Employment Law Alert : Gibbons P.C.: Labor Relations, Employment Contracts, Employee Benefits, & Wrongful Discharge Lawyers & Attorneys

Grey-Allen appealed the order granting summary judgment on her retaliation claim. The defendants appealed the order denying their motion for judgment as a matter of law of for a new trial. On appeal, the Second Circuit affirmed the District Court’s decision.

Anti-Retaliation Protections

In granting summary judgment, the District Court concluded that although Grey-Allen was investigating an allegation of sexual harassment, the investigation was not connected to any charge of discrimination filed with the EEOC. In interpreting the language of the “participation clause” of Title VII, the Second Circuit looked to other Courts of Appeals which consistently have held that the protections afforded to employees under Title VII from retaliation do not apply to an internal investigation by an employer that is not associated with a formal EEOC proceeding.

Alter Ego Liability

The Circuit Court concluded that Hugh Benjamin’s high managerial rank and significant control over the company’s operations sufficiently enabled a jury to reasonably conclude he was a proxy or alter ego of the company. The Court also ruled that, although the District Court’s jury instructions on the alter ego theory were an error because they lowered the threshold to find Hugh Benjamin an alter ego, the error was harmless because a reasonable juror could not find that he was not an alter ego given the facts of the case. Significantly, he reported directly to the President, exercised managerial responsibility for the company’s day-to-day operations and was a corporate shareholder. Thus the Second Circuit affirmed the District Court’s ruling that the Farragher/Ellerth defense was not available to the company.

Analysis for Employers

Before a formal charge of discrimination has been filed, an employer has a better chance of withstanding a retaliation claim based on its taking action against an employee who participates in an internal investigation. Often an employer may not receive immediate notice from a state agency or the EEOC when a complaint is filed. Therefore, an employer still may be at risk when acting based upon its findings in an investigation and negatively affects an employee who participates in the investigation. Nevertheless, the earlier it implements remedial steps, the better its chances to overcome a retaliation claim. Furthermore, the employer should appropriately document its findings and formulate well-reasoned bases for any response it implements. Finally, employers should train managers to understand potential ramifications resulting when company policy is violated by senior managers. Gibbons attorneys in the Employment & Labor Department are available to assist employers in workplace investigations and related litigation.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

Court’s Rationale

In reaching its decision, the Third Circuit construed the definition of “employer” under various laws and interpretations including the FMLA and that of the Fair Labor Standards Act (“FLSA”) containing a similar definition, the Department of Labor’s implementing regulations, and the rationale of the Fifth and Eighth Circuits addressing individual liability claims. The Court held that “just as a real estate management company acting as an agent for building owners may be liable as an employer under the FLSA, an individual supervisor working for an employer may be liable as an employer under the FMLA.” Finally, the Court applied the “economic realities” test, which analyzes whether the purported supervisor exercised the control of an “employer” over the employee. Here, the Court found that sufficient evidence existed regarding the presence of control over the plaintiff to create an issue of fact to deny summary judgment to the individual defendant. Specifically, the Court found that even if the supervisor lacked the authority to terminate the plaintiff, he exercised substantial authority over her termination decision by preparing her termination letter and attending her termination meeting. In addition, the Court noted the individual supervisor’s control over the plaintiff’s employment conditions prior to her termination involved supervising her work, preparing her performance reviews and disciplining her, which further establishes control.

Implications for Employers

The concept of individual liability, especially for an employer which may defend the individual, is more of a tactic by a plaintiff to “personalize” the lawsuit rather than just involving a corporate defendant. Individual liability may exist even if the individual supervisor acted within the scope of his/her duties that involved discipline, termination or some other adverse consequence to the employee. It is not clear from Haybarger whether others involved in such decision-making, such as human resources and legal department personnel, could potentially be liable. However, Haybarger highlights the need for employers to follow a protocol when making decisions that adversely affect an employee’s terms and conditions of employment, to ensure that those participating in the decision-making are trained properly and that documentation concerning the decision-making process is prepared so that an individual supervisor is not left alone or unchecked to decide these matters.

Mitchell Boyarsky is a Director in the Gibbons Employment & Labor Law Department.

Writing for the Court, Chief Justice Roberts officially recognized the ministerial exception and rejected the Sixth Circuit’s analysis, emphasizing that:

members of a religious group put their faith in the hands of their ministers. Requiring a church to accept or retain an unwanted minister, or punishing a church for failing to do so, intrudes upon more than a mere employment decision. Such action interferes with the internal governance of the church, depriving the church of control over the selection of those who will personify its beliefs. By imposing an unwanted minister, the state infringes the Free Exercise Clause, which protects a religious group’s right to shape its own faith and mission through its appointments.

Accordingly, the Court concluded that the ability of religious groups to choose who will preach their beliefs, teach their faith, and carry out their mission is paramount. The Court, however, stopped short of defining the term “minister,” and stated that it was reluctant “to adopt a rigid formula for deciding when an employee qualifies as a minister.”

As it related to Perich, the Court held that she was covered by the ministerial exception “given all the circumstances of her employment.” Among the factors weighed by the Court were: (1) the School held Perich out as a minister, (2) Perich’s title as minister reflected a significant degree of religious training followed by a formal process of commissioning, (3) Perich held herself out as minister of the Church by, amongst other things, claiming a special housing allowance on her taxes that was available only to employees earning their compensation “in exercise of the ministry,” and (4) Perich’s job duties reflected a role in conveying the Church’s message and carrying out its mission.

Despite its refusal to define “minister” in its “first case involving the ministerial exception,” the Court did provide guidance regarding the extent to which ministers perform secular duties and vice versa – the extent to which lay employees perform duties performed by ministers. Specifically, the Court found that the Sixth Circuit gave too much weight to the fact that lay teachers (who were not commissioned ministers) performed the same religious duties as called teachers. Further, the Court found that the Sixth Circuit placed too much emphasis on the fact that Perich performed secular duties. Under these facts, Perich’s religious duties consumed only 45 minutes of each workday. As Chief Justice Roberts noted, the issue of whether someone is a minister “is not one that can be resolved by a stopwatch. The amount of time an employees spends on particular activities is relevant in assessing that employee’s status, but that factor cannot be considered in isolation, without regard to the nature of the religious functions performed” as well as the other considerations discussed above. Moreover, the Court made clear that the ministerial exception is not limited to the head of a religious organization.

What is important for religious employers to remember is that the Court’s decision in Hosanna-Tabor Evangelical Lutheran Church does not create a blanket exception from all wrongful termination lawsuits for religious group employers. Rather, the decision merely creates an exception for those employees who qualify as “ministers,” which is a case-by-case determination. Accordingly, before taking any adverse actions against employees, religious group employers should continue to evaluate their decisions and consider: (1) whether the employee qualifies as a minister, and (2) whether there is any legal risk in taking action. Attorneys in the Gibbons Employment & Labor Law Department can assist with any questions that you may have.

Peter J. Dugan is an Associate in the Gibbons Employment & Labor Law Department.

Background

In Staub, an Army Reservist sued his employer for military discrimination under USERRA after he was terminated by the Vice President of Human Resources (the decisionmaker) for allegedly violating a disciplinary warning. Staub did not contend that the decisionmaker was motivated by hostility towards his military obligations. Rather, he claimed that his managers were motivated by such hostility, and that the decisionmaker was influenced by their actions. A jury found the employer liable and awarded Staub damages. The Seventh Circuit reversed, concluding that the employer was entitled to judgment as a matter of law because the decisionmaker had relied on more than the allegedly biased managers’ advice in making her decision.

In so holding, the Seventh Circuit joined the Fourth Circuit in taking a narrow approach to the cat's paw theory, holding that if the final decisionmaker's motive is pure, an employer cannot be held liable for a subordinate's alleged bias. Other federal circuit courts had taken a more lenient view, upholding cat's paw claims where a terminated employee could prove that a biased worker "influenced" or "played a role" in the final decision, or that the biased supervisor "caused" the ultimate decisionmaker’s action.

The Supreme Court's Decision

In an 8-0 decision, the Supreme Court reversed the Seventh Circuit and resolved the circuit split. In the majority opinion, by Justice Scalia, the Court held that "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." In the instant case, both of plaintiff's supervisors acted within the scope of their employment when they took actions that allegedly caused the decisionmaker to fire Staub, and there was evidence that their actions were motivated by hostility towards Staub's military obligations and were causal factors underlying the decisionmaker’s decision. There was also evidence that Staub's supervisors had the specific intent to cause Staub's termination.

The Court arrived at its holding through an analysis of general tort and agency law. The Court explained that the agent had the scienter required for USERRA liability so long as the earlier agent intended, for discriminatory reasons, for the adverse action to occur. Moreover, the decisionmaker's exercise of judgment does not prevent the earlier agent's action from being a proximate cause of the harm. Nor can the ultimate decisionmaker's judgment be deemed a "superseding cause" of the harm. The Court reasoned that to conclude otherwise would have the "improbable consequence" that if an employer isolated a personnel official and vested the decision to take adverse employment action in that official upon review of the employee’s personnel file, then the employer would be "effectively shielded from discriminatory acts and recommendations of supervisors that were designed and intended to produce the adverse action." According to the Court, "[t]hat seems to us an implausible meaning of the text, and one that is not compelled by its words."

The Court also rejected the employer’s argument that a decisionmaker's independent investigation of the employee's allegations of discriminatory animus should provide an absolute affirmative defense, stating: "Nor do we think the independent investigation somehow relieves the employer of 'fault.' The employer is at fault because one of its agents committed an action based on discriminatory animus that was intended to cause, and did in fact cause, an adverse employment decision." However, the Court explained that if the employer's investigation resulted in an adverse action for reasons unrelated to the supervisor's original biased action, then the employer would not be liable.

Justice Alito filed a separate concurring opinion, with which Justice Thomas joined, in which he opined that the same decision could have been reached based on the statutory text rather than on principles of agency and tort law "that do not speak directly to the question presented here." The majority rejected Justice Alito's contention that they had strayed from the statutory text.

The Supreme Court’s Decision

Writing for the majority, Justice Scalia began by comparing the statutory language of Title VII’s anti-retaliation provision with its substantive anti-discrimination provision. Title VII prohibits discrimination on the basis of race, color, religion, sex, and national origin “with respect to . . . compensation, terms, conditions, or privileges of employment,” and discriminatory practices that would “deprive any individual of employment opportunities or otherwise adversely affect his status as an employee.”

Title VII’s anti-retaliation provision, however, prohibits any employer action that “well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.” Interpreting this statutory language, the Court had no difficulty concluding that “a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancé would be fired.”

Having addressed the scope of Title VII’s anti-retaliation provision, the Court then analyzed “the more difficult question in this case,” which was whether Thompson himself could sue. Noting that Title VII provides that “a civil action may be brought . . . by the person claiming to be aggrieved,” the Supreme Court found that Thompson was himself a “person aggrieved” within the meaning of Title VII and applied a “zone of interests” test to determine that he had standing to sue under the statute. To illustrate, the Court emphasized that “injuring him was the employer’s intended means of harming Regalado. Hurting him was the unlawful act by which the employer punished her.” As such, the Court concluded that he qualified as a “person aggrieved with standing to sue.”

Analysis

While acknowledging the fact that the decision would lead to “difficult line-drawing problems concerning the types of relationships entitled to protection,” the Court did not believe such a concern justified a “categorical rule that third-party reprisals do not violate Title VII.” Indeed, the Court also “decline[d] to identify a fixed class of relationships for which third-party reprisals are unlawful.” Specifically, the Court speculated that “firing a close family member will almost always [suffice, but] inflicting a milder reprisal on a mere acquaintance will almost never [be enough].”

Conclusion

It is important for employers to be aware of the implications of the Supreme Court’s decision in Thompson v. North American Stainless, LP. Because third parties now have standing to sue for retaliation under Title VII - even when they do not engage in any protected activity - employers should be cautious in taking any adverse employment action against a spouse, fiancé, or family member of an employee who has, in fact, engaged in protected conduct under the statute. The decision does, however, create a number of delicate issues for employers. While spouses, fiancés, and family members would undoubtedly qualify as relationships entitled to protection, the Court did question whether “firing an employee’s girlfriend, close friend, or trusted co-worker,” would “dissuade the employee from engaging in protected activity.” The Supreme Court’s decision declined to delineate a bright-line rule, and instead instructed lower courts that “the significance of any given act of retaliation will often depend upon the particular circumstances.” In light of the Thompson case, employers should consider revising their anti-retaliation policies as noted above. Additionally, cautious employers should ensure that their legitimate reasons for terminating employees or taking other adverse actions are sufficiently and properly documented.

Michael J. Riccobono is an Associate in the Gibbons Employment Law Department.

Conclusion

A decision is expected later in the Supreme Court term and should provide clarification of the circumstances under which the bias of a non-decision-maker will be attributed to the employer and what steps the employer needs to take to shield itself from liability. As set forth in an article previously published by the Employment & Labor Law Alert, employers should, as a matter of best practices, be mindful of the possibility that a recommended adverse employment action by a non-decision maker may be motivated by discriminatory animus.

The Court’s Decision

In denying the employer’s motion for summary judgment, the court rejected the employer’s arguments that Hoffman was not disabled because his cancer was in remission and because he had worked full time for a year without restrictions. Relying on the expanded definition of disability in the ADAAA, the court held that Hoffman did not need to show that he was substantially limited in a major life activity at the time he requested an accommodation because his cancer, although in remission, would have substantially limited a major life activity if it were active.

Also of importance is the court’s treatment of the reasonable accommodation issue. The court noted that Carefirst failed to provide any evidence that the requested accommodation (allowing Hoffman to work from home) would have created an undue burden on the company. How much would it cost? How would it affect other service technicians’ workload? Were there enough customers in Hoffman’s home area to justify Hoffman having a continuous home office there? The court’s discussion on this point suggests that had Carefirst provided such evidence, the court may have found that Carefirst had satisfied its duty under the ADA to offer a reasonable accommodation.

Conclusion

It is important for employers to be cogniznant of the ADAAA’s expanded definition of “disability.” “Disabled” employees now include those whose impairment is episodic or in remission at the time an adverse employment action is taken or a request for an accommodation is made. Moreover, the Hoffman case highlights the importance of engaging in the interactive process with employees who have requested accommodations - even when the employee’s impairment may not be immediately noticeable by the employer. Of course, should this issue arise, the employer should consult with legal counsel before taking any adverse action against the employee.

Michael J. Riccobono is an Associate in the Gibbons Employment Law Department.