Over the course of his years of counseling people of all ages and races a high school guidance counselor found himself saying the same things over and over to women during sessions.” As a consequence, he decided to write an adult relationship book he hoped would give women “the road map to having the upper hand in a relationship with a man.” The book discussed sexually provocative themes and used sexually explicit terminology. However, when the employee’s school district employer learned of his sexually explicit relationship book, it fired him from his guidance counselor position.
Protected speech. Thereafter, the employee sued the school district under Sec. 1983 alleging that it improperly retaliated against him for engaging in speech protected by the First Amendment. The district court dismissed the suit for failure to state a claim because, in its view, the book did not address a matter of public concern and was not entitled to First Amendment protection. While his relationship book addressed an issue of public concern, the Seventh Circuit, in Craig v Rich Township High School District 227, determined that the school district’s interest in ensuring effective delivery of counseling services outweighed the employee’s speech interest.
In discharging the employee, the school district charged that the book caused disruption, concern, distrust and confusion in the school community; that the employee violated its policy “prohibiting conduct that creates ‘an intimidating, hostile, or offensive educational environment;” and that he “failed to present himself as a positive role model and failed to properly comport himself in accordance with his professional obligations as a public teacher.” The district court found that the book was “little more than a lurid account of plaintiff’s own sexual preferences and exploits.”
Matter of public concern. Although the Seventh Circuit disagreed with the trial court’s assessment that the book did not discuss an issue of “public concern,” it nevertheless upheld the dismissal of the employee’s claim. Despite its lofty terminology, the “matter of public concern” inquiry does not require that speech relate to an issue of exceptional significance in order to be entitled to prima facie First Amendment protection. “Public concern is something that is a subject of legitimate news interest; that is, a subject of general interest and of value and concern to the public at the time of publication.” An employee who “participates in a public dialogue on matters of interest to the public” will place his speech within the protection of the First Amendment. Moreover, “the inappropriate or controversial character of a statement is irrelevant to the question whether it deals with a matter of public concern.”
Thus, the appeals court rejected the district court’s ultimate conclusion that just because the book happened to “touch on a matter of public interest (relationships between men and women) does not mean that it addresses a matter of public concern.” This is precisely what public concern means — speech directed to the public need only address a “matter in which the public might be interested” in order to be eligible for First Amendment protection. The appeals court observed that while book was full of objectionable content, it nevertheless dealt with adult relationship dynamics, an issue of concern to a large segment of the public. The fact that the employee’s book dealt with a subject of general interest to the public was enough to establish prima facie First Amendment protection.
School environment disrupted. Still, the appeals court determined that even though the employee’s speech implicated an issue of public concern, the school district’s interests in restricting the employee’s speech outweighed his interest in making his views known. An employer does not necessarily violate the First Amendment by discharging an employee that speaks out on a matter of public concern. “The government is entitled to restrict speech that addresses a matter of public concern ‘if it can prove that the interest of the employee as a citizen in commenting on the matter is outweighed by the interest of the government employer in promoting effective and efficient public service.’”
The Connick-Pickering balancing test determines whether the school district’s interests in disciplining the employee outweighed his First Amendment speech rights. Interference with work, personnel relationships, or the speaker’s job performance can detract from the public employer’s function, and avoiding such interference can be a strong state interest. In this instance, the school district reasonably predicted that the book would disrupt the learning environment at the school where the employee worked because some students who learned of the book’s hypersexualized content would be reluctant to seek the employee out for advice. The appeals court observed that the employee referenced his employment throughout the book, including working in an office where he was the only male counselor and counseling both male and female students. Thus, the record established that the school district’s interest in ensuring effective delivery of counseling services outweighed the employee’s speech interest.
By Lisa Milam-Perez, J.D.
A case that could potentially have transformed the landscape for labor organizing has been dismissed by the Supreme Court as improvidently granted. At issue in UNITE HERE Local 355 v Mulhall (Dkt No 12-99) was whether a “neutrality agreement” between a labor union and an employer during an organizing drive is a “thing of value” and therefore illegal under Section 302 of the Labor-Management Relations Act. A Supreme Court affirmance of the Eleventh Circuit’s holding that neutrality agreements are unlawful under the statute’s antibribery provision would have drastically curtailed organized labor’s use of corporate campaigns (or “top down” organizing) as a favored strategy for growing its ranks. Justice Breyer dissented from the order of dismissal, joined by Justices Sotomayor and Kagan.
The issue before the High Court was significant. “The importance of neutrality agreements for union organizing cannot be overstated, attorneys J. Michael McGuire and Bryan M. O’Keefe, of the management firm Shawe Rosenthal, wrote in Employment Law Daily. “While the traditional ’secret ballot’ election was the preferred method of union organizing for much of the first 50 years of the NLRA, in the late 1980s and early 1990s labor unions shifted their focus to non-traditional means of organizing and obtaining voluntary recognition. After all, the secret ballot election process can be expensive and time-consuming; the union must first obtain signatures from at least 30 percent of employees to even trigger an election (and unions usually seek a much higher percentage before asking for a vote), followed by a usually acrimonious 42-day election period. Even if the union wins — and to this day unions win the majority of NLRB elections — litigation over various aspects of the election process can drag on for months or years. In the post-Reagan era, when unions were hemorrhaging money and members, this ‘bottom-up’ form of traditional organizing could not keep pace with labor’s continuing decline in membership.” Thus, organized labor turned to the “corporate campaign” model, seeking to secure an employer’s neutrality in the face of a union organizing drive, followed by a quicker “card-check” recognition.
So here’s the deal that troubled the employee-plaintiff—or, perhaps more accurately, the National Right to Work (NRTW) Legal Defense Foundation, which represented him: a casino entered into an agreement with UNITE HERE in which the employer agreed to remain neutral during the union’s organizing drive and also to provide access to the workers off-the-clock and turn over a list of their home addresses. The casino also agreed to card-check recognition, to refrain from filing unfair labor practices against the union, and to enter into arbitration if the parties failed to reach a bargaining agreement within 150 days. In exchange, the union would funnel $100,000 into a campaign for a local ballot initiative on casino gaming, and to refrain from striking if recognized as the employees’ bargaining representative. A divided Eleventh Circuit struck down the deal. While “employers and unions may set ground rules for an organizing campaign, even if the employer and union benefit from the agreement,” such ground rules can cross the line into a prohibited “thing of value,” the appeals court wrote.
The High Court heard oral argument in the case on November 13. As Justice Breyer noted, however, upon consideration of the briefs in the case and argument, it became apparent that the case may have been moot because the neutrality agreement at issue appears to have expired before the Eleventh Circuit issued its ruling; second, the sole plaintiff may have lacked standing. The dissent urged that the Court should simply request additional briefs on these two questions rather than dismiss the grant of certiorari. If in fact the federal courts lack jurisdiction, the appellate court’s decision should be vacated, Breyer argued, “thereby removing its precedential effect and leaving the merits question open to be resolved in a later case.”
Breyer also asserted that the Court should seek further briefing on yet another question: whether Sec. 302 authorizes a private right of action. “Long ago and in passing,” he noted, the Court held there is a private right to seek injunctions under Sec. 302(e), but “in light of the Court’s more restrictive views on private rights of action in recent decades,” this dictum stood on uncertain ground. If no private right of action exists, then courts will not need to resolve these difficult questions as to the scope of Sec. 302, “unless the Federal Government decides to prosecute such cases rather than limit its attention to cases that clearly fall within the statute’s core antibribery purpose.”
Federal courts — including the Third and Fourth Circuits — have consistently rejected the notion that neutrality agreements are a “thing of value” under Sec. 302. The Eleventh Circuit’s 2012 holding created a circuit split.
“Unless resolved,” Breyer continued, the split threatens to impede collective bargaining. “The Eleventh Circuit’s decision raises the specter that an employer or union official could be found guilty of a crime that carries a 5-year maximum sentence if the employer or union official is found to have made certain commonplace organizing assistance agreements with the intent to ‘corrupt’ or ‘extort.’ In my view, given the importance of the question presented to the collective-bargaining process, further briefing, rather than dismissal, is the better course of action.”
As of now, though, the circuit court’s holding stands. Celebrating the organization’s win in the wake of the Supreme Court’s order, NRTW president Mark Mix cautioned, “Union bosses and employers who use workers’ rights as a bargaining chip will now enter into these agreements at their own risk.” In the Eleventh Circuit, at least.
Recently, the U.S. Supreme Court agreed to hear two major cases involving disputes over insurance coverage for contraceptives mandated by the Patient Protection and Affordable Care Act (ACA). The two cases, Sebelius v. Hobby Lobby Stores, Inc. and Conestoga Wood Specialties v. Sebelius are both suits where corporate employers are requesting an exemption from the ACA mandate to provide contraceptive coverage to their employees on the basis of religious objection by the owners.
The government’s petition for writ of certiorari in Hobby Lobby poses the question whether the Religious Freedom Restoration Act allows a for-profit corporation to deny its employees the health coverage of contraceptives to which the employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners.
The players before the Supreme Court
Hobby Lobby. In the Hobby Lobby case, the companies are Hobby Lobby, a craft store chain, and Mardel, a Christian bookstore chain. Their owners, the Greens, run both companies as closely held family businesses according to what they describe as Christian principles. Hobby Lobby, a closely held family business organized as an S-corp, is an arts and crafts chain with over 500 stores and about 13,000 full-time employees. Mardel is an affiliated chain of 35 Christian bookstores with just under 400 employees, also run on a for-profit basis.
The Greens objected to the ACA requirement to provide certain contraceptive services as a part of their employer-sponsored health care plan, specifically drugs and devices that they believe to be abortifacients. (Note that abortion coverage itself is not required.) Media reports are that the Greens are Baptists, an evangelical Christian denomination. The Greens allege that the contraceptive mandate violates the Free Exercise Clause of the First Amendment, as well as the Religious Freedom Restoration Act (RFRA), which states that the government “shall not substantially burden a person’s exercise of religion” unless it is the least restrictive means to further a compelling government interest. The Tenth Circuit ruled that for-profit corporations could deny contraceptive coverage to employees, even if otherwise entitled by federal law, on the basis of religious objections by the individuals controlling the corporation.
Conestoga Wood Specialties. Conestoga Wood Specialties, a secular, for-profit corporation, was denied an injunction preventing enforcement of the contraceptive mandate. The Hahns, a Mennonite family, objected to two types of contraceptives as well. The Hahns own 100 percent of the voting shares of Conestoga, which is a Pennsylvania for-profit corporation that manufactures wood cabinets and has 950 employees. As Mennonites, the Hahns say their church teaches that taking of life, which includes anything that terminates a fertilized embryo, is intrinsic evil and a sin against God to which they are held accountable. According to the Mennonite.net website, pacifism is one of the cornerstones of the Mennonite faith, prompting many young Mennonites to elect service to the church rather than military service.
In its decision, the Third Circuit stated that the Free Exercise Clause protects religious freedom of individuals from government interference. However, secular corporations, which do not pray, worship, observe sacraments, or engage in other religious activity, are not entitled to Free Exercise Clause protection, and the rights of the owners do not pass through to the corporation. Conestoga petitioned for certiorari.
Corporations not protected. Autocam Corp. v Sebelius involved similar RFRA and free exercise arguments against the contraceptive coverage requirement. Autocam Corporation and Autocam Medical, LLC, are for-profit, secular corporations engaged in high-volume manufacturing for the automotive and medical industries. Members of the Kennedy family, all of whom are practicing Roman Catholics, own “a controlling interest” in the two corporate entities, which have 1,500 employees worldwide, including 661 in the U.S. The Kennedys believe that they cannot direct their closely held company’s health insurance plan to “provide, fund, or participate in health care insurance that covers artificial contraception, including abortifacient contraception, sterilization, and related education and counseling.” They object that under ACA, Autocam’s health plan would have “to directly pay for the purchase of drugs and services” that the Kennedys find objectionable.
The Sixth Circuit found in the Autocam case that if the free exercise clause were expanded to cover corporations as if they were persons, it would “lead to a significant expansion of the scope of the rights the Free Exercise Clause [previously] protected.” The RFRA claims raised by Autocam’s owners were also dismissed for lack of standing because of a longstanding rule barring claims by shareholders “intended to redress injuries to a corporation.”
Generally, shareholders of a corporation cannot bring claims intended to redress injuries to a corporation, even when the corporation is closely held. This shareholder standing rule prevented the Kennedys from bringing a RFRA claim arising from a legal obligation on Autocam. The Kennedys’ actions with respect to Autocam were not actions taken in an individual capacity, but as officers and directors of the corporation, said the court. The decision to comply with the mandate falls on Autocam, not the Kennedys, the court concluded.
S-corp owners’ rights infringed. In Gilardi v Department of Health and Human Services, a divided D.C. Circuit ruled that the ACA requirement that most health plans cover FDA-approved contraceptives infringed the rights of two owners of Subchapter S corporations under RFRA. Although the court did not go so far as to rule that secular, for-profit corporations have a right to free exercise of religion, it did find that the connection between the Gilardis’ payment for health insurance coverage and the use of the premiums to cover contraceptive services was direct enough to infringe on their individual rights under RFRA and the Free Exercise Clause of the First Amendment. It affirmed the district court’s denial of a preliminary injunction with respect to the companies, however.
The Gilardi brothers owned two businesses that provide fresh-cut and repack produce solutions and services. Because they operated as S corporations for tax purposes, the two companies paid no income tax; the income and tax obligations were passed through to them as individuals. They alleged that as practicing Catholics, they felt a moral obligation to provide health insurance for their 400 employees but had never covered contraception, sterilization, or abortion under their self-insured plan, and they claimed that the mandate to cover contraceptives violated the rights of both the individuals and the corporations under the RFRA, the Freedom of Speech and Free Exercise Clauses of the First Amendment.
The court reasoned that closely held, Subchapter S corporations are distinguished from larger, publicly held entities because the income is attributed to the individual owners, who pay the taxes. Further, the burden on the owners did not occur when the employees purchased contraceptives but when the employers were compelled to pay for the benefits to be covered under the health plan.
Similarly, in Korte v Sebelius, the Seventh Circuit ruled that the contraceptive coverage requirement violates the rights of both individual business owners and closely held business corporations under RFRA. The relationship between the prohibited conduct and the owners’ Catholic religion was direct because it was their financial contribution that supported contraception that violated their religious beliefs, not the employees’ choice to use the benefits.
The plaintiffs here were two closely held business corporations and the Catholic families who own them. The Kortes own and operate a construction company with approximately 90 full-time employees, 70 of whom belong to a union that sponsors their health-insurance plan. The company provides a health-care plan for the remaining 20 or so. The Grote family owns and manages Grote Industries, Inc., a manufacturer of vehicle safety systems with 1,148 full-time employees at various locations, including 464 in the U.S. The members of both families are Catholic and they follow Catholic moral teaching regarding the sanctity of human life and the wrongfulness of abortion, abortifacient drugs, artificial contraception, and sterilization.
To find that commercial corporations could engage in religious activity, the court reasoned that RFRA contains findings that its purpose was to restore the interpretation of the Free Exercise Clause under certain cases, including a couple of cases that involved individuals and their jobs. These cases protected conduct and the employee’s livelihood, or profit-making activity, said the court, extrapolating that the conduct of secular, for-profit corporations also was protected by RFRA.
Law of unintended consequences
These cases involve a craft store chain, a wood cabinet manufacturer, an automotive and medical industries manufacturer, a produce company, a construction company, a manufacturer of vehicle safety systems, and a Christian bookstore. Which corporate entity on its face seems capable of exercising religious beliefs and practices? Which one seems not like the others? Or is the similarity among these entities, and their practices, really based on the beliefs and behaviors of the individuals behind them?
The decision whether facially secular for-profit corporations, which have a primary purpose that is not obviously religious in nature, should be protected by either RFRA or the Free Exercise Clause could have profound and far-reaching consequences well beyond the contraception cases the Court is considering.
For example, what if the Catholic or evangelical Christian individuals whose religious beliefs were being exercised through a corporate form, albeit closely held, felt their beliefs compelled them to reject other mandated prescription drug coverage, say, for unmarried or divorced men who wanted to treat erectile dysfunction, given that recognized church teachings reject sexual conduct outside of marriage?
What if individual Scientologists, whose sincerely held religious beliefs include rejection of psychotropic drugs specifically, and the principle that psychiatric disorders can have physical roots generally, owned a closely held corporation and objected to providing coverage for antidepressants? After all, the ACA significantly extends the reach of the Mental Health Parity and Addiction Equity Act’s requirement that insurance coverage for mental health or substance use disorders must provide the same level of benefits as for general medical treatment. Starting in 2014, the ACA will require all small group and individual market plans created before March 23, 2010, to comply with federal parity requirements.
The Court has had enough difficulty balancing the Establishment and Free Exercise Clause with respect to individuals’ religious beliefs. Applying RFRA and Free Exercise protections to for-profit corporations could take us somewhere we don’t really want to go.
In a 2012 survey, 69 percent of the respondents ranked potential for or suspicion of employee abuse as their top concern in administering FMLA leave, particularly intermittent leave. While it may be only a small number of employees who take advantage of family and medical leave, the costs of FMLA abuse, which include the cost of replacement workers, overtime, lost productivity, lost business, and overworked staff, can add up.
The tale of two Bells: Ohio Bell
What can you do if you believe an employee is abusing FMLA leave? Two recent cases provide some guidance. In the first, an employee with chronic back pain who took intermittent FMLA leave for more than two years, and who was fired after his employer became suspicious of the patterns in the timing of his leave requests, could not advance FMLA interference and retaliation claims. In an unpublished opinion, the Sixth Circuit found summary judgment was warranted as to his FMLA retaliation claim because he failed to refute his employer’s “honest belief” that he abused FMLA leave and violated its code of conduct.
Suspicious leave usage. The Ohio Bell telecommunications specialist began taking intermittent FMLA leave in 2006. In 2008, his supervisors noticed that his leave days routinely fell on Fridays and weekends and that he often requested FMLA leave days in advance.
Investigation. Suspecting misuse of FMLA leave, his supervisor contacted HR, which recommended an investigation. The FMLA manager agreed that the employee’s FMLA use was suspicious and turned the matter over to the company’s asset protection department for investigation, which hired a private investigation firm to conduct surveillance of the employee during his FMLA leave.
Outside consultant. On two separate days of leave, the employee was videotaped working in his yard and garage, driving his family around, and conducting personal errands. Ohio Bell provided the surveillance report and video to an outside medical consultant for review. Finding that the employee’s activities on the videotaped days were inconsistent with the physical behaviors typical of someone with incapacitating back pain, the consultant suggested that he was not incapacitated from performing his work duties on those dates.
Hearing and termination. Six days later, the investigator questioned the employee regarding his FMLA usage. He was unable to recall his activities on those days but suggested that he may have received a Cortisone shot or have been under the influence of prescription painkillers and thus unable to operate a company vehicle. As a result of the investigation, his requests for FMLA leave on the two days in question were denied and, after the investigation’s findings were reported to management, it was recommended that he be terminated. After a hearing by the dismissal review board, the employee was fired for violating the company’s code of business conduct, which prohibited fraudulent or illegal conduct.
Honest belief. Finding that the “honest belief” rule protected Ohio Bell’s discharge decision, the appeals court pointed out that, to reach its termination decision, the company relied on the investigation report and the surveillance tapes of his activities; his interview statements; the medical consultant’s report; the employee’s email to his supervisor indicating he would take FMLA leave on a certain day if he was assigned to the night shift; and his pattern of using leave on weekends or combined with his days off and holidays.
It was also entirely proper for Ohio Bell to consider its medical consultant’s report in forming its honest belief. She reviewed the video footage, the employee’s job description, and his FMLA certification to conclude that his activities on the two days in question were inconsistent with the actions of someone with incapacitating back pain. Although the employee argued that she should have talked to his physician and inquired about the specific weight of the objects she observed him carrying in the video, Ohio Bell was not required to show that its investigation was “optimal or that it left no stone unturned.” In sum, Ohio Bell made a reasonably informed and considered decision based upon the particularized facts before it at the time.
In a case decided just a week earlier, a federal district court in Wisconsin found that an employer that tracked an employee’s suspicious pattern of leave use for more than six months prior to hiring a private investigator to document her activities had an “honest suspicion” that she misused her leave and failed to cooperate with its investigation. Here, a telecommunications specialist for Wisconsin Bell began using FMLA leave in 2004. In 2008, her supervisor became suspicious of her leave use after the employee asked when her annual leave allotment would replenish. The employee stopped calling in sick when she used her entire FMLA annual allotment; however, she resumed calling in and requesting FMLA coverage for her absences after her annual allotment was replenished.
Suspicious leave usage. As in the case of the Ohio Bell employee, after tracking the specialist’s leave, the supervisor discovered that she requested leave on Saturdays as well as days immediately prior to or following her scheduled days off. He also noticed that she did not call in sick on days she was scheduled to work a shift paying a premium wage differential. Believing that she was trying to maximize her days off, the supervisor requested an investigation.
Investigation then termination. Like Ohio Bell, Wisconsin Bell contacted a private investigator who followed the employee to a church on a day she requested leave. He also observed her driving to out-of-town locations. In addition, the supervisor discovered a blog posting that appeared to be written by the employee indicating she was taking classes at the church on Saturdays. Though the employee denied any affiliation with the church, the company’s labor relations manager called the pastor, who confirmed that she had been attending a class there on Saturdays. After checking the FMLA tracker and discovering that the employee took FMLA leave on six straight Saturdays, the supervisor terminated the employee.
Honest suspicion. Here, the court found that Wisconsin Bell had an “honest suspicion” the employee misused her FMLA leave as well as an honest suspicion she violated its code of business conduct by failing to cooperate with the company’s investigation. Moreover, violating the code was itself a legitimate, nondiscriminatory ground for termination. Specifically, the employee failed to disclose that she was taking classes at the church on Saturdays and denied going out of town on the day she was on FMLA leave. After reading the employee’s blog and talking to the pastor, the employer had a factual basis for concluding that she failed to cooperate with its investigation. These facts defeated her FMLA claims.
Employer’s honest belief is question for the jury
In a case emphasizing the importance of an impartial investigation, a federal district court in Michigan found that fact questions existed as to whether an employer had an honest belief that its employee engaged in misconduct when it decided to fire her upon her return from FMLA leave. The employee asked for six weeks of FMLA leave to undergo a hysterectomy. In response, he allegedly asked her whether she could return to work earlier or postpone her surgery. Within days of receiving her leave documents, he began counseling her on her performance.
A week later, she sent her supervisor an email discussing an upcoming training session she was going to provide to the management team at a retail store that fell under her purview. She attended the training and also attended the store’s afternoon golf outing, which the supervisor purportedly told her not to attend. When he found out about the outing, he requested an investigation into her conduct. At the conclusion of the investigation, he decided to terminate her. The next day, she began her FMLA leave. While she was on leave, she was advised she was going to be terminated. She returned to work at the end of her leave and was terminated two days later.
Here, the employer argued that even if there was a question of fact as to motive, the honest belief rule rendered the termination decision “unassailable” because the employer honestly believed, after conducting an investigation, that the reason she was terminated was her misconduct. However, because her supervisor was the individual who filed the complaint against her, provided the investigator with the background information, participated in the investigation, and made the final termination decision, a fact question existed as to whether the honest belief rule applied. Thus, the issue of motive could only be decided at trial.
What can an employer do to combat leave abuse? Training managers to be aware of patterns of suspicious leave usage can be helpful, but thorough documentation of all leave taken can help support personnel decisions and substantiate actions taken.
- Document. Keep records of all time off from work, including the dates that leave is taken, the hours of leave taken, copies of employee notices of leave, copies of all notices given to employees concerning family and medical leave, and any records of any disputes regarding the leave.
- Train managers. Managers should be well versed in their company’s leave policies and as well as with company call-in procedures.
- Investigate thoroughly. Finally, carefully and thoroughly investigate suspected leave abuse. The cases above illustrate the need for an impartial investigator. A properly conducted investigation can be good support for employment decisions.
- Use surveillance with caution. While surveillance of the employees suspected of leave abuse has been upheld by some courts, it is important to keep in mind that this may raise other issues, however, such as privacy concerns and disparate treatment.
Lorene D. Park, J.D.
The “goal of Title VII and the ADA is to make the plaintiff whole, i.e., put the plaintiff in the same position he would have been absent discrimination.” In the view of a federal district court in Ohio, that means that if an employer’s discrimination forces an employee to find a new job, relocation expenses incurred to obtain comparable employment may reasonably be considered to have arisen from the discrimination — including “any loss that occurred because the employee was compelled to sell his home under unfavorable market conditions.” Thus, in response to the employer’s motion in limine on the issue, the court agreed that it would hear oral argument on whether to present the issue to a jury (Hounshel v Battelle Energy Alliance, November 18, 2013).
In this case, a nuclear engineer alleged that, after he questioned a supervisor’s unethical behavior, he was put on a performance improvement plan and ordered to seek counseling for anger management. Though he claimed he had no performance or anger issues, he was placed on administrative leave due to allegedly false claims by his supervisor. He was also required to undergo a psychological evaluation. When he returned to work he was sequestered from his coworkers, denied training, and treated with suspicion. He claimed that, as a result, he was constructively discharged and forced to take a job out of state. He filed suit against his former employer seeking, among other things, compensatory damages for having to sell his house in a bad economy. After a year on the market, his house sold for $119,000; he owed nearly $160,000 on his mortgage at the time. He claimed that, had he not been constructively discharged, he would have remained in the home and not suffered such a loss.
Issues regarding proof. The court noted that the employee faced a problem of proof because the loss on the sale of his house could have more to do with his personal financial choices than his forced relocation. However, it saw two possible approaches he might take. First, he could argue that because he never intended to move, the measure of damages would be the difference between the sale price and what the home would have been worth had he stayed. However, the problem with that approach was he did not identify an expert to testify about the home’s current value and, because he no longer owned the property, he could not offer an opinion.
Alternatively, the employee could argue that after waiting for nearly a year, he was forced to sell for less than fair market value (FMV). Thus, the measure of damages would be the difference in sale price from FMV. While generally the employee or his wife could testify on FMV, they had not indicated they would do so in discovery so the court was not yet willing to let them do so. It did, however, aver that it would hear oral argument on the issue. The court stated that, if it allowed either the employee or his wife to testify, it would instruct the jury that an actual sale between a willing buyer and a willing seller is strong evidence of FMV.
Problems with such damages. The statutory goals of placing an employee in the same position (at least financially) that he would have been absent discrimination are laudable to be sure. But I see a few problems with reimbursing a purported loss due to selling a house in a bad economy. First, as noted by the court, the loss sustained by the employee might be due to his personal financial choices, not the employer’s actions. Plus, the measure of damages seems speculative because there is the possibility that he might not have stayed in the house regardless of whether he stayed with the employer. Or, the market might actually continue to get worse, so an award based on present FMV could be a windfall for the employee because he would actually have come out worse selling later on. There is also the question of whether the tactics used by the employee in marketing his house had something to do with the lower than desired sales price. Employees must mitigate damages for the loss of future pay in discrimination cases by making diligent efforts to find a new job. One would think a similar duty would apply in marketing a house for sale. It will be interesting to see how the court ultimately rules on this damages issue.