Category Archives: Current Affairs

August 12, 2013

EEOC Slapped with Order to Pay $4.6 Million for Pursuing Unreasonable and Groundless Discrimination Claims

By Mark Wiletsky 

240px-US-EEOC-Seal_svgWhen a former employee sues for discrimination or retaliation, the employer generally is unable to recover its fees or costs for defending the lawsuit, even if the employer prevails.  That was not the case, however, in a recent class action brought by the agency tasked with enforcing federal anti-discrimination laws, the Equal Employment Opportunity Commission (EEOC).  A federal court recently slammed the EEOC with over $4.6 million in attorneys’ fees, costs and out-of-pocket expenses after finding that the EEOC’s pattern or practice class action claim and 153 of the individual discrimination claims were unreasonable or groundless.  EEOC v. CRST Van Expedited, Inc., No. 07cv95 (N.D. Iowa, August 1, 2013).

 EEOC Sued Employer Alleging Sexual Harassment 

In September 2007, the EEOC filed a lawsuit against trucking company, CRST Van Expedited, Inc. (CRST) alleging that the company’s lead drivers and team drivers subjected female employees to sexual harassment and created a sexually hostile environment in violation of Title VII.  The EEOC filed its action on behalf of employee Monika Starke and a class of similarly situated female employees.   

After almost a year of discovery in the case, the EEOC was pressed to identify the total number of harmed individuals making up the purported class.  In October 2008, the EEOC identified 270 allegedly aggrieved female employees.  When the EEOC failed to make all of the individuals available for deposition by a court-ordered deadline, the District Court barred the EEOC from pursuing claims on behalf of those 99 individuals who were not deposed.

CRST filed multiple motions for summary judgment to get the remaining claims dismissed before trial.  First, CRST succeeded in getting the EEOC’s pattern or practice claim dismissed, which meant that the EEOC was left to pursue harassment claims only on behalf of individual employees. CRST then hammered away at all of the individual claims and succeeded in getting them all dismissed for a multitude of reasons, ranging from lack of evidence that some individuals had suffered severe or pervasive harassment to some individuals not reporting any harassment to the company.  Significantly, the Court dismissed 67 of the individual claims because the EEOC had failed to exhaust administrative prerequisites by failing to investigate or attempt conciliation of the claims.  Having dismissed all claims against CRST, the District Court found that CRST was the prevailing party and was entitled to recover its attorneys’ fees and costs, which exceeded $4.5 million.

EEOC Appeals and Keeps Two Claims Alive 

The EEOC appealed the dismissal of 107 of the claims to the Eighth Circuit Court of Appeals.  The Eighth Circuit reversed the dismissal of the claims on behalf of two female employees and consequently found that CRST was no longer the prevailing party entitled to recover its attorneys’ fees and costs.  The case was sent back to the District Court for continuation of those two claims. 

District Court Awards Millions in Attorneys’ Fees, Costs and Expenses 

After the case was sent back to the District Court, the EEOC voluntarily dismissed one of the two remaining claims because it had failed to exhaust the administrative prerequisites as to her claim.  CRST agreed to settle the remaining claim for $50,000 and the parties asked the Court to dismiss the case in its entirety as a result of the settlement.  CRST then asked to recover its attorneys’ fees, costs and expenses for the claims on which it prevailed. 

In order to recover its attorneys’ fees, costs and expenses, CRST needed to show that it was the prevailing party for purposes of Title VII and that the EEOC’s claims were frivolous, unreasonable, or without foundation.  The Court ruled that CRST was the prevailing party on the EEOC’s pattern or practice claim and on 153 of the EEOC’s individual claims.  CRST was not the prevailing party, however, for the claim it settled, for the three claims withdrawn by the EEOC and for 98 claims that the Court dismissed as a discovery sanction against the EEOC.  The Court then ruled that the EEOC’s failure to exhaust Title VII administrative prerequisites of investigation and conciliation for 67 of the individual claims was unreasonable.  It further ruled that the EEOC’s pattern or practice claim was unreasonable as it was based only on anecdotal evidence.  In total, the Court found that 153 of the individual claims as well as the pattern or practice claim were unreasonable or groundless.   

After discounting the total amount of CRST’s attorneys’ fees, costs and out-of-pocket expenses to reflect those claims for which CRST was not the prevailing party, the Court ordered the EEOC to pay CRST $4,694,442.  This award represented $4,189,296 in CRST’s attorneys’ fees, $91,758 in costs and $413,387 in out-of-pocket expenses for expert witness fees, travel expenses, delivery fees, and similar expenses. 

While the EEOC performs an important function and pursues meritorious cases, the case against CRST shows that employers can and should fight back when the EEOC brings a frivolous case.  Significantly, this is not the first time a court has awarded fees against the EEOC or rejected its claims.  Last year, the Tenth Circuit (which covers Colorado) slapped the EEOC with attorneys’ fees and costs in EEOC v. TriCore Reference Laboratories, No. 11-CV-2096 (10th Cir. 2012), affirmed summary judgment against the EEOC in EEOC v. The Picture People, Inc., No. 11-CV-1306 (10th Cir. 2012), and the court affirmed a district court’s decision that the EEOC’s administrative subpoena was overbroad in EEOC v. Burlington Northern Santa Fe Railroad.  We also recently discussed a letter sent by nine state Attorney Generals, in which they criticized the EEOC’s lawsuits and position concerning employers’ ability to use background checks to screen employees with a criminal record.  Hopefully, these losses, fee awards, and criticisms will cause the EEOC to more thoroughly evaluate which cases have merit before subjecting employers to the high cost and aggravation of defending meritless claims.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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July 29, 2013

The Battle Over Background Checks Continues — State AGs Accuse EEOC of “Gross Federal Overreach”

By Mark Wiletsky 

Is it discriminatory if an employer does not hire anyone with a particular criminal conviction, regardless of that person’s race, gender, religion, or other protected characteristic?  According to the EEOC’s April 2012 Enforcement Guidance, it might be.  But in a July 24, 2013 letter sent to EEOC Commissioner Jacqueline Berrien and the four EEOC Board Members, nine state Attorneys’ General (AGs) disagree.  The AGs chastise the EEOC for filing recent lawsuits against BMW Manufacturing Co., LLC and Dolgencorp (Dollar General), in which the EEOC alleges that these employers violated Title VII’s disparate impact prohibition by using a bright-line screening policy that rejected all individuals with past convictions in certain categories of crimes, such as murder, assault, reckless driving and possession of drug paraphernalia.   

The letter then criticizes the EEOC’s April 2012 Enforcement Guidance on Arrest and Conviction Records, stating that the EEOC’s policy guidance incorrectly applies the law and constitutes an unlawful expansion of Title VII.  The AGs argue that if Congress wishes to protect former criminals from employment discrimination, it can amend the law, but it is not the EEOC’s role to expand the protections of Title VII under the guise of preventing racial discrimination. 

The Republican state AGs from Colorado, Montana, Utah, Kansas, Nebraska, West Virginia, Alabama, South Carolina and Georgia joined in this missive to say “enough is enough” on the EEOC’s background check lawsuits.  Citing the burden on businesses to undertake more individualized assessments of an applicant’s criminal history, the AGs urge the EEOC to rescind its April 2012 Enforcement Guidance and dismiss the lawsuits against Dollar General and BMW.  Not likely, but it may get the attention of federal lawmakers who may try to rein in the EEOC’s position on this issue.

Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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July 22, 2013

Myriad of Social Media Privacy Laws Create Havoc for Multi-State Employers

By Elizabeth Dunning 

ComputerDoes your company request that your employees and applicants provide user names and passwords to their personal social media accounts?  Do you require applicants to log onto their online accounts in your presence so that you can view their content?  Perhaps you ask employees to “friend” their supervisors.  If you haven’t followed new developments in state employment laws, you may not realize that such activities are unlawful in some states.  In just two years, eleven states have passed social media privacy laws that prevent employers from accessing employees’ and applicants’ personal online accounts.  Each state law differs in certain respects, making it difficult for multi-state employers to adopt a uniform and consistent social media policy.  To help sort things out, we highlight here the primary differences in the state social media privacy laws. 

States with Workplace Social Media or Internet Privacy Laws 

The eleven states that have enacted social media or internet privacy laws affecting employers to-date are:  Arkansas, California, Colorado, Illinois, Maryland, Michigan, Nevada, New Mexico, Oregon, Utah and Washington.  All but one of these states protect the access information for both current and prospective employees, with New Mexico only protecting the log-in information of applicants. 

Differences in State Social Media Laws 

Generally, all of these states prohibit an employer from requesting or requiring an employee or applicant to disclose his or her user name, password or other means of accessing his or her personal social media accounts. Many of these states also make it unlawful to discipline, discharge, discriminate against or penalize an employee, or fail to hire an applicant who refuses to disclose his or her access information to personal social media accounts.  However, that’s where the uniformity in the laws generally ends.  The following chart highlights numerous key differences between the state laws. 

Legal Provision

States Recognizing Provision

Prohibits employers from requesting that employee add employer representative or another employee to his or her list of contacts (e.g., “friend”)

Arkansas, Colorado, Oregon and Washington

Prohibits employers from requesting employee to access his or her personal social media account in the presence of the employer (“shoulder surfing”)

California, Michigan, Oregon and Washington

Prohibits employers from requesting employee to change the privacy settings on his or her personal social media accounts

Arkansas, Colorado and Washington

Specifically permits employers to view and access social media accounts that are publicly available

Arkansas, Illinois, Michigan, New Mexico, Oregon and Utah

Exception when access required to comply with laws or regulations of self-regulatory organizations

Arkansas, Nevada, Oregon and Washington

Exception for investigations of employee violation of law or employee misconduct

Arkansas, California, Michigan, Oregon, Utah and Washington (Colorado and Maryland limit this exception to investigation of securities or financial law compliance)

Exception for investigation of unauthorized downloading of employer’s proprietary, confidential or financial data

Colorado, Maryland, Michigan, Utah and Washington

Inadvertent acquisition of personal log-in information while monitoring employer systems not a violation but employer not permitted to use the log-in information to access personal social media accounts

Arkansas, Oregon and Washington

As you can see, the differences in the laws exceed the similarities, making it difficult for an employer operating in more than one covered state to comply with all applicable provisions.  Even the definition of covered social media accounts varies by state, creating even more inconsistencies. 

Would a Federal Law Help? 

With eleven laws in place and almost 20 additional states considering social media privacy bills, the issue seems ripe for a federal bill that would bring some uniformity to the protections offered to employees and applicants.  In February 2013, the Social Networking Online Protection Act, which offers such workplace protections, was introduced into the U.S. House of Representatives.  Unfortunately, it has languished in committee and is not expected to pass.  In addition, a federal law on the issue will likely only simplify the web of state laws if it specifically preempts state law.  Without federal preemption, we might face two sources of law on the issue, federal and state, which might muddy the waters even more.  In any event, it does not appear that a federal law will be enacted before additional states enact their own laws, leaving employers to struggle with the variances in state law. 

Best Practices for Complying with Social Media Privacy Laws 

With the vast amount of information available on social media and the increased use of social networking platforms for business purposes, it is likely that most employers will at some point need to access or review content on an employee’s or applicant’s social media account.  Perhaps it will be for an investigation of an employee who downloaded proprietary information or perhaps it will be to confirm derogatory statements about the company made by an employee.  Whatever the reason, the first step is to recognize that these laws exist and you will need to review which, if any, apply to your company and/or the employee involved.  Remember that you are generally free to access publicly available social media content.  However, if one of these state laws applies, consult with legal counsel before accessing (or requesting access to) any personal social media accounts to determine what restrictions and exceptions are applicable to your particular circumstances. 

Establish a social media policy specifying that employees are not permitted to disclose or post proprietary or confidential company information on their personal social media accounts.  Make a clear delineation between company/business-related social media accounts where you control who speaks on behalf of your organization, and personal accounts where employees do not represent the views of the company. Be careful that your social media policy does not run afoul of the National Labor Relations Act by interfering with employees’ right to discuss their wages and working conditions in a concerted manner.  Communicate your policy to your employees through normal channels, such as your employee handbook, online policy/intranet, etc. 

Train your supervisors, managers and human resources staff on these laws.  Sometimes supervisors or HR folks think it is acceptable to ask an employee to “friend” them online, or to ask for their log-in information to view pictures or other benign posts.  Despite good intentions, company representatives could get you into legal trouble so advise them of these laws and your restrictions on requesting access to personal social media accounts.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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July 3, 2013

ACA Employer Health Care Mandate – “Pay or Play” – Put Off Until 2015

By Elizabeth A. Nedrow

Health insuranceIn our Alert a few months ago, we described the so-called “pay or play” penalty provisions affecting employers under the federal health care reform statute known as ACA (the Patient Protection and Affordable Care Act).  Yesterday the Obama Administration informally announced that it will delay implementation of pay or play until 2015.  Yesterday’s announcement included a promise to publish formal guidance regarding this change within the next week.

Reducing the Complexity of ACA Implementation

The Administration cites complexity of the pay or play requirements as the reason behind this delay in implementation.  In response to concerns by businesses that they need more time to understand and comply with the complex law, the Treasury Department states that they are looking to simplify the new reporting requirements.  Mark Mazur, Assistant Secretary for Tax Policy at the U.S. Department of the Treasury, wrote: “Just like the Administration’s effort to turn the initial 21-page application for health insurance into a three-page application, we are working hard to adapt and to be flexible about reporting requirements as we implement the law.”  Mazur states that the Administration will work with employers, insurers and other reporting entities to voluntarily implement information reporting in 2014 so that they may conduct “real world testing” of reporting systems which should lead to a smoother implementation in 2015.

Look for Additional ACA Guidance Soon

While employers certainly welcome the news that there is more time to comply with ACA mandates, the delay doesn’t mean employers can take the summer off.  As noted above, we can expect formal guidance on pay or play implementation in the next week, and additional action may be required after that.  In addition, the Administration’s announcement states a hope that employers will voluntarily comply with pay or play in 2014 (including the reporting systems), so that implementation in 2015 will go smoothly.  Other provisions of ACA, such as the requirement that individuals have health insurance coverage or pay a penalty (the individual mandate), elimination of pre-existing condition exclusions, and the operation of health insurance exchanges, are still currently scheduled to go into effect on January 1, 2014.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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July 1, 2013

Affirmative Action by State University Requires Strict Scrutiny and No Workable Race-Neutral Alternatives

College gradsBy Jude Biggs 

In a highly anticipated opinion regarding the future of affirmative action, the U.S. Supreme Court ruled that to avoid violating the Equal Protection Clause, the University of Texas’ consideration of race in its admissions process must meet a strict scrutiny standard where its affirmative action efforts are narrowly tailored to meet its diversity goal.  Fisher v. University of Texas at Austin, No. 11-345 (U.S. June 24, 2013).  Because the Fifth Circuit Court of Appeals gave the University substantial deference in deciding whether its affirmative action plan was narrowly tailored to meet its stated goal, the Supreme Court vacated the lower court’s decision in favor of the University and sent the case back to the lower court with instructions to apply the tougher strict scrutiny standard.

Rejected Caucasian Applicant Alleges School Violated Constitution by Considering Race  

In 2008, Fisher applied for admission to the University of Texas at Austin.  Fisher, who is white, was denied admission.  For years, the University had considered race as one of various factors in its undergraduate admissions process.  Under the affirmative action plan in place when Fisher applied, the University remained committed to increasing racial minority enrollment on campus but did not assign a numerical value based on race for each applicant.  Instead, the University included an applicant’s race as one of numerous components that made up the applicant’s Personal Achievement Index.  When Fisher was rejected, she sued the University and various school officials alleging that the University violated the U.S. Constitution’s Equal Protection Clause by considering race.   

Affirmative Action Survives, But Is Narrowed 

The federal district court and the Fifth Circuit appellate court upheld the University’s admissions plan.  The Fifth Circuit, however, gave substantial deference to the University, both in the definition of its compelling interest in creating diversity in its student body and in deciding whether its affirmative action plan was narrowly tailored to meet its goal.  When the Supreme Court agreed to hear this case, supporters of affirmative action worried that the more conservative court would rule that consideration of race under affirmative action programs was unconstitutional.  

The Fisher decision, however, does not actually decide the constitutionality issue but instead defines the standard by which courts must evaluate a program that considers race as a factor.  The Court explained that the University must meet the demanding burden of strict scrutiny and remanded the case to the Fifth Circuit to analyze whether the University has offered sufficient evidence to prove that its admissions policy meets that scrutiny.  The Court stated that “the reviewing court must ultimately be satisfied that no workable race-neutral alternatives would produce the educational benefits of diversity.” 

Justice Thomas: “Use of Race is Categorically Prohibited” 

Justice Clarence Thomas joined in the majority’s decision, agreeing that strict scrutiny should apply to the University’s use of race in its admission program.  Writing a separate concurring opinion, however, he went further, stating that he would hold that a state’s use of race in higher education admissions decisions is categorically prohibited by the Equal Protection Clause.  Justice Thomas would overrule the 2003 Supreme Court decision in Grutter v. Bollinger, which upheld the use of race as one of many “plus factors” in an admissions program, and abolish the use of race as a factor in affording educational opportunities.  He finds that there is no compelling interest that could justify what he calls racial discrimination.  He states that there is no doubt that the University’s discrimination injures white and Asian applicants who are denied admission because of their race, but he also believes that those who are admitted under the “discriminatory admissions program” suffer even more harm, stamping them with a “badge of inferiority.”

Justice Thomas’ views differ from those of retired Justice Sandra Day O’Connor, who wrote in 2003 in Grutter, that “classroom discussion is livelier, more spirited, and simply more enlightening and interesting” when students are exposed to the “greatest possible variety of backgrounds.”  Justice O’Connor also stated that the Court expected that after 25 more years, the use of racial preferences would no longer be needed.  Today, some might say American universities have reached the point when affirmative action is no longer needed; others, however, do not believe the United States has achieved the promise of true equality. 

Whether Justice Thomas’ view is adopted or whether Justice O’Connor’s views remain in force in the future – at least for awhile – remains to be seen. 

Will Fisher Be Revisited Again? 

The Fifth Circuit now must apply the strict scrutiny standard to the evidence provided by the University of Texas to determine whether its consideration of race meets Equal Protection muster.  No matter the outcome, it is likely the “losing” party will seek review of that decision by the U.S. Supreme Court.  We know how Justice Thomas will rule, but the question remains, will enough other justices join him to throw out any consideration of race in state affirmative action programs? 

Private Employers Not Bound by This Decision  

Because the Equal Protection clause applies only to state actors (providing that no state shall deny to any person the equal protection of the laws), the analysis of whether an affirmative action program violates the Equal Protection clause does not apply to private companies or organizations.  That said, there could be a spillover effect.  Generally, discrimination in the workplace is governed by Title VII and analogous state laws.  It is unclear whether individuals who feel they have suffered reverse discrimination by a private employer’s affirmative action or diversity efforts will leverage the narrowing scope of affirmative action in the public sector.  It is likely private sector litigants will point to Justice Thomas’ concurring opinion to try to abolish any consideration of race in the employment context as discriminatory, and others will point to Justice O’Connor’s rationale for affirmative action.  So stayed tuned! 

Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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June 26, 2013

Employers Benefit From Supreme Court Ruling On Title VII Retaliation Claims

By Jude Biggs 

In a favorable ruling for employers, on June 24 the U.S. Supreme Court held that a retaliation claim under Title VII of the Civil Rights Act of 1964 requires an employee to show the employer’s desire to retaliate was the “but-for” cause of the challenged employment action.  University of Texas Southwestern Medical Center v. Nassar, No. 12-484 (U.S. June 24, 2013).  This establishes a different causation standard for retaliation claims than is required for underlying Title VII discrimination claims, which only require an employee to show the motive to discriminate was one of the employer’s motives in making an adverse decision.  Although cumbersome to have two standards, the decision is good news for employers, as often a jury will not find any discrimination by an employer, but may find retaliation after an employee speaks up about alleged discrimination.  Making it more difficult to prevail on a retaliation claim will, hopefully, encourage plaintiffs to bring fewer cases or resolve them earlier than going through an expensive trial.  

Employee Must Prove Employer Would Not Have Taken Action But For an Improper Motive 

In a 5-4 decision, the Supreme Court ruled a plaintiff making a retaliation claim under Title VII must establish that the employer would not have taken the alleged adverse employment action but for the plaintiff having engaged in protected activity.  Protected activity that may trigger a retaliation claim includes the employee opposing, complaining of or participating in a proceeding about unlawful discrimination in the workplace.  Through this ruling, the Court instructs that retaliation claims should fail if an employer had other reasons or motivations – singly or together — that caused the employer to take the adverse action (even if one other factor was retaliatory in nature).   In less legal terms, the employer wins if it can show its non-retaliatory reasons caused it to make the decision, even if a small portion of the decision was based on retaliation against the employee for engaging in protected conduct. 

Justice Kennedy, writing for the majority which included Justices Roberts, Scalia, Thomas and Alito, stated that the text of Title VII’s anti-retaliation provision appears in a different section of the law from the provision that prohibits discrimination based on race, color, religion, sex or national origin.  When Congress inserted the less rigorous “motivating factor” standard for discrimination cases in 1991, it could have inserted that standard into the anti-retaliation provision.  In choosing to omit it, Congress deliberately concluded that retaliation claims are to be treated differently and retaliation is unlawful only when the employer takes adverse action against an employee “because” of their protected activity.  The Court pointed to its interpretation of the Age Discrimination in Employment Act of 1967 in Gross v. FBL Financial Services, Inc. to require “but for” causation for retaliation claims. 

The Court also stated that this causation standard is essential to the fair and responsible allocation of judicial resources.  Recognizing that retaliation claims have been on the rise, the Court recognized that lessening the causation standard could contribute to the filing of frivolous claims, diverting resources from employers, agencies and courts in other efforts to fight workplace harassment. 

Dissent Urges Congressional Action 

Justices Ginsburg, Breyer, Sotomayor and Kagan dissented, alleging that fear of retaliation is the leading reason why employees do not speak up about discrimination in the workplace.  Because Title VII plaintiffs often have been subjected to both discrimination and retaliation, they now will have to litigate their claims under two standards:  (1) discrimination under the “motivating factor” test which requires a plaintiff to show only that a prohibited characteristic was a motivating factor in the employer’s adverse action, even if other factors also motivated the action; and (2) retaliation under the “but for” standard which requires a plaintiff to show that the employer would not have taken the adverse action but for a retaliatory motive.  The dissent concluded that this decision is at odds with a line of previous decisions that recognize retaliation claims are inextricably bound up with an underlying discrimination claim.  Justice Ginsburg, writing the dissenting opinion, stated “the Court appears driven by a zeal to reduce the number of retaliation claims filed against employers.” Calling the majority decision “misguided,” the dissent urges Congress to enact another Civil Rights Restoration Act to counter and remedy the injustice done by the majority opinion. 

Employers May Face Fewer Retaliation Claims or At Least, Fewer Successful Claims 

In practice, it is questionable how relevant the causation standard may be to potential litigants of retaliation claims.  Employees believing they have been wronged after they complain about discrimination will likely still file retaliation claims, no matter what causation standard applies.   Juries often will conclude retaliation occurred based on a general “fairness” standard.  However, employers may be able to resolve such claims at the summary judgment stage (when a court decides a claim does not merit a trial), because proof of other factors that contributed to the adverse employment decision will defeat the retaliation claim. 

Disclaimer:This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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June 25, 2013

Supreme Court Limits Definition of Supervisor for Employer Liability in Workplace Harassment Claims

By Emily Hobbs-Wright 

In a huge win for employers, the U.S. Supreme Court today decided that for purposes of determining employer liability for Title VII harassment cases, a “supervisor” is limited to those who are empowered by the employer to take tangible employment actions against the victim.  Vance v. Ball State Univ., No. 11-556 (U.S. June 24, 2013).  This means that employees who oversee the daily activities of other employees, but do not have the power to discipline, fire, promote, transfer or take other actions against an employee, are not considered “supervisors” in workplace harassment cases under Title VII.   

In drawing a sharp line between co-workers and supervisors, the Supreme Court adopted a clear standard that parties and reviewing courts can apply early in a case in order to determine which side has the burden of proof in Title VII harassment litigation.

Supervisor vs. Co-Worker as Harasser – Why It Matters 

Determining employer liability for harassment under Title VII of the Civil Rights Act of 1964 depends on whether the alleged harasser is a “supervisor” or a “co-worker” of the individual being harassed.  If the harasser is a co-worker, the employer will be liable for the harassing behavior only if the complainant can show that the employer was negligent, meaning that the employer knew or should have known of the conduct and failed to take immediate and appropriate corrective action.  See 29 CFR § 1604.11(d).   

If the harasser is a supervisor, however, the test for employer liability changes dramatically.  If the harassing supervisor caused a tangible employment action such as firing, demoting or reducing the complainant’s pay, the employer will be automatically liable for the harassment.  If there was no tangible employment action, the employer may still be liable, unless it can meet a two-pronged affirmative defense known as the Faragher/Ellerth defense.  

In order to establish the Faragher/Ellerth defense, outlined by the Supreme Court in the companion cases of Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Industries, Inc. v. Ellerth, 24 U.S. 742 (1998), an employer must show: (1) that the employer exercised reasonable care to prevent and promptly correct the harassing behavior; and (2) the plaintiff-employee unreasonably failed to take advantage of preventative or corrective measures established by the employer or to avoid harm otherwise.   

The key difference between cases alleging harassment by a co-worker and a supervisor is the burden of proof.  With co-worker harassment, the plaintiff-employee bears the burden of demonstrating employer negligence.  When trying to avoid liability for supervisor harassment, however, the employer bears the burden of establishing the Faragher/Ellerth affirmative defense.  The higher hurdle that must be met by employers when litigating supervisor harassment raises the opportunity for the plaintiff-employee to recover damages for harassment in the workplace.  Consequently, an important issue in a harassment case is whether the alleged harasser is a supervisor or a co-worker.   

Supreme Court Resolves Split in the Circuits on Definition of “Supervisor”

Lower courts have disagreed on the test for deciding whether an alleged harasser is a “supervisor” or merely a co-worker.  Some federal appellate courts, including the First, Seventh and Eighth Circuits, have ruled that an employee is not a supervisor under Title VII unless he or she has the power to hire, fire, demote, promote, transfer, or discipline the victim.  Other circuits, including the Second and Fourth Circuits, have followed the more expanded approach urged by the Equal Employment Opportunity Commission (EEOC), which applies “supervisor” status to those who have the ability to exercise significant direction over another employee’s daily work activities.   

In a 5-4 decision, the Supreme Court resolved this split in authority by holding that an employer may be vicariously liable for an employee’s unlawful harassment only when the employer has empowered that employee to take tangible employment actions against the victim, that is, to effect a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.  Calling the EEOC’s definition of supervisor “nebulous,” the Court stated that it was not sufficient to deem an employee a “supervisor” based on his or her ability to direct another employee’s tasks.  The Court noted that the EEOC Guidance that looks at the number (and perhaps the importance) of the tasks in question would be a “standard of remarkable ambiguity.”  Relying on the Faragher and Ellerth decisions, the Court stated that a supervisor is instead empowered by the company as a distinct class of agent that may make economic decisions affecting other employees under his or her control. 

Bright Line Between Co-Workers and Supervisors Will Aid Employers Facing Harassment Claims 

The bright line test that the Court adopted for determining who is deemed a “supervisor” in Title VII cases eliminates murkiness and provides a clear test that reviewing courts can easily apply. The Court noted that it typically will be known before litigation is commenced whether an alleged harasser was a supervisor, and if not, it will become clear to both sides after discovery.  The Court goes on to say “once this is known, the parties will be in a position to assess the strength of a case and to explore the possibility of resolving the dispute.  Where this does not occur, supervisor status will generally be capable of resolution at summary judgment.”  The Court clearly wanted employers to be able to get the supervisor issue resolved early in a lawsuit so that both sides will know who bears the burden of proof and can pursue early resolution of the case based on the strength of the evidence. 

Employees Still Protected, but Must Prove Company Negligence 

The Court’s majority, which includes Justices Alito, Roberts, Scalia, Kennedy and Thomas, states that employees who face harassment by co-workers who possess the authority to inflict psychological injury by assigning unpleasant tasks or by altering the work environment in objectionable ways will still be protected under Title VII.  The Court states that such victims will be able to prevail “simply by showing that the employer was negligent in permitting this harassment to occur, and the jury should be instructed that the nature and degree of authority wielded by the harasser is an important factor to be considered in determining whether the employer was negligent.”  According to the majority, the fact that harassing co-workers may possess varying degrees of authority over daily tasks will not be a problem under the negligence standard “which is thought to provide adequate protection for tort plaintiffs in many other situations.” 

Dissent Would Follow EEOC’s Guidance and Extend “Supervisor” Status Based on Authority to Direct an Employee’s Daily Activities 

Justice Ginsburg, joined by Justices Breyer, Sotomayor and Kagan, wrote a lengthy dissent opining that the majority’s rule diminishes the force of Faragher andEllerth, ignores the reality of the current workplace and strays from the objective of Title VII in preventing discrimination in the workplace.  The dissent favors the EEOC’s Guidance, believing that employees who direct subordinates’ daily work are supervisors.  Justice Ginsburg wrote that although one can walk away from a fellow employee’s harassment, “[a] supervisor’s slings and arrows, however, are not so easily avoided.”  The dissent recites numerous cases in which a person vested with authority to control the conditions of a subordinate’s daily work life used his position to aid his harassment, and then points out that in none of the cases would the majority’s “severely confined definition of supervisor yield vicarious liability for the employer.”  The dissent concludes that the majority decision embraces a position that relieves scores of employers of responsibility for the behavior of the supervisors they employ.  

Conclusion – Victim Must Prove Employer Negligence When Harassed by a Non-Supervisor 

The Vance opinion means that employees alleging harassment by another employee who does not have the power to hire, fire, promote, transfer or discipline them, bear the burden of proving the employer’s negligence in order for the employer to be liable for the harassment.  This means the alleged victim must prove that the employer knew or should have known of the conduct and failed to take immediate and appropriate corrective action.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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June 21, 2013

Arbitration Agreement Waiving Class Claims Upheld – What it Means for Employers

By Jeffrey T. Johnson 

Supreme court bldgArbitration is a matter of contract between the parties and courts are not permitted to invalidate an agreed-upon provision that prohibits claims from being arbitrated on a class action basis, the U.S. Supreme Court ruled in its June 20, 2013 opinion in American Express Co. v. Italian Colors Restaurant.  Employers can benefit from this ruling by crafting arbitration agreements that limit an employee’s right to pursue employment claims on behalf of a class of employees.   

Cost to Pursue Individual Arbitration Not a Factor 

At issue in the American Express case was an arbitration agreement between American Express and merchants who accept its charge cards that required the parties to arbitrate all disputes.  The agreement further stated that “there shall be no right or authority for any Claims to be arbitrated on a class action basis.”  

When numerous merchants filed a class action lawsuit against American Express alleging violations of federal antitrust laws due to American Express’ alleged high card fees, American Express moved to dismiss the lawsuit and instead force each merchant to arbitrate its claim individually, as required by the arbitration agreement.  The District Court agreed with American Express and dismissed the class action lawsuit.  The merchants appealed the dismissal to the Second Circuit Court of Appeals, arguing that the cost to prove the antitrust claims by each individual merchant would far exceed the amount they could recover as an individual plaintiff.  The merchants submitted a declaration from an economist who estimated that the cost of expert analysis on the antitrust claims would be “at least several hundred thousand dollars, and might exceed $1 million.”  The maximum amount of damages that each individual plaintiff could expect to recover was $38,549 as treble damages.  The Second Circuit reversed the dismissal, ruling that because the cost for each merchant to arbitrate their claim individually was prohibitive, the class-action waiver in the arbitration agreement was unenforceable and arbitration could not proceed.  American Express sought review by the Supreme Court. 

In a 5-3 ruling, the Supreme Court held that the Federal Arbitration Act (FAA) does not allow courts to invalidate a contractual waiver of class actions on the ground that the plaintiffs’ cost to arbitrate a federal statutory claim individually exceeds the potential recovery.  Justice Antonin Scalia, writing for the majority, rejected the merchants’ argument that cost vs. recovery should factor into the enforceability of an arbitration agreement.  He wrote that “the antitrust laws do not guarantee an affordable procedural path to the vindication of every claim.”  The Court drew a distinction between contract provisions that prohibit an individual from asserting their statutory rights at all (e.g., a waiver of certain claims) and prohibiting class claims.  Relying on earlier precedent, the Court reiterated that it may invalidate arbitration agreements that operate as a prospective waiver of a party’s right to pursue statutory remedies, but will not invalidate an agreement because it is not worth the expense involved in a party proving a statutory remedy.  The Court also refused to create preliminary hurdles before a plaintiff could be held to contractually-agreed arbitration, such as requiring a court to evaluate the cost to prove claims as well as the damages that could be recovered if the plaintiff is successful.  Justice Scalia wrote that “such a judicially created superstructure” would “undoubtedly destroy the prospect of speedy resolution that arbitration in general and bilateral arbitration in particular was meant to secure.” 

Dissent:  Majority’s Response to Merchants Was “Too Darn Bad” 

Justice Elena Kagen, joined by Justices Ruth Bader Ginsburg and Steven Breyer (Justice Sotomayor did not take part in the decision), wrote a stinging dissent in which she characterized the case as small business owners who were forced to accept a form contract by a monopolizing credit card company that violated antitrust laws.  The dissent states that if the arbitration clause is enforceable, American Express has insulated itself from antitrust liability because it used its monopoly power to insist on a contract that “effectively deprives its victims of all legal recourse.”  Justice Kagen wrote: the “nutshell version of today’s opinion, admirably flaunted rather than camouflaged:  Too darn bad.”  The three dissenting justices believe that the FAA was never meant to produce the outcome arrived at by the majority, and that the majority decision blocks the vindication of meritorious federal claims and insulates wrongdoers from liability.  The dissent instead would rely on the “effective vindication” rule, namely that an arbitration clause will not be enforced if it prevents the effective vindication of federal statutory rights, however it achieves that result, to invalidate the bar on class arbitration in the American Express agreement. 

Employment Arbitration Agreements 

Recent Supreme Court decisions upholding arbitration agreements, such as the American Express opinion, may bolster efforts to use arbitration agreements in the employment context.  Although there are pros and cons to utilizing arbitration agreements with employees, a significant advantage is the ability to prohibit class actions by requiring employees to arbitrate their employment disputes on an individual basis.  In addition, arbitration can be less costly than litigating in court, and more confidential as most arbitration filings are not public records.  Perhaps most significantly, arbitration allows employment cases to be heard by arbitrators, not juries, thereby reducing the risk of runaway verdicts.  Employers should consult with employment counsel to determine if arbitration agreements are warranted with their workforce and if so, what provisions will best protect the company’s interests.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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June 19, 2013

Wyoming Employers – Time to Pay More Attention to those Unemployment Claims

320px-Flag_of_Wyoming_svgBy Brad Cave 

July 1 creates some new incentives for Wyoming employers to participate in the unemployment claims system.  Currently, UI benefits are paid to the employee beginning immediately when a deputy clerk of the Wyoming Department of Workforce Services determines that the employee is entitled to benefits.  If the employer appeals that determination, and a hearing officer reverses the deputy’s decision, the employer’s account is not charged for the benefits paid under the deputy’s erroneous decision.  The same is true if the employer obtains reversal of a decision granting benefits through an appeal to the Unemployment Insurance Commission or the district court. 

Effective July 1, this general rule has an exception that all employers should keep in mind.  Bowing to federal pressure, the Wyoming Legislature amended the Wyoming Employment Security Law (ironic name for the unemployment benefit statute, isn’t it) to require employers to respond to requests for information from the Department.  See, http://legisweb.state.wy.us/2013/Enroll/SF0073.pdf  Employers will no longer escape the monetary consequences of erroneous payments if the Department determines that, (1) an erroneous payment of benefits was made because the employer was at fault for failing to respond adequately or on time to a written request for information; and, (2) the employer has established a pattern of failing to respond adequately or on time to such requests.  The employer’s responses must be received within fifteen (15) days after the Department sends the request, whether by regular mail or email.   What constitutes a pattern of failing to respond remains to be seen – the Legislature said only that the phrase means a “repeated documented failure” to respond to written requests for information, “taking into consideration the number of instances of failure in relation to the total volume of requests by the Department” to the employer. 

Action items for Wyoming employers: 

1.  Maintain documentation of your responses to the Department on unemployment claims.  We don’t believe that certified mail is necessary for most employers, but we do suggest keeping copies of all the documentation you return in response to a request.  Also, the amendment requires the Department to acknowledge receipt of the requested information within fifteen (15) days if the employer requests such acknowledgement. 

2.  Some employers use a third-party agent or centralized offices in remote states to respond to unemployment claims.  Be sure to notify those who process your UI claims, as the amendment clearly holds the employer responsible for delays or inadequate information from an employer’s agent.  Likewise, if you have drug your feet getting back to your UI agent with the necessary information, now is the time to improve your response time so the agent does not blame you for a “pattern of failing to respond.” 

3.  As always, be very careful about what you (or your agent) say or submit in response to a request for information.  A determination for or against an employee regarding unemployment benefits is not “binding, conclusive or admissible” in any subsequent litigation between the employer and employee.  But the employer can be bound by what it says were the reasons for termination and the documents it submits to support the termination.  Any discrepancy in the employer’s reasons can weaken your objection to the UI claim and be used in other legal proceedings to challenge the legitimacy of your reasons for the termination.

Disclaimer: This article is designed to provide general information on pertinent legal topics. The statements made are provided for educational purposes only. They do not constitute legal advice and are not intended to create an attorney-client relationship between you and Holland & Hart LLP. If you have specific questions as to the application of the law to your activities, you should seek the advice of your legal counsel.


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