Employee Can Sue More Than One Employer For Discrimination

For the first time, the U.S. Court of Appeals for the Fourth Circuit has expressly adopted the joint employment doctrine for Title VII cases.  Now, an employee can potentially go after more than just the company that pays her when bringing a claim for unlawful discrimination or harassment.  The Fourth Circuit joins the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits in holding that more than one company can be held liable for an employee’s claim under Title VII.

Brenda Butler was hired by ResourceMFG, a temporary staffing agency, to work at the Drive Automotive Industries (“Drive Automotive”) factory in South Carolina.  During her time at the Drive Automotive factory, Ms. Butler wore a ResourceMFG uniform, her paycheck came from ResourceMFG, she parked her car in a special ResourceMFG lot, and ResourceMFG had the power to discipline and fire her.  But Drive Automotive set Ms. Butler’s work schedule and arranged portions of her training, and Drive Automotive employees supervised Ms. Butler when she was on the factory floor.

Ms. Butler claimed that one of her Drive Automotive supervisors verbally and physically harassed her on the job.  She said that the supervisor commented on many occasions about her physical features, particularly her rear end, even giving her the nickname “big booty Judy.”  According to Ms. Butler, the supervisor also rubbed up against her in a sexually suggestive way.  She complained about the sexual harassment to management at ResourceMFG, but she says they did nothing.  After further complaints from Ms. Butler, Drive Automotive made a request to Resource MFG that she be terminated.  Shortly thereafter, Ms. Butler received a call from ResourceMFG terminating her employment at Drive Automotive.

In response, Ms. Butler brought Title VII claims against not only her official employer, ResourceMFG, but also against Drive Automotive, since it was a Drive Automotive supervisor who she claimed sexually harassed her.  A South Carolina district court dismissed Ms. Butler’s claims against Drive Automotive, after determining that ResourceMFG was her sole employer for purposes of liability under Title VII.  But on appeal, the Fourth Circuit reversed this dismissal of Ms. Butler’s Title VII case against Drive Automotive, after finding that Drive Automotive could be liable under the joint employer doctrine.

This decision is the first time that the Fourth Circuit has expressly adopted the joint employer doctrine for Title VII cases, joining several other federal appellate jurisdictions across the country.  The Court reasoned that, given the remedial purpose of Title VII in stamping out discrimination in the workplace, the joint employer doctrine prevents a company from evading liability by hiding behind another employer such as a staffing agency.

In order to determine whether a company is a joint employer for purposes of liability under Title VII, the Fourth Circuit adopted what it called the “hybrid test,” which is comprised of nine enumerated factors, to consider the level of control a company has over a particular worker.  The Court said that of those nine factors, the most important are the following three: 1) whether the entity has the power to hire and fire; 2) whether the entity has supervisory power over the employee; and 3) whether the entity controls the place and way in which the employee performs the work.  The Court made it clear that the degree of control that an entity exercises over a worker remains the principal guidepost for determining joint employment under Title VII.

While the impact of this case for staffing companies is obvious, this case could reverberate far beyond the staffing industry.  In the government contracting arena, it is common for prime contractors to use subcontractors whose employees are closely controlled by the prime.  Similarly, in the construction industry, the employees of prime contractors and subcontractors are often closely intertwined.  These types of companies will need to be extra careful not to exercise too much control over non-employees, or they may find themselves on the receiving end of a Title VII suit.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com. 

EEOC Suffers Defeat in Ongoing Attack on Separation Agreements

The EEOC’s 2013-2016 Strategic Enforcement Plan identified as one of its top priorities the regulation of overly broad separation agreements that allegedly interfere with employees’ Title VII rights to file discrimination charges. Recently, the agency sued several employers for using what appear to be fairly standard separation agreements. The EEOC’s lawsuit against CVS, which has received the most attention, was dismissed last month when an Illinois federal court granted CVS's Motion for Summary Judgment on procedural grounds. Equal Employment Opportunity Commission v. CVS Pharmacy, Inc., No. 14-cv-863 (N.D.Ill.2014).  While this was a technical ruling, it bodes well for employers that this standard separation agreement was not invalidated, and in fact, the Court appeared to criticize the agency’s case on the merits. Nonetheless, we do not expect the EEOC to back off from its new aggressive position, and employers should conduct a careful review of their separation agreements.

The CVS case was closely followed by employers and employment law attorneys alike because the terms of CVS's Severance Agreement are commonly used in separation agreements, namely, a cooperation clause, a non-disparagement clause, a confidentiality requirement, and a release with a covenant not to sue. The EEOC argued that the agreement was overly broad, misleading, and unenforceable because it interfered with an employee’s right to file a charge, even though the agreement provided that it did not prohibit the employee from participating in an investigation by a federal, state, or local agency that enforces discrimination laws. This disclaimer language is routinely included in separation agreements, and was previously deemed enforceable by the EEOC.  As such, many employers’ separation agreements were put in jeopardy by this case. If these terms were declared unenforceable, the incentive for most employers to pay employees monetary settlements in exchange for a release of claims and an agreement to not sue would be lost. In view of this dismissal of the EEOC's lawsuit, this will not be the case—for now.

The Court did not reach the issue of whether or not the terms of CVS's Severance Agreement are enforceable.  Instead, the lawsuit was dismissed on the ground that the EEOC did not fulfill the administrative prerequisite of attempting to conciliate with CVS before filing the suit.  Still, the judge added footnotes, that although not binding authority, seemingly do not bode well for the EEOC’s position. The judge noted the disclaimer to CVS’s general release language, the passage protecting the individual’s right to participate in agency proceedings, and reasoned that the language plainly encompasses the employee’s right to file an EEOC charge.

Notwithstanding the procedural defeat in this case, the EEOC has indicated that it continues to hold to its position, and may appeal the dismissal to the 7th Circuit. Looking ahead, we will wait and see what happens with the EEOC’s lawsuit in Denver against College America for its use of a severance agreement that also has non-disparagement as a condition for paying severance, and required that employees represent that they have no pending claims, including administrative actions, against the company. Ironically, the employee at issue in the College America case filed three EEOC charges after she signed the purportedly restrictive agreement. In the meantime, it is more important than ever for employers to have a well-crafted and comprehensive separation agreement that will withstand challenge.

Sara Dajani is an associate attorney with Berenzweig Leonard, LLP. She can be reached at sdajani@berenzweiglaw.com.

EEOC Takes Aggressive Position On Severance Agreements

The Equal Employment Opportunity Commission (“EEOC”) recently filed a lawsuit against one of the nation’s largest pharmacy chains, CVS, claiming its separation agreements violate Title VII of the Civil Rights Act. This action by the EEOC is surprising and significant, since the targeted provisions are ones that are commonly found in severance agreements. According to the lawsuit, the EEOC claims that CVS conditioned payment of severance benefits on execution of severance agreements that contained overly broad, misleading, and unenforceable language that unlawfully prevents employees from communicating with the agency or filing discrimination claims. In its lawsuit, the EEOC claims the following provisions of the agreement violate Title VII:

• A cooperation clause requiring employees to notify the company of contacts relating to legal proceedings;
• A non-disparagement clause;
• A non-disclosure of confidential information clause; and 
• A general release and covenant not to sue clause.
  

The EEOC is seeking a permanent injunction prohibiting CVS from restricting the rights of former employees to file charges or participate in agency proceedings, reformation of CVS’s separation agreement, and for CVS to provide 300 additional days for any former employee who signed the agreement to file administrative charges.

The EEOC claims that being able to bring charges and communicate with employees plays a critical role in the EEOC’s enforcement policy because it informs the agency of employer practices that may be unlawful. An employee’s right to communicate with the EEOC is protected under federal law, and therefore, the EEOC claims that when employers have language similar to that found in CVS’s severance agreements, it has the effect of buying an employee’s silence regarding discriminatory practices.

The EEOC’s claims are a departure from its prior position in which it previously determined similar language was in compliance with Title VII. In fact, CVS modeled its severance agreements with language the EEOC previously found compliant in an earlier lawsuit. This can be rightly viewed as an overreach by the EEOC to strike down provisions of severance agreements that are used almost universally by employers and have been previously approved by the agency.

If the EEOC is successful in this lawsuit, employers will need to revisit their severance agreements and make any necessary changes to comply with the court’s decision. However, unless the court strikes down the provisions in the case, or another court acts otherwise, we are not currently recommending a drastic departure from our prior severance agreements based on this lawsuit. While we believe it is unlikely that the EEOC will be successful on all of its claims against all provisions of CVS’s agreements, this new aggressive stance by the agency is a good reminder to employers to always revisit severance agreements to ensure they are legally compliant, and consider taking steps to avoid similar claims.

Nick Johnson is an attorney with Washington, DCbusiness law firm Berenzweig Leonard. He can be reached at njohnson@BerenzweigLaw.com. 

EEOC’s Policy On Employee Criminal Records Scrutinized

The Equal Employment Opportunity Commission (EEOC) announced last year a new enforcement guidance under Title VII of the Civil Rights Act of 1964 to employers regarding the use of arrest and convictionrecords in employment decisions. Though there is no federal law prohibiting an employer from asking about arrest and/or conviction records, this recent guidance informed employers that even a neutral and uniformly applied “policy (e.g., excluding applicants from employment based on certain criminal conduct) may disproportionately impact some minority groups protected under Title VII, and may violate the law if not job related and consistent with business necessity.” If a background check is in fact necessary, the EEOC recommended that the policy at least consider “the nature of the crime, the time elapsed, and the nature of the job, and then provide an opportunity for an individualized assessment for people excluded.”

This guidance left employers in quite a dilemma, as on one hand if employers continued to uniformly use neutral background checks on all employees, they may run the risk of being subject to a disparate impact lawsuit. On the other hand, refusing to conduct background checks may be problematic as they have played a vital role in enabling employers to comprehend employees’ criminal history in an effort to avoid liability for criminal or fraudulent acts committed by employees and/or avoiding claims of negligent retention.

Faced with this predicament, a recent federal court in Baltimore cast serious doubt on the EEOC’s background check guidance. In the case, the EEOC filed a lawsuit against a corporate events provider that had a uniformly applied policy of running background checks on all prospective employees prior to commencing employment. The EEOC challenged this policy claiming that it had a disproportionate effect on minorities due to the higher statistical incarceration rates for minorities. The court dismissed the case on summary judgment in favor of the company due to the unreliability of the EEOC’s witnesses; however, the judge went out of his way to state his strong disdain for the EEOC’s guidance. Specifically, the judge noted that the EEOC’s guidance places employers in an unworkable position due to the inherent risks that can come from ignoring criminal history checks and employers should not have to second guess their decision to obtain fundamental information on their potential workers.

Although this opinion casts doubt on the EEOC’s enforcement of background checks, this opinion does not affect the guidance itself and best practices suggested by the EEOC. Unfortunately, there is no bright line rule governing background checks and companies should be sure to consult with an attorney before implementing a background check policy that could include criminal history or credit checks.

Nick Johnson is an associate attorney with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at njohnson@BerenzweigLaw.com.

Sexual Harassment of Female Employee Not Considered Severe Enough Under Title VII

A female employee of Staples in the Roanoke, Virginia area complained after a male co-worker on multiple occasions stripped down to his boxers and changed into his work uniform in front of her in the employee break room, rather than changing in the men’s bathroom.  Some of these changing incidents were witnessed by other Staples employees, both male and female. On the final occasion of witnessing the male employee changing, the female employee ran out of the break room crying while several male employees laughed at her reaction.

The female employee elevated her complaints to Staples human resources, and after the male employee was counseled, there were no further incidents of him changing in the employee break room.  But the female employee did experience some additional harassment following her complaint, including someone cutting up all of the family pictures on her desk, someone stealing her Bible and leaving only one page taped to her desk, and someone cutting the cord to the radio on which she was known to listen to Christian music.  The female employee strongly suspected that it was the male employee who committed these acts against her in retaliation for her complaints against him, but she was unable to prove it.

The female employee sought medical counseling for the stress and anxiety she experienced as a result of the workplace conditions at Staples, and was prescribed Prozac and other anti-anxiety medicine.  Eventually, she took disability leave and then resigned for what she described as her fear of the potential to experience more harassment while working at Staples.  She sued Staples for sexual harassment as well as religious discrimination, and after the close of written discovery and depositions, Staples asked the Court on summary judgment to rule in its favor as a matter of law and dismiss the female employee’s claims without going to trial.

A Roanoke federal judge ruled in favor of Staples and dismissed the female employee’s lawsuit on summary judgment prior to trial.  Without condoning what it called the male employee’s “immature” behavior, the judge noted that the male employee never got completely naked when changing, never made any sexual comments to the female employee when changing, and never physically touched her.  The Roanoke federal judge concluded that the changing incidents were not sufficiently severe and offensive to legally support the sexual harassment claim, such that in the Court’s mind no reasonable jury could conclude that the incidents were motivated by unlawful sexual harassment.  Likewise, the judge was not persuaded that the Bible stealing and radio cord-cutting incidents where pervasive enough to support a religious discrimination claim against Staples.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com.

National Origin Employment Discrimination Covers Europeans

Recently, a federal judge in Virginia was presented with the novel legal issue of whether someone of European descent is covered under the national origin protections of Title VII of the federal Civil Rights Act.

A Caucasian professor with a Ph.D. from Harvard applied for several different teaching positions at Northern Virginia Community College.  Each time a minority candidate was selected over him: first, a native of India; second, a native of Korea; third, a native of Senegal; and fourth, another native of India.  The community college said he was not selected for the positions because he did not provide enough evidence of outstanding teaching skills.  The professor countered by citing his prior teaching positions at Harvard, Georgetown, Johns Hopkins, and The Naval Academy.

The professor sued the community college for discrimination based on national origin, claiming that his European ancestry was viewed as a negative at Northern Virginia Community College where minorities make up the majority of the student body.  The community college countered that European does not constitute a protected national origin under federal discrimination law because there is such a variation of cultures among the countries of Europe.

A federal judge in Alexandria agreed with the professor that European is a protected class.  The court reasoned that despite differences from one country to the next, Europe has enough commonality in terms of people, culture and linguistics to make it an identifiable place of national origin.

This turned out to be a pyrrhic victory for the professor, however, because the court ultimately found against him on his substantive discrimination claim against Northern Virginia Community College.  The court concluded that despite his Ivy League credentials, the professor failed to provide enough peer references and prior teaching accolades compared with the candidates who were ultimately chosen over him.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com.