KEY CASES

3rdCir: Suspension of security clearance meant employee not qualified for job

An employee's Title VII mixed-motive discrimination claim alleging national origin and religious bias was properly dismissed because the employee failed to establish a prima facie case under a mixed-motive theory, the Third Circuit held. The employee, an aviation security researcher with the FAA for more than 15 years, was the only Muslim and the only member of his team who was of Arab descent. In 2003, on the day the US invaded Iraq, he was placed on administrative leave with pay and, without further explanation, was told not to come to work. The employee was suspended indefinitely in 2005 after he was denied renewal of his "top secret" security clearance. On a matter of first impression, the appeals court held a mixed-motive plaintiff fails to establish a prima facie case if there is unchallenged objective evidence that he did not possess the bare minimum qualifications for the position he sought to obtain or retain. Cautioning that it was not imposing a requirement for mixed-motive plaintiffs to show they were subjectively qualified for their jobs, the court spoke "only in terms of an absolute minimum requirement of qualification, best characterized in those circumstances that require a license or a similar prerequisite in order to perform the job." In this case, a security clearance was the minimum requirement needed to hold the employee's position. When his clearance was suspended, the employee was not qualified on the most basic level to perform his job (Makky v Chertoff, August 7, 2008).

3rdCir: Equitable estoppel entitled retiree to higher pension payments

Extraordinary circumstances entitled a retiree to a higher pension award after the retiree reasonably and detrimentally relied on a series of material representations by his employer as to the amount of pension benefits he would receive, the Third Circuit ruled, affirming an ERISA judgment in favor of the retiree based on an equitable estoppel theory. The appeals court also awarded the retiree restitution for past payments that were unduly low, noting the trial court erred in concluding it could not grant such relief. Finally, the appeals court affirmed the lower court's grant of injunctive relief requiring the employer to calculate the employee's future payments at an earlier adjusted service date, rejecting the employer's contention that such a remedy constitutes an impermissible "informal amendment" to the plan. In fact, on review, the Third Circuit amended the injunction so that the retiree's benefits were to be calculated based on an even earlier date of service than the date relied on by the lower court (Pell v DuPont, August 8, 2008).

6thCir: USERRA claims are arbitrable; employee held to arbitration agreement

USERRA claims are arbitrable, ruled the Sixth Circuit, in a decision that finds the court adopting the Fifth Circuit's reasoning in Garrett v Circuit City Stores, Inc. Upon returning from a tour of duty in Afghanistan, the plaintiff filed a USERRA suit against his employer. The employer moved to stay the suit, contending the employment agreement between the parties reserved dispute resolution to arbitration. Analyzing both the language of the agreement and the statute itself, the appeals court ordered the matter to arbitration. The agreement expressly stated that any disputes regarding the employment relationship were subject to arbitration. "Having made the decision to arbitrate," wrote the court, "the [employee] should be held to it unless Congress itself has evinced an intention to preclude a waiver of a judicial forum." This, the court decided, Congress did not do. "The text of USERRA was unambiguous" and nothing in the statute exempted USERRA from congressional policy favoring arbitration. Furthermore, "there is no inherent conflict between arbitration and USERRA's underlying structure and purposes." (Landis v Pinnacle Eye Care LLC, August 11, 2008).

9thCir: Accrual begins when applicants not hired, not when legal wrong suspected

Job applicants who, several years after their nonhire, alleged the city and county of San Francisco gave preferential hiring treatment to Asian and Filipino candidates failed to timely file their Section 1981, 1983, 1985 and 1986 race and national origin discrimination claims, concluded the Ninth Circuit, in an apparent matter of first impression. Some of the applicants contended they had no reason to know of the discriminatory treatment until several years after they were denied positions, when they received notice that allegedly unqualified Asians and Filipinos had been hired. Other unsuccessful applicants asserted they were unaware of the defendants' discriminatory conduct until they received a letter notifying them of the instant lawsuit. Joining seven other circuits, however, the Ninth Circuit held the statute of limitations period begins "upon awareness of the actual injury" (i.e., the adverse employment action), not when "the plaintiff suspects a legal wrong" (i.e., the discriminatory intent behind the adverse action). Therefore, the applicants' claims "accrued at the time they received notice they would not be hired" or "when a reasonable person would have realized he had not been hired," held the appeals court (Zolotarev v City and County of San Francisco, August 7, 2008).

DIll: Complaints about racial profiling of customers was not protected activity

A discharged African-American employee's claim of reprisal for complaining about racial profiling of African-American customers by sales associates could not survive summary judgment, ruled a federal district court in Illinois. Title VII focuses on how employers treat employees, not customers, and his complaints were about how his employer treated customers, emphasized the court. Even assuming that the employee, an assets protection investigator, was required to conduct racial profiling himself, he complained not about how it affected him differently than other employees, but about how it affected all assets protection investigators. Since his complaints focused on his employer's unequal treatment of African-American customers and not unequal treatment of employees, "it was not objectively reasonable for [him] to believe that he was complaining about activity protected under Title VII," wrote the court (Denham v Saks, Inc, July 30, 2008).

DMinn: Checking in on a child is not "caring for" family member

An employee was not entitled to FMLA leave to check in on the 11-year-old son of his girlfriend while the girlfriend underwent surgery, a federal district court in Minnesota ruled. The employee conceded he was not entitled to FMLA leave on that day to care for his girlfriend, who was not a family member. But he alleged that he stood in loco parentis to the child, thus the boy was his "son" and a family member under the FMLA. Even assuming this were true, the employee did not establish that the child suffered from a serious health condition. Nor could the employee establish that he was absent to "care for" the son on that day. The undisputed facts show the employee accompanied his girlfriend to the hospital, the child stayed with his aunt all day, and the employee left the hospital a few times to go check on the child. While the employee's concern for the child "may be laudable," the court noted, his actions "do not qualify under the broadest reading of the statute as physical or psychological care under the FMLA. The FMLA does not protect mere visitation." Because his absence was not FMLA-protected, the employee could not assert an interference claim (Brehmer v Xcel Energy, Inc, August 4, 2008).

STATE LAW CASES

AZ: Tort claims arising from union corporate campaign activity may proceed

A supermarket chain may proceed with its lawsuit against the United Food and Commercial Workers based on the union's corporate campaign-related activity, an Arizona court held, rejecting the union's contention that the claims of defamation, trespass, tortuous interference with contractual relations, interference with business expectancy, and state RICO violations were preempted by the NLRA. The court also rejected the motions to dismiss of individual union officers who argued they were immune from liability pursuant to the Labor Management Relations Act, as such immunity applies only to claims that arise in a collective bargaining context. Finally, the court gave little credence to the union's assertion that the suit was brought for the improper purpose of deterring the union from exercising its constitutional rights, citing the employer's contention that the union conduct at issue was not protected petitioning activity (Bashas Inc v UFCW, AzSuprCt, July 28, 2008).

CA: Non-compete agreements are generally void, state High Court holds

In a much anticipated decision, the California Supreme Court ruled that a non-compete agreement was invalid because it restrained an accountant's ability to practice his profession. Noting that under state law "…an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule," the Court rejected the argument that limiting an employee's ability to practice his or her vocation is permissible if it is reasonably based. The Court also rejected a "narrow-restraint" exception created and adopted by the Ninth Circuit that upheld non-compete agreements that prohibit individuals from pursuing only a small or limited part of their business, trade or profession (Edwards v Arthur Andersen LLP, CalSCt, August 7, 2008).

CA: Employer sues state agency over enforcement action on illegal workers' behalf

The case was recently dismissed on abstention grounds, but the matter will no doubt rear its head again: A California restaurateur filed suit against the state's labor commissioner, who had brought an enforcement action against his restaurant for unpaid wages. The former employees for whom the commissioner obtained more than $40,000 in backpay relief were undocumented aliens, and the restaurant claims that, under the federal IRCA, the commissioner lacked authority to award back wages to the alien workers. Here's where it gets interesting: In its complaint, the restaurant sought not only to reverse the backpay award, but a disgorgement and restitution of all wages paid out to the former employees, which, the restaurant alleges, were obtained under false pretense (Kaji Enterprise, Inc v Bradstreet, CDCal, dismissed without prejudice July 24, 2008).

KY: State's civil rights act protects employees, not independent contractors

A marketing and public relations consultant was an independent contractor and not an employee of a Kentucky software company, a state appeals court concluded, applying the common law agency test in determining the plaintiff's employment status. As such, she could not sue the company for sexual harassment under the state's civil rights act. Because the Kentucky statute is modeled after federal law, the court looked to the definition of "employee" as articulated by the courts in Title VII litigation. Finding the protections of the federal statute do not extend to independent contractors, the court reasoned that the state-law equivalent is similarly limited in scope, and thus affirmed a lower court's ruling of judgment as a matter of law to the employer (Steilberg v C2 Facility Solutions, LLC, KyCtApp, August 1, 2008).

MT: Internal auditor's wrongful discharge claim not preempted by National Bank Act

A nationally chartered bank could not hide behind the National Bank Act's "at-pleasure" provision, which permits national banks to dismiss bank officers at their pleasure, to evade a wrongful discharge claim filed by a former internal audit officer who was discharged after internally reporting a "potential irregularity" in a bank loan that may have involved misconduct by a bank executive. Adopting South Dakota's conflict preemption analysis, the Montana Supreme Court reversed a lower court's finding of preemption and concluded the federal banking law did not preempt the state's wrongful discharge statute because the state law did not stand as an obstacle to the federal law's objectives. Concluding the National Bank Act did not apply here, the high court did not reach the issue of whether the internal auditor was an "officer" within the meaning of the statute (Fenno v Mountain West Bank, MontSCt, August 4, 2008).

NM: Executive order requiring state contractors to provide healthcare is constitutional

A New Mexico executive order that requires prospective contractors to offer health care coverage to their New Mexico employees as part of their procurement submittal is an appropriate exercise of the governor's authority and is consistent with the state constitution and laws, the state attorney general concluded. The order does not unconstitutionally create new law or otherwise improperly impinge on the legislature's lawmaking function. The state legislature gave broad discretion to procuring agencies to determine what specifications and conditions will be required of agency contractors, the attorney general found. Moreover, the order does not address the creation or administration of health plans or interfere with legislative authority to enact substantive health care legislation. The attorney general also concluded the health benefits that are provided by contractors pursuant to this provision may be accounted for as part of the prevailing wage (Opinion of Gary K. King, New Mexico Attorney General, July 31, 2008).

LEGISLATION

President Bush signs consumer product safety bill with whistleblower protections

The Consumer Product Safety Improvement Act (HR 4040) was signed into law on August 14 by President Bush. The legislation increases staff and funding for the Consumer Product Safety Commission (CPSC), enhances the agency's recall authority and expedites CPSC rulemaking. The measure also strengthens the CPSC inspector general role and mandates creation of a website for CPSC employee reports of waste and fraud. Of note to the employment bar: the statute's whistleblower protection clause safeguards private-sector employees who raise objections to, or inform authorities about, violations of consumer product safety rules. The bill also increases civil penalties for violators of the Consumer Product Safety Act from $1.8 million to $15 million.

California paid sick leave bill dies in Senate committee

A proposed bill that would require California employers to provide paid sick days to their employers died in the state's Senate appropriations committee on August 7 amid pressure from business groups. The Healthy Families, Healthy Workplaces Act (AB 2716) would allow employees to use the leave to recover from illness, care for a sick family member or recover from domestic violence or sexual assault. Proponents have promised to reintroduce the measure in the 2009 legislative session. The bill would make California the first state to require paid sick leave for employees, expanding on legislation signed into law in 2002, when California became the first state to guarantee paid family and medical leave.

LABOR NEWS

Six-week lockout results in $15.5 million payout to union, workers

A lengthy labor dispute at a suburban Chicago electrical plant that included a six-week lockout in 2001 has ended with a multimillion-dollar settlement for the electrical workers union and some 200 current and former workers after representatives of Midwest Generation and the Electrical Workers Local 15 agreed to a company payout of $15.5 million in back pay and other relief, according to the Lake County News Sun.

Verizon reaches agreement with two unions, averts threatened strike

Verizon has reached a tentative agreement on three-year contracts with the Communications Workers of America and the International Brotherhood of Electrical Workers, averting a strike by the rank and file, who had voted in support of a work stoppage as negotiations lumbered on. The two unions represent approximately 65,000 employees primarily in the company's Verizon Telecom business group in 10 Northeastern and Mid-Atlantic states and Washington, DC.

Delta and Northwest pilots ratify joint bargaining agreement pending merger

Pilots for Delta Air Lines and Northwest Airlines, both represented by the Air Line Pilots Association, Int'l (ALPA), have overwhelmingly ratified a joint bargaining agreement reached between the two airlines and the union leadership in June—the first time a labor deal was reached in advance of an airline merger, the union announced last week. The agreement will become effective and apply to both pilot groups when the merger between Delta and Northwest closes, expected later this year. "This momentous vote broke the traditional merger paradigm," said Captain Dave Stevens, Northwest MEC chairman.

Steelworkers, U.S. Steel reach tentative four-year contract

United States Steel Corp has reached a tentative agreement with the United Steelworkers on a new four-year bargaining agreement that will cover approximately 16,000 USW-represented employees in Ohio and Alabama. The pact provides "very significant" wage hikes, substantial bonus and pension increases, and improves benefit programs for active employees and retirees, including a reduction in retiree health care premiums. "We've gone through some tough times in the steel industry during the last 20 years," said Leo Gerard, USW's international president. "This contract is the new standard in the industry."

Teamsters' Carhaul members reject national contract agreement

Carhaul workers represented by the Teamsters union have rejected the tentative national master agreement reached by the union for 2008-2011. The tentative contract had eliminated various work restrictions so that employers would be able to haul more cars, a proposal the membership rejected. The union said it would meet with members and local leaders to discuss the issues behind the defeat. "We understand that our members are worried and angry about the difficult economic conditions facing the auto and carhaul industries," said Fred Zuckerman, director of the union's carhaul division. "We hope to resolve this contract without going on strike."

Tinkerbell, Minnie Mouse hauled off in handcuffs after labor protest

A labor dispute arising amid negotiations for a new contract for some 2,300 maids, bell hops and other service workers at Disney-owned hotels culminated in the arrest last week of union protestors, many dressed as legendary Disney characters, who were hauled into police vans as Disneyland tourists looked on, CNN reported.

LITIGATION TRENDS

Workplace issues top corporate law department concerns

When the results of Corporate Counsel's seventh annual "Who Represents America's Biggest Companies" survey came in this summer, one thing was immediately clear: Workplace issues were among companies' biggest concerns. Firms that did a substantial amount of labor and employment litigation work for big companies in 2007 had the most mentions, according to the article.

Company data becoming unmanageable, two out of five execs say

The Federal Rules of Civil Procedure were amended 18 months ago to require that companies, in the event of litigation, be able to quickly access a variety of electronically-stored information. The burden these discovery rules pose on organizations was made clear in a recent survey of more than 520 leaders in the banking and securities, financial services and technology industries: nearly two of five executives said the volume of data in their organizations was increasing in size and becoming unmanageable. And 17.5 percent of executives surveyed said their companies are not ready to handle complex discovery requests.

IN OTHER NEWS

Court approves $33 million settlement in Smith Barney brokers' sex bias suit

A federal district court in California has given final approval to a $33 million settlement to resolve a class action sex discrimination suit filed by female brokers of Smith Barney, a unit of Citibank, who alleged the company discriminated against them in pay, promotions, new account opportunities, and training and sales support. Some 1,285 brokers have submitted claim forms, attorneys for the plaintiffs said at a hearing last week.

Discharge for taking smoking break is upheld

A paralegal at a New York law firm was permissibly fired for violating her employer's ban on smoking breaks for hourly employees, a New York appeals court has ruled. According to law.com, the law firm had recently begun enforcing its no-break policy—which did not apply to lawyers and other salaried employees—after the breaks became increasingly drawn out. The discharged smoker, who insisted her smoking breaks "re-energized" her, must repay $3,000 in unemployment benefits that she received after willfully misrepresenting the reason for her discharge, the court ruled on August 7, affirming a decision of the state's Unemployment Insurance Appeal Board.

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Editor

Lisa Milam-Perez, JD

About CCH WorkWeek

This weekly newsletter provides corporate counsel and law firm practitioners with need-to-know employment and labor law information in a timely, yet manageable manner. Benefit from news and information in a broader context, with deeper analysis of recent developments and corresponding trends. Delivered to you every Monday, CCH WorkWeek offers timely coverage of breaking legislative developments, regulatory activity, state law changes, key case law and expert commentary by CCH editors.