Sixth Circuit: State and Federal Whistleblower Statutes Do Not Protect Internal Reporting by Employee Until He Investigates and Reports to Government

Today, the Sixth Circuit affirmed the dismissal of whistleblowing and public policy claims by the terminated officer of a financial institution who had provided information about misconduct to his supervisors that lead to his former boss being fired. Hill v. Mr. Money Finance Co., No. 07-3907. The Court found that the plaintiff’s activities were not protected by state or federal whistleblowing statutes or public policy because, among other things, he was fired before he reported the misconduct to government authorities.

According to the Court’s opinion, the plaintiff was hired as a Senior Vice President and was permitted by the company president to work three days each week in the office (since he lived approximately 90 miles away). At some point, he provided about 54 pages of evidence to a member of the Board of Directors about misconduct by the company’s president, including questionable credit card charges (for, among other things, flowers and lingerie), and two questionable loans. This information was forwarded to the CEO and ultimately to outside counsel, which arranged for the president to resign. None of this was reported to any federal or regulatory authorities. That same Board member was eventually hired as the new president and he terminated some of the “perks” of the plaintiff’s position, including his ability to work from home or receive a car allowance. When the plaintiff sought an increase in compensation to reflect the changes, the new president instead arranged for him to interview with other companies that would consider his compensation needs.

The plaintiff then attended a seminar where he learned about Suspicious Activity Reports (SARs) filed with the federal law enforcement and the Treasury Department concerning improper loans. He informed the new president that he believed that the former president’s misconduct was required to be documented in a SAR, but the new president failed to take any action on this information or learn about the SAR process. A few weeks later, the new president decided to eliminate the plaintiff’s SVP job as part of a reorganization. However, before the plaintiff was so informed of the reorganization, he sent a letter to the Board and the bank’s compliance officer about his concern that the bank was required to file a SAR concerning the former president’s misconduct. In particular, he believed it was illegal not to submit a SAR under the circumstances. The bank’s outside counsel refused to disclose whether a SAR had been filed, but responded “that [the plaintiff’s] approach to the situation created ‘disturbing problems’; that Mr. Money has no problem with filing an SAR because it has no reason to protect the resigned [former president]; and that if [the plaintiff] wanted to file an SAR, he should ‘go ahead.’” Apparently unaware that the plaintiff had already raised the issue with the current president, the attorney also expressed displeasure “at [the plaintiff] choosing to ignore ‘the chain of command,’ and suggested that [the plaintiff] ‘manufactured this issue for reasons that have nothing to do with’ filing a SAR.” Nonetheless, the attorney advised the compliance officer to “seek clarification from the Financial Crimes Enforcement Network (“FinCEN”), a division of the Treasury Department, whether an SAR needed to be filed.” The compliance officer sought clarification about one of the two improper loans and was told that it was not criminal misconduct which required a SAR.

Eleven days after informing the Board that he felt a SAR was necessary, the plaintiff was fired in the reorganization based on the needs of the business and his requested compensation. He then provided a letter he had mailed the day before detailing how he felt retaliated against for reporting the prior president’s misconduct when his working conditions had been changed by the current president. Two months later, the plaintiff filed suit and then filed a SAR.

The Court affirmed the dismissal of the plaintiff’s claim that his termination violated Ohio’s Whistleblower statute at Ohio Revised Code § 4113.52. The Court concluded that an employee is only protected “from retaliation ‘as long as he made a ‘reasonable and good faith effort to determine the accuracy’ of each informational element.’” The Court did not believe that the plaintiff satisfied this requirement of the Ohio statute despite evidence that he:

1) “gathered the concerns of multiple employees”; (2) assembled these concerns “into a written report,” which he presented to [the Board member]; (3) sought “additional information” on a credit card account when another employee brought her concerns to him, which entailed “obtaining online account information”; (4) reviewed “approximately 54 pages of MasterCard statements, which revealed the specifics of [the former president’s] activity”; (5) “pulled files to review loans” made to [an] (individual with the Ohio address, whose loan documents were delivered to New Jersey) and [a] singer; (6) “read the statutes relating to embezzlement and bank fraud.”

While the plaintiff “demonstrate[d] that he transmitted the concerns of multiple employees to [the Board member]. However, . . . serving as a “mere conduit” of information does not by itself amount to a reasonable and good faith effort” under the Ohio Whistleblower statute. “[I]t is clear that only those employees in the chain of command – only those “conduits” – who satisfy the requirement to make a reasonable and good faith effort to determine the accuracy of information they received and passed on are protected under the statute.”

The Court also rejected the plaintiff’s argument that he had submitted a written report to the Board member when he assembled the 54 pages of evidence of the misconduct, including his handwritten notes on some of the pages. Rather, the evidence “likewise fails to show that [the plaintiff] sought any information beyond that contained in the statements printed by another employee. He states that he did not know nor seek to ascertain whether the bank conducted an audit on the credit card or exactly how much money [the former president] paid back, if any.” The Court was also troubled by the amount of effort which the plaintiff put into determining whether the misconduct was criminal – or even felonious. “Merely stating in a sworn affidavit that he ‘believed that these serious crimes were felonies’ may conceivably satisfy the requirement that the employee reasonably believed a felony occurred, but it does not satisfy the requirement to make a reasonable and good faith effort to determine the accuracy of that belief. Even if it is not inconceivable that a jury would find reasonable and good faith effort with regard to the first informational component (occurrence of misconduct), it is far less conceivable with regard to the second informational component (criminality of misconduct), and wholly inconceivable with regard to the third informational component (felonious nature of misconduct). Therefore, we affirm the district court’s decision as to [the plaintiff’s] claim under the Ohio Whistleblower Statute, on the grounds that [the plaintiff] did not proffer sufficient evidence to create a genuine issue of material fact as to his reasonable and good faith effort to determine the accuracy of the information he reported.”

The Court also affirmed the dismissal of the federal whistleblowing claims because the plaintiff failed to “establish that his conduct qualifies for whistleblower protection under Federal Whistleblower Statutes [at 31 U.S.C. §5328 and 12 U.S.C. §1831j] , because [he] did not file protected information with the federal agencies specified in the statutes until after Defendants terminated his employment, and his ‘internal whistle-blowing’ to . . . the Board members does not satisfy statutory requirements.” As explained by the district court, “The language of sections 1831j and 5328(a) is clear and unambiguous. If the plaintiff did not report the relevant information, himself or through a conduit, to a federal banking agency, the Attorney General, the Secretary of the Treasury, or any federal supervisory agency, before being discharged or otherwise discriminated against . . . then the plaintiff is not protected by these whistle-blower protection laws.” More pointedly, “[a]lthough [the plaintiff] “had threatened to file an SAR on more than one occasion, and even announced his intent to do so, [he] did not actually file an SAR until after Defendants fired him.” Statutory language is clear that retaliation must follow the provision of information to a specified federal authority.”

The Court likewise affirmed the dismissal of the public policy claim. As explained by the district court: Because the plaintiff “did not report criminal activity within the corporations to anyone outside of the companies with any authority or oversight over the Defendants’ industries until after he was terminated,” [the plaintiff’s] actions “do not fulfill the goals of these statutes or of the public policy behind these statutes.” According to the Court, “[t]he obvious implication of [Ohio decisions] is that an employee who fails to strictly comply with the requirements of [the shistleblower statute] cannot base a [public policy] claim solely upon the public policy embodied in that statute.”

“[T]here is no genuine material issue as to whether [the plaintiff] reported anything outside the company – and as we agreed above, he did not. [The plaintiff’s] conduct did not fulfill the goals of the identified public policies, not solely because [he] did not comply with statutory requirements, but also because [he] failed to report, as required by the clear public policies he identified. Holding that a public policy in favor of reporting crimes requires that a possible crime actually be reported is not at odds with lower court decisions [he] cites in support of his claim.”

For some reason, the Court found distinguishable other public policy claims which protected internal whistleblowers simply because they involved different public policies. Rather “all of [those] cases deal with the policy favoring workplace safety. “

The Court likewise faulted the plaintiff for failing to identify any other specific public policy which prohibited retaliation against employees engaged in his behavior. The Plaintiff “does not match the “source” to the clear policy: we are left guessing as to which of these numerous statutes manifests a clear public policy against the “dismissal of bank employees in retaliation for reporting unlawful conduct by the officers of financial institutions,” let alone what specific statutory language expresses said policy clearly. Even if such a policy were clearly manifest, this claim fails for the same reasons as above – there was no “reporting” of violations to external authorities. Since [the plaintiff] did not establish the clarity element of the tort, whether he has established the jeopardy element is moot.”

Even if the Court did not think much of the plaintiff’s retaliation claims, it dismissed the Defendants’ request for sanctions for pursuing a frivolous claim.

Insomniacs can read the full option at http://www.ca6.uscourts.gov/opinions.pdf/09a0099n-06.pdf.

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

Sixth Circuit: Union’s Waiver of 30-Year Retired Employee’s Benefits Without Notice or Consent Protected Assets of Bankrupt Employer.

Today, the Sixth Circuit issued a decision in which it held that the statutory and severance claims of a 30-year retired employee of bankrupt LTV Steel had been waived by the employee’s former union even though he received no notice of the waiver, never consented to it, and had been explicitly excluded from receiving compensation under the waiver agreement. McMillan v. LTV Steel, Inc., No. 07-4370. Although federal law is pretty clear that unions no longer represent retired employees in negotiations, the employee was deemed to have waived that compelling legal argument when he failed to raise it in support of his claims before the bankruptcy or district courts. The Sixth Circuit also refused to disturb the district court’s conclusion that the employee’s actual claim for pension and 401(k) benefits was with the Pension Benefit Guaranty Corporation (PBGC) since it had assumed control of the employer’s retirement benefits when it filed for bankruptcy.

According to the court’s opinion, the plaintiff retiree worked for 30 years in a UWSA unit for LTV Steel. The UWSA and LTV had negotiated both a defined contribution plan (i.e., a 401(k) plan to which both the employee and employer contributed) and a defined benefit plan (i.e., pension). In 1999, the UWSA and LTV reorganized the retirement benefits to eliminate future pension contributions (and limit future payouts to a $10,000 lump sum), and to transfer employer contributions from the 401(k) plan to the pension plan. About a year later, LTV filed for bankruptcy protection, issued a WARN notice a few months later and eventually permanently closed the retiree’s plant. The plaintiff retiree worked at reduced pay at other LTV plants, but remained out of work beginning in August 2001. Under a USWA negotiated agreement, he had the option to transfer (without seniority) to another plant, to remain on layoff status, to accept retirement or to take severance. The plaintiff elected to retire in December 2001 and take his $10,000 pension lump sum. While the opinion is ambiguous on this point, this amount was apparently never paid.

In the meantime, LTV eventually sold all of its assets in December 2001, but the sale proceeds were only sufficient to pay secured creditors and not to pay administrative claims or unsecured creditors, such as the plaintiff and other retirees. Accordingly, PBGC assumed LTV’s pension obligations. The UWSA then renegotiated the CBA with LTV and eliminated, among other things, the previously promised severance pay. Nonetheless, six months later, the USWA filed an administrative claim with the bankruptcy court for LTV’s failure to pay severance pay, WARN Act liability, retiree benefits, etc. The UWSA settled its claim with LTV in December 2003 for $15M, but the settlement expressly did not benefit retirees such as the plaintiff who worked at his original plant or were laid off prior to November 2001. In the 2003 settlement, UWSA waived any and all other claims it could make arising out of any bargaining agreement. The plaintiff received no notice of the USWA administrative claim and did not receive notice of, or consent to, the 2003 settlement.

Nonetheless, the plaintiff filed his own administrative claim against LTV in 2002 for over $300,000 (for unpaid wages, pension benefits and 401(k) payment) and it was denied by the bankruptcy court. The plaintiff eventually reached an unsecured settlement with Copperweld -- one of LTV’s subsidiaries -- for the full amount, but retained his right to pursue his claim against LTV. In 2004, he filed another administrative claim for over $40,000 for his unpaid 401(k) contributions, severance pay and other benefits.

The bankruptcy court found that the 401(k) contributions were transferred to the pension fund in 1999 and were now being administered by PBGC and not LTV. The Sixth Circuit agreed that the plaintiff should be limited to asserting a claim against the PBGC. In addition, the bankruptcy court found that collateral estoppel from the Copperweld settlement estopped the plaintiff from pursuing the same amount from LTV, despite his reservation of rights to pursue claims against LTV. The Sixth Circuit found that the plaintiff’s claims were not entitled to administrative priority status because the liability arose before LTV filed for bankruptcy and did not relate to retiree healthcare benefits.

Finally, his claim for severance benefits and WARN Act payments were deemed waived by the USWA in 2003 even though he received no proceeds from that $15M settlement, received no notice of the claim or settlement, and never consented to the settlement. Indeed, the law is clear that unions cannot negotiate on behalf of retirees because they are no longer union members. However, even though the bankruptcy court erroneously concluded that the USWA was acting as his agent, the plaintiff never raised the issue of agency to the bankruptcy or district courts, but rather, focused on his lack of notice and consent to the settlement. Therefore, the Sixth Circuit determined that he could not belatedly raise the agency argument even if the lower courts had erred. Moreover, if the UWSA had been his agent, it had authority to waive his WARN Act and severance pay claims on his behalf – even without notice or consent. Therefore, those claims were also dismissed.

Insomniacs can read the full court decision at http://www.ca6.uscourts.gov/opinions.pdf/09a0040p-06.pdf.

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

USCIS Again Delays Mandatory E-Verify Implementation For Federal Contractors Until May 21, 2009

As summarized here on December 9, 2008 and January 12, 2009, the federal government published its final regulation in November which will require many federal contractors and subcontractors to begin using the e-verify program to confirm the employment eligibility of many existing and newly-hired employees as federal service and construction contracts and solicitations are issued or amended. However, although the initial implementation date was scheduled to be January 15, 2009 and was pushed back to February 20, 2009, it has once against been postponed until May 21, 2009. In other words, federal agencies have been directed to postpone the insertion of a new clause into procurement contracts and solicitations requiring contractors and subcontractors to enroll and utilize the e-verify program. This regulation implements Executive Order 12989 which was amended in June 2008.

The USCIC website now provides, among other things, that “This new rule requires federal contractors to agree, through language inserted into their federal contracts, to use E-Verify to confirm the employment eligibility of all persons hired during a contract term, and to confirm the employment eligibility of federal contractors’ current employees who perform contract services for the federal government within the United States. Federal contracts awarded and solicitations issued after May 21, 2009 will include a clause committing government contractors to use E-Verify. The same clause will also be required in subcontracts over $3,000 for services or construction. Contracts exempt from this rule include those that are for less than $100,000 and those that are for commercially available off-the-shelf items. Companies awarded a contract with the federal government will be required to enroll in E-Verify within 30 days of the contract award date. They will also need to begin using the E-Verify system to confirm that all of their new hires and their employees directly working on federal contracts are authorized to legally work in the United States.”

Additional details about the e-verify requirements and exemptions are included in the December 9 posting [Many Federal Contractors and Subcontractors Required to Use E-verify Program After January 15, 2009].

Contractors remain free to utilize the e-verify system and USCIS points out that more than 100,000 employers have registered for the program. In response to the Chamber’s protests about e-verify, USCIS contends that e-verify is not mandatory because employers are not mandated to become federal contractors.

Insomniacs can read the UCSIS announcement at http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=534bbd181e09d110VgnVCM1000004718190aRCRD&vgnextchannel=534bbd181e09d110VgnVCM1000004718190aRCRD.

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 I-9 Form Delayed Until April 3, 2009

No one would ever accuse the federal government of being efficient. As reported here on January 26, 2009, USCIS announced in December 2008 that a new I-9 form would become mandatory for all employers on February 2, 2009. However, this new I-9 form was not placed on the USCIS website until the end of January 2009 – days after the Obama inauguration and only days before the mandatory deadline. Then, on Friday, January 30, 2009 -- only a week later and only one business day before the new form became mandatory -- the Obama administration has announced that EMPLOYERS MUST NOT USE THE NEW FORM UNTIL April 3, 2009. Indeed, the new administration has re-opened the review and public comment period until March 3, 2009.

Insomniacs can read the full USCIS press release at http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=52b16d962492f110VgnVCM1000004718190aRCRD&vgnextchannel=68439c7755cb9010VgnVCM10000045f3d6a1RCRD.

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.

Employers Must Begin Using Another New I-9 Form Beginning on Monday, February 2, 2009.

NOTICE: This information was superceded on January 30, 2009. See posting on February 2, 2009.

On December 11, 2008, the Citizenship and Immigration Service (CIS) announced that it had submitted to the Federal Register an interim final rule which would streamline the I-9 process and yet again revised the I-9 form. According to the CIS, “[t]he interim final rule narrows the list of acceptable identity documents and further specifies that expired documents are not considered acceptable forms of identification. An expansive document list makes it more difficult for employers to verify valid and acceptable forms and single out false documents compromising the effectiveness and security of the Form I-9 process. The changes included in the interim final rule will significantly improve the security of the employment eligibility verification process.” However, it has taken until late January for the CIS to finally place the new I-9 form on its website for employers to download and begin using next week.

In particular, the new “rule eliminates Forms I-688, I-688A, and I-688B (Temporary Resident Card and older versions of the Employment Authorization Card/Document) from List A. USCIS no longer issues these cards, and all that were in circulation have expired. The rule also adds to List A of the Form I-9 foreign passports containing specially-marked machine-readable visas and documentation for certain citizens of the Federated States of Micronesia (FSM) and the Republic of the Marshall Islands (RMI). The rule makes other, technical changes to update the list of acceptable documents. The revised Form I-9 includes additional changes, such as revisions to the employee attestation section, and the addition of the new U.S. Passport Card to List A. “

Insomniacs can review the CIS press release in full at http://www.uscis.gov/portal/site/uscis/menuitem.5af9bb95919f35e66f614176543f6d1a/?vgnextoid=9ad43f347a62e110VgnVCM1000004718190aRCRD&vgnextchannel=68439c7755cb9010VgnVCM10000045f3d6a1RCRD. The pending interim final rule can be reviewed in full at http://edocket.access.gpo.gov/2008/E8-29874.htm. The new I-9 form to be used only after February 2, 2009 can be downloaded from
http://www.uscis.gov/files/form/I-9_IFR_02-02-09.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.

Supreme Court: Answers Given During Employer’s Internal Investigation Can Constitute Protected Opposition under Title VII.

Today, a unanimous United States Supreme Court reversed a judgment affirmed by the Sixth Circuit Court of Appeals in Cincinnati in favor of a Tennessee school district which fired an employee (for alleged embezzlement) after she answered questions during an internal investigation into rumors of sexual harassment which revealed that she felt sexually harassed by the school’s employee relations director. Crawford v. Metropolitan Government of Nashville and Davidson County, Tennessee, No. 06-1595. The Court held that the protection of Title VII’s opposition clause “extends to an employee who speaks out about discrimination not on her own initiative, but in answering questions during an employer’s internal investigation.” In doing so, the Court rejected the employer’s argument that the employee’s passive response to questions during the internal investigation was not entitled to the same legal protection given to employees who affirmatively lodge a complaint of harassment with the employer or an agency because it would discourage employers from conducting internal investigations out of fear of creating new classes of protected employees. The Court concluded that “nothing in the statute requires a freakish rule protecting an employee who reports discrimination on her own initiative but not one who reports the same discrimination in the same words when her boss asks a question.”

According to the Court’s opinion, the employer “began looking into rumors of sexual harassment by [its] employee relations director” in 2002. When the investigator asked the plaintiff, “a 30-year Metro employee, whether she had witnessed ‘inappropriate behavior’ on the part of” the director, the plaintiff “described several instances of sexually harassing behavior: once, [the director] had answered her greeting, ‘Hey Dr. Hughes, what’s up?,’ by grabbing his crotch and saying ‘[Y]ou know what’s up’; he had repeatedly ‘put his crotch up to[her] window’; and on one occasion he had entered her office and ‘grabbed her head and pulled it to his crotch,’. . . Two other employees also reported being sexually harassed by [the director.]” Although the school district took no action against the director, it fired the plaintiff “and the two other accusers soon after finishing the investigation, saying in [the plaintiff’s] case that it was for embezzlement.” In turn, the plaintiff filed a charge of retaliation with the EEOC and ultimately filed suit in federal court.

“The Title VII antiretaliation provision has two clauses, making it “an unlawful employment practice for an employer to discriminate against any of his employees . . . [1] because he has opposed any practice made an unlawful employment practice by this subchapter, or [2] because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under this subchapter.” 42 U. S. C. §2000e–3(a). The one is known as the “opposition clause,” the other as the “participation clause,” and [the plaintiff] accused [the school district] of violating both.” The district court granted summary judgment for the employer on the grounds that the plaintiff had failed to engage in activity protected under Title VII. The Sixth Circuit affirmed.

In reversing, the Court noted that “’Oppose’ goes beyond ‘active, consistent’ behavior in ordinary discourse, where we would naturally use the word to speak of someone who has taken no action at all to advance a position beyond disclosing it. Countless people were known to “oppose” slavery before Emancipation, or are said to “oppose” capital punishment today, without writing public letters, taking to the streets, or resisting the government. And we would call it “opposition” if an employee took a stand against an employer’s discriminatory practices not by “instigating” action, but by standing pat, say, by refusing to follow a supervisor’s order to fire a junior worker for discriminatory reasons. . . . There is, then, no reason to doubt that a person can “oppose” by responding to someone else’s question just as surely as by provoking the discussion.”

The Court was unconcerned with disincentives for an employer to conduct a thorough internal investigation because it felt that the affirmative defenses created in its Ellerth and Faragher decisions were sufficient incentive for an employer to conduct internal investigations of sexual harassment rumors and allegations. Indeed, it felt that a contrary decision in this case would undermine the structure it had created in those earlier cases: “If it were clear law that an employee who reported discrimination in answering an employer’s questions could be penalized with no remedy, prudent employees would have a good reason to keep quiet about Title VII offenses against themselves or against others. . . . The appeals court’s rule would thus create a real dilemma for any knowledgeable employee in a hostile work environment if the boss took steps to assure a defense under our cases. If the employee reported discrimination in response to the enquiries, the employer might well be free to penalize her for speaking up. But if she kept quiet about the discrimination and later filed a Title VII claim, the employer might well escape liability, arguing that it “exercised reasonable care to prevent and correct [any discrimination] promptly” but “the plaintiff employee unreasonably failed to take advantage of . . .preventive or corrective opportunities provided by the employer.”

Finally, the Court rejected any requirement that the plaintiff bring her own internal complaint before filing a Charge or lawsuit as indicated by the Court’s earlier discussions in Faragher and Ellerth of an employee’s obligation to exercise reasonable care to avoid and/or mitigate the harm. “But that mitigation requirement only applies to employees who are suffering discrimination and have the opportunity to fix it by ‘tak[ing] advantage of any preventive or corrective opportunities provided by the employer,’; it is based on the general principle “that a victim has a duty ‘to use such means as are reasonable under the circumstances to avoid or minimize . . . damages,’ . . . We have never suggested that employees have a legal obligation to report discrimination against others to their employer on their own initiative, let alone lose statutory protection by failing to speak. Extending the mitigation requirement so far would make no sense; employees will often face retaliation not for opposing discrimination they themselves face, but for reporting discrimination suffered by others. Thus, they are not “victims” of anything until they are retaliated against, and it would be absurd to require them to “mitigate” damages they may be unaware they will suffer.”

Nonetheless, the Court recognized that not every description of harassing behavior during an internal investigation will constitute protected conduct: “It is true that one can imagine exceptions, like an employee’s description of a supervisor’s racist joke as hilarious, but these will be eccentric cases, and this is not one of them” even though there was evidence (which could not be fully considered at the summary judgment stage of the litigation) that the plaintiff had told the director to “bite me” and “flip[ed] him a bird” because the plaintiff “gave no indication that [his] gross clowning was anything but offensive to her.”

Insomniacs can read the Supreme Court’s full opinion at

Trucking Company Pitt-Ohio Agrees To Pay $2.43M To Settle EEOC Sex Discrimination Class Action Lawsuit

On Thursday, the EEOC’s Cleveland office announced that the interstate trucking firm, Pitt-Ohio Express, Inc., “has agreed to pay $2.43 million and provide other remedial relief to a class of women to settle” a sex discrimination class action lawsuit brought by the EEOC. The EEOC had alleged in this lawsuit “that Pitt Ohio Express Inc. denied a class of qualified female applicants employment as truck drivers or dockworkers since 1997, while men were placed in these positions during the same period. The comprehensive relief obtained by the EEOC includes $2.43 million for the class of women denied employment. Non-monetary relief includes offers of employment to women who should have been previously hired as drivers and dock workers and equal employment opportunity training to all supervisors and managers, as well as reporting and monitoring provisions.”

According to the EEOC, “[t]he consent decree settling the suit was approved by the court following a fairness hearing held [Thursday] morning. . . . Pitt-Ohio Express Inc. is a regional carrier specializing in short-haul transporting, providing direct service to over seven states in the northeastern United States. The company is headquartered in Pittsburgh and has terminals in Cleveland, Columbus, Cincinnati and Toledo.”

According to the terms of the consent decree, “neither this Decree nor the fact of a settlement are an admission or concession by Pitt Ohio of any violation of Title VII or of any liability or wrongdoing whatsoever.” Nonetheless, the consent decree contains the following terms:
• Pitt Ohio, its officers, agents, employees and all others in active concert with them are enjoined from discriminating in hiring based on sex in violation of Title VII against female applicants for driver and dockworker positions in its Ohio terminals, and from failing to create and maintain records as required by Title VII or regulations issued pursuant to Title VII.
• Pitt Ohio, it officers, agents, employees and all others in active concert with them shall not retaliate against any female applicants for driver and dockworker positions at its Ohio terminals for participating in this proceeding or otherwise asserting any rights under Title VII in this proceeding.
• The payments to Claimants are for compensatory damages. Based on the lack of any prior employment relationship between Pitt Ohio and the Claimants, the absence of any adjudication of issues raised in the Complaint and Pitt Ohio's payment to the Claim Fund according to the procedures herein as a step in resolving all claims and issues, each Claimant, to whom a payment was made will be provided by the Claim Fund, an IRS Form 1099-MISC for the year in which payment is made, as required by law, directed to the same address to which the check was sent.
• Within 60 days after the entry of this Decree, EEOC shall provide Pitt Ohio the name of each Offer Eligible Claimant who has expressed interest in employment with Pitt Ohio and whom it contends should receive "priority hiring consideration" as defined in paragraph 23, and at the same time it will provide Pitt Ohio the current qualifications information received from each such Offer Eligible Claimant. As used herein, "priority hiring consideration" refers to Pitt Ohio's obligation to make employment offers for driver and dockworker positions to Offer Eligible Claimants who meet the hiring criteria in effect for such positions at the time the offer for such position would be made. . . . Absent disagreement or once any disagreement about whether an Offer Eligible Claimant should receive "priority hiring consideration" has been resolved, such Offer Eligible Claimant entitled to "priority hiring consideration" shall be placed on a "Job Offer List" according to her stated Ohio terminal preference for employment. When a job vacancy for a driver or dockworker position becomes available at an Ohio terminal, Pitt Ohio will consult the Job Offer List for that terminal, invite as many Offer Eligible Claimants to interview as it deems appropriate and make offers of employment to Offer Eligible Claimants on the Job Offer List before considering the application of any other person. . . . Pursuant to these "priority hiring consideration" provisions, Pitt Ohio shall extend at least 40 offers of employment, 26 for driver positions and 14 for dockworker positions. If at least 30 hires do not result from the initial offers, EEOC will provide Pitt Ohio the names of additional Offer Eligible Claimants and Pitt Ohio shall in good faith make additional offers until 30 hires are achieved or until the termination of this Decree, whichever is earlier. Each Offer Eligible Claimant hired pursuant to the "priority hiring consideration" provisions will receive "rightful place instatement." "Rightful place instatement" shall mean that, when an Offer Eligible Claimant is hired into a driver or dockworker position, she shall be hired into the vacant position at the then existing hiring rate for the position with seniority rights and accompanying benefits, based on the position and her earlier date of application. Rightful place instatement shall not extend to bumping Pitt Ohio employees who occupy jobs, displacement of drivers from current route and shift assignments, or vacation preference rights.
• Pitt Ohio will appoint from its human resources department an ombudsperson to resolve informally issues arising from or which result from women entering driver and/or dockworker positions pursuant to the terms of this Decree. To the extent necessary, Pitt Ohio will issue procedures for submission and handling of issues by the ombudsperson. The ombudsperson will not be the person in the human resources department responsible for responding to EEO charges or other EEO compliance.
• Within 30 days after the date of this Decree, Pitt Ohio shall provide a training proposal to EEOC for approval. The proposal shall include: format of the training; name(s) and qualifications of the instructor(s); content and topics to be covered; length of the program; and estimated training dates and locations. The training shall include at least the following topics: Title VII recordkeeping requirements (retention requirements, prohibition against destruction of records, etc.); hiring practices and procedures which comply with Title VII; the interview process and types of questions to be asked of applicants; and personnel policies and procedures which comply with Title VII. Pitt Ohio shall conduct EEO training to be attended by its executives, managers, supervisors, human resources staff and recruiters from its corporate headquarters and Ohio terminals, and any other employees at corporate headquarters and the Ohio terminals coming in direct contact with prospective applicants or involved in the recruitment, selection and hiring process. This training shall be completed within 90 days of the date of this Decree. Pitt Ohio shall train all newly-hired and newly-promoted management or supervisory staff, and other staff involved in the application and hiring process at its corporate headquarters or Ohio terminals on equal employment opportunity law, including the topics listed in paragraphs 34, within 90 days after their hire, promotion or transfer for the duration of this Agreement. To satisfy this requirement, Pitt Ohio may substitute viewing of a video presentation of the original training session, provided a qualified trainer attends to answer questions.
• In addition to the steps of training and appointment of an ombudsperson, identified elsewhere in this Decree, Pitt Ohio will help assure management and supervisory accountability in effecting the terms of this Decree in its Ohio facilities by: (a) directing managers and supervisors to carry out their supervisory responsibilities so as to achieve compliance with Pitt Ohio's policy or policies prohibiting unlawful employment discrimination and/or retaliation; (b) taking corrective action, which may include discipline up to and including discharge of any supervisor or manager who violates Pitt Ohio's policy or policies prohibiting unlawful employment discrimination or retaliation; (c) directing managers and supervisors to report incidents of unlawful discrimination and/or retaliation to Pitt Ohio's human resources group.
• Pitt Ohio will incorporate into the performance evaluations of its supervisors and managers an equal opportunity component.
• Within 14 days after the date of this Decree, Pitt Ohio shall post the Notice attached as Exhibit C at its Ohio terminals and corporate headquarters, and keep it upon those premises in places where bulletins and notices to employees and applicants for employment customarily are posted. Such Notice shall remain for the five-year duration of this Decree. If such Notice becomes defaced, marred or otherwise unreadable, Pitt Ohio will ensure that new readable copies are posted in the same manner as heretofore specified.
• With the first reporting period starting on the first day of the month immediately after the date of this Decree, Pitt Ohio shall submit to the EEOC's Cleveland Field Office a written report for each preceding six-month period for three years and then for each preceding one-year period for the remaining term of the Agreement, regarding recruitment and hiring of women in driver and dockworker positions in Ohio, which shall include: (a) for each Ohio terminal for the reporting period, a list of driver and dockworker hires, including name, sex, date of hire, job title, rate of pay, and status as full-time or part-time employee; (b) for each Ohio terminal for the reporting period, a list of the names of driver and dockworker applicants, their sex, and for each their address, social security number (if available), job applied for, date of application and an indication of the status of the applicant (i.e., hired or disposition code information); and (c) for each Ohio terminal, copies of the applicant logs for the preceding reporting period.

Insomniacs may read the full EEOC press release at http://www.eeoc.gov/press/1-22-09.html and the full terms of the consent decree at

Senate Passes Ledbetter Fair Pay Act of 2009

Yesterday, by a vote of 61-39, the Senate passed the Ledbetter Fair Pay Act of 2009 in order to reverse the 2007 Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618, which held that the statute of limitations under Title VII begins to run when a discriminatory pay decision is announced and/or implemented is not renewed with each subsequent paycheck. (The FLSA and companion Equal Pay Act already run with each illegal paycheck). The Act was already passed by the House of Representatives earlier in January and President Obama is expected to sign it. [Editor's Note: The White House blog confirms that he expects to sign the Senate version of the Ledbetter Act. http://www.whitehouse.gov/now-comes-lilly-ledbetter/]

The Ledbetter Act provides as follows:
• Nothing in the Act “is intended to change current law treatment of when pension distributions are considered paid.”
• An unlawful discriminatory compensation practice occurs under Title VII, the Americans With Disabilities Act (“ADA”), the Rehabilitation Act of 1973, and the Age Discrimination in Employment Act (“ADEA”) “when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid, resulting in whole or in part from such a decision or other practice.
• In addition to relief provided by Title VII and 42 U.S.C. § 1981a [i.e., compensatory and punitive damages], an aggrieved person may obtain relief, including recovery of back pay for up to two years preceding the filing of the Charge of Discrimination when the unlawful employment practices that have occurred during the charge filing period are similar to or related to unlawful employment practices with regard to discrimination in compensation that occurred outside the time for filing a charge.

Interestingly, the Act provides that it should take effect as if enacted on May 28, 2007 – the day before the Supreme Court’s 2007 Ledbetter decision -- and apply to all claims of discrimination in compensation under Title VII, the ADEA, the ADA and the Rehabilitation Act which are pending on or after that date. In that this provision would impose retroactive liability on defendants in lawsuits (which may no longer be pending) where the defendants were not otherwise liable under then-existing laws, there may be a constitutional challenge made to any retroactive application. In other words, Congress is attempting to substitute itself for the judicial branch and impose liability on Goodyear and other employers which the Supreme Court and other courts already dismissed more than 17 months ago.

Insomniacs may read the legislation in full at http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=111&session=1&vote=00014

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 Provides Guidance for Imposing Attorney Fees on Unsuccessful Plaintiffs Who Bring or Pursue Frivolous Employment Claims.

Today, the Sixth Circuit affirmed in part and remanded in part a federal court sanction which imposed joint and several liability upon the plaintiffs’ attorney and eight unsuccessful plaintiffs who pursued discrimination and wrongful discharge claims against their former supervisors and managers at the Cuyahoga County Juvenile Court. Garner v. Cuyahoga County Juvenile Court, No. 07-3602. The Sixth Circuit agreed with the district court’s analysis of the merit of the plaintiffs’ claims and affirmed the award of $69,345 in Rule 54 costs, but remanded the $660,103 attorney fee award so that the district court could articulate how the fees should be re-allocated in consideration of (i) each plaintiff’s respective ability to pay; (ii) the admission of the plaintiffs’ attorney that she was primarily responsible for prosecution of the frivolous claims; (iii) the potential conflict of interest between the plaintiffs’ and their attorney on this issue; (iv) each plaintiff being responsible for their own claims and not for the prosecution or defense of other plaintiffs’ claims; and (v) the point in time when each plaintiffs’ claim became frivolous and should have been dropped. Most saliently, the Court found it inappropriate to impose joint and several liability for the fee sanction when there were factual differences in the claims and the plaintiffs’ attorney had admitted her primary responsibility for prosecuting the frivolous claims.

According to the Court’s opinion, the discrimination and wrongful discharge claims of fourteen plaintiffs had been consolidated into one lawsuit and all of them were dismissed on summary judgment in a 250-page opinion. Some of the claims were dismissed because the plaintiff failed to present evidence to substantiate each element of the prima facie case (i.e., the “no evidence plaintiffs”) and some were dismissed because the plaintiff could not show that the defendants’ non-discriminatory/retaliatory explanation was pretextual (i.e., the “insufficient evidence plaintiffs”). After the dismissal of the case, the defendants filed a bill of costs under Civil Rule 54 in the amount of $69,345 (for, among other things, deposition transcripts, witness fees, copies). The defendants then moved for reimbursement of their $664,885 in attorneys fees from the plaintiffs on the grounds that the claims were frivolous under 42 U.S.C. § 1988. Defendants also sought sanctions against the plaintiffs’ attorneys under “28 U.S.C. § 1927, [Civil Rule] 11 .. , Ohio Revised Code § 2323.51, and the court’s inherent authority.”

The district court awarded costs to the Defendants and imposed joint and several liability against all of the plaintiffs. In granting the defendants’ fee motion for $660,103 in fees, the district court did not impose any fee sanctions upon the insufficient evidence plaintiffs or under Civil Rule 11, but held that the remaining claims were frivolous, should not have been pursued at all (and certainly not beyond the close of pre-trial discovery) and justified sanctions against eight of the plaintiffs and their attorney on a joint and several liability basis. The Sixth Circuit agreed with the district court’s analysis of the merits of the plaintiffs’ claims, affirmed the award of Rule 54 costs, and affirmed that the plaintiffs’ attorney could be liable for fees under § 1927, but remanded the attorney fee award so that the district court could reconsider and articulate how the fees should be re-allocated.

As an initial matter, the Sixth Circuit “conclude[d] that the district court erred in holding each employee jointly and severally liable with respect each other’s claims, as opposed to individually liable, for attorney fees under 42 U.S.C. § 1988. While “[t]he employees here all shared a disparate-impact claim involving common allegations about the CCJC’s employment practices, . . . this lone claim does not justify imposing the entire fee award jointly and severally among all of the employees in this case. Most of the individual employees’ claims are in fact unrelated. The disparate treatment claims, for example, do not share a common factual nexus. And the retaliation claims similarly involved different allegations unique to each employee. Indeed, the employees’ respective claims were sufficiently distinct that the district court decided to issue individual summary judgment orders against each one.”

The Court also remanded the sanction award so that the district court could better articulate how the fee sanction should be allocated in light of each plaintiff’s ability to pay. While the court agreed that each plaintiff bore the burden of proving an inability to pay their share of the sanction, “[w]e are nevertheless troubled by the district court’s failure to explain why the salary information provided to the court was insufficient to establish the employees’ inability to pay. In particular, the court itself recognized, in the portion of its order addressing costs, that the employees had “modest incomes” averaging about $35,000 per year. We are therefore puzzled as to why this information was not addressed in the portion of the court’s order discussing the calculation of attorney fees . . . The district court’s obligation to “explain its reasoning adequately” exists irrespective of which party bears the burden of persuasion to demonstrate an inability to pay.”

The Court also remanded so that the district court could explain when the sanctions began to accrue. “The parties disagreed during oral argument as to whether the attorney fees improperly included legal work done before the completion of discovery—i.e., the point in time at which the employees should have realized that their claims were frivolous and the lawsuit should have been voluntarily dismissed. Because the record is not clear on this issue, the district court should ensure on remand that the total attorney-fee award excludes fees incurred before the point in time when the individual employees should have known that their claims were frivolous. We presume that, for most of the employees, this point in time occurred at the close of discovery. But the district court should make a clear finding, for each of the individual employees, to determine whether this presumption is correct.”

Finally, the Court also remanded so that the district court could consider re-allocating a greater portion of the fee sanction against the plaintiffs’ attorney. “Our review of the record suggests that the fault for bringing the groundless claims in this case lies principally with Attorney Frost and not with her clients. Indeed, Frost graciously conceded during oral argument that, if there is anyone to blame for the litigation, she should be the one and not her clients. Frost’s concession tempts us to simply instruct the district court to reverse the imposition of any liability against her clients under § 1988.” However, because clients selected the attorney to be their agent, they remain responsible for the actions of their attorney. Moreover, the court did not want the Defendants to lose their ability to recoup their fees in the event that the attorney became insolvent.

In affirming the frivolous nature of the no-evidence plaintiff’s claims as a sufficient basis for imposing sanctions, the Sixth Circuit rejected the plaintiff’s arguments that the CCJC had previously lost a discrimination claim and there was some evidence to support the claims of the insufficient evidence plaintiffs. The court rejected the plaintiffs’ arguments because the no-evidence plaintiffs failed to “establish[] a clear nexus between themselves” and the prima facie evidence of the insufficient evidence plaintiffs and ruling in their favor “would encourage frivolous “me-too” claimants to piggyback on the nonfrivolous claims of legitimate plaintiffs.” The court also refused to permanently bar every “employer who has lost a discrimination claim . . . from recovering attorney fees against subsequent frivolous claimants” because the plaintiffs failed to “present[] relevant evidence deriving from [the] prior successful jury verdict against the CCJC.”

Insomniacs can read the full court opinion at

DOL Posts New FMLA Forms on its Website.

The newly revised FMLA regulations became effective on Friday, January 16, 2009 and the Department of Labor has posted the new FMLA forms on its website at http://www.dol.gov/esa/whd/fmla/finalrule.htm. These new forms include:
• WH-380-E Certification of Health Care Provider for Employee’s Serious Health Condition (PDF)
• WH-380-F Certification of Health Care Provider for Family Member’s Serious Health Condition (PDF)
• WH-381 Notice of Eligibility and Rights & Responsibilities (PDF)
• WH-382 Designation Notice (PDF)
• WH-384 Certification of Qualifying Exigency For Military Family Leave (PDF)
• WH-385 Certification for Serious Injury or Illness of Covered Servicemember -- for Military Family Leave (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 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.

Chicago Dentist to Pay $462,500 in Consent Decree to Settle EEOC Harassment and Retaliation Lawsuit

Yesterday, the EEOC announced that a “Chicago dental practice will pay $462,500 to settle a class sexual and religious harassment and retaliation lawsuit” it filed in September 2007 in federal court which alleged that “James L. Orrington, D.M.D., Ltd. discriminated against 18 employees by subjecting them to sexual harassment, including sexual propositions, comments and touching; forcing them to engage in Scientology religious practices and learn about Scientology as conditions of their employment; and/or retaliating against employees who complained about the sexual or religious harassment.” EEOC et al. v. James L. Orrington D.M.D., Ltd., No. 07 C 5317. “The consent decree resolving the case was entered by the court [yesterday] morning.”

The EEOC also announced that “[i]n addition to requiring that Orrington pay monetary relief, the three-year consent decree resolving the case enjoins Orrington from engaging in sexual or religious discrimination and prohibits the firm from conditioning any terms or conditions of employment on complying with the religious teachings or practices of Scientology or attending seminars regarding Scientology. The consent decree also requires that Orrington contract with an outside representative to receive and investigate complaints of sexual discrimination and religious discrimination; adopt and distribute a policy against sexual harassment, religious discrimination and harassment, and retaliation; provide training to employees; submit periodic reports to the EEOC about any complaints of sexual harassment, religious discrimination or harassment, or retaliation; and post a notice at its facility regarding the outcome of this lawsuit.

Insomniacs can read the full press release at

Sixth Circuit: Employee Whose Reputation Was Damaged By Publicizing Investigation Report Gets Chance To Clear Name Through a Public Hearing.

Last Thursday, the Sixth Circuit reversed the dismissal of a complaint brought in a Columbus federal court by an state engineering college department chair whose reputation had been damaged after the university, among other things, held a press conference publicizing certain investigations into plagiarism allegations in his department, blaming him and others for some of the lapses and then suspending him from advising graduate faculty students for three years. Gunasekera v. Irwin , No. 07-4303 (6th Cir. 1/8/09). The Court held that the Plaintiff had been deprived of constitutional due process when his graduate student advising status was suspended without a pre- or post deprivation hearing (which need not be public). However, the novel holding of the case is that the Plaintiff was entitled to a public name-clearing hearing in that his reputation had been damaged through a press conference publicizing a report which never contained his denials of the allegations.

According to the Court’s opinion, “[i]n 2004, [the Plaintiff] was the Moss Professor of Mechanical Engineering at the Russ College of Engineering and Technology of Ohio University (“Russ College”) and had been Chair of the Department of Mechanical Engineering for fifteen years. He had worked at Ohio University (“the University”) for more than two decades and had Graduate Faculty status at Russ College which enabled him to supervise graduate students’ thesis work. That year, a student alleged widespread plagiarism in mechanical engineering graduate-student theses. Two internal investigations uncovered plagiarism in collateral areas rather than in the analysis or conclusions. Following these probes, . . . the Provost of Ohio University, instructed . . the Dean of Russ College, to take further action. In response, [the Dean] asked an administrator and a retired faculty member to investigate the alleged plagiarism. These men prepared a report known as the Meyer/Bloemer Report and submitted it to [the Dean] and [the Provost] on May 30, 2006.”

“On May 31, 2006, [the Provost] held a press conference to publicize the Meyer/Bloemer Report. As the district court explained, the report found “rampant and flagrant plagiarism in theses” and “singled out three faculty members, including [the Plaintiff], for ignoring their ethical responsibilities and contributing to an atmosphere of negligence toward issues of academic misconduct.” Gunasekera v. Irwin, 517 F. Supp. 2d 999, 1002 (S.D. Ohio 2007). In response to this report, the University suspended [the Plaintiff’s] Graduate Faculty status for three years and prohibited him from advising graduate students.” Plaintiff filed suit a few months later alleging deprivations of his property interests in his employment and liberty interests in his reputation without due process.

Constitutional Liberty Interests and Name Clearing Hearings.

The Supreme Court has previously explained that the fourteenth amendment to the constitution protects the property and liberty interests of citizens:

While this Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fourteenth Amendment], . . . [w]ithout doubt, it denotes not merely freedom from bodily restraint, but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as essential to the orderly pursuit of happiness by free men.

Meyer v. Nebraska, 262 U.S. 390, 399.

In a 1972 case where the one-year employment contract of a non-tenured state college instructor was not renewed without any reason being given, the Supreme Court held that the instructor’s liberty interest in his reputation was not implicated. “The State, in declining to rehire the [instructor], did not make any charge against him that might seriously damage his standing and associations in his community. It did not base the nonrenewal of his contract on a charge, for example, that he had been guilty of dishonesty, or immorality. Had it done so, this would be a different case. For “[w]here a person's good name, reputation, honor, or integrity is at stake because of what the government is doing to him, notice and an opportunity to be heard are essential.” Board of Regents of State Colleges v. Roth, 408 U.S. 564, 573-74 (1972) (citing Wisconsin v. Constantineau, 400 U.S. 433, 437). “The State, for example, did not invoke any regulations to bar the [instructor] from all other public employment in state universities. Had it done so, this, again, would be a different case. For "[t]o be deprived not only of present government employment but of future opportunity for it certainly is no small injury.” Indeed, “[i]n such a case, due process would accord an opportunity to refute the charge before University officials.” Roth, supra. “The purpose of such notice and hearing is to provide the person an opportunity to clear his name. Once a person has cleared his name at a hearing, his employer, of course, may remain free to deny him future employment for other reasons.” Id. at n. 12.

In Gunasekera, the Defendants conceded that the Plaintiff possessed a liberty interest. “Given this concession, [the Court did] not need to apply [its] five-factor test used to decide whether someone is entitled to a name clearing hearing due to a deprivation of his or her liberty interest” Nonetheless, the Court indicated that it would likely have done so because “[t]he accusations regarding plagiarism were connected to his suspension (and as discussed above, [the Plaintiff’s] suspension deprived him of benefits and pay); the University alleged more than simple incompetence; the allegations were public; [the Plaintiff] claims that the statements were false; and the University called a press conference to publicize its charges.” Notably, there is no indication in the Court’s opinion that the Plaintiff had ever been interviewed as part of the investigation process or that his denials or version of events was included in the publicized reports. Thus, there seems to have been no public airing or publicization of his version of events or denials when the allegations against him were publicized.

The Court found that the parties’ dispute “boils down to what process is due and whether such a hearing must be public.” Procedurally, the Court was compelled to accept the Plaintiff’s allegations as true at this stage of the litigation. This is important because there was “some dispute as to whether the hearing offered by the University was public or not. . . The University asserted, and the district court agreed, that the proposed hearing was public because [the Plaintiff] would have been allowed to bring anyone, including members of the press, to his hearing. Gunasekera, 517 F. Supp. 2d at 1014 & n.9. [The Plaintiff] counters that the hearing offered was not public because the University specifically denied his request for a hearing publicized in the same way the Meyer/Bloemer report had been. Id. However, this dispute is contained in documents outside the pleadings which we cannot properly consider on a Rule 12(b)(6) motion. Taking the allegations in the complaint in the light most favorable to [the Plaintiff] , [the Court] assume[d] that he was not offered a public opportunity to clear his name.”

In the past, the Court had held that “a name-clearing hearing need only provide an opportunity to clear one’s name and need not comply with formal procedures to be valid.” Chilingirian v. Boris, 882 F.2d 200, 206 (6th Cir. 1989).” Nonetheless, the Court had not addressed “whether a name-clearing hearing must include a public opportunity clear one’s name.” For instance, “a university disciplinary hearing need not be public.” Flaim v. Med. Coll. of Ohio, 418 F.3d 629, 635 (6th Cir. 2005). However, “a disciplinary hearing is very different from a name-clearing hearing. A name-clearing hearing is not a venue for an employer to determine the proper punishment, but rather an opportunity for an individual to confront a public stigma that has already been imposed by an employer.”

Entitlement to a name clearing hearing depends on “(1) the nature of the private interest affected—that is, the seriousness of the charge and potential sanctions, (2) the danger of error and the benefit of additional or alternate procedures, and (3) the public or governmental burden were additional procedures mandated. Flaim, 418 F.3d at 635 (describing test instituted by Supreme Court in Mathews).” In considering the first prong of this test, the Court found it to be “clear that where, as here, the employer has inflicted a public stigma on an employee, the only way that an employee can clear his name of the public stigma is through publicity. The injury of which [the Plaintiff] complains is the fact that he was publicly associated with and perhaps partially blamed for a plagiarism scandal. As to the second prong of Mathews, publicity adds a significant benefit to the hearing, and without publicity the hearing cannot perform its name-clearing function. A name-clearing hearing with no public component would not address this harm because it would not alert members of the public who read the first report that [the Plaintiff] challenged the allegations. Similarly, if [the Plaintiff’s] name was cleared at an unpublicized hearing, members of the public who had seen only the stories accusing him would not know that this stigma was undeserved. . . . Following this conclusion [in a similar case], the Second Circuit held that: ‘Requiring the [employer] to address such risk by offering plaintiff the opportunity to publicly refute the charges made against him or publicising his refutations itself, does not place an undue burden upon the government’s interest in terminating [employees] who either are not performing to expected standards or are behaving in an unacceptable fashion.’ Id. [The Court] agreed with the Second Circuit that requiring that name-clearing hearings involve some form of publicity would not necessarily put an undue burden on the government.” (emphasis added).

“In order to determine what the name-clearing hearing should entail and what its limits might be in each case, courts should again turn to the Mathews balancing test. . . By applying this test to the facts of the case before it, a court can tailor a name-clearing hearing which allows the employee to challenge directly any public stigma while also accounting for any legitimate concerns of the employer. . . . Requiring that a name clearing hearing include a public component may be the only way to make such a hearing effective. If a name-clearing hearing has no public component, it may not be able to serve its function of curing the public stigma that necessitated the hearing. With respect to the third prong, government interests will shape the nature of the publicity required. For example, privacy concerns within the university setting might dictate the form of the publicity. Cf. Flaim, 418 F.3d at 637 n.2 (noting that the publicity attending a “full-dress judicial hearing” “might be detrimental to the college’s educational atmosphere”). Though [the Court had] few facts before [it] on this Rule 12(b)(6) motion, . . . it is possible that concerns for the privacy of students [under FERPA, etc.] implicated in plagiarism would impact the precise nature of the publicity required.”

The Court held that the university would be ”required to offer [the Plaintiff] a name-clearing hearing that is adequately publicized to address the stigma the university inflicted on him. The exact nature of that publicity depends on a fact-intensive review of the circumstances attending his case,” which was left “to the district court . . . regarding the exact parameters of the name-clearing hearing.” Considering that the defendants had prematurely presented some evidence that a public hearing had already been offered to the Plaintiff, it remains to be seen whether the district court will find the prior offer to be sufficient on summary judgment or at trial. Because this was a new issue for the Court and the right to a public hearing was not established law in this Circuit, it found that the defendants were entitled to qualified immunity on this allegation.

Property Interest in Advising Graduate Students.

The Plaintiff also alleged that he had been denied property interests without due process of law in that his graduate student advising status had been suspended for three years without a pre or post deprivation hearing.

The Supreme Court has previously explained in Roth that “the Fourteenth Amendment's procedural protection of property is a safeguard of the security of interests that a person has already acquired in specific benefits. These interests -- property interests -- may take many forms.” Among other things, these property interests extend to “a person receiving welfare benefits under statutory and administrative standards defining eligibility for them, ” to “a public college professor dismissed from an office held under tenure provisions, to “college professors and staff members dismissed during the terms of their contracts,” and “to a teacher recently hired without tenure or a formal contract, but nonetheless with a clearly implied promise of continued employment.” Roth, supra. “To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims.”

In Gunasekera, the Sixth Circuit noted that “[t]o prevail on the claim that he was unconstitutionally deprived of his property when his Graduate Faculty status was suspended, [the Plaintiff] must “‘establish three elements; (1) that [he] ha[s] a life, liberty, or property interest protected by the Due Process Clause of the Fourteenth Amendment . . . , (2) that [he] w[as] deprived of this protected interest within the meaning of the Due Process Clause, and (3) that the state did not afford [him] adequate procedural rights prior to depriving [him] of [his] protected interest.’” The Defendants denied that the Plaintiff had any property interest in his graduate student advising status because they retained the discretion to suspend him under the circumstances and he suffered no decrease in his salary or benefits.

Plaintiff “alleges that Graduate Faculty status is ‘a right intrinsic’ that a professor maintains so long as he or she satisfies the four criteria the University requires of its Graduate Faculty. Id. He argues that because these criteria limit the University’s discretion to name Graduate Faculty and because ‘[i]n actual practice . . . professors retain their appointment so long as they satisfy those criteria,” he has a property interest in his Graduate Faculty status.’” The Plaintiff’s “argument does not turn on the language of the [university] regulations, but rather on his ability to show that a common practice and understanding had developed which gave him a legitimate claim to Graduate Faculty status so long as he met the stated [four] conditions. At oral argument, the University admitted that there is no precedent regarding when Graduate Faculty status is retained, because it has never been revoked or suspended [before Plaintiff’s status was revoked]. Viewing the allegations in the complaint in the light most favorable to” the Plaintiff, the Court found that “he has alleged that University custom gives him a property interest in his Graduate Faculty status.”

Moreover, because Plaintiff lost some income “(including “a summer salary research stipend that complements annual salary” for Graduate Faculty) and benefits (such as a reduced teaching load), his suspension “alter[ed] his employment enough to make Graduate Faculty status a property interest.” See also “Newman v. Commonwealth, 884 F.2d 19, 25 n.6 (1st Cir. 1989) (“In this case, plaintiff was barred from voting on degrees and from serving on important university committees or as chair of her department. A letter of censure for an act of ‘objective plagiarism’ and ‘seriously negligent scholarship’ was placed in her permanent file, an action that undoubtedly affects her ability to secure other employment in the future. We think it obvious that this severe sanction substantially damaged plaintiff’s property interest in her position.” (emphasis added)).”

Having shown that he suffered a property loss when his graduate student advising status was suspended, the Plaintiff was then required to show that he was deprived of his property interest without due process (i.e., a pre- or post- termination hearing). In this case, the Plaintiff alleged that “he was not given notice or an opportunity to be heard regarding “his satisfaction of the criteria for appointment to Graduate Faculty status” before or after his suspension. Moreover, “[a]t oral argument, [Defendants’] lawyer conceded that [the Plaintiff] had not been offered either a pre- or a post-deprivation hearing.” The Sixth Circuit has already “held that prior to termination of a public employee who has a property interest in his employment, the due process clause requires that the employee be given ‘oral or written notice of the charges against him or her, an explanation of the employer’s evidence, and an opportunity to present his or her side of the story to the employer.’” . . . Because [the Plaintiff] asserts that he was never given any opportunity to be heard either before or after he was deprived of his property interest in his Graduate Faculty status, the district court’s dismissal of [the Plaintiff’s] property-interest claim must be reversed.”

Insomniacs can read the full court decision at http://www.ca6.usc.ourtsgov/opinions.pdf/09a0005p-06.pdf.

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

USCIS Agrees with Chamber of Commerce to Delay Mandatory E-Verify Implementation For Federal Contractors Until February 20, 2009

As summarized here on December 9, 2008, the federal government published its final regulation in November which will require many federal contractors and subcontractors to begin using the e-verify program to confirm the employment eligibility of many existing and newly-hired employees as federal service and construction contracts and solicitations are issued or amended after January 15, 2009 (i.e., this Friday). In other words, federal agencies have been directed to insert a new clause into procurement contracts and solicitations requiring contractors and subcontractors to enroll and utilize the e-verify program. This regulation implements Executive Order 12989 which was amended in June 2008.

The U.S. Chamber of Commerce filed a federal lawsuit in December 2008 seeking to invalidate the new federal regulation. In the meantime, on Friday, January 9, 2009, the Chamber of Commerce announced that USCIS had agreed in the interim to delay mandatory implementation of the e-verify system for federal contractors until February 20, 2009. (This information is similarly, but less overtly, confirmed on the USCIS website). Contractors remain free to utilize the e-verify system and USCIS points out that more than 100,000 employers have registered for the program. In response to the Chamber’s protests about e-verify, USCIS contends that e-verify is not mandatory because employers are not mandated to become federal contractors.

Insomniacs can read the Chamber’s full press release at http://www.uschamber.com/press/releases/2009/january/090109_everify.htm and confirm USCIS’s agreement to the postponement at http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=75bce2e261405110VgnVCM1000004718190aRCRD&vgnextchannel=75bce2e261405110VgnVCM1000004718190aRCRD.

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.

DOL Explains that Training Program for Exempt Managers Does Not Destroy FLSA Exemption During Training Period Because “Holistic” Approach is Taken.

Yesterday, the federal Department of Labor released a number of administrative letter opinions from last month, one of which concerned a training program for long-time retail store managers who wished to be promoted to regional store managers. (FLSA 2008-19). Both the store managers and the regional managers constituted exempt managerial positions. The question posed was whether the store managers lost their exemption during the training period because the store managers would perform little or no exempt work during about half of the seven week training period (while they shadowed the regional managers).

According to the inquiry, “[d]uring the training period, each of the store managers accompanies an area sales manager on visits to area stores, reviews store paperwork, addresses issues with the managers of the stores visited, investigates inventory shortages and violations of company policy, and attends sales meetings. At the beginning of the training period, the trainee simply “shadows” the area sales manager, but as the training progresses, the area sales manager delegates more and more duties to the trainee. By the end of the training period, it is the area sales manager who “shadows” the trainee.” During the training period, “trainees analyze sales figures, product returns, and inventory data to determine store performance; review data with the store manager and suggest improvements; review the hours worked by employees; approve payroll; determine whether the store manager allocates labor hours effectively and, if not, suggest improvements; audit lottery ticket sales; and work with the store manager to control losses.” Thus, for the first few weeks, the trainee performs little or no exempt work. After the training period ends (or if the trainee fails to complete the program), the trainee returns to a store manager position until a potential regional manager position opens and the manager successfully applies for it.

The employer was concerned about the trainee’s exempt status because “29 C.F.R. § 541.705 states, “exemptions do not apply to employees training for employment in an executive . . . capacity who are not actually performing the duties of an executive . . . employee.” In addition, “exemptions normally apply on a workweek by workweek basis.” However, there is also a federal district court case in which the plaintiff was found to be exempt during a period of training that was between two periods in which he qualified as an exempt systems engineer. Booth v. EDS Corp., 799 F. Supp. 1086, 1093 (D. Kan. 1992). (“[The plaintiff] has pointed to no evidence in the record that indicates that he or EDS considered phase two of the [training] program to be a separate employment position.”).

According to the Acting Wage and Hour Administrator, “[t]he fact that, during at least some of the weeks of training, the store managers do not perform significant amounts of exempt work, in and of itself, does not cause the store managers to lose their exempt status because the primary duty test for executives need not be met each and every workweek in all cases. In its 2004 revisions to 29 C.F.R. Part 541, the Department included this discussion in the preamble to the final regulations:

“As stated in the 1949 Weiss Report at 61, the search for an employee’s primary duty is a search for the ‘character of the employee’s job as a whole.’ Thus, both the current and final regulations ‘call for a holistic approach to determining an employee’s primary duty,’ not ‘day-by-day scrutiny of the tasks of managerial or administrative employees.’ Counts v. South Carolina Electric & Gas Co., 317 F.3d 453, 456 (4th Cir. 2003) (“Nothing in the FLSA compels any particular time frame for determining an employee’s primary duty”). To clarify this ‘holistic approach,’ the Department has reinserted in subsection (a) the language from current 541.304 that the determination of an employee’s primary duty must be based on all the facts in a particular case ‘with the major emphasis on the character of the employee’s job as a whole.’ 69 Fed. Reg. 22,122, 22,186 (Apr. 23, 2004) (emphasis in original).”

In this situation, the DOL found that “there is no reason to believe that the seven-week training program itself is an employment position in the company. Nor is it reasonable to conclude that the store managers’ primary duty changes during the seven weeks of training. These employees, who we are to assume have been employed as bona fide exempt store managers for years, remain exempt during the seven weeks of management training because their primary duty continues to be that of an exempt store manager. The training provided is of limited duration and does not consist of the performance of work that would otherwise be performed by nonexempt workers. The managers return to their normal exempt store manager duties following the training. Under these circumstances, where the trainees are employed in exempt positions and are temporarily reassigned to training for a different exempt position, it is our opinion that the exemption is not lost during the training period.”

Insomniacs can read the full letter opinion letter at http://www.dol.gov/esa/whd/opinion/FLSA/2008/2008_12_19_19_FLSA.htm.

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

Delaware County Court of Appeals Reverses Employer’s Summary Judgment on Age Discrimination Claim of Fired Salesman With History of Declining Sales.

Last month, a divided Delaware County Court of Appeals reversed summary judgment on an age discrimination claim which had been entered in favor of an employer and against a salesman who had been terminated for poor performance. Peters v. Rock-Tenn Co., 2008-Ohio-6444. According to the court, the plaintiff alleged that he had been set up to fail by his employer when it doubled his sales quota and required him to sell new products. The employer showed that his sales had declined in each of the prior four years. Problematic for the employer, however, was evidence that the sales goal of the plaintiff’s significantly younger replacement was no greater than the plaintiff’s actual sales.

According to the court’s opinion, the plaintiff alleged that he had been terminated from his sales job in January 2007 after 25 years of employment based on his age. In particular, he alleged “that he had been assigned additional duties without adequate support and training, as a pretext for terminating his employment.” In the year before his termination, his new supervisor both doubled his sales goals and required him to begin selling new products in territories already covered by existing sales agents. However, the sales goal of his significantly younger replacement was less than the plaintiff’s goal; the replacement was apparently only required to match what the plaintiff had sold in his last year of employment.

The employer contended that the plaintiff had been discharged for unsatisfactory performance. According to the employer, the plaintiff’s sales had actually decreased in each of the prior four years and he had only successfully solicited one new client in the last three year (which brought in less than $1,000 in sales commission). His supervisor testified that he was among the poorest performing salespeople. In essence, he was “coasting” on his existing client base and was no longer effective at generating new sales – or even maintaining his existing sales level.

However, the plaintiff produced evidence that he had received a large bonus for 2006, and that he had been commended by his supervisor for receiving a perfect satisfaction score from his largest customer. He also argued that by doubling his sales quota and assigning him new products to sell, the employer was setting him up to fail and shared the blame for his declining sales performance. Surprisingly, the court of appeals found this argument to be sufficient to create a material issue of disputed fact which could only be resolved by a jury trial and not by a judge on summary judgment.

The court indicated that it was rejecting supposed evidence of discriminatory intent -- based on a comment by a non-decisionmaker (a plant general manager) that he and the plaintiff were the “old” company – because it was isolated and ambiguous.

In his dissent, one judge noted that the plaintiff had admitted that the employer wanted all of its salespeople to meet his new goal and “the median age of the company’s salesmen was 55; all were over the age of forty, and half were older than” the plaintiff. Moreover, merely because the plaintiff was good at certain aspects of his job should not have obviated the employer’s concern with his inability to generate new sales in the last three years. Nonetheless, the case was remanded to a jury trial.

Insomniacs can read the court’s decision in full at http://www.sconet.state.oh.us/rod/docs/pdf/5/2008/2008-ohio-6444.pdf.

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

Ohio Appeals Court Denies Unemployment Compensation To Supervisor Who Was Fired for Challenging His Managers About His Subordinates.

Last month, the Summit County Court of Appeals affirmed the denial of unemployment compensation to a manager who had been fired for insubordination in challenging his managers on behalf of his employees and for violating company policies and procedures. Curtis v. InfoCision Mgt Corp., 2008-Ohio-6434. Moreover, the employee had been ordered by the Unemployment Compensation Board of Review to repay $7,000 in unemployment compensation he had received before the employer’s appeal had been upheld.

As reported by the court, the fired manager had been taken through progressive discipline and was involved in three incidents of insubordination and/or policy violations before being fired. The first incident – on May 27, 2005 – took place after the supervisor’s manager questioned him about several of his employees leaving early for, and others returning late from, lunch. The supervisor “yelled across the room to [his manager] asking him what he was going to do about the employees returning late. In response to this, [the manager] asked [the supervisor] to step outside of the room and into the hallway where their conversation would not be overheard by other employees. [The supervisor] refused multiple requests to leave the room and speak with [the manager and] was issued a written warning for insubordination a few days later.

Later in October 2005, the supervisor sent an inappropriate email to another manager accusing him of lying and being unprofessional in the actions he took involving the termination of one of the supervisor’s most productive subordinates by a customer. The manager indicated that he only agreed to speak with the customer liason about the problem, but the supervisor insisted that he had promised to do more on behalf of the subordinate: "Let's be perfectly honest with each other. You DID indeed say last week that you were going to speak to [them] BOTH. I understand that we will just go on from here and [the employee] will be OK with that. But please do not lie straight to my face and tell me that you never said that you were going to talk to [them]. That is not professional or acceptable to me personally and/or morally."

Just a few days later, the supervisor then violated company policy by permitting his employees to call customers off a suspended call list because they otherwise had nothing to do. The supervisor was aware that the customer had suspended the particular program and had not yet been given a direction that the suspension had been lifted. He was then fired a few days later. The Court agreed with the UCBR that the supervisor had been fired with just cause and was not, therefore, eligible for unemployment compensation.

Insomniacs can read the decision in full at http://www.sconet.state.oh.us/rod/docs/pdf/9/2008/2008-ohio-6434.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.