Supreme Court Requires SERB ULPs to be Filed Within 90 Days of Earliest Notice

At the end of last month, the Ohio Supreme Court affirmed SERB’s dismissal of unfair labor practice charges filed against the City of Columbus on the grounds that they were untimely.   State ex rel. Murray v. State Emp. Relations Bd., Slip Opinion No. 2018-Ohio-5131.  A unanimous court concluded that the plaintiff should have realized by the time of filing his federal lawsuit that he had grounds to file an unfair labor practice charge over the more than two-year delay in scheduling an arbitration hearing on his termination and rejected his argument that he had filed his lawsuit only to preserve the federal two-year limitations period and had been lead to believe that his union and the city were still discussing scheduling his arbitration.  Accordingly, SERB did not abuse its discretion in dismissing as untimely the ULPs filed more than 120 days after the lawsuit had been initiated.  A divided Court affirmed the dismissal of two later ULPs filed within 90 days of when a settlement agreement between the city and union was signed and provided to the plaintiff claiming to have resolved his grievance 14 months earlier.  The city and union had told the federal court in June 2011 that the grievance had been resolved in July 2010, but did not sign or provide the agreement until September 2011.  The majority found that SERB did not abuse its discretion in finding that the plaintiff should have filed within 90 days of June 23 when he learned about the secret resolution.

According to the Court’s opinion, the plaintiff had been fired from the police department on September 4, 2008 and filed a timely grievance.  The union sought arbitration on September 10 and then the matter sat, as they often do, for almost two years. A year and 360 days after his termination (presumably to beat the limitations period), the plaintiff filed suit on September 4 alleging that he had been denied due process by his termination and delayed arbitration.  An arbitration hearing was then scheduled, according to the plaintiff, and cancelled.   More than 120 days after he filed his federal lawsuit, on January 18, 2011, the plaintiff filed two unfair labor practice charges with SERB against the city and the union, alleging that they collaborated to deny him an arbitration hearing.  However, in June 2011, the city and the union told the federal court that they had settled the plaintiff’s grievance almost a year earlier in July 2010 and sent him a copy of the settlement in September 2011 that was not even signed until September 29, 2011.  The plaintiff filed two more ULPs against the city and the union accusing them of falsifying evidence to deprive him of an arbitration hearing.  SERB dismissed all of the plaintiff’s ULPs on the grounds that they were filed more after the 90 day limitations period had run.

SERB may not hold hearings on ULPs that are filed more than 90 days after the challenge practice occurred. “The ninety-day time period does not commence until the charging party knew or should have known of the conduct which constituted the improper conduct and actual damage ensued.”  Timeliness determinations are not reviewable on direct appeal, but a mandamus will issue if SERB abused its discretion.  In this case, while the plaintiff contended that negotiations over the scheduling of his arbitration hearing continued until December 2010, the Court concluded that he should have realized that he had grounds to file an ULP by the time he filed his federal lawsuit – challenging his termination and the delay in scheduling the arbitration – on September 3.  Because he did not file his initial ULPs until more than 90 days after he initiated his federal lawsuit, his ULPs were untimely.   His ULPs alleging falsification of evidence filed in December 2011 were found to be untimely because they were filed more than 90 days after his attorney had been notified in federal court in June 2011 that the union and city had resolved his grievance among themselves in July 2010, even though they did not ultimately provide him with a copy of the settlement until September 29, 2011.

Dissenting, Justice O’Connor disagreed that the limitations period could have run on the falsification ULPs when the falsified evidence was not even created or provided to the plaintiff until less than 90 days before he filed those ULPs.   He likely would have been unable to prove his case until he received a copy of the supposed agreement.  She believed that SERB abused its discretion by speculating when the ULP actually occurred.

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 Fee Award to Employer in Non-Compete Case Without Prevailing on Final Judgment

Yesterday, the Sixth Circuit Court of Appeals affirmed an award of $72, 183 in attorney’s fees to an employer which successfully obtained a preliminary injunction against former employees who had begun working for a competitor in violation of their non-competition agreements.  Kelly Services, Inc. v. De Steno, No. 18-1118 (6^th Cir. 1-10-19).   The Court rejected the employees' arguments that they should not be liable for the fees without a judgment on whether their agreements were enforceable and without a jury trial on the amount of fees.   Their agreements awarded the employer fees incurred in enforcing the agreement and did NOT require the employer to actually prevail before obtaining a fee award.    In other words, the employer was entitled to attorney’s fees regardless of whether the non-compete clauses were actually enforceable and regardless of whether it ultimately prevailed on the merits.  The Court affirmed, but noted that the reasonableness of the fees might depend on the reasonableness of the enforcement efforts.  In any event, it would be “highly impractical” to ask a jury to rule on attorney’s fees earned in a pending action, so a jury trial was not required under the Seventh Amendment.

According to the Court’s opinion, the defendant employees each signed a non-competition agreement which precluded them from working for a competitor for one year after leaving employment with the plaintiff employer. Their contracts also contained a provision which provided in relevant part that:

I further agree to pay any and all legal fees, including without limitation, all attorneys’ fees, court costs, and any other related fees and/or costs incurred by the Company in enforcing this Agreement.

When the employer learned that they were working for a competitor in violation of their non-competition agreements, it filed suit for breach of contract and breach of the duty of loyalty and sought damages, including attorney’s fees.  A preliminary injunction hearing was held and the employees preliminarily enjoined from working for competitor in violation of their non-compete agreements.   The Court did not lift the preliminary injunction until approximately four months after the one-year period in the non-compete had passed.  The parties subsequently both moved for summary judgment.  The employees argued, among other things, that the non-compete agreements were not enforceable and they were entitled to a jury trial under the Seventh Amendment to determine their financial liability for, and the reasonability of, the attorney’s fees.  The employer argued that it had already obtained all of the relief that it sought (i.e., to keep the employees from working for the first year after their employment for a competitor)  and were, thus, automatically entitled to an award of attorneys’ fees for obtaining enforcement of the agreement.  Indeed, the employer asserted that the contracts did not require the employer to prevail on the merits in order to be entitled to attorneys’ fees when seeking to enforce the agreement.  The trial court ruled in favor of the employer and rejected the request for a jury trial on the amount of fees.

The contracts by their terms do not require a final determination of liability in favor of [the employer] as a condition for the award of fees.  Unlike numerous similar agreements, these contracts do not employ the words “prevailing party,” nor by their literal language do they require a final determination of liability.  In fact, as the district court correctly noted, defendants argued below that these provisions were not prevailing party provisions.  . . .

In reasoning that a final determination of contract breach was not required, the district court may have stated too freely that the contract required former employees to pay attorneys’ fees “if [the employer] merely sought to enforce the contracts.”  De Steno, 2017 WL 4786105, at *2.  One can imagine cases where efforts to “seek enforcement” could for instance be unreasonable, made with little or no basis, or made for purposes of oppression or harassment, or could be simply unsuccessful.  A court might read the words “reasonable . . . fees . . . involved in enforcing” and “fees . . . incurred . . . in enforcing this Agreement” not to extend to such situations.  We do not address the possibility of such a limited interpretation, however, because the record is clear that none of these situations is present in this case.  The district court entered a preliminary injunction that resulted in substantial relief, based on a determination that [the employer] had shown a strong likelihood of success on the merits.  Indeed, defendants withdrew their appeal from the grant of that relief. . . .

The Court rejected the Seventh Amendment argument on the grounds that calculating attorney’s fees for the pending case is an equitable power better left to a judge, as previously explained by the Second Circuit:

Accordingly, although plaintiff had the right to a jury decision on whether defendants should recover attorneys’ fees, plaintiff did not have the right to a jury decision on a reasonable amount of attorneys’ fees. Unlike the client in Simler v. Conner, [372 U.S. 221 (1963),] no party here claimed that the contract directed the amount of attorneys’ fees to be awarded by specifying a percentage of an ascertainable sum. Therefore, the district court, in its equitable role, should have determined a reasonable fee.

The Court found it would be “highly impractical” to require a jury to determine a reasonable amount of attorney’s fees.  The trial would become a trial about the cost of the trial itself.  It would also be impractical to require a jury to “look behind the curtain” and determine the proper cost of pretrial motions, etc. before the trial was even complete.  Therfore, it distinguished prior cases where juries ruled on the amount of attorneys’ fees to be awarded concerning disputes which had already been concluded (as in indemnification cases).  In this case, the Court also found that summary judgment was properly granted to the employer on the liability question, so it did not need to be submitted to a jury.

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.

Franklin County Appellate Court Finds Employer Legally Conditioned Rehiring Offer on Release of Claims and Dismissal of Litigation

Late last month, the Franklin County Court of Appeals unanimously upheld a jury instruction and verdict rejecting the age discrimination and retaliation claims of the plaintiff employee against his former managers and officers at his bankrupt former employer.  Bresler v. Rock, 2018-Ohio-5138.  The plaintiff had been laid off with most other employees for financial reasons in May 2014, but was not recalled like his older co-worker in August 2014.  Instead, he was terminated and then filed suit in November 2014 alleging age discrimination and seeking an injunction against retaliation.  Even though the plaintiff had never applied for employment, the employer offered the next month and the following March to rehire him subject to signing a release of all claims and dismissal of the lawsuit.  After he rejected the offers, a younger woman was hired instead for his former position when his older co-worker retired.    The Court rejected the plaintiff’s attempt to amend his Complaint at trial to add a retaliation claim and the jury ruled in favor of the defendants on the age discrimination claims.  The Court found that there was nothing illegal or improper about the employer conditioning the plaintiff’s rehire on a release of claims when the employer had no obligation to rehire the plaintiff at all.

Although the employee did not appeal the denial of the Court’s refusal to permit an amendment of his complaint to include a retaliation claim, he did appeal the trial court’s instruction to the jury at the 2016 trial:

It is not an adverse employment action for an employer to require an employee to dismiss a lawsuit or withdraw claims as part of a condition of being rehired.  Employees and employers may lawfully negotiate settlements that include the waiver or release of age discrimination claims.

The employee argued that it is retaliatory to refuse to hire an employee on the basis of him filing a charge of discrimination or filing a lawsuit.   The Court reviewed federal law on retaliation and found that when an employer has no obligation to rehire an employee, it is not retaliation to offer rehiring conditioned on releasing discrimination claims and dismissing litigation.  Moreover, employers and employees are permitted to negotiate settlements of disputes that include waivers and releases of claims.  Among other things, refusing to pay severance pay to an employee in the absence of a release of claims is rarely found to be retaliatory.

The Court distinguished retaliation cases where the employee had otherwise been entitled to a certain benefit before the employer withheld it following the filing of a charge or lawsuit.  Because the plaintiff had been terminated and had never sought reinstatement or rehiring before the employer offered to resolve the dispute by rehiring him, he could not show that he had been retaliated against by the employer’s offer:

. . . . Ohio and Sixth Circuit case law supports the proposition that employers may offer re-employment and back pay conditioned upon settlement and release of claims.  Here, similar to the facts in Graves, the company was under "no obligation" to rehire appellant following the RIF.  Graves.  As the company had "no duty" to offer employment to appellant, "its failure to make such an offer would not have been an adverse employment action."  Id.

The Court also found that the Complaint’s request for injunctive relief was not a claim for relief for retaliation.  Indeed, the facts which the plaintiff claimed to support such a retaliation claim did not even occur until after the Complaint was filed and the plaintiff did not seek to amend his Complaint to include a retaliation claim until after the close of his evidence at trial several years later.   Requests for injunctive relief are remedies, not causes of action.  Accordingly, the Complaint did not give the defendants fair notice that a retaliation claim was being litigated during the discovery phase or prior to trial. 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can 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.

Ohio Court and Jury Reject Plaintiff’s Disability Discrimination Claim When She Was Not Diagnosed Until Months After Her Termination

Late last month, the Cuyahoga County Court of Appeals affirmed an employer’s jury verdict in a disability discrimination lawsuit filed by a former employee.  Anderson v. Ohio Bell Tel. Co., 2018-Ohio-5237.    In that case, the employer terminated the plaintiff after she had taken three months of medical leave on account of undiagnosed wrist and hand pain and sought an indefinite leave of absence which was not supported by medical documentation.   Several months following her termination, she was diagnosed with major depression, but the trial court refused to permit her treating psychiatrist to testify as an expert (when he had not been previously identified as an expert witness as required by the civil rules) or to matters that existed before he began treating her two months after she had been fired.  None of her other treating medical professionals could opine to a reasonable degree of medical certainty that she was unable to work in the months prior to her termination of employment.  The jury returned a verdict for the employer, finding that the plaintiff did not prove that she suffered from a disability on the date that she was terminated.  The Court found that the plaintiff’s treating physicians were reasonably limited to testifying only to what they actually perceived in their treatment of her. 

According to the Court’s opinion, the plaintiff had complained of various hand, wrist and back pain and claimed that she was unable to work.   She began a medical leave of absence on August 5 and it was converted to short term disability.  The employer extended her medical leave without requiring any medical documentation. After she was warned that she could be terminated without supporting medical documentation, her physician provided medical documentation reflecting her complaints of pain, but providing no diagnoses or indication that she was unable to work.  Her medical leave was extended another month, at which point she requested on October 22 an indefinite leave of absence as a reasonable accommodation without providing any supporting medical documentation or even a diagnosis.  She was terminated on November 5.   In January, she was diagnosed with major depression and her psychiatrist found her unexplained pain was consistent with depression.

The Court also rejected the plaintiff’s argument that the employer could be held liable – even if she were not in fact disabled on the date she was terminated – solely because the employer’s witnesses could not explain the legal definition of “disability.”  Whether the employer applied the correct definition of disability in practice is irrelevant when the plaintiff did not prove that she suffered from a disability when she was terminated.

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.

Unanimous Supreme Court Rejects Another Non-Statutory Exception to FAA Enforcement

Yesterday, the Supreme Court unanimously reversed  an arbitration decision that will affect non-competition litigation between employees and employers who have incorporated arbitration clauses into their agreements.  The Court ruled that the Federal Arbitration Act requires the arbitrability of a dispute to be resolved by the arbitrator even if the trial court finds the request for arbitration to be “wholly groundless” if the parties’ agreement reserved questions of arbitrability to the arbitrator.  Henry Schein, Inc. v. Archer & White Sales, Inc., No 17-1272 (1-9-19).  In that case, the parties’ contract provided for arbitration of disputes, except when the party was seeking injunctive relief.  While the contract did not specifically address the question of arbitrability, its brief two-sentence arbitration clause referred to the AAA rules, which provides that arbitrators can decide arbitrability.  The plaintiff filed suit seeking damages and injunctive relief and the defendant sought to have the entire matter referred to arbitration.  The plaintiff objected on the grounds that the defendant’s request was “wholly groundless” (because of the contract’s exception for injunction requests) so that the trial court could resolve the arbitrability question.  The trial and appellate court agreed, but the Supreme Court reversed and found that the FAA does not contain an exception for “wholly groundless” arguments as to arbitrability.  However, because the contract was silent about the question of arbitrability, the Court remanded the matter to determine if the parties’ contract reserved the question of arbitrability to be decided by the arbitrator or the trial court.

The Court rejected the defendant’s argument that Sections 3 and 4 of the FAA only require a court to stay litigation pending arbitration and to refer a matter to arbitration after an initial evaluation of arbitrability.

This Court has consistently held that parties may delegate threshold arbitrability questions to the arbitrator, so long as the parties’ agreement does so by “clear and unmistakable” evidence. First Options, 514 U. S., at 944 (alterations omitted); see also Rent-A-Center, 561 U. S., at 69, n. 1.  To be sure, before referring a dispute to an arbitrator, the court determines whether a valid arbitration agreement exists. See 9 U. S. C. §2.  But if a valid agreement exists, and if the agreement delegates the arbitrability issue to an arbitrator, a court may not decide the arbitrability issue.

The Court also refused to impose a common law exception into the FAA to prevent a waste of the parties’ resources.   Moreover, it was doubtful that systematic resources would be spared when there was likely to be collateral litigation over arbitrability regardless of whether the arbitrator or trial court decided the issue.

Under the Act, arbitration is a matter of contract, and courts must enforce arbitration contracts according to their terms. Rent-A-Center, 561 U. S., at 67.  Applying the Act, we have held that parties may agree to have an arbitrator decide not only the merits of a particular dispute but also “‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.”  Id., at 68–69; see also First Options, 514 U. S., at 943.  We have explained that an “agreement to arbitrate a gateway issue is simply an additional, antecedent agreement the party seeking arbitration asks the federal court to enforce, and the FAA operates on this additional arbitration agreement just as it does on any other.”  Rent-A-Center, 561 U. S., at 70.

                 . . .

We must interpret the Act as written, and the Act in turn requires that we interpret the contract as written. When the parties’ contract delegates the arbitrability question to an arbitrator, a court may not override the contract. In those circumstances, a court possesses no power to decide the arbitrability issue.  That is true even if the court thinks that the argument that the arbitration agreement applies to a particular dispute is wholly groundless.

That conclusion follows not only from the text of the Act but also from precedent. We have held that a court may not “rule on the potential merits of the underlying” claim that is assigned by contract to an arbitrator, “even if it appears to the court to be frivolous.”  AT&T Technologies, Inc. v. Communications Workers, 475 U. S. 643, 649–650 (1986). A court has “‘no business weighing the merits of the grievance’” because the “‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’” Id., at 650 (quoting Steelworkers v. American Mfg. Co., 363 U. S. 564, 568 (1960)).

                 . . . .

The [wholly groundless] exception is inconsistent with the statutory text and with our precedent. It confuses the question of who decides arbitrability with the separate question of who prevails on arbitrability.  When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract

 Ultimately, however, the Court expressed

no view about whether the contract at issue in this case in fact delegated the arbitrability question to an arbitrator. The Court of Appeals did not decide that issue.  Under our cases, courts “should not assume that the parties agreed to arbitrate arbitrability unless there is clear and unmistakable evidence that they did so.”  First Options, 514 U. S., at 944 (alterations omitted).  On remand, the Court of Appeals may address that issue . . .

This decision will affect employers because many employment agreements contain non-competition and non-solicitation clauses as well as arbitration clauses that similarly carve out exceptions for when the employer seeks injunctive relief.  The reason for such carve-outs is so that the employer can obtain speedy preliminary injunctive relief when damages will be inadequate for the harm caused by the improper competition or solicitation.  However, if the employee seeks to have the entire matter referred to arbitration, resolution of the dispute could be delayed while the parties select an arbitrator, etc. to resolve the arbitrability issue.   

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.