Persistence Pays Off in Cuyahoga County Age Discrimination Claim When Only the Plaintiff Was Fired for Failing to Meet Sales Goals

Last week, the Cuyahoga County Court of Appeals reversed summary judgment in favor of an employer in an age discrimination claim when the plaintiff's evidence showed that he was fired in 2003 for alleged poor sales performance (in not meeting his sales goals for five consecutive years) even though the employer maintained the employment of younger salespersons whose sales quota were similar or worse, he was replaced by newly hired younger salespeople and the employer had taken away hi four largest accounts and reassigned them to younger salespeople before claiming his performance was unacceptable. Pattison v. W.W. Grainger Inc., 2010-Ohio-2484. The case bounced up and down the appellate chain on various procedural motions involving whether there was a final appealable order and timely appeal. However, when the merits of the trial court's summary judgment decision finally reached the court of appeals, it reversed the decision.

The Court of Appeals found two errors by the trial court. First, the trial court erred in finding that the plaintiff failed to satisfy his prima facie burden of proving that he was qualified for his position when it relied on the evidence asserted by the employer to justify his termination. The prima facie burden is not supposed to be difficult and the plaintiff had been employed in his sales position for more than 25 years before his termination. Former customers also spoke highly of him and several customers decreased the amount of their business with the employer after he was terminated. Thus, he was clearly "qualified" for purposes of his prima facie case.

Second, the Court of Appeals found that the plaintiff produced more than sufficient evidence of pretext to justify sending the case to a jury to resolve the factual disputes. To raise a genuine issue of fact as to pretext and defeat a summary judgment motion under this position, [a plaintiff] must show one of the following: "(1) that the proffered reason had no basis in fact, (2) that the proffered reason did not actually motivate the action, or (3) that the proffered reason was insufficient to motivate the action." First, the plaintiff produced evidence that he had been fired for failing to meet sales goals when at least five younger salespeople had similarly failed to meet the same goals and had not been terminated. Indeed, he showed that he had received performance warnings and reprimands from his new, younger, supervisor when similarly situated younger employees had similarly failed to meet the same sales goals, but were not reprimanded. On the contrary, one of the younger salespeople had been promoted even though his sales volume was less than plaintiff's volume and others were simply transferred. "Given that [the employer] transferred or promoted significantly younger TM's, who were not meeting sales goals, while terminating [the plaintiff], who was by no means the least productive, raises an inference that [the employer's] stated reason for terminating [the plaintiff] was pretextual." In fact, the court found that the employer's stated reason for his termination was false. It was also arbitrary in that the decision of when to fire a salesperson based on poor performance was left to the discretion of the manager instead of a formula.

Second, the plaintiff showed that his accounts were distributed among younger salespeople (two of whom were newly hired and one was hired four months earlier), which was evidence of setting up the plaintiff to fail and discriminatory animus. Third, he showed that in the year before his termination only 1 of the 13 territory managers (his position) met his sales goal for the prior year and that person had just been hired and did not have any performance goals. Indeed, the supervisor testified that the territory had failed to meet sales goals in five of the last seven years. Finally, the plaintiff alleged that the supervisor had forced out other, older salespeople like himself.

In light of the plaintiff's factual evidence, the court remanded the case back to the trial court for a jury trial.

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

Sixth Circuit: Retired Employee Can Assert ERISA Claim Based on False Information Provided in Written Benefit Estimate

Last week, the federal Sixth Circuit Court of Appeals in Cincinnati issued a decision recognizing for the first time that a plaintiff can assert an estoppel claim against a pension plan under ERISA when the plaintiff relied to his detriment upon a written and certified estimate of his monthly retirement benefit in making his decision to retire and then was then told two years later that his actual benefits were substantially lower than the prior estimate, that his future benefits would be reduced accordingly and that he was requested to repay approximately $11,000 to the retirement plan. Bloemker v. Laborers Local 265 Pension Fund, No. 09-3536 (6^th Cir. 5/19/10). However, the Court affirmed the dismissal of the plaintiff's statutory and breach of contract claims.

According to the Court's opinion, the plaintiff's 2005 annual statement of status estimated that he "would be entitled to to a monthly benefit pension of

$2,666.99." Interested, he contacted the third-party administrator of his pension plan "to discuss the possibility of early retirement. He received a letter from her

stating that if he were to retire on April 1, 2005, he would be eligible for "approximately $2,564.00 per month, single life annuity, payable for your lifetime only."

Based on this, the plaintiff applied for early retirement benefits on February 10, 2005" and on March 1, 2005, he received a Benefit Election Form which was stamped by the TPA, stated that he would receive $2,339.47 per month for his life, and contained a certification stating:

Based on our records of your hours worked under the Plan and the contributions which have been made on your behalf, we hereby certify that you are entitled to receive the retirement benefit specified above, and that the amount shown for any optional forms of payment are equivalent to your basic benefit.

The plaintiff retired and in 2006 received a letter from the TPA indicating that a computer error caused it to miscalculate his early retirement benefits, that he was entitled to $500/month less than previously indicated and that he needed to repay the approximately $11,000 he had been overpaid to date. The plaintiff filed suit after exhausting his administrative remedies under the plan. In his suit, he alleged that the Plan and the TPA should be equitably estopped from denying him the larger retirement benefit on account of their material misstatements on which he relied to his detriment. He also alleged that the Plan and TPA breached a written contract to him in the application for benefits and that the TPA breached its statutory fiduciary duties to him. The trial court dismissed his claims

In the past, the Sixth Circuit has – unlike other circuit courts -- been reluctant to recognize estoppels claims against pension plans because estoppel "cannot be applied to vary

the terms of the unambiguous plan documents." In addition,

pension benefits are typically paid out of funds to which both employers and employees contribute. Contributions and pay-outs are determined by actuarial assumptions reflected in the terms of the plan. If the effective terms of the plan may be altered by transactions between officers of the plan and individual plan participants or discrete groups of them, the rights and legitimate expectations of third parties to retirement income may be prejudiced.

The Court remains unwilling to accept estoppels claims based on oral or verbal statements by low level employees which modify the written terms of the plan. "This policy concern is

greatly lessened when the representations at issue are made in writing, and, particularly here, where the representations constituted formal certifications."

Under Sixth Circuit precedent,

the elements of an equitable estoppel claim are: 1) conduct or language amounting to a representation of material fact; 2) awareness of the true facts by the party to be estopped; 3) an intention on the part of the party to be estopped that the representation be acted on, or conduct toward the party asserting the estoppel such that the latter has a right to believe that the former's conduct is so intended; 4) unawareness of the true facts by the party asserting the estoppel; and 5) detrimental and justifiable reliance by the party asserting estoppel on the representation.

The Court found these elements to be satisfied by the plaintiff's allegations in this case. It found the defendants' alleged gross negligence sufficient to constitute constructive fraud. Moreover, while it generally has found that a plaintiff can not prove justifiable reliance on a misrepresentation if the misstatement contradicted unambiguous plan documents, in this case, the plaintiff alleged that "it would have been impossible for him to determine his correct pension benefit given the complexity of the actuarial calculations and his lack of knowledge about the relevant actuarial assumptions."

We hold that a plaintiff can invoke equitable estoppel in the case of unambiguous pension plan provisions where the plaintiff can demonstrate the traditional elements of estoppel, including that the defendant engaged in intended deception or such gross negligence as to amount to constructive fraud, plus (1) a written representation; (2) plan provisions which, although unambiguous, did not allow for individual calculation of benefits; and (3) extraordinary circumstances in which the balance of equities strongly favors the application of estoppel.

The Court affirmed the dismissal of his fiduciary duty claims and breach of contract claims.

Section 1132(a)(1)(B) of ERISA provides that a plan beneficiary may bring suit "to recover benefits due to him under the terms of his plan." 29 U.S.C. § 1132(a)(1)(B). As discussed above, the written ERISA plan documents govern the rights and benefits of ERISA plan beneficiaries. . . . . Where a retirement plan creates benefits in excess of those established by ERISA, however, those rights may be enforceable in contract under federal common law. . . . Furthermore, when additional documents operate to modify or amend the plan, a beneficiary can rely on those modifications to determine his benefits. . . . .

However, the Benefit Election form submitted by the plaintiff "did not purport to be an amendment or a modification to the Plan. Nor did it purport to create a separate contract for benefits in addition to those provided by the Plan. Instead, it simply claimed to provide the actuarially certified benefit [the plaintiff] was entitled to, based on the Plan." Thus, there was no basis for asserting a claim for breach of contract.

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.

Supreme Court: Even Partially Prevailing Parties Can Win Attorneys Fees in ERISA Litigation

On Monday, an almost unanimous United States Supreme Court held that certain parties can be awarded attorney fees from the opposing party even if they are not "prevailing parties" in the litigation. Hardt v. Reliance Standard Life Ins. Co., No. No.09-448 (5/14/10). In that case, the plaintiff sued the defendant insurance company when it denied her LTD benefits for carpal tunnel syndrome. The trial court found that she had presented compelling evidence that she was totally disabled and that the defendant had acted on incomplete medical evidence. Instead of granting her summary judgment, however, the trial court remanded the case to the insurance company to reconsider its prior decision within 30 days. Not surprisingly under the circumstances, the defendant reversed its decision and awarded the plaintiff benefits. The trial court then awarded her attorney fees under ERISA §1131(g)(1). The Fourth Circuit Court of Appeals reversed on the grounds that the plaintiff had never obtained an enforceable court judgment and, thus, was not a "prevailing party." With Justice Thomas writing the majority opinion, the Supreme Court reversed on the grounds that the specific statutory provision permits the trial court discretion to award attorney fees to either party, not merely prevailing parties. Justice Stevens concurred separately.

The insurance company initial denied the LTD claim based on its evaluation of the results of her functional capacity evaluation (showing she was capable of some sedentary work). After she appealed, it reversed itself and found she was totally disabled from her current occupation (clerical) and could have benefits for 24 months. In the meantime, the plaintiff was diagnosed with "small-fiber neuropathy, a condition that increased her pain and decreased her physical capabilities over the ensuing months." She applied for and received social security benefits on the grounds that she was completely disabled from working. The insurance company notified her that her LTD benefits were about to run out and demanded repayment for about $14K because of her receipt of SSA benefits. She appealed and provided updated medical information. The insurance company again asked for a capacity evaluation, but did not ask the evaluator to consider her neuropathy problems. The evaluators requested two evaluations and complained that the plaintiff was refusing to try out of fear of pain. The defendant then hired a physician and vocational counselor to resolve her appeal, but the physician concluded that she might improve after reviewing only some of her medical records and the counselor opined that there were 8 jobs she was capable of performing based on her 2003 medical condition (before the neuropathy was diagnosed). Thus, the insurance company terminated her benefits in 2006.

After exhausting her administrative remedies, the plaintiff filed suit in federal court. The court denied cross-motions for summary judgment. However, the court found compelling evidence that the plaintiff was completely disabled and the defendant had failed to properly review her medical records. Thus, it remanded the case for 30 days to the insurance company to reconsider its prior decision. After the insurance company reversed itself again, the plaintiff requested to be awarded attorney fees.

ERISA's section 1132(g)(1) provides: "In any action under this subchapter (other than an action described in paragraph (2)[i.e, recovering delinquent contributions on behalf of a multi-employer plan]) by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." Based on the plain text of the statute, the Supreme Court found that it was erroneous to limit the recovery fees to a prevailing party and, instead, held that it is within the trial court's discretion to award fees "as long as the fee claimant has achieved 'some degree of success on the merits.'" Unlike §1132(g)(2) which limits fees to a party who obtains a judgment for the plan, there is no mention of "prevailing party" in that section of the statute.

To guide courts faced with this decision in the future, the court then analyzed when it would be appropriate to award attorney fees under §1132(g)(1). The basic principle of the "American Rule" is that each party pays their own attorney unless provided otherwise by statute or contract. Statutory standards vary widely from prevailing party, to substantially successful litigant, to when appropriate to the court's discretion. The Court found the most analogous situation to involve a similar statute under the Clean Air Act which permits an award of fees "when appropriate." Even in that situation, the Court found that Congress did not intend to completely abandon the American Rule and would still require some success by the party to obtain its aims in the litigation before it would be awarded fees. Thus, fees are available to partially prevailing parties who achieved some success.

A claimant does not satisfy that requirement by achieving "trivial success on the merits" or a "purely procedural victor[y]," but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a "lengthy inquir[y] into the question whether a particular party's success was 'substantial' or occurred on a 'central issue.'"

In this case, the plaintiff convinced the court that the defendant insurance company had failed to comply with ERISA in reviewing her request for benefits. Summary judgment in her favor was only denied in order to give the insurance company another chance to evaluate her application – something it had already done several times before she initiate the litigation. Only because of the trial court's instruction did the insurance company reverse itself. Thus, the plaintiff achieved victory even without a court order.

These facts establish that [the plaintiff] has achieved far more than "trivial success on the merits" or a "purely procedural victory." Accordingly, she has achieved "some success on the merits," and the District Court properly exercised its discretion to award [the plaintiff] attorney's fees in this case.

No further remand was deemed necessary.

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.

New FLSA Child Labor Regulations Become Effective in July 2010.

Last week, the Wage and Hour Division of the federal Department of Labor released revised regulations governing the use of child labor in the United States. The new rules govern the employment of children under the age of 18, become effective on July 19, 2010 and are the first significant revision of the rules in 30 years. Among other things, the new rules will permit older teenagers to operate table-top mixers (like those used in most home kitchens), but otherwise expands the list of prohibited equipment (which now, for instance, prohibit the use of weed-trimmers and most power tools). With respect to younger teenagers, “[i]f a task is not specifically permitted, it is prohibited.” In general, while the new regulations attempt to prohibit younger teenagers from engaging in dangerous activities and prohibits all peddling, street sales and door-to-door sales (other than for charitable causes, like the Girl Scouts and PTOs), it also specifically permits jobs in all other industries covered the FLSA (other than mining, manufacturing and specifically prohibited activities like laundry, waste disposal, mass mailings, dry cleaning and house painting, etc.), including government, food service, financial, insurance and other white collar establishments.

The revised regulations now permit 15 year old minors to be lifeguards at pools and amusement parks if they are certified by the Red Cross. The new regulations also permit younger teenagers to engage in intellectual or artistically creative work like tutoring, writing software, etc. under certain conditions. Finally, the traditional working hours restrictions still apply based on the schedule of the local public school district, regardless if the particular youth attends a private school with a different schedule or is home schooled. Moreover, the revised regulations clarify that the 3-hour restriction on school days includes Fridays.

The Department of Labor has preared a fact sheet on the current rule, hazardous occupations side-by-side comparison of new final rule and current rule, and Reg. 3 side-by-side comparison of new rule and current rule.

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.

Supreme Court: Disparate Impact Claims Accrue with Each New Employer Action Regardless of When Policy Was Adopted

This morning, the United States Supreme Court ruled that Title VII disparate impact claims accrue each time the employer uses the facially neutral employment practice which has a disparate impact on a protected class. Lewis v. City of Chicago. No. 08-974 (5/24/10). Accordingly, the class action could proceed with its disparate impact discrimination claims even though the earliest Charge of Discrimination filed by a class member was filed with the EEOC more than 300 days after the challenged policy was adopted and announced and even more than 300 days after it had first been applied because the employer had used the disputed employment practice on other occasions within 300 days of when the Charge had been filed. Writing for a unanimous Court, Justice Scalia noted that to have held otherwise would mean that an employer could indefinitely utilize a discriminatory policy if it were lucky enough not to be challenged within the first 300 days.

According to the Court's opinion, the City of Chicago administered a civil service test in 1995 to select firefighters. In January 1996, it announced that applicants who scored below 65 failed and would not be considered further and that even though applicants with scores between 66 and 88 passed and, thus were qualified, they would not be considered for vacancies until all of the "well qualified" applicants who scored 89 or better were hired or given further consideration. No applicant filed a Charge of Discrimination to challenge the City's stated policy. In May 1996, the City hired its first class of firefighters from the 1995 list based on the policy announced in January 1996 and, again, no applicant filed a Charge of Discrimination to challenge the City's action within 300 days. The City then continued to process candidates off the 1995 list for six years until it ran out of "well qualified" applicants and began processing "qualified" candidates. In March 1997, the first Charge of Discrimination was filed by a qualified applicant who was passed over by the City's January 1996 process, the EEOC completed its investigation in July 1998 and a class action lawsuit was filed later that year. The trial court denied summary judgment to the City on the issue of timeliness while the plaintiff were pursuing a continuing violation theory to avoid the 300-day limitations period issue. There was then an eight-day bench trial which found in favor of the plaintiffs. The City apparently stipulated that the adoption of the 89-point cut off had a severe disparate impact on African-Americans. (There was no evidence presented that the City's use of the policy had a disparate impact each or any time it was utilized.) The Seventh Circuit Court of Appeals had reversed the trial court judgment on the grounds that the City's hiring decisions were merely the affect of a past decision which the plaintiffs had failed to challenge within the 300-day limitations period. The Supreme Court reversed.

Employment decisions may be challenged as intentional discrimination (i.e., disparate treatment) or unintentional discrimination (i.e., disparate impact). The second theory began in the Supreme Court's 1971 decision in Griggs v. Duke Power Co., 401 U. S. 424, 431 (1971). Congress later amended Title VII at 42 U.S.C. § 2003-2(k):

"(1)(A) An unlawful employment practice based on disparate impact is established under this subchapter only if—

"(i) a complaining party demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin and the respondent fails to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity . . . ."

Thus, a plaintiff establishes a prima facie disparate impact claim by showing that the employer "uses a particular employment practice that causes a disparate impact" on one of the prohibited bases.

Title VII requires that a Charge of Discrimination be filed with the EEOC within 300 days "after the alleged unlawful employment practice occurred." §2000e–5(e)(1).
In disparate treatment cases, that "practice" is when the employment action is deliberately taken with discriminatory intent. After the passage of 300 days, employees cannot later sue for the current affects of past discriminatory decisions under the disparate treatment theory. However, in disparate impact cases, no discriminatory intent is required. Thus, in disparate impact the question is generally not whether the lawsuit is timely, but whether a valid disparate impact claim can be alleged at all. In other words, if the plaintiff can show that any employment action taken in the prior 300 days has a disparate impact, then the claim can proceed regardless of when the employment practice was first adopted or utilized. In this case, the City's practice of excluding candidates with a score between 66 and 88 from further consideration constituted an employment practice and, apparently, it was stipulated that it had an adverse impact on the plaintiffs on account of their race.

While the Court had sympathy with the plight of the City (and all other employers) that its decision to adopt the policy became lawful when it was not timely challenged, the Court concluded that "it does not follow that no new violation occurred—and no new claims could arise—when the City implemented that decision down the road. If petitioners could prove that the City" use[d]" the "practice" that "causes a disparate impact," they could prevail.

Granted, "[e]mployers may face new disparate-impact suits for practices they have used regularly for years. Evidence essential to their business-necessity defenses might be unavailable (or in the case of witnesses' memories, unreliable) by the time the later suits are brought. And affected employees and prospective employees may not even know they have claims if they are unaware the employer is still applying the disputed practice." However, the alternative was even less satisfactory:

[I]f an employer adopts an unlawful practice and no timely charge is brought, it can continue using the practice indefinitely, with impunity, despite ongoing disparate impact. Equitable tolling or estoppel may allow some affected employees or applicants to sue, but many others will be left out in the cold. Moreover, the City's reading may induce plaintiffs aware of the danger of delay to file charges upon the announcement of a hiring practice, before they have any basis for believing it will produce a disparate impact.

The case was remanded to the Seventh Circuit to determine whether a new trial was necessary and whether the relief ordered by the trial court should be modified (as stipulated by the parties) to exclude consideration of the first round of hiring decisions which were made more than 300 days before the filing of the first Charge.

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.