Employment Law Update - Fall 2005
Supreme Court Broadens Age Discrimination Claims
By: Kevin C. McCormick, Esq.
The U.S. Supreme Court has ruled in the case of Smith v. City of Jackson, Mississippi, that the Federal Age Discrimination in Employment Act (ADEA) allows older workers to sue for age discrimination when an employer's age-neutral policy, practice, or other employment action unintentionally discriminates against them. These so-called "disparate impact" claims have long been allowed under Title VII of the Civil Rights Act of 1964, but in recent years, many federal circuit courts of appeals have found that they aren't allowed under the ADEA.
The good news is that the Court's decision provides a long overdue answer to an issue that has remained murky ever since the ADEA was passed in 1967. The bad news is that employers in many states are now subject to liability for disparate impact claims in situations where no liability previously existed. Let's take a look at this important new decision and what it means to you.
Legal Background
In general, the federal discrimination laws recognize two types of discrimination claims. "Disparate treatment" claims arise when employers intentionally treat employees differently because of their race, sex, religion, national origin, or other protected characteristic. In this type of claim, employees must prove that their employer intentionally discriminated against them because of their membership in a protected class.
On the other hand, a "disparate impact" claim arises when an employer takes an action that's neutral on its face but has the unintended effect of discriminating against a protected class of employees or applicants. For example, requiring employees to be able to lift 100 pounds may discriminate against women, the disabled, or older workers, even if the employer had no intent to discriminate.
The ADEA generally prohibits employers from discriminating against employees who are age 40 or older. Unlike Title VII, the ADEA specifically allows employers to take an employment action that would otherwise be considered discriminatory if it's "based on reasonable factors other than age." This provision lies at the heart of the confusion over whether disparate impact claims are allowed under the Act.
Facts
In 1998, the city of Jackson, Mississippi, adopted a pay plan in which it granted raises to all city employees. One of the stated purposes of the plan was to ensure equitable compensation to all employees regardless of age, sex, race, or disability. The following year, the city granted additional raises to all of its police officers in an effort to make their starting salaries more competitive in the region. Officers with less than five years of tenure received proportionately larger raises (when compared to their former pay) than those with more than five years of tenure.
Because most of the officers who were over 40 years old had more than five years of service, they generally received proportionately smaller raises than those who were under 40. A group of those older officers sued the city under the ADEA for both disparate treatment and disparate impact. The only issue before the Supreme Court was whether they could pursue their disparate impact claims. The trial court and federal appeals court had held that they couldn't because disparate impact claims aren't available under the ADEA.
Court's Ruling
The Supreme Court's ruling is procedurally complicated, but the long and short of it is that a majority of the justices concluded that the ADEA does recognize disparate impact claims. Ironically, however, the Court also held that the police officers who filed the lawsuit couldn't actually prove that the city had violated the ADEA and dismissed their claims.
So why did the Court recognize a disparate impact claim under the ADEA but not recognize the officers' claims in this specific case? It all goes back to that provision of the ADEA that allows employers to treat employees differently for reasonable factors other than age. Basically, the Court said that even when an employment action results in a disparate impact against older workers, the employer won't be liable if there was a reasonable basis for the action. In this case, the city gave younger officers proportionately higher raises than their older co-workers to make starting salaries more competitive with other police departments in the area. The Court basically said that was a good enough reason to avoid liability under the ADEA.
Bottom Line
Federal law has historically recognized that an employee's age, unlike his race, sex, or other protected characteristic, frequently is relevant to his ability to perform certain jobs. As the Supreme Court explained, the ADEA acknowledges that fact by allowing employers to take employment actions that have an adverse impact on older workers if they're based on a reasonable factor other than age.
So in disparate impact claims under the ADEA, it appears that courts will engage in a two-part analysis. First, they will examine whether older workers as a class were adversely affected by the challenged employment action, practice, or policy. If they were, the court will go on to examine whether the action was taken on the basis of a reasonable factor other than age. If it was, then the employer won't be liable for age discrimination under the ADEA. But if there was no reasonable basis for the action, then the employer will be liable.
So how do you know whether your reasons for taking an employment action are reasonable? The Court provided a little guidance on that as well. In determining whether an action is reasonable, it isn't necessary for it to be the best or the most reasonable solution to the problem. In other words, you don't have to prove that there was no way to achieve your goals without adversely affecting older workers. You just have to prove that your approach was reasonable, not that it was the best or fairest possible approach.
As always, make sure you thoroughly analyze and document the reasons for all of your employment actions and policies. Take extra care to analyze the effects of your actions on older workers - especially when it comes to things like layoffs or cuts in benefits. If you discover that the proposed action may have an adverse effect on older workers, take care to document the reasons the employment action is necessary and reasonable.
Supreme Court Exempts IRAs From Bankruptcy
In a unanimous decision, the Supreme Court has held that the IRAs funded from a pension plan rollover were exempted from the bankruptcy estate under 11 U.S.C.A. §522(d)(10)(E). In settling a split among the circuit courts of appeals, the Supreme Court rejected the notion that the IRAs should be exempt because the petitioners had complete access to the plans. The court found that the 10% penalty for early withdrawal limited access to the funds so as to allow them to be excluded from the bankruptcy estate.
Background/Facts
Richard and Betty Jo Rousey were former employees of Northrup Grumman Corp. At the time of their termination,
Northrup Grumman required them to take lump-sum distributions from their pension plans. The Rouseys deposited the lump sums into two IRAs.
These funds qualified as IRAs under several of the requirements of the Internal Revenue Code. As IRAs the contributions were non-taxable as rollovers from another retirement plan. Furthermore, the IRA agreements provided that the "entire interest in the custodial account must be, or begin to be, distributed by" April 1 following the calendar year end in which they reach age 70.
Several years after establishing these IRAs the Rouseys filed a joint Chapter 7 bankruptcy petition. The Rouseys sought to shield portions of their IRAs from their creditors by claiming them exempt from the bankruptcy estate pursuant to 11 U.S.C.A. §522(d)(10)(E). Under this exemption, a debtor may withdraw from the bankruptcy estate the right to receive "a payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor."
The Bankruptcy Trustee objected to the exemption and the Bankruptcy Court agreed. The Rouseys appealed. The appellate panel agreed with the Bankruptcy Court, concluding that the IRAs were not "similar plans or contracts" to a stock bonus, pension, profit sharing, or annuity plan because unlike such plans that have limited access, the Rouseys had unlimited access to funds held in the IRAs. The Rouseys appealed again and the Eighth Circuit affirmed. The Rouseys then appealed to the Supreme Court. The Supreme Court granted certiorari to resolve a split among the circuits as to whether debtors can exempt IRAs from the bankruptcy estate under 11 U.S.C.A. §522(d)(10)(E). Justice Thomas delivered the unanimous opinion of the Court.
Holding of Court
The Supreme Court began by examining what may be exempt from the bankruptcy estate under 11 U.S.C.A. §522(d)(10)(E). Breaking down the statute, the Court found that under the statute, the Rouseys' right to receive payment under their IRAs must meet three requirements to be exempted under this provision: (1) the right to receive payment must be from "a stock bonus, pension, profit-sharing, annuity, or similar plan or contract"; (2) the right to receive payment must be "on account of illness, disability, death, age, or length of service"; and (3) even then the right to receive payment may be exempted only "to the extent" that is "reasonably necessary to support" the account holder or his dependents.
Looking to each requirement, the Court first examined the requirement that the payment be "on account of illness, disability, death, age, or length of service." The Court found the phrase "on account of" to mean "because of" based on interpretations of that phrase in other parts of the bankruptcy code.
The trustee argued that the Rouseys' right to receive payment was not "because of" the listed factors. Instead, the trustee claimed, that there was no causal connection between the right to payment and any of the factors because the Rouseys could withdraw the funds at any time for any reason.
The Supreme Court disagreed. The Court found that the statutes governing IRAs demonstrate that the Rouseys' right to receive payment is causally connected to their age. While the Court acknowledged that the Rouseys did have the right to receive payment at any time, that right was restricted by a 10% penalty that applies to withdrawals prior to age 59.
The Court found that this penalty was designed by Congress as a deterrent to prevent early withdrawals, and the low rate of early withdrawal is consistent with this design. Furthermore, this 10% penalty would restrict the Rouseys' rights to 10% of the funds and therefore limit the right to payment of the balance of the IRA funds. As the Court stated, "the Rouseys no more have an unrestricted right to payment of the balance in their IRAs than a contracting party has an unrestricted right to breach a contract simply because the price of doing so is the payment of damages."
The Court then turned to the requirement that the Rouseys' IRAs be a "stock bonus, pension, profit-sharing, annuity, or similar plan or contract." Because the Rouseys' IRAs were not stock bonus, pension, profit-sharing, or annuity plans, the Court noted that the issue was whether the IRAs were a "similar plan or contract."
The Court found that the IRAs were a "similar plan or contract." The Court found that the IRAs, like the listed plans, enabled the Rouseys to save for retirement. Furthermore, the IRAs, like the listed plans, provided a substitute for wages and were not merely savings accounts. The Court again rejected the argument that the Rouseys had complete access to the IRAs, subject to the 10% penalty. Accordingly, the Court found that the Rouseys' IRAs should be exempted from the bankruptcy estate under 11 U.S.C.A. §522(d)(10)(E). Rousey v. Jacoway, 125 S. Ct. 1561 (U.S. 2005).
This decision no doubt is welcome news to anyone faced with the not uncommon reality of bankruptcy. In spite of a split in lower court decisions, a unanimous Supreme Court had no problem in arriving at its decision.
National Labor Relations Act - RNs Not Supervisors - Marking NLRB Sample Ballot With An "X" In The "Yes" Box
In this case, the Federacion Central de Trabajadores, UFCW, Local 481, AFL-CIO (Union), filed a petition with the Board seeking to represent a bargaining unit composed of the Hospital's registered nurses (RNs). The Hospital alleged that the RNs were excluded from the provisions of Section 9 of the Act, 29 U.S.C. §158, by reason of
their supervisory status. The Board's Regional Director issued a decision that the RNs were not supervisors but were employees entitled to Section 9 representation, and ordered an election. The Hospital filed a request for review.
The request did not stay the election, and on March 21, 2002, the Regional Director conducted a vote. Pending resolution of the request for review, however, the ballots were impounded. The Hospital also filed an objection to the conduct of the election, claiming that its outcome was faulty because the Union distributed material that gave the voters the impression that the Board favored the Union.
Meanwhile, the Board denied the Hospital's request for review, and ordered that the impounded votes be counted. The result showed that the Union won the election.
On August 9, 2002, the Regional Director denied the objection to the conduct of the election. The Hospital filed exceptions, which were denied by the Board, and the Union was certified as the exclusive bargaining agent of the RNs.
The Hospital refused a request by the Union to commence negotiations for a collective bargaining agreement. Based on this refusal, the Union filed unfair labor practice charges with the Board. The Regional Director issued a complaint against the Hospital, which responded by claiming as a defense the invalidity of the Board's certification. The Board granted the General Counsel's motion for summary judgment and found that the Hospital had committed an unfair labor practice by refusing to bargain with the Union. The Hospital filed a petition for review with the U.S. Court of Appeals.
The Status of RNs As Supervisors
In N.L.R.B. v. Kentucky River Community Care, Inc., 532 U.S. 706 (2001), the Supreme Court restated the three-part test for determining the statutory definition of a "supervisor": "Employees are statutory supervisors if: (1) they hold the authority to engage in any of the listed supervisory functions; (2) their 'exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment'; and (3) their authority is held 'in the interest of the employer'."
The Hospital argued that the RNs were supervisors in that they assigned work to employees, but the Court determined that the record showed that they did so only by consensus, which did not meet the criteria of "independent judgment."
The Hospital also claimed that the RNs have a supervisory role in evaluating and reprimanding employees. However, the Board determined that the evidence was limited to the effect that RNs make oral representations to Area Supervisors concerning the job performance of other employees.
On the issue of supervising care, the Board found that any discretion exercised by the staff RNs in directing patient care tasks of licensed practical nurses (LPNs) and technicians was constrained by physicians' orders and detailed protocols, negating the need for any meaningful discretionary supervision by the RNs.
This issue has been debated for years with decisions going both ways. Healthcare employers should look closely at the specific facts in this recent case and if needed, adjust the duties of their RNs accordingly.
As to the second issue, the essence of the Hospital's claim concerning the election was that the Union distributed copies of the Board's sample ballot, with a "Yes" box marked with an "X", without identifying the source of the ballots, creating the impression that the Board favored the Union.
The Board did not agree, and considered evidence that for several months prior to the election, Union organizers engaged in activities at the location where the ballot was handed out to employees by the same organizers, and that the leaflet was reproduced on yellow paper rather than blue paper which the official notice of election was
printed.
The Court agreed with the Board that this conclusion was strengthened by the disclaimer on the Board's notice, indicating that it was the only official notice, and that any markings on a sample ballot were made by someone other than the NLRB. These notices, with the disclaimer language were posted in prominent places throughout the Hospital. Hospital General Menonita v. N.L.R.B., 393 F.3d 263 (1st Cir., 2004). As to this second issue, the Board has long held that an employer's or union's pre-election marking up of the Board's sample ballot would normally be grounds for the setting aside of the election upon the filing of proper objections by the losing party. In this somewhat surprising decision, neither the NLRB nor the reviewing Court of Appeals felt this long-standing rule had been violated. The caution, however, should still stand - an employer is permitted to print and distribute its own sample ballot, but make sure the employer's name is printed in the corner of the ballot and that there is no mention or indication by use of a U.S. Government/NLRB, etc. seal, that the Government/NLRB is condoning the printing.
This case is important in the healthcare industry in that it illustrates current Board and Court thinking in the area of the status of RNs in NLRB elections.
EEO - Confederate Flag Stickers in the Workplace - National Origin and Religious Discrimination Claims Fail
Plaintiff worked as a security guard for Defendant Burns International Security Services. He had a Confederate flag sticker on his lunch box and Confederate flag bumper stickers on his truck. Plaintiff's supervisors told him that Burns was about to implement a "diversified hiring program" and that he would have to remove his stickers. When plaintiff refused, they explained that Burns had a "zero tolerance" policy with respect to the display of Confederate symbols. Other supervisors also attempted to convince plaintiff to remove or cover his stickers. Thereafter, another Burns employee told plaintiff that the company had concluded that plaintiff had voluntarily resigned. The next day, a security guard captain told plaintiff that plaintiff had been terminated because of the stickers.
Plaintiff filed suit under Title VII alleging that Burns discharged him because of his national origin and religion. The "national origin" claim was based on his self-proclaimed identity as a "Confederate Southern-American" and his display of the Confederate battle flag in the workplace. His religion claim arose from the same claimed identity and the cross design of the flag. The district Court granted Burns' motion to dismiss based upon its conclusion that "Confederate Southern-American" did not qualify as a national origin under Title VII and that plaintiff had not established that his display of a Confederate flag was essential to maintaining a sincerely held religious belief.
On appeal, the Third Circuit Court of Appeals held that plaintiff did not suffer an "adverse employment action" as required to establish a prima facie claim. In order to be entitled to relief, a plaintiff must have suffered a cognizable injury. The Court has defined "an adverse employment action" as an action by an employer that is "serious and tangible enough to alter an employee's compensation, terms, conditions, or privileges of employment." Although plaintiff's complaint spoke of being discharged because of his national origin and religion, he conceded that he was fired because he had refused to cover or remove his Confederate flag symbols. The record reflected that, had plaintiff complied, he would have continued working for Burns as a "Confederate Southern-American" and Christian. Therefore, even if the Court assumed arguendo that plaintiff was a member of a protected class and accepted that the Confederate flag may be viewed as a religious symbol, plaintiff still would have not established a cause of action. He was not alleging that he was discharged because of his claimed national origin or religion. He did not argue that the employer was ever aware of the religious symbolism he attached to the Confederate flag. Before he was terminated, his employer tried to convince him to cover or remove his stickers so that he could remain an employee. Nothing in plaintiff's complaint suggested that Burns' requirement conflicted with a sincerely held belief that was endemic to his professed national origin or religion claims. By his own account, plaintiff only "displayed these stickers because he is proud of being a Confederate Southern-American" and "is interested in sharing his passion for his heritage with others." He did not claim that anything fundamental to his national origin or religion required display of Confederate symbols. His personal need to share his heritage could not be equated with something endemic to national origin or a religiously mandated observance, and plaintiff did not argue otherwise.
A concurring judge concluded that Plaintiff's discharge did constitute an "adverse employment action" but that he still failed to state a prima facie case for national origin discrimination because "Confederate Southern-American" is not a legitimate national origin classification for Title VII purposes. "National origin" refers to "country where a person was born, or, more broadly, the country from which his or her ancestors came." When one cannot trace ancestry to a nation outside of the United States, a former regional or political group within the United States, such as the Confederacy, does not constitute a basis for a valid national origin classification. Storey v. Burns Intern. Security Services, 390 F.3d 760 (3d Cir. 2004).
USERRA - Reemployment Rights of National Guard / Reserve Members - FMLA Leave
The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects the family and medical leave (FMLA) rights of reservists and national guardsmen. According to the U.S. Department of Labor, time spent on active duty should be counted toward their eligibility to take time off from work under the Family and Medical Leave Act.
Under ordinary circumstances, a worker becomes eligible for leave under the FMLA after working for a covered employer for at least 12 months and 1,250 hours. A DOL memo clarifies that the months and hours that the employee would have worked, but for his military service, should be combined with the months employed and the hours actually worked to meet the 12-month and 1,250 hour requirements.
According to the memo, a member of the National Guard or reserves who's absent from employment for an extended period of time because of military service, who then requests FMLA leave shortly after returning to civilian employment, may be entitled to receive the leave - even though he may not have actually worked for the employer for a total of 12 months, or may not have performed 1,250 hours of actual work with the employer in the 12 months before the start of the FMLA leave.
For example, someone who has been employed by an employer for nine months is ordered to active military service for nine months, after which he's reemployed. Upon reemployment with a covered employer, he must be considered to have been employed for more than the required 12 months (nine months actually employed plus nine months while in military service) for FMLA eligibility.
Moreover, an employee returning after military service should be credited with the hours of service that would have been performed but for the period of military service in determining FMLA eligibility. To determine the hours that would have been worked during the period of military service, the employees preservice work schedule generally can be used for calculations. For example, an employee who works 40 hours per week for an employer returns to employment following 20 weeks of military service and requests leave under the FMLA. To determine the person's eligibility, the hours he would have worked during the period of military service (20 x 40 = 800 hours) must be added to the hours actually worked during the 12-month period before the start of the leave to determine if the 1,250-hour requirement is met. If the employee is otherwise eligible, then the FMLA leave should be granted.
AFL-CIO Membership Levels Dropped Before Defections of Five Unions
Even before the AFL-CIO in late July and again in September lost five of its largest affiliates, which together represent about 6 million members, average membership levels had fallen by 189,000 since the last convention, membership figures compiled in conjunction with the federation's quadrennial convention show.
Since 2001, the federation's membership has decreased from 13,164,000 to 12,975,000. The figures represent the average of monthly per-capita payments made by affiliated unions for the 24 months before the convention, which was held July 25-28, 2005. The most recent figures are based on per-capita taxes paid from July 1, 2003, to June 30, 2005. These figures were used to determine each union's voting strength at the convention.
With the disaffiliation of the Service Employees International Union, the International Brotherhood of Teamsters, and the United Food and Commercial Workers, Unite Here, and the Laborers' International Union, the federation's membership now stands at about 9.5 million members.