Although not contractually required to do so, many employers offer their management-level employees aseverance package in the event of a reduction-in-force or some other non-disciplinary event which requires an employer to terminate a relationship with a managerial employee. The terms and compensation contained in severance packages usually depend upon salary, years of service, and work performance and/or value of the employee to the employer. However, if an employee can show that the terms of a severance package offered to them are less favorable than those offered to other, similarly situated employees, the employee may be able to state a claim for discrimination.
In the case of Gerner v. City of Chesterfield, Virginia (2012), the United States Court of Appeals for the Fourth Circuit reversed a lower court ruling from the Eastern District of Virginia and found that although a severance agreement is offered upon employment termination and is not a contractual right, it is nevertheless an employment benefit upon which a discrimination claim may lie. Finding that the district court judge (Hudson, J.) erred in his analysis of the legal standard, the appellate court held Title VII protects current and former employees from discrimination, as well as those who have not been hired and have been discriminated against in the hiring process. Further, the Court found that Ms. Gerner's allegations that she was offered a less favorable severance package than her male counter-parts under the City’s reduction-in-force plan, were sufficient to allege an adverse employment action for a gender discrimination claim. In making its ruling, the Court relied upon U.S. Supreme Court precedent and decisions from other Circuit Courts.
This decision by the Fourth Circuit, which is the highest federal appellate court for Virginia, Maryland, West Virginia, and the Carolinas, is a reminder to employers that they must be vigilant in making sure that employment benefits (even severance packages which are often viewed as “voluntary” or “discretionary”) are provided on an equitable basis. Alternatively, employers must make sure that they have a strong, non-discriminatory, reason for any difference in the provision of such benefits among similarly situated employees.
The Fourth Circuit Court of Appeals allowed a former city employee’s sexual harassment and retaliation claims to proceed to trial by reversing a lower court ruling which granted summary judgment in favor of the employer. Plaintiff Katrina Okoli, formerly an executive assistant for John P. Stewart, the director of Baltimore’s Commission on Aging and Retirement, filed a lawsuit alleging sexual harassment hostile work environment, quid pro quo sexual harassment, and retaliation. In the case of Okoli v. City of Baltimore, et al., Plaintiff Okoli alleged that over a four month span, Defendant Stewart repeatedly sexually propositioned her; told her of his alleged sexual exploits; asked her about her underwear; fondled her leg underneath a table on several occasions; and forcibly tried to kiss her when they were alone in a conference room. Okoli alleged that she rejected such advances by Stewart and also twice complained about the harassment to officials within the City government, as well as wrote a letter to Baltimore’s then-mayor Martin O’Malley concerning the harassment. Okoli was fired by Stewart just hours after her letter was received by the mayor’s office.
For its part, the City contended (and apparently the lower court agreed) that Stewart’s conduct was sporadic and infrequent and did not rise to the level of a hostile work environment. Further, the City argued that Okoli’s work had deficiencies, and that she was going to be fired even before she wrote the letter complaining of Stewart’s behavior. Additionally, the City argued, Okoli’s letter was non-specific and did not state that she was being “sexually” harassed by Stewart, only “harassed.” Therefore, they argued, Okoli did not engage in protected activity under Title VII to warrant a retaliation claim against the City.
The Appellate Court disagreed and held that the statements attributed to Stewart were both severe and pervasive. In addition, the Court held that a plaintiff need not mention the “magic words” of “sex” or “sexual” to effectively advance a sexual harassment complaint. Citing decisions from other circuit courts, the Court held that the complainant only need put the employer on notice that unlawful behavior is afoot. Okoli’s use of the words “unethical,” “degrading and dehumanizing” in her letter complaining about Stewart’s behavior were enough to raise a sexual harassment complaint. Finally, the Court determined that the district court erred in concluding that simply because Stewart had a document on his computer that pre-dated Okoli’s letter, such document was a termination letter. Stewart modified the computer document three times before delivering it to Okoli as a termination letter just hours after her sexual harassment complaint reached the mayor’s office. Under those facts, the Court concluded that there was sufficient evidence to infer that Stewart did not intend to fire Okoli prior to receiving word that she complained about his behavior to the mayor and his staff.
A Virginia Federal Court jury recently determined that Virginia Tech violated the Equal Pay Act, and awarded back pay to two women employees of its fundraising office. The Equal Pay Act is a federal law amending the Fair Labor Standards Act, which prohibits employers from paying unequal wages to women and men for doing the same or substantially similar work.
To establish a case under the Equal Pay Act, an employee must establish that:
different wages are paid to employees of the opposite sex;
the employees perform substantially equal work on jobs requiring equal skill, effort and responsibility; and
the jobs are performed under similar working conditions.
However, an employee who proves all the above elements may still not
prevail. A business may avoid liability if it establishes that such
payment was made pursuant to a seniority system, a merit system, a
system which measures earnings by quantity or quality of production, or a
differential based on any other factor other than gender.
In the Virginia Tech cases, the two women claimed their starting
salaries were lower than the men who did the same work. In its defense,
Virginia Tech countered that the men had more experience when hired.
Both sides presented extensive statistical evidence. According to
the plaintiff’s economist, men’s salaries involved with Virginia Tech’s
fundraising were an average of 15% higher. Virginia Tech’s expert
analyzed the experience and duties of the employees, and determined
there was only an 8% difference. Tech's expert concluded that this
difference could be linked to gender, but opined that there was a chance
it occurred randomly since the disparity was not statistically
significant.
Notably, one of the women testified that when she inquired about the
pay differential between her and her male predecessor, the senior
regional director of major gifts replied that her predecessor had a
family to support. In addition, the Judge identified other statements
that tend to show Virginia Tech's animus toward the women when he
previously denied Virginia Tech's motion for summary judgment.
How does your company prevent potential liability under the
Equal Pay Act? Businesses should evaluate its pay structure, including
policies regarding seniority systems, merit systems and incentive
systems in light of the prohibition of gender pay disparity. An
effective way to prevent managers and supervisors from making
compensation decisions based on a protected category under the
discrimination laws is to establish and implement a comprehensive job
evaluation system. As the lawyers for the women argued during the trial
in this matter - if Virginia Tech "had good policies, we wouldn't be
here."
As summer quickly approaches, businesses begin receiving an
increasing number of offers for unpaid internships. As many businesses
already know, there are many advantages to using an intern – unpaid
internships may help fuel growth for your company and also provide an
opportunity to mentor young professionals. However, unpaid interns can
create legal troubles for the unwary business owner. Federal labor laws
governing internships provide that the relationship has to benefit the
intern more than the company. If it doesn’t, then the business must
comply with the Fair Labor Standards Act (“FLSA”) by paying minimum wages and possibly overtime.
The following criteria provide guidance in evaluating internship
programs for for-profit organizations, but it is important to note that
each program is unique and must be carefully examined:
the training, even though it includes actual operation of the
facilities of the employer, is similar to that which would be given in a
vocational school;
the training is for the benefit of the trainee;
the trainees do not displace regular employees, but work under close observation;
that the employer that provides the training derives no
immediate advantage from the activities of the trainees and on occasion
the employer’s operations may actually be impeded;
the trainees are not necessarily entitled to a job at the completion of the training period; and
the employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.
If your company’s internship program does not satisfy all of the above criteria, your interns may be considered “employees” under the FLSA. Hiring an intern, which qualifies as an “employee” may cost your company thousands in unpaid wages and legal fines!
So, how do you ensure compliance? Establish a written
internship program outlining the terms and structure of the relationship
in a way that the intern is receiving the full benefit of the learning
experience, and ensure that your managers and other employees properly
implement it.
Federal employee Robert T. Perry (“Perry”) had a long-running legal battle with his federal employer, the Pension Benefit Guaranty Corporation
(“PBGC”). After three lawsuits, two of which were settled, Perry’s
claims of hostile work environment and retaliation have now been
dismissed on summary judgment.
The case, Perry v. Gotbaum,
was the third lawsuit brought by Perry against the PBGC and centered
around Perry’s allegations that the PBGC discriminated and retaliated
against him based upon a Settlement Agreement entered into by the
parties to settle the first two lawsuits. As required under the
Settlement Agreement, the PBGC provided Perry with a grade and step
increase in salary, paid for $10,000 worth of training, paid Perry a
lump sum of $60,000, and placed him on Leave Without Pay (“LWOP”) Status
for a time-period not to exceed six months. In addition to proving
Perry with a salary increase and training, it appears that the impetus
behind the Settlement Agreement was to provide Perry with an opportunity
to find employment outside of the PBGC and give him a lump sum payment
during his job search. Per federal government regulations, the personnel
actions required under the Settlement Agreement had to be documented
using a federal government Standard Form 50 (“SF-50”).
In his third lawsuit, Perry complained, inter alia, that the comments
section of the SF-50 forms used to process the personnel actions
included information referencing his prior lawsuits and the Settlement
Agreement. According to Perry, such comments would have a chilling
effect on his ability to seek employment outside of the PBGC because it
would be clear that he had engaged in protected activity. Further, Perry
complained that the PBGC had used a more generic code when processing
SF-50 forms for other employees, and therefore he should have been
afforded the same treatment.
While the Court agreed with Perry that he engaged in protected
activity regarding his prior lawsuits and the resulting Settlement
Agreement, the Court ruled in favor of the PBGC finding that the Agency
actually went back and corrected the SF-50 forms to respond to Perry’s
concerns about the remarks placed on the forms. Further, since the
Settlement Agreement was not confidential and had been filed with the
Court, it was a public record and Perry could not base his claims of a
retaliatory and/or discriminatory disclosure upon information that was
generally available to the public. In addition, the Court found that
there was no basis to find the PBGC’s “honest mistake” was an attempt
to hamper Perry’s future job opportunities since it was in the Agency’s
interest to have Perry find employment outside of the PBGC as soon as
possible. As such, the Court dismissed Perry’s federal employment discrimination and retaliation claims.
It should be noted that the legal standard applied by the Court in
this public sector case applies to private sector Virginia businesses as
well.
In an unpublished decision, the Fourth Circuit Court Appeals
recently held that an employer may be liable for third-party harassment
by a customer if the employer knew or should have known of the
harassment and failed to take appropriate actions to halt it. The
evidence of repeated complaints to supervisors and managers by the
employee created a triable issue as to whether the employer had notice
of the harassment, and thus, the Appeals Court allowed this claim to go
forward to trial.
In EEOC v. Cromer Food Services, Incorporated, a route driver for a southeastern vending machine company
alleged he suffered daily sexual harassment at the hands of two
housekeeper employees of one of the company’s largest customers – a
hospital. According to the driver, the harassment began after a
co-worker left a note in the hospital cafeteria calling him gay.
Following this incident, the two male hospital employees allegedly began
harassing him with unwanted sexual comments.
The driver claims he complained to numerous people at CFS, including
his supervisor, his direct supervisor, another supervisor, a manager of
the company, and the chairman of the Board. As the harassment
continued, he took more drastic measures by reporting the harassment
directly to a human resources professional at the hospital and to the
supervisor of the two hospital employees. But, the hospital employees
were unrelenting.
In response to this lawsuit, the company asserted that it did not
have actual or constructive knowledge of the harassment because the
complaints by the driver were vague and insufficiently detailed for
action to be taken. In addition, the company pointed out that the
employee failed to report the harassment to its President in accordance
with the company’s written sexual harassment protocol.
The Fourth Circuit reversed the trial court’s dismissal of the claim.
In doing so, it noted that the District Court focused on only one
snippet of the driver’s deposition testimony which stated that he did
not provide details of the harassment to the company. The Appeals Court
acknowledged that although anti-harassment law requires notice to the
employer – it should not require it to be pellucid.
The Fourth Circuit also pointed out the flaws in the employer’s
approach in this matter. The Court stated that harassment claims could
not be avoided by utilizing a “see no evil, hear no evil” strategy, and
it criticized the protocol requiring reports to be made to the President
by recognizing that such requirement may likely intimate an employee.
Moreover, the Court drew attention to the fact that management failed to
report the harassment up the chain of command as required by company
policy.
This case illustrates to employers within the Fourth Circuit
(which includes Virginia, Maryland, North Carolina, West Virginia and
South Carolina) that a company’s written policy for reporting harassment
may not provide insulation from liability under Title VII. Virginia
businesses must ensure that they have a reasonable process in place to
address allegations of harassment by its employees and third parties.
In a unanimous recent opinion, the United States Supreme Court
broadly construed the term “person aggrieved” in Title VII's
antiretaliation provision to include a co-worker who is a relative or
close associate of a targeted employee.
In the case of Thompson v. North American Stainless, LP, Plaintiff Thompson worked as a metallurgic engineer for North American Stainless
(“NAS”), the owner and operator of a stainless steel manufacturing
facility in Kentucky. Thompson began dating a coworker, and thereafter
they became engaged to be married. According to the lawsuit, the
couple’s engagement was common knowledge at the facility. Three weeks
after the Equal Employment Opportunity Commission
notified NAS that Thompson’s fiancée had filed a discrimination charge,
NAS fired Thompson. Thompson pursued a retaliation claim against NAS
for his discharge.
NAS moved for dismissal of the case before trial, contending that
Thompson’s claim of third-party retaliation under Title VII was
insufficient as a matter of law. The trial court granted NAS’s motion
for summary judgment, which decision was affirmed by the Sixth Circuit Court of Appeals.
In denying Thompson a trial, the Sixth Circuit joined several other
appeals courts in holding that the authorized class of claimants under Title VII’s antiretaliation provision is limited to persons who have personally engaged in protected activity.
The Supreme Court disagreed, and rejected this narrow interpretation
of aggrieved persons under the law. However, it declined to expand the
provision into the outer boundaries of the standing standard set forth
in Article III of the Constitution – which would allow anyone who
claimed an injury by a Title VII violation to sue. The Court noted that
such expansive interpretation would allow a shareholder to sue a company
for firing a valuable employee for racial discriminatory reasons if he
showed a decrease in his stock value as a consequence.
In settling on the middle ground, the Supreme Court stated that
“Title VII’s antiretaliation provision must be construed to cover a
broad range of employer conduct.” The Court’s concern was to prohibit
employer action that would dissuade a reasonable employee from asserting
or supporting a discrimination claim. Thompson fell within the zone of
interests protected by the law.
Employment Pointer: This decision clears up the
ambiguity over whether third parties have standing to sue for
retaliation under Title VII. Although, the Court noted that there is no
bright line test for who is protected. Given the broader scope of
persons to be protected under this law, companies must be aware of its
management’s underlying reasons for adverse employment actions and
ensure that indirect revenge against an employee for filing a
discrimination charge has not been a contributing factor.
The Virginia Supreme Court recently granted a writ of appeal in a noncompete case from the Fairfax County Circuit Court. In Home Paramount Pest Control Companies, Inc. v. Justin Shaffer,
the issues before the Court include whether the lower court erred in
finding the noncompete overly broad. In finding the noncompetition
agreement unenforceable, the Fairfax Circuit Court considered the scope
of the restricted activities, but did not consider the portion of the
agreement in light of the narrow geographic scope of the restriction
which applied only to certain limited geographic boundaries within
Fairfax County.
Noncompetition agreements in Virginia are strictly construed against
the employer, but a court will enforce the parties’ agreement if it is
reasonable and narrowly tailored to protect the legitimate business
interests of the company. In assessing the enforceability these types
of restrictive covenants, Virginia courts scrutinize three aspects for
reasonableness: (1) duration of the restriction; (2) geographic scope
of the restriction; and (3) breadth of the restricted activities.
In Virginia, the enforceability of noncompetes is governed by common
law principles (i.e., case law and precedent). Thus, the body of law on
this subject is constantly evolving with each new court decision. The
Virginia Supreme Court’s decision in this matter will shed further light
on employer's ability to restrict post-employment activities of its
workers.
In a case arising out of a stock purchase and employment agreement gone wrong, a district court judge has declined to enforce a settlement “Term Sheet”, stating that the document did not rise to the level an enforceable settlement agreement between the parties.
The case, Intersections, Inc., et al. v. Loomis & Loomis, , involved a stock sale of $14 million dollars from defendant Joseph Loomis (“Loomis”) and his company, Net Enforcers, Inc. (“NEI”) to plaintiff Intersections, Inc. (“Intersections”). Loomis remained an employee of NEI after he sold it, and entered into an employment agreement which contained a non-compete and other restrictive covenants. Within a year after the stock purchase and Loomis entering into the employment agreement, NEI suspended Loomis from his position and ultimately terminated his employment. Litigation followed in which plaintiffs alleged that Loomis and his sister, co-defendant Jenni Loomis, engaged in fraud by misrepresenting the financial condition of NEI. Plaintiffs also alleged that Loomis engaged in conversion of NEI assets and breach of his fiduciary duties to NEI.
In an attempt to settle the case, the parties engaged in extensive settlement discussions with a magistrate judge and reached an agreement, in principle, to settle the case. In exchange for receiving a monetary payment from the defendants, inter alia, the parties agreed that Loomis’ employment agreement containing the non-compete provisions would be void. A handwritten term sheet was prepared by the magistrate judge reflecting the agreement reached by the parties. However, when plaintiffs prepared draft settlement agreements for signature by the parties, they were rejected by the defendants. Thus, the parties never signed a final settlement agreement.
In rejecting both the plaintiff’s attempt to enforce the settlement agreement and the magistrate judge’s report and recommendation to enforce the agreement, the Court held that the parties had not entered into a legally enforceable agreement because there was no meeting of the minds as to the final terms of the settlement. In particular, the Court found that plaintiffs added terms to the agreement beyond what was agreed to at the settlement conference; contingencies in the proposed agreement were not satisfied; and there was apparently not a meeting of the minds as to whether all of the restrictive covenants in Loomis’ employment agreement would be void as part of the settlement of the case. As such, the Court concluded that under Virginia law, it could not save an agreement that had never ultimately been reached by the parties.
An associate professor at the University of Virginia College at Wise was informed that his employment as a faculty member was going to be terminated. Professor James Holbrook had served as an assistant professor for three years at the time he was told his employment was being terminated. Feeling that his imminent job termination was unjust, Professor Holbrook filed suit against the College alleging statutory and constitutional violations and seeking a preliminary injunction barring his termination during the pendency of the lawsuit.Holbrook v. the University of Virginia.
However, Chief Judge James P. Jones of the Western District of Virginia denied the injunction citing the relatively new injunction standard set forth by the Supreme Court in 2008. The Court cited Winter v. Natural Resources Defense Council, Inc., and stated that the Supreme Court had “narrowed the grounds” upon which a party may obtain a preliminary injunction. In Winter, the Supreme Court held that in order to obtain a preliminary injunction, a plaintiff had to establish,
that he is likely to succeed on the merits,
that he is likely to suffer irreparable harm in the absence of preliminary relief,
that the balance of equities tips in his favor, and
that an injunction is in the public interest.
Chief Judge Jones noted that in light of this new standard, the Fourth Circuit in The Real Truth About Obama, Inc. v. FEC, had essentially “repudiated” the traditional balancing of the hardships test found inBlackwelder Furniture Co. of Statesville v. Seilig Manufacturing Co., 550 F.2d 189 (4th Cir. 1977), and required courts in this Circuit to now apply all four prongs of the preliminary injunction standard as set forth in Winter. Finding that the new standard was more rigid and lacked the flexibility of the prior Blackwelderstandard, the Court held that it could only find in favor of the plaintiff if he clearly met all four prongs of theWinter test. As such, the Court held that Professor Holbrook did not make an adequate showing of irreparable harm since he could obtain monetary damages as a form of relief during the underlying case without the necessity of imposing an injunction at the outset of the litigation. Therefore, Professor Holbrook’s Motion for a Preliminary Injunction was denied.
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