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Fired for using “n-word,” reporter then sues for race bias

November 10th, 2014  |  Joy Waltemath  |  Add a Comment

About 18 months ago, I wrote a post asking whether employers would fire an employee for using the n-word.  I looked at a slice of relevant case law and concluded that, despite what seemed to late, ineffective, or no discipline at all for reported n-word usage in those cases, employers that did discipline and/or terminate individuals who used inexcusable racial language in the workplace likely were not the ones getting sued.

OK, so they fired him. But then I came across the case of the white male Fox TV reporter who was fired after he used the “n-word” (in a non-pejorative manner) while discussing a story during a newsroom editorial meeting. And he did sue his employer. Denying the employer’s motion for summary judgment, the court said management was aware that the reporter was being judged by a social norm deeming it acceptable for African-Americans, but not whites, to use the n-word. Treating it under the cat’s paw theory of liability, the court found a triable fact issue as to whether the TV station negligently permitted the discriminatory animus of one co-anchor (among others) to influence the firing decision.

The n-word incident. During the editorial meeting, the racially diverse coworkers discussed a story about an NAACP Youth Council that was holding a symbolic burial for the n-word. Participants at the burial reportedly used the word “at least a hundred times or more,” prompting the employee to ask: “Does this mean we can finally say the word ‘ni**er?’” One African-American colleague replied, “I can’t believe you just said that!” Other attendees were also offended, as were others in the office as reports of the meeting spread, and even though he apologized, his black co-anchor reportedly told him “because you’re white you can never understand what it’s like to be called a ni**er and that you cannot use the word ‘ni**er.” He was suspended, issued a final warning, and required to take sensitivity training.

The newsroom leak. That was not the end of the matter. Instead, a local newspaper published a story about the employee’s suspension for his reportedly “‘bizarre’ and ‘shocking’ sermon in which he insisted there’s nothing wrong with a word most commonly referred to as ‘the N-word.’” Of course, this story got picked up by other print and online media outlets. No investigation was conducted into the leak, even though the leak violated the station’s policies. The reporter was not allowed back on the air and his contract was not renewed. He sued, and ultimately his Title VII cat’s paw race discrimination claim survived a summary judgment motion (including an interesting discussion about whether cat’s paw cases survive given the tension between Staub and Vance, as well as a discussion of vicarious liability for acts outside the scope of employment under Sec. 219(2)(d) of the Restatement (Second) of Agency).

Should anyone say that word? Essentially, the court found evidence that the employee’s co-anchor acted with discriminatory animus based on her belief that African-Americans, but not whites, could say the n-word in the workplace. She encouraged other workers to complain about the employee. Even after he completed sensitivity training and was awaiting reinstatement, she continued to complain, intervening with HR to say she had heard from black journalist associations and from people on the street about the employee’s language. There was evidence she intended to, and did, cause the station to change direction — from planning to reinstate the employee to letting his contract expire – because two days later, he was told that his contract would not be renewed.

In allowing the case to go to a jury, the court also found a fact issue as to whether the station was negligent, noting the employee had no opportunity to defend himself during the investigation, nor was there any investigation into who leaked information about the editorial meeting to the media, which then created adverse publicity that resulted in his firing. Instead, it seemed to the court that the station “simply rubberstamped” the co-anchor’s desire to see him fired.

What would you do? Is this a “damned if you do, damned if you don’t” scenario? Should you have an absolute prohibition on the use of the word? A straightforward policy barring anyone from saying the n-word could have protected the employer to some extent here, but is that realistic in a newsroom, an educational setting, or for any media business? Earlier this year, for example, the NFL considered and rejected a specific ban on the use of the n-word, finding instead that its existing unsportsmanlike conduct rule, which covers “abusive, threatening or insulting language, or gestures to opponents, teammates, officials or representatives of the league” was sufficient. The academic community has grappled with the word in the educational context; see here and here.  Context obviously matters. What about who is speaking?  Determining the correct approach requires careful thought and cultural competence. Don’t let your managers make this decision on their own.

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Should employers go “old school” in criminal background checks to avoid the unforgiving FCRA?

November 6th, 2014  |  Lorene Park  |  Add a Comment

By Lorene D. Park, J.D.

Even absent unlawful intent, some employers are facing high defense costs and others are paying multi-million dollar settlements because they allegedly failed to send the right notice at the right time when using criminal background checks performed by other companies. The Fair Credit Reporting Act (FCRA) is hyper-technical in its requirements and unforgiving of noncompliance — so much so, that it begs the question of whether employers should go “old school,” performing their own background checks to avoid potential liability under the FCRA, which only applies when they run background checks through a company in the business of compiling background information. Here are some recent examples:

A typical case. In one recent case, three individuals who applied to work at Lowe’s but were denied employment based on background checks filed a collective and putative class action against Lowe’s and LexisNexis, which provided the background report. One plaintiff was denied an assistant manager position after his report wrongly stated that he had a criminal history that actually belonged to another person of the same name. He did not receive a copy of the report until three days after he was informed of the rejection. A second plaintiff was rejected for a sales position based on a felony conviction that the background check failed to note had been overturned on appeal; he was not provided with a copy of the report nor given notice that the report was given to the employer. The third applicant’s report was not inaccurate but she alleged that the employer failed to provide her a copy until “several days after” she was rejected. A federal court in North Carolina refused to dismiss their class action under the FCRA, which alleged that Lowe’s routinely used consumer reports, but failed to provide copies or notice of the reports before taking an adverse employment action (Brown v Lowe’s Companies, Inc).

Data entry clerk with old conviction. A data entry clerk for Canon Business Solutions was fired soon after she was hired because her background check revealed a felony conviction that was over ten years old. A federal court in New Jersey denied Canon’s motion for summary judgment on her class action claim that it had a nationwide practice of taking adverse employment actions without complying with the FCRA and that it willfully violated the Act by never providing her a copy of the report, describing her rights under the Act, or giving her a chance to explain the conviction before firing her (McPherson v Canon Business Solutions, Inc).

Multi-million dollar settlements. A federal court in Virginia granted preliminary approval of a settlement ending a class action against Dollar General under the FCRA. Dollar General agreed to pay over $4 million to resolve claims that it violated the Act by denying the plaintiffs employment either before they received a copy of their consumer report and a summary of rights, or by failing to provide the documents at a meaningful and reasonable time before making the adverse decisions. The summary of rights eventually sent to applicants was also purportedly outdated (Marcum v Dolgencorp, Inc dba Dollar General).

Dollar General is not the only large company to agree to big payouts when faced with FCRA class actions. Earlier this year, Swift Transportation Company agreed to pay $4.4 million to resolve a class complaint alleging that it violated the FCRA by failing to obtain the authorization of online applicants before having criminal background checks run and then relied on the results to take adverse actions without notifying the applicants of their rights (Ellis, III v Swift Transportation Co of Arizona).

Strict requirements. As these examples show, the FCRA has specific requirements that apply before an employer has a background check run, before taking an adverse action based on the results, and after taking the adverse action. Failure to comply can result in civil penalties, punitive damages, attorneys’ fees, and even criminal penalties. Briefly, the requirements include:

  • Before obtaining background information, such as a credit or criminal background report, from a company in the business of compiling background information:
    • In writing and in a stand-alone format, tell the applicant or employee that the employer might use the information for decisions about his or her employment. The notice cannot be in an employment application. Avoid adding extraneous information in disclosure forms; some employers, including Whole Foods and AT&T Corp. have been hit with FCRA suits on this basis.
    • If seeking an “investigative report” (based on personal interviews about a person’s character, reputation, lifestyle, etc.) tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.
    • Get the applicant’s or employee’s written permission to do the background check.
    • Certify to the company providing the report that the employer notified the subject and got permission; complied with FCRA requirements; and will not discriminate or otherwise misuse the information in violation of federal or state laws.
  • Before taking an adverse employment action based on the background check, give the person advance notice and a meaningful opportunity (usually five days) to review the report and explain negative information. Make sure the notice given to the employee includes a copy of the consumer report relied upon to make the decision and a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” available from the FTC.
  • After taking the adverse employment action, the employer must tell the applicant or employee (orally, in writing, or electronically):
    • that he or she was rejected because of information in the report;
    • the name, address, and phone number of the company that sold the report;
    • that the company selling the report did not make the hiring decision, and cannot provide specific reasons for it; and
    • that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days.

More information on these requirements can be found in “Background Checks: What Employers Need to Know,” a joint publication from the EEOC and the FTC. In addition, the FTC, which enforces the FCRA, has published “Using Consumer Reports: What Employers Need to Know,” which has a detailed summary of the Act’s notice and other requirements, including extra requirements for “investigative reports” and links to further information. The EEOC has also cautioned that special care should be taken when basing employment decisions on criminal background information that may be more common among people of a certain race, national origin, or other protected characteristic so as to avoid potential liability under Title VII. The agency issued a detailed guidance and a Q&A discussing discrimination and criminal records.

Recordkeeping and disposal. Any employment records you make or keep (including application forms and other records related to hiring) must be preserved for one year. (The EEOC extends this requirement to two years for educational institutions and for state and local governments and the DOL extends it to two years for certain federal contractors.) If the applicant or employee files a discrimination charge, you must keep the records until the case is concluded. Once you’ve satisfied all applicable recordkeeping requirements, you may dispose of any background reports you received but must do so securely which, according to the FTC, can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it cannot be read or reconstructed. For more information, see the FTC’s online publication “Disposing of Consumer Report Information? Rule Tells How.”

Penalties. An employer that fails to comply with the FCRA can be liable for actual damages, costs, and attorneys’ fees. If the violation is willful, the employer also may be liable for statutory damages and punitive damages. The U.S. Supreme Court has ruled that violations committed either with knowledge or in reckless disregard of FCRA requirements could be considered “willful” (Safeco Insurance Co of America v Burr). The FCRA also imposes criminal sanctions for knowing and willful violations.

Continued uncertainty. In addition to the threat of significant liability, employers are plagued with a certain level of uncertainty given that this area of law is rapidly developing and new issues emerge as courts address new FCRA cases. Recent developments of note include:

  • According to a complaint filed in California this month, LinkedIn sells employment information from members without their knowledge and employers are using that information to make hiring and firing decisions without giving notice required by the FCRA. This raises interesting implications as to the scope of FCRA coverage.
  • Because punitive damages are not capped under FCRA, a federal district court in Virginia refused to find, as a matter of law, that an employer’s Rule 68 offer of judgment, which appeared favorable to the employee, satisfied his claim for relief (Milbourne v JRK Residential America, LLC).
  • A company’s outside counsel was acting as an attorney-agent when doing a background investigation and therefore did not qualify as a reporting agency under the FCRA, ruled a federal court in the District of Columbia (Mattiaccio v G, II v DHA Group, Inc).
  • A summary report of a background check obtained by Dish Network on a technician who worked for a third-party contractor that provided installation services to Dish customers was a consumer report under the FCRA. Granting summary judgment for the technician, the federal court in New York noted that the summary had information on his character and reputation and was used for employment purposes (Ernst v Dish Network, LLC).

Should HR take it old school? Considering the complex requirements of the FCRA, the uncertainty of emerging legal issues, penalties for even unintentional noncompliance, and potential Title VII concerns over the disparate impact of basing employment decisions on criminal background checks, employers should consider having HR or management personally perform background checks as needed. The FCRA does not apply when an employer does its own foot work; it only applies to background checks run through a company in the business of compiling background information (i.e., a credit reporting agency). One would think that simply verifying employment history, investigating gaps in periods of employment, and checking references would clue an employer in if an applicant had been incarcerated for any period of time.

Interestingly, a 2012 study by the Society for Human Resource Management (SHRM) indicates that fewer employers are conducting criminal (and credit) background checks on job candidates as compared to a 2010 study. SHRM found that most background checks are done to reduce theft and avoid legal liability (e.g., for negligent hiring). Employers might well be weighing these concerns against the potential for liability under the FCRA and deciding it’s simply not worth it. It will be interesting to see if the trend continues, particularly when industry commentators are noting a significant increase in FCRA class actions.

In the meantime, employers that continue to utilize background checks performed by credit reporting agencies should make sure to comply fully with the FCRA.

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Judicial review of conciliation efforts unauthorized, unworkable, EEOC says

November 5th, 2014  |  Pamela Wolf  |  Add a Comment

Courts may not review the sufficiency of the EEOC’s pre-suit conciliation efforts in a Title VII suit, the agency told the Justices in a brief responding to Mach Mining’s contention otherwise. Moreover, the standards for review that have been articulated are unworkable, and the remedy for deficiencies in the conciliation process is more process, not dismissal, the EEOC said, urging the Court to affirm the Seventh Circuit’s similar conclusions below. Granting Mach Mining’s petition for cert last June, the Court has taken up the question of whether and exactly to what extent courts can enforce the EEOC’s “mandatory duty” to conciliate discrimination claims before filing lawsuits.

There is a lot at stake in the high-profile case — if employers are able to raise a failure-to-conciliate affirmative defense and win dismissal of an EEOC lawsuit without reaching the merits, the agency could be forced to change its conciliation procedures. The agency would be required to disclose information it has always understood to be confidential, for example. A ruling in favor of the employer in this case could also open the door to further scrutiny of the agency’s complete range of pre-litigation activity.

Seventh Circuit ruling. Below, the Seventh Circuit ruled that Mach Mining could not raise the EEOC’s failure to conciliate in good faith as an affirmative defense to the agency’s Title VII sex discrimination lawsuit. The Seventh Circuit disagreed with its sister circuits, including the, Second, Fourth, Fifth, Sixth, Eighth, Tenth, and Eleventh Circuits, and held that the statutory directive to the EEOC to negotiate first and sue later does not implicitly create a defense for employers who allegedly have violated Title VII. The language of Title VII, the lack of a meaningful standard for courts to apply, and the overall statutory scheme convinced the appeals court that an alleged failure to conciliate is not an affirmative defense to the merits of a discrimination suit. Further, the court explained that finding in Title VII an implied failure-to-conciliate defense would add to that statute an unwarranted mechanism by which employers could avoid liability for unlawful discrimination.

Congressional intent. In its response brief on the merits, the EEOC cited Title VII language in support of its argument that Congress did not intend to permit judicial review of the agency’s conciliation effort. According to the EEOC, its statutory duty is to “endeavor” to persuade employers to voluntary comply with Title VII, and Congress declined to specify any particular process for reaching that goal. The agency also underscored statutory language requiring that nothing that is said or done in conciliation be made public or used as evidence in a later proceeding absent consent. “That broad confidentiality mandate is incompatible with judicial review of the conciliation process,” the agency asserted. The EEOC’s letter finding reasonable cause to the employer and its letter stating that conciliation was unsuccessful should be sufficient to establish that the agency has met its duty to try to conciliate charges. Requiring only these facially valid documents also preserves confidentiality, the agency urged.

Judicial review principles. The Commission also pointed to the Administrative Procedure Act to illustrate longstanding principles of judicial review as applied to federal agencies, even though the APA was not implicated here. The informal conciliation process at issue in this case is not a final agency action under the APA, the EEOC said, because it’s neither a discrete decision nor agency action marking the culmination of the EEOC’s decision-making process. The same is true of the agency’s determination that conciliation has failed — it’s merely a step in a process leading to a court’s determination of whether unlawful discrimination has occurred. Further, an employer would be unable to obtain judicial review under the APA to force the EEOC to take particular actions during conciliation because an agency’s failure to act is only remediable when the agency has neglected to undertake a specific action required by law, and Title VII requires only that the EEOC “endeavor” to conciliate.

“Moreover, by deciding not to prescribe standards for judging the sufficiency of the Commission’s conciliation efforts, by requiring conciliation to be kept confidential, and by entrusting the ultimate decision whether conciliation has succeeded to the Commission, Congress made clear that the conciliation process is committed to agency discretion by law,” the EEOC argued.

Impact on enforcement. Judicial review of the EEOC’s conciliation efforts would also undermine effective enforcement of Title VII, the Commission asserted. Employers that see litigation as imminent would likely have an incentive to treat all communications during conciliation as potentially supporting an inadequate-conciliation argument as opposed to a genuine opportunity for dialogue. In addition, both the employers and the EEOC would likely be less open to negotiation if they knew that communications would not remain confidential and could potentially be used against them.

And once the EEOC files suit, employers have every incentive to raise sufficiency-of-conciliation arguments, according to the Commission. The result would be a burden on the courts, with mini-trials on the collateral issue, and delay that might even avoid adjudication on the merits altogether. “Experience has demonstrated that employers view the inadequate conciliation argument as a ‘potent weapon’ in Title VII suits …. and will use that weapon to obtain discovery, delay, and dismal,” the EEOC argued. Judicial review is unnecessary to ensure that the EEOC conciliates in good faith, the agency said. “The Commission has ‘powerful incentives to conciliate’ and it has a long history of doing so in many cases.”

Unworkable standard for review. The EEOC also argued that while several federal courts of appeals have authorized judicial review of the agency’s conciliation efforts, those courts have fallen short of formulating a workable standard with the result that individual judges determine conciliation sufficiency on an ad hoc basis. “This creates substantial uncertainty for the EEOC, which never knows if its informal conciliation efforts will someday be found insufficient,” the Commission said.

The EEOC called Mach Mining’s proposed factors for reviewing conciliation efforts no more workable than those articulated by the courts. The company’s proposed judicial review is “intrusive, imposing burdens on the EEOC to provide certain information, conciliate for a certain time, and negotiate in a certain way — even though there is no basis in the statutory text for any such rules.” Moreover, the company’s proposed remedy of dismissal makes it worse, the EEOC said, arguing that dismissing a Title VII lawsuit on the merits “is far too drastic a remedy for a deficiency in conciliation process.” The remedy for a lack of process, the agency said, should be more process.

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Revised “white-collar” overtime regulations coming soon

October 30th, 2014  |  David Stephanides  |  1 Comment

Back on March 13, President Obama issued a memorandum to Secretary of Labor Perez directing his agency to propose revisions to the “white-collar” overtime regulations (29 CFR Part 541). Many observers are now speculating over what approach the DOL will take as it carries out its mission.

The rule-making process is expected to take from 12 to 18 months at a minimum, and a proposed rule is scheduled to be released this November. With an allowance for public comment, a final rule could be released near the end of 2015, all presuming the DOL acts quickly. The last time the regulations were updated in 2004 (the DOL issued its final rule on April 23), the rule-making process began with stakeholder meetings commencing during 2002 with a proposed rule released on March 31, 2003.

While it is unknown how the DOL will interpret the memorandum’s directive to “modernize and streamline” the existing regulations (it is doubtful the existing organizational structure will be scraped), many observers believe the minimum salary threshold will be moved up from its current $455 per week, or a further parsing of the job duties required to meet the various exemptions will be necessary, or both. Whatever follows, any proposed rule will require employers to reexamine their overtime pay classification schemes as they did back in 2003-2004.

If the DOL further delineates the job duties required to meet the exemptions, it will surely mean they will become more restrictive. After all, the thrust of the President’s memorandum is aimed at the “millions of Americans [who] lack the protections of overtime and even the right to the minimum wage.”

Job duties pertaining to managerial or supervisory responsibility (executive exemption), advanced knowledge in a particular field (professional exemption), or the exercise of independent judgment (administrative exemption) will most certainly be addressed. These fact-specific criteria are regularly the subject of a plethora of wage-hour class action litigation.

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New issues emerge regarding medical marijuana use by employees

October 28th, 2014  |  Lorene Park  |  1 Comment

By Lorene D. Park

Medical marijuana is currently legal in 23 states plus the District of Columbia, but more states are in the process of legalizing it. Among these states, Colorado and Washington also allow recreational use and they may soon be joined by Alaska, Oregon, and the District of Columbia, depending on the outcome on the upcoming November vote. But the use of marijuana is still illegal under federal law. That leaves employers with a whole lot of questions and only piecemeal answers as courts and legislatures grapple with the changing legal landscape. Here are some recent developments.

Can employees still receive unemployment benefits if they were fired for failing an employer’s drug test after their medical use of marijuana? According to a Michigan Court of Appeals, employees cannot be denied unemployment benefits solely on this basis. The court consolidated the cases of three employees, who were qualified patients with registration identification cards under the Michigan Medical Marihuana Act (MMMA), and were not using or under the influence of marijuana on the job, but were fired for testing positive and then denied unemployment on that basis. The court held that it would be an impermissible penalty under the MMMA to require employees to forfeit unemployment benefits simply for using medical marijuana, so long as they did not disqualify themselves in other ways such as ingesting or being under the influence at work. The court was careful to point out that nothing in the opinion requires an employer to allow employees to ingest marijuana at work or to work while under the influence (Braska v Challenge Manufacturing Co).

Must an employer’s “zero tolerance” drug use policy make an exception for the use of medical marijuana? This remains an open question. Some states have laws that specifically prohibit employers from discriminating against employees based on medical marijuana use and protect employees from termination for simply having a medical marijuana card. But that doesn’t mean zero tolerance policies are per se unlawful and no state requires employers to condone marijuana use, or being under the influence of marijuana, while on duty.

The Colorado Supreme Court is currently considering this issue in Coats v Dish Network, LLC, a case involving a quadriplegic customer service rep who was fired after testing positive for marijuana in violation of the employer’s drug policy. He was licensed to use medical marijuana, and he did so while off-duty to ease his disability. He asserted that he never used the drug at work and was never impaired while on duty. The appeals court had held that Colorado’s Lawful Activities Statute, which prohibits employers in the state from firing employees for engaging in lawful off-duty conduct, does not bar the discharge of an employee who uses medical marijuana off the clock. Although Colorado’s Medical Marijuana Amendment permits use of the drug for medicinal purposes (and the state’s voters legalized its general use), marijuana is still prohibited under federal law, the majority noted, and thus was not a “lawful activity” under the statute at issue. Thus, the appeals court upheld the dismissal of the employee’s wrongful discharge claims. Oral arguments were heard by the state high court on September 30, 2014.

Is an employee entitled to reimbursement for medical marijuana under workers’ compensation laws? A state appeals court in New Mexico has said yes on this issue in a case involving an employee who had numerous surgical procedures after a workplace back injury and suffered frequent and extremely severe pain as a result. Agreeing with a workers’ compensation judge that New Mexico’s Workers’ Compensation Act and its attendant regulations authorize reimbursement for medical marijuana, the appeals court affirmed the judge’s order requiring an employer to reimburse the employee for medical marijuana used under the Lynn and Erin Compassionate Use Act. Rejecting the argument that the judge’s order was contrary to federal public policy, the court noted that the Department of Justice has recently offered “equivocal statements” about state laws allowing marijuana use for medical and even recreational purposes, and has even informed the governors of two states that voted to legalize possession of the drug and regulate its production and distribution that it would defer its right to challenge those laws (Vialpando v Ben’s Automotive Services).

Employers should stay informed. Given the changing legal landscape as open questions are decided, and the potential for liability under antidiscrimination and other laws, employers should stay informed of new developments at both the state and federal levels. Note that marijuana is still a controlled substance under federal law but that Attorney General Eric Holder announced guidelines for prosecutors in states with medical marijuana laws, making it clear that the focus of federal resources is not on individuals whose actions comply with state marijuana laws. For an overview of Federal law, see “Federal law and marijuana use at work.”

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