Three Oldest Employees Selected for RIF Failed to Prove Age Bias

The U.S. Court of Appeals for the Eighth Circuit ruled that an employer had legitimate, non-discriminatory reasons for laying off its three oldest employees through a reduction in force. The Court found that the employees, who sued their employer for age discrimination under the Age Discrimination in Employment Act (ADEA), failed to prove that the employer’s stated reason for the RIF and the criteria it used to determine which employees to let go were pretextual.

Facts of the Case: In Rahlf v. Mo-Tech Corp., Inc., a manufacturer of molds for the automobile, medical, consumer products, and computer industries laid off the three oldest employees as part of a RIF, and the employees sued for age discrimination under the ADEA. The employer claimed that the RIF was necessary due to a change in client needs and anticipated reductions in workload and profitability. The employer further explained that technological advances in the mold-making process reduced the company’s need for manual mold makers like the plaintiffs. To determine which mold makers to lay off, the employer ranked each based on several factors including their proficiency with the new computerized manufacturing process, general mold making efficiency, and management’s personal knowledge of each employee’s work performance. Based on these criteria, management agreed that the three plaintiffs should be let go.

The Court’s Ruling: The Eighth Circuit upheld the district court’s grant of summary judgment in favor of the employer, rejecting the plaintiffs’ claim that the employer’s stated reasons for the RIF were meant to conceal the real, discriminatory reasons for their terminations. The employees argued that the RIF was not necessary because within a year after they were fired, the employer hired five new employees. The Court, however, noted that none of the new hires were mold makers. Rather, the new employees filled lesser skilled positions or were skilled in the computerized manufacturing process. The Court also held that the fact that the remaining mold makers were busy and the company’s sales increased after the three employees were terminated did not support an inference that the RIF itself was pretextual. The Court held that an employer does not have to demonstrate financial distress to justify its RIF decision. The Court then rejected the employees’ attack on the employer’s methods to determine which mold makers to terminate. The employees contended that the employer’s failure to review positive performance evaluations and its reliance on the subjective evaluations of management were evidence of pretext. The Court, however, noted that given the small number of mold makers considered for the RIF (11) and management’s close involvement with the daily operations, subjective knowledge of each employee’s work performance and skills was relevant to the ultimate termination decision. Moreover, the employer relied on both objective and subjective criteria. Each employee’s productivity and profitability were objectively measured based on whether hours budgeted for particular jobs were met or exceeded. The employer also consulted a computer program that assessed each employee’s performance. As for the employer not considering positive performance reviews, the Eighth Circuit held that it was not required to consider them in making its RIF decision when the employer had many other relevant factors under consideration. Finally, the Court dismissed the employees’ argument that the employer provided inconsistent rationales for the lay offs where there was no evidence to support the claim. Indeed, the Court of Appeals found that the employer consistently maintained that the reason for the RIF was shifting client needs and an anticipated decrease in workload and profits.

Practical Impact: Reductions in an employer’s workforce often give rise to litigation. Thus, it is important to establish legitimate, business related reasons when deciding to reduce a workforce. While using objective criteria provides the best defense to a claim of discrimination, this case proves that subjective factors also can be considered. Whatever the reasons relied upon in making the RIF decision, they should be clearly identified and based on well documented facts in the event the employer’s motives are called into question.

Decision Maker’s Lie About Reason for Failing to Promote Employee Allowed Plaintiff to Defeat Summary Judgment in Discrimination Lawsuit

For an employer embroiled in a discrimination lawsuit, summary judgment is usually the last opportunity to get the case dismissed before going to trial. A decision by the District of Columbia Court of Appeals demonstrates how lying about the reason for an adverse employment action can torpedo an employer’s defense to a claim of discrimination on summary judgment and allow the case to proceed to trial.

Facts of the Case: In Colbert v. Tapella, a 30 year African American female employee of the federal Government Printing Office sued her employer for race and gender discrimination after she was passed over for two different promotions that were filled by white males. The decision makers for the positions did not interview the candidates. Instead, they evaluated each on their written applications, respective qualifications, responses to a questionnaire, and any personal knowledge that they had of the candidates’ work performance. During the initial EEO investigation, one of the decision makers told the investigator that he did not select the plaintiff, in part, because she “wandered.” When the decision maker was later deposed, he admitted that he did not tell the truth when he said that the plaintiff wandered. Despite the employer’s attempt to downplay the admission, the decision maker’s stated rationale for passing over the plaintiff was called into question.

The Court’s Ruling: The D.C. Circuit overruled the district court’s grant of summary judgment in favor of the employer, finding that the lower court erred when it required the plaintiff to prove both that the employer’s reason for not promoting her was pretext and that race and gender bias was the actual reason she was passed over. The Court of Appeals held that “a jury can conclude that an employer who fabricates a false explanation has something to hide; that ‘something’ may well be discriminatory intent.” While a plaintiff cannot always avoid summary judgment by showing that the employer’s explanation to be false, the evidence in this case demonstrated that the employer’s proffered non-discriminatory reasons for the nonpromotion was unfounded. The Court found that the decision maker’s statements that the plaintiff was less qualified and lacked the same experience as the white male applicants who were selected for the positions were not supported by any evidence in the record. The Court further noted that there was insufficient, independent evidence that no discrimination had occurred. Instead, the decision maker’s lie about the plaintiff wandering, his lack of knowledge about the plaintiff’s actual experience, and the employer’s record of failing to promote minorities, was enough evidence of discrimination to defeat the employer’s motion for summary judgment. .

Practical Impact: An employer’s reason for taking an adverse employment action must be based on a legitimate, non-discriminatory reason that should be supported by facts and not change over time. Changing the articulated reason for taking the adverse action only reveals that it may not have been the real reason for the action. Employers must recognize that their responses will be evaluated by people who will have a different perspective from them. What may appear to an employer as a benign misstatement of fact can be perceived by a jury as evidence of a malicious, discriminatory act. It may be trite, but honesty is always the best policy.

TAKE NOTE

Confidentiality Provision in Employment Agreements. In NLRB v. Northeastern Land Services, an employee of a non-union temporary staffing agency was terminated in violation of the confidentiality provision in his employment agreement after he complained to a client of his employer about the amount of pay he was receiving for the use of his personal computer for work. The Court of Appeals for the First Circuit upheld the NLRB’s decision that the confidentiality provision, which prohibited the employee from discussing the terms of his employment as well as his compensation with “other parties,” was overly broad and a per se violation of Section 8(a)(1) of the NLRA. Section 8(a)(1) bars employers from interfering with employees’ right to discuss the terms and conditions of their employment with others. The NLRB had found that the provision could be reasonably understood by employees that they were prohibited from discussing their compensation with union representatives. The First Circuit held that the NLRB did not have to consider the employer’s justification for enforcing the confidentiality provision, which the employer stated was to prevent employees from disclosing one of the key components of its bid to clients, its labor costs. The Court held that where the discipline is imposed pursuant to an overly broad rule, a discipline is unlawful regardless of whether the conduct could have been prohibited for lawful reasons. Had the employer not relied on the confidentiality provision, but instead on the employee’s disruptive conduct, the employer probably would have been within its right to terminate the employee. However, by relying on the overly broad provision, the employer lost any defense to the termination.

Unfair Labor Practices. The Court of Appeals for the District of Columbia Circuit overruled an NLRB finding that a hospital unlawfully placed a nurse on investigatory suspension due to her union activities because the Board’s decision was not supported by substantial evidence. In Jackson Hospital v. NLRB, the employee, a registered nurse, had complained about the hospital’s implementation of a new policy for administering medications to patients that required nurses to take medications to patients in a labeled plastic bag. Previously, nurses would take medication to patients in an unlabeled cup. The nurse complained to the hospital’s CEO that the procedure was impractical and difficult to implement, hoping that the policy would be revised. The nurse then was observed by the unit manager taking medication to a patient in an unlabeled cup rather than a labeled plastic bag, as the policy required. The unit manager and the director of nursing decided to issue the nurse a verbal warning, and arranged a meeting to deliver the discipline. When the nurse was told about the meeting, she asked if she could have a union representative present. The nurse was told no, and she refused to go ahead with the meeting. She was then told that she was being placed on suspension. The next day, the union requested a meeting with management. The two sides, however, never met to discuss the discipline because of a series of cancellations by the union, and the nurse remained on indefinite suspension. The NLRB General Counsel filed a complaint, alleging that the hospital suspended the nurse based on her union activity. Following a hearing on the merits, the ALJ ruled that the hospital had conspired to set the nurse up by provoking her into insisting on a right to have union representation at the meeting, when in fact the nurse had no such right. [The Supreme Court has ruled that an employee has a right to union representation at an investigatory interview that could lead to disciplinary action, but if the employer has already reached a final decision to impose certain discipline prior to the interview (as in this case), the employee has no right to have a union representative at the meeting, unless the parties’ collective bargaining agreement provides otherwise.] The ALJ concluded that the hospital deliberately schemed to get the nurse to invoke her non-existent right to union representation, so that when her request was denied, she would refuse to participate in the meeting, and the hospital could take action against her. A three member panel of the NLRB affirmed the ALJ’s decision. On appeal to the DC Circuit, the Court of Appeals found that there was not a shred of evidence in the record to support the ALJ’s conspiracy theory. The Court also found specious the ALJ and the NLRB’s reliance on the failure of the parties to meet to discuss the nurse’s discipline, which they blamed on the hospital, when in fact the union was responsible for the failure to meet.

Joint Employment Under the FLSA. The U.S. District Court for the District of Maryland held that employees who sued their employer and the company that they had been on assignment with for violations of the Fair Labor Standards Act and Maryland’s wage and hour laws alleged sufficient facts to establish a joint employment relationship with the two defendants. In Jennings v. Rapid Response Delivery, the plaintiffs were employed as drivers by Rapid Response, a delivery and courier services company. In Spring 2009, the plaintiffs were assigned by Rapid Response to work exclusively for Maryland Tire, which delivered tires to wholesale customers. Shortly after they were assigned to Maryland Tire, they were given a new work schedule and told that their wages and hours would be set pursuant to a contract between the two companies. The plaintiffs regularly worked more than 40 hours a week with Maryland Tire, but were not properly paid overtime. They also were not permitted to take a meal or rest break. When one of the plaintiffs complained about her wages, Rapid Response told the employee that Maryland Tire no longer wanted her services, and she was fired. No attempt was made to reassign the employee. The plaintiffs claimed that Rapid Response and Maryland Tire violated the FLSA by failing to pay overtime and retaliated against the employee who raised complaints. Maryland Tire filed a motion to dismiss the complaint on the ground that it was not the plaintiffs’ “employer” under the FLSA. Under the FLSA, an employee may be employed by more than one employee at the same time. In such a case, each employer would be jointly and severally liable for violating the FLSA. The District Court considered the variety of factors used to determine whether there was a joint employment relationship, and found that the plaintiffs alleged sufficient facts in their complaint to survive the motion to dismiss. The plaintiffs alleged that (1) Rapid Response had a contractual relationship to assign drivers to Maryland Tire for its delivery needs; (2) the contract required the plaintiffs to work exclusively for Maryland Tire; (3) their wages and hours were contractually set by Rapid Response and Maryland Tire, and; (4) Rapid Response would terminate employees at Maryland Tire’s request. In denying the motion to dismiss, the District Court found that these allegations demonstrated that Maryland Tire exercised “functional control” over the plaintiff, and thus the lawsuit could proceed against Maryland Tire as a joint employer under the FLSA and Maryland’s wage and hour laws.

Inflatable Rats Are Constitutionally Protected. A union’s display of a 16 foot-tall by 12 foot-wide inflatable rat at the entrance of a hospital that was a neutral worksite to protest the hospital’s use of non-union contractors was not unlawful picketing and did not violate the secondary boycott provisions of the NLRA. In Sheet Metal Workers Local 15 (Brandon Regional Medical Center), the Board applied the same reasoning it used in Carpenters’ Local 1506 (Eliason & Kurth of Arizona, Inc.) in finding that the display of large stationery banners was not “picketing” and more akin to protected handbilling. The Board held that the use of a stationary inflatable rat to bring attention to a labor dispute was constitutionally protected speech, not unlike cross burning, flag burning, or residential lawn signs, and therefore did not violate the NLRA. The sole dissenting member of the Board opined that this decision will further erode the NLRA’s protections against secondary boycotts that were created to protect neutral employers from labor dispute that do not directly involve them.

Leave as a Reasonable Accommodation. One of the most vexing questions for employers is how much leave must be provided to an employee with a disability as a reasonable accommodation under the Americans with Disabilities Act (ADA). The ADA requires employers to provide reasonable accommodations so that employees with disabilities can perform the essential functions of their jobs. Leaves of absence are often provided as an accommodation when the disabled employee has exhausted or does not qualify for leave under the employer’s policy (or the FMLA). At a Commission meeting on June 8, 2011, the EEOC addressed this very issue, inviting comments from representatives of employers and employees, and EEOC officials. Unfortunately, the meeting provided no answers and very little guidance on how to navigate these situations. Employers must continue to conduct individualized factual assessments in each case to determine whether leave is an appropriate accommodation. What may be a reasonable amount of leave in one situation may not be reasonable in another after considering, among other things, the employee’s position, whether others can be assigned to perform the employee’s duties in their absence (and for how long), the financial impact of the leave on the employer’s operations, the employer’s resources, whether the employee has been given prior extensions of leave, and the amount of information the employer knows about the length of time the employee will be out of work.

TOP TIP

Fair Credit Reporting Act amendment takes effect on July 21, 2011.

While employers generally have been permitted to use consumer credit reports when, for example, evaluating job applicants or employees for promotion, reassignment, or retention, this practice has come under scrutiny by federal and state legislators since the recession and foreclosure crisis because of the impact that the economy has had on the credit status of millions of Americans. Use of credit histories in employment decisions also has spawned discrimination actions when their use appear to disparately impact minority groups. Notwithstanding, the use of credit reports can be an invaluable tool for employers in evaluating applicants and employees, particularly for positions that provide access to cash or other individual’s credit information. The Fair Credit Reporting Act (FCRA), which protects consumers by ensuring fairness and accuracy in credit reporting, was recently amended by Congress as part of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act.

The amendments, which take effect on July 21, 2011, require that an employer that makes an adverse decision based, in whole or in part, on an individual’s credit score, must provide the affected individual with written or electronic disclosure of the following:

• The individual’s credit score that was used;
• The range of possible credit scores under the credit scoring model used;
• The date that the credit score was created;
• The name of the entity that provided the credit score; and,
• A list of the key factors, in order of importance, that affected the individual’s credit score.

These new requirements apply only when a numerical credit score is used in making an adverse action. If a credit report (and not a credit score) is used to take an adverse action, then the FCRA’s existing requirements would apply, and the affected individual must be provided the following:

• The contact information of the consumer reporting agency that supplied the credit report;
• A statement that the consumer reporting agency that supplied the report did not make the decision to take the adverse action and that it cannot provide the individual specific reasons for the action;
• A notice of the individual’s right to dispute the accuracy or completeness of any information the agency furnished; and,
• Notice that the individual can obtain a free copy of their consumer report from the agency if requested within 60 days of receiving notice.

Whether an employer intends to use a credit score or a credit report in its employment decisions, it must first notify the individual in writing that a report may be used. An employer also must obtain the person’s written authorization before asking a consumer reporting agency for the credit score or report. There are legal consequences for employers who fail to secure an applicant’s permission before requesting a consumer report or who fail to provide adverse action notices to unsuccessful job applicants. Indeed, the FCRA allows individuals to sue employers for damages in federal court, including punitive damages and attorney fees. In addition, the Federal Trade Commission, other federal agencies, and the states can sue employers for noncompliance and obtain civil penalties.