Based Incentive Compensation Plan (PBIC) was a binding implied-in-fact contract, thus barring any equitable claim under the theories of unjust enrichment or quantum meruit.   Pursuant to the terms of the PBIC, the Plaintiff was not entitled to any profit bonus or incentive compensation unless he was still employed on the date when the profit bonus was actually paid.  However, the Court of Appeals found that the PBIC could not be a contract since there was no evidence that the plaintiff even knew about the PBIC, let alone agreed to it.   All that the employer produced was an unsigned plan document and not any communications to the Plaintiff about the PBIC or indication that the Plaintiff’s employment and incentive compensation were subject to the PBIC.  Moreover, to the extent that the PBIC contained any promises, they were illusory (and thus, non-binding) since the employer retained “sole and absolute discretion” as to when, whether, and in what amount to award bonuses.  In contrast, the plaintiff produced evidence of a powerpoint presentation about the incentive compensation he was eligible to earn for that year and an email from his supervisor about the percentage of his profit bonus; neither exhibit made any reference to the PBIC or any requirement that he needed to still be employed on the date that the bonus was paid.

The doctrine of unjust enrichment “applies when a benefit is conferred and it would be inequitable to permit the benefitting party to retain the benefit without compensating the conferring party.” . . . A claim for quantum meruit shares the same essential elements as a claim for unjust enrichment, and both doctrines are equitable doctrines.  . . .  the two doctrines differ, however, when calculating damages.  The damages for unjust enrichment are " ' "the amount the defendant benefited," ' " while the damages for quantum meruit are " ' "the measure of the value of the plaintiff's services, less any damage suffered by the other party." ' "

 . . . 

"A contract is illusory only when by its terms the promisor retains an unlimited right to determine the nature or extent of his performance; the unlimited right, in effect, destroys his promise and thus makes it merely illusory." . . . . In deciding that the PBIC Plan is an illusory contract with respect to [the plaintiff], we do not mean to say that the PBIC Plan would be illusory under all circumstances. This is not a case where [the plaintiff] was made aware of the terms of the PBIC Plan and thereby assented to the PBIC's terms in exchange for his continued employment with JPMC.

Reverse Race Discrimination.  The Court of Appeals affirmed the dismissal of this claim because the Plaintiff failed to meet his prima facie case or show that the employer’s explanation was pretextual.  First, the Court adopted the heightened burden of proof for a reverse race discrimination claim, which requires evidence of “background circumstances supporting the inference that [the defendant employer] was the unusual employer who discriminated against non-minority employees.”  The plaintiff could not meet this burden, although he correctly argued that some courts have questioned the correctness of using a modified burden of proof in any race discrimination claim.    

In any event, the Court found that the Plaintiff did not identify any similarly situated non-white employees who were treated better.   The Plaintiff identified his supervisor for sending inappropriate personal emails because he only received a disciplinary warning, but the Court found him not to be similarly situated “in all respects” (i.e., “ 'all of the relevant aspects of his employment situation were "nearly identical" to those of the [comparable employee's] employment situation.'").  

Thus, to be deemed "similarly situated," "the comparables 'must have dealt with the same supervisor, have been subject to the same standards and have engaged in the same conduct without such differentiating or mitigating circumstances that would distinguish their conduct or the employer's treatment of them for it.'

They obviously did not report to the same supervisor.  “[A] supervisor's "position of authority within the company create[s] a meaningful distinction" that "explains [the employer's] different treatment of the two.” More importantly, the employer did not learn of the supervisor’s alleged misconduct until the plaintiff raised it after his termination (presumably during his deposition).  “Other factors may have been at play including a discrepancy in the volume, frequency, and level of inappropriateness contained in the emails of each of the two men.”  

Ultimately, the Court found that the plaintiff could not show that his termination for admittedly violating the employer’s code of conduct was pretextual.   He could not “demonstrate that the proffered reason ‘(1) has no basis in fact, (2) did not actually motivate the employer's challenged conduct, or (3) was insufficient to warrant the challenged conduct.’"  Importantly, he could not show that the employer knew of any other similar violations of the code of conduct (including that of his supervisor) at the time of the Plaintiff’s termination in January 2012.   

Whistleblowing.  The trial and appellate courts both concluded that the plaintiff could not prevail on his whistleblower claim because he could not satisfy the statutory requirement that the complaint be made in writing to the employer after first making a verbal report.  The employer had produced several thousand pages of documents in discovery, including emails and text messages.  The plaintiff insisted that he had texted and/or emailed his supervisor (in addition to personal conversations) about his objections to the legality of a product campaign.  However, his alleged objections were not reflected in the documents produced in discovery.  Therefore, he could not satisfy his statutory burden of proof under Ohio’s whistleblower statute.   

The Plaintiff filed a motion to compel a forensic examination of his email and text mail boxes to ensure that none of his messages were inappropriately deleted by the defendant employer.  However, the trial court denied that discovery motion on the grounds that it was “unlikely to lead to admissible evidence and disproportionately costly.”  The appellate court found this not to be an abuse of discretion in light of the thousands of pages produced in discovery.  Moreover, it noted that the Plaintiff’s  

argument has less to do with the adequacy of the discovery process and more to do with [his] dissatisfaction that he did not discover sufficient evidence to support his claims. The trial court noted it had made an effort throughout the case "to keep discovery proportionate to the issues, and to sensibly minimize the financial cost and time burden which electronic discovery might otherwise require."

Indeed, the supervisor denied ever receiving such a written report and the Plaintiff failed to mention any written objections about the product campaign in his own deposition.

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 be changed or 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.

NLRB Overrules Register-Guard and Finds Many Employees Have Presumptive Right to Use Employer’s Email System

As expected, the NLRB last week overruled its December 2007 decision in Register-Guard which had given more weight to an employer’s private property rights to manage its own email system than to employees’ need to communicate among themselves.   In Purple  Communications, Inc., 361 NLRB No. 126 (2014), another divided Board addressed this issue (which it bypassed in September) and held “that employee use of email for statutorily protected communications on nonworking time must presumptively be permitted by employers who have chosen to give employees access to their email systems.”  (emphasis added).   Although this decision will apply to union and non-union employers, it does not create an unrestricted right.   Employers are not required to provide email access to employees who do not already have access to the employer’s email system in the course of their work.   In addition, employers may still under “special circumstances” ban total nonworking use of email, “including section 7 use on nonworking time,” in order “to maintain production or discipline.”  Moreover, employers “may apply uniform and consistently enforced controls over its email system to the extent such controls are necessary to maintain production and discipline.”  This would include, for instance, banning large attachments and permitting employer monitoring of email usage.   Finally, nonemployees do not “have rights to access an employer’s email system.” Interestingly, the Board reserved for another time the rights of employees to utilize “other type[s] of electronic communications systems.”  Importantly for all employers, this decision will require another revision to common workplace email policies.

The NLRB has previously taken the position that email communication among employees (or with union organizers) can constitute protected “concerted activity.”  Employees had a statutory right under Section 7 of the NLRA to engage in concerted activities, which means that employers could not prohibit it or discipline an employee for engaging in such conduct.   However, in 2007, the NLRB narrowed an employee’s right to use an employer’s email system for union and other section 7 activities. The Guard Publishing Company, d/b/a The Register-Guard, 351 NLRB 1110 (12/16/07). The NLRB’s majority concluded that that a newspaper publisher employer did not violate §8(a)(1) of the National Labor Relations Act by maintaining a broad policy which prohibited employees from using its e-mail system for any “non-job-related solicitations.”  The Board analogized email to other employer equipment, such as telephones.   The Court of Appeals for the District of Columbia later narrowed the ruling when it held in 2009 that the employer still could not discriminate against union solicitation by permitting other personal non-work related solicitation emails, but disciplined the union president for sending union-related solicitation emails.   It was anticipated that the current NLRB would revisit and – to be consistent with the General Counsel’s views on other social media -- reverse the Register-Guard decision.  However, in September it ignored the issue in Purple Communications, Inc., 361 NLRB No. 43 (2014), even though the NLRB General Counsel invited the Board to overrule Register-Guard.  Nonetheless, last week, the NLRB revisited the issue and, as expected, ultimately overruled Register Guard.

According to the Board’s decision, the employer maintained a lawful “electronic communications policy limiting employee use of its email and other electronic systems [including computers, voice mail, cell phones and other equipment] to “business purposes only” and “specifically prohibit[ing]” certain uses by employees,”   including:  

2. Engaging in activities on behalf of organizations or persons with no professional or business affiliation with the Company. 

. . . .

5. Sending uninvited email of a personal nature.

Although there was no allegation that the employer had unlawfully enforced this policy against any employees, the NLRB’s General Counsel invited the Board to overrule Register-Guard in order to make this lawful policy unlawful.  The Board then invited amicus briefs from the employer and union communities on the issue, reversed Register-Guard, applied the decision retroactively and remanded the case for a determination whether the employer could rebut the new lawful presumption.   As the Board noted, the employer at worse would only be required to rescind its policy and so notify employees; it would not be subject to back pay liability or reinstatement obligations. 

After briefing, the Board adopted “a presumption that employees who have been given access to the employer’s email system in the course of their work are entitled to use the system to engage in statutorily protected discussions about their terms and conditions of employment while on nonworking time, absent a showing by the employer of special circumstances that justify specific restrictions.”   The Board rejected the argument   

that social media, texting, and personal email accounts constitute adequate alternative means for employee communications. Even if we agreed that alternative means were germane to the analysis here—which, as discussed below, we do not— the Respondent and amici here have not shown that our presumption would impinge more than minimally upon employers’ property rights, and therefore there is no need to go any further in accommodating them. In any event, we would not agree that such personal communication options are adequate, in light of the high value our precedents place on communication in the workplace.

As for the “special circumstances” which could justify limits on employee use of email, the employer bears the burden of articulating “the interest at issue” and showing “how that interest supports the email use restrictions it has implemented.” 

Because limitations on employee communication should be no more restrictive than necessary to protect the employer’s interests, we anticipate that it will be the rare case where special circumstances justify a total ban on nonwork email use by employees. In more typical cases, where special circumstances do not justify a total ban, employers may nonetheless apply uniform and consistently enforced controls over their email systems to the extent that such controls are necessary to maintain production and discipline.

By way of example, the Board observed that “[a]n employer’s interests in protecting its email system . . .  from damage or from overloads due to excessive use, would of course be relevant” to showing “special circumstances.”   The argument would be strengthened if the employer could show that “it adopted the restriction in order to protect the interests it asserts, instead of just citing certain interests, post hoc, to support a restriction that was not actually based on them.”   Moreover, an employer’s interests generally “will establish special circumstances only to the extent that those interests are not similarly affected by employee email use that the employer has authorized.”  However, it rejected “[t]he prior existence of an employer prohibition on employees’ use of email for nonwork purposes.”   

As for permitted restrictions on employee use of email, the Board noted that an employer could establish “uniform and consistently enforced restrictions, such as prohibiting large attachments or audio/ video segments, if the employer can demonstrate that they would interfere with the email system’s efficient functioning.”   

employers who choose to impose a working-time limitation will have concerns about the extent to which they may monitor employees’ email use to enforce that limitation. Our decision does not prevent employers from continuing, as many already do, to monitor their computers and email systems for legitimate management reasons, such as ensuring productivity and preventing email use for purposes of harassment or other activities that could give rise to employer liability.

Of course, employer surveillance of employee’s section 7 activities can violate the NLRA, but the Board responded that it would address such “surveillance allegations by the same standards that we apply to alleged surveillance in the bricks-and-mortar world.”

 

“those who choose openly to engage in union activities at or near the employer’s premises cannot be heard to complain when management observes them. The Board has long held that management officials may observe public union activity without violating the Act so long as those officials do not ‘do something out of the ordinary.’” An employer’s monitoring of electronic communications on its email system will similarly be lawful so long as the employer does nothing out of the ordinary, such as increasing its monitoring during an organizational campaign or focusing its monitoring efforts on protected conduct or union activists. Nor is an employer ordinarily prevented from notifying its  employees, as many employers also do already, that it monitors (or reserves the right to monitor) computer and email use for legitimate management reasons and that  employees may have no expectation of privacy in their use of the employer’s email system.

Apparently oblivious to a standard liability problem facing many employers from personal use of an employer’s email address – where the recipient – who may not be a co-worker -- does not always know the sender’s rank in the organization, the Board rejected concerns about the employers’ First Amendment and other rights:

We are simply unpersuaded that an email message, sent using the employer’s email system but not from the employer, could reasonably be perceived as speech by, or speech endorsed by, the employer—  particularly a message reflecting a view different from the employer’s. Email users typically understand that an email message conveys the views of the sender, not those of the email account provider. They would no more think that an email message sent from a coworker via a work email account speaks for the employer (unless the message was sent by the employer’s supervisor or agent) than they would think that a message they receive from a friend on their personal Gmail account speaks for Google.

There were two lengthy dissents.

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.

NLRB: Employers Can Support Charities and Ban Use of Employer’s Email System Without Violating the NLRA

[Editor's Note: The Court of Appeals for the District of Columbia reversed the Board's holding that the employer did not violate the NLRA by disciplining the union president on the grounds that the employer permitted other personal email solicitations.Guard Publishing Co. d/b/a The Register-Guard v. NLRB, No. 07-1528, U.S. Court of Appeals for the District of Columbia Circuit (July 7, 2009). ]

Just in time to stuff the Xmas stockings of good charities (like the Salvation Army, Red Cross and United Way) and employers, a divided NLRB in a 3-2 decision recently announced a new rule regarding the use of employer email systems to support union activities in The Guard Publishing Company, d/b/a The Register-Guard, 351 NLRB No. 70 (12/16/07). The NLRB’s majority concluded that that a newspaper publisher employer did not violate Section 8(a)(1) of the National Labor Relations Act by maintaining a broad policy which prohibited employees from using its e-mail system for any “non-job-related solicitations.” Further, the Board’s majority rejected allegations of discriminatory enforcement of the policy when the employer permitted incidental personal use of the email system (and to periodically solicit funds for the United Way) as long as the employees were not permitted to use the email system to elicit support for groups and organizations, including union. Indeed, the Board explicitly endorsed, “[f]or example, a rule that permitted charitable solicitations but not noncharitable solicitations [even though it] would permit solicitations for the Red Cross and the Salvation Army, but it would prohibit solicitations for Avon and the union.”

In particular, the employer’s written policy prohibited the use of e-mail for “non-job-related solicitations”: "Company communication systems and the equipment used to operate the communication system are owned and provided by the Company to assist in conducting the business of The Register-Guard. Communications systems are not to be used to solicit or proselytize for commercial ventures, religious or political causes, outside organizations, or other non-job-related solicitations."

In practice, the employer allowed a number of nonwork-related employee e-mails (such as such as baby announcements, party invitations, jokes and the occasional offer of sports tickets or request for services such as dog walking), but there was no evidence that it regularly permitted e-mails urging support for groups or organizations, other than the United Way. The employer issued two written warnings to an employee (who was also the local union president) for sending three union-related e-mails to the workforce during non-working time. One email was sent from her workstation computer and two were sent from the union offices to the employees’ work email addresses. The unfair labor practice complaint alleged that the employer’s maintenance of the policy and its enforcement against the union president violated the NLRA.

Addressing the maintenance of the policy, the Board majority reasoned that employees have no statutory right to use an employer’s equipment for Section 7 purposes. “An employer has a “basic property right” to “regulate and restrict employee use of company property.” Union Carbide Corp. v. NLRB, 714 F.2d 657, 663–664 (6th Cir. 1983). The Respondent’s communications system, including its e-mail system, is the Respondent’s property and was purchased by the Respondent for use in operating its business. The General Counsel concedes that the Respondent has a legitimate business interest in maintaining the efficient operation of its e-mail system, and that employers who have invested in an e-mail system have valid concerns about such issues as preserving server space, protecting against computer viruses and dissemination of confidential information, and avoiding company liability for employees’ inappropriate e-mails.”

Moreover, the majority found that Republic Aviation Corp. v. NLRB, 324 U.S. 793 (1945), in which the Court held that a ban on solicitation during nonworking time was unlawful absent special circumstances, applied only to face-to-face solicitations was inapplicable to the use of an employer’s e-mail system. Consequently, the Board majority found no basis to refrain from applying the settled principle that, absent discrimination, employees have no statutory right to use an employer’s equipment or media for Section 7 communications.” "As with oral solicitations, however, if an employer has no rule in place that limits nonwork-related e-mails to nonworking time, the employer must show an actual interference with production or discipline in order to discipline employees for e-mails sent on working time."

With respect to the alleged discriminatory application of the policy to the union president’s e-mails, the majority “clarified” that “discrimination under the Act means drawing a distinction along Section 7 lines.” “In other words, unlawful discrimination consists of disparate treatment of activities or communications of a similar character because of their union or other Section 7-protected status.” The majority adopted the reasoning of the Seventh Circuit Court of Appeals, noting that in two cases involving the use of employer bulletin boards, the court had distinguished between personal nonwork-related postings such as for-sale notices and wedding announcements, on the one hand, and “group” or “organizational” postings such as union materials on the other. See Fleming Companies v. NLRB, 349 F.3d 968, 975 (7th Cir. 2003). The Board majority found that the court’s analysis, “rather than existing Board precedent, better reflects the principle that discrimination means the unequal treatment of equals.” Therefore, the majority overruled the Board’s prior decisions to the extent they are inconsistent.

Applying the new standard, the majority found that the employer had permitted a variety of personal, nonwork-related e-mails, but had never permitted e-mails to solicit support for a group or organization. Because two of the union president’s e-mails were solicitations to support the union, the employer did not discriminate in violation of the NLRA by applying its e-mail policy to those e-mails. However, the majority found that a third e-mail by the union president was not a solicitation, but was simply a clarification of facts surrounding a recent union event. Accordingly, the enforcement of the policy with respect to that e-mail was unlawful (even though it was sent from her work station) because the employer had discriminated against the employee on the basis of her union activities.

As the Board explained the future application of its new rule, “an employer clearly would violate the Act if it permitted employees to use e-mail to solicit for one union but not another, or if it permitted solicitation by antiunion employees but not by prounion employees” because “[i]n either case, the employer has drawn a line between permitted and prohibited activities on Section 7 grounds. However, nothing in the Act prohibits an employer from drawing lines on a non-Section 7 basis. That is, an employer may draw a line between charitable solicitations and noncharitable solicitations, between solicitations of a personal nature (e.g., a car for sale) and solicitations for the commercial sale of a product (e.g., Avon products), between invitations for an organization and invitations of a personal nature, between solicitations and mere talk, and between business-related use and non-business-related use. In each of these examples, the fact that union solicitation would fall on the prohibited side of the line does not establish that the rule discriminates” in violation of the NLRA. For example, a rule that permitted charitable solicitations but not noncharitable solicitations would permit solicitations for the Red Cross and the Salvation Army, but it would prohibit solicitations for Avon and the union.

The Board also unanimously affirmed the judge’s finding that the employer violated Section 8(a)(1) by maintaining an overly broad rule, in the absence of special circumstances, prohibiting employees from wearing or displaying union insignia while working with the public.

Insomniacs can read the full decision at http://www.nlrb.gov/about_us/news_room/template_html.aspx?file=http://www.nlrb.gov/shared_files/Press%20Releases/2007/R-2652.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. 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.