ARBITRATION

Recent Development: Supreme Court affirms employer’s right to require mandatory arbitration of employment disputes.

Background

In an attempt to decrease litigation expenses and reduce exposure to uncertain jury awards, an increasing number of employers are now including arbitration clauses in their job applications, employee handbooks and employee contracts. By agreeing to arbitrate instead of litigate, employees give up their rights to have their claims heard by a jury in a court of law. Arbitration provisions can be an effective, efficient and economical way of disposing of employment disputes. However, such agreements are not without their faults.

Why arbitrate? Studies show that many potential jurors tend to have a “pro-labor” mind set that favors terminated employees. Jurors tend to be emotional; many of them feel that employees should be the top priority of a company, not its profits. Consequently, when they rule in a plaintiffs’ favor, juries have allowed their emotions to dictate the damages rather than the law or facts of the case. As a result, we see large damage verdicts and punitive damages. Thus, by “trying” a case to an arbitrator (or panel of arbitrators), plaintiffs have no jury to sway and employers can take the emotional aspect of the case and alleviate the potential for an award based on jury sympathy. With these risks in mind, it is not surprising that many employers are turning toward mandatory arbitration provisions in their employment contracts, handbooks or even job applications, whereby aggrieved non-union employees agree to waive their rights to a jury trial, to take all common law and statutory claims out of the judicial arena and to privately arbitrate those disputes.

Why not arbitrate? When considering arbitration provisions, most employers cite decreased litigation expenses as a primary reason underlying their decisions to implement arbitration clauses. While arbitrating some employment disputes may be less costly than litigation, arbitration may not always translate into lower expense for an employer. As with litigation, pre-arbitration procedures can be costly. Most arbitrations allow the parties to conduct the same type of discovery and file the same types of motions that typically are filed in litigation. In addition, preparing for an arbitration may be substantively no different than preparing for a trial. Thus, although the timing for the discovery, motions and the arbitration (“trial”) may be truncated, the costs associated with the same may not.

In addition, it is sometimes problematic to find an arbitrator on whom both parties agree. This is particularly significant in the context of claims based on federal anti-discrimination statutes (i.e., Title VII, ADEA, ADA, FMLA). Unlike federal judges, employers may find themselves faced with an arbitrator who is not legally familiar with the standards of proof for such claims. Moreover, especially in dealing with what can be emotionally charged allegations, arbitrators often have some difficulty in telling a complainant that he/she is not entitled to any award. On the other hand, most federal judges have no qualms about granting summary judgment against a complainant in an appropriate case. Finally, most arbitrations are binding and thus non-appealable. Although this factor can be appealing to an employer on the winning side of a case, such a “one-shot deal” may ultimately prove harmful in those instances where the arbitrator does not have a background in the area of law and/or the arbitrator is unwilling to allow a discrimination plaintiff leave with nothing. Thus, for these reasons, arbitrating traditional “discrimination” claims, such as those based on race, sex, age, disability, etc., may not prove the best avenue for an employer.

By contrast, the arbitration arena can be very positive for the majority of employment-related claims based on state common law (such as breach of contract, intentional infliction of emotional distress and wage and hour disputes). Such claims are typically straightforward and arbitrators are more familiar with the state standards of proof and state law.

Enforceability:

A threshold question is: Are mandatory arbitration clauses in employment contracts enforceable?

Supreme Court Says Employers Can Require Arbitration

Appealed From: 9th Circuit Court of Appeals (194 F.3d 1070)
Question presented:

Whether the 9th Circuit Court of Appeals erred in holding that the Federal Arbitration Act does not apply to contracts of employment?

In 1995, when Saint Clair Adams applied for a job at a Circuit City in Santa Rosa, California, he filled out a six page application that included an arbitration clause. Adams signed the arbitration contract, agreeing to settle “all previously unasserted claims, disputes or controversies arising out of or relating to” his employment with Circuit City, “exclusively by final and binding arbitration before a neutral Arbitrator.”

The arbitration provision at issue provided as follows:

“I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for employment, employment and/or cessation of employment with Circuit City, exclusively by final and binding arbitration before a neutral Arbitrator. By way of example only, such claims include claims under federal, state and local statutory or common law, such as the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, including the amendments of the Civil Rights Act of 1991, the Americans with Disabilities Act, the law of contract and the law of tort.”

Adams left Circuit City just a year later and soon after, wrote a letter demanding arbitration to appeal his benefits. When Circuit City failed to respond to Adams’ arbitration request, he sued Circuit City and three of his supervisors in Sonoma County Superior Court alleging discrimination and harassment based on his sexual orientation.

Although Adams argued that the arbitration agreement was “an unconscionable contract of adhesion,” U.S. District Judge Charles A. Legge disagreed. Judge Legge found that there were some limitations to recovery for Adams, but he did not see it as legally unfair. “I believe it’s clear here that the contract is to be interpreted to bind both parties, that is Mr. Adams and the company, to arbitration,” Legge said in his April 1998 ruling. “I find that the contract is enforceable,” he added, in staying the state court proceeding and sending the case to arbitration.

A unanimous 9th Circuit Court of Appeals reversed and focused on the Federal Arbitration Act, a federal statute regulating arbitration agreements and its applicability to employment contracts. The appeals court found that Adams’ arbitration agreement was an employment contract. Although a disclaimer in the agreement said that it does not “form a contract of employment between Circuit City and me,” the court held that applicants must sign the agreement as a condition of employment.

Since the arbitration agreement between Adams and Circuit City was an employment contract, according to the court, it is not covered under the FAA. “The district court…lacked the authority, as a matter of substantive law, to compel arbitration because the Federal Arbitration Act does not apply to this case,” the per curiam opinion read.

The U.S. Supreme Court granted certiorari on May 22, 2000 and limited review to whether the FAA applies to employment contracts and whether the state retains its right to regulate arbitration agreements.

The Decision in Circuit City Stores v. Adams

On March 21, 2001 the Supreme Court reversed the 9th Circuit Court’s opinion and ruled that employers may include arbitration agreements in their employment applications, requiring employees to submit their disputes to an arbitrator rather than to a judge.

Interpreting the Federal Arbitration Act to apply to employment contracts of all employees except transportation workers, the justices rules that the 1925 Act may be enforced to keep discrimination complaints against employers out of the court system.

Circuit City’s appeal of the Ninth Circuit decision resulted in the Supreme Court’s first ruling on the extent of the exemption clause. Earlier decisions had explained the basic coverage of the FAA, but until now the high court had not interpreted the exclusion provision.

Describing the Federal Arbitration Act as necessary to overcome the judicial hostility to arbitration which was prevalent when the Act was passed in 1925, Justice Kennedy, speaking for the court, said that the FAA “compels judicial enforcement of a wide range of written arbitration agreements.”

The opinion acknowledged that various employee-interest groups and the attorneys general of twenty-two states had filed briefs urging the court to preserve employees’ rights to pursue state court actions. Arguing against the trumping of state laws by the federal statute, the various states sought to protect employees from “contracting away” their rights to state remedies in court.

Justice Kennedy said that “there are real benefits to the enforcement of arbitration provisions,” and that arbitration agreements “allow parties to avoid the costs of litigation.” Exempting employment contracts from the coverage of the FAA, the opinion said, “would call into doubt the efficacy of alternative dispute resolution procedures adopted by many of the nation’s employers, in the process undermining the FAA’s pro-arbitration purposes and `breeding litigation from a statute that seeks to avoid it.'”

Other Considerations regarding Arbitration provisions in employment agreements

Generally speaking, it is recommended that the language be drafted to state that the employee agrees to arbitrate any all claims against the employer, including, specifically, employment disputes. To show that an employee has knowingly and voluntarily agreed to arbitrate her employment claims, it is recommended that both the employee and employer sign or initial beside that specific provision of the agreement. Some states have particular laws which affect the validity of an arbitration provision. Georgia, for instance, specifically requires that there be a space for the employee and employer to include their initials beside the specific arbitration provision; otherwise, the arbitration provision is unenforceable. See O.C.G.A. § 9-9-2(c)(9).

An interesting question regarding the enforceability of an arbitration provision regards the issue of the costs of the arbitration itself. Several courts have found that to be enforceable, a binding arbitration clause must provide that the employer will be solely responsible for the costs of the arbitration proceeding. In other words, some courts find that any provision stating that the company and the employee will “split” or divide the costs of arbitration is invalid, with the effect that the entire arbitration provision will be unenforceable.

The language of an arbitration provision in a handbook or contract is extremely important. If drafted improperly, the arbitration clause may be no more valuable than the paper on which it is written. To be enforceable, an arbitration provision should provide for a neutral arbitrator, more than minimal discovery, the same relief as available in court, a written decision, payment of the arbitrator’s fee by the employer and the claimant’s payment of only reasonable expenses. The language may also need to provide that an arbitrator shall have the right to award a prevailing claimant his attorneys’ fees. Additional considerations arise when an employer tries to bind its existing employees to arbitration agreements, for the company must provide them with additional legal “consideration” for this waiver of their right to have any claims heard by a jury. Thus, while arbitration clauses can be an effective means of cutting costs and minimizing risks, each employer should carefully consider the various pros and cons of such agreements before instituting them.

In light of an employer’s possible multi-state operations, the following factors should be considered:

1. Prohibition of Arbitration Agreements. The employer should be aware that some states specifically prohibit the arbitration of some or all employment-related matters. See, e.g., California Labor Code § 229 (an action for unpaid wages may be maintained without regard to the existence of an arbitration agreement between employer and employee); Kentucky Revised Statutes Annotated § 417.050 (written agreements to submit employment disputes to arbitration are invalid); and the Idaho Code Annotated § 7-901 (specifically excludes arbitration agreements between employers and employees). At least one court has held that an arbitration agreement will be enforced only if the employer bears the expense of the arbitration. Cole v. Burns Int’l Security Serv., 105 F.3d 1465 (D.C. Cir. 1997). Although many more jurisdictions specifically permit the use of arbitration agreements in the employment context, because states vary in their determination of what makes such agreements enforceable, the laws of each state in which the employer does business will need to be reviewed prior to a company-wide distribution of the agreement. We now have to “wait and see” how such states will respond to the Supreme Court’s decisions.
2. Drafting and Negotiating Arbitration Agreements. The law concerning the enforceability of arbitration agreements continues to evolve. However, as discussed below, there are some common factors that should be considered in drafting and negotiating any such agreement.

What not to include in Pre-Dispute Agreements:

Palandino v. Avnet Computer Technologies, Inc., 134 F.3d. 1054 (11th Cir. 1998):
Court found that the presence of an unlawful provision in an arbitration agreement may taint the entire agreement, rendering the whole arbitration provision unenforceable. The employer there had an otherwise “fine” arbitration provision, but it also included one clause which stated, “The arbitrator is authorized to award damages for breach of contract only and shall have no authority whatsoever to make an award of other damages.” The employer, realizing that clause was unenforceable, said it would simply redact it. The court declined and held the entire arbitration agreement unenforceable because: (a) it was unclear what types of claims were subject to arbitration; and (b) the clause purported to limit the damages the employee could recover.

Hooters of America, Inc. v. Phillips, 173 F3d 933 (4th Cir. 1999):
Employee alleged sexual harassment by a supervisor at work consisting of grabbing and slapping her buttocks. Employer, claiming that employee had agreed to settle all employment-related disputes through arbitration, filed a preemptive motion to compel arbitration. The Fourth Circuit, after acknowledging that pre-dispute arbitration agreements are enforceable, noted that the procedure set up by Hooters was so manifestly unfair on its face that it was compelled to deny the motion to compel arbitration. The procedure included granting several rights to summary disposition and factual disclosure to Hooters which were not granted to a complainant and all the available arbitrators were selected from a list complied solely by Hooters. “To uphold the promulgation of this aberrational scheme under the heading of arbitration would undermine, not advance, the federal policy favoring alternative dispute resolution.” Id.

A Consideration: In order to ensure coverage by the FAA, drafters of arbitration agreement must take steps to avoid claims that the agreement constitutes a “contract of employment” — since such contracts are specifically excluded from coverage under the FAA. Two techniques which may reinforce the notion that the arbitration agreement is not a contract of employment include: (1) making sure the arbitration agreement is a stand-alone document and is not a part of the boilerplate language in an all-inclusive employment agreement or employee manual; and (2) having the agreement encompass all disputes between the employer and employee, even those that do not relate to the employment relationship (i.e., post-termination defamation claims that arguably would not “arise out of the employment relationship”).

The Eleventh Circuit. The Eleventh Circuit has set forth some general requirements that a court should consider in determining whether an arbitration agreement could bar court litigation of federal statutory claims. In Paladino v. Avnet Technologies, Inc., 134 F.3d 1054 (11th Cir. 1998), cited above, the Court reasoned that an arbitration agreement will not bar court litigation unless the following three factors are met:

1. the employee must have agreed individually to the contract;
2. the agreement must specifically authorize the arbitrator to resolve statutory claims; and
3. the agreement must give the employee the right to insist on arbitration if the federal statutory claim is not resolved to the employee’s satisfaction via the Company’s internal grievance process.

In light of the Paladino decision, an employer may want to take the following steps: (a) make sure the agreement is a stand-alone document and do not simply rely on an arbitration provision in the employee handbook; (b) specifically identify the federal statutes it intends the agreement to cover — including, but not limited to: Title VII of the Civil Rights Act of 1964, as amended; The Americans with Disabilities Act; The Family and Medical Leave Act; and The Age Discrimination in Employment Act; and (c) include a statement in any grievance policy indicating the employee has a right to pursue his/her claim through arbitration pursuant to the Procedure.

c. Consideration. A mutual promise to arbitrate some or all claims, in and of itself, constitutes legal consideration to render an agreement enforceable. Though not particularly necessary to establish adequate consideration, as a practical matter, an employer’s offering some other inducement for entering into the agreement (i.e., hiring, promotion, other non-standard benefits such as stock options), especially to existing employees, strengthens its position that consideration was adequate.

d. Persons and Entities Covered by the Agreement. If an employer is in the business of acquiring other companies, any agreement it promulgates should specifically identify likely defendants and make them third-party beneficiaries of the agreement. Thus, language regarding “affiliated, predecessor and successor companies” should be included. Such language will help avoid “coverage litigation.” Similar language should be contained in the agreement to identify agents and employees who often are named as party defendants (i.e., department heads, managers and supervisors) and their ability to invoke the agreement should claims be made against them in their capacities.

e. Scope of Claims Covered. For practical reasons, the agreement should attempt to encompass all conceivable claims in order to derive the most benefit from the arbitration process. In addition to specifically outlining certain claims, if the agreement will be distributed to existing employees, the Company may want to consider making sure that its agreement includes specific language that the agreement is intended to cover all disputes that may have arisen prior to the signing the agreement, as well as all future claims.

Notwithstanding the foregoing, an employer’s agreement must be careful not to preclude the employee’s ability to take his or her claim to a state fair employment practices agency, or the local district office of the EEOC. Otherwise, such language could be viewed as the employer’s attempting to take away substantive, federally protected rights rather than providing an alternative forum for resolving disputes.

f. Punitive Damages. Generally, unless the agreement specifically excludes punitive damages, the arbitrator has the jurisdiction to award such damages, even where state law prevents arbitrators from awarding punitive damages. The employer should note that at least one court has thrown out an entire arbitration agreement that attempted to waive all rights to punitive damages, even though the agreement contained a severability clause. Graham Oil Co. v. Arco Prods. Co., 43 F.3d 1244 (9th Cir. 1994)(non-employment case concerning commercial contract claim). Furthermore, other cases have reasoned that, even if punitive damages are lawfully excluded from the agreement, the employee then has an arguable basis for taking “residual” (a/k/a “inarbitrable”) claims to court. See, e.g., Janmort Leasing, Inc. v. Econo-Car Int’l, Inc., 475 F. Supp. 1282 (E.D.N.Y. 1979)(ruling that where the parties conceded claims for punitive damages were “inarbitrable” under the agreement, a separate judicial trial on the matter would be appropriate); Willoughby Roofing & Supply Co. v. Kajima Int’l, Inc., 598 F. Supp. 363 (N.D.Ala. 1984)(stating generally, that it is better to include the issue of punitive damages in the arbitration agreement to promote judicial economy). In order to avoid any ambiguity as to punitive damages, the Company may want to consider including specific language on punitive damages and in particular that the arbitrator will make all such determinations.

g. Counsel. The Older Workers Benefit Protection Act mandates certain procedural steps for the enforcement of releases under the Age Discrimination in Employment Act. It does not appear from the case law that such steps are applicable to pre-dispute arbitration agreements, even those which may cover ADEA claims. Having said that, in order to avoid claims that an agreement is unenforceable due to overreaching or confusion on the part of any employees, the employer may want to include language that the employee is encouraged to consult with counsel prior to signing the agreement and that the employee is free to be represented by counsel throughout the arbitration process. Such language also may minimize claims of fraud in the inducement against the employer.

Also, the Tenth, Eleventh and D.C. Circuits have held that arbitration agreements that require a Title VII plaintiff to pay all or part of an arbitrator’s fee are unenforceable. Shankle v. B-G Management of Colo., Inc., 163 F3d 1230 (10th Cir. 1999). Accord Paladino v. Avnet Computer Techs., Inc., 134 F.3d 1054, 1062 (11th Cir. 1998); Cole v. Burns Int’l Sec. Servs., 105 F.3d 1456, 1485 (D.C. Cir. 1997).

In summary, an arbitration provision should provide for at least the following:

• a neutral arbitrator,
• more than minimal discovery,
• the same relief as available in court,
• a written decision,
• payment of the arbitrator’s fee by the employer,
• the claimant’s payment of only reasonable expenses.
• The language may also need to provide that an arbitrator shall have the right to award a prevailing claimant his attorneys’ fees.

Also, it is suggested to include a provision which gives either side the right to file a proceeding in court if it is necessary to obtain equitable relief, i.e. an injunction or temporary restraining order.

Recent Significant Developments in The Law of Sexual Harassment

INTRODUCTION

Prior to 1998, federal courts generally held employers strictly liable for so-called “quid pro quo” harassment, in which a supervisor explicitly or impliedly conditioned job benefits on the granting of sexual favors by a subordinate or threatened adverse action for a refusal to participate. By contrast, the federal courts held employers liable for supervisory “hostile work environment” harassment — in which a supervisor’s harassing comments or actions were deemed so severe or pervasive as to alter the terms and conditions of the plaintiff’s employment — only where the plaintiff could show that the employer knew or should have known of the harassment and failed to take appropriate remedial measures.

The United State Supreme Court abandoned this framework and adopted an entirely new analytical framework for harassment cases in Faragher v. City of Boca Raton, 524 U.S. 775, 118 S. Ct. 2275, 141 L. Ed. 2d 662 (1998) and Burlington Indus., v. Ellerth, 524 U.S. 742, 188 S.Ct. 2257, 141 L. Ed. 2d 633 (1998). Under the Faragher/Ellerth standard, an employer’s liability for harassment by a supervisor no longer turns on whether the harassment is characterized as quid pro quo or hostile work environment. Now, the critical question is whether the harassment culminates in a “tangible employment action,” such as a discharge or failure to promote. If so, the employer is strictly liable for the supervisor’s harassment. If the harassment by a supervisor did not result in a tangible employment action, but was sufficiently severe or pervasive as to be actionable, the employer remains vicariously liable unless it can prove as an affirmative defense that: (1) it exercised reasonable care to prevent and correct promptly any harassing behavior; and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise.

SAME-SEX HARASSMENT

Is Same-Sex Harassment Actionable?

Yes. In a unanimous decision on March 4, 1998, the Supreme Court held that nothing in Title VII necessarily bars a claim of discrimination “because of . . . sex” merely because the plaintiff and the defendant (or the person charged with acting on behalf of the defendant) are of the same sex. Oncale v. Sundowner Offshore Servs., 523 U.S. 75, 188 S. Ct. 998, 1001-02, 140 L.Ed. 2d 201 (1998) (alteration in original). The Court explicitly rejected the reasoning, as applied by the Fifth Circuit in Oncale, “that same-sex sexual harassment claims are never cognizable under Title VII.” 118 s. Ct. at 1002. Thus, while courts will not find actionable discrimination merely “because” the harasser or victim is homosexual, there is a cause of action if the discriminatory behavior is “because of” the victim’s sex. In other words, if harassment occurs because, for instance, the male employee wears an earring and otherwise exhibits characteristics that did not comport with this male co-workers’ views of masculinity, this is harassment based upon impermissible gender stereotyping and is “because of” sex.

ALSO, beware that state laws and other local laws may make discrimination based upon homosexuality actionable. ALSO, some state statutes may prohibit an employer from discharging an employee based upon the employee’s lawful activities outside of the workplace. See Borquez v. Robert C. Ozer, P.C., 923 P.2d 166 (Colo. Ct. App. 1995).

Misc.

Not a Protected Class. Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252 (1st Cir. 1999): A gay employee who worked for ten years in a factory and endured taunts and name-calling had no cause of action under Title VII, because Title VII does not list sexual orientation as a protected class. Plaintiff’s attempts on appeal to re-characterize the complaint as sex-based harassment because he did not fit the stereotypical image of masculine behavior was rejected by the court as not having been argued before the lower court.

Harassment. In Bibby v. Philadelphia Coca-Cola Bottling Co., 85 F. Supp. 2d 509 (E.D. Pa. 2000), the court found that harassment of a gay man was on account of sexual orientation and not sex and thus not actionable under Title VII.

Must The “Harasser” Be Homosexual?

No. In Oncale, the Supreme Court rejected the requirement imposed by many lower courts “that such claims are actionable only if the plaintiff can prove that the harasser is homosexual (and thus presumably motivated by sexual desire).” Oncale, 118 S. Ct. at 1002. Writing for the unanimous Court, Justice Scalia did note, however that an “inference of discrimination . . . would be available to a plaintiff alleging same-sex harassment, if there were credible evidence that the harasser was homosexual.” Id.

Must the “Victim” be Homosexual?

No and, in fact, it may not even be relevant. In Fitzpatrick v. QVC, Inc., 1999 U.S. Dist, LEXIS 19134 (E.D. Pa. Dec. 7, 1999), where a male employee who files suit alleged that he was sexually harassed by a male supervisor, the court found he may not be compelled to respond to questions at deposition about his sexual orientation. The court rejected the defense position that under Fed. R. Civ. P. 26, discovery questions have wider latitude than Fed. R. Evid. 412 (the “rape shield” law) and denied a defense motion to compel on the grounds that whether an individual is gay has no relevance to whether he was offended by the alleged harassing actions of his supervisor.

What Amounts to a “Tangible Employment Action” That Will Bar The Employer’s Assertion Of The Faragher/Ellerth Affirmative Defense?

The majority opinion in Ellerth, written by Justice Kennedy, defines a “tangible employment action” as a “significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities or a decision causing a significant change in benefits.” Id. at 2268. In “most cases” such an action “inflicts direct economic harm . . . is documented in official company records and may be subject to review by higher level supervisors.” Id. at 2269.

EEOC’s Position: The EEOC provides three criteria by which to determine whether a change constitutes a tangible employment action:

a. A tangible employment action is the means by which the supervisor brings the official power of the employer to bear on subordinates, as demonstrated by the following:

• it requires an official act of the enterprise;
• it is usually documented in official company records;
• it may be subject to review by higher level supervisors; and
• it often requires the formal approval of the enterprise and use of its internal processes.

b. A tangible employment action usually inflicts direct economic harm.

c. A tangible employment action, in most instances, can only be caused by a supervisor or other person acting with the authority of the company. Examples of tangible employment actions include:

• hiring and firing
• promotion and failure to promote;
• demotion;
• undesirable reassignment;
• a decision causing a significant change in benefits;
• compensation decisions; and
• work assignment.

EEOC, Enforcement Guidance 915.002 (6/18/99) as reproduced in BNA EEOC Compliance Manual, N:4078.

What Conduct Is Severe Or Pervasive Enough To Be Actionable In The Absence Of A Tangible Employment Action? What Are Appropriate Corrective Measures:

Eleventh Circuit – Coates v. Sundor Brands, Inc., 164 F.3d 1361 (11th Cir. 1999) (grant of summary judgment to company affirmed: Employer had promulgated a sexual harassment policy with contact information and although harassment continued beyond plaintiff’s original complaint, this was in part because plaintiff requested that no steps be taken and assured supervisor subsequently that the harassment had stopped and did not later “provide adequate notice that the employer’s directives [had been] breached”); Fleming v. Boeing Co., 120 F.3d 242 (11th Cir. 1997) (summary judgment for employer on claims of two different plaintiffs affirmed; company investigated alleged harasser and demoted him, reducing his salary and placing a warning in his personnel file, such actions were “immediate and appropriate”).

Under What Circumstances Does an Employee Unreasonably Fail To Take Advantage Of Any Preventive or Corrective Opportunities Provided by The Employer or To Avoid Harm Otherwise? What Is The Consequence Of A Complainant’s Failure to Use the Employer’s Complaint Procedure?

The Eleventh Circuit in Madray v. Publix Supermarkets, Inc., No. 98-5802, 2000 WL 373956 (11th Cir. April 13, 2000), found that two female employees had failed to avail themselves of the “preventive or corrective opportunities provided by the employer” when they did not file a complaint with the individual the policy designated, nor use of the other designated avenues for lodging a complaint.

The employees sued their employer, Publix Supermarkets, Inc. (“Publix”) and supervisor for hostile environment sexual harassment in violation of Title VII. Plaintiffs alleged that their supervisor made a practice of hugging and patting employees and that they complained about the supervisor’s harassing behavior to three mid-level managers over the course of several months. 2000 WL 373956 at *2. First, one plaintiff told a Second Assistant Manager at a party for a departing employee that it made her sick for her supervisor “to hug me and touch me and kiss me.” Id. She did not request that the manager take any action as a result of her comment, however. About a month or two later, she claimed that, while in a restaurant with several other employees of the store, she told a different Second Assistant Manager that her supervisor had grabbed her and “ducked [her] over and kissed [her] on the neck.” Plaintiff did not request that the manager take any action, but did say that she did not know what to do about her supervisor’s behavior. Two to three weeks before lodging a formal complaint, plaintiff testified that the bakery manager witnessed an incident of inappropriate behavior by the supervisor and that the bakery manager told the supervisor, “that’s sexual harassment,” but the supervisor responded that he did not care what the bakery manager called it. Plaintiff stated that when she thanked the bakery manager for trying to stop the supervisor’s inappropriate behavior, she said she hoped he would stop since the bakery manager had told him it was sexual harassment. The bakery manager responded, “Well, if it doesn’t, you let me know. And if it still continues, if you don’t complain about it, then I have to as a manager.” Plaintiff responded that she would arrange to meet with the District Manager to discuss her complaint.

Shortly thereafter, the District Manager met with both plaintiffs and began an investigation. Id. Upon completion of the investigation, the supervisor was given a written warning, demoted to Assistant Manager and transferred to a store in another city. Neither plaintiff had any further contact with the supervisor. Id.

Following the investigation, plaintiffs filed suit, claiming, among other things, that the management personnel to whom they reported the supervisor’s conduct responded ineffectively, that the employer was aware of the supervisor’s behavior via managers and supervisors in the store and that the employer was ineffective in curtailing the misconduct. Id.

The Eleventh Circuit Court of Appeals rejected these arguments, affirming the district court’s granting of summary judgment. As a threshold matter, the court found that Publix’s sexual harassment policy was effective because it provided employees alternate avenues for lodging a complaint, other than with the harassing supervisor. Id. at *5. Although the store manager was the only designated representative located within each store and, in this case, was the alleged harasser, the policy also designated several additional individuals to whom an employee could complain. Those individuals were accessible to employees. Id. at *6. In addition, the complaint procedures provided employees multiple avenues for lodging a sexual harassment complaint outside the supervisory chain of command. Therefore, the Court found that Publix exercised reasonable care to prevent sexual harassment.

The Court next addressed plaintiffs’ contention that the decision to discuss their supervisor’s behavior with mid-level managers, rather than those individuals identified by the sexual harassment policy, was not unreasonable in view of the employer’s Open Door Policy, which encouraged employees to speak to managers about problems. Id. at *10. In the Court’s view, plaintiffs failed to reasonably utilize even those complaint procedures. The complained to mid-level managers within the store during informal, often social circumstances. They did not fully inform the mid-level managers of the extent of the harassment, nor did they request that any action be taken. In fact, at least once, plaintiffs declined the assistance of a mid-level manager and said they would take action themselves in accordance with the sexual harassment complaint procedure. Id. at *11. Therefore, the Court concluded, Publix was entitled to interpose the affirmative defense established in Faragher and Ellerth to eliminate its vicarious liability for the sexual harassment plaintiffs experienced. Id.

Miscellaneous Decisions and Recent Developments

Pregnancy Discrimination – In Armindo v. Padlocker, Inc., 209 F3d 1319 (11th Cir. 2000), the court held that the discharge of a pregnant employee on account of her poor attendance had not been shown to be pretextual and the employer is not required to treat a pregnant employee more favorable than a non-pregnant employee.

Baseline of actionable harassment? Gupta v. Florida Board of Regents, 2000 U. S. App. LEXIS 10887 (11th Cir. May 17, 2000) (jury verdict in favor of plaintiff was reversed; conduct was not objectively severe or pervasive enough, as a matter of law, to constitute actionable harassment where plaintiff, a professor of economics, alleged that another professor invited her to dine at Hooters, began calling plaintiff at night and over the weekend, asking if she was talking to her boyfriend or in bed, told her on one occasion, during a phone call that occurred after a storm that he would have come over to spend the night with her during the storm, put her hand on her inside thigh for a brief moment, complimented her on her clothing and jewelry while touching it and on one occasion allowed her to see him in his undershirt and unzipped his pants to tuck in his shirt in front of her); Mendoza v. Borden, Inc., 195 F.3d 1238 (11th Cir. 1999) (plaintiff alleged harassment by highest-ranking employee at dairy facility, whom she claimed constantly watched her, followed her around, stared at her, on one occasion looked at HR up and down, stopped in her groin area and made sniffing motions, on a third occasion walked around her desk and sniffed without looking at her crotch and rubbed up against her on another occasion and then told her he was “getting fired up”; a divided en banc Eleventh Circuit ruled that conduct was neither severe nor pervasive enough to sustain the sexual harassment claim); Allen v. Tyson Foods, Inc., 121 F.3d 642 (11th Cir. 1997) (grant of summary judgment for employer was reversed in action where plaintiff offered evidence that her supervisor wrote her sexually explicit notes, solicited sexual favors and improperly touched plaintiff on one occasion, that the entire plant at which she worked was “engulfed by an atmosphere of improper sexuality,” that supervisors engaged in sexual intercourse, sexually graphic jokes and vulgar and sexually demeaning language, that employees groped one another’s breasts and genitalia and that employees used various chicken parts to mimic sexual organs and activities).

RECENT DEVELOPMENTS REGARDING THE AMERICANS WITH DISABILITIES ACT

“Major Life Activity” – Interaction with Others. McAlindin v. County of San Diego, 192 F.3d 1226 (1999), modified, 201 F.3d 1211 (9th Cir. 2000); Plaintiff diagnosed with anxiety and panic disorders may bring an action under the ADA where his disorders result in withdrawal from public places and from family members. Such behavior substantially restricts his interaction with others, which the court holds to be a “major life activity.”

Supreme Court Alert! On April 17, 2001 the Supreme Court announced it will clarify the ADA’s protections for workers who are partly disabled or can be accommodated only by sidestepping a company’s seniority system.

Toyota v. Williams, 00-1089
Plaintiff developed repetitive stress injuries, i.e. carpal tunnel syndrome. She claimed this prevented her from performing part of her assembly line job (1 of 4 types of tasks). The lower court found that even though she can perform some manual tasks, she is substantially limited in performing assembly line work and therefore is considered disabled under the ADA. Toyota’s position on appeal is that people should not be considered disabled under the ADA if they are unable to perform only part of their job.

US Airways v. Barnett, 00-1250
Plaintiff Barnett hurt his back and, as an accommodation, was given a job in the mailroom. However, other employees with more seniority wanted that same job. Under the usual seniority rules they could bump him to a less desirable job. Barnett asked to stay in the mailroom as an accommodation under the ADA, but the airline said it had to abide by its seniority system and removed him. US Airways said it was not obligated to set aside its seniority system for Barnett. The full 9th Circuit Court of Appeals ruled against the company and said that a seniority system alone does not absolve employers from seeking solutions under the ADA.

Medical Information – In Cossette v. Minnesota Power & Light, 188 F.3d 964 (8th Cir. 1999), the court held that the ADA protected an employee from unauthorized gathering or disclosure of medical information by the employer regardless of whether the employee was disabled. In doing so, the court aligned itself with the Ninth and Tenth Circuit. Fredenburg v. Contra Costa County Dep’t of Health Servs., 172 F.3d 1176 (9th Cir. 1999); Griffin v. Stellteck, Inc., 160 F.3d 591 (10th Cir. 1988), cert. denied, 119 S.Ct. 1455 (1999).

Motivating factor – Not Sole Cause. – Baird v. Rose, 192 F3d 462 (4th Cir. 1999): The court held that violations of the ADA should be measured not by the “solely because of” standard applicable under the Rehabilitation Act (which prohibits discrimination “solely because of” disability), but under the causation in standards applicable in Title VII actions, because the ADA prohibits discrimination “by reason of” disability. The court instead used a “motivating factor” test.

Miscellaneous:

Nonverbal Defamation. In Wallace v. Skadden Arps Slate Meagher & Flom, 715 A.2d 873 (D.C. 1998), the District of Columbia Court of Appeals reversed summary judgment on plaintiff’s defamation claims where actions taken during her dismissal were held within the relevant community to be “code” for “problem employees”, precluding future employment.

Damages – Lost Stock Options. In Greene v. Safeway Stores, Inc., 210 F.3d 1237 (10th Cir. 2000), the court held that stock option profits plaintiff lost are awardable in an ADEA case. In so holding, the court said: “In forcing Greene to exercise the options earlier than he otherwise would have, Safeway curtailed Greene’s right to choose the date on which he could exercise his right to buy stock in order to maximize his profit on the sale of the shares acquired.” Id. at 1244.