Issue: Court designates sales managers as “employees” because company controls distribution of sales leads

For the week of October 20, 2008

A group of insurance "sales leaders" who filed for overtime wages under the Fair Labor Standards Act (FLSA) have been deemed by the 5th U.S. Circuit Court of Appeals to be employees rather than independent contractors, and therefore eligible for overtime pay. Hopkins v. Cornerstone America, No. 07-10952 (5th Cir. October 13, 2008). The court based its decision on the economic realities of the situation, and determined that the managers were economically dependent upon the company for which they worked, instead of being in business for themselves.

Cornerstone America, the sales and marketing division of Mid-West National Life Insurance Company of Tennessee, uses a "pyramid" system of sales agents, all of whom agree to work as independent contractors, with payment on a commission basis. Certain of the agents have been promoted to "sales leaders," a management-level designation. In that position, the opportunity for personal sales diminishes, and income is earned primarily from overwrite commissions on sales made by subordinate agents. In the model used by Cornerstone, there is no formal relationship between the sales leaders and the sales agents. Instead, each sales agent contracts directly with Cornerstone; the company controls the hiring and firing of each agent, along with the assignment and promotion of each, regardless of sales leader group.

Although the sales leaders have a certain amount of flexibility with regard to their own working hours and daily routine, and although they all are designated as independent contractors who receive no employment benefits and very little corporate oversight, a group of those managers filed suit against Cornerstone and its parent companies, alleging that they were "employees" entitled to overtime wages. Both the plaintiffs and the company filed summary judgment motions on the issue of whether the sales leaders were employees or independent contractors. The district court found in favor of plaintiffs, and that decision was appealed to the Fifth Circuit.

The FLSA’s definition of "employee" is extremely broad, and includes some individuals who may not qualify as employees under traditional agency law principles. The Fifth Circuit’s approach to the question of whether the sales leaders are independent contractors or actual employees was premised on a five-factor analysis. To determine whether the workers are economically dependent upon Cornerstone, the court reviewed (1) the degree of control exercised by the company; (2) the extent of the relative investments of the workers and the company; (3) the degree to which the workers’ opportunity for profit or loss is determined by the company; (4) the skill and initiative required for performing the job; and (5) the permanency of the relationship. Under that analysis, the Fifth Circuit upheld the lower court’s determination that the sales leaders were employees, rather than independent contractors.

The court’s decision focused largely on the fact that the company exercises a substantial amount of control over the plaintiffs’ ability to earn income. Such control includes hiring, firing, and assigning sales agents, on whom the sales leaders’ income depends; advertising for new recruits; controlling the number of sales leads the leaders could receive; and limiting the types and price of insurance products the leaders could sell. In addition, Cornerstone precludes sales leaders from being involved in or owning any other businesses while employed with Cornerstone. These facts, in addition to the fact that most of the sales leaders have been with Cornerstone for a substantial period of time, creating more of a long-term employment relationship than a transient independent contractor relationship, led the court to its determination.

The court's opinion is a guide to employers who want to understand what the courts look for when making the determination of whether an individual is an "employee" v. an "independent contractor." In order to establish a true independent contractor relationship, the economic realities of the situation should show that the worker possesses some unique skill, and that he or she is allowed to control the methods and means by which that skill is exercised. If instead, the individual’s duties involve only a standard set of skills (in this case, business sense, salesmanship, and basic management skills), and the company is controlling the individual’s wages by limiting the method by which the individual can earn that wage, the courts are more likely to find a traditional employer/employee relationship. In this case, that determination may lead to unanticipated liability for overtime pay under the FLSA.

Issue: Consensual sexual relationship may not support subsequent claim of retaliation

For the week of October 13, 2008

Title VII’s anti-retaliation provision states that it is unlawful for an employer to discriminate against any individual because he or she opposes an action prohibited by Title VII. The 7th U.S. Circuit Court of Appeals recently found that an individual’s claim of retaliation was not supported by the evidence, because that individual did not necessarily believe that he was being sexually harassed by his supervisor, with whom he was having a consensual sexual relationship. Tate v. Executive Management Services, Inc., No. 07-2575 (7th Cir. October 10, 2008).

Alshafi Tate cleaned office buildings in Indianapolis for Executive Management Services, a commercial cleaning company, where he was supervised by Dawn Burban. Within weeks after beginning his employment in August 2002, Tate began a consensual sexual relationship with Burban. Beginning in October 2003, Tate attempted to end that relationship after Burban began calling Tate’s home, upsetting Tate’s wife. On one occasion when Tate tried to discuss ending the relationship, Burban informed him that if the relationship ended, he would lose his job.

On January 13, 2004, Burban and Tate got into a verbal altercation, after which Burban prepared an "insubordination" incident report. Tate’s employment subsequently was terminated. Tate filed a lawsuit alleging that he had been sexually harassed by Burban, and that his firing was in retaliation for his rejection of her advances.

At trial, the jury returned a verdict in Tate’s favor on the retaliation claim, although it found against Tate on his claim of sexual harassment. The company’s motion for judgment as a matter of law/for a new trial was denied by the trial court. On appeal, the Seventh Circuit reversed that denial, holding that Tate could not support a claim of retaliation because he did not have a "reasonable belief" that he had been sexually harassed by Burban.

In order to support a claim of retaliation, an employee must show: (1) a statutorily protected activity; (2) an adverse employment action; and (3) a causal connection between the two. In order to show that he had engaged in a "protected activity," Tate did not have to prove that Burban sexually harassed him. However, he did have to show that he "reasonably believed in good faith" that the conduct of which he complained violated Title VII, and that he was fired because of that complaint.

The court first addressed the issue of whether Tate actually had made a protected report of sexual harassment, since Tate’s only "complaint" was made directly to Burban. The federal circuits are split on whether a rejection of a supervisor’s sexual advances is, in and of itself, a protected activity, and the Seventh Circuit has not yet ruled on the issue. In this case, the court found it unnecessary to answer that specific question. It found instead that Tate did not show a reasonable belief that Burban’s actions constituted illegal sexual harassment and, therefore, he did not make a complaint of behavior that actually violated Title VII. Tate’s testimony showed that he felt that he was "wrongly mistreated" when he was fired, and that he and Burban were "not good with each other" once Burban began to call his home and argue with his wife. These statements point to personal reasons for ending the relationship rather than concerns about the legality of Burban’s actions. His complaints, therefore, were not protected by Title VII.

Title VII’s anti-retaliation language was designed to protect the right of an employee to protest discrimination that he or she believes, reasonably and in good faith, violates Title VII. That statutory language ensures that employees who make such reports remain free from retaliation or reprisal. While the court’s decision in this case was in favor of the employer, it points out the potential legal issues that arise when supervisors enter into personal relationships with subordinates. Whether or not a company’s handbook includes an anti-fraternization policy, employers should recognize the possibility for potential legal issues in such circumstances, and should take steps to ensure that individuals in a personal relationship are not in a direct reporting relationship within the company.

Issue: FMLA’s 1250 hour eligibility requirement is absolute

For the week of September 22, 2008

The Family and Medical Leave Act (FMLA) provides that an employee is entitled to leave under certain circumstances, including a serious health condition that makes that individual unable to perform the functions of his or her job. Employers are prohibited from interfering with an eligible employee’s right to take the leave associated with that act. Under the FMLA, an "eligible" employee is one who has been employed for at least 12 months at the company, and who has worked a minimum of 1250 hours during the 12-month period immediately prior to the leave request.

The 7th U.S. Circuit Court of Appeals recently addressed a situation in which an employee’s working hours fell just below the 1250 hour requirement. In that case, the court found that the 1250 hour hurdle was absolute, and that any lesser number of hours removed the employee from eligibility to assert a claim under the FMLA. Pirant v. U.S. Postal Service, No. 07-1055 (7th Cir. September 4, 2008).

Antoinette Pirant was hired in 1993 by the U.S. Postal Service (USPS) to work as a mail handler. In the years of her tenure with the USPS, Pirant was regularly disciplined for attendance policy violations. In fact, she was "terminated" four times, and on each of the four occasions was able to convince her supervisors to reduce the termination to a suspension.

In March 2001, Pirant was put on a Last Chance Agreement that specifically stated that further attendance problems would lead to termination, and that this was her "absolute last chance" on the issue. When Pirant subsequently was absent without excuse, she received a notice of termination, and her last day of work was set for October 28. However, on October 26, Pirant convinced her supervisor to extend her final day until December 10.

On October 5, Pirant’s supervisor ordered her to clock out two hours early, based upon an incident of alleged insubordination. Pirant did so, but complained to a USPS Dispute Resolution Specialist (Andrews) that she had been wrongfully accused. She was informed of her right to file a formal grievance on the issue, but did not do so within the allotted time.

On December 6, Pirant was absent from work, and did not provide a medical reason other than she "had not been feeling well." On December 10, Pirant went to an emergency room and was examined for carpal tunnel syndrome and for arthritis in her knee. She was directed by a doctor not to work from December 10 to December 17.

On January 4, Pirant’s employment was terminated for her violation of the Last Chance Agreement. She filed a federal court complaint, claiming that the USPS violated the FMLA when it terminated her for missing work, since at least one of her absences was related to her "arthritic knee." In an initial response to that complaint, the USPS admitted that Pirant was qualified for FMLA coverage. However, after checking the official time records, and in light of the two hours that Pirant did not work because of the suspension imposed on October 5, the USPS amended its answer to state that Pirant had worked only 1248.8 hours in the preceding 12 months, and therefore was not eligible for FMLA leave. The district court dismissed Pirant’s claim. The dismissal was upheld on appeal.

The Seventh Circuit held that there was no factual dispute regarding Pirant’s eligibility, since the official payroll records showed a less-than-1250 hour work history – although barely less. Although Pirant argued that she should have been credited with the two hours missed while suspended, she was unable to show that she had appealed that suspension. Therefore, those two hours were not counted toward the 1250 hour minimum. In addition, the court held that Pirant’s time spent "donning and doffing" her uniform was not "work time" under the Fair Labor Standards Act, as it was not integral to her job. Therefore, that additional time did not count toward the FMLA’s 1250 work hour requirement.

The USPS’ ability to offer formal documentation of Pirant’s exact work hours was the factor that led to its success in this case. Although the shortfall between Pirant’s hours worked and the hours required for FMLA eligibility was a de minimus amount of time, the court was unwilling to act outside of the statutory mandate of 1250 hours. This case is a clear example to employers of the importance of complete and accurate payroll and work-time records.

Issue: Calling in sick without providing additional information is not sufficient to trigger FMLA

For the week of September 15, 2008

Under the Family and Medical Leave Act (FMLA), eligible employees are entitled to up to 12 weeks of unpaid leave during a 12-month period. The FMLA specifically prohibits employers from interfering with an employee’s attempt to exercise his or her rights under that Act. In order to exercise those rights on the basis of an employee’s own "serious medical condition," the employee must provide notice to the employer of the seriousness of the health condition that forms the basis of the leave request. Recently, the 7th U.S. Circuit Court of Appeals found that calling in sick, without providing additional information, does not provide sufficient notice of a "serious health condition" under the FMLA. De la Rama v. Illinois Dept. of Human Services, No. 07-1156 (7th Cir., Sept. 2, 2008).

Elizabeth de la Rama, a Filipino-American, worked as a registered nurse at a Mental Health Center, run by the Illinois Department of Human Services for mentally ill adults. Under the Center’s leave policy, de la Rama was entitled to 12 sick days each year, accrued at a rate of one per month. In 2004, de la Rama called in sick for the period from July 19 through August 19. At one point during that period, she verbally informed her supervisor that she was suffering from back pain, and needed to take a week off. On July 27, she provided a doctor’s note that stated that she was under a doctor’s care and could not return to work until August 10. At that point, her employer explained that in order to request medical leave, de la Rama would have to submit a written request and complete certain written forms. Although de la Rama continued to submit doctor’s notes requesting time off, those notes did not state her medical condition, nor describe its severity, and de la Rama did not complete the required forms requesting medical leave during this period. In addition, although she was diagnosed with fibromyalgia in early August, de la Rama did not inform her employer of that diagnosis.

On October 4, 2004, de la Rama submitted the required forms, explaining that she suffered from fibromyalgia and a herniated disk. The Center retroactively granted FMLA leave to de la Rama, beginning on September 2. De la Rama returned to work on January 3, 2005, after 17 weeks of medical leave. At that point, de la Rama’s record reflected 24 days of "unauthorized absence" (UA) for July and August, and future absences would have triggered a disciplinary proceeding against her.

De la Rama pursued a grievance in order to remove the UAs from her employment record. At a hearing, management and the union agreed that the UAs would remain on de la Rama’s record, but that those absences never would be used in any disciplinary proceedings against her. De la Rama subsequently filed a lawsuit, including a claim of interference with her FMLA rights. The district court granted summary judgment to the defendants, and the Seventh Circuit affirmed that decision.

The appellate court found that de la Rama had provided insufficient notice to alert her employer of a "serious medical condition" until October 2004, when the leave was granted. When de la Rama called in sick in July and August, she did not indicate that she suffered from a condition that would require an extended leave, and did not provide documentation of the fibromyalgia until October. The fact that the leave was granted once documentation of the serious medical condition was provided undercut de la Rama’s argument that her employer interfered with her ability to exercise her rights under the FMLA.

An employee may be excused from expressing the need for medical leave when circumstances themselves provide the employer with sufficient notice of the need for extended leave, for instance, when an employee’s family calls from the emergency room to inform employer of a serious auto accident. But – in the words of the Seventh Circuit - the FMLA "does not require employers to play Sherlock Holmes, scanning an employee’s work history for clues as to the undisclosed, true reason for an employee’s absence." Employers should not interpret this case as license to step outside of the parameters of the FMLA, which requires them to review medical information provided by employees, and to grant leave when appropriate. But it reminds employers that they are entitled to certain information from employees in order to make a full and fair decision with respect to the leave requested.

Third Circuit clarifies the “faltering company” exception to notice requirements of the WARN Act

For the week of September 8, 2008

The purpose of the Worker Adjustment and Retraining Notification (WARN) Act is to protect workers by requiring advance notice of plant closings. Such notice allows workers some time to adjust to the prospective loss of employment, and to seek other jobs or retraining. The WARN Act requires generally 60 days’ written notice before a closing or mass layoff by covered employers (typically, those with at least 100 full-time employees at a site). Companies that violate the Act are liable for back pay and benefits for each day that the required notice is not provided, up to the 60 day maximum.

The WARN Act includes three specific affirmative defenses to the 60-day notice requirement: the "business circumstances" exception, the "natural disaster" exception, and the "faltering company" exception. Recently the 3d U.S. Circuit Court of Appeals reversed summary judgment on behalf of an employer that had relied on the "faltering company" exception as an explanation for failure to provide more than a week’s notice before a total shut-down of the company. In Re: APA Transport Corp. Consolidated Litigation, 3d Cir., No. 07-1050, 07-1051, 07-1052, August 29, 2008.

In that case, APA Trucking Corporation (APA) entered a Loan Agreement with Transamerica Business Capital Corporation in 1996, which allowed APA the use of a revolving line of credit in the amount of $40 million secured by real property, equipment, and accounts receivable. After entering into the Agreement, APA suffered continuous losses and, in October 2001, began a series of meetings, requested by Transamerica, to discuss APA’s financial future. The Loan Agreement was set to expire on February 28, 2002, at which time the entire loan amount would become due. That Loan Agreement required a 60 day notice from APA to Transamerica for requests to extend the loan. As of the end of 2001, APA had not made a timely request to extend or renew the Loan Agreement.

However, during the month of January 2002, APA sent two separate letters to Transamerica, each requesting additional financing. Neither letter was followed by any action on the part of APA to support the requests, and Transamerica did not provide a credit memorandum or credit approval in response to either letter. Transamerica then formally notified APA that the Loan Agreement would terminate on February 28, 2002, pursuant to its terms. Unable to function without financing, APA notified its employees, in a letter received by the president of the local union on February 14, that the company would permanently close its Philadelphia terminal effective on February 20. APA asserted that it had provided the "shortened" notice because it had been "actively seeking financial assistance to alleviate its severe economic problems."

A number of lawsuits were filed against APA, including one by the company’s employees, who alleged a WARN Act violation. APA asserted a "faltering company" defense to that claim. In order to succeed under that theory, a company must show that it was actively seeking capital or business at the time that the 60-day WARN Act notice would have been required, that it had a realistic opportunity to obtain that financing, that the capital would have been sufficient to avoid the shutdown, and that sending the required 60-day notice would have precluded it from obtaining the financing.

The district court granted summary judgment to the company, based on the faltering company defense. On appeal, however, the Third Circuit reversed, and found in favor of the employees on that issue. First, the court held that the faltering company exception is to be construed narrowly, and that it requires proof that the company was "actively seeking" financing at the time that the 60-day notice was required to have been given to employees. APA was unable to provide that proof. On the date 60 days prior to the February 20 terminal closing, the company had made no formal request for financing from Transamerica or any other financial backer. In addition, the court held that the words "actively seeking" should be construed literally, and found that meetings called by Transamerica to discuss loan status, and correspondence without follow-up were insufficient to demonstrate that level of engagement. In spite of the fact that APA knew that the Loan Agreement was to expire on February 28, 2002, it made no formal request for extension, nor did it take other steps to secure financing. The court characterized APA’s efforts as "waiting for Transamerica to offer additional financing," and found that action to be insufficient to meet the interpretation of the term "actively seeking" financing.

In these difficult financial times, companies contemplating plant shut-downs or large lay-offs should have a clear recognition of the pre-conditions and requirements set forth in the WARN Act. Companies seeking to assert an available exception or defense to the requirements of the Act should work closely with legal counsel, human resource personnel, and funding sources in order to avoid the financial penalties associated with violation of that Act.

Issue: Employer’s directive for inpatient alcohol treatment does not violate ADA

For the week of September 1, 2008

An employee may be entitled to the protections of the Americans with Disabilities Act if he is "regarded as" disabled by his employer. An employer regards an employee as disabled when it mistakenly believes that the employee’s impairment substantially limits his ability to work. The "regarded as" provision of the ADA was meant to combat erroneous views related to impaired individuals, and to keep employers from basing employment-related decisions on myths or stereotypes.

Recently, the 8th U.S. Circuit Court of Appeals upheld judgment in favor of an employer who terminated an individual’s employment after the employee refused to enter an in-patient alcohol treatment program recommended by a psychologist. Although the employee claimed that the termination was based upon a "perceived" disability in violation of the ADA, the Eighth Circuit found that because the mandatory inpatient treatment was based upon the recommendation of a qualified medical provider and not upon myths or stereotypes about the disabled, it did not establish a perception of disability and, therefore, was not a violation of the ADA. Kozisek v. County of Seward, Nebraska, 8th Cir., No. 07-3682, Aug.,27, 2008.

In 1994, after 13 years of employment with Seward County, Nebraska as a weed control officer, Fredrick Kozisek applied for and obtained the position of County Veterans Service Officer (CVSO), which included work related to veterans’ issues. However, the job was considered to be a "multi-position" that also included Building and Grounds supervisor and General Assistance Administrator. During his tenure as CVSO, Kozisek and the County disagreed on the nature of the job, with Kozisek arguing to devote more time to veterans’ issues, and less to the other two portions of the position. Kozisek himself is a Vietnam veteran, and suffers from Post Traumatic Stress Disorder, for which he regularly took medication. Kozisek did not inform his employer of his PTSD.

One evening in July 2005, having failed to take his prescribed medication for a number of days, Kozisek left work early and began drinking. Under the influence of alcohol he then shot a number of his family’s farm animals, including the family dog, and subsequently threatened his wife. He was arrested the next morning by the County Sheriff. Based on the incidents, the County and Kozisek agreed that Kozisek would get a psychological/substance abuse evaluation. After a meeting with Kozisek, a mental health practitioner from the Veterans Administration recommended that Kozisek complete inpatient alcohol treatment. Kozisek did not want to undergo inpatient treatment, and informed the County that he would prefer outpatient counseling and AA meetings. The County then informed Kozisek that he had 10 days to enroll in an inpatient treatment or lose his job. Kozisek refused, and his employment ultimately was terminated.

Kozisek then filed a lawsuit claiming, in part, that he was fired because the County regarded him as disabled by alcoholism, as evidenced by its requirement that he complete inpatient treatment as a condition of his continuing employment. The lower court granted summary judgment in favor of the County. That decision was upheld on appeal by the Eighth Circuit, which found that the County’s decision was "not based upon misconceptions, myths or stereotypes" related to Kozisek’s drinking problem. Rather, it was based upon a licensed mental health therapist’s recommendation of inpatient treatment. According to the Court, the County’s insistence that Kozisek fulfill that recommendation does not violate the ADA’s prohibitions on regarding employees as disabled.

The "regarded as" provision of the ADA was meant to combat "archaic attitudes, erroneous perceptions, and myths" working to the disadvantage of the disabled or perceived disabled. According to the Court, then, "[i]f a restriction is based upon the recommendations of physicians, then it is not based upon myths or stereotypes about the disabled and does not establish a perception of disability." The County’s success in this case was based on the fact that it obtained an opinion from a mental health professional after an incident that involved a violation of law by Kozisek, and then acted upon that recommendation, without making independent judgments related to Kozisek’s impairment or to that impairment’s effect on his ability to function in any particular major life activity.

Issue: The USERRA supersedes employer’s “fitness for duty” procedures

For the week of August 25, 2008

The Uniformed Services Employment and Reemployment Rights Act (USERRA) was enacted to protect the rights of veterans and members of the uniformed services, and is broadly construed in favor of those individuals. The Act specifically states that a returning veteran must be "promptly reemployed" after an honorable discharge from military service and requires that, in most cases, reinstatement is made to the position which the individual would have held had he or she not left for military leave. The 6th U.S. Circuit Court of Appeals has held that a police department’s delay in re-employing a returning Army reservist violated the USERRA, even though the delay was based upon the employee’s suspected dishonesty. Petty v. Metropolitan Govt. of Nashville-Davidson County, 6th Cir., No. 07-5649, Aug. 18, 2008.

Brian Petty was a member of the Army Reserve with the Army National Guard. In 1991, Petty was hired by the Metropolitan Government of Nashville-Davidson County ("Metro") as a police officer. In October of 2003, Petty’s unit was called up to active duty in Operation Iraqi Freedom. Petty was assigned to Camp Navistar in Kuwait, where he was in charge of running a section of that camp. In mid-2004, an inspector discovered a five-gallon container of homemade wine during an inspection of Petty’s quarters. Although Petty claimed that his supervisor asked him to manufacture the wine, he ultimately admitted some personal use and also admitted sharing some alcohol with a female enlisted soldier, both of which were against the Military Code of Justice. After his arraignment, Petty submitted a request to resign his commission. Upon his resignation, the charges against him were dismissed and Petty was discharged "under honorable conditions (general)" on February 1, 2005.

On February 28, 2005, Petty visited Metro to request re-instatement to his position. On that date, the Police Department instituted a return-to-work process, which was applied to all officers returning from an extended leave, regardless of the reason for that absence. As part of that process, Petty provided to Metro an incomplete copy of his discharge form DD-214 (minus the language related to the specifics of the charges against him), but signed a form which would have allowed Metro to obtain all of his military paperwork.

During the three weeks of the return-to-work process, Petty did not receive any salary or benefits. Upon his return to work in March, Petty was assigned to an office job, and not to his original position. At that point, Metro initiated a formal investigation centering on a charge that Petty was untruthful in his return-to-work paperwork. In spite of the fact that Metro determined the charge to be "unfounded" and returned Petty to work, the head of the Police Department’s Office of Professional Accountability (OPA), Kennetha Sawyers, continued to look into the issue, and ultimately obtained a complete copy of the DD-214, which indicated the reason for Petty’s resignation from the Army to be "in lieu of trial by court martial." Sawyers then began a second investigation, and Petty continued his desk-job assignment.

Petty filed a lawsuit alleging that Metro delayed his rehiring and then did not properly reinstate him, both in violation of the USERRA. When the lower court granted summary judgment in favor of Metro, Petty appealed. The Sixth Circuit reversed, finding in favor of Petty. The appellate court based its decision on the fact that Petty had fulfilled the criteria for reinstatement – his request for reemployment was timely, and his discharge was "honorable" – but that Metro did not comply with the Act’s requirement to promptly reinstate Petty to his former position. When Metro raised Petty’s possible dishonesty as a defense, the Court responded by reminding Metro that the USERRA allows an employer to terminate a former serviceman for "cause" after reemployment, but does not allow an employer to use that same "cause" as an excuse not to reinstate that individual at all.

This decision was based upon the amount of time it took to reemploy Petty and the fact that he never was re-placed into his former position, in spite of the lack of evidence that he was able to do that job. Although Metro isn’t ruling out further action in this matter (it could ask for a hearing of the entire Court, since this matter was decided by a single judge), the decision that USERRA does not permit a delay in reinstatement is noteworthy. While the argument that a police department should be able to "screen" returning employees for safety reasons has some intuitive logic, the Court’s language was clear and uncompromising: "Metro was not permitted to limit or delay Petty’s reemployment by requiring him to comply with its return-to-work process." Employers should be aware that the language of the USERRA expressly states that the Act supersedes any policy, plan, or practice that limits the rights or benefits accorded to returning military personnel.

Issue: Third party “peer review” records not always relevant in employment discrimination claim

For the week of August 18, 2008

The production of otherwise-confidential documents in employment discrimination cases continues to be addressed by federal courts at an increasing rate. The issue typically pits state-law protection for "peer review" documents against federal anti-discrimination laws and regulations, and has generated growing controversy among health care providers who routinely rely on the state-law protection afforded to such information. A federal district court in Michigan recently addressed a plaintiff/physician’s discovery subpoena to a non-party hospital for peer review records of "similarly situated" physicians, and granted that hospital‘s motion to quash the subpoena. The court skirted the issue of peer review protections, however, by simply finding that the documents requested were "not relevant" in the discovery phase of the case. Zamorano v. Wayne State University, E.D. Mich., No. 07-12943, Aug. 1, 2008.

Lucia Zamorano filed a lawsuit, claiming that she was terminated from her employment with Wayne State University (WSU) and with the University Neurological Surgeons (UNS) because of her gender. In the course of that legal action, Zamorano issued a subpoena to non-party POH Medical Center seeking peer review records for a number of UNS-related physicians, some of whom had been granted hospital privileges by POH. (Peer review records include information related to the doctor’s application for professional privileges, as well as the hospital’s determination regarding that application.) POH objected to the production of those records, arguing that such information was not relevant to Zamorano’s claims.

The court agreed with POH and granted the motion to quash. However, its decision was not based upon any specific state-law peer review protection, but rather on the scope of the applicable federal rule.

Zamorano alleges that she was treated differently than male physicians who were similarly situated to her. She requested peer review documents from POH in an attempt to affirmatively prove that she was as qualified or more qualified than the male doctors who were not terminated by WSU and UNS. Under the applicable federal rule - Federal Rule 26(b)(1) – parties may obtain any information that is "relevant" to that party’s claim. Such information does not, on its own, have to be admissible at trial, so long as it "appears reasonably calculated to lead to the discovery of admissible evidence."

The court reviewed Zamorano’s claims, reviewed the scope of the request for information from POH, and determined that the documents sought would not lead to admissible evidence. The court specifically stated that in order to prove discrimination, Zamorano would have to prove how WSU and UNS viewed the qualifications of the other doctors when WSU and UNS made determinations to hire or granted privileges to them. Information considered by other hospitals regarding the qualifications of those individuals would not be relevant, even under the broad scope of Rule 26(b)(1) and, therefore, POH’s motion to quash the subpoena was granted.

This decision once again adds to the confusion generated by the intersection of federal anti-discrimination laws and state-law protections for peer review information. Although the court made its decision based upon the wording of the applicable federal rule, it did not ignore the sensitive nature of peer review records. The court stated that the "shield of confidentiality" that normally protects peer review documentation "justifies greater caution for the Court in exercising its discretion regarding exposing the records to public scrutiny." Such language indicates an awareness of the importance of the state-law protections, and a willingness to protect the documentation when necessary, as in this case.

Issue: The USERRA does not pre-empt an employment contract’s arbitration clause

For the week of August 11, 2008

Federal law favors arbitration of disputes. While the U.S. Supreme Court has held that statutory claims - including employment-related issues – generally are subject to arbitration, it has not specifically addressed the arbitrability of claims under the Uniformed Services Employment and Re-employment Act (USERRA). Until recently, in fact, only one federal appellate court had addressed that issue, and had determined that claims related to the USERRA are subject to arbitration, if arbitration is required under a written agreement. Garrett v. Circuit City Stores, Inc., 449 F.3d 672 (5th Cir. 2006). Recently, the 6th U.S. Circuit Court of Appeals reached the same conclusion, finding that an optometrist who was called to military duty was required to arbitrate his claims related to demotion and earnings. Landis v. Pinnacle Eye Care, LLC, 6th Cir., No. 07-6204, August 11, 2008.

Dr. Timothy Landis, an optometrist, brought a law suit against Pinnacle Eye Care alleging employment discrimination based, in part, on his military service. Landis claimed that when he was called to active duty in Afghanistan, he negotiated certain employment terms that were to go into effect upon his return. However, neither Landis nor Pinnacle amended Landis’ existing written employment agreement to reflect those terms. Landis alleged that upon his return from Afghanistan, Pinnacle refused to honor the additional terms; he then filed a lawsuit claiming violation of the USERRA. The district court granted the company’s motion to stay the law suit, and ordered the matter to arbitration, based upon an arbitration clause in the original agreement. Landis appealed that decision to the Sixth Circuit, claiming that his rights to proceed under the USERRA would preclude arbitration.

After reviewing the situation, the Sixth Circuit affirmed the lower court’s decision. It did so based upon the wording of the agreement between Landis and Pinnacle, in which Landis agreed to resolve "any controversy, dispute or disagreement" related to the employment relationship, and which could not otherwise be amicably negotiated, through arbitration.

While Landis argued that the USERRA pre-empted the arbitration clause, the Sixth Circuit disagreed. It pointed out the Supreme Court’s view that, although not every statutory claim may be appropriate for arbitration, parties who agree to arbitrate claims should be held to that agreement "unless Congress itself has evinced an intention to preclude waiver of judicial remedies for the statutory rights at issue." The Sixth Circuit then addressed the USERRA in some detail, and determined that nothing in the statutory language or legislative history of that Act demonstrated a Congressional intent to preclude arbitration. The Court also found that arbitration provides a fair opportunity for a claimant to present and prevail on a claim of a USERRA violation and that, therefore, arbitration of such claims is appropriate.

This decision is of interest to both employers and employees, and applies in any situation in which the terms and conditions of a work-related relationship are governed by a written agreement – including, arguably, an independent contractor situation. Parties to such agreements should be aware of the parameters of dispute resolution included in written agreements, and should be prepared to act consistently with those agreed-upon mechanisms before proceeding to lengthy and expensive litigation.

Issue: Designation as “joint employer” requires some control over the work or working conditions of the employee

For the week of August 4, 2008

The Family and Medical Leave Act (FMLA) makes it unlawful for any employer to interfere with an employee’s rights under that Act. Although the Act itself does not address situations in which multiple entities may be viewed as "joint-employers" for purposes of the FMLA, the Department of Labor (DOL) has issued regulations setting out situations in which joint-employer liability may be found. Those situations typically involve circumstances in which an individual employee has a relationship with more than one company, including, for instance, the assignment by a placement agency of a temporary/contract employee to a second entity. If the placement agency determines the rate and method of pay, while the second company determines the work schedule and amount of supervision needed, those two companies might be deemed to be "joint-employers" for purposes of the FMLA. This issue becomes especially important when one of the two entities has less than the requisite "50 employees within a 75-mile radius" to come within the purview of the FMLA, but when added to the second company, falls within the applicable number of employees.

Recently, the 7th U.S. Circuit Court of Appeals addressed the joint-employer issue for the first time, and held that an emergency communications center was not a joint-employer with the city and county that financed and sponsored the center. Moldenhauer v. Tazewell-Pekin Consolidated Communications Center, et al., 7th Cir., No. 07-1118, July 31, 2008.
The City of Pekin and the County of Tazewell, both in Illinois, created a non-profit corporation in 1976 to provide emergency 911 communication services at an affordable rate. The entity, Tazewell-Pekin Consolidated Communications Center (referred to as "Tazcom"), serves 38 public and private entities. Denise Moldenhauer began working at Tazcom in 1983. After Moldenhauer was diagnosed with chronic pancreatitis in 1991, she began to miss work because of acute flare-ups. As her illness progressed, she missed additional amounts of work, and in 1998, Tazcom’s Executive Director (Thompson) began to express his concern over the amount of work being missed.

In May 2002, Moldenhauer notified Thompson that she wished to take leave under the FMLA. That request was denied, and Moldenhauer filed a complaint with the DOL. The DOL investigated the issue, and sent a preliminary letter, designating Tazcom, Pekin, and Tazerwell as joint-employers under the FMLA. In January 2003, Thompson suspended Moldenhauer for 20 days due to absenteeism, and ultimately terminated her employment in April 2003, when she continued to miss work.

Moldenhauer filed suit in federal court against the City, the County, and Tazcom, alleging violation of the FMLA. The district court granted summary judgment for defendants, finding that neither the City nor County controlled Moldenhauer’s work, and that Tazcom did not have sufficient employees to be liable under the FMLA. Moldenhauer appealed, but the decision was upheld by the Seventh Circuit.

The Court’s decision was premised on the fact that although the bulk of Tazcom’s operating funds are derived from the two municipal entities, that its offices are in space rented from Pekin, that its employees contract with Pekin for health and life insurance, and that its payroll was managed by Pekin, Tazcom is run by an Executive Director unaffiliated with either Pekin or Tazewell County. The Executive Director manages the day-to-day operations, including assignments and schedules, hiring and firing of employees, and the creation of a budget for the operation of Tazcom. Although multiple entities can be viewed as joint employers when each share the employee’s services or exert control over those services, in this case, neither the City nor the County was involved in Moldenhauer’s actual work. Therefore, the Court determined that the number of individuals employed directly by Tazcom (23) could not be consolidated with any other entity to create the requisite number of employees necessary to trigger FMLA liability. On that basis, the Court affirmed summary judgment in favor of the defendants, and dismissed Moldenhauer’s FMLA claim.

This case should be of particular interest to companies that "share" employees with a placement agency or other potential joint-employer. An entity with no direct involvement or control of an individual’s actual work is not likely to be deemed a joint-employer. However, such entities also should be aware that under the rationale of this case, a company can be a joint-employer by reason of its control of any aspect of an individual’s work, whether or not that control includes the ability to hire or fire the employee. Based on that fact, specific attention should be paid to issues related to medical leaves that might implicate FMLA rights and obligations, whether or not a company is the direct employer of the individual requesting the leave.

Issue: The HCQIA immunizes participants from money damages in an objectively conducted peer review action

For the week of July 28, 2008 – special healthcare law edition

In 2006, a federal district court allowed to stand a verdict for $22.5 million in favor of a cardiologist who sued a hospital and a department chairman after a five-month suspension of his cardiac catheterization lab (cath lab) and echocardiography privileges. See Poliner: A Texas-Sized Credentialing Verdict for Physicians, at (http://www.medlawblog.com/archives/-credentialing-poliner-a-texassized-credentialing-verdict-for-physicians.html). In a highly-anticipated decision, the 5th U.S. Circuit Court of Appeals has overruled that verdict, holding that the hospital and individuals involved in the peer review process are protected from money damages by the Health Care Quality Improvement Act (HCQIA). Poliner v. Texas Health Systems, 5th Cir., No. 0-11235, July 23, 2008.

Dr. Lawrence Poliner, an interventional cardiologist with a solo practice at Dallas’ Presbyterian Hospital, came under peer review after a number of patient issues were brought to the attention of Dr. James Knochel, chairman of the hospital’s Internal Medicine Advisory Committee (IMAC). After Knochel was presented with four different patient issues in 1998, he consulted with various hospital administrators and IMAC members, and determined that an “abeyance” – a temporary restriction – of Poliner’s cath lab privileges was necessary to allow an investigation as provided in the Medical Staff bylaws. Poliner was subjected to an abeyance, and then an extension of that abeyance, while the investigation proceeded. Upon completion of the investigation, the IMAC unanimously agreed that Policer’s cath lab and echocardiography privileges should be suspended. Although Poliner ultilized each internal appeal process available to him, each upheld the suspension, although his privileges ultimately were reinstated with conditions after five months.

In May 2000, Poliner sued Knochel, the hospital, and other physicians with roles in the peer review process. The defendants moved for summary judgment on multiple grounds, including immunity under the HCQIA. The district court analyzed the case as involving two separate peer review actions – the first consisting of the abeyance periods, and the second consisting of the five-month suspension. It entered summary judgment in favor of all defendants on the ultimate suspension, but denied summary judgment on the abeyance-related peer review process against the hospital, Knochel and two other doctors. That case was heard by a jury, which entered the “Texas-size” verdict referred to above, assigning monetary damages to Poliner’s state-law defamation claim. The defendants asked the district court for judgment notwithstanding the verdict (“JNOV”), which was denied. They then appealed to the Fifth Circuit, which reversed that denial and entered judgment in favor of the defendants, ending a 10-year saga of medical credentialing and peer review disputes.

The Fifth’s Circuit’s decision was based on a detailed analysis of the application of HCQIA to the facts of this matter. Congress passed the HCQIA to “improve the quality of medical care” by granting limited immunity from lawsuits for money damages to participants in professional peer review actions. In order for that immunity to apply, a “professional review action” must be taken: (1) in the reasonable belief that the action was in furtherance of quality health care; (2) after a reasonable effort to obtain the facts of the matter; (3) after adequate notice and hearing procedures are afforded; and (4) in the reasonable belief that the action was warranted by the facts known after a reasonable effort to obtain those facts. The Act includes a presumption that a peer review action meets those standards, unless that presumption is rebutted “by a preponderance of the evidence.” The Court then analyzed the “abeyances” imposed on Poliner under that criteria, and found that the participants were protected against monetary damages.

First, the Court found that Knochel’s imposition of the initial abeyance was taken in the reasonable belief that the action was in furtherance of quality health care. At the time of that decision, Knochel was aware of a number of recent patient issues involving Poliner; at the time of the extension of that abeyance, Knochel had become aware that a review of 44 cases indicated that Poliner had given substandard care in more than half. Based on those facts, the Court concluded that the defendants’ belief that restricting Poliner’s privileges during the investigation would further quality health care was objectively reasonable.

Next, the Court reviewed the totality of the circumstances, and found a reasonable effort of the part of defendants to “obtain the facts of the matter.” Poliner argued to the Fifth Circuit that at the time of the abeyance, there was insufficient evidence to label him as a “present danger” under the hospital’s bylaws. In one of the most interesting – and likely to be controversial – holdings in the case, the Court pointed out that immunity under the HCQIA is “not coextensive with compliance with an individual hospital’s bylaws.” Provided that a peer review process complies with the standards set out in the HCQIA, a failure to comply with a hospital’s bylaws does not automatically defeat a peer reviewer’s right to immunity from damages.

Third, the Court reviewed the procedural requirements imposed by the HCQIA to determine whether Poliner received the required adequate notice and hearing procedures. It cited an exception within the Act that allows an “immediate suspension or restriction of clinical privileges, subject to subsequent notice,” where the failure to impose such restriction may result in imminent danger to patients. The Court went on to find that the defendants were warranted in concluding that failing to impose temporary restrictions on Poliner may have led to that “imminent danger,” and that, therefore, the notice provided to Poliner regarding the abeyances was adequate to satisfy the HCQIA.

Lastly, the Court found that the abeyances were “tailored to address the health care concerns” that were being raised. The fact that the abeyances related only to the cath lab – leaving Poliner’s other privileges unaffected – made the restrictions reasonable.

According to the Court, Poliner failed to rebut the statutory presumption that the peer review actions taken were compliant with HCQIA. Because the defendants were therefore immune from money damages under that Act, the district court’s judgment was reversed and judgment was rendered for the defendants. While this particular long-fought battle may be reaching an end, questions related to the peer review process abound, including the confidentiality of peer review documentation in employment-related federal lawsuits, the interplay between hospital bylaws and the fairness of peer review processes, and how the Joint Commission’s revisions to MS.1.20 can best be utilized to affect the composition of a fair hearing committee. Healthcare entities, including both hospitals and physician groups, should be aware of these issues and of ongoing developments related to each, in order to effectively avoid unnecessary litigation and liability.

Issue: President Bush signs new military tax break bill into law

For the week of July 21, 2008

A military bill that both sets forth new tax benefits and extends existing benefits was signed into law in June 2008 by President Bush. The Heroes Earnings Assistance and Relief Tax Act of 2008 ("HEART") provides certain tax benefits and affects 401(k) plans and health flexible spending accounts for active-duty military service personnel and their families.

The HEART Act permits (but does not require) sponsors of Cafeteria Plans with a health flexible spending arrangement to allow participants called to active duty to take distributions of the unused balance in their health flexible spending accounts, instead of mandating forfeiture of unspent monies in those accounts. Now, participants called to active duty may take a distribution of their unused balance to avoid forever losing the contributions. In addition, under the new Act, survivors of those who die during active military duty can put all or part of the death gratuity payments into a tax-deferred savings or retirement plan, even if the contribution puts them over the allowable annual limit. Further, National Guard and reservists can make penalty-free withdrawals from personal retirement plans.

Under HEART, small businesses that employ National Guard and reserve members, and that have agreed to pay the differential between salaries and military pay for employees called to active duty now can receive up to $4,000 in tax credit to offset those payments. Many employers gratuitously provide active duty employees a regular paycheck in the amount of the difference between the employee’s military pay and his or her regular salary. Pre-HEART, this created several administrative issues, as the IRS did not view the differential pay as wages, but rather as supplemental income. Under Section 415 of the Tax Code, a retirement plan may, but is not required to, treat such differential pay as "compensation". The new bill resolves that contradiction.

Now, any payments made by an employer after December 31, 2008 to an employee on active duty for a period of more than 30 days will be treated as "differential wage payments" to the extent the payments represent all or a portion of the wages the individual would have received from the employer absent being called to active military service. Any such payments will be subject to federal withholding rules and will be reportable as W-2 wages. Further, a participant on active duty who is treated as an employee due to receipt of differential wage payments is still entitled to take advantage of the rule allowing for distributions from a qualified plan, 403(b) plan or 457 plan upon commencement of military leave lasting at least 30 days.

The law also would modify the Uniformed Services Employment and Re-employment Rights Act (USERRA) to the extent that an individual who dies or becomes disabled while performing qualified military service will now be viewed as resuming employment in accordance with USERRA on the day preceding death or disability. HEART requires employers to make the applicable amendments to formal retirement plan documents and corresponding summary plan descriptions.

Issue: Employer’s inclusion of FMLA benefits in handbook may bind company, even without the requisite 50 employees

For the week of July 21, 2008

Under the Family and Medical Leave Act (FMLA) a qualified employee is one who has worked for at least 1250 hours during the previous 12 months. In addition, an employer is subject to the FMLA if it has at least 50 employees within a 75 mile radius. Recently, the 7th U.S. Circuit Court of Appeals held that an employee can proceed with state-law claims for breach of contract or promissory estoppel based on handbook language granting FMLA-type leave, even though the employer had less than 50 employees. Peters v. Gilead Sciences, Inc., 7th Cir., No. 06-4290, July 14, 2008.

Steven Peters was employed by Gilead Sciences as a pharmaceutical sales representative when he suffered a work-related injury in 2001. He re-aggravated the injury in 2002, and underwent corrective surgery in December of that year. At that time, he took what he thought was FMLA leave for 12 days. The day after beginning his leave, Peters received a letter from Gilead, stating the terms of his "FMLA" leave, and informing him of his right to reinstatement after leave. The letter tracked language that was set forth in the company’s employee handbook regarding employees’ entitlement to family and medical leaves. Although the letter and the handbook both included the 1250 hour/12 month language, neither included the 50-employees-within-a-75-mile-radius ("50/75") language and, in fact, Gilead did not have 50 employees within a 75 mile radius.

Peters returned to his position on December 16, 2002. In March, 2003, Peters began to experience an adverse reaction to his medication and took a second leave from March 4 until May 5, 2003. At that time, a letter was sent to him setting forth the terms and conditions of the leave, and again the letter omitted the 50/75 language. However, Peters did not receive this second letter.

In April of 2003, Gilead decided to replace Peters with another employee. On April 25, Gilead sent a letter to Peters, designating him as a "key" employee. Under the FMLA, that designation - which includes the highest paid 10% of all salaried employees – allows a company to replace such a key employee rather than hold his position open. The letter advised Peters that his position had been filled, but offered an alternative position to him, which he declined.
Peters then filed suit against Gilead, alleging a number of claims, including FMLA and state-law claims. Gilead filed a motion for summary judgment, which was granted on all claims except for Peters’ FMLA claim. His state-law promissory estoppel claim was not addressed – instead the lower court incorrectly allowed Gilead to re-characterize that claim as an "equitable estoppel" response to Gilead’s affirmative defenses. Gilead then filed for reconsideration, which the court granted, dismissing the FMLA claim.

On appeal, the Seventh Circuit pointed out that the lower court "did not address whether Gilead’s promises were actionable as a contract or under promissory estoppel." It pointed out that Peters had filed a state-law claim based upon his own reliance on Gilead’s representations - both in the handbook and the letters - which characterizes his entitlement to leave as based upon the FMLA. Promissory estoppel is applicable to a situation in which a promise may lack the elements of a binding contract, but has induced detrimental reliance on the part of the promisee. In this case, Gilead’s handbook had promised 12 weeks of medical leave, and had repeated that promise in its letters to Peters. Because Peters relied upon those representations, and had assumed that he would be reinstated to his position, the Seventh Circuit remanded the case for consideration of Gilead’s liability under state law.

Employers who do not come within the 50/75 requirement of the FMLA can offer FMLA-like benefits to their employees. However, a decision to offer such a benefit should be made consciously and after discussion with and recommendation from legal counsel regarding the effects and ramifications of such handbook or policy language. To fail to do so may result in unintended liability for damages under state law contract or promissory estoppel claims.

Issue: Second Circuit says employer has a duty to reasonably accommodate employee with an obvious disability, even without a request to do so

For the week of July 14, 2008

The Americans with Disabilities Act (ADA) requires that employers engage in an "interactive process" and to work together with disabled employees to determine whether an employee’s disability can be reasonably accommodated. Recently, the 2d U.S. Circuit Court of Appeals held that Wal-Mart failed to engage in this process when it did not initiate the issue of accommodation with an employee whom it perceived to be disabled. Brady v. Wal-Mart Stores, Inc, et al, 2d Circ., No. 06-5486-cv, July 2, 2008.

Patrick Brady, a 19-year old with cerebral palsy, had worked successfully for two years at a local pharmacy prior to applying for a job in the pharmacy department of a Wal-Mart store in Centereach, New York. At the time of that application in 2002, Brady signed a document that stated that he could perform the tasks associated with the position of a Wal-Mart pharmacy assistant, "either with or without a reasonable accommodation." Brady was hired for the job, and was instructed to stock pharmacy merchandise and hand out prescriptions. However, Brady’s supervisor immediately appeared to be unhappy with his performance, and told him to "speed it up." While his work was done slowly, Brady did not hand out the wrong prescriptions, nor did he require assistance from anyone to perform the job at that time. At the end of his first shift, Brady requested a schedule for the upcoming week. Although Brady’s supervisor told him that she would call him with a schedule, she did not. Brady worked two more days in the pharmacy without incident and, at the end of the second day, asked again about a schedule. Again, the supervisor said she would call him; and again, she failed to do so. When Brady returned to the store to talk to her directly, the supervisor sent him to the personnel department. The personnel manager told Brady that he was being transferred out of the pharmacy, and that the only available position was collecting shopping carts and garbage in the parking lot. Brady understood the re-assignment to be a demotion, and felt that he was even less suited to it than to the position of pharmacy assistant.

After Brady’s transfer, his father approached the assistant store manager to discuss the situation. During that discussion, the manager mentioned that new employees typically were given a training period and that Brady had not been provided enough time to learn the pharmacy job. However, he then transferred Brady to the food department, where Brady was not provided with instructions or training and was not given the option of returning to the pharmacy. Brady also was given a work schedule that conflicted with his community college schedule, even though he had notified Wal-Mart of that limitation on his availability at the time of his employment application. Frustrated, Brady quit his job on the following day.
Brady then sued Wal-Mart, alleging violation of both the ADA and the New York Human Rights Act. He brought a number of claims, including a claim that Wal-Mart had filed to reasonably accommodate his disability. The case proceeded to trial, and the jury found in Brady’s favor on number of claims, including his failure-to-accommodate claim. Based on its findings, the jury awarded damages to Brady that ultimately amounted to $600,000 in compensatory damages, and $300,000 in punitive damages.

On appeal, the Second Circuit addressed a number of issues, including whether the district court erred in not granting Wal-Mart’s motion regarding judgment on Brady’s failure-to-accommodate claim. Wal-Mart argued that because Brady had never requested an accommodation and had testified that he did not think he needed one, the district court should have granted judgment as a matter of law on that claim. The Second Circuit disagreed, holding that while it is generally the responsibility of the disabled individual to inform the employer that an accommodation is needed, an employer who is aware of or perceives a disability is obligated to provide a reasonable accommodation for that known or perceived impairment.

This holding has the potential to complicate an already unsettled issue for employers, when it applies - as in Brady’s circumstance - to a situation in which an employer views an employee as disabled, but the employee does not perceive himself to need an accommodation. Employers should be aware of this interpretation of the ADA’s requirement for an "interactive process" and should request assistance from both human resource managers and legal counsel when faced with an impaired employee who might require reasonable accommodation in order to do his or her job.

Issue: Confidentiality provision in employment agreement may violate federal labor law

For the week of July 7, 2008

The National Labor Relations Act (NLRA) prohibits work rules that restrict discussion of wages or working conditions among employees or with a union, or rules which might "reasonably be construed" to restrict such discussions. Recently, the National Labor Relations Board held that a temp agency violated the NLRA by including a confidentiality provision in the employment contract between the temp agency and a temporary worker, and by terminating the worker for his violation of that provision. The Board held that the provision was unlawful because employees reasonably could construe it as restricting discussions with union representatives. In re: Northeastern Land Services, Ltd. and John Dupuy, NLRB Case No. 1-CA-39447, June 27, 2008.

Jamison Dupuy was employed by Northeastern Land Services (NLS), a temp agency, as a right-of-way agent to perform activities related to land acquisition for El Paso Energy, which was a client of NLS. At the outset of his assignment with El Paso, Dupuy was required by NLS to sign an employment agreement that included the following confidentiality language: "Employee also understands that the terms of this employment, including compensation, are confidential to Employee and the NLS Group. Disclosure of these terms to other parties may constitute grounds for dismissal."

During the course of the El Paso project, Dupuy experienced delays in getting paid. Because he felt that NLS was not helping him to resolve the problem, Dupuy told NLS that he was going to raise the issue directly with El Paso. Ultimately, Dupuy did contact El Paso, raising the late payment issue as well as another compensation issue related to reimbursement for the use of his personal computer. He also followed up with an e-mail to NLS on which he copied El Paso, mentioning the computer issue. NLS then terminated Dupuy’s employment, stating that he had "not lived up to [his] end of the bargain" when he failed to comply with the confidentiality provision of his employment agreement by discussing compensation issues with El Paso.

Dupuy’s claim was first heard by an Administrative Law Judge (ALJ), who dismissed the complaint. The ALJ found first that the confidentiality provision did not restrict NLS’ employees’ ability to discuss the terms of their employment with one another. He further found that although the provision did restrict the employees’ right to discuss terms and conditions of employment with third parties, NLS had proffered a legitimate business justification that outweighed the restriction on employees’ rights when it stated that it is engaged in a very competitive industry in which confidentiality of such terms and conditions is critical. Second, the judge determined that since the confidentiality provision was not unlawful, NLS did not violate the NLRA when it terminated Dupuy’s employment.

The Board reversed the ALJ’s decision, concluding that the NLS confidentiality provision was unlawful because employees reasonably could construe the language – which precluded discussions of compensation and other terms of employment with "other parties" – as prohibiting discussion with union representatives about those issues. Further, because an employer’s imposition of discipline pursuant to an unlawful policy constitutes a violation of the NLRA, Dupuy’s termination was found by the Board to have been unlawful.

Based upon its findings, the Board ordered injunctive relief that included rescission of the confidentiality language in the NLS agreements, along with restatement of Dupuy, and all references to his termination deleted from his personnel file. In addition, NLS was ordered to "make Jamison Dupuy whole for any loss of earnings and other benefits" caused by NLS’ actions.
Employers that routinely include confidentiality language in employment agreements and employee handbooks should periodically review that language to assure that it cannot be interpreted as precluding employees from discussing compensation or other employment terms and conditions with union representatives. Such interpretation can create unintended liability for employers under the NLRA.

Issue: Employer may use subjective criteria to defeat claim of pretext in ADEA case

For the week of June 23, 2008

The Age Discrimination in Employment Act (ADEA) prohibits an employer from failing to hire or promote an individual who is at least 40 years old because of that individual’s age. Once the individual establishes a prima facie case of discrimination – by showing that she was in the protected age group; that she was otherwise qualified for the position; and that a younger person was hired to fill the position – a legal presumption arises that the employer unlawfully discriminated against that individual. The burden then shifts to the employer to provide a non-discriminatory reason for the company’s failure to hire. The employee can demonstrate that the proffered reason was a "pretext" for discrimination by presenting evidence indicating that age was a determinative factor in the adverse employment decision.

When an employer fails to hire or promote an over-40 year old employee, and contends that the selected (but younger) candidate was more qualified, a comparative analysis of the qualifications is necessary to determine whether a jury could disbelieve the employer’s proffered reason for its decision. Often, however, an employer’s evidence consists of subjective evaluations of the candidates’ qualifications. Because such subjective information can be easily fabricated after-the-fact., courts typically will not allow an employer to rely exclusively on subjective criteria to avoid a finding of pretext.

Recently, the 8th U.S. Circuit Court of Appeals affirmed a lower court’s summary judgment in favor of a school district that relied largely upon subjective criteria to support its failure to promote a 60 year old teacher. Wingate v. Gage County School District, 8th Cir., No. 07-3492, June 16, 2008.

In that case, Nancy Wingate worked as a part-time teacher for the Gage County School District from 1977 until 2001. In 2001, Wingate decided to return to teaching on a full-time basis, and unsuccessfully applied for four different full-time positions over the next three years. In 2004, she applied for two more full-time positions, but was not interviewed for either of them. The positions were filled by a 28-year-old and a 31-year-old. The District contended that it did not interview Wingate because she was only an "average" teacher, had trouble handling large groups of students, and that the District would have had to hire a replacement to fill Wingate’s part-time position.

Wingate filed suit, alleging violation of the ADEA. In response, the District filed a motion for summary judgment. Because the District conceded that Wingate was able to set forth a prima facie case, a legal presumption arose that the District had discriminated against Wingate. The District then was required to provide a non-discriminatory reason for its actions. To satisfy its burden, the District asserted that the individuals hired were "better qualified" for the positions, and that Wingate was only "average," while the District endeavored to hire only "above-average" teachers. In addition to these subjective assertions, the District pointed out that the jobs applied for by Wingate involved large groups of students, and that her prior experience was with small groups of students. Further, the individuals hired had special education certification or experience, and Wingate did not.

Wingate presented no evidence sufficient to refute the District’s proffered reasons for not hiring her, other than to assert that because many of the reasons were subjective, they were simply a pretext for discrimination. However, the Court disagreed, stating that although is has cautioned against the use of subjective criteria, it has not "outright prohibited its use." The Court noted that the District did not rely exclusively on subjective criteria, but also used legitimate educational considerations in making the hiring decisions. Stating that the use of subjective criteria does not automatically give rise to an inference of age discrimination, the Court upheld the dismissal of Wingate’s case.

Employers should not interpret this decision as an invitation to base hiring decisions solely on subjective criteria. Instead, hiring decisions involving a subjective analysis also should include some objective criteria or other business-related considerations in order to avoid the possibility of a finding of "pretext."

Issue: Agoraphobic faculty member could not support ADA/FMLA claims

For the week of June 30, 2008

In an unpublished opinion, the 3d U.S. Circuit Court of Appeals has upheld a lower court’s determination that an associate professor’s termination was appropriate, even though the professor claimed that he was disabled by agoraphobia. Lloyd v. Washington & Jefferson College, 3d Circ., No. 07-2907, June 11, 2008.

Karl Brett Lloyd became an Associate Professor in the Information Technology Leadership (ITL) Department of Washington & Jefferson College in July 2002. In April 2003, the College instituted a policy that full-time faculty members were to be "on campus a minimum of four days per week, for at least four hours per day." However, Lloyd was permitted to spend three days a week on campus and to work from home for the rest of the week because of his agoraphobia. In January 2004, Lloyd took a leave under the FMLA for stress-related medical problems caused, he said, by Dr. Charles Hannon, the Chair of the ITL Department.

Upon his return in February 2004, Lloyd asked for additional accommodation to his schedule, and for certain additional FMLA leave. At that point, the College agreed to transfer Lloyd to a non-teaching position in the Information Technology Services Department, where he could work three days a week under a different supervisor, at his same salary. Lloyd was instructed to report for work at 9:00 a.m. on April 5, 2004 to accept the job. When he failed to report, he was considered to have resigned, and his employment was terminated. Lloyd ultimately filed suit, claiming violation of the ADA and the FMLA.

The district court granted summary judgment in favor of the College. The Third Circuit affirmed that decision, addressing each of Lloyd’s four arguments in turn.

First, Lloyd argued that his "record of impairment," as evidenced in part by his receipt of Social Security Disability benefits, precluded summary judgment on his ADA claim. The Court pointed out that it cannot regard a medical impairment as a "disability" under the ADA if there is no proof that the impairment substantially limits a major life activity. Here, Lloyd did not attempt to show how his receipt of benefits established any such limitation; he therefore failed to support his ADA "record of impairment" argument.

Second, Lloyd argued that he was substantially limited in his ability to think and to interact with others. However, the Court found that argument to be flawed, based on Lloyd’s ability to work and teach for three days a week, as well as to serve as a local borough councilman. Further, according to the Court, if Lloyd actually had been substantially limited in his ability to think and interact with others, he would not be a qualified person with a disability (able to do the essential functions of the job, with or without accommodation), since such abilities are essential functions for a college professorship.

Lloyd’s third argument -- that the College interfered with his exercise of FMLA rights by terminating him – was dismissed by the Court, which found that Lloyd failed to show the "serious health condition" required for an FMLA claim.

Finally, the Court found that Lloyd’s discrimination and retaliation claims failed because Lloyd could not show the requisite "adverse employment action." While Lloyd complained that the school improperly discharged him, the facts show that the College made numerous attempts to accommodate Lloyd, including the initial three day per week schedule, and a transfer away from his original supervisor.

The determinative issue in this case was Lloyd’s inability to support the argument that his agoraphobia created a disability under the ADA, or even a serious health condition for purposes of the FMLA. That fact, coupled with the College’s participation in the required "interactive process" in the form of its offer of a flexible schedule and transfer to another supervisor, supported the Court’s decision to affirm summary judgment in favor of the employer.

Issue: Failure to follow written policy supports claim of age discrimination

For the week of June 16, 2008

In what was characterized by the Court as "a close case," the 10th U.S. Circuit Court of Appeals has reversed a judgment in favor of Alaska Airlines on an issue of age discrimination, and remanded the case for trial. The case arose after an employee revealed his pending retirement plans during an interview for promotion, and then was denied the position. Maughan v. Alaska Airlines, Inc., 10th Cir., No. 07-6198, June 12, 2008.

Curtis Maughan worked as a Quality Control (QC) Supervisor/Representative, responsible for overseeing the maintenance work performed by vendors on the Airlines’ planes. In 2004, Maughan applied for a promotion, and was interviewed for the position. During that interview, Maughan was asked about his "five-year goals." He responded that he planned to retire within that time, as he would be eligible for retirement with the next 18 months. He was not selected for the position. When Maughan subsequently asked his supervisor why he was not promoted, the supervisor told him that "word on the street" was that Maughan did not get the position because he told the interview panel that he planned to retire. One day after that conversation, Maughan received a performance evaluation that was critical of his work performance. Within a month, the supervisor recommended Maughan’s termination.

Although Maughan contacted the company’s human resources manager and reported that he believed that he had been discriminated against and harassed because of his age, Alaska never conducted an investigation into that complaint. Instead, Maughan was offered a severance package in exchange for a release, an offer which he refused. Instead, Maughan filed suit under the Age Discrimination in Employment Act (ADEA). The Airlines moved for summary judgment. The district court granted that motion, finding that Maughan failed to offer evidence that Alaska’s proffered reason for the termination – Maughan’s poor performance – was simply a pretext for discrimination.

Under the now-familiar McDonnell Douglas burden-shifting analysis, once a plaintiff has shown a prima facie case of discrimination, the employer must provide evidence of a legitimate business reason for its actions. In order to carry the ultimate burden of proof, the plaintiff then must show that the proffered reason was simply a pretext for discrimination. Such pretext can be shown by inconsistencies or contradictions in the employer’s reasons, including actions contrary to a written company policy.

In this unpublished opinion, the Tenth Circuit reversed the lower court’s decision, holding that while it was a close case, Maughan put forth enough evidence to undermine the company’s proffered reason for his termination. Maughan was able to show that his March 2005 performance review criticized some of the same characteristics that were praised in a December 2004 review; he showed that an issue included in the March review had actually occurred much earlier in 2004 without prior reprimand or comment; and he presented evidence that the company acted contrary to a written policy when it failed to investigate his complaints of age discrimination.

While Maughan’s evidence of pretext was not "abundant," it was not refuted by the Airlines, and therefore was sufficient to allow the case to go to a fact finder/jury for decision. While many courts have recognized that an employer may make reasonable inquiries into the retirement plans of its employees, this inquiry seemed to have led inexorably to the employee’s termination. In this instance, the company’s failure to follow its written policies was a critical factor in the Court’s decision. Had an investigation been done pursuant to the existing policy, the Airline may have been able to more fully document the issues related to Maughan’s termination, and may then have been able to provide the "uncontroverted independent evidence" entitling it to judgment as a matter of law in this case.

Issue: FMLA does not support retaliation claim by employee who did not actively participate in spouse’s previous FMLA lawsuit

For the week of June 9, 2008

The Family and Medical Leave Act allows employees to take reasonable leave for certain reasons spelled out in that Act. The FMLA includes prescriptive provisions – which create a series of substantive rights, consisting primarily of 12 weeks of unpaid leave – along with proscriptive provisions, which bar employers from penalizing employees and other individuals from exercising rights granted under the FMLA. The 5th U.S. Circuit Court of Appeals recently addressed the issue of whether the anti-retaliation provisions of the FMLA automatically protect the co-worker/spouse of an employee from retaliation, and held that it does not. Elsensohn v. St. Tammany Parish Sheriff’s Office, 5th Cir., No. 07-30693, June 6, 2008.

Lawrence Elsensohn is employed by the St. Tammany Parish Sheriff’s Office as a law enforcement officer, in the rank of sergeant. His wife, Wendelle, also had been employed with that Office, but left her employment after bringing – and settling – an FMLA complaint against that employer. According to Elsensohn, he had not been involved in his wife’s FMLA claim, other than to provide "moral support" to her. Although Elsensohn would have been a witness on his wife’s behalf, he did not have to testify, because the case settled in or around October 2004.

In early 2005, Elsensohn alleged that he was being harassed by the Warden of the St. Tammany Parish Jail, and that the harassment was related to his wife’s FMLA claim. After he reported to Internal Affairs about the harassment, Elsensohn was assured that there would be no further problem. In fact, during the following months, Elsensohn received excellent performance reviews. However, when Elsensohn applied for a number of promotions in 2006, he was denied in each instance. In response to his queries to his supervisor, Elsensohn was told that he would not be receiving a promotion of any kind, and that his chances for advancement were "closed off." Shortly thereafter, Elsensohn was involuntarily placed on a night shift, losing his holiday and overtime pay opportunities. In that position, he also was precluded from seeking secondary and supplemental employment.

In December 2006, Elsensohn filed a lawsuit against the Sheriff’s Office and two individual defendants, alleging that the defendants’ actions interfered with, restrained, and denied his rights under the FMLA. He alleged that the actions were taken as a result of his association with his wife, who had opposed the defendants’ unlawful practices related to her FMLA rights. Specifically, Elsensohn relied on a section of the FMLA that makes it unlawful for an employer to discriminate against an individual because that person "has given, or is about to give, any information in connection with any inquiry or proceeding relating to any right" provided under the FMLA, or has "testified, or is about to testify" in any legal proceeding under the Act.

The defendants moved to dismiss the claims, arguing that Elsensohn’s action was a purely derivative claim, which is not permitted under the FMLA. Further, the defendants argued that Elsensohn did not testify for his wife, nor was "about to testify" on her behalf, since her claim had been settled. The district court agreed with that argument and dismissed Elsensohn’s FMLA claim. The Fifth Circuit upheld that dismissal of the claim, stating that Elsensohn did not satisfy the literal criteria set forth under the statute. First, he had not provided information of any kind in his wife’s FMLA action; in fact, he averred that he had "attempted not to involve himself in his wife’s FMLA claim." Similarly, he never had testified in any proceeding related to his wife’s claim, and was not "about to testify," since her suit was settled prior to the actions of which Elsensohn ultimately complained.

This case may have been decided on a hyper-technical interpretation of the FMLA, but it provides a reminder to employers that the FMLA prohibits retaliation against those who assist others in FMLA claims through evidence and testimony. While courts typically avoid broadening the protections of anti-retaliation statutes through judicial interpretation, employers should recognize that these claims are decided on a case-by-case basis. Had there been evidence of Elsensohn’s participation in his wife’s FMLA legal action, the case may have gone very differently. A careful review of the factual issues associated with retaliation claims is critical prior to taking any adverse employment action against an individual associated with someone who has brought an FMLA claim against the employer.

Issue: Prohibition on union buttons may violate National Labor Relations Act

For the week of May 26, 2008

The 9th U.S. Circuit Court of Appeals has overturned a decision by the National Labor Relations Board related to a hospital’s prohibition on union buttons. According to the Ninth Circuit, prohibiting the buttons violated of nurse/employees’ rights under the National Labor Relations Act. Washington State Nurses Ass’n v. NLRB, 9th Cir., No. 06-74917, May 20, 2008.

Washington State Nurses Association (WSNA) is a union representing approximately 1200 registered nurses at Sacred Heart Medical Center, an acute care hospital in Spokane, Washington. In the fall of 2003, WNSA and Sacred Heart began negotiations for a new collective bargaining agreement, as the then-existing agreement was to expire in January 2004. Those negotiations continued well into 2004, extending past the CBA’s expiration date.

During the period of negotiations, nurses at Sacred Heart wore buttons that included a number of different union-related messages, specifically including one that said: "RNs Demand Safe Staffing." On February 27, the hospital issued a memo that banned the nurses from wearing that particular button in any areas where the nurses "may encounter patients or family members." The memo stated the reason for the prohibition as "patients and family members may fear that the Medical Center is not able to provide adequate care." No nurse was disciplined for wearing that button.

Within a week after the memo, WSNA filed an unfair labor practice charge with the NLRB. After a hearing, an Administrative Law Judge found that the hospital had engaged in an unfair practice by prohibiting the button. A three-member panel of the Board subsequently reversed that decision, finding that "special circumstances" supported the prohibition, since the button’s message could "disturb patients."

A federal appellate court can overturn the findings of an agency such as the NLRB when those findings are not supported by substantial evidence on the record considered as a whole. Applying that rationale, the Ninth Circuit overturned the Board’s decision, with direction to reinstate the ALJ’s original holding in favor of the WSNA. The Court found that the Board has long recognized that union members have a protected right to wear union insignia in the workplace and, in fact, that restrictions on the wearing of union insignia in immediate patient care areas are presumptively invalid, unless special circumstances exist to preclude those insignias. The employer bears the burden of proving such special circumstances, including, presumably, any adverse impact on patient care.

The Ninth Circuit held that there was no evidence in the record to support the hospital’s assertion of "special circumstances," as there was no actual testimony that any patients had been disturbed or upset by the message on the buttons. Although the Board concluded that the button’s "inherently disturb[ing]" message was enough to support a finding of special circumstances, that approach was contrary to the basic principle – specifically cited by the Ninth Circuit – that conjecture is no substitute for evidence. Without more, the hospital did not carry its burden, and the Board’s decision could not stand.

The message to employers is clear: special circumstances justifying a restriction on union insignia must be established by substantial evidence in the record. Speculation or conjecture related to the effect of a union-related message or insignia will not be sufficient to defend against a claim of unfair labor practices. Witness testimony, affidavits by management or HR personnel, and documentation of complaints are evidence of the type that can effectively support such a defense.

Issue: Fifth Circuit limits duty to affirmatively disclose negative information in employment reference

For the week of May 19, 2008

In a case with importance in both healthcare law and employment law, the 5th U.S. Circuit Court of Appeals reversed a lower court decision that would have required a hospital to affirmatively disclose that a physician with privileges to practice at that hospital had left his practice based upon performance issues related to drug use. Kadlec Medical Center v. Lakeview Medical Center, et al, 5th Circ., No. 06-30745, May 8, 2008.

Kadlec Medical Center and its insurer filed a lawsuit against Lakeview Medical Center, and against Louisiana Anesthesia Associates (LAA) and its shareholders. The suit was based upon the employment termination of Dr. Robert Berry – a member of LAA with privileges to practice at Lakeview – who was terminated from LAA after he was determined to have been impaired while under the influence of prescription drugs. In reference letters written by Lakeview Hospital and by members of LAA, Berry’s drug use was not disclosed. Subsequently, Berry applied to work as a locum tenens (temporary physician) at Kadlec Hospital in Washington State.
In October 2001, Kadlec began its credentialing process, and sent a request to Lakeview for information about Berry. Although the request included a detailed questionnaire and a signed consent for release of information, the hospital responded with a short letter that stated that: "Our records indicate that Dr. Robert L. Berry was on the Active Medical Staff of [Lakeview] in the field of Anesthesiology from March 04, 1997 through September 04, 2001." The letter did not disclose any information about Berry’s on-duty drug use, the investigation into that use, or any information about Berry’s termination from LAA. In addition, two LAA physicians submitted letters to Kadlec, one stating that Berry was an "excellent clinician" and would be an "asset" to any anesthesia practice, and the other recommending him "highly" as an anesthesiologist. Kadlec then credentialed Berry.

In November 2002, a patient for whom Berry acted as anesthesiologist at Kadlec suffered complications related to anesthesia, and is now in a permanent vegetative state. The patient’s family sued Kadlec and Berry, and the case was settled for over $7 Million. Kadlec and its insurer then filed a lawsuit against Lakeview, LAA, and the individual doctors who supplied the favorable reference letters. A jury awarded $8.24 Million to plaintiffs, and judgment was entered against Lakeview and LAA. (The judgments against the individual doctors were ascribed to LAA.)

On appeal, the Fifth Circuit upheld the judgment against LAA, but reversed it as to Lakeview. In a detailed opinion, the Court analyzed the claims of intentional misrepresentation and negligent misrepresentation against the defendants. It found that in order to prove either, the plaintiff first must establish an affirmative duty to disclose information.

The Court began by stating that after choosing to write referral letters, the defendants "assumed a duty not to make affirmative misrepresentations" in their letters. It concluded that the LAA defendants did, in fact, make misleading statements, while Lakeview did not. The Court also examined whether the defendants had an affirmative duty to disclose negative information about Berry in the reference letters, and concluded that no such duty existed. Based upon this analysis, the Court reversed the judgment against Lakeview, while upholding the judgment against LAA and its physicians.

Although this case was specifically decided under Louisiana law (which states that a former employer’s negative reference about an employee to a prospective employer can form the basis of a defamation claim), it is noteworthy in a number of respects. It does not stand for the proposition that every inadvertent incorrect statement leads directly to legal liability for a former employer. Instead, it underscores the fact that once an employer undertakes to provide information about a former employee, it may incur liability for misleading or intentionally false statements.

As a credentialing issue, this case is important, based on the fact that the credentialing process includes an original source verification requirement (including information related to licensure and current competence, and health fitness to perform the requested privileges), meaning that Kadlec was obligated to attempt to obtain such information from Lakeview. While the Court’s holding in this case does not modify that obligation, it does seem to excuse Lakeview’s failure to provide available information related to those very issues. Clearly, this is yet another case in which a Court’s employment-related decision may have an unintended but far-reaching impact on healthcare-related situations.

Issue: Employee’s demotion while on intermittent FMLA leave can result in retaliation claim

For the week of May 12, 2008

According to the 7th U.S. Circuit Court of Appeals, a school district’s bookkeeper who was demoted while taking intermittent leave to care for her elderly mother provided evidence that her leave was part of the motivation for her demotion, and therefore sufficiently raised a claim of retaliation under the FMLA. Lewis v. School District #70, et al, 7th Cir., No. 06-4435, April 17, 2008.

Debra Lewis began working as a bookkeeper and treasurer for Freeburg Community School District in Saint Clair County, Illinois in 1997. She performed her job "admirably" until 2004, when both of her parents became terminally ill. After Lewis’ father died in May of that year, Lewis began to care for her mother at home. While Lewis’ supervisor (Dr. Hawkins) was aware that she was missing work to do so, he gave permission for the absences and allowed Lewis to "work from home." However, after a few weeks of this arrangement, Lewis’ schedule began to create problems for the other School District employees, who had to rearrange their own schedules to cover Lewis’ work absences.

At a School Board meeting on June 28, 2004, Dr. Hawkins related to the Board that Lewis’ continued absences were creating difficulties for the School District. While certain Board members expressed the view that a new bookkeeper should be hired, Hawkins dissuaded them and instead, sent a letter to Lewis advising her to resume her regular work schedule. Although Lewis returned to that schedule, she again began missing work in September and October to care for her mother.

At the October Board meeting, Lewis’ absences again were discussed. This time, Hawkins also mentioned that Lewis was experiencing performance problems cause by the absences. When a Board member expressed the view that Lewis should be fired, Hawkins informed the Board that the District could face liability under the FMLA if it fired Lewis. He suggested that Lewis be offered "official" unpaid FMLA leave instead. That offer was made and accepted by Lewis. However, during the period of her intermittent leave, the District did not bring on assistance with the bookkeeping functions. Lewis continued to perform all of the functions of bookkeeper, doing the work from home and on weekends during her days of leave, but was not paid for that work.

Between October 2004 and March 2005, Hawkins was encouraged by the Board to document Lewis’ "poor performance" in order to "build a case" against her. He did so, and in March 2005, Lewis received her first and only performance evaluation from Hawkins, in which she was advised that her performance problems were a "direct result of [her] reduced hour schedule." Based on the negative review, the Board offered a choice to Lewis: either resign, or be reassigned to a teacher’s assistant position at a lower salary.

Lewis filed a lawsuit, alleging that her demotion was a result – in whole or in part – of her protected FMLA leave. While the lower court dismissed the FMLA claim on summary judgment, the Seventh Circuit reversed that decision, holding that Lewis presented sufficient evidence of an impermissible retaliatory motivation to create a genuine issue for a jury.

As part of that evidence, the Court specifically cited the District’s initial failure to inform Lewis of her right to FMLA leave, the District’s decision to hold Lewis to the standard of a full-time employee during her period of FMLA leave, and School Board members’ expressions of hostility toward Lewis’ absences.

The Court’s opinion provides a checklist for employers. First, FMLA leave should be discussed with the employee as soon as the employer is made aware that that individual is caring for a family member with a serious medical condition. Second, an employee should not be disciplined or demoted for performance issues caused by the actual FMLA leave, as to do so would negate the purpose of the Act. Third, employers should ensure that its decision makers are made fully aware of employees’ rights (and employers’ obligations) under the FMLA, and that such decision makers are trained to appropriately discuss and consider the ramifications of those rights and obligations.

Issue: USERRA plaintiffs need not pre-pay filing fees in federal court actions

For the week of May 5, 2008


According to the 7th U.S. Circuit Court of Appeals, a military veteran claiming that his employment termination was a violation of the Uniformed Services Employment and Reemployment Rights Act (USERRA) is not required to pay the filing fee to pursue that claim in federal court. Davis v. Advocate Health Ctr. Patient Care Express, 7th Cir., No. 07-2709, April 28, 2008.

Robert Davis, a veteran of the Vietnam conflict, worked briefly as an answering service agent for Advocate Health Center Patient Care Express. When Davis was terminated from that position prior to completing his probationary period, he filed a lawsuit in federal court, claiming violation of the USERRA. At the same time, Davis filed a motion to waive the filing fee associated with the lawsuit, arguing that the USERRA excused such payment by a veteran.

The district court denied the motion, finding that language in the USERRA regarding fees and costs did not include a waiver of filing fees for lawsuits, and holding that such waiver would "encourage frivolous lawsuits." The court directed Davis to pay the filing fee within 25 days, or his suit would be dismissed. Davis did not pay the fee, waited for the 25 days to pass, and then filed an appeal to the Seventh Circuit.

While the district court never formally entered judgment against Davis, the Seventh Circuit accepted jurisdiction of the matter for purposes of the appeal. It found that because Davis had not complied with the condition upon which the case could have gone forward (payment of the filing fee), the lower court’s conditional dismissal became an appealable "final decision" whether or not a final judgment was entered. The Court held that all that is required for a judgment to be final for purposes of appeal is "that the district court is done with the case."

The Seventh Circuit then addressed the question of whether the USERRA excuses Davis from paying his filing fee, and found that it does. The employer argued that the only statutory mechanism that allows a plaintiff to avoid paying filing fees is the in forma pauperis statute. However, the Seventh Circuit pointed out a number of other statutes in which filing fees are waived for members of the armed services, including a specific federal statute that seamen may file suit without prepaying fees or costs, and one that allows military members seeking review of courts-martial to petition the Supreme Court for review without prepayment of fees and costs. Based upon those statutes, and upon the fact that the few cases to have addressed the same issue have been decided in favor of the military veteran, the Seventh Circuit reversed the lower court’s decision. It then directed its own clerk to refund the appellate filing fee paid by Davis.

While cases involving procedural issues of this type typically are of more interest to lawyers than to employers, the message in this case is universally applicable: courts construe the USERRA liberally in favor of veterans seeking its protection. Based on that message, employers should be knowledgeable about the provisions of the USERRA, and should recognize how those provisions may affect employment-related decisions involving veteran/employees.