Supreme Court Holds that ADEA Claims Apply to All Government Entities Regardless of Size

This morning a unanimous Supreme Court ruled that the provisions of the Age Discrimination in Employment Act apply to all governmental employers regardless of size.   Mt. Lemmon Fire District v. Guido,  No. 17-587  (11-6-18).   Thus, a fire department with fewer than 20 employees would be subject to ADEA claims challenging its reduction in force.   The Court found that the amendment of the ADEA adding government subdivision liability was more similar to the amendment of the FLSA, which applies to all governmental employers regardless of size, than to the amendment of Title VII, which only applies to employers – including governments – with more than 15 employees.  This is consistent with how the EEOC has traditionally interpreted the statutes, but is contrary to a 1990 Sixth Circuit holding (governing Ohio).  The Court’s holding was based on the different language used to amend the ADEA to include governments because the phrase “the term also means” typically is interpreted to create an additional, separate category than to modify or clarify a prior term.

According to the Court’s opinion, the defendant fire district laid off its two oldest full-time firefighters as part of a budgetary reduction in force.  The plaintiffs filed suit challenging their termination under the ADEA.  The employer moved to dismiss on the grounds that, with fewer than 20 employee, it was not subject to the ADEA.

When originally enacted, neither Title VII nor the ADEA covered state or local governmental entities.  However, Title VII was amended to include governmental employers in 1972.  The ADEA and the FLSA were amended two years later to include local and state governmental entities.   

Following the amendment, Title VII defined employers to include “persons”: “[t]he term ‘employer’ means a person engaged in an industry affecting commerce who has fifteen or more employees . . . .”  42 U. S. C. §2000e(a)–(b).  In turn, “persons” was defined to include governmental employers: “[t]he term ‘person’ includes one or more individuals, governments, governmental agencies, [and] political subdivisions,”  as well as other specified entities.  Thus, all employers must have 15 or more employees and can include governmental entities.

In contrast, the ADEA defines employers differently:

The term ‘employer’ means a person engaged in an industry affecting commerce who has twenty or more employees . . . .  The term also means (1) any agent of such a person, and (2) a State or political subdivision of a State . . . .

29 U. S. C. §630(b) (emphasis added). Thus, the Court was faced with deciding whether the ADEA’s failure to define “person” as it did in Title VII to include governmental entities meant that governmental entities were not subject to the 20-employee threshold that applied to other persons. “Does “also means” add new categories to the definition of “employer,” or does it merely clarify that States and their political subdivisions are a type of “person” included in §630(b)’s first sentence?”  In other words, does the “term” refer to “employer” or to “person” in the preceding sentence?

In further contrast, the FLSA was amended to define covered employers to include: “any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency, but does not include any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such labor organization.”  29 U.S.C. §203(d).   Further, “[p]ublic agency” means the Government of the United States;  the government of a State or political subdivision thereof;  any agency of the United States (including the United States Postal Service and Postal Regulatory Commission), a State, or a political subdivision of a State;  or any interstate governmental agency.”  Id. at §203(x).

In interpreting the three different definitions of “employer,” the Court based its ruling on a number of factors.  “First and foremost, the ordinary meaning of ‘also means’ is additive rather than clarifying.”    “Also” is generally understood to mean “in addition to” or “besides” or “likewise.”  It can be read to create an additional category of employer.   In other statutes, “also means” is generally interpreted to recognize separate and additional categories from the earlier categories.   The Court had previously held that the ADEA did not violate state government’s Tenth Amendment immunity and noted in that it applied to employers with so many employees and to state and federal governments as though governments were never subject to the numerical threshold.  

Second, reading the statute otherwise would create a “strange” result by requiring a 20-employee threshold for persons and government entities, but not for agents, “a discrete category that, beyond doubt, carries no numerical limitation.”  Why would “agents” be included as a separate category if they were required to also employ 20 employees?

Third, the Court rejected the argument that the ADEA should be interpreted to be consistent with Title VII because the statutes utilized different language to define their coverage.  Rather, the Court found the ADEA language to be more similar to the FLSA, on which some of the ADEA is based.  Governmental employers are covered by the FLSA regardless of size.   For that matter, however, “persons” are also covered by the FLSA regardless of workforce because the FLSA relies on a different threshold for its coverage (i.e., gross volume of sales) that is unrelated to the number of individuals employed.   Nonetheless, the Court did not seem to consider that fact.  

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

When Willful Misconduct Is not Necessarily All Other Intentional Misbehavior

Earlier this month the Montgomery County Court of Appeals affirmed a $655,733.44 jury verdict (in addition to$262, 227 in costs,  interest and attorney fees)  in favor of an executive who it found was terminated in violation of his employment agreement and in bad faith.   Becker v. Direct Energy, LP, 2018-Ohio-4134.   The Court concluded that the trial court’s jury instruction explaining when the defendant company could terminate “for cause” the executive was correct and that there was sufficient evidence to show that the company acted in bad faith.  Thus, when the employment agreement provided that the executive could only be terminated “for cause” if the company “in good faith” believed that he had “engaged in acts of fraud, material dishonesty, or other acts of willful misconduct in the course of his duties hereunder,” the “other acts of willful misconduct” referred to conduct which was similar to “fraud” and “material dishonesty.”    Therefore, the jury could conclude that the plaintiff’s behavior did not constitute willful misconduct that the employer acted in bad faith in terminating him for yelling at and poking a subordinate employee who twice in three weeks had violated significant safety rules when the plaintiff had a long history of excellent performance and no prior disciplinary infractions, when other employees had received far less severe sanctions and when circumstantial evidence showed that his potential severance pay could have been a motivating factor for his termination.

According to the Court’s opinion, the plaintiff’s employment agreement provided that the executive could be terminated for cause or without cause.  However, if he was terminated without cause, he would be entitled to severance pay (including 24 months of salary and 18 months of COBRA payments), or he could resign with three months’ notice (entitling him up to 3 months of pay if the company opted for an earlier separation).  The executive had worked for many years for the company and its predecessors and his performance reviews reflected that his division was one of the most profitable.  The company had also been more focused on employee safety.  

The plaintiff was responsible for conducting random surprise inspections of employees and found an employee, who had been suspended during the prior year for safety issues, engaged in a number of unsafe practices and serious quality issues.  After discussing the issues with the employee, the plaintiff spoke with the employee’s supervisor about taking disciplinary action, but the supervisor never spoke to or terminated the employee.  Two weeks later, the plaintiff spoke with the supervisor about whether that employee was even teachable because the supervisor had not properly handled the situation.   He then decided to inspect that employee’s work again on his way to another meeting and found some of the same safety violations he had previously noted just two weeks earlier.   Stressed because he was running late, the plaintiff lost his temper with the employee.  He poked the employee (who was much larger than him) in the chest and yelled at him in a very unprofessional manner.  Although he apologized, he also believed that the employee should be fired because of his unsafe practices.

The employee called his wife, who worked in HR for another company and told her that he thought that he was going to lose his job.  The next day, he filed several internal complaints about the executive’s unprofessional treatment of him the prior day.  The executive admitted that much of the complaint was true.  While he denied harassing the employee, he was embarrassed by his behavior.  Up to this point, there was no allegation about violence, pushing or physical harm.  HR conducted an investigation and the current and former manager both recommended that the executive receive no more than a written reprimand or warning based on his prior record and level of the offense.   After a conference call with senior management, HR forwarded a copy of the executive’s employment agreement to legal counsel.  During the next conference call, the decision was made to terminate the executive for willful misconduct under his employment agreement.

The executive was informed of his termination and asked to remain until the end of the month. The script prepared for his termination indicated that he was not to be permitted to resign (even though the company’s practice had always been to permit employees to resign at any time for any reason) and that the remaining employees would be told that he was passing the torch, instead of being terminated.  The plaintiff filed suit for breach of contract, breach of the duty of good faith and fair dealing, and defamation.  

On appeal, the Court rejected the employer’s arguments that the court should have ruled in its favor as a matter of law on the grounds that the plaintiff materially breached the employment agreement.  The court found this to involve an issue of fact, which was resolved against the employer at trial.

The Court also agreed that “willful misconduct” under the employment agreement was ambiguous.  Under the doctrine of ejusdem generis, because “the agreement used the term “or other acts of willful misconduct,” it  can be read, under an established principle of construction, to indicate that willful misconduct was intended to relate back and be confined to the same general nature as the previous, more specific terms, which were fraud and material dishonesty.”  Indeed, the former executive who had hired the plaintiff testified (without objection) that this is what he meant when that term was inserted into the employment agreement.  In addition, “[t]here is no dispute about the  fact that [the defendant’s] legal counsel prepared the agreement, and Ohio law is settled that  ambiguities in contracts are construed strictly against the drafter.”  The employer could have avoided the ambiguity by defining the term “other acts of willful misconduct”  or deleted “other,” which had referred back to the earlier specific acts.

The Court also rejected the employer’s argument that there was no evidence (i.e., admissions) that the plaintiff had been fired in order to avoid paying his severance pay because circumstantial evidence may support a verdict as well as direct evidence.  The jury had ample circumstantial evidence that the employer had acted in bad faith.  The HR employees had not initially recommended more than a written warning for the plaintiff’s misconduct.  After this, she then learned that the plaintiff’s most recent performance evaluation had been “exceeds expectations,”  and she provided his employment agreement to counsel.  Consideration of the employment agreement could support a plausible inference that the severance pay factored into the decision, particularly because none of the witnesses recalled any discussion as to whether violation of the harassment/workplace violence policies would similarly constitute willful misconduct under the agreement or whether there were any grounds to terminate him for cause under the agreement.  The employer also prepared a script for the termination meeting which did not permit the plaintiff to voluntarily retire and which gave a false reason for his separation.  The actual decisionmaker was not called to testify as to the basis for their decisions.  There was also testimony that the employer did not have a zero tolerance workplace violence policy and comparisons to other similar situations show that the plaintiff was treated much more harshly for a first time disciplinary infraction.

As for the jury instructions, the Court found that the trial court’s instruction were proper:  “the terms fraud or material dishonesty may be instructive regarding the seriousness  required for behavior * * * to constitute an other act of willful misconduct.”  Moreover,

As indicated above, the agreement provides that the termination must be made in, quote, “good faith.”  Thus, a second issue is whether [the defendant’s] termination of [the plaintiff] on the basis that his conduct was an act of willful misconduct, breached [its] obligation to exercise good faith and fair dealing in interpreting the agreement to justify terminating [his] employment.

The jury was also instructed that “it could not find for [the plaintiff] regarding a breach of good faith and fair dealing unless it found that [the employer’s] action in terminating [him] from his position for cause

“was not an act of honesty in interpreting and applying the language in the Employment Agreement, but was instead an act of dishonesty in applying the definition of cause for an ulterior purpose or motive, and not a truthful interpretation or application of the definition of “cause” as contemplated by the parties.

As for the award of attorney’s fees, they generally are not awarded in the absence of punitive damages or statute.  However, the Court recognized an exception for when “a prevailing party may be awarded attorney fees after demonstrating the unsuccessful litigant’s bad faith.”  In this case, “[b]ad faith can involve conduct during litigation, but can also involve conduct giving rise to a party’s claim.”  “The jury did not just find that [the employer] had breached the duty of good faith and fair dealing; it specifically found that [it] had acted to take advantage of [the plaintiff].”  The jury unanimously agreed that the employer had acted in bad faith when responding to one of the jury interrogatories:

Do you find that Plaintiff proved by the preponderance of the evidence that Defendant’s decision to terminate him “for cause” was made in bad faith to take advantage of Plaintiff and improperly deny him the benefits he would have received if he had been terminated “without cause” under the contract? 

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

EEOC Settles Class Action Against Cleveland Warehouse Employer for $3.6M

On Tuesday, the EEOC announced a $3.6M settlement with a Cleveland employer to resolve a class action sex discrimination lawsuit alleging that the employer had discriminated against women applying for entry-level warehouse positions in Cleveland and Detroit. 

The suit was resolved by a five-year consent decree entered by Judge Donald C. Nugent on Oct. 16, 2018. Under the terms of the decree, Sherwood will pay $3.6 million to a class of females identified by the EEOC, and the company must offer jobs to at least 150 women identified by the agency during the claims process. The consent decree establishes hiring goals designed to increase the percentage of females hired for entry-level warehouse positions and maintain a higher representation of females in those positions over a period of years.

The decree also requires Sherwood to create and produce to the EEOC electronic data such as applicant flow logs, and to disclose the number of female and male applicants who seek entry-level warehouse positions, the number of females and males hired for such positions, and the company's progress in meeting hiring goals. The EEOC will monitor Sherwood's hiring practices and the company's compliance with the decree for five years.

Sixth Circuit Affirms Dismissal of Threadbare ADEA Complaint

This morning, the Sixth Circuit affirmed the dismissal of a “threadbare” complaint under the Age Discrimination in Employment Act.  Smithv. Wrigley Mfg Co., No. No. 18-5397 (6^th Cir. 10-18-19).  The plaintiff alleged simply that she had been a good and long-time employee and that she had been unfairly fired when younger employees had not been.  While this allegation asserts the basic elements of an ADEA claim, it did not contain any facts showing the differences in ages, behavior or treatment that are necessary to survive a motion to dismiss under Civil Rule 12(b)(6).  A court must only accept as true factual allegations and need not defer to mere legal conclusions.  Accordingly, the case was dismissed before the plaintiff was permitted to conduct any discovery.

According to the Court’s opinion, the complaint in its entirety provided:

Plaintiff was a longtime employee of [Wrigley] and its predecessor company.  Despite Plaintiff’s good record with [Wrigley], [Wrigley] discharged the employment of Plaintiff on or about March 3, 2016.  This discharge was largely based upon the pretext of alleged misconduct when the real motivation was age discrimination in violation of 29 U.S.C. § Sections [sic] 621 to 634.  Plaintiff is and was over 40 years of age at the time of discharge.  The conduct of [Wrigley] in discharging Plaintiff was inconsistent with the way Plaintiff was treated in her many years of service with [Wrigley] and its predecessors, and inconsistent with the way other employees similarly situated, who were younger, were treated.  Plaintiff was qualified for her position and had been so during her many years of service.  [Wrigley] did not object to Plaintiff drawing unemployment.  Plaintiff before being terminated always gave [Wrigley] her best effort as she had always done for years.  Younger employees that were performing on a par with Plaintiff were still working with [Wrigley] after Plaintiff’s discharge.

The Court found that dismissal prior to discovery was appropriate because the complaint had failed to allege facts from which any court could “draw a reasonable inference of discrimination.   . . . . In the absence of facts regarding the ages or positions of the younger,  similarly-situated employees, or any example of how those employees were treated differently, the court could not do so.”

Though [the plaintiff] mentioned that younger employees who were “performing on a  par” with her were still employed when she was fired, she offered no names, ages, or qualifications for the younger employees who were treated differently, or any examples of how their treatment differed.  Without additional facts, the court cannot infer that [the employer] fired [the plaintiff] because of her age.

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

Sixth Circuit Affirms Jury’s ADA Verdict Rejecting Job Description, but Denies Front Pay and Insurance Damages

On Tuesday, the Sixth Circuit mostly affirmed a jury’s $588K award in an ADA case (not including attorneys’ fees), but agreed that the plaintiff should have been reinstated instead of awarded front pay under the circumstances and agreed that he had failed to carry his burden of showing lost medical insurance benefits. Gunther v. Bemis Company, Inc., No. 17-6144/6185 (6th Cir. 10-16-18).   Based on testimony from plaintiff and his co-workers, the jury was entitled to conclude that overhead lifting was not an essential job function even though it was in his job description.  The testimony showed that employees typically helped each other with such lifting.  The Court rejected the employer’s argument about mitigation of damages because the older and functionally illiterate plaintiff was not able to find replacement employment that did not require him to read.  

According to the Court’s opinion, the plaintiff employee suffered a shoulder injury while working and had been placed on temporary light duty.  The employer accommodated his temporary lifting restrictions and kept him on light duty for 18 months, when they met with him for an hour, placed on leave and then fired him four months later on the grounds that he could not safely perform the essential functions of his position as reflected in his carefully drafted job description.

Several employees testified that the plaintiff could perform the essential functions of his position with reasonable accommodations because they typically helped each other with lifting and had equipment to help lift as well.

Although an employer’s job description provides evidence of a job’s essential functions, 42 U.S.C. § 12111(8), it is “not dispositive,” Rorrer v. City of Stow, 743 F.3d 1025, 1039 (6th Cir. 2014).  Yes, [the employer] presented evidence that it carefully composed the press assistant job description.  But the jury also heard evidence that these requirements were not essential, and the company and other employees did not treat them as essential.  

[The employer] adds that [Plaintiff] cannot establish his qualifications for the job based on the option that other employees could help lift heavy equipment.  Employers, it is no doubt true, need not “accommodate individuals by shifting an essential job function onto others.”  Hoskins v. Oakland Cty. Sheriff’s Dep’t, 227 F.3d 719, 729 (6th Cir. 2000).  But the argument assumes that these tasks amount to essential functions that a single employee must be able to handle.  The jury heard evidence to the contrary—that press workers often ask for and receive help with certain tasks—permitting it to find that this was not an indispensable task for individual employees.  See Camp v. BI-LO, LLC, 662 F. App’x 357, 362–63 (6th Cir. 2016).  In the last analysis, [Plaintiff] presented sufficient evidence to create a triable issue of fact over the essential job requirements of a press operator, making the final resolution one for the jury, not for us.

The Court rejected the employer’s argument that $181K in back pay should be reduced because the plaintiff did not sufficiently mitigate his damages.  The Plaintiff quit school in the 8^th grade and claimed that he could not read the help ads.  He applied for a few jobs, but they did not offer many hours, or comparable pay.   In fact, he would not have qualified for his prior position, which required reading.  The jury could find that the plaintiff had been reasonably diligent in searching for new employment.

The Court agreed that the plaintiff should have been reinstated instead of being awarded $315K front pay.  The employer had indicated that it would agree to reinstatement if the jury ruled in his favor and the plaintiff requested reinstatement, but the trial court had refused to permit the jury to order reinstatement on the grounds that it was not safe for the plaintiff to return to work (a conclusion that the jury implicitly rejected in its verdict).  There was no evidence of hostility between the employer and plaintiff.  Although the employer had argued on the merits that the plaintiff could not safely perform his job, it was permitted to concede that if the jury found otherwise then he could be reinstated.  Although the front pay award was vacated, the matter was remanded to the trial court to re-determine the pay award because the plant had closed after the trial.  The plaintiff would be awarded pay from the time of trial until when the plant closed, as well as any other potential remedy given to laid off employees, such as severance pay or transfer to another plant.

The Court agreed that the Plaintiff did not show his entitlement to $92K in compensatory damages for lost insurance benefits.  At most he testified that he joined his wife’s insurance plan after his termination, but he did not offer any evidence of how much more expensive it was and whether he incurred any medical expenses that were previously covered by the defendant employer’s medical plan.

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