Court Rejects Disability Discrimination Claim and Plaintiff’s Unsupported Allegations

The Summit County Court of Appeals last month affirmed summary judgment for a school district on a disability discrimination claim brought by a former food services manager. Pilato v. Nordonia Hills City Schools Bd. of Edn., 2019-Ohio-3085.  The manager contended that she had been required to work during her medical leave, but the Court ruled that this did not create a jury question because emails that she sent before and during her medical leave reflected that she had voluntarily continued to work without being directed to do so.  Further, the Court concluded that she failed to create a jury question about the reason for her termination when the evidence was so clear and “one-sided” as to her fault despite her self-serving denial that there was nothing for the jury to decide.  In other words, the court refused to let the plaintiff’s self-serving and unsupported allegations contradict otherwise overwhelming evidence in order to avoid summary judgment.  


According to the Court’s opinion, the plaintiff had worked for many years without any disciplinary history.  Because she required knee surgery, she requested and was approved for 10 days off work at the end of the school year.  Before she left, she and her manager began planning for the next school year and indicated that they would touch base again after her surgery.  During her absence, a food order that she had placed was cancelled using her secret username and password from a non-school computer.  Further, employee payroll records were changed from her home computer.  Moreover, employees complained about her bullying them.  When confronted, she denied the allegations opted to resign her employment rather than accept a demotion and transfer or being fired, but then brought sue alleging disability discrimination.  


The Court found that she had not been denied a reasonable accommodation when she continued to work during her medical leave.  She had applied and been approved for medical leave.  Although she complained on appeal that she had been directed to address the food order cancellation issue while on leave, she had waived by issue by not raising it before the trial court.   While she argued in general that she had been expected to work from home while on leave, her supervisor denied this and her own emails indicated that she had not been asked to work.  The Court ultimately would not let her contradict her own emails with her deposition testimony in order to create a disputed issue of fact.  It found that the evidence was “so one-sided” that the employer was entitled to judgment as a matter of law.


The Court rejected her argument that the school fired her because it had required her to work during her medical leave. Instead, GFS had provided records showing that the food order had been cancelled using her secret username and password from a non-school computer and she admitted to having logged onto the GFS website that same evening.  Aside from her self-serving denial, the evidence was so overwhelming and “one-sided” that she was guilty of the offense that there was nothing for the jury to decide.  Indeed, it was undisputed that the school had already been working with her to plan for the next school year before she went on leave and the only intervening event was the misconduct alleged following her surgery.


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.

Employer Ordered to Pay $572K for Retaliation Claim

Last week, the federal Sixth Circuit Court of Appeals affirmed a $414,600 jury verdict for compensatory and punitive damages, back pay and front pay as well as $157,734 in attorney’s fees for retaliation claim brought by a former supervisor who claimed that she had been demoted on account of her gender and retaliated against when she complained internally and to the EEOC.   Hubbell v. FedEx Smart Post, Inc., No. 18-1373 (6^th Cir. 2019).   The plaintiff produced sufficient evidence to show that the employer had engaged in conduct towards her that would deter a reasonable person from exercising their protected rights through discriminatory disciplinary actions, surveillance and payroll policies.  Further, some of the actions occurred close in time to her protected conduct.  Finally, “the law in this circuit, however, is that a written anti-discrimination policy does not by itself shield an employer from punitive damages,” especially when there is evidence that the employer did not necessarily follow its own policies or investigate the plaintiff’s internal complaints of discrimination.


According to the Court’s opinion, the plaintiff had been working as a supervisor without any disciplinary record when the new hub manager suggested that women were better suited for administrative roles and she should seek a demotion.  When she refused, she claimed that he assigned her and other female supervisors the worse employees.  She was also given poor performance reviews and disciplinary actions.  When she objected and claimed to HR that he was discriminating against her, no formal or documented investigation was conducted.   After she was demoted, she was told that she – and she alone – could not clock into work more than three minutes early when all other employees were allowed to clock in and be paid 15 minutes early.    She subsequently filed an EEOC Charge.  She was then subjected to closer scrutiny, and was issued multiple disciplinary actions.  She was also restricted from working more than 8 hours/day.   When she filed another EEOC Charge, the guards were told to monitor her restroom breaks and other employees were interrogated about their conversations with her.   She was issued a disciplinary action for attendance even though she had doctor’s notes and was on medical leave.   Finally, she was not even assigned to work overtime during peak periods.  She was fired shortly after she initiated her lawsuit and then amended her complaint to include retaliatory discharge.  


While the trial court dismissed her hostile work environment claim on summary judgment, at trial several former co-workers testified in support that she was treated more harshly and more closely scrutinized than any other employee.  The jury found that she had suffered retaliation, and awarded her damages, but also initially found that the employer had acted in good faith, which would relieve it of punitive damages.  The judge told the jury to re-deliberate the issues with conflicting verdicts (i.e., punitive damages and employer’s good faith) and the jury returned by finding that the employer had not acted in good faith.   The trial court denied the employer’s post-trial motions, but reduced the punitive damage award in accordance with the damage caps in the 1991 Civil Rights Act.


On appeal, the Sixth Circuit affirmed the decision and verdict in all respects
.   

Supervisory knowledge.  There was no dispute that the decisionmakers were aware that she had filed EEOC Charges.  However, the court agreed that she did not carry her burden of proving that the decisionmakers were aware of her lawsuit until after she was fired.  One denied knowing about the lawsuit and another testified that he could not recall when he learned about it.  “Although [the plaintiff] argues that the question of whether to believe Jensen’s testimony should be left to the jury, Jensen’s statement that he did not remember when he learned that [she] filed suit is simply not enough to carry her burden of showing knowledge.”


Retaliation.  The trial court had found that the only materially adverse job action which the plaintiff had suffered was the employer’s refusal to let her clock in more than 3 minutes early when her co-workers had no such restriction.   However, regardless of how the trial court ruled on summary judgment, the jury and appellate court were not limited in considering such evidence that was introduced at trial.  Because this pre-dated her first EEOC Charge, the employer argued that she could not prove that she suffered any actionable retaliation from the negative feedback in her disciplinary actions and scrutiny.  The Sixth Circuit disagreed.

“a plaintiff seeking Title VII’s protection against retaliation need show only “that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.”   . . . .reiterating that the showing required for a Title VII retaliation claim “is less burdensome than what a plaintiff must demonstrate for a Title VII discrimination claim.” 

Accordingly, the closer scrutiny, the unwarranted disciplinary actions over trial matters, and interrogating her co-workers about their conversations with her, etc.  could support a finding of retaliation.

A reasonable factfinder could also find that some or all these acts were taken in retaliation for Hubbell’s EEOC complaint(s).  Trial evidence revealed that Hubbell was repeatedly disciplined within a year of filing her EEOC complaints, starting with three disciplinary writeups within approximately two months of filing her first EEOC complaint—the first one coming a mere four days after she filed her complaint.  Such close temporal proximity, standing alone, may be enough to prove causation.

Punitive Damages.   While a plaintiff is required to show, among other things, that the employer acted with malice or reckless indifference with respect to the plaintiff’s civil rights,  the plaintiff is not required to show that the employer’s behavior was “egregious.” While egregious behavior is sufficient to show malice or reckless indifference, less egregious behavior can satisfy the standard.   Moreover, even if the employer took steps to avoid discriminating by distributing and training on anti-discrimination policies, it can still be held liable for the actions of a manager acting within the scope of his employment who is also acting with malice or reckless indifference.  “The law in this circuit, however, is that a written anti-discrimination policy does not by itself shield an employer from punitive damages.  Tisdale v. Fed. Express Corp., 415 F.3d 516, 532–33 (6th Cir. 2005).”  Moreover, in this case, there was evidence that the employer failed to formally investigate the plaintiff’s allegations.  

Attorney’s Fees.  The court found no abuse of discretion in reducing the amount of fees, even if the employer had not objected to the amount.

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 Court Rejects Plaintiff’s Reliance on Error in Emailed Negotiations

Earlier this month, the Franklin County Court of Appeals affirmed an employer’s summary judgment on an employee’s breach of contract and promissory estoppel claims based on emailed negotiations over her severance pay when the emails contemplated a final, signed agreement which was never executed by the parties.  Watson v. Franklin University, 2019-Ohio-2929.  The plaintiff requested 18 months instead of the offered 6 months of severance pay and the employer initially appeared to agree in an email, which was corrected later that same afternoon to change the date from 2014 from 2015.  Because the plaintiff sought 18 months of severance pay, this implicated the statute of frauds because performance would last more than one year and the requirement for a signed agreement could not be satisfied through promissory estoppel.  Further, the plaintiff could not show justifiable reliance on an email which agreed to the 18 months of severance when the email was corrected later that same afternoon to change the date from 2015 to 2014 and the parties never signed a formal severance agreement.  There was no evidence that she relied on the morning email to her detriment by rejecting job offers in reliance on the morning email before it was corrected.  Accordingly, she could not prove a valid claim for promissory estoppel.


According to the Court’s opinion, the plaintiff was hired in 2011 and was notified that her job was being eliminated and her employment terminated on November 13, 2013.  She was offered 6 months of severance, contingent on signing an agreement and release of claims and on a reduction in the severance pay if and when she obtained other employment. She had previously negotiated a severance agreement in connection with a prior job and had retained an attorney to advise her.   She countered a couple of weeks later requesting 18 months of severance that would not be reduced if and when she obtained another job.  After speaking with the employer on December 3, the employer emailed her that same morning confirming their conversation about severance pay through May 2015 without being reduced by other employment. A formal agreement was to follow with the new terms.   Later that same afternoon, the employer emailed her to explain that it had misread the dates and that it was only willing to pay severance through May 2014 – i.e., six months.   It sent her the formal agreement to sign, but she refused to sign it because it only promised six months of severance pay. 

She brought suit for claims of breach of contract, breach of the covenant of good faith and fair dealing and promissory estoppel.  The trial court granted summary judgment on the first two claims prior to discovery and on the promissory estoppel claim after discovery.   She appealed.


The Court agreed that the statute of frauds applied to an agreement to make installment payments for more than a year and would have applied to the parties’ severance pay agreement.   The plaintiff attempted to argue that the emails exchanged discussing the terms of the severance agreement satisfied the statute of frauds and indicated the employer’s initial agreement with her demand.  However, “that e-mails purporting to reference an agreement or some aspect of an agreement are not sufficient to satisfy the statutory requirement for a signed agreement as provided for in R.C. 1335.05.”  Further, the emails reflected that both parties anticipated the signing of a formal agreement and were not relying on the emails as the contract. “Where the evidence establishes that it was the expectation of all parties that no meeting of the minds would occur absent a final written agreement signed by all the parties, no party can base a legal claim on communications or correspondence that comprise the interim negotiations.”   This is particularly true when the negotiating parties are sophisticated in terms of education, experience and advice of counsel.  Finally, the Court refused to use promissory estoppel to satisfy the statute of frauds.


The Court also affirmed dismissal of the promissory estoppel claim on the basis that she could not show that she  reasonably relied or detrimentally relied on the employer’s morning email appearing to agree to the 18 months of severance.  In order to prove a promissory estoppel claim, the plaintiff must show, among other things, that she relied to her detriment on the false promise and that her reliance was reasonable.  In this case, however, “'[i]f a written agreement is contemplated, reliance upon statements made before an agreement is signed will be unreasonable as a matter of law, particularly when sophisticated business parties are involved in the negotiations.”  In light of her experience, she was considered to be a sophisticated party.  Further, the evidence showed that the plaintiff never changed her position, let alone relied to her detriment, on the morning email appearing to agree to the 18 months of severance before that misunderstanding was clarified in writing in the afternoon.


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.

CEO Without Remedy Under ERISA When Deferred Comp Plan Fails to Comply with 409A

Last week, the Sixth Circuit Court of Appeals affirmed the dismissal of state law claims brought by a retired CEO who had been assessed tax penalties on account of deferring large amounts of his compensation under an executive deferred compensation plan without complying with IRC 409A on the grounds that the plan was covered by ERISA which, therefore, pre-empted the state law claims. Wilson v. Safelite Group, Inc. No. 18-3408 (6^th Cir. 7-10-19).  The Court found that deferred compensation plans which permitted distributions during periods of active employment as well as during retirement could still qualify as a pension plan under ERISA.  Further, because the plan permitted the deferral of both bonuses and annual salary, it was not exempt from ERISA under DOL regulations as a bonus plan.


According to the Court’s opinion, the employer created a bonus/incentive plan for five executives if they secured a buyer for the company.  When a likely buyer emerged, the company created a non-qualified deferred compensation plan to help most of those executives avoid adverse tax consequences from the incentive plan bonuses.   Under the deferred compensation plan, the executives could defer their regular annual salary and annual bonuses as well as the incentive bonuses.   The CEO make elections to deter his incentive bonus and large portions of his salary each year under the deferred compensation plan.  The plan’s default deferral provided for the payout to begin shortly after employment ended, but it could also be drawn out over as long as ten years and even permitted withdrawals before employment ended.  The CEO was audited by the IRS in 2014 and it determined that some of the deferrals did not comply with IRC 409A and he was assessed with taxes and penalties.  Two years later, the CEO sued his former employer for breach of contract and negligent misrepresentation.  The employer moved for partial summary judgment on the grounds that the deferred compensation plan was a pension plan governed by ERISA, which pre-empted the state law claims.  The trial court agreed, but permitted the CEO to amend his complaint to bring claims under ERISA.  The CEO declined and instead appealed the ERISA ruling.   The Sixth Circuit affirmed.


The parties disputed whether the deferred comp plan satisfied the ERISA requirements because it permitted withdrawals before retirement. “In essence, the question is whether a plan that allows for distributions both before and after termination can be an ERISA employee pension benefit plan.” The Court construed the statute to not require withdrawals to begin only after employment had ended:

Subsection (ii) does not specify deferral of income “until termination” or “to termination”; rather, it says “for periods extending to the termination.”  Thus, deferrals may occur for various “periods,” and those periods may last up to and/or beyond termination.  Subsection (ii) covers a wide array of plans and does not exclude plans that give participants the option to receive in-service distributions.

The employer’s deferred compensation plan presumed that distributions would not begin until after termination of employment, but permitted participants to elect earlier distributions.   It also stated that it was governed by ERISA.  As long as the plan provided for distributions after termination of employment, the requirements of ERISA were satisfied.


That being said, the DOL had published a regulation exempting certain deferred compensation plans which did not “systematically” defer the payment of “bonuses.” “By regulation, employee pension benefit plans do not include “payments made by an employer to some or all of its employees as bonuses for work performed, unless such payments are systematically deferred to the termination of covered employment or beyond, or so as to provide retirement income to employees.”  29 C.F.R. § 2510.3-2(c).”  In other words, the payment of a bonus is typically not a retirement program and would not be treated as a pension plan unless the payment of those bonuses were systematically deferred to termination of employment.  “A bonus plan may defer payment of bonuses and remain exempt, “unless such payments are systematically deferred to the termination of covered employment or beyond, or so as to provide retirement income to employees.”  29 C.F.R. § 2510.3-2(c) (emphasis added).”  Thus, deferred bonus compensation plans which do not systematically defer the payment of bonuses to post-employment periods are exempt from ERISA.


The court rejected the application of this exemption because the deferred comp plan did not relate exclusively to the incentive bonuses and also permitted the deferral of annual salary and regular annual bonuses.


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 Examines The Last Man Standing

 Last week, the Sixth Circuit Court of Appeals reversed an employer’s summary judgment on a breach of contract claim brought by its former CEO and award of prevailing party attorney’s fees on the grounds that it was ambiguous – and thus a jury question – whether the CEO’s comment that employees should not be the “last man standing” breached his employment agreement to not solicit employees to resign their employment.  Slinger v. Pendaform Co., No. 18-6187 (7-11-19).   The employer’s honest belief and reliance on a non-discriminatory reason for terminating the CEO is insufficient evidence to warrant summary judgment for breach of contract when the CEO plausibly proved that the employer’s explanation was simply pretext to avoid paying severance pay.   When it comes to evaluating breach of contract claim, intent and good faith is generally irrelevant unless the contract contains a clause making it relevant.  In other words, breaching a contract is a strict liability issue that cannot be avoiding by claiming a good reason or good faith.


According to the Court’s opinion, the defendant company was acquired by a company which was not a fan of the CEO’s performance.   He was directed to simply respond to emails and to forward emails he received.  Because he had an employment agreement that required severance pay if he was terminated without cause, the acquiring company intended to simply let his employment agreement expire naturally so that he would not be entitled to severance pay.   However, the agreement did not require severance pay if he was fired for cause (which included gross misconduct, fraud, felony or insubordination).  The agreement also contained a provision prohibiting him from soliciting employees to resign their employment.    As sometimes happens, the acquiring company began laying off employees.  During this period, the CEO visited one of the Ohio plants to retrieve the personal items he had left there and chatted with some employees about the future of the company.   Apparently, he said something to the effect that they should not be the last man standing.  Some employees did not think much of his comments, but others were alarmed and reported the comment to new management.   Within two minutes of learning of the comments, the new company president emailed that the CEO should be fired.  The CEO was then quickly fired for “gross misconduct” by soliciting employees to resign in violation of his employment agreement.   When he brought suit for his severance pay, the trial court granted summary judgment to the employer and awarded it over $188K in attorney’s fees as the prevailing party under the agreement.  The CEO appealed and the Sixth Circuit reversed.


The Court criticized the trial court’s weighing of the evidence at the summary judgment stage of the litigation.  The trial court seemed to be relying on the honest belief rule and reliance on a legitimate business reason instead of construing the evidence in favor of the party opposing summary judgment as required by the rules of civil procedure.    The Court found that Wisconsin law – which governed the agreement –and the employment agreement do not recognize a good faith defense to breach of contract.   While the contract could have created a good faith belief defense for the employer (and some contracts do), this one did not.   Therefore, the employer’s subjective belief as to whether the CEO had engaged in gross misconduct was insufficient evidence to avoid a jury question on a material dispute of fact as to whether the CEO’s comment breached the agreement.  


While the parties did not materially dispute what the CEO said, they disputed what he meant and was understood by his comment:

What his words meant is disputed.  The gloss that one puts on the interaction is the nub of this case.  In the company’s telling of the tale, Slinger deliberately approached every employee to deliver the same missive of impending doom, disrupting the workplace by soliciting employees to leave.  In Slinger’s version, he was approached by employees nervous about their job security after the merger and told them kindly to look after themselves.  And indeed, some employees took his comments as a friendly goodbye, while others feared for their jobs.  The District Court ignored these differences in simply stating that “five employees stated Plaintiff’s comment concerned them and believed they should find other employment.”  2018 WL 3708023, at *7.  That statement fails to summarize all of the evidence.  “A study of the record in this light leads us to believe that inferences contrary to those drawn by the trial court might be permissible.”

In contrast, the CEO asserted that the company’s explanation was simply pretext to terminate him without severance pay.  He put forward a compelling case:  The purchase agreement noted next to his name “no severance.”   The decision to terminate him was made within two minutes.  In addition, the Company suggested that it fired him for gross misconduct and then changed it to breach of the non-solicitation clause.   Moreover, the employment agreement did not define “solicit.”

What Slinger said is not disputed, but the import and meaning of his words in context is disputed.  Each party’s characterization of the same events is plausible and is linked to specific evidentiary support.  Given that the term “solicit” is susceptible to two reasonable, competing interpretations, summary judgment here was improper.

Because there could be different inferences drawn from the evidence whether the CEO was fired for cause or simply to avoid paying severance pay, the jury was entitled to hear the evidence and decide whether the agreement had been breached.  Accordingly, the attorney’s fee award was also vacated.  One can wonder if there is too much water under the bridge for the parties to settle in light of the expense of this litigation.

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.