HIGHLIGHTS FOR THE MONTH OF MARCH 2008

By: Kraig B. Long

RECENT DEVELOPMENTS

EEOC Provides Guidance on Employment of Veterans With Service-Connected Disabilities

The EEOC has issued question-and-answer guides providing technical assistance for employers and veterans on workplace issues affecting veterans with service-connected disabilities. The Guide for Employers examines the different protections for veterans with service-connected disabilities under the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the Americans with Disabilities Act (ADA). Some issues covered by the EEOC Guidance include:

• A description of how the ADA and USERRA Differ: In brief, USERRA prohibits discrimination in employment based on military service and provides reemployment rights to veterans who wish to return to their civilian jobs after military service. The ADA, by contrast, prohibits discrimination and harassment against all applicants and employees with disabilities (including veterans), and reaches recruiting, hiring, and job accommodations. The guidance notes that USERRA in some instances provides more protection to veterans returning to jobs than does the ADA by, for example, requiring employers to assist the returning veteran in becoming qualified for a job in an appropriate case.

• Pre-hire inquiries concerning disability: The Guidance explains that while the ADA virtually prohibits employers from making inquiries about disability, employers may, in connection with an affirmative action plan, invite individuals to self-identify as disabled veterans and give preference to them in hiring. The Guidance explains how such inquiries must be framed to comply with the law. The EEOC also suggests that the ADA permits, but does not require, an employer to given preferential consideration in hiring to a qualified individual who is a disabled veteran over a qualified non-disabled applicant.

• Discussion of accommodations in recruitment and employment: The Guidance provides advice to employers on how to advertise jobs in a manner calculated to reach veterans and also provides examples of how to accommodate the disabilities of individuals during the application and interview process. In addition, the EEOC lists potential reasonable accommodations for disabled employees to permit them to perform the essential functions of a job, such as telecommuting, modified schedules, adjusting the physical configuration of the workplace, and the like. The EEOC also counsels employers on how to determine (absent an express request from the individual) whether an accommodation is being sought. For example, the need may be identified by a family member or friend, or may arise from a statement by the disabled veteran that, while not framed expressly as a “request for accommodation,” is the functional equivalent. The EEOC notes that a disabled veteran may not view his/her injury as a disability or know to ask for an accommodation. If, however, the employer sees that the individual is experiencing problems on the job that clearly are related to his injury and might be relieved by an accommodation, the EEOC urges the employer to open a dialogue with the employee.

Nursing Home Unlawfully Withdrew Recognition of the Union

In NLRB v. HQM of Bayside, LLC, the U.S. Court of Appeals for the Fourth Circuit upheld a National Labor Relations Board (NLRB) ruling that a Maryland nursing home operator violated the National Labor Relations Act (NLRA) by unilaterally withdrawing recognition of the union while there was still majority support within the bargaining unit.

Facts of the Case: In October 1998, the NLRB certified the union as the exclusive collective bargaining representative of hourly workers at the nursing home, and the union and nursing home entered into a collective bargaining agreement. Two months before the agreement expired, some of the nursing home’s employees circulated a “disaffection petition,” stating that they no longer wanted to be represented by the union. Thirty-one employees signed the petition, representing a majority of the 58 bargaining unit employees. Accordingly, the nursing home notified the Union that it believed the Union no longer represented a majority of the employees, and that it was going to withdraw recognition of the union when the agreement expired. Shortly thereafter, and just a few days prior to the expiration of the bargaining agreement, a pro-union petition was circulated that garnered 34 signatures, including 13 signatures of employees who also signed the disaffection petition. The union notified the nursing home that a majority of the bargaining unit employees had signed a petition stating that they wanted to maintain the union as their bargaining representative. Undeterred, the nursing home withdrew recognition of the Union upon the expiration of the bargaining agreement.

The Union filed an unfair labor practice charge, claiming that the nursing home unlawfully withdrew recognition from and refused to bargain with the Union. During a hearing on the matter before an administrative law judge (ALJ), the ALJ explained that in order for the nursing home to unilaterally withdraw recognition of the Union without violating the NLRA, it had to show that “at the time of the withdrawal, the Union had in fact lost the support of a majority of the employees in the bargaining unit.” The ALJ concluded, however, that the nursing home could not rely on the signatures of the 13 employees who subsequently signed the pro-union petition because they had clearly demonstrated that they had changed their positions regarding the union. The NLRB affirmed the ALJ’s ruling that the nursing home unlawfully withdrew recognition of the Union, and ordered it to recognize and bargain with the Union.

The Court’s Ruling: On appeal, the Fourth Circuit affirmed the NLRB’s decision, noting that once the bargaining unit elects a union as representative, the union enjoys a presumption of majority support even after the agreement expires. The Fourth Circuit concluded that the nursing home failed to rebut this presumption with evidence of an actual loss of majority support at the time it withdrew its recognition.

Lessons Learned: The Fourth Circuit stressed that an employer unilaterally “withdraws recognition at its peril.” Employers should take heed of the court’s suggestion that NLRB-conducted elections are the preferred way to resolve questions regarding support for the union where employers are faced with seemingly contradictory evidence.

Claim Based on "Association Discrimination" Can Go to the Jury

The U.S. Court of Appeals for the Seventh Circuit recognized a possible claim of “association discrimination” under the Americans with Disabilities Act (ADA) where a self-insured hospital terminated an employee in order to avoid having to continue paying for her husband’s expensive cancer treatment.

Facts of the Case: In Dewitt v. Proctor, the employee and her husband were covered under the hospital’s health insurance plan, which was partially funded by the hospital. Over the course of three years, the employee’s husband received medical treatment for prostate cancer. The costs of this treatment exceeded $300,000, all of which was paid for through the hospital’s self-coverage. On several occasions, the employee’s supervisor asked her about her husband’s high medical claims and the type of treatment he was receiving for his cancer. The supervisor also asked the employee whether she had considered hospice care for her husband because it was a less expensive alternative. At a meeting, the supervisor informed employees that the hospital was facing financial troubles and would take “creative” efforts to cut costs. Approximately three months later, the employee was terminated and designated as “ineligible to be rehired in the future.” The employee sued the hospital, alleging disability discrimination, among other things. The district court found this claim to be without basis, granting summary judgment to the hospital.

The Court’s Ruling: On appeal, the Seventh Circuit reversed the trial court’s grant of summary judgment on the employee’s disability claim, which was based on “association discrimination” under the ADA, i.e. that the hospital discriminated against the employee based on the employee’s association with a disabled individual. The Seventh Circuit found there was evidence to support the employee’s claim that the hospital terminated her to avoid having to fund her husband’s medical treatments in the future. The Seventh Circuit ruled that the case should be remanded to a jury to determine whether discrimination had occurred.

Lessons Learned: This case emphasizes the need for employers to focus on performance-related reasons for employment decisions, as non-performance-related reasons, such as an employee’s relationship with a disabled individual, could impose liability under anti-discrimination laws.

TAKE NOTE

Supreme Court Limits Review of Arbitration Awards Under the FAA. In Hall Street Associates v. Mattel, Inc., the U.S. Supreme Court held that parties to an arbitration agreement cannot, by contract, expand or change the grounds for judicial review of an arbitration decision subject to the Federal Arbitration Act (FAA). Under the FAA an arbitration award can be vacated only for “extreme arbitral conduct” such as the arbitrator’s fraud, corruption, misconduct or material mistake but not for faulty legal conclusions. In Hall, the parties to an arbitration agreement identified an alternative standard of court review whereby the arbitrator’s award could be modified or vacated because of legal error. The Supreme Court ruled that the FAA provides the exclusive grounds for vacating or modifying an arbitral award. While the Court recognized that the FAA’s general policy permits the parties to tailor many of the features of arbitration by contract, the Court concluded that text of the FAA compels exclusive grounds for review. The Supreme Court, however, made clear that its decision only applies to a court’s review of arbitration awards subject to the FAA. Thus, parties still may be able to define the scope of judicial review under the various state arbitration acts.

OFCCP Issues Second Round of Audit Scheduling Letters. Are your Affirmative Action Plans in order? The Office of Federal Contract Compliance Programs (OFCCP) announced that it issued a second round of audit scheduling letters on March 10 to approximately 5000 supply and service contractor establishments for compliance evaluations, demonstrating the agency’s aggressive enforcement strategy. The OFCCP’s Announcement states that the list of companies identified for review was generated through certain external Federal contractor databases and by the OFCCP’s computerized selection system (which includes a mathematical model that ranks contractors based on indicators of potential workplace discrimination). The Announcement further states, “The current list excludes establishments based on a variety of factors, including, for example, establishments that are currently undergoing a compliance evaluation, were evaluated within the last 24 months, or have received the Secretary of Labor’s Opportunity Award or an Exemplary Voluntary Efforts Award within the last three years.” The OFFCP’s web site provides further information on scheduling letters and how to respond to them. Now may be a good time to review your AAP with Fiona Ong of our office to ensure that your plan is in order.

Non-competition Agreements . In Cintas Corp. v Perry, the U.S. Court of Appeals for the Seventh Circuit refused to enforce an employer’s claim that its former national account manager violated the terms of a non-compete agreement when he went to work for a major competitor. The Court rejected the company’s argument that the Court was obliged to modify the overly broad covenants to render them reasonable. The employment agreement included, among other restrictions, a non-competition clause that prohibited, for 24 months after termination, the employee (Perry) from being (1) employed in a managerial capacity for any competitor or (2) calling on, soliciting, or communicating with any customer. It also prohibited the solicitation of Cintas employees for 24 months after termination. After Perry went to work for Cintas’ main competitor, he accompanied a fellow employee to a sales meeting with a former customer but remained in the car during the meeting. He also conducted a telephone interview with an applicant, but ended the interview after learning that the applicant had previously worked for his former employer. The new employer did not hire the applicant. Cintas claimed that these activities were in breach of Perry’s agreement and sued. Perry defended his actions and also argued that the covenants were unenforceable because they were more expansive than necessary to protect Cintas’ legitimate interests. In its legal briefs before the district court, Cintas essentially conceded that the blanket prohibition on employment with a competitor for 24 months was overbroad, and instead argued that the court was obliged to enforce the agreement under the Ohio rule that permits courts to modify restrictive covenants to render them reasonable in order to protect legitimate protectable interests. Both the trial court, and on appeal the Seventh Circuit, rejected this argument. While courts may under Ohio law rewrite restrictive covenants to align them with the expectations of the parties (a rule that is more liberal than Maryland’s “blue pencil” rule that permits a court only to strike language that is unreasonably overbroad), they are not obliged to correct the employer’s drafting of the contract. The Court held, in any event, that remaining in a car while another employee conducts a sales meeting does not amount to solicitation of former customers, and declining to continue an interview with someone upon learning that he worked for Cintas did not amount to solicitation.

Breastfeeding Moms Protected from Discrimination in DC. The District of Columbia joined the majority of states that protect a woman’s right to breastfeed in any public or private location where she has the right to be with her child. On February 14, 2008, Mayor Adrian Fenty signed into law the “Child’s Right to Nurse Human Rights Amendment Act of 2007,” which amends the DC Human Rights Act of 1977. The law requires employers to provide reasonable daily unpaid break periods “as required by the employee so that the employee may express milk for her child to maintain milk supply and comfort.” It also requires the employer to “make reasonable efforts” to provide a sanitary location in close proximity to the employee’s work area for this purpose. The law permits breaks to run concurrently with any break to which the employee already is entitled. Finally, if it would cause an undue hardship on the operation of the business, breaks need not be provided. Unlike legislation passed in some states, the District of Columbia law does not merely make nursing in public an exception to the state’s obscenity or indecent exposure laws, but allows mothers to sue for civil rights violations if they are prevented from breastfeeding at work or places of public accommodation.

TOP TIP

SOX Compliance.

A divided United States Court of Appeals for the Fourth Circuit rejected a former employee’s claim brought under the Sarbanes-Oxley Act of 2002 (SOX) whistleblower provisions that he was wrongly terminated for trying to expose corporate wrongdoing. In Livingston v. Wyeth, Inc., the Fourth Circuit held that to maintain a whistleblower claim under SOX, the plaintiff must prove not only that he reasonably believed that the conduct he complained about constitutes a violation of federal securities laws, but that the belief was objectively reasonable. The Court stated that the plaintiff’s belief must be based on an existing violation, and not a hypothetical or one that may occur in the future. The Court held that the former employee’s belief that his former employer’s conduct violated securities laws was not based on any existing violations. Instead, the former employee was conjuring a “hypothesized cover-up and misrepresentation” of the former employer’s noncompliance with certain federally mandated practices, which, even if proved, would not have violated federal securities laws. The Fourth Circuit concluded that the former employee failed to produce evidence that he provided information or made a complaint to his former employer about conduct that a reasonable employee could have believed at the time constituted a violation of the securities laws, and affirmed summary judgment for the employer.

SOX, which was enacted in the wake of the Enron accounting scandal, affords robust protection to whistleblowers and does not require proof of an actual violation of federal securities law. Although in this Fourth Circuit example the former employee was not successful because of the failed reasonable, objective basis for believing a SOX violation had occurred, a whistleblower who reasonably believes that the employer is violating federal securities laws but is wrong may still be protected from retaliation. Thus, employers subject to requirements of SOX, as well as those who are seeking to implement best practices with regard to exposing corporate fraud, should be proactive in ensuring compliance with its provisions by:

• Adopting a Whistleblower Policy that includes a complaint procedure that encourages, and offers a variety of ways for, employees to raise their concerns and a strong anti-retaliation provision.

• Providing Training to Supervisory Staff on how to recognize a potential SOX whistleblower complaint and the process to follow in responding to the complaint.

• Ensuring That Employee Performance Issues Are Well Documented on an ongoing and contemporaneous basis and that employment terminations are reviewed for any potential whistleblower claims.

• Conducting an Effective and Thorough Investigation when a complaint arises. You may want to consider an outside investigator, which is likely to be viewed as independent and objective.

• Preserving and Retaining Documents and Records not only because SOX has stiff penalties for failure to preserve documents relating to whistleblower complaints, but because mismanagement of documents and records can hamper the employer’s ability to investigate and respond to a complaint, which could become a major issue if a charge or lawsuit is filed. A well drafted record retention policy will ensure that relevant documents are preserved and are accessible on a timely basis as needed to conduct an investigation.

For greater clarification of any of these issues, you may contact any Shawe Rosenthal attorney.

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