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Top labor and employment developments in November 2017

December 9th, 2017  |  Lorene Park

By Lorene D. Park, J.D.

In case you missed Employment Law Daily’s in-depth coverage, here’s a brief recap of some of the key developments in the L&E community for November.

Sexual harassment takes center stage in media and in court

November saw a surge in press coverage of sexual harassment in the workplace, as the creator of the #MeToo campaign led a march in Los Angeles and prominent figures in the entertainment, technology, government, and the news media came under fire for sexual misconduct. Coworkers, fans, and others who heard the allegations for the first time expressed shock while also expressing support for victims of harassment who came forward. And in Washington D.C., lawmakers finally addressed what appears to be a long history of sexual harassment in Congress. The “Senate Anti-Harassment Training Resolution of 2017″ (S. Res. 330), which mandates sexual harassment training for U.S. senators, senate staff, and interns, passed on November 9 with unanimous consent. After that bipartisan effort, the House followed suit, passing a resolution (H. Res. 630) by voice vote on November 29, requiring all members and staff to complete mandatory anti-harassment and anti-discrimination training during each session of Congress.

Meanwhile, federal courts are addressing a full docket of sexual harassment cases, with November decisions addressing same-sex harassment, fabricated evidence, and more:

• In a sexual harassment suit by a Connecticut employee who claimed two coworkers viewed her changing clothes on a security camera and showed it to others, a federal court refused the employer’s bid for full access to her social media accounts, finding such a fishing expedition would constitute a “wholesale invasion” of her privacy. However, the employer was entitled to communications, including those through her social media accounts, that were relevant to her harassment and emotional distress claims (Marsteller v. Butterfield & Stamford, LLC).

• A youth aide at a residential facility in New York raised triable issues on her hostile work environment claim based on testimony that, during the 16 shifts she worked with a male administrator, he told her intimate details of his life, said she reminded him of a stripper because she “had the goods,” and otherwise behaved inappropriately. After she complained, he added to her workload and, when she asked how to do bed checks, he yelled and called her insubordinate (Kenney v. State of New York, Office of Children and Family Services).

• Dealing the harshest possible sanction to an employee who fabricated text messages and submitted them in the two-year litigation of her Title VII suit to bolster sexual harassment claims, a federal court in Oregon dismissed her suit with prejudice. The employer’s forensic computer expert examined a phone she produced and discovered many of the texts were in her “unsent” folder of drafts and were time-stamped a year after the alleged harassment, and she had “interspersed” bits of actual messages from the alleged harasser (Lee v. Trees, Inc.).

• A federal court in Nebraska concluded that allegations by a male railroad employee that a male coworker asked if he could “piss on demand,” touched his leg two days later, followed him into a restroom where he looked at him before leaving, and then stalked him as he walked to a parking garage were not enough to support a Title VII sexual harassment claim. The employer was awarded summary judgment (Mullanix v. Union Pacific Railroad Co.).

• The Fourth Circuit held that a teacher who was suspended, investigated, and issued a notice of termination (he was instead transferred) after a student complained of a sex-related remark and an investigator uncovered other inappropriate conduct could not establish a causal link between his discipline and his prior political activities, so his First Amendment retaliation claim failed (Penley v. McDowell County Board of Education).

Battles in litigation over Trump’s immigration, transgender policies

Though President Trump has faced a stream of criticism for a laundry list of missteps, in November federal courts mainly addressed procedural matters in lawsuits challenging the administration’s ban on transgender individuals in the military, the so-called travel ban, and the rescission of the Deferred Action for Childhood Arrivals (DACA) program.

Military ban. The Trump Administration lost another round in its battle in Doe 1 v. Trump to maintain a ban on transgender individuals serving in the U.S. military, when a federal court in the District of Columbia refused to stay its October 30 order preliminarily enjoining the controversial ban due to the likelihood that the plaintiffs would prevail on the merits of their Fifth Amendment equal protection challenge. The Administration presumably sought the stay while the government appeals the preliminary injunction.

On November 21, a federal court in Minnesota also preliminarily enjoined the ban in Stone v. Trump, granting a motion filed by the ACLU of Maryland and six transgender members of the armed forces who claimed the ban unconstitutionally singled out transgender individuals for discriminatory treatment based on uninformed speculation, stereotypes, moral disapproval, and a bare desire to harm this already vulnerable group.

And in Karnoski v. Trump, the State of Washington was granted its motion to intervene and join the plaintiffs in challenging the transgender ban in federal court there.

Travel ban. On November 28, a coalition of 16 State Attorneys General filed an amicus brief in the Supreme Court to oppose President Trump’s third “travel ban” and his administration’s application for the stay of a preliminary injunction halting enforcement of that ban. Filed in Trump v. Hawaii, the amicus brief urges the Justices to reject the Justice Department’s emergency stay application, which seeks a complete stay of the Hawaii district court’s preliminary injunction against the third travel ban.

The Administration’s November application followed the Ninth Circuit’s decision refusing to stay that portion of the district court’s injunction preventing the Administration’s implementation of the third ban against individuals from predominantly Muslim countries who have a bona fide relationship with a person or entity in the United States. The district court ruled that the third ban, like its predecessors, “plainly discriminates based on nationality” in violation of the Immigration and Naturalization Act. Version three suspended and limited indefinitely the entry into the U.S. of foreign nationals of Chad, Iran, Libya, North Korea, Somalia, Syria, Venezuela, and Yemen.

DACA policy. The President also faces challenges to his rescission of the deferred action program for undocumented immigrants who entered the U.S. as children. On November 3, Microsoft Corp. and the Trustees of Princeton University filed suit in the District of Columbia, claiming Trump’s decision to strip some 800,000 “Dreamers” of their protected status hurts employers and universities too, and that breaking assurances that DACA applicants’ information would not be shared with ICE violated the Administrative Procedure Act and Fifth Amendment. “Microsoft has invested significant resources in Dreamers, who serve in critical roles at the company,” according to the complaint. Microsoft and subsidiary LinkedIn employ at least 45 DACA recipients as software engineers, financial analysts, and in other positions.

On November 9, a federal court in New York pared down two lawsuits in New York (Vidal v. Duke and State of New York v. Trump) challenging the administration’s rescission of the DACA program, the failure to give adequate notice to DACA recipients of new deadlines, and the policy change on the use of DACA application information for immigration enforcement. The court granted in part the defendants’ motion to dismiss for lack of subject matter jurisdiction. The state plaintiffs lacked Article III standing on due process and equitable estoppel arguments concerning the information policy. None of the plaintiffs had standing to assert claims of inadequate notice.

Other Trump Administration news

Pay transparency. In addition to these challenges, the National Women’s Law Center (NWLC) and Labor Council for Latin American Advancement filed suit over the administration’s rollback of the revised EEO-1 report, which would have required companies with 100 or more employees to report how much they pay workers by race, gender, and ethnicity. According to the plaintiffs, this information is critical to rooting out discrimination and closing the wage gap.

Contraceptive coverage exemptions. The NWLC also filed a complaint in a federal court in Indiana, along with Americans United for Separation of Church and State, challenging the administration’s interim final rules that allow employers and universities to cite religious or moral objections in order to be exempt from providing contraceptive coverage.

Fiduciary rule delayed again. Also, the DOL extended, this time until July 1, 2019, the special Transition Period for the Fiduciary Rule’s Best Interest Contract Exemption and the Principal Transactions Exemption, and the applicability of certain amendments to Prohibited Transaction Exemption 84-24. The DOL said the extension gives it time to consider public comments. During the extended period, fiduciary advisers have a duty to give advice that adheres to “impartial conduct standards” under which advisers must adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation, and refrain from making misleading statements. The DOL also extended to July 1, 2019, a temporary non-enforcement policy and will not pursue claims against fiduciaries who work in good faith to comply.

Meanwhile, in federal appellate courts . . .

While there were no groundbreaking labor and employment decisions handed down by the High Court in November (just a decision explaining that Fed. R. App. P. 4(a)(5)(C)’s 30-day deadline for filing a notice of appeal is not jurisdictional and may be waived), there were a number of interesting decisions handed down in the circuit courts:

1st Cir.: No conflict of interest with insurer-provided attorney. Finding no conflict of interest to stop an insurer-selected attorney from defending an employer in an age discrimination suit, even though the employer’s own attorney would prosecute a counterclaim for embezzlement, the First Circuit concluded that both the insurer and the employer had an interest in a strong counterclaim. Moreover, there was no evidence the employer’s wishes in litigation strategy were being ignored, and there was nothing unworkable about having two attorneys representing the employer in the underlying litigation (Mount Vernon Fire Insurance Co. v. VisionAid, Inc.).

2d Cir.: No compensation for student intern. Though a social work student complained about the quality of her internship (“grunt work” such as filing and fetching food) and did not receive course credit or a tuition refund, the Second Circuit found that the Glatt v. Fox Searchlight factors weighed in favor of finding she was an intern, not entitled to compensation for a year-long internship. So long as the relationship had “the qualities of a bona fide internship providing educational or vocational benefits in a real world setting, the intern can be the primary beneficiary” even if her activities “provide direct benefit to the employer” (Sandler v. Benden).

4th Cir.: Disciplining union driver violated NLRA. The NLRB did not err in finding that an employer violated the NLRA by disciplining a senior delivery driver with a history of protected union activity shortly before his grievance hearings. In an unpublished decision, the Fourth Circuit refused to “second-guess” whether company officials or the driver and his union reps were more truthful. It also found that the driver did not forfeit the NLRA’s protections by using profanity in asserting his collectively bargained right (S. Freedman & Sons, Inc. v. NLRB).

4th Cir.: Managers using small cars to fill in for drivers get overtime. Though professional motor carriers are generally exempt from the FLSA’s overtime pay requirement, Congress in 2008 waived the Motor Carrier Act exemption for motor carrier employees whose work affects the safety of vehicles weighing 10,000 pounds or less. Because the plaintiffs regularly filled in for delivery drivers using their own small vehicles, they were protected by the 2008 waiver and were therefore entitled to overtime wages (Schilling v. Schmidt Baking Co., Inc.).

5th Cir.: Pre-shift wait time excluded from pay under Portal-to-Portal Act. The Portal-to-Portal Act precluded the pre-shift wait time of three employees working on an oil refinery expansion project from being compensable under the FLSA. The Fifth Circuit observed that the waiting itself was neither tied to nor necessary to the erection and dismantling of scaffolding—the work the employees performed—so the wait was not intrinsic to their principal activities and was not compensable (Bridges v. Empire Scaffold, LLC).

6th Cir.: Staffing agency’s in-house employees get OT for sales, not account management. For the first time addressing the FLSA’s administrative exemption in the staffing company employee context, a divided Sixth Circuit held that in-house staffing company employees fell within the exemption while they were in account manager positions involving the exercise of discretion and independent judgment (e.g., while matchmaking temps with clients). The court found triable issues, though, on whether the administrative exemption applied to the time they spent working as staff consultants, who have less discretion than managers. For example, consultants follow rigid guidelines but account managers independently write job descriptions based on client needs (Perry v. Randstad General Partners (US) LLC).

6th Cir.: Claims to lifetime retiree health benefits ended with expiration of CBA. Retirees of Honeywell who claimed their collective bargaining agreement included a promise to pay lifetime health insurance failed to sway the Sixth Circuit, which found that a general clause limiting the duration of the agreement applied to the employer’s promise to provide healthcare. Specifically, the language of the CBA unambiguously promised healthcare benefits until October 31, 2011—the date the CBA expired (Watkins v. Honeywell International Inc.).

7th Cir.: No en banc rehearing of EEOC claim AutoZone segregated workforce. The EEOC was denied an en banc rehearing of a decision holding that AutoZone did not violate Title VII when it transferred an African-American employee out of its “Hispanic” store because, allegedly, it was segregating by race. The appeals court panel had found that, because the transfer was “purely lateral,” with no reduction in pay or responsibilities, it was not an adverse action. The EEOC had urged that under 42 U.S.C 2000e-2(a)(2), an infrequently litigated provision, an employee is not required to prove his opportunities or status were adversely affected—it was enough that the employer segregated workers by race in a manner that would “tend to deprive any individual of employment opportunities.” The majority of active Seventh Circuit judges declined to reconsider the earlier holding. Three judges dissented from the denial of rehearing—contending the holding ran counter Supreme Court authority (EEOC v. AutoZone, Inc.).

9th Cir.: Minimum wage compliance based on workweek as a whole, not individual hour. On an issue of first impression in the Ninth Circuit, the court joined its sister circuits and held that the relevant unit for determining minimum wage compliance under the FLSA is the workweek as a whole, not the individual hour within the workweek. In this instance, Xerox properly used subsidy pay to ensure that its call center employees always received the appropriate minimum wage for the workweek (Douglas v. Xerox Business Services, LLC).

9th Cir.: Glassdoor must produce info on those who posted reviews of employer. The Ninth Circuit has affirmed the denial of Glassdoor, Inc.’s motion to quash a grand jury subpoena requiring it to disclose identifying information about eight users who posted on its website their anonymous reviews of their employer. Rejecting Glassdoor’s First Amendment challenge, the court found the company failed to allege, must less prove, that the government’s investigation of the employer for fraud was conducted in bad faith (United States v. GlassDoor, Inc.).

9th Cir.: FedEx pilot called to active duty improperly denied signing bonus. An Air Force reservist called to active duty days before he was to begin training as a wide-body pilot at FedEx was improperly denied the $17,700 signing bonus he would have earned had he not served. The Ninth Circuit held that FedEx was not allowed to use his failure to qualify as a wide-body pilot to justify paying him a lower bonus if that failure was due to his military service. Since his bonus was based on his job position, and FedEx had to reemploy him in the “job position that he would have attained with reasonable certainty” had he not been deployed, his service was a “substantial factor” in the failure to pay the higher signing bonus (Huhmann v. Federal Express Corp.).

And finally . . . some big settlements

Not content to risk an even more expensive outcome, employers facing high-stakes litigation often choose to settle, even if it means a big payout. November saw the following settlements:

• A federal court in North Carolina preliminarily approved a $45M deal to end long-running equal pay class action claiming Family Dollar Stores paid women store managers less than their male counterparts in violation of the Equal Pay Act and Title VII.

• First Bankers Trust Services agreed to pay $15.75M to resolve what the DOL claimed were ERISA violations of fiduciary duties with respect to three employee stock ownership plans.

• American Airlines and Envoy Air agreed to pay $9.8 million in stock, worth over $14 million if cashed in today, to settle a nationwide disability discrimination class action claiming they violated the ADA by denying reasonable accommodations and requiring employees to have no restrictions before they could return to work after medical leave, according to the EEOC.

• A federal court in Pennsylvania approved a $1.6M settlement to over 200 distributors who delivered Snyder of Hanover and Lance brands of snack products to stores in Tennessee and surrounding states. They claimed they were misclassified as independent contractors and denied overtime pay in violation of the FLSA and state law.