Weinstein Case Highlights Difficulty Employees Face When Reporting Workplace Harassment Claims

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NPR had an excellent story yesterday about the problems that employees face in the workplace when they report sexual harassment:

"Former Hollywood mogul Harvey Weinstein's ouster from the Academy of Motion Pictures Arts and Sciences following numerous allegations of sexual misconduct have prompted others on social media to open up about workplace harassment complaints that have gone unheeded.

Most employers in most industries have written policies on and procedures for reporting incidents of sexual harassment, and human resources officials are required to investigate those claims.

And while recent decades have seen a cultural shift and more education to help minimize sexual harassment, HR consultant Sharon Sellers says there is still a big gap between what should happen, and what actually does. One concern is that many people don't feel safe reporting claims.

"The employer should take every complaint seriously, and this is one area I see where it falls down," Sellers says."

Most employees don't want a lawsuit; they just want to be allowed to do their job without being sexually harassed. Companies do their employees (and their bottom line) a disservice by not building a strong HR department that has the resources and independence within the company to investigate harassment claims and, when necessary, speak truth to power within the company.

Read the rest of NPR's article here.

"Service Fees" Can Confuse Matters for Tipped Employees

Tipped Employees

Tipped Employees

While most restaurants leave it up to their customers to decide how much to tip their servers, and increasing trend among some restaurants is to include a mandatory gratuity or “service fee” on their bills. Sometimes this is done only for groups of six or more patrons. Other times it is included as an extra charge when customers purchase a banquet package or other private dining option.

Mandatory gratuities or services fees are legal only under certain circumstances and only if handled properly by the employer. In some states, such fees are only legal if the money is used for the sole purpose of paying the server. Under the FLSA, service charges must be counted as income on the books of the restaurant, and then they may be used to pay servers or for other purposes. In no event, however, may servers be paid less than the minimum wage.

Other common issues tipped restaurant workers face include:

  • Requiring servers and bartenders to contribute a percentage of tips to a tip pool, but using the tips to pay employees who are not customarily tipped, such as custodial, management, or kitchen workers.

  • Denying overtime pay to employees who worked at more than one restaurant owned or controlled by the same company, even when their combined hours totaled more than 40 hours in one workweek.

  • Having employees work off-the-clock, earning only tips for their labor. Even if tipped employees receive most of their pay through tipping, the employer still must pay them at least $2.13/hour in cash wages on top of whatever tips they may earn.

If you have a question about how a tipped employee should be paid or if you think your employer is violating the FLSA, visit my main website to learn more.

Halliburton pays nearly $18.3 million in overtime owed to more than 1,000 employees nationwide after US Labor Department investigation

Employee Rights Under the FLSA

Employee Rights Under the FLSA

In one of the largest recoveries of overtime wages in recent years for the U.S. Department of Labor, oil and gas service provider, Halliburton, has agreed to pay $18,293,557 to 1,016 employees nationwide. The department's Wage and Hour Division investigated Halliburton as part of an ongoing, multi-year compliance initiative in the oil and gas industry in the Southwest and Northeast.

Investigators found Halliburton incorrectly categorized employees in 28 job positions as exempt from overtime. The company did not pay overtime to these salaried employees — working as field service representatives, pipe recovery specialists, drilling tech advisors, perforating specialists and reliability tech specialists — when they worked more than 40 hours in a workweek, in violation of the Fair Labor Standards Act. The company also failed to keep accurate records of hours worked by these employees.

Simply paying an employee a salary does not necessarily mean the employee is not eligible for overtime. The FLSA provides an exemption from both minimum wage and overtime pay requirements for individuals employed in bona fide executive, administrative, professional and outside sales positions, as well as certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the department's regulations.

The FLSA requires that covered, non-exempt employees be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus time and one-half their regular rates, including commissions, bonuses and incentive pay, for hours worked beyond 40 per week. Employers must maintain accurate time and payroll records.

Supreme Court Rules 6-2 Against Tyson -- Workers Win Millions in Back Pay

Supreme Court Rules For Workers in Pay Dispute

Supreme Court Rules For Workers in Pay Dispute

In a victory for American workers, the Supreme Court last week upheld a $5.8 million judgment against Tyson Foods in a pay dispute with more than 3,000 workers at a pork-processing plant in Iowa. You can read the opinion in Tyson Foods v. Bouaphakeo here.

The justices voted 6-2 on to reject new limits Tyson asked them to impose on the ability of workers to band together to challenge pay and workplace issues. The case revolved around the question of whether the workers could bring a class action case. Tyson argued that since each employee spent a different amount of time putting an gear and removing it, they shouldn't be able to sue as a group using "representative evidence" to prove up their case. The court rejected that argument.

“In many cases,” according to the Court majority opinion, “a representative sample is ‘the only practicable means to collect and present relevant data'” to prove that the company being sued was legally at fault.   The opinion went on to provide some guidance to when such evidence would be allowed in such cases.

In this case, the Court was more content to allow such evidence because Tyson Foods had not obeyed its legal duty to keep records on how much each worker had worked as overtime.  Without such records, the employees had to marshal other evidence, and the sample was the best proof available to them.

The case is notable because it represents at least a small opening in the legal wall against group actions that the Supreme Court has been steadily building over the last several years.

Read more:

Uber Drivers File FLSA Class Action in New York

FLSA Wage Action Against Uber

FLSA Wage Action Against Uber

On June 2nd, the New York Taxi Workers Alliance filed a class action complaint on behalf roughly 5,000 New York City Uber drivers against Uber Technologies and its related entities.  The complaint alleges that Uber’s drivers are misclassified as independent contractors and that Uber’s compensation scheme falls far below statutory minimum wage and overtime requirements.

According to the complaint, Uber exercises sufficient control over their “independent contractors,” to qualify them as employees:

From fares and fees, to what to wear and what route to take, in addition to subjecting its employees to constant monitoring by GPS, Uber directs and sets the terms and conditions of their Drivers’ work. Although Uber’s rules are often described as “suggestions,” Drivers understand clearly that failure to follow these guidelines results in temporary or permanent termination of their employment with Uber. After working for Uber continuously for years, laboring for twelve-hour-plus shifts, for six or seven days a week, these workers simply cannot be considered independent contractors performing a “gig.”

The complaint contains claims for minimum wages and overtime under the FLSA, recovery of equipment costs, unlawful deductions, breach of contract, and promissory estoppel.

You can read a copy of the filed Complaint here.

Tort Reform Is A Lie: Hot Coffee Still Being Used to Mislead

Here's the lie:

The lies used to support corporate efforts to continue to restrict regular people's access to the courthouse are powerful. And, sadly, they work. Routinely, potential clients who are sitting in my office will reference the famous McDonalds "Hot Coffee" case and try to assure me that their case isn't like the Hot Coffee case.  Their case is real. 

Here's the thing, the story everyone knows about the Hot Coffee case is a myth. It's a lie pushed by big business and their tort "reform" groups to poison the minds of potential jurors and make it harder for those who have been legitimately injured to received fair compensation. 

So, What Happened?:

In 1992, 79-year-old Stella Liebeck bought a cup of takeout coffee at a McDonald’s drive-thru in Albuquerque and spilled it on her lap. She sued McDonald’s and a jury awarded her nearly $3 million in punitive damages for the burns she suffered.

Before you hear all the facts, your initial reaction might be "Isn’t coffee supposed to be hot?" or "McDonald’s didn’t pour the coffee on her, she spilled it on herself!" But that would be before you hear all the facts.

Here are the facts:

Mrs. Liebeck was not driving when her coffee spilled, nor was the car she was in moving. She was the passenger in a car that was stopped in the parking lot of the McDonald’s where she bought the coffee. She had the cup between her knees while removing the lid to add cream and sugar when the cup tipped over and spilled the entire contents on her lap.

The coffee was not just “hot.” It was very dangerously hot. McDonald’s policy was to serve it at an extremely hot temperature that could cause serious burns in seconds. Mrs. Liebeck’s injuries were far from minor. She was wearing sweatpants that absorbed the coffee and kept it against her skin. She suffered third-degree burns (the most serious kind) and required skin grafts on her inner thighs and elsewhere. (See the video above for pictures.)

Importantly Mrs. Liebeck’s case was far from an isolated event. McDonald’s had received more than 700 previous reports of injury from its coffee, including reports of third-degree burns, and had paid settlements in some cases.

Mrs. Liebeck offered to settle the case for $20,000 to cover her medical expenses and lost income. But McDonald’s never offered more than $800, so the case went to trial. The jury found Mrs. Liebeck to be partially at fault for her injuries, reducing the compensation for her injuries accordingly.

But the jury’s punitive damages award made headlines — upset by McDonald’s unwillingness to correct a policy despite hundreds of people suffering injuries, they awarded Liebeck the equivalent of two days’ worth of revenue from coffee sales for the restaurant chain. Two days. That wasn’t, however, the end of it. The original punitive damage award was ultimately reduced by more than 80 percent by the judge. And, to avoid what likely would have been years of appeals, Mrs. Liebeck and McDonald’s later reached a confidential settlement for even less than that.

Here is just some of the evidence the jury heard during the trial:  

  • McDonald’s operations manual required the franchisee to hold its coffee at 180 to 190 degrees Fahrenheit.

  • Coffee at that temperature, if spilled, causes third-degree burns in three to seven seconds.

  • The chairman of the department of mechanical engineering and biomechanical engineering at the University of Texas testified that this risk of harm is unacceptable, as did a widely recognized expert on burns, the editor-in-chief of the Journal of Burn Care and Rehabilitation, the leading scholarly publication in the specialty.

  • McDonald’s admitted it had known about the risk of serious burns from its scalding hot coffee for more than 10 years. The risk had repeatedly been brought to its attention through numerous other claims and suits.

  • An expert witness for the company testified that the number of burns was insignificant compared to the billions of cups of coffee the company served each year.

  • At least one juror later told the Wall Street Journal she thought the company wasn’t taking the injuries seriously. To the corporate restaurant giant those 700 injury cases caused by hot coffee seemed relatively rare compared to the millions of cups of coffee served. But, the juror noted, “there was a person behind every number and I don’t think the corporation was attaching enough importance to that.”

  • McDonald’s quality assurance manager testified that McDonald’s coffee, at the temperature at which it was poured into Styrofoam cups, was not fit for consumption because it would burn the mouth and throat.

  • McDonald’s admitted at trial that consumers were unaware of the extent of the risk of serious burns from spilled coffee served at McDonald’s then-required temperature.

  • McDonald’s admitted it did not warn customers of the nature and extent of this risk and could offer no explanation as to why it did not.

After the verdict, one of the jurors said over the course of the trial he came to realize the case was about “callous disregard for the safety of the people.” Another juror said “the facts were so overwhelmingly against the company.”

That’s because those jurors were able to hear all the facts — including those presented by McDonald’s — and see the extent of Mrs. Liebeck’s injuries.

But that's not the story that the public has heard. Tort reform advocates lied about the facts of the case and the fake story gained traction. It went viral. So viral that now this story is what is most often cited by jurors and others when explaining why they don't trust lawyers, why they don't like lawsuits, and why they think plaintiffs are just out for a quick buck. 

And it's all a lie.

 

 

If you want to read more, start here.

Court Rules Company's Website Violates Americans with Disabilities Act

Computer

In what is the first lawsuit of this kind that I have heard of to go to trial, a Florida federal court has ruled in favor of a blind man who has filed nearly 70 lawsuits alleging that various companies’ websites violate the Americans with Disabilities Act.

On June 12, Judge Robert Scola, of the Southern District of Florida, decided that Winn-Dixie’s website is heavily integrated with the company’s physical store locations, making it subject to the ADA. His decision will require the company to update its site.

Plaintiff Juan Carlos Gil won't receive damages but the company will have to rebuild its website to comply with the court's order. The company has set aside $250,000 to update the site, though testimony during the trial indicated it will not cost nearly that much. During the trial experts estimated it would cost less than $37,000 for the company to update its site

The court ordered the company to comply with the Web Content Accessibility Guidelines (WCAG) 2.0 Level AA drafted by accessibility experts. Experts consider this to be the de facto standard for website accessibility.

Gil can’t see the screen of his computer but uses JAWS or other screen reader software that tells him the details of the site he is visiting. When he hits the tab and shift buttons, it tells him what he needs to type. He uses the Winn-Dixie site to buy groceries and prescription drugs. He wants to use the websites to find coupons and refill prescriptions. 

One of the main questions the court had to decide was whether the website is a “place of public accommodation” under the ADA. The court ruled that because the site is “heavily integrated” with Winn-Dixie’s stores, it is.

The Court wrote:

“Although Winn-Dixie argues that Gil has not been denied access to Winn-Dixie’s physical store locations as a result of the inaccessibility of the website, the ADA does not merely require physical access to a place of public accommodation. Rather, the ADA requires that disabled individuals be provided ‘full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.’”

This case indicates that companies which have a website that is a large portion of a customer's experience (think Amazon, Wal-Mart, etc.) will need to make sure their websites are accessible for those who are blind or risk a lawsuit similar to this one. 

Read more about this case. 

Backlash Against Remote Working as Companies Order Employees Back to the Office

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An IBM-convened panel at SIOP 2017 explored the benefits and challenges of remote working. With perspectives from academia as well as public and private sectors, the consistent message was that teleworking works, and that associated challenges can be managed with careful planning and communication.

Apparently IBM doesn't believe its own research.

Last week thousands of IBM employees — roughly 40 percent of the total 380,000 workforce — were given an ultimatum. They must either relocate to a regional office or leave the company. This will be a substantial hardship for many of those employees because they may live hundreds of miles from the nearest regional office. 

IBM's move is part of a growing trend among larger tech companies that are rethinking telework. Within the last several years Best Buy and Yahoo both ended or severely restricted their telework programs.

The fact that Yahoo and IBM have made this move is pretty surprising to me. Most research on the subject indicates that teleworking, when handled correctly, works. In fact it works better than working in the office for many. The true enemy of deep, substantive work is often the office environment itself. Meetings, office chit chat, and all the distractions that find their way to your office or cubicle are the real enemies of work. 

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Here is an interesting article from remote work proponent Jason Fried discussing why he thinks companies like Yahoo are making a mistake by eliminating remote work options. Put simply, if you hire quality people who are interested in doing meaningful work, then remote working is a great option. If remote working is not working in your organization, then it likely indicates a problem with the type of people you are hiring or in the structure of your organization itself. 

Perhaps these companies that are ending remote work programs are mistakenly addressing a symptom of a larger problem within their organizations.  

Jury awards $769,000 Against Washington University in Disability Discrimination Case

A St. Louis woman has won a $769,000 verdict against Washington University in a trial alleging the school refused to accommodate her disability and then fired her.

The plaintiff, age 55, worked as a researcher at the university's medical school from 1996 to 2012 and had herniated disks, according to her lawsuit. She claimed her back problems caused her extreme pain in certain positions "including but not limited to cell culture and bench work" and that the university and her supervisor discriminated against her by not accommodating her condition.

Her lawyer said the university in November 2012 fired her from her cancer research position, telling her the school had lost funding for her projects. Her lawsuit said her firing was in retaliation for her request that she not be required to sit and bend over for excessive periods of time.

After a five-day trial in St. Louis Circuit Court, the jury Friday awarded Lin $269,000 in actual damages and $500,000 in punitive damages.

It should be noted that St. Louis is seen by many as being one of the most plaintiff-friendly venues in the country so your mileage may vary. 

Read the story here.

 

 

$51 Million Dollar Verdict Awarded in Age Discrimination Case

A former Lockheed Martin engineer, who sued for age discrimination after being laid off at age 66, was awarded $51.6 million by a jury in a federal court in New Jersey. This may be the highest amount ever awarded to an individual in an age discrimination case, and stands as a stark reminder that age discrimination remains a big — and potentially very expensive — issue for HR.

Robert Braden was a mid-level manager who spent almost 29 years at a Lockheed Martin facility in Moorestown, NJ. He claims that he was a target in a reduction in force plan to replace older workers with younger ones, and that he and other older workers consistently received less pay and lower reviews and raises than younger workers.

In his lawsuit complaint, Braden said that he was the oldest of six engineers in Lockheed's Electronic Systems-Mission Systems and Sensors unit, that his title was project specialist, senior staff, and that he was the only one let go in that round of layoffs. He said that he was given no specific reason for his termination and that his job performance had been "excellent." He also said that supervisors and company executives regularly made remarks about older workers.

The $51.6 award breaks down like this:

  • $50 million for punitive damages under the New Jersey Law Against Discrimination,

  • $520,000 for economic loss,

  • $520,000 for willful action against the Age Discrimination and Employment Act (ADEA) and

  • another $520,000 for pain and suffering.

(Note that in Texas, the size of the this verdict would have been greatly reduced by the application of damages caps passed by the Texas legislature to protect companies who commit this type of wrongful conduct.)

Discrimination against older workers remains a significant problem

While the size of the Lockheed verdict is certainly surprising, workplace age discrimination, unfortunately, is not. A 2013 AARP study found that almost two in three workers ages 45 to 74 said they have experienced workplace age discrimination.

And with an aging US population and ongoing economic uncertainty, more people plan to or must stay in the workforce well past the age of 65. As a result, managers and supervisors should take steps to ensure all employees are vigilant and sensitive to behavior and practices that can be grounds for an age discrimination claim.

Don't Sign Away Your Right to Get a New Job

The growth of noncompete agreements is part of a broad shift in which companies assert ownership over work experience as well as work. A recent survey by economists including Evan Starr, a management professor at the University of Maryland, showed that about one in five employees was bound by a noncompete clause in 2014.

Employment lawyers say their use has exploded. Another recent study showed that noncompete and trade-secret lawsuits had roughly tripled since 2000. Noncompete agreements are not being used beyond the realm of protecting truly proprietary information.  They are being used, and arguably abused, by companies of all types against employees at all levels. 

Employment lawyers know this, but workers are often astonished to learn that they’ve signed away their right to leave for a competitor. A recent article in the New York Times tells the story of Timothy Gonzalez, an hourly laborer who shoveled dirt for a fast-food-level wage, was sued after leaving one environmental drilling company for another.

By giving companies huge power to dictate where and for whom their employees can work next, noncompetes take a person’s greatest professional assets — years of hard work and earned skills — and turn them into a liability.

Read the entire New York Times Story

 

Can You Trust Your Company's HR Department?

A fellow blogger has a post out this week titled "Who Do You Report Harassment To If the Harasser Is the CEO?".  It is a thoughtful article and it makes the excellent point that HR for every company needs to bake into their policies a method by which an employee can internally report sexual harassment being committed by the CEO or owner of a company without risk of retaliation. I think that is an excellent goal to strive for and I hope that all HR departments set that as a goal.  There is only one problem with the premise of the article. 

The effort will almost certainly fail. 

Michael Corleone: "C'mon Frankie... my father did business with HR, he respected HR."

Frank Pentangeli: "Your father did business with HR, he respected HR... but he never trusted HR!"

 

 

HR is, in my opinion, possibly the most challenging role for any manager to do and do well. It is arguably designed to fail. The problem is obvious: HR serves two masters. On the one hand, HR is designed to serve as a helpful ombudsman to employees. To assist employees who are being mistreated. To conduct thorough investigations and correct inappropriate behavior against employees. On the other hand, HR is required to defend management against accusations of unlawful employment practices. HR is usually directly involved in the termination decisions that lead to EEOC filings. HR is then in charge of or at least heavily involved in drafting the company's defensive statement of position filings, arguing that the company is blameless. Thus, the very department that an employee is supposed to trust with his or her career and feel comfortable making a complaint to is the same department that will be spearheading the fight against the employee when it all goes south. 

What this means in most companies is that, no, you cannot trust HR to help you. While many HR officers have their hearts in the right place when they start working in the field, they can't help but know who is responsible for signing their paychecks. Hint: it's not the employee bringing a complaint against a member of management.  

So, should you bring complaints to HR? Yes, you should. In fact, in many cases you are legally required to do so or you risk waiving any claims you may have against the company for the discrimination or harassment you are reporting. Just don't assume that HR's only role is to help you. Because it isn't. While HR may be trying to assist you they are also assessing corporate risk, documenting your complaint in a way that will assist the company in defending against your complaint, and looking for ways to satisfy the demands of management. 

Here are a couple of quick tips: 

  1. Make all reports in writing. When push comes to shove down the road, HR is liable to either not "remember" you made a complaint or to remember it substantially differently than you do. Putting your report in writing is the only way to prove you made a complaint, when you made it, and to whom the complaint was made.

  2. You know that written report from number 1, above? KEEP A COPY. A written complaint does you know good if you send the only copy to HR. It might...you know...get lost.

  3. Consider going outside the organization to the EEOC. If your complaint involves EEO-based (age, sex, race, religion disability, color) discrimination or harassment then consider making a complaint to the EEOC sooner rather than later. There will be little question that a report to the EEOC is protected activity under the law. This gives you a somewhat higher level of protection from retaliation than if you merely report internally.

  4. Consult with an employment lawyer. If you are in a situation in which you feel you need to make a complaint against management then, make no mistake, you job IS at risk. Start looking for a qualified employment attorney who represents employees. Be warned, in many parts of the country there aren't that many who lawyers who specialize in representing employees. So start looking before you need one. And don't expect such a lawyer to visit with you for free. This is not a simple car accident case and you aren't looking for a PI lawyer who can take your case on a contingent fee basis. Employment law is very specialized and contingency fees are generally not available for consulting services. If you find a qualified lawyer to advise you, however, it is money well spent.

Bottom line: Yes, you should report harassment or discrimination internally to your company's HR department. But that doesn't mean you should blindly trust the HR department. Understand that they serve two masters and protect yourself accordingly.  

Tip Pool Violations and Other Forms of Wage Theft Common in the Restaurant Industry

Restaurant Workers Are Often Victims of Wage Theft

Restaurant Workers Are Often Victims of Wage Theft

The Wall Street Journal recently reported that wage lawsuits against restaurants have proliferated in troubling and damaging numbers:

“…The number of wage-violation lawsuits has been on the rise for more than a decade, driven by a successful worker-organization movement, increased attention by plaintiffs’ attorneys and complicated labor laws that leave some employers confused, according to legal analysts and industry leaders.

Nationwide, these lawsuits have doubled in the last 10 years in federal courts. In Texas, the number of overtime lawsuits and settlements continues to increase as well. The US Department of Labor recently reported that its wage and hour division found violations in 95 percent of its investigations of Austin-area restaurants between Oct. 1, 2015 and June 30, 2016. 

So why do the vast majority of restaurant employers continue to violate wage laws despite news reports of DOL investigations and lawsuits? 

Read more about overtime claims by restaurant workers.

Does Judge Gorsuch Really Love the Jury Trial?

National Employment Lawyers Association Opposes Nomination of Neil Gorsuch to Supreme Court

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In our current environment of a new scandal every five minutes, it is easy for really important issues to get lost in all the noise.  One such big issue currently pending is the nomination of Neil Gorsuch to the U.S. Supreme Court. 

Some oppose Gorsuch's nomination not for anything he has said or done himself, but because of the hotly contested and partisan manner in which his potential seat on the Court was arguably stolen from an equally qualified candidate by certain members of Congress last year. I personally think it was a big mistake for the republicans to inject even more partisan politics into the manner in which Supreme Court justices are selected. In our system of jurisprudence, the Supreme Court's power comes solely from its credibility with the American people. The more partisan the Court looks, the weaker it becomes.  Regardless of one's position on the issues the Court decides, it is in all of our interests for the Court to be respected and considered to be above politics to the greatest degree possible. 

Putting that issue aside for the moment, organizations that typically vet Supreme Court candidates are starting to come in with their assessments of him on issues that are important to said organizations' memberships.  This week the National Employment Lawyers Association announced their opposition to Mr. Gorsuch. NELA is the largest organization of U.S. attorneys who primarily represent employees. 

NELA's letter in opposition to Mr. Gorsuch, the text of which I include in full below, gives several reasons for the organization's opposition to his appointment. However, the most important reason listed, to my mind, is Mr. Gorsuch's reported antipathy for the jury trial...at least in employment cases. 

There have been several news reports over the course of the preceding few weeks touting Mr. Gorsuch's love of the jury trial and his plan to bring it back. Others have discussed Gorsuch's antipathy for the McDonnell-Douglass burden shifting framework in employment cases (an optional but usually-used framework for analyzing employment-related claims frequently used by judges to dismiss discrimination and harassment cases without a trial). On the surface both of these positions seem to align with the interests of employees. I hope that Gorsuch's statements regarding these issues are genuine and would support his efforts in this regard. 

But what NELA points out is that Judge Gorsuch, like many federal judges, has gotten into the bad habit of doing the jury's work for them in far to many cases. Rather than denying motions for summary judgment whenever there is a fact question at issue to be decided by a jury, he all to often weighs the evidence, draws inferences against the employee, and decides the credibility of the witnesses in the case -- all issues that are supposed to be left to the wisdom of the jury. 

Judge Gorsuch is, sadly, not unique in these reported failings. Federal judges overstepping their Constitutional role in employment cases to make improper fact determinations is a well-known problem throughout the country. (Read: "When it comes to employment cases, judges are killing the Civil Rights Act of 1964" by Judge Richard Kopf as well as "Anti-Discrimination Laws Have Been "Gutted"" on this blog.) It is a serious problem that threatens one of the most sacred elements of the American system -- the Constitutional right to a trial by jury. 

The following is the full text of NELA's letter in opposition to Judge Gorsuch's nomination: 

March 13, 2017

Submitted Via Email:
Ted_lehman@judiciary-rep.senate.gov
Paige_herwig@judiciary-dem.senate.gov

The Honorable Chuck Grassley, Chairman
United States Senate Committee on the Judiciary
224 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Dianne Feinstein, Ranking Member
United States Senate Committee on the Judiciary
152 Dirksen Senate Office Building
Washington, DC 20510

Dear Chairman Grassley and Ranking Member Feinstein:

On behalf of the National Employment Lawyers Association (NELA), and its 4,000 circuit, state, and local affiliate members across the country, I write to express our strong opposition to the nomination of Judge Neil M. Gorsuch to the United States Supreme Court.

NELA is the largest professional membership organization in the country comprising lawyers who represent workers in labor, employment and civil rights disputes. Founded in 1985, NELA advances employee rights and serves lawyers who advocate for equality and justice in the American workplace. Our members litigate daily in every circuit, affording NELA a unique perspective on how employment cases actually play out on the ground. NELA strives to protect the rights of its members’ clients, and envisions a workplace in which employees will be paid at least a living wage in an environment free of discrimination, harassment, retaliation, and capricious employment decisions; employees’ safety and livelihood will not be compromised for the sake of corporate profit and interests; and individuals will have effective legal representation to enforce their rights to a fair and just workplace, adequate remedies, and a right to trial by jury.

As a member of the Tenth Circuit Court of Appeals, Judge Gorsuch has demonstrated a troubling propensity to both draw inferences against plaintiff-employees and make improper determinations regarding the credibility of the respective parties when deciding whether an employee should be permitted to present her claims to a jury (the procedural posture in most employment cases on appeal). This practice runs afoul of the applicable provisions of the Federal Rules of Civil Procedure and rulings from the Supreme Court. Judge Gorsuch has shown an affinity for deploying legal reasoning unsupported by the text and purposes of the particular employment laws at issue, and adopting inappropriately narrow readings of both the facts and law in ways that operate to the detriment of employees seeking to vindicate their statutory rights. This pattern gives rise to the question of whether Judge Gorsuch places the interests of employers over the rights of employees, which should be fully explored during his confirmation hearing.

Judge Gorsuch’s tendencies as described above are made more troubling by his much-discussed skepticism regarding the doctrine of Chevron1 deference. Administrative regulations, as well as other interpretations and enforcement guidance from administrative agencies such as the Equal Employment Opportunity Commission (EEOC) and National Labor Relations Board (NLRB) provide invaluable guidance to employers and employees regarding the nature of their rights and responsibilities, and are an essential tool for judges and advocates in resolving employment disputes. One can imagine many ways in which a Supreme Court Justice with Judge Gorsuch’s apparent tendencies regarding employment cases, further unencumbered by any responsibility to defer to authoritative interpretations developed by the agencies charged with interpreting and enforcing our workplace laws, could undermine profoundly the effective enforcement of the employment laws passed by Congress.

The case descriptions that follow constitute representative examples of the ways in which Judge Gorsuch’s jurisprudence in employment cases has manifested itself in cases arising under a number of different employment statutes.

A. Hwang v. Kansas State Univ.2 (Disability Discrimination)

After she was diagnosed with cancer, Professor Grace Hwang requested and received a six-month leave of absence covering the fall semester to recover from a bone marrow transplant. As she was preparing to return to teaching the following January, a flu outbreak erupted on campus. Because her doctor advised her not to subject her compromised immune system to such an environment, she sought further leave, during which she could have worked from home. This request contravened the employer’s rule capping all leave requests to a maximum of six months.

Judge Gorsuch ruled that Professor Hwang’s request for an additional leave of absence was unreasonable and affirmed the dismissal of her case. Applicable law requires that requests for accommodations be evaluated on a case-by-case basis, and in U.S. Airways, Inc. v. Barnett 3, the Supreme Court suggested that a reasonable accommodation may require an employer to modify an otherwise neutral rule (such as this employer’s six-month cap on leave). Judge Gorsuch’s reasoning also contravened EEOC Enforcement Guidance, and conflicted with rulings from numerous other Circuit Courts of Appeals.

B. Roberts v. Int’l Bus. Machines Corp.4 (Age Discrimination)

In affirming summary judgment in favor of the defendant-employer in this case, Judge Gorsuch demonstrated a number of troubling propensities that employee rights advocates understand all too well: he both drew inferences against the non-moving party and improperly weighed the evidence in a manner that Supreme Court law requires be done by a jury.

In a text message conversation, two of the defendants’ human resources employees were quoted as referencing the plaintiff’s “shelf life” in deciding whether to eliminate his position (they subsequently did). In deciding that the phrase could not constitute direct evidence of discrimination, Judge Gorsuch concluded that “the instant message conversation unmistakably suggests that ‘shelf life’ was nothing worse than an inartful reference to Mr. Roberts’s queue of billable work.”

He then moved to the question of whether the phrase, in conjunction with conflicting evidence regarding the plaintiff’s performance record, could demonstrate that the defendant’s alleged reasons for firing the plaintiff were a pretext for age discrimination. Judge Gorsuch held that the plaintiff could not demonstrate that changes in his performance reviews were a pretext for discrimination unless he could “advance evidence that IBM’s changed evaluation of his performance, whether wise or mistaken, wasn’t honestly arrived at.”

The only way in which Judge Gorsuch could reach such conclusions about the meaning of statements such as “shelf life” and the credibility of the defendant’s asserted reasons for terminating the plaintiff was by drawing a series of inferences in the defendant’s favor, and by avoiding a more common interpretation of the phrase “shelf life” when applied in conversation to an older employee. Longstanding Supreme Court precedent holds that judges must avoid drawing such inferences when deciding whether a case should be dismissed or proceed to trial.5

C. TransAm Trucking, Inc. v. Administrative Review Board 6 (Whistleblower Retaliation)

Alphonse Maddin worked as a truck driver for the defendant-employer. He was driving a tractor-trailer down an Illinois freeway on a subzero night in 2009 when he noticed that his truck was nearly out of gas. He pulled over because he could not find a fuel station, and ten minutes later, the trailer’s brakes locked up due to the frigid temperatures. Mr. Maddin was unable to resume driving the tractor-trailer and reported the truck’s unsafe condition to a dispatcher. The dispatcher told Mr. Maddin that a repairperson would be sent to fix the brakes.

Mr. Maddin dozed off briefly and awoke to find that his torso was numb and he could not feel his feet. He told the dispatcher about his physical condition and asked when the repairperson would arrive. “[H]ang in there,” the dispatcher responded.

Approximately one half hour later, Mr. Maddin called his supervisor, Larry Cluck, and told Mr. Cluck that his feet were going numb and that he was having difficulty breathing. Mr. Cluck told Mr. Maddin not to leave the trailer and gave him two options: drag the trailer with inoperable brakes, or stay put until the repairperson arrives. Mr. Maddin knew that dragging the trailer was illegal, but concluded that he might not live much longer if he were to wait for a repairperson. Consequently, Mr. Maddin unhitched the trailer and drove off.

Fifteen minutes after Mr. Maddin left—more than three hours after he first notified TransAm that he was stranded in subzero temperatures—the repairperson arrived. Mr. Maddin drove the truck back to meet the repairperson, who then fixed the trailer’s brakes. Less than a week later, TransAm terminated Mr. Maddin for abandoning the trailer. Mr. Maddin filed suit, as the applicable law prohibits an employer from firing an employee who “refuses to operate a vehicle because . . . the employee has a reasonable apprehension of serious injury to the employee or the public because of the vehicle’s hazardous safety or security condition.”

An Administrative Law Judge, a panel of the Department of Labor’s Administrative Review Board (ARB), and a majority of the Tenth Circuit Court of Appeals panel that reviewed this case agreed that Mr. Maddin had engaged in protected activity and was retaliated against. Judge Gorsuch, however, dissented, and went out of his way to disregard the ARB’s statutory interpretation, adopt an unnecessarily narrow interpretation of the term “operate” to conclude that Mr. Maddin had not engaged in protected activity, and belittle the applicable statute’s health and safety goals as “vague and generic.”

D. Strickland v. UPS, Inc.7 (Retaliation Under the Family and Medical Leave Act and Gender Discrimination)

In this case, the plaintiff was subjected to intense and unwarranted scrutiny of her performance after returning from a protected and approved two-week leave under the Family and Medical Leave Act. She was required to attend additional meetings that took her away from her responsibilities, was required to commit to unrealistic performance goals, and was prevented from raising concerns regarding her treatment in line with applicable company policy. Multiple co-workers testified that the plaintiff was treated differently than her all of her co-workers after her return from leave. The treatment worsened to the point where the plaintiff left the company, though she never officially quit and it was unclear whether she intended to return to work.

A majority of the Tenth Circuit Court of Appeals panel reversed the district court’s grant of judgment as a matter of law on the plaintiff’s constructive discharge claims (as applied to her retaliation claim), as there was conflicting evidence as to whether the plaintiff intended to return to work. The panel also reversed the district court on the plaintiff’s gender discrimination claims, finding that there was evidence that she was treated worse than her male co-workers.

Judge Gorsuch dissented, and would have affirmed the district court’s ruling on the plaintiff’s gender discrimination claim. Despite the evidence presented that indicated that the plaintiff was treated less favorably than her male co-workers, Judge Gorsuch concluded that the supervisor in question treated both male and female employees poorly. In reaching this conclusion, Judge Gorsuch disregarded evidence from a male co-worker that he was not subjected to the same scrutiny as the plaintiff, despite trailing her in all relevant sales categories. He also relied in part on evidence that another female employee did not also face differential treatment, despite applicable law holding that the fact that the defendant does not discriminate against every employee of the plaintiff’s protected class is no defense to a discrimination claim.

E. Weeks v. Kansas8 (Retaliation)

Judge Gorsuch held that in-house counsel did not engage in protected opposition to alleged unlawful discrimination when she advised a fire marshal to take seriously an employee’s complaints of discrimination, and he affirmed the district court’s grant of summary judgment.

This ruling is problematic for its adoption of an exception to existing anti-retaliation laws. This judge-created exception is not included in the text or supported by the purposes of Title VII of the Civil Rights Act. Pursuant to his approach, employees in positions that require them to monitor an employer’s compliance with the law (such as in-house counsel) must engage in special forms of opposition or participation activity to demonstrate that they have taken a position truly “adverse to their employer.” Absent proof of this higher level of opposition, employees who hold positions such as that of a general counsel, who in many cases will be the employee best equipped to learn about and oppose unlawful workplace discrimination, are not protected against subsequent retaliation.

In affirming summary judgment and dismissing the plaintiff’s case before trial, Judge Gorsuch also refused to resolve the question of whether the exception at issue conflicted with the Supreme Court’s decision in Crawford v. Metro. Gov’t of Nashville & Davidson Cty.,9 which suggested that all one must do to “oppose” unlawful workplace behavior and be protected against retaliation is to “antagonize ...; contend against; ... confront; resist; [or] withstand” it. Judge Gorsuch did so because the plaintiff failed to cite Crawford in her briefs, even though that fact does not prevent a judge from resolving an apparent conflict with binding Supreme Court precedent.

Employees who have been treated unlawfully in the workplace deserve a full and fair opportunity to prove their claims in our federal courts. Reasoning of the type found in many of Judge Gorsuch’s opinions undermines workers’ ability to vindicate their rights and undercuts the promise of a fair and just American workplace that is embodied by the employment statutes enacted by Congress. Judge Gorsuch’s treatment of both the law and facts in the cases cited above, and in others that we reviewed, suggests an ideological perspective which is unsympathetic to workers and too solicitous of employers, and belies his reputation as a committed textualist. As such, we respectfully urge you to oppose Judge Neil M. Gorsuch’s confirmation to the United States Supreme Court.

Sincerely,


Terisa E. Chaw
Executive Director

Read More: ScotusBlog Profile of Gorsuch - Natural Successor to Scalia

$500,000 Defamation Settlement for a Facebook Comment

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According to a report in the ABA Journal, a woman has agreed to pay $500,000 to settle a defamation suit over a comment she made on Facebook that allegedly implied a onetime rival had caused the death of her child. 

The case reportedly resulted from a disagreement between two North Carolina women who originally were cooperating in an effort to take control of a local low-wattage radio station. They had a falling out and eventually the toxic dispute moved online. According to the report, one of the women made a comment on Facebook regarding the other that "I didn't get drunk and kill my kid", implying that the other woman had done so.

The comment was particularly harmful to the other woman because her son was killed by an accidental shooting while playing with another child in the 1970s. 

And while the comment at issue does seem pretty nasty, a $500,000 defamation settlement in a case like this is pretty remarkable. As is often the case with settlements, one wonders if there were other issues motivating the parties that did not make the news reports.

View the entire article.

McDonald's Hit with Sexual Harassment Charges

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The Fight for $15 group, a union-sponsored group, has found another way to pressure McDonald's. The group recently filed EEOC charges on behalf of 15 U.S. McDonald's workers who say they were sexually harassed on the job. 

The Charges were filed with the U.S. Equal Employment Opportunity Commission against McDonald's USA LLC and individual franchisees in eight states over the last month. The charges include one worker alleging a manager showed her a picture of his genitals and said he wanted to "do things" to her. Another charging party alleged a supervisor offered her $1,000 for oral sex.

A big part of this effort by Fight for $15 has to do with McDonald's claim that it does not employ any of the employees of any of its franchisee restaurants. In a case before the National Labor Relations Board, Fight for $15 claims the company is a joint employer of franchise workers who say they faced retaliation for joining in nationwide strikes organized by the group. McDonald's disclaims responsibility for any employment law violations that occur in its franchise restaurants even though all employment policies and procedures and training emanate from the McDonald's corporation.  

I'll be keeping an eye on these cases as they progress because they have the potential to dramatically change the legal landscape of employment law with regard to franchise business models.  

 

Read More: Reuters

Buc-ee’s Sues Former Employee for Violating Retention Agreement / Non-Compete

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Story in the HoustonPress reports a former employee of the popular Buc-ee's convenience store chain is being sued for more than $60,000.00 for allegedly violating what is called a retention agreement. 

The employee in question, Kelly Rieves, was hired by the store as an assistant manager in Cypress, Texas for total compensation of about $55,000. She was hired as an at-will employee, meaning that the company could fire her for any reason at any time. But Buc-ee’s required her to sign an employment contract that is uncommon in the convenience store industry. It's called a "retention agreement". 

What is a "Retention Agreement"?

The contract Rieves signed divided her pay into two categories, regular pay and “retention pay." The amount allocated to "retention pay" accounted for approximately one-third of her total compensation. The contract allowed the store to recoup the retention pay should she fail to remain employed for a full 48-month term. The contract also required Rieves to give six months' notice before leaving. This is despite the fact that the company maintained the right to terminate Rieves prior to the end of the period. (The contract may or may not have contained notice provisions in favor of the employee that I am not privy to but it would not be required to have such provisions under Texas law.)

Three years later, Rieves decided to leave her job a year or so before her contract expired. We don't know her reasons but we do know she tried to work it out with the company first but her boss refused to let her out from under the contract. So she quit. 

In response, Buc-ee’s sued her for the full amount of the retention pay she earned during her three years with the company -- an amount over $67,000.00.

Are Retention Agreements Legal?

In a word, yes. If drafted properly, retention agreements can be enforced against employees in Texas. However, it is highly unusual to see such an agreement used with anyone other than high-level company executives. 

In the case of Ms. Rieves, a trial court ruled in favor of the company last fall. And it gets worse. The Court also ruled that, in addition to the original sum she owed under the contract, she was also responsible for the company’s legal fees plus interest on the retention pay since she left Buc-ee’s. 

The total the company is now seeking from Rieves approaches $100,000. The matter is currently on appeal. 

The Moral of the Story.

Don't sign an employment contract without having an attorney review it for you. Don't sign an arbitration agreement without having an attorney review it for you. Just don't! 

As a lawyer who primarily represents employees, I spend a fair amount of my time trying to help workers get out of contracts that they never should have signed in the first place. It is an uphill battle. 

The time to negotiate or get changes to employment-related contracts is BEFORE you sign them. Companies do not necessarily have your best interests at heart. You need to understand the implications of what you are signing BEFORE you sign it. A couple hundred dollars spent on lawyer contract review may seem like a lot when you are excited about starting a new job, but compared to the economic havoc that can be caused by signing a contract you don't understand, it's peanuts. 

Get the information you need to protect yourself and your family. It may be the best money you ever spend.

More: Read the entire story from the HoustonPress here.

Beware: Failing to Report Sexual Harassment Can Kill Your Case

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A recent case out of the Fourth Circuit Court of Appeals, McKinnish v. Brennan No. 14-2092 (4th Cir. Nov. 6, 2015), serves as a stark reminder of the important of utilizing employer's internal sexual harassment reporting procedures if any are available. 

In McKinnish, the employee received numerous sexually explicit text messages, photos, and videos from her supervisor over a ten-month period. She considered them to be harassing. But she never reported them to her employer as alleged harassment. McKinnish's husband eventually reported the messages to the employer after he discovered them. And the employer did the right thing and immediately terminated the supervisor.

McKinnish later sued and alleged hostile-environment sexual harassment under Title VII. The employer (the U.S. Postal Service) argued that McKinnish's claims should be dismissed because they were subject to what employment lawyers call the Faragher-Ellerth defense. The employer agreed. 

What is the Faragher-Ellerth defense?

In 1998, the U.S. Supreme Court used two cases called Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries, Inc. v. Ellerth, 524 U.S. 742 (1998) to create a defense for employers against sexual harassment claims. It later expanded this defense in a case called Vance v. Ball State

The Faragher-Ellerth affirmative defense applies when: (i) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and (ii) the plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.

In other words, if the employer has an internal policy providing a process for reporting, investigating and correcting incidents of sexual harassment, and employee must make use of that policy. If she fails to do so an it is determined by the court that her refusal to utilize the internal process was unreasonable, she will lose her claim against the company. 

Often, employees don’t want to report sexual harassment internally because it is uncomfortable to talk with someone in HR about the problem, because the employee doesn’t believe HR really has her best interests at heart, or she fears retaliation.  In fact, that is exactly what Ms. McKinnish argued in her case. Sadly, the court rejected this argument, holding that an employee’s “subjective fears of confrontation, unpleasantness or retaliation” do not alleviate the employee’s duty to alert his or her employer to an allegedly hostile environment.

Bottom Line: Report Sexual Harassment

This is an area where the Supreme Court has been pretty consistent. The courts want employers and employees to try to work out employment-related problems before they resort to going to court. The law requires you to give the company a chance to do the right thing before you sue them. 

  • If you are being sexually harassed, report it.

  • Report it in writing (email is fine).

  • Keep a copy (print the email).

Is it possible that in response to your report the company won’t take any action or might even retaliate against you? Yep. But if that happens then a lawyer will be in a much better position to help you and the court will be much more likely rule in your favor.

Another Court Follows Wallace Decision - FRCP 9(b) Fraud Pleading Standard Does Not Apply to SOX Whistleblower Cases

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As previously written about here, I had the privilege this year of being a part of the team of lawyers representing the plaintiff in Wallace v. Tesoro. The opinion issued in favor of my client by the Fifth Circuit in that case created very positive law for SOX whistleblowers around the country. 

This past week I learned of a recent decision from the District of Connecticut in a Sarbanes-Oxley whistleblower retaliation case that adopted the Wallace pleading standard for SOX whistleblowers. The case serves to underscore the broad scope of protected conduct under SOX. In Wiggins v. ING, the court held that the heightened Rule 9(b) pleading standard for fraud claims does not apply to SOX retaliation claims and a whistleblower can plead that she had a reasonable belief that her employer violated one of section 1514A’s enumerated fraud provisions without specifically alleging that she believed that the employer’s conduct satisfied all of the elements of the federal statute/SEC rule that was allegedly violated.

In Wiggins, the Plaintiff worked as an operations consultant at an insurance company. She alleged that she disclosed irregularities in the processing of terminated retirement plans that reflected a lack of compliance with federal securities laws, including “frequent inaccuracies in market value assessments on retirement plans that were being terminated and sent to other providers, incorrect and inconsistent application of deferred sales charges, and deliberately failing to provide identified “problem” files for quarterly auditing procedures.” She alleged that the company terminated her employment in response to her whistleblowing.

Court Holds: Rule 9(b) Does Not Apply to SOX Whistleblower Claims

The company argued that Ms. Wiggins’ complaint should be dismissed because it alleged she had blown the whistle about fraudulent activities but did not allege said fraud with the heightened particularity required under Rule 9(b) for pleadings in which a defendant is sued for fraud.

The court rejected the company's argument and concluded that the “reasonable belief” standard set forth in the statutory text obviates any requirement for a SOX whistleblower to prove actual fraud:

ING’s argument overlooks the fact that section 1514A(a)(1) “protects an employee who `reasonably believes’ that conduct violates an enumerated statute.” Wallace v. Tesoro Corp., 796 F.3d 468, 480 (5th Cir. 2015). As such, there is room for a plaintiff to maintain a SOX whistleblower claim under Section 1514A, assuming he has satisfied the other pleading requirements, “even if the [complained of] conduct turns out not to be fraudulent.” Id.; see also Guyden v. Aetna, Inc., 544 F.3d 376, 384 (2d Cir. 2008) (“a whistleblower need not show that the corporate defendant committed fraud to prevail in her retaliation claim under § 1514A”). Because section 1514A protects the employee who acted under a reasonable belief that fraud was occurring — rather than protecting only those employees who report activity that is, in fact, fraudulent —”Federal Rule of Civil Procedure 9(b) does not apply because [Wiggins] brings a retaliation claim based on his reasonable belief of fraud rather than a claim necessitating proof of fraud.” Jin Huang v. Harman Intern. Industries Inc., Civil Action No. 3:14-cv-1263-VLB, 2015 WL 4601047, at *2 n. 3 (D. Conn. July 29, 2015); see also Wallace, 796 F.3d at 480 (“Although [the defendant] maintains that dismissal can be affirmed for failing to satisfy Rule 9(b), it is plain from the rule’s text that it does not apply to this [SOX] retaliation suit”). Thus, ING’s argument that the Amended Complaint must be dismissed because it does not meet the heightened pleading standard of Rule 9(b) is without merit, because SOX whistleblower claims do not need to be plead in accordance with this heightened standard.

The court went on to state that “a SOX whistleblower plaintiff can state that she had a reasonable belief that her employer violated one of section 1514A’s enumerated provisions, without specifically alleging that she believed that the employer’s conduct satisfied all of the elements of the federal statute/SEC rule that was allegedly violated.” In addition, the court noted that “in order for a SOX whistleblower plaintiff to allege that she reasonably believed that her employer was violating one of the enumerated provisions, the plaintiff must allege that she believed, at least approximately, that her employer’s actions satisfied the elements of the enumerated provision allegedly violated.”

Wiggins follows the Fifth Circuit's holding in Wallace, of broadly construing SOX protected whistleblowers and refusing to impose a heightened standard of objective reasonableness. This is important because it makes it much more difficult for an employer to seek dismissal of a SOX whistleblower case at the pleading stage on a motion to dismiss.

 

Hat Tip: Jason Zuckerman

Fifth Circuit Reinstates SOX Whistleblower Claim Against Tesoro Corp.

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A unanimous panel of the Fifth Circuit U.S. Court of Appeals issued a decision last Friday reinstating Plaintiff Kevin Wallace’s Sarbanes-Oxley Act (SOX) whistleblower claim against Tesoro Corp. 

Wallace worked for the petroleum company Tesoro as Vice President of Pricing and Commercial Analysis. He discovered structural flaws in Tesoro’s accounting system that garbled important financial results and tax reporting used by management, the Board of Directors, and Tesoro’s public filings. Wallace confirmed his findings with company experts and reported them internally. On March 12, 2010, Wallace reported internally that he was being retaliated against by management. He was fired within hours of this report.

The district court had previously dismissed the case based on several procedural motions filed by Tesoro. Tesoro argued that the case needed to be plead pursuant to FRCP 9(b)'s strict fraud pleading requirements. Tesoro also argued that the lawsuit raised factual issues that had not been presented with particularity to OSHA (the administrative agency charged with conducting initial investigation into SOX charges).

The Fifth Circuit reversed the dismissal and remanded the case back to district court for further proceedings and discovery. In rejecting Tesoro's arguments, the Court stated:

The requirements of Rule 9(b) show how poorly it would work as a benchmark for reasonable belief that fraud is occurring. “At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003). But an employee who is providing information about potential fraud or assisting in a nascent fraud investigation might not know who is making the false representations or what that person is obtaining by the fraud; indeed, that may be the point of the investigation. Leaving those employees unprotected would have grave consequences for the statutory scheme of employee protection embodied in § 1514A and would do so in a way that appears completely unrelated to whether a belief actually is reasonable.

SOX was enacted as a reaction to a number of major corporate and accounting scandals, including Enron, and Worldcom. The law protects employees from retaliation for engaging in protected activity, which is defined as:

"any lawful act done by the employee to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341 [mail fraud], 1343 [wire fraud], 1344 [bank fraud], or 1348 [securities fraud], any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders . . ."


The undersigned is counsel for Mr. Wallace, co-counseling with San Antonio attorney Alex Katzman and Washington D.C. attorney Richard Renner. The U.S. Department of Labor, Office of the Solicitor of Labor, participated with an amicus brief asking the Fifth Circuit to reverse.


Download: Wallace v. Tesoro Corp., No. 13-51010 (5th Cir. 7-31-2015).