EMPLOYMENT LAW – Selmi – Spring 2011
I. INTRODUCTION
-Employment law is the law of the non-unionized workplace (outside of the NLRA)
-High percentage of public workers are unionized, but most public employees can’t strike
-Industries with high levels of organizing: nursing, restaurants/hotels, janitors
-The main reason for decline in unionization: shifting in structure of the economy
Unionized workplaces:
-are collective
-have arbitration to resolve grievances
-place a special value on speech
-are based around seniority
Non-unionized workplaces:
-are individual
-do not have arbitration or just cause protections
-place a special value on privacy
-are uniform and not about seniority
-The labor market theory: the market as a restraint that will “discipline” the worst employers because the good
employees will gravitate toward better employers
Essential elements to the labor market theory:
-Mobility (employees must be able to move to change employers)
-Workers can obtain information on various employers and employment opportunities
-Some employers will provide alternatives (no “race to the bottom”)
-The market is particularly rigid (not much flexible, part time, telecommute, etc.)
“New psychological contract”
-Previously, there was much more company loyalty as companies invested in their employees who in turn stayed
with and improved their employer
-In the modern era, the onus is on the employees to invest in themselves and use their employers to obtain skills and
knowledge while the employer knows that the employee is bettering the company only temporarily until the
employee moves on to another employer
-Human capital is what the employee brings to the labor market (education and experience)
General Human Capital and Specific Human Capital
-For most private employers, wages increase with seniority (not usually merit-based)
-Employers typically prefer to lay off employees than to reduce wages
Who is an employee?
-Most of the laws that govern the workplace only apply to employees
-None of the federal employment laws (ADA, ERISA, etc.) apply to independent contractors
-Independent contractors do not get benefits; must sue employers for employment injuries
-Employees have statutory remedies; ICs do not
-Employees injured in the workplace must use worker’s comp system; IC’s must file for tort remedies in court
-The label of the employee is irrelevant (“independent contractor” or “employee at will”)
The law will determine your employee status
-Courts confronting the issue of which entity is functioning as an employer look beyond labels and ostensible
relationships to determine whether an employment relationship exists.
Estrada v. FedEx
-CA state case where FedEx drivers were seeking reimbursement of certain expenses
-FedEx tells its drivers how to do their jobs and where to go (more like employee) but doesn’t control the drivers’
profits (more like independent contractor)
-Deferential standard of review (because employee status is not a jurisdictional element)
-“Control of details” test – common law agency test
(1) Whether the worker is engaged in a distinct occupation or business
(2) Whether, considering the kind of occupation and locality, the work is usually done under the principal’s
direction or by a specialist without supervision
(3) The skill required
(4) Whether the principal or worker supplies the instrumentalities, tools, and place of work
(5) The length of time for which the services are to be performed
(6) The method of payment, whether by time or by job
(7) Whether the work is part of the principal’s regular business
(8) Whether the parties believe they are creating an employer-employee relationship
-Court finds that the drivers are employees, not independent contractors
FexEx v. NLRA
-Federal case where union attempted to organize drivers and FedEx objected to the classification
-De novo review (because employee status is a jurisdictional element)
-D.C. Circuit uses a different test: whether the position “presents the opportunities and risks inherent in
entrepreneurialism”
-Court finds that the drivers can make their own hours, figure out their own routes, and may hire their own
employees for routes, and finds that they are independent contractors, not employees
-There are some industries where the employee/IC issue comes up regularly (i.e. agriculture)
-As a general matter, agricultural workers are treated about as badly as you can be treated, both by their employers
and under law (they are excluded from the NLRA and the FLSA)
-Volunteers typically do not have any protection in the workplace (b/c they aren’t employees)
-To work for free for a for-profit business (i.e. law firm), the business must receive no real benefit and must provide
a benefit to the volunteer/intern
-In the law firm context, the question is whether a partner is an employee or an employer
-No automatic exclusion based on the “partner” label (it’s about the function of their jobs)
-In Clackamas Gastroenterology Associates v. Wells, the Supreme Court established a test for assessing whether
physician shareholders in a professional corporation were employees:
(1) Whether the organization can hire or file the individuals or set rules and regulations of the individual’s
work
(2) Whether and to what extent the organization supervises the individual’s work
(3) Whether the individual reports to someone higher in the organization
(4) Whether and to what extent the individual is able to influence the organization
(5) Whether the parties intended that the individual be an employee, as expressed in written agreements or
contracts
(6) Whether the individual shares in the profits, losses, and liabilities of the organization
-The Clackamas test has been used to draw the line between ownership status and employee status
-Under the “joint employer” doctrine, the contracting employer and the subcontractor may be held liable for
statutory violations if the contracting entity maintains significant control over the work and the works are
economically dependent upon the contracting entity
II. COMMON LAW REGULATION OF THE WORKPLACE
-“At-will” employment in the U.S. is the default rule (but you can change it by contract)
-In the employment context, damages are much more limited for contract claims than tort claims
-Contractual claim will generally be much easier to establish than a tort claim
A. Contract Actions
(i) Express contracts
-A written contract for a fixed term remains the most straightforward way to overcome the at-will presumption
-Even when the contract is silent on the issue of termination, courts presume that contracts for a fixed period of time
cannot be terminated without cause during the term of the contract
-In Guiliano v. Cleo, Inc., the company sent plaintiff home and stripped him of his duties, but still paid him
The court found that he was constructively discharged (and terminated without cause)
-To establish constructive discharge, employee must prove that “no reasonable employee could have been expected
to continue working in those circumstances”
-In a definite term contract, the terms of the contract govern (employment period, pay, etc.)
-When definite term contracts fail to specify the circumstances under which they can be terminated, courts must
imply terms to fill the gap
-Generally, a fixed-term contract can be terminated for just cause, even if the contract does not specifically reserve
that right to the employer
-Most modern courts are willing to enforce indefinite-term contracts restricting the employer’s power to terminate
where the parties’ intentions are clear (see, e.g., Sheon v. Amero from Supreme Court of NV)
-A few courts persist in the traditional view that indefinite-term contracts are per se unenforceable, even when
protections of job security are included in a written contract
-In an indefinite term contract, there is no fixed time period, and the indefinite terms imply “just cause” termination
-Adverse business conditions usually suffice for cause in indefinite term contracts
-But financial resources are usually insufficient to constitute cause to terminate a definite-term contract
-When a prospective employee inquires about job security and the employer agrees that he employee shall be
employed as long as he does the job, a fair construction is that the employer has given up his right to discharge at
will without assigning cause and may discharge only for cause (Toussaint v. Blue Cross Blue Shield of Mich.)
-Although many courts have abandoned the requirement of additional consideration for job security, some
jurisdictions require additional consideration when plaintiffs rely on oral promises
-Another hurdle is the statute of frauds – generally the SoF bars enforcement of oral contracts not capable of
performance within a year; in the employment context, many courts take the position that indefinite-term just-cause
contracts are not barred because performance could be completed within a year (i.e. because of death or layoff)
(ii) Implied contracts
-Two types of implied contracts: (1) Oral and (2) Written
-Implied contracts do not have the formalities of an express written contract, and usually did not involve actual
official agreements between the parties (Most involve promises by employer like “Your job will be secure here”)
-Business reasons, such as financial difficulties, constitute good cause under an implied contract
-Implied written contracts do not need to come from official handbooks; they could be from employment letters or
other written documents provided to employees
Woolley v. Hoffmann-LaRoche, Inc.
-Plaintiff alleged that express and implied promises in the company’s employment manual created a contract under
which employees could only be fired for cause
-Regular contract law requirements (offer, acceptance, consideration) do not apply when implying contracts
-Court reads handbook as constituting an offer from the employer to the employee
But this doesn’t make sense, because there’s no real consideration or reliance
-The court treats the handbook as a unilateral contract (but this also doesn’t make sense)
What this means is that the employer can take away the handbook at any time
-A specific and clear disclaimer in the handbook that the document creates no binding rights will almost always be
respected by the courts
-In a case like Woolley, the terms of the handbook become the contract
-To the extent the disclaimer is (1) bold and prominent and (2) not inconsistent with the terms of the document, it
will found to be valid and override any arguments that the document is a contract
-If you put the disclaimer on every page, that’s a good way to make sure the disclaimer counts
-When there is ambiguity in a document, that ambiguity is construed against the employer
-A majority of states have held that personnel manuals can give rise to binding obligations
-Other courts, however, rely on basis fairness arguments rather than formal contract theory to justify holding
employers to the promises contained in employee handbooks
-Even in states willing to enforce promises contained in employee handbooks, courts will not find contractual rights
to exist if the language in a particular handbook is not sufficiently clear to create a promise
Asmus v. Pacific Bell
-There was a contract between the parties (not an implied agreement) whereby PacBell created a policy to give its
employees continued employment
-PacBell throws out the agreement when the economy tanks without additional consideration or mutual agreement
-CA Supreme Court doesn’t see the need for additional consideration to modify the contract, because they find that
it was a unilateral contract
-Three different approaches:
1) Employer can change the agreement anytime (promise is illusory) – Govier v. North South Bank (WA)
2) Modification/Removal requires additional consideration – Demasse v. ITT (AZ)
3) Middle of the road - Asmus
-Three requirements to change a preexisting agreement not to terminate (without cause)
1) Reasonable period of time – no false pretenses or illusory promises
2) Reasonable notice of the change – fairness/negotiation
3) Abrogation of the contract can’t interfere with any vested rights
-The court in Touissant v. Blue Cross Blue Shield of Mich. suggested that employee handbook provisions
guaranteeing job security should be enforced because the employer derives the benefit of “an orderly, cooperative,
and loyal workforce” as a result of its promsies
(ii) Promissory estoppel claims
- For the most part, promissory estoppel does not work in the employment context
-Where promissory estoppel does work: significant relocation in reliance on offer of new job
Goff-Hamel v. OB&GYN, P.C.
-Plaintiff left her job at an old doctor’s office to work at a new one; before she started her job the offer was
withdrawn and she had no job
-She had no incentive to leave her old job and she was enticed to come to the new job, so court awarded damages
Pugh v. See’s Candies, Inc.
-No written materials, but a verbal promise to Pugh of continued employment if he did well + his long tenure of
service and promotions + See’s policy of only firing people for good cause
-Pugh’s argument was that all the above created his reliance and induce him to stay at See’s
-Court found an implied-in-fact promise that Pugh would only be terminated for cause
-Promissory estoppel claims may also be based on a promise of something other than at-will employment, like a
promise of job security at the current job (see Blinn v. Beatrice Community Hospital, NE Supreme Court)
-Promissory estoppel is difficult to establish, and usually reserved for those limited circumstances where an
employee has reasonably incurred expenses in reliance on the promise and the employer is aware of those expenses
Cotran v. Rollins Hudig Hall Int’l, Inc.
-Employee accused of sexual harassment, employer conducts investigation and terminates the employee, employee
sues for wrongful discharge
-Issue is whether, when an employee is hired under an implied agreement not to be discharged except for “good
cause” and is fired for misconduct, the employer needs to prove that the misconduct actually occurred
-Court holds that employer need not actually prove that the misconduct occurred; all that is required is a “reasoned
conclusion…supported by substantial evidence gathered through an adequate investigation that includes notice of
the claimed misconduct and a chance for the employee to respond”
Fortune v. NCR
-Employee was terminated before he received commissions that he would otherwise be due; issue is whether the
“bad faith” termination constitutes a breach of the employment at will contract
-The court found that NCR paid Fortune all the commissions he was due under the contract
Employees are always due the compensation which they have earned
-Court holds that implying good faith here won’t do anything to hurt at-will employment
-Employers can’t terminate an employee to avoid paying them commissions which they have previously earned, just
as they can’t terminate an employee to prevent a pension from vesting
Murphy v. American Home Products Corp.
-Employee claims that he was terminated because of his disclosure to top management of illegal account
manipulations of pension reserves
-NY Court of Appeals refuses to imply a good faith term which would limit at-will employment
-The whole principle of at-will employment is that it permits termination for anything, and might very well involve
bad faith
-Courts refuse to read an obligation of good faith and fair dealing into employment contracts when it would
contradict other terms
-Although many courts refuse to recognize a duty of good faith in employment at all, other courts have held that the
duty exists, but does not limit the employer’s ability to discharge an at-will employee without cause
-Many states simply refuse to recognize employee claims based on the covenant of good faith and fair dealing at all
B. Public Policy Protections
Three things to know about public policy action:
1) Tort not a contract
2) Different from just cause (more limited)
3) The tort is designed to protect the public, not the individual (although individual benefits)
(i) Public policy tort
-You can’t fire someone because
(1) they refuse to commit perjury (Petermann v. Int’l Brotherhood of Teamsters)
(2) they file for worker’s compensation benefits (Frampton v. Central Ind. Gas Co.)
(3) they perform jury duty (Nees v. Hocks)
-Also, if they engage in union activity (Glenn v. Clearman’s Golden Cock Inn)
-The possibility of criminal prosecution if an employee acts or doesn’t act also may be a basis for a public policy tort
Sheets v. Teddy’s Frosted Foods
-Employee was the QA person, an at-will employee who could have been prosecuted criminally for failing to
properly do his job under the CT Uniform Food, Drug, and Cosmetic Act
-Issue is whether an employer has a completely unlimited right to terminate the at-will employee, or whether he is
protected from complete at-will employment by a public policy tort exception
-Court recognizes the public policy tort because there is a significant public interest at stake
-Court says that it needs not decide whether a violation of a statute is “invariably a prerequisite to the conclusion
that a challenged discharge violates public policy” only that an employee should not be forced to choose between
continued employment and risking criminal sanction
-In creating a public policy tort, you must have a basis in which to ground it (In Sheets, it was the CT statute)
-An overwhelming majority of American jurisdictions have recognized a public policy exception to the at-will rule
-Most courts that recognize the public policy tort will protect the employee so long as she has a good faith, or at
least objectively reasonable, belief that the act was illegal, even if she turns out to be wrong
Hayes v. Eateries, Inc.
-Employee complained to his boss that another manager was embezzling from the employer; he asserts that he was
fired because of this disclosure
-Not whistleblowing case because the reporting was internal not external, so no public policy tort
-Court distinguishes this case because the “victim” of the crime (embezzlement) is a private entity, not the state
and/or the public (might be different if the company was publically-owned)
It is the company’s discretion to decide whether to seek prosecution of the embezzlement
-At least one court has imposed a higher standard of proof on financial whistleblowers, as opposed to
whistleblowing regarding public safety (Ellis v. City of Seattle – 2001 WA case)
-In recognizing a public policy claim, many courts have emphasized that it protects only public and not purely
private interests (the issue then becomes how to distinguish public and private interests)
Gantt v. Sentry Insurance
-Gantt is pressured into not participating in a sexual harassment investigation where he was going to give testimony
supporting the other employee’s allegations; he gives the testimony anyway and is constructively discharged
-Court lists sources of public policy (see below), and applies the relevant state statute to hold that the plaintiff
established a valid claim based on retaliation for refusal to withhold information
-Gantt is all dicta, but is helpful to understanding the sources of the public policy exception
-Sources of the public policy exception (in order of applicability priority):
1) Statute
2) Constitution
3) Administrative rules
4) Judicial decisions
5) Code of ethics
-Most states will allow statutes and its constitution as sources, but vary on the acceptance of the other three as valid
sources for public policy
-When dealing with professionals (like nurses), several courts have held that their ethical codes may provide a
source of public policy (see, e.g. Rocky Mountain Hospital & Medical Service v. Mariani – 1996 CO case)
-Some courts reject the use of federal statutory law as a source of public policy (see, e.g., McLaughlin v.
Gastrointestinal Specialists – 2000 PA case)
-Others have found that “substantial public policy interests can reside in certain federal statutory provisions” (see,
e.g. Strozinsky v. School District of Brown Deer – 2000 WI case)
Kirk v. Mercy Hospital
-Nurse tried to bring patient’s TSS to doctor’s attention and was told to “stay out of it”
-Court looked to Code of Conduct adopted pursuant to MO Nursing Practice Act to find public policy upon which a
cause of action for wrongful discharge can be based
-When employees simply disagree with the employer’s decision, the employee will always lose
-Courts want to avoid turning disputes between employer and employee into wrongful discharge torts
-It is inappropriate for a court to create a common-law remedy in order to overcome an inadequate statutory remedy
-Employees can still bring a claim for wrongful discharge if they were constructively discharged
-The standard used for constructive discharge: You have to prove that no reasonable person could have been
expected to continue working under the conditions you were working
-Some courts do not restrict public policy to violations of the “literal language” of a statutory or constitutional
provision, but assert that they should consider whether a discharge contravenes the “spirit as well as the letter” of
such a provision
-Other courts have been reluctant to find public policy violations without a specific showing of an actual violation
(ii) Statutory protections for whistleblowers
-Statutory protections for whistleblowers are a separate encroachment on employment at-will
-Whistleblowing is a broad term for reporting the misconduct of your employer
-Whistleblowing is now a statutory issue (state and federal) which has displaced common law
-One of the things that consistent is that whistleblowers very often lose
-It’s important to identify the scope – both what and who – of a whistleblowing statute
(i.e. Sarbanes-Oxley only applies to publicly-traded companies)
-Also need to look at the requirements
The first and most common is that it must be reported externally
You might have to also first report the matter internally
-What are the criteria for bringing a whistleblowing claim?
You have to have a good faith belief that whatever issue it is that you are raising is true
You don’t have to know the specific law that you believe is being broken
So:
(1) Scope of the statute: subject matter
(2) Scope of the statute: who is covered
(3) Requirements for reporting (external vs. internal)
(4) Good faith belief that allegation is true
-Plaintiffs have prevailed in 100% of retaliation claims that have reached that Supreme Court
-Sarbanes-Oxley Act has a whistleblowing provision which is designed to protect from retaliation individuals at
publicly-traded companies who report securities fraud
Individuals are required to file a complaint (but the requirement is very broad)
-Employees cannot sue under Sarbanes-Oxley unless they filed a complaint with OSHA within 90 days of the
violation, and the Secretary of Labor did not issue a final decision within 180 days
-The statute provides for compensatory damages, including reinstatement, back pay, and “any special damages
sustained as a result of the discrimination”
Day v. Staples
-Employee complained about business practices of Staples and alleged that its procedures constituted fraud
-Court finds that employee failed to make a prima facie showing of retaliatory discrimination
-A prima facie showing of retaliatory discrimination requires that the employee’s complaint allege the existence of
facts and evidence showing that:
(1) the employee engaged in protected activity or conduct
(2) the employer knew or suspected, actually or constructively, that the employee engaged in the protected
activity
(3) the employee suffered an unfavorable personnel action
(4) the circumstances were sufficient to raise the inference that the protected activity was a contributing
factor in the unfavorable action
-After employee makes a prima facie showing, burden shifts to employer to show that it would have done it anyway
C. Collective Job Security
-Protection of worker job security at the collective level is limited. Three possible bases exist:
(1) Common law contract, property, and tort claims
(2) The notice provisions of the Worker Adjustment Retraining and Notice Act (WARN)
(3) The NLRA’s prohibition on retaliatory partial closings in the context of a union organizing drive
(i) Common law claims
-Two alternate theories over employee rights in the workplace:
(1) Workplace is the employer’s property
(2) Employees have a vested interest in their job
Steelworkers v. United States Steel Corp
-Employees claim that employer told them that if the workers remained productive, rendering the plants ‘profitable’,
that they would not shut down operations; the plant shut down
-Employees want a finding of promissory estoppel but also proceed on a community property claim
-On promissory estoppel claim, court held that the statements weren’t made by company officials, but by other
employees (Selmi says you can get around this) and that the condition precedent (profitability) was never fulfilled
Court finds that the numbers could reasonably be interpreted to show that the plants were not
profitable. Not willing to use P’s limited analysis of profitability to make determination
-On community property claim, court says that a claim that the town and employees have some sort of vested
property interest (bordering on deprivation of prop without due process of law) cannot hold water without
Congressional action.
-Injunctive relief would have been too difficult to administer (so judges’ hands are tied)
-Some courts have allowed individuals who can show specific damage resulting from employer misrepresentations
to recover on tort grounds
(ii) WARN
-Requires employers with 100 or more full time employees to provide notification of plant closings and mass layoffs
involving 50 or more workers at a single worksite to workers, unions, and affected state agencies 60 days in advance
-The notice period may be reduced or eliminated where the employer can establish that providing notice at an earlier
point would have interfered with good faith efforts by the employer to obtain infusions of capital or new business
necessary to avoid or postpone the closing, or where the closing was caused by unforeseen business circumstances
or natural disasters
-Reductions in penalties are also available where the employer establishes that it made good faith efforts to comply
with the Act
-WARN Act notification requirements are enforced solely through civil actions brought by employees, their
bargaining agents, or on rare occasions by the local municipality (also, unions have standing to sue for damages on
behalf of their members)
(iii) NLRA’s prohibition on retaliatory plant closings
-When an employee closes their entire business, even if the liquidation is motivated by vindictiveness toward the
union, it is not an unfair labor practice under the NLRA (Darlington Mfrg. Co.)
-But a partial closing of the business could violate 8(a)(3) of NLRA if it were designed to discourage the exercise of
protected rights among the remaining employees
D. Employee Mobility
-Restrictive covenants, Trade secret law, and Duty of loyalty are all ways to restrict employee mobility
(i) Restrictive covenants
-Restrictive covenants (or “covenants not to compete”) prevent employees from competing against employer
(1) Purpose
-Protect customer base
-Protect trade secrets
-Protect goodwill of the business
(2) Scope
a) Length
b) Geography
(3) Public Interest
-If you are fired, the employer can still enforce the restrictive covenant against you
-This is one area where employment at-will can benefit employees
-Restrictive covenants are prohibited in CA
Hopper v. All Pet Animal Clinic, Inc.
-Vet has a restrictive covenant with her employer (5 miles of Laramie, 3 years)
-Court finds the covenant valid, and the geographic restriction valid, but uses the “blue pencil” to narrow the time
restriction to one year (3 years was too long); time and geographic restriction are related to the purpose of the RC
-There is a general recognition that while an employee may seek protection from improper and unfair competition of
a former employee, the employer is not entitled to protection against ordinary competition
-The enforceability of a covenant not to compete depends upon a finding that the proper balance exists between the
competing interests of the employer and the employee
-A valid and enforceable covenant not to compete requires a showing that the covenant is
(1) in writing, (2) part of a contract of employment, (3) based on reasonable consideration, (4) reasonable
in duration and geographical limitations, and (5) not against public policy
-You want to sue early on to get a preliminary injunction and enforce the purpose of the RC
-The proper duration of a covenant will typically depend upon the time needed to protect the employer’s legitimate
interest (for businesses that operate on the Internet, this can be very short)
-Employer is not responsible for paying employee during the time when they are restricted from other employment
-But growing trend to the opposite, where employers pay employee’s salary after discharge: “garden leave”
-Courts don’t strike down restrictive covenants just because they’re not negotiated
-The employer usually defines who or what competitors are for the purposes of the RC
-Impermissible purposes for restrictive covenants include: keeping good employees, binding employee movement,
keeping employee talents and skills at the company
-Courts don’t allow restrictive covenants to be created orally
-It is important that public not suffer injury from enforcement of the covenant
-Many courts apply different rules of interpretation to restrictive covenants for professionals because of a concern
that depriving communities of professionals may adversely affect the public interest
-Restrictive covenants among attorneys are generally prohibited
(ii) Trade secrets
-Uniform Trade Secrets Act (UTSA), some form of which has been adopted in almost every state
-Most of the trade secrets law now is by state statute; the statutes simply reflect the common law
-Damages can be lost profits, or ill-gotten gains, but damage are difficult so trade secrets law is almost always
enforced by preliminary injunctions
-The critical question is usually not whether the information at issue was a trade secret, but whether the information
was readily ascertainable or whether the employer took sufficient steps to guard its secrecy
A common means of establishing intent to preserve secrecy is to require a confidentiality agreement
-The information has to (1) be a trade secret, and (2) has to be “misappropriated”
-Trade secrets can be formulas, patterns, methods, techniques, customer lists, pricing info, etc.
-Two components to defining a trade secret:
(1) Something that derives its independent economic value from the fact that it is secret
(2) The employer has taken adequate efforts to protect the secrecy
-Under UTSA, damages are available for misappropriation of trade secrets, and exemplary damages may be
available for willful violations, but the preferred relief is injunctive relief to preserve the value of the secret
Dicks v. Jensen
-Plaintiff claims that his employees violated trade secrets law by using his customer lists to start a new business
-Court finds that customer lists can be a trade secret, but the former employer didn’t do anything to protect the lists
to ensure their secrecy (should have taken steps to show that it’s a secret)
Pepsico, Inc. v. Redmond
-Quaker hires Redmond away from Pepsico, and Pepsico sues to enjoin Redmond from starting work at Quaker
because he is intimately aware of Pepsico’s business plan
-Court articulates the “inevitable disclosure” rule – by the nature of the new job, Redmond would inevitably disclose
trade secret information
-Court found that Quaker’ intent may have been going after Pepsico people for not only their skills, but for their
knowledge – it enjoins Redmond from assuming his new job responsibilities until a certain date
(iii) Duty of loyalty
Augat v. Aegis
-Augat VP Greenspan was going to jump ship to Aegis; he induced employees to join him while he was still
discharging his duties at Augat
-Distinction between some Augat employees who set up Aegis after they left, and Greenspan who secretly sought
the services of the other Augat (Isotronics) managers
-Court finds that Greenspan, working with the defendant, breached the duty of loyalty
If he had stopped working and then solicited the managers, it would have been ok
-Plaintiffs want profits from the new company; Court doesn’t give them this but authorizes the award of lost profits
caused by the disruption (minimal b/c tough to calculate)
-An at-will employee may plan to go into competition with his employer and may take active steps to do so while
still employed. However, an employee may not appropriate his employer’s trade secrets, may not solicit his
employer’s customers while still working for the employer, and may not carry away certain information like
customer lists
-The scope of the duty often differs for higher and lower-level employees
-Traditional remedy for breach of duty of loyalty is recovery of ill-gotten gains (tort claim)
Also related to the breach of fiduciary duty
(iv) Tortious interference with contract
-Fourth “tag-along” claim: tortious interference with the contract (rarely succeeds though)
-Tortious interference claim is usually against third-party employer, not employer-employee
It requires intent to break a contract
-Tortious interference requires:
(1) Existence of a valid contract between plaintiff and third party
(2) Defendant’s knowledge of the that contract
(3) Defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship
(4) Actual breach or disruption of the contractual relationship
(5) Resulting damage
E. Dignitary Interests
(i) Intentional Infliction of Emotional Distress (IIED)
-A tort claim
-You have to prove intent to cause emotional harm AND harm has to be severe
Wornick Co. v. Casas
-Court finds that arbitrary termination of employee was not “outrageous” (an essential element of IIED) and thus not
sufficient to support a finding of IIED
Bodewig v. K-Mart, Inc.
-Kmart cashier was accused of stealing money; after manager verified that she didn’t have it in her pockets and
register was clear, she was asked to undergo a strip search which the customer watched; she quit the next day and
brought a claim for IIED
-Difficult to succeed against the employer because of the issue of intent
-Court found that the employer and employee have a special relationship, so Kmart had a heightened obligation to
the employee that did not require deliberate intent to inflict distress (not so for third party though)
-A number of courts have found that the existence of the employment relationship is relevant to the outrageousness
inquiry, following the Restatement position that “the extreme and outrageous nature of the conduct may arise from
an abuse by the actor of a position, or a relation with the other, which gives him actual or apparent authority over the
other, or power to affect his interests.”
-Liability of the employer may turn on whether the court views the outrageous conduct as falling within the scope of
the supervisor’s employment
-In Monarch Paper, company VP was demoted by new management to custodial duties and was taunted by the new
management – this is a valid claim for IIED
(ii) Privacy
Four different types of common law invasion of privacy claims (first and third most likely to arise in employment):
(1) Unreasonable intrusion upon the seclusion of another
(2) Appropriation of the other’s name or likeness
(3) Unreasonable publicity given to the other’s private life
(4) Publicity that unreasonably places the other in a false light before the public
-The law is reluctant to recognize protections for privacy of private employees
-Courts frequently find that employees have a reduced expectation of privacy in the workplace
-Employee privacy claims are also defeated when courts find that the employer’s intrusion was justified for business
reasons or that the employee consented to the intrusion
-When an employee believes than an impending employer action will violate her privacy, she is confronted with the
choice of (a) submitting to the invasive search and suing later for invasion of privacy, (b) going to court immediately
to seek injunctive relief, or (c) objecting to the search, being fired, and then suing for wrongful discharge
None of these are desirable options, and some may not work in different jurisdictions
-A number of courts have held that there is no such thing as “attempted invasion of privacy” so if the employee
chooses to be fired instead of submitting to a drug test or strip search they have no recourse (and if they had
submitted the court may found that they consented and have no claim)
K-Mart Corp. Store No. 7441 v. Trotti
-Private employee locked her purse and belongings in a locker with her own lock; she sued for violation of her
privacy when the employer opened her locker and went through her stuff
-Court held that the element of “highly offensive intrusion” is fundamental to the definition of invasion of privacy;
because highly offensive intrusion was not required in the lower court, the appellate court ordered a new trial
-The intrusion on seclusion tort has been used to challenge employer collection of certain types of private
information about employees, such as sexual or health information (see, e.g., Johnson v. K-Mart Corp.)
-However, courts often hold that employers have a legitimate interest in obtaining types of sensitive information
-Employer surveillance will violated the NLRA if it tends to discourage employees’ exercise of those rights,
particularly the right to organize a union
Colgate-Palmolive and Chemical Workers Union
-Employer installs cameras in bathrooms and fitness centers to combat theft and union files grievance
-Court finds that the use of cameras in these or similar circumstances is unquestionably germane to the working
environment, however, it’s not a mandatory subject of bargaining
Smyth v. Pillsbury
-Employer repeatedly assures employees that all e-mails would remain confidential and privileged and that they
wouldn’t be used against employees; employee sues for violation of privacy after he is fired when the employer
intercepts his e-mails containing inappropriate and unprofessional comments.
-Court finds that interception of e-mails, even if a reasonable expectation of privacy was found, cannot be said to be
‘highly offensive to the ordinary person’ (so not an intrusion upon seclusion)
-Court emphasizes three factors about the communications in Smyth:
(1) Voluntarily made,
(2) To a supervisor,
(3) Over the company e-mail system
Stengart v. Loving Care Agency
-Issue is whether e-mails sent from an employee’s yahoo account but on the employer’s laptop are protected by
attorney-client privilege (employer discovered the emails)
-Court holds that an employer policy that transforms all private communications into company property merely b/c
the computer is company property furthers no legitimate business purpose
-Like Smyth, most cases raising privacy claims in an employee’s work email generally have not succeeded
-On the other hand, claims of invasion of privacy when an employer reads emails on an employee’s personal email
account, even when accessed at work or through employer-provided computers, have been more successful
-The employer’s interests are factored in when the court determines employee privacy
-The main employer argument is that any expansion of employee privacy rights will curtail the at-will employment
doctrine, which should only be done by legislatures
(iii) Employment-related testing
-Drug testing: generally fine (see Skinner, Von Raab)
-Genetic testing: new statute recently passed that generally prohibits genetic testing
-Test doesn’t have to be “good” or “effective” but can be challenged if involves questions of race or religious beliefs
-Polygraph testing only permissible in the law enforcement context
-Generally permissible for employers not to hire smokers or to ban smoking at the company, unless state has a
statute prohibiting employers from firing for “lawful offwork activity”
(iv) Off-work Activity
-Concerns activities which may take place in public but would be considered to be part of someone’s “private life”
-You’re not just an at-will employee at work, but anywhere in your life
McCavitt v. Swiss Reinsurance America Corp.
-Court finds that personal relationships outside work do not fall within a NY statute that prohibits firing an
employee for, among other things, “an individual’s legal recreational activities outside work hours”
(v) Reputation
-Defamation is a false statement that causes harm to one’s reputation that is not privileged
-Also requires actionability of the statement regardless of harm or the existence of special harm
-Must be published
-Truth is an affirmative defense to defamation
-Defamation issues usually come up in references and recommendations
-Defamation law looms as a potential liability for employers in the realm of recommendations
Zinda v. Louisiana Pacific Corp.
-Employee’s termination and its reasoning is included in a company newsletter
-Excessive publication is evidence of intent to harm
-He has to prove that the statement is knowingly false, that the statement was published, and that there was some
intent
-Court finds that employer had conditional privilege (protects it from defamation claims)
-There are five conditions which may constitute abuse of the conditional privilege:
(1) Because of the defendant’s knowledge of reckless disregard as to the falsity of the defamatory matter
(2) Because the defamatory matter is published for some other purpose other than that for which the
particular privilege is given
(3) Because the publication is made to some person not reasonably believed to be necessary for the
accomplishment of the purpose of the particular privilege
(4) Because the publication includes defamatory matter not reasonably believed to be necessary to
accomplish the purpose for which the occasion is privileged, or
(5) The publication includes unprivileged matter as well as privileged matter
-Conditional privileges (1) allow cases to proceed to summary judgment more quickly, and (2) eliminate the element
of truth from the equation
Chambers v. American Trans Air, Inc.
-Employee filed suit for defamation against her former employer and two former supervisors after she had her mom
and boyfriend obtain references from the two supervisors, who gave bad references
-Court found that a conditional privilege applied to the communications, because of the “necessity for full and
unrestricted communication on matters in which the parties have a common interest of duty”
-Recommendations and performance evaluations are typically unreliable because of the subjective nature of these
evaluations and the tendency of evaluators to be over-positive
-Some states have statutes which immunize employers who provide references from suit
-Some jurisdictions have an absolute privilege for intracorporate communications
-Other jurisdictions have a qualified privilege that preclude lawsuits if the defamatory statements are made in good
faith
-Employers can have liability for giving inaccurate overly positive references
-Randi W. v. Muroc Joint Unified School District: a school district “unreservedly recommended” an employee who
they knew had numerous charges of sexual improprieties against him; another school hired him and he sexually
assaulted a student – the first school was held liable
-Self-publication may satisfy the publication requirement if the employee was compelled to repeat or share a
defamatory statement to another (but the self-publication doctrine has not been widely accepted)
F. Employee Voice
(i) Employee speech
-In Novosel, the 3d Circuit Court of Appeals upheld a public policy exception to the at-will doctrine based on the 1st
Amendment’s right of freedom of speech (but not representative of the law nationwide)
Edmonson v. Shearer Lumber Prods.
-Employee was fired because he opposed company’s proposal for how to manage the nat’l forest next to the town
-The employer didn’t lie: they said he was terminated for opposing the project that the employer supported
-The court rejects Novosel and held that the 1st amendment and the Idaho constitution are not a basis for a public
policy exception for free speech because they apply only to the government and not to private employers
-In states that do not recognize the First Amendment as a source of public policy, employees may lawfully be
discharged not only based on their speech on public issues, but also because they refuse to participate in employersponsored speech with which they disagree, or because of their off-duty political activities or associations
-The area where courts have generally been most protected is employees’ political activity
-Certain types of private employee speech may also be protected if they fall within the scope of statutory or common
law protections for whistleblowers
(ii) Section 7 rights
-Section 7 of the NLRA has implications in union but also the nonunion workplace (“concerted activity”)
-Discharges or discipline of employees who engage in protected concerted activity under § 7 may be challenged
under the NLRA as unfair labor practices (with or without the presence of a union)
-Employee activity is protected under §7 if (1) it is “concerted” – involving two or more employees, or one
employee acting on the authority of other employees, or seeking to enlist their support in a common endeavor; (2) it
relates to wages, hours, or terms and conditions of employment; and (3) it is “protected” – neither disloyal,
indefensible, violent, unlawful, or in breach of contract.
NLRB v. Washington Aluminum Co.
-Workers walked out of work because the heat was not on in winter and were discharged; NLRB found that the
activity was protected concerted activity under §7
Timekeeping Systems, Inc.
-Employee sent an email to all other employees proposing a new bonus system and vacation policy and was
discharged; NLRB found that the activity was concerted and therefore protected
-It was concerted because it involved other employees (mere talk w/o action can still be protected)
-Activity is not protected under §7 if it is disloyal, disparaging, breach of contract, violent, or unlawful
-Just being disrespectful, however, is not sufficient
-Public employees do have limited speech rights (as opposed to private employees)
-When you balance the interests, employee’s interest is almost always the same, and employer’s interest varies
-Employee handbook provisions that explicitly restrict §7 activity violate the NLRA (i.e. confidentiality agreements)
-A number of state legislatures have “wage transparency” laws
-If the provision does not explicitly restrict §7 activity, the Board analyzes whether (1) employees would reasonably
construe the rule to prohibit §7 activity, or (2) the rule was promulgated as a response to union activity, or (3) the
rule has been applied so as to restrict § 7 rights
III. TITLE VII
A. Law/Process
The primary anti-discrimination statute is Title VII (of the Civil Rights Act of 1964)
-Outlaws discrimination on the basis of: (1) race, (2) national origin, (3) gender, (4) religion
-Originally there were no juries and no damages – remedies were limited to lost wages
-Race is still the predominant claim, but sexual harassment is a significant number of the claims
§1981:
-Prohibits discrimination in contract on the basis of race & national origin
-It has been interpreted to include the employment setting
-Two huge advantages to suing under §1981:
1) No administrative process required – don’t need to go through the EEOC
2) No cap on damages
-Title VII was amended in 1972 to bring in public employers, and amended again in 1991
-The 1991 amendment changed Title VII dramatically
1) Jury trials now available for claims for intentional discrimination
2) Damages for claims of intentional discrimination up to $300,000
-Claims under Title VII, ADEA, and ADA all must go through the EEOC
(1) Charge – fill out “charge of discrimination” form
You have 180 days from discriminatory action to file the charge
But in states that have a state agency that handles discrimination, you have 300 days
(2) Cause/No Cause – investigation of the claim
EEOC determines whether discrimination likely occurred or not
No Cause is much more common (Cause in only 5% of cases)
(3) Notice of Right to Sue
-If EEOC finds Cause, they invite the employer to come in for settlement negotiations
-If there’s no settlement, the EEOC can choose to bring the case against the employer
EEOC sues private employers, DOJ sues public employers
-If EEOC finds No Cause, they issue to the employee a Notice of Right to Sue in federal court
-You can also request a Notice of Right to Sue if the case has been with the EEOC for 180 days
Many plaintiffs choose this, since time from filing to finding is usually 2 years
-The EEOC attempts to mediate cases, and they usually attempt to do so early on
-Lily Ledbetter Fair Pay Act, passed in 2009, states that a discriminatory act occurs when the salary decision is
adopted, or when the individual is subjected to or affected by the pay decision
B. Disparate Treatment
(i) Basic framework
-Disparate treatment claims can take three forms: (1) individual treatment claim based on direct evidence, (2)
individual treatment claim based on circumstantial evidence, (3) class action claim based on circumstantial evidence
-The vast majority of individual employment discrimination cases involve circumstantial evidence
McDonald-Douglas framework:
(1) First, plaintiff must establish prima facie case of discrimination
(i) belongs to racial minority
(ii) applied and was qualified for a job for which the employer was seeking applicants
(iii) despite qualifications, was rejected
(iv) after being rejected, position remained open and employer continued to seek applicants from persons of
complainant’s qualifications
(2) Then, burden shifts to employer to articulate a legitimate non-discriminatory reason for the employee’s rejection
(3) Plaintiff must show that the non-discriminatory reason was merely pretext
-Nondiscriminatory reason proffered by the employer need not be “legitimate” to satisfy their burden of production
-Many claims of discrimination are proved by establishing that other similarly situated individuals were treated
differently (an individual who is “directly comparable to [the plaintiff] in all material respects”)
-Some courts have established the identification of a “similarly situated” individual as the fourth element of the
prima facie case; other courts have held that establishing a “similarly situated” comparator is one means of proving
discrimination but is not a required element of proof
-St. Mary’s Honor Center v. Hicks: to prevail on summary judgment, the plaintiff must prove in the third step that
the employer’s reasons are only pretext to “cover” the underlying discrimination
-In Hicks, despite the fact that the plaintiff proved that the employer’s reason was pretext, the plaintiff did not
prevail because the Court found that the reason was personal animus, not discrimination
-In Reeves v. Sanderson Plumbing Products, Inc., the court reiterated that proof of pretext may, but need not suffice
to prove discrimination
-Pretext is evidence of discrimination (but proving pretext does not mean you automatically win)
-Employers are liable based on discriminatory action (there is not an intent element)
(ii) Mixed motives
-An employer may have “mixed motives” – legitimate and discriminatory reasons
-Plaintiffs want to show that the legitimate motives were merely pretextual
-Mixed motive useful for plaintiffs to get past the summary judgment stage, but at trial it is much more difficult to
prevail on a purely mixed motive theory (should go for single motive pretext)
-In a mixed motive case, where there are legitimate and non-discriminatory factors, if the plaintiff proves that race
was “a motivating factor”, the burden shifts to the defendant to prove that it would’ve made the decision anyway – if
employer is able to show that there is no remedy (Price Waterhouse v. Hopkins)
Desert Palace, Inc. v. Costa
-Woman warehouse worker for Caesar’s in Las Vegas experienced problems with management and her co-workers
and was eventually fired after a physical altercation with a co-worker
-Issue is whether plaintiff must present direct evidence of discrimination in order to obtain a mixed-motive
instruction under Title VII
-Court holds that no heightened showing is required; a plaintiff “need only present sufficient evidence for a
reasonable jury to conclude, by a preponderance of the evidence, that ‘race, color, religion, sex, or national origin’
was a motivating factor for any employment practice.”
(iii) Retaliation
-Retaliation is the fastest rising claim in employment discrimination
-The most common claim is when the plaintiff files with the EEOC and the employer retaliates
-You can still have retaliation without a formal complaint though
-Retaliation cases tend to be stronger on the merits (timing is the causal link)
-The underlying discrimination claim does not have to be meritorious
-In Burlington Northern & Santa Fe Ry. Co. v. White, the Court held that in order to establish a retaliatory act, “a
plaintiff must show that a reasonable employee would have found the challenged action materially adverse, which in
this context means it might well have dissuaded a reasonable worker from making or supporting a charge of
discrimination
-The lower courts have applied the Burlington Northern standard to other antidiscrimination statutes
-Not all acts taken by an employer constitute retaliation under the law: the standard is that if the employer’s action is
the kind of action that would discourage a reasonable employee from filing a complaint, that action is retaliation
-SCOTUS has held that the protections of anti-retaliation extend to an employee who participates in an internal
investigation even if the individual did not initiate a complaint (Crawford)
-Court has also held that third party retaliation falls within the scope of the statute
-The plaintiff in a retaliation action must establish an actual injury resulting from the retaliatory act, and without
proof of an actual work-related harm acts that do not result in a change in pay, responsibilities, or employment are
generally not defined as rising to a level of retaliation
-Must also establish a causal link between the action and some protected activity
(iv) Pattern or practice / BFOQ
-Class action “pattern or practice” claims are proved through a combination of statistical and anecdotal evidence
-Once plaintiff establishes statistically significant disparity, employer can seek to rebut the statistics
-An employer can defend a classification based on sex, national origin, religion, or age, by establishing that the
classification is a bona fide occupational qualification (BFOQ)
-The defense is narrow – “reasonably necessary” (also can’t defend a racial classification)
-Employers are required to provide reasonable accommodations to people for their religions, but that requirement
has been construed narrowly
-BFOQ with religion is only in limited areas (i.e. ministerial roles, religious positions at private universities, etc.)
C. Disparate Impact
-Unintentional discrimination claims are known as “disparate impact” cases
-The plaintiff doesn’t have to prove intent to discrimination; instead they have to prove that an employment practice
has a statistically significant adverse impact on a specific group
-If the plaintiff can prove that impact, the burden shifts to the employer to justify that the practice is necessary or
legitimate
-If defendant justifies its practice, the plaintiff can show an alternative practice
-You cannot get damages for disparate impact cases
Disparate Impact proof structure:
(1) Must prove neutral employment practice w/ substantial “adverse impact” (no intent to discriminate required)
(2) Affirmative defense: Business necessity (burden of proof shifts to Δ)
(3) Plaintiff’s counter: Alternative employment practice
Griggs v. Duke Power Co.
-Issue was whether employer is prohibited from using a high school degree requirement or a standardized
intelligence test as a condition of employment or transfer when neither standard is shown to be significantly related
to job performance and both requirements operate to disqualify black employees at a much higher rate
-Employer imposed these restrictions right after the Civil Rights Act of 1964
-Court held that it is not necessary to prove intentional discrimination – “The Act proscribes not only overt
discrimination but also practices that are fair in form, but discriminatory in operation”
-In Ricci v. DeStefano, the Court held that the City of New Haven’s decision to discontinue using an exam for
firefighter promotions – because it had an adverse impact on African American and Latino firefighters – violated
Title VII because the test had not been demonstrated to be invalid
-To prove disparate impact, must be “statistically significant” (two standard deviations)
-For the employer to satisfy the “business necessity” test, the employer must justify its practices as required or
essential to the business (different means of satisfying the test have developed)
-The employer has the opportunity to adopt the alternative practice proposed by the plaintiff to rebut business
necessity; if the employer accepts the test, then the plaintiff loses
EEOC v. Joe’s Stone Crab, Inc.
-Issue is whether employer was liable for intentional or disparate impact discrimination because its waitstaff was
exclusively male (although it adjusted after EEOC filed discrimination charge)
-Problem because there was no clear “practice” – but EEOC identified their reputation as having a male-only
waitstaff as discriminatory (Joe’s tried to emulate “Old World” tradition w/ all male waiters)
-Court finds that the statistics are not conclusive enough to prove disparate impact and remands
But the EEOC should have proceeded under a disparate treatment theory
B. Sexual Harassment
-Two questions: (1) What kind of behavior? (2) When is the employer liable?
-Two types of behavior: (1) Quid-pro-quo and (2) Hostile work environment
- Under Title VII only the employer is liable (can sue the individual supervisor under tort law)
-In Meritor Savings, the Court said that agency principles should inform the employer liability decision
-Quid-pro-quo is a traditional sex for work case (“if you sleep with me, you’ll get promoted”)
These cases are rarely litigated because they usually get settled
-Hostile work environment requires that “a sexually objectionable environment must be both objectively and
subjectively offensive, one that a reasonable person would find hostile or abusive, and one that a victim in fact did
perceive to be so.” (Billings v. Town of Grafton)
-Must be severe or pervasive
-Reasonableness inquiry: subjective and objective components
-HWE is usually a pattern of behavior; one event could be severe enough by itself (but that’s probably QPQ)
-To satisfy the subjective component, you must show that (1) the behavior was unwelcome, and (2) it was
sufficiently severe and pervasive as to constitute a hostile work environment
-Plaintiff must also establish a basis for holding the employer liable
-Previously, some courts adopted a “reasonable woman/victim perspective” but after some SC precedent most courts
have adopted a formal objective reasonableness test
-In HWE claims, frequency of the behavior matters, and so does whether the woman complains
-The less egregious the behavior, the more frequent it needs to be (and vice-versa)
-Same-sex harassment: Title VII does not prohibit harassment based on sexual orientation
-In Oncale, employee on an all-male oil rig claimed that he was harassed for being effeminate
In a 9-0 decision, SC said that same-sex harassment is actionable under Title VII
-But, harassment on the basis of sexual orientation is not actionable
Burlington Industries, Inc. v. Ellerth
-Issue is whether an employee who refuses unwelcome sexual advances but suffers no tangible adverse job
consequences can recover against her employer (supervisor harassment)
-Liability rule from Burlington Industries:
(1) Agency – supervisor must have immediate (or successively higher) authority over the employee
(2) Is there a “tangible employment action”?
If yes, then strict liability
If no, then employer has affirmative defense
(a) that the employer exercised reasonable care to prevent and correct promptly any sexually
harassing behavior (Was there an effective policy designed to combat harassment?)
(b) that the plaintiff employee unreasonably failed to take advantage of any preventative or
corrective opportunities provided by the employer or to avoid harm otherwise
-“Tangible employment action” is: hiring, firing, failing to promote, reassignment with significantly different
responsibilities, or a decision causing a significant change in benefits
-If there is no tangible employment action because the employee submitted to the supervisor’s requests, then such a
situation is quid pro quo harassment and the employer is strictly liable
-The main thing is required for a sexual harassment policy is there has to be some clear means for a person to
complain effectively and anonymously (most policies say “complain to your supervisor” except if your supervisor is
the harasser, then there is an alternative person to whom to complain)
-The affirmative defense promotes the promulgation of sexual harassment policies and creates an incentive for
employers to take sexual harassment seriously (self-policing and resolution)
-A reflexive response of the employer transferring the victim is never an adequate response
-The remedies are not different whether the plaintiff wins on strict liability or by proving liability over the
affirmative defense (no punitive damages)
-To get punitive damages under Title VII, you need to prove recklessness (heightened standard)
-The framework for sexual harassment also applies to racial/nat’l origin harassment
IV. OTHER FEDERAL STATUTORY REGULATION
A. National Origin & the Immigrant Workforce
-Employment laws apply to undocumented workers
-The law makes it an offense to hire undocumented workers
-The employer has a duty to make sure the worker is lawfully able to work, but the employer is under no duty to
investigate the documents and information the worker offers
-When the employer knows or has reason to know that the person is not eligible to work, they have to fire them (but
that’s all they have to do)
Hoffman Plastic Compounds, Inc. v. NLRB
-Issue is whether undocumented workers can be awarded backpay under NLRB
-Court finds that they cannot, because the workers are also breaking the law (INA/IRCA)
-When labor law is in conflict with immigration law, Court finds that immigration law takes precedent
-But (dissent says) this creates perverse incentive for employers to hire undocumented immigrants, since the
employer won’t be penalized with back pay if they break the law
-One area where there have been few cases is accent discrimination (see Fragante v. City & County of Honolulu)
-The EEOC has taken the position that English-only policies must be justified by business necessity (BFOQ), and it
has pursued a number of cases challenging such policies
-Most cases challenging English-only rules have been unsuccessful
Maldonado v. City of Atlus
-City imposed English-only rule requiring employees to speak English during official business
-Court analyzes under disparate-impact and disparate-treatment claims; finds that there is at least enough evidence to
survive summary judgment and remands
Williams v. Mohawk Industries
-Issue is whether employer’s widespread and knowing employment and harboring of illegal workers allowed it to
reduce labor costs by depressing wages in violation of federal and state RICO statutes
-Court found that plaintiffs had stated a valid claim
-At least three types of plaintiffs have attempted to bring civil RICO claims based on immigration law violations:
local government, law-abiding employers who do not hire undocumented workers, and undocumented workers
B. FMLA
-FMLA was passed in 1993 and signed by Clinton after being vetoed twice by Bush
-In order to qualify, employees must work more than 1250 hours in a year and are not eligible for leave until one
year after they begin (also, statute only applies to employers that have more than 50 employees)
-Provides up to 12 weeks of unpaid leave for birth/adoption of a child or for a illness of one’s own, spouse, or child
-Applies to both men and women the same
-The unpaid birth/adoption leave isn’t as relevant because most white collar business provide maternity or paternity
leave (and for lower wage workers, they can’t afford to take unpaid leave)
-FMLA (1) requires that the employer keep the job open during the unpaid leave time
(2) allows employee to keep their health insurance
-FMLA does not provide paid leave, but eight states do
-No requirement that employer provide breaks, or pensions, or health care
-Worker’s compensation and unemployment are mandatory
-Discretionary benefits are heavily regulated
-Employees are required to provide their employers with notice regarding FMLA leave and whether an employee
has provided adequate notice frequently arises in litigation
-Employers have the “responsibility to determine the applicability of the FMLA and consider requested leave as
FMLA leave”
-Employees must “provide [an] employer with notice sufficient to make her employer aware that her absence is due
to a potentially FMLA-qualifying reason”
C. FLSA
-The FLSA applies to everyone (although there are a lot of exemptions, i.e. independent contractors)
(1) Employees must be covered as individuals or employed by an employer that is subject to “enterprise”
coverage
(2) There must exist an employment relationship: the worker must be an employee and not an independent
contractor, student, or volunteer
(3) Act exempts certain categories of employees from the provisions
-Establishes a minimum wage ($7.25/hr since July 2009)
A “living wage” is a new concept that has been established in many cities
-Establishes a 40-hour workweek as the norm – beyond 40 hours mandates OT pay (but no maximum)
OT pay is 1.5 times regular pay (have to calculate regular pay rate per hour)
-Employee can’t contract for less than the minimum wage
-But exception for tipped employees: Must pay $2.13/hr and that plus tips must exceed minimum wage
-Supervisors/Managers cannot split the tips, except in certain circumstances (Starbucks cases)
-Exemptions for agricultural workers and domestic workers
-Paying by piecerate (i.e. per bushel) is permissible, as long as it reaches minimum wage
-Sometimes employers try to circumvent the requirements of the FLSA by designating certain workers are
independent contractors, but the label is not dispositive even when the employee accepts the designation
-Under the “joint employer” doctrine, multiple entities may be mutually liable for violations of the FLSA with
respect to a particular employee
-Courts generally use an “economic realities” test to assess the existence of a joint employer relationship
Whether the alleged employer:
(1) had the power to hire and fire the employees
(2) supervised and controlled employee work schedules or conditions of employment
(3) determined the rate and method of payment
(4) maintained employment records
-Like the determination of who is a covered employee, the determination of who is the employer for FLSA liability
purposes is fact-intensive and typically evaluated on the record as a whole
-Unpaid internships at for-profit businesses almost certainly violate the FLSA, unless the internship was for the
benefit of the intern and not for the benefit of the company
At non-profits, unpaid internships or volunteer work is permissible
Exemptions from FLSA:
-White collar exemptions: executive, administrative, and professional employees
-Outside salesmen
-Computer analysts, programmers, and software engineers
-Employees of seasonal amusement parks and recreational businesses
-Agricultural workers
-Domestic service workers
-The Agricultural Workers Protection Act (AWPA) provides farm workers substantive rights concerning
recruitment, employment, housing, and transportation and requires employers of migrant workers to post notices of
wage rates and document hours but does not provide wage and hour protections
Heath v. Perdue Farms, Inc.
-Issue is whether “chicken catchers” for Perdue are employees that would be entitled to overtime wages under FLSA
-The court finds that the chicken catchers are employees, not independent contractors, based on the six factor
analysis cited in the case:
(1) The degree of control which the putative employer has over the manner in which the work is performed
(2) The opportunities for profit or loss dependent on the managerial skills of the worker
(3) The putative employee’s investment in equipment or material
(4) The degree of skill required for the work
(5) The permanence of the working relationship
(6) Whether the service rendered is an integral part of the putative employer’s business
-“[T]he label that parties give to their relationship is not controlling” – courts “look not to the label, but to the
underlying ‘economic reality’ of the relationship”
-The court also finds that chicken catchers are not “agricultural workers” subject to the exception; that question was
resolved by the SC in Holly Farms
-Are prisoners “employees” under the FLSA?
-Use totality of circumstances test from Vanskike:
(1) Type of work performed
(2) Relationship between alleged employer and alleged employee
(3) Whether the work primarily benefited the employer or the employee
(4) Whether the worker displaced other workers (i.e. whether the prisoners’ labor is being utilized to
compete in the marketplace)
(5) Whether the purpose of the statute will be frustrated if an employee relationship is not found
-“Off the clock” work authorized or with the knowledge of the employer is impermissible; this of course only
applies to hourly wage workers and not salaried workers
Such cases are often easy to turn into class actions, since the policy applies generally
-Rest and breaks are not required (a break for 20 minutes or less is paid)
-Employers can require employees to pay for meals and uniforms
-Whether workers should be compensated for the time they are putting on their uniforms depends on the type of gear
(whether it is “indispensable to the workplace” i.e. safety)
-Another area of dispute is employees who work “off the clock”
-For employees who are “on call” – what work is compensable?
-In Skidmore v. Swift & Co., the Court framed the issue in whether the employee spending the time “waiting to be
engaged” (not compensable) or if is “engaged to wait” (compensable)
Dinges v. Sacred Heart St. Mary’s Hospitals, Inc.
-Two “on call” EMTs contend that they are entitled to overtime compensation for the entire time that they were on
call (had to be within a 7 minute drive of the hospital, etc.)
-Court finds that they on call periods are not compensable beyond what the employees agreed to
-The question is whether the employee can “use the time effectively for personal pursuits”
If so, the on call time is not compensable
-General Dinges principle: Voluntary arrangement, that seems fair and appropriate, and when the employees are
working they are compensated reasonably for the time when they come in
-Public sector employees can get “comp time” in lieu of OT wages (at the same 1.5 rate as OT)
-Employee must agree to comp time
-Employer must permit employees who have accrued comp time to use it “within a reasonable period after making
the request if the use of the compensatory time does not unduly disrupt the operations of the public agency”
-You can only store up 240 hours before the employer has to start paying
-Private employees cannot offer comp time
-Between hiring more employees and paying overtime, employers prefer paying overtime
(hiring new employees requires employers to train and pay benefits)
-Mandatory overtime is permissible (doesn’t violate FLSA)
-High end (white collar) exemptions
-Require (a) compensation on salary basis, (b) exceed a specific pay threshold, (c) meet certain duties requirements
-Salary basis test: employees must receive a “predetermined amount” of compensation each week regardless of
hours worked
-Pay threshold test: Employee’s salary must be at least $455 a week ($23,660 annually)
If you earn less than 23,600 / year, guaranteed OT
If you earn between 23,600 and 100,000 / year, eligible if you satisfy the “standard duties” test
If you earn over 100,000 / year, must satisfy a “highly compensated” duties test
-The duties test varies depending upon whether an employee is executive, administrative, or professional
-Executive employees must meet the following test:
(1) Have as his or her primary duty managing the enterprise in which the employee is employed, or a
customarily recognized department or subdivision thereof
(2) Customarily and regularly direct the work of two or more other employees, and
(3) Have the authority to hire and fire other employees, or make suggestions and recommendations that are
given particular weight as to hiring, firing, advancement, promotion, or any other change of status of other
employees
-Administrative employees must meet the following test:
(1) Have the primary duty of performing office or nonmanual work directly related to the management or
general business operations of the employer or the employer’s customers; and
(2) Have a primary duty that includes the exercise of discretion and independent judgment with respect to
matters of significance
-A learned professional employee is a worker
(1) Whose primary duty is the performance of work requiring knowledge of an advance type (defined as
work which is predominantly intellectual in character and which includes work requiring the constant
exercise of discretion and judgment)
(2) In a field of science or learning, and
(3) Whose knowledge is customarily acquired by a prolonged course of specialized intellectual instruction
-A creative professional employee is one whose primary duty is the performance of work requiring invention,
imagination, originality, or talent in a recognized field of artistic or creative endeavor
-That an employee used computer software to guide their discretion does not make them not exempt
-Section 207(i) of FLSA creates an exemption to the overtime requirement for workers in retail stores or service
businesses who (1) are paid a wage that exceeds 1.5 times the minimum wage, and (2) receive more than half their
compensation in the form of commissions
D. ERISA
-Passed in 1974, in the wake of the failure of several notable pension plans bankruptcies
-Originally, the focus was on retirement benefits, not health benefits
-ERISA preempted preexisting state regulations (ERISA now exclusive remedy)
(1) Fiduciary duties, (2) Limited remedies, (3) Broad preemption
-When you sue, you are suing on behalf of the plan to recover the funds
-You don’t get any cash – just the money (which goes back into the account) and attorney fees
No compensatory or punitive damages
Two types:
1) Defined Benefit (DB)
-Will provide income after an individual retires until their death, traditionally calculated as a certain percent of your
average highest three years of salary
-It is “your entitlement” and it vests after a certain period of years
-The risk lies with the employer
2) Defined Contribution (DC)
-Employer and employee make contributions into an individual account for each employee, and the employee is
responsible for managing the plan
-The most common form today is the 401(k) plan
-The risk lies with the employee
-There is also a third plan, called a “cash balance plan” (but they are on the decline)
-Pension Benefit Guaranty Corporation (PBGC) only insures defined benefit plans
-If you leave your employer before the defined benefit vests, you get nothing
-If you leave your employer before the defined contribution vests, you get your money but not the employer’s
contribution
-A lot of employers provide significant amounts of their contribution in company stock
-There are fiduciaries, but their duties are limited by the plan
-If the plan document makes the employer stock the mandatory contribution, the fiduciary has no duty other than to
make sure that employer stock is provided (implement the terms of the plan)
-Courts also don’t want to impose significant duties on fiduciaries in this area
Kirschbaum v. Reliant Energy, Inc.
-Issue is whether the company had a fiduciary duty to liquidate the common stock fund and stop purchasing
company stock (the stock tanked and the fund lost a lot of money)
-According to the court (5th Cir.), the question is “how to define when the duty of prudence might require a
fiduciary to disobey the clear requirements of an EIAP and halt the purchase of employer stock”
The focus is “how the fiduciary acted” not “whether his investments succeeded or failed
-In Moench v. Robertson, the 3d Circuit concluded that a fiduciary is entitled to a presumption that his decision to
invest in the employer’s securities was prudent; a plaintiff may rebut the presumption by showing that “owing to
circumstances not known to the settler and not anticipated by him [the making of such investment] would defeat or
substantially impair the accomplishment of the purposes of the trust”
-Court finds that plaintiff did not rebut the Moench presumption, so summary judgment for employer was proper
-Kirschbaum was one of many stock-drop cases – most similar cases have failed
E. Workers compensation
-Worker’s compensation is an insurance scheme that is designed to remedy workplace injuries
-You have to prove that the injury occurred at work and in the course of employment
-The remedies are limited (no compensatory or punitive damages)
Remedies are medical costs and limited wage replacement
- Comprehensive system of no-fault insurance
(1) No-fault
(2) Limited remedies
(3) Exclusive remedy
-Employee has to establish that injury arose out of the course of employment
-East to get, but hard to get out (hard to get relief in court)
-How to get out:
(1) If person is an independent contractor instead of an employee
(2) If injury arises out of an employer’s intentional tort
-Most states require employers to have insurance, but some allow employers to self-insure
-Commuting to work is usually not covered
Eckis v. Sea World Corp.
-Issue is whether the plaintiff’s injury occurred win the course of her employment (she sued in tort, but the employer
argued that the proper remedy was worker’s compensation)
-Liability of the employer to pay compensation under the Act attaches “where, at the time of the injury, the
employee is performing service growing out of and incidental to his employment and is acting within the course of
his employment” and “where the injury is proximately caused by the employment” either w/ or w/o negligence
-Where reasonable doubt exists as to whether an act of an employee is contemplated by the employment, or as to
whether an injury occurred in the course of the employment, the Labor Code requires courts to resolve the doubt
against the right of the employee to sue for civil damages and in favor of the applicability of worker’s comp
-The court finds that the injuries occurred within the scope of the plaintiff’s employment, so reversed the jury
verdict and entered judgment in favor of Sea World
V. ARBITRATION/MEDIATION OF WORKPLACE DISPUTES
(i) Mandatory arbitration agreements
-In arbitration you get a decision that is both final and binding
-You have to pay for the arbitrator (unlike a judge)
-The person who determines the scope of the arbitration agreement is the arbitrator, not a court
-Arbitration traditionally has not involved class action
-The idea behind mandatory arbitration is that individual employees would have to arbitrate whatever disputes arise
out of their workplace arrangement as opposed to litigating it
-Differences between litigation and arbitration:
(1) Limited appellate review
(2) Limited discovery
(3) Quicker and more efficient resolution
(4) Private as opposed to public forum
(5) More informal, and rules of procedure don’t necessarily apply
-The only ways to overturn an arbitration decision are
(1) The decision was the result of fraud
(2) The decision was a result of gross injustice (i.e. clear bias)
-In Alexander v. Gardner-Denver Co., the Court held that an employee could proceed in court on a Title VII claim
and through arbitration on a claim that discharge violated a contractual right to be discharged only for cause
Court also held that courts need not defer to an arbitrator’s decision on discrimination claims in such cases
Gilmer v. Interstate/Johnson Lane Corp.
-The issue is whether a claim under ADEA can be subjected to compulsory arbitration pursuant to an arbitration
agreement in a securities registration application
-Gilmer argued that compulsory arbitration would be inconsistent with the statutory framework and purposes of the
ADEA; the Court disagreed
-The court discusses the arguments against allowing mandatory arbitration:
(1) private, not public (but EEOC can still bring its own statutory claims)
(2) unequal bargaining position (mere inequality, however, is an insufficient reason)
-Gilmer has been extended to other statutory rights and to whistleblower claims
-After Gilmer, employers started imposing arbitration agreements with ferocity, but many agreements weren’t welldesigned & often contained terms that gave big advantages to the employer (most were stuck down, i.e. Hooters)
-In Cole v. Burns Int’l Security Servs., the D.C. Circuit limited enforceable predispute arbitration agreements to
those that “do not undermine the relevant statutory scheme” and construed the ambiguity in the arbitration
agreement against the employer as the drafter
-The court also articulated standards for assessing the enforceability of a predispute arbitration agreement
-Predispute arbitration agreement is enforceable only if it:
(1) Provides for neutral arbitrators
(2) Provides for more than minimal discovery
(3) Requires a written award
(4) Provides for all types of relief that would otherwise be available in court, and
(5) Does not require employees to pay either unreasonable costs or any arbitrators’ fees or expenses as a
condition of access to the arbitration forum
-Courts have found that it is unfair to impose costs on one party all the time or always on the losing party (but courts
have generally upheld agreements that require splitting the cost)
-Courts have also struck down employer-imposed limitations on remedies
-Arbitration agreements are valid and permissible unless they run against other law
-Arbitration agreements where only the employee is bound are invalid
-Waiver of any statutory rights as a part of the agreement would be impermissible
-Although rules of evidence and civil procedure do not apply, many arbitration agreements stipulate that they do
-Courts have frowned upon limited compensatory and punitive damages in arbitration agreements, so you generally
have access to all remedies
-30% success rate for plaintiffs in court; 40-60% success rates for plaintiffs in arbitration (recovery tends to be less)
(ii) Mediation and other dispute resolution processes
-Arbitration is a neutral third-party making a decision; mediation is a neutral third-party facilitating a settlement (if
the two parties agree on a settlement, the settlement is binding)
-Mediation has had mixed success; many courts require mediation
-Employers can’t require employees to proceed through their internal processes, unless the employee agreed to it
contractually