General Employment Law - Timmons Fall 2003 Page 1 of 60 General Employment Law I. Themes of Employment Law A. The law is secondary in structuring the employment relationship – individual employers and employees establish the relationship and most of its terms by agreement. B. Employment legislation attempts to influence the working of the labor market. C. Employment at Will 1. Today, almost all states have limited the doctrine to some degree. D. Immutable Rules 1. Rules that the parties cannot change by agreement i. Minimum wage ii. Child labor E. Default Rules 1. Rules that state the applicable rules unless the parties agree to alter them. Legal Boundaries of the Employment Relationship A. Employees versus Independent Contractors 1. Secretary of Labor v. Lauritzen i. Issue is whether migrant workers were employees or independent contractors. ii. Importance is that only employees are covered by FLSA. iii. FLSA does not adequately define employee. iv. Common-law standard of employee focuses on control – specifically, who has the right to control the means and manner of work. v. Courts have held that since Congress did not provide much guidance as to defining employee, that common-law standard should apply. vi. Court focuses on six criteria for determining if a worker is economically dependent upon the business and is thus an employee a. Degree of control exercised by employer b. Degree to which workers have profit or loss stake in business c. Capital investment by workers d. Degree of skill required e. Degree of permanency of the relationship f. Integral relationship to the business vii. Sometimes difficult for employers to determine whether workers will be considered an employee or independent contractor under these criteria. viii. Concurrence argues that workers without substantial human capital are employees covered by FLSA while workers with substantial human capital would not be covered. ix. The Economic Reality Test using the six factors above is the majority test. 2. Partners are employers rather than employees and therefore are generally unprotected by employment laws.
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General Employment Law - Timmons Fall 2003 Page 2 of 60 3. Volunteers are not employees because they are not compensated for their work. 4. Some employment statutes do not cover all employers i. Some have minimum number of employee requirements. a. Title VII and ADA require 15 employees. b. ADEA require 20 employees. Enforcement of Employment Rights A. Arbitration of Employment Disputes 1. Two fundamental types of arbitration i. Interest arbitration a. Arbitrator establishes rights or terms between parties when they cannot agree. ii. Grievance arbitration a. Arbitrator interprets how a statute or collective bargaining agreement should be applied. 2. Basic goal of arbitration is to resolve disputes quickly and cheaply. 3. Gilmer v. Interstate/Johnson Lane Corp. i. Issue in Gilmer was whether a mandatory arbitration provision is effective in a suit involving the federal ADEA. ii. Gilmer argues a. Procedural limitations of arbitration provisions. 1). Court basically indicates that FAA provides safeguards and that there should not be a presumption. b. Unequal bargaining power between employee and employer. 1). Court indicates that this should be a case by case decision. c. Arbitration is inconsistent with statutory framework of ADEA. 1). Court indicates that other statutory provisions of same import have been held to be arbitrable. 4. FAA expressly excludes contracts of seamen, railroad workers, and any other class involved in the movement of goods in interstate commerce. i. Supreme Court affirmed that only workers involved in the TRANSPORTATION of goods qualify for interstate commerce exception. 5. Some courts interpret Gilmer to require five basic safeguards before courts will enforce an arbitration provision covering federal statutory rights i. A neutral arbitrator ii. More than minimal discovery iii. A written award iv. Availability of all remedies that would be available in court. v. No requirement for the employee to pay unreasonable costs or any of the arbitrator‟s fees or expenses.
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General Employment Law - Timmons Fall 2003 Page 3 of 60 6. Pre-dispute arbitration provisions are where the problems arise. 7. Gilmer and Unionized Employees i. Supreme Court carefully distinguished unionized employees by indicating that arbitration provisions in collective bargaining agreements did NOT foreclose the ability to bring statutory employment claims. 8. EEOC has indicated hostility to arbitration provisions, indicating that these agreements are contrary to the purposes of the statutes. 9. Employees cannot waive the EEOC‟s right to sue. B. Choice of Enforcement Forum – Agencies or Courts 1. Most employment rights are enforced by government agencies or by the workers themselves in court. 2. Agency Enforcement i. Compensation versus Fines a. Agencies often force employers to compensate workers for harms done. b. Another possibility is for the agency to fine the employer with the proceeds going to the government. ii. Agency or Court Adjudications a. Efficiency is a major goal of agency hearings. iii. Judicial Review of Agency Actions a. If the agency holds a hearing, the losing party will typically be allowed review in the court system. 3. Individual Enforcement i. Many employment rights are enforced by individual workers themselves by court action without agency involvement. 4. Hybrid Enforcement – Title VII i. Employee must first file complaint with agency. ii. Only after complaint is filed will an employee be given the standing to sue the employer in court. Historical Foundations of Employment at Will A. Statute of Laborers 1. Purpose of statute was to keep worker wages at pre-Plague levels. 2. England wanted to control the movement and wages of laborers. 3. Labor shortage due to plague increased worker bargaining power. 4. All persons who did not own their own land and did not practice a trade had to go to work for anyone who wanted them for pre-Plague wages. i. Worker would be imprisoned if they did not comply. 5. Duties of Employers i. Employers could not take more employees than needed. ii. Very little other is required except to pay wages. B. Statute of Artificers 1. Statute is meant to be a clarifying act. 2. Purpose is to “banish idleness, advance husbandry, and yield unto the hired person...a convenient proportion of wages” 3. Main differences from Statute of Laborers
General Employment Law - Timmons Fall 2003 Page 4 of 60 i. Employment is for at least one year. a. Obligation for both employers and employees. ii. Provides for just cause standard for terminating employment prior to the one-year period. iii. Sets up procedural mechanism for disputes. C. Blackstone‟s Rule 1. If the hiring be general without any particular time limited, the law construes it to be a hiring for a year. 2. This is clearly a default rule. i. Parties can change by agreement. 3. In agricultural society, the one year rule would be the most fair to both employees and employers. i. Servant can take advantage of master during harvest time. He could threaten to quit and demand higher wages. 4. Yearly contract rule is an attempt to avoid the cyclical problems. 5. A default rule is the rule that most parties would come up with if they thought about it. i. Saves transaction costs. 6. In practice, the Blackstone rule was modified to allow termination with reasonable notice. i. Key issue became what was reasonable notice. D. Employment at Will 1. Rule in every state except Montana. 2. General Rule - Either party can terminate the relationship at any time for a good reason, a bad reason, or no reason at all. 3. Wood‟s treatise indicated i. A general or indefinite hiring is prima facie a hiring at will, and if the servant seeks to make it out a yearly hiring, the burden is upon him to establish it by proof. 4. Wood explained that it is a default rule and parties can contract around it. 5. Wood viewed it as having employment at will versus contract of employment for a definite term. 6. Wood believed full performance is a condition precedent to getting paid. 7. All states have wage payment laws that require frequent payment of wages and payment for services rendered. E. Skagerberg v. Blandin Paper Co. 1. Promise of permanent employment was found by court to be indefinite and was thus, employment at will. 2. A promise of permanent employment according to this court is meaningless. 3. According to the court, employee must provide additional consideration above and beyond his services as an employee in order to obtain permanent employment. 4. Types of consideration that would have been possible i. Giving up legal right to sue
General Employment Law - Timmons Fall 2003 Page 5 of 60 ii. Selling to competitor 5. Court finds that none of the consideration offered by Skagerbuer is acceptable. i. Not accepting Purdue job. ii. Agreement to purchase the superintendent‟s house. iii. Giving up established business. iv. Paper company saved the commission it would have had to pay a consultant. 6. Detriments, if they are bargained for, are sufficient consideration. 7. Courts are not necessarily supposed to determine if consideration was adequate. 8. One performance can be consideration for multiple promises. i. Skagerberg‟s doing his job should be sufficient for wages and for permanent employment. 9. This case and many others are a perversion of contract law. 10. Mutuality of obligation has been required by courts in employment law. i. Courts would insist on symmetry between both employee and employer. 11. In the U.S., absent an agreement to the contrary, employment for an indefinite term is actually employment at will, terminable by either party for a good reason, a bad reason, or no reason at all. 12. Unless an exception appears, the default rule is used. 13. Employment at will rule is perceived as unfair to workers. 14. Most common defense of rule is that it is efficient. F. Employment at Will in Practice 1. Are there any reasons that an employer would NOT want to terminate an employee for a bad reason or no reason? i. Yes. a. Labor market. b. To keep them from going to a competitor. c. Employee morale. d. Might lead to a bad reputation in the labor market. ii. Even the most self-interested employer has reasons to keep employees. 2. Why would employer want employment at will as opposed to termination only for just cause? i. Employment at will is cheap to administer. ii. Employment at will might make employees work harder if they know they can be terminated at will. 3. Third-Party Effects i. When employer choices have effect on third parties. 4. Unfortunately, employment discharge determinations are often made by lower-level employees who may not take the overall good of the organization into account. 5. One way to get around employment at will is to bargain for a definite term.
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General Employment Law - Timmons Fall 2003 Page 6 of 60 6. Bargaining for job security tends to send some signals that you may be the type of employee who needs job security. i. Even trying to feel an employer out about security may send the wrong signals. 7. Might not want default rules to be sticky – default rules should be those that are easy to bargain around. 8. Is there a problem with running only top law firm that uses just cause termination? i. Might attract only those employees who think they are only marginal and therefore, need protection from at-will termination. Contract Erosions of Employment at Will A. Express Modification of At-Will Contracts, Written and Oral 1. Chiodo v. General Waterworks Corp. i. Facts a. Chiodo had contract for definite term – 10 years. b. Fired prior to end of term. ii. Even if there is a contract for a definite term, if the employer has just cause for terminating the employment, the employee does not have a case. iii. Law implies a right to fire for just cause, even if there is an express contract indicating a definite term. iv. Absolute protection from firing an employee would create a moral hazard – employee would have no incentive to work. v. Three Ways to Say the Same Thing a. Employers may terminate an employee for just cause even under a definite term contract. b. Employer is justified in terminating a contract for a definite term when an employee materially breaches the contract. c. Employee cannot be discharged under a contract for a definite term when they substantially perform the job. vi. Contract of Employment for Definite Term VERSUS Indefinite Term Contract with Just Cause Protection a. Why would you rather have Contract for Definite Term? 1). Courts generally indicate that under this type of contract, the just cause MUST be something that the employee did. i). Under Indefinite Term Contract with Just Cause Protection, just cause does not have to be something done by the employee. 2). Also, employee would have right to leave. 2. Erector Set Handout Hypo i. Willful disobedience of an order is insubordination and courts hold that this is just cause. a. Key to this is that the order has to be reasonable. 1). Would want to look at how orders are enforced against other employees.
General Employment Law - Timmons Fall 2003 Page 7 of 60 ii. Tek was not given work rules until after she went to work. Because Erector Set did not provide additional consideration for this contract, Tek might have a case for saying that there was no contract that dealt with work rules. iii. Employer must really believe, in good faith, that breach was material. iv. If employee can show that flexible hours are implied (trade usage, course of dealing) in contracts with like professionals, they might be able to demonstrate that the order is not reasonable. v. Unless otherwise agreed, an agent is subject to obey all reasonable orders with regard to the job. vi. If an employee is engaged for a certain position, any change in duties or significant change in rank, it may consist of a breach of employment contract. If employee refuses to do those duties, it is not insubordination. vii. For pre-engineered steel issue, would want to know whether architects have professional discretion to use available materials. viii. One of the problems with this is that it is a policy statement – not necessarily a direct order and ambiguous as to how much preengineered steel must be used. ix. Big question to know is why it is not being used. If she is not using the steel because of safety concerns, there might be a cause of action for wrongful discharge in violation of public policy. 3. Remedies When There is Breach of Contract for Definite Term i. When employer breaches, employee will generally recover expectation damages. Wages from time of breach through end of term. ii. Employee has duty to mitigate. a. If employee does find another job, wages are subtracted. b. Employer must prove that there was another job available that was not inferior and in-kind. iii. When employee breaches, employer will generally recover expectation damages – cost of replacing employee plus consequential damages. iv. Court will never order specific performance of a contract for personal services. v. Under some circumstances, courts will order negative enforcement of personal services contract. a. Employee may not work for competitor, etc. 4. Hetes v. Schefman & Miller Law Office i. Receptionist was arguably promised an indefinite contract with a just cause provision. ii. Acceptance of the job and coming to work constituted consideration for the offer. iii. Continuing to work would constitute proper consideration, even if the promises were made after she came to work.
General Employment Law - Timmons Fall 2003 Page 8 of 60 iv. This is much different treatment than Skagerberg case. v. Most courts now enforce promises of employment by finding consideration for promises in ongoing employment. vi. Rule a. Oral promises indicating that an employee will only be discharged for cause are enforceable, even though the employment is not for a definite term. vii. Employee‟s continuing to work can serve as consideration for the promise of job security. viii. What employer believed as to whether they were bound by promises is not determinative. ix. There is an additional requirement that the standard is what the employee reasonably believed the promises to entail. a. Did the employee reasonably believe that she had job security. b. Employer would argue that casual, vague statements should not qualify as being reasonably believed. x. Not all courts will allow this kind of case to go to the jury. xi. Some courts will indicate that casual, vague statements made by an employer does not create reasonable belief of job security. xii. Anytime plaintiff is basing claim of contract based exceptions to employment at will, only persons with authority to bind the employer would be able to make the statements. xiii. Authority to bind employer a. Express – through formal means (articles of incorporation, etc.) b. Implied – not through formal means c. Apparent – if it reasonably appeared to plaintiff that employee had authority to bind, the employer may be bound 5. Probationary Periods i. A few courts have held that having probationary periods for employees implies that after probationary period employees may have greater job security. ii. Most courts hold that probationary periods are consistent with an implied at-will relationship. 6. Ohanian v. Avis Rent A Car System i. Employer says that alleged contract for permanent employment could not be completed within one year, and thus it was not enforceable absent a writing. ii. If a condition terminating a contract MAY occur within one year of its making, then the contract is performable within a one-year period and does not fall within the Statute of Frauds. iii. Oral promise for a definite term of two years is unenforceable. a. Distinction is that a contract to work for more than one year is not PERFORMABLE.
General Employment Law - Timmons Fall 2003 Page 9 of 60 b. Just because performance might be excused (death) does not mean contract falls outside statute of frauds. iv. Courts distinguish between performance and breach. v. Question is only “could the contract have been performed within the one year?” vi. Court indicates that the contract was performable within one year. vii. The court indicates that the employer could have terminated employee for adverse business conditions and this would not be breach. viii. If an employer orally promises an employee “lifetime” employment, is this fully performable within one year? a. In New York, courts say that this violates SoF unless there is just-cause to dismiss the employee (breach by employee AND adverse business conditions). b. Most courts say that an oral promise for lifetime employment is enforceable. ix. Court in this case is hostile to statute of frauds. x. In this case, the person that allegedly made the promise of lifetime employment is someone who is now hostile to the employer. B. Reliance and Implied-in-Fact Contracts 1. Grouse v. Group Health Plan, Inc. i. Defendant‟s argument is that there was no promise of any job security. Simply a promise of employment at will. Thus, since we could have fired him one minute after starting work, that they should not be liable for terminating prior to even starting work. ii. Promissory Estoppel a. Promise that promisor should reasonably have expected to induce reliance on the promise; b. Promise had to, in fact, induce reasonable reliance; c. Injustice can only be avoided through the enforcement of the promise. iii. The court indicates that the proper damages would be limited to reliance damages. a. What the plaintiff gave up in reliance on the promise. iv. Expectation damages will not be given in these types of cases. v. Grouse is an example of using doctrine of promissory estoppel to allow employee to seek damages for the reasonable reliance on the promise. 2. Veno v. Meredith i. Veno argued that employer had said that they were both going to retire together. Also pointed to employer co-signing for house. ii. Court found the promises vague and broad. iii. Court indicates that it is not enough that employer hoped that employee would stay with the company. iv. Unlikely that THIS court would have accepted argument in Hetes case.
General Employment Law - Timmons Fall 2003 Page 10 of 60 v. Court indicates that a very clear statement to modify an employment at will contract is required. vi. Veno then argued that he gave additional consideration from services rendered and this would provide consideration necessary for modification to just cause employment. vii. Court also indicates that length of time that employee can be discharged should be commensurate with the hardship the employee has endured or the additional benefit he has bestowed. viii. When sufficient additional consideration is present, an employee should not be subject for discharge without just cause for a reasonable time. ix. Hypos a. 8 years after move = lose b. 1 week after move = win c. 1 week after move + clear statement of employment at will = lose x. Presumption of employment at-will may be overcome by implied contract – if surrounding circumstances of hiring indicated that employment was not to be employment at will. xi. Court believes that additional consideration creates an inference that parties intended more than at-will employment. xii. Court thinks inference that is created by additional consideration is just that employee will not be discharged without just cause for a reasonable time. xiii. Here the court found that enough time had passed for the employee to recoup the additional consideration. xiv. This court is using the additional consideration as an interpretation device to determine what the parties intended. If parties clearly state that intention was at-will employment, it will be hard for the court to infer otherwise. xv. If Employer paid the out-of-pocket costs of move, it might lead to an inference that employee did not reasonably believe that the offer was for anything other than employment at will. xvi. When there is a clear statement of employment at will, it is difficult to overcome this statement by showing that conduct indicated something else. xvii. This court is using idea of additional consideration in a manner much different from Skagerberg. a. Skagerberg court used additional consideration to be a shield for employer. b. Veno court uses additional consideration as a sword to help employee overcome employment at will presumption by using consideration as an interpretation device for what the parties intended. 3. Pugh’s v. See’s Candies Inc.
General Employment Law - Timmons Fall 2003 Page 11 of 60 i. Long-term, high-level employee was dismissed for what he perceived as an illegitimate reason. ii. The court indicates that the jury could find an implied in fact promise of continued employment. iii. Factors a. Personnel policies or practices of the employer; b. Employee‟s longevity of service; c. Actions or communications by the employer reflecting assurances of continued employment; and d. Practices of the industry in which the employee is engaged. iv. The idea of this court is that there is an implied in fact contract arising out of the parties‟ conduct. v. Courts seek to enforce the actual understanding of the parties to a contract. vi. Courts may infer a promise based on course or dealing, course of performance, and trade usage. vii. The court takes contract law and applies it to the employment context. viii. The factor of longevity of employment can be looked at skeptically. This factor would tend to serve as a disincentive for employers to keep long-term employees. If a long-term employee is more protected by implied in fact contract arising out of parties‟ conduct than a less senior employee, the employer may have an incentive to get rid of long-term employees. ix. Court subsequently played down the factor of longevity of service by indicating that it is insufficient in itself for finding an implied in fact contract. x. Court also spoke of factor of employer‟s acknowledged policies. Might serve as an incentive for employers to alter practices that indicate any implied promise of just-cause employment. xi. Some of the factors create disincentives for employers in many areas. xii. Implied contracts tend to arise over the term of employment, they typically do not arise at the start of employment. 4. Hypo i. Employer fires P and indicates that reason is that P threatens other employee. There is an agreement that there is an implied-in-fact contract that termination will be only for just-cause. ii. Questions jury must answer a. What happened? Were there threats? 1). Employer might phrase as “Did employer reasonably believe that there were threats?” i). Reasonable Good-Faith Standard. ii). Pugh court would use this standard. This would allow employer to terminate with a reasonable belief that there was just-cause.
General Employment Law - Timmons Fall 2003 Page 12 of 60 iii). Most courts follow the reasonable good-faith standard. 2). Employer might phrase as “Did the employer in good faith, believe that the employee made threats?” i). Subjective Good-Faith Standard. 3). If representing plaintiff, the question would be phrased as “Did plaintiff actually make the threats?” i). Objective Just-Cause Standard. ii). Under this standard, employer would have to be right in order to avoid liability. This could make it very hard for an employer to terminate using discretion. iii). Pugh court would not have used this standard because they are concerned with interfering with managerial discretion. b. Do the threats amount to just-cause for termination? C. Employment Manuals 1. Woolley v. Hoffman-La Roche, Inc. i. Holding was that, absent a clear and prominent disclaimer, an implied promise contained in an employment manual that an employee will be fired only for cause may be enforceable against an employer even when the employment is for an indefinite term and would otherwise be terminable at will. ii. Court indicates that it does not matter whether employer intended to be bound by the contract. a. Rationale for this is that “reasonable employee” would see the manual as a binding contract. b. Fairness requires interpreting the manual according to the expectations of the reasonable employee. iii. The court indicates several factors that would indicate that employees would expect the manual to be binding. a. Large employer b. Manual prepared voluntarily c. Large, comprehensive manual d. Professional in appearance iv. What about the fact that the employer could change the manual? Does the court think it makes a difference? a. Can an employee reasonably rely on something that can be changed by the employer? v. Usually, changeability DOES make a difference. If changeable, it tends to indicate that it is non-binding. a. Some courts do not follow this thinking. vi. Some courts have said that if manual was only given to supervisors it is not meant to be a binding promise to all employees.
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General Employment Law - Timmons Fall 2003 Page 13 of 60 a. This court says that employees would reasonably expect to be bound by provisions in manual. Court says that manual was an offer and the consideration for that offer is the employees‟ continued employment. a. This court holds, as a matter of law, that widely-distributed manuals constitutes an offer and employees‟ continued employment is the consideration. b. Promise for promise = bilateral contract c. Promise for action/non-action = unilateral contract 1). Reward is classic example of this. 2). According to Woolley court, it is reasonable to interpret promise of job security in employment manual as seeking continued employment of employees. 3). A manual is an offer that seeks the formation of a unilateral contract. d. This court indicates that it does not matter that an employee has not read the manual. 1). Since employers get benefit from some (but not all) employees having read the manual, it is appropriate to presume reliance upon the promises in the manual. Some courts indicate that the Woolley court takes contract interpretation too far. a. Offers typically cannot be accepted by a party who does not know of offer. Promissory estoppel might also apply but it is difficult to show reliance. Court basically says that employers can avoid this problem by adding disclaimer. This court feels that there is a public policy of holding employers to the promise of job security. Most courts have required that the employer have relied on the manual before promises can bind the employer. a. Woolley court presumed this reliance. Reasons for issuing employment manuals that are not legally binding. a. Guidance for supervisors for treatment of employees. b. More sinister reason is that employer can exploit unsophisticated employees by indicating job security and not really having the manual be enforceable. Disclaimers a. If there is a provision that indicates that no one except president or vice-president can make binding promises this helps to overcome apparent authority problem. b. Every disclaimer will not be effective in every court.
General Employment Law - Timmons Fall 2003 Page 14 of 60 c. In many jurisdictions, disclaimer must be conspicuous. d. Validity of disclaimer may hinge on what is said in the disclaimer and also what the other provisions of the manual said – if the provisions of the handbook indicate strongly that provisions are binding. e. Two courts have reached different conclusions as to the same disclaimer. f. Downside of prominent disclaimer is that it may erode employee confidence in fair treatment. 2. Demasse v. ITT Corp. i. Issue is whether job security policy can be modified unilaterally by the employer. ii. If employer changes manual to add a disclaimer that employment is at-will, it is definitely effective as to later-hired employees. iii. The problem is whether the disclaimer is effective to current employees. iv. This court holds that an employer cannot unilaterally change the manual. a. The rationale is through strict contract law. There must be offer, acceptance, and consideration in order for there to be an effective contract. b. The court indicates that an employee does not have to QUIT in order to maintain rights under the old manual. That would be the only way to indicate that the manual was not accepted. c. This court also indicates that separate consideration is necessary to effect a modification. 1). Continued employment is insufficient consideration for this type of change. v. Four years passed between time that new manual came out and provisions changed. vi. This court indicates that it would be illusory vii. Demasse majority indicates that there cannot be a modification to promise of job security as to existing employees unless there is additional consideration. viii. Most courts hold that employers can terminate job security promises after a reasonable time on reasonable notice. 3. U.R. Sacked Handout Hypothetical i. Representing Employer a. Would indicate that it was a philosophy, not a contract. b. Appears to be more geared toward what the supervisor should do and not what the employee is entitled to. 1). Specific steps for discharge. c. Mandatory language only applies to disciplinary causes listed in the policy. d. Language is more permissive than mandatory.
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General Employment Law - Timmons Fall 2003 Page 15 of 60 e. List of causes is not indicated as exhaustive. f. Who was the manual provided to? If given to supervisors only, it might not be seen as binding as to employee‟s rights. g. Manual never says employees will ONLY be discharged for good cause. h. Manual only provides procedural rights. ii. Representing Employee a. Would point to not following policy for discharge steps. b. Manual is full of mandatory language. 1). Termination must follow procedures listed. c. All types of terminations listed are for cause. 1). The list is non-exclusive. d. Policy appears to be written with an eye toward preventing unionization. Tort Erosions of Employment at Will A. Better to sue in tort than contract because 1. Emotional distress damages 2. Punitive damages B. Contract based exceptions are examples of employment security systems. C. Tort of Wrongful Discharge in Violation of Public Policy 1. Tort of wrongful discharge in violation of public policy is judge-created exception to common law of employment at will. i. Only provides reason-specific job security. 2. The major issue with tort is how to contain it and keep it from consuming the employment at will doctrine. 3. How do courts contain the tort is the main question. 4. Nees v. Hocks i. Court indicates that there are important interests in the community that necessitate ii. There is a public interest in allowing jury duty and allowing employer to terminate persons for serving on a jury violates public policy. iii. Oregon legislature impliedly stating that there are only certain reasons for not serving jury duty. iv. How do courts limit tort? a. Discharge must violate clear public policy. b. Must cite to some source of public policy. 1). Some courts have said that only statutes or Constitution are the only applicable sources of public policy. 2). Some courts consider a broader range of sources such as judicial decisions and professional codes of ethics. 3). Courts generally do not allow plaintiff‟s moral code to qualify as public policy.
General Employment Law - Timmons Fall 2003 Page 16 of 60 4). Some courts do not recognize tort if employee‟s discharge is simply inconsistent with public policy. 5). Courts that require statutes often have to strain to come up with public policy rationale. i). “Moon River” Case a). Plaintiff could claim that requirement to violate law violated public policy. b). Plaintiff could claim the right to bodily privacy. c). Court allowed that the right to bodily privacy was a social right and violation could serve as violation of public policy. d). Employer would argue that statute is not violated because viewer would not necessarily be “offended or alarmed” by the conduct. e). Could argue that the public policy is to protect the interests of the UNWILLING viewer. c. Courts are more willing to find violation when there are obvious third-party effects. 1). When duty benefits the public at large. d. Does this discharge fall into one of the four accepted categories below? 1). Refusing to commit unlawful acts 2). Exercising a statutory right 3). Fulfilling a public obligation 4). Whistleblowing e. Does not recognizing tort increase jeopardy of employee not following public policy? 5. Tort of Wrongful Discharge in Violation of Public Policy Under Express At-Will Relationship i. Classic justification for overriding freedom of contract arises when the contract impacts third parties. ii. There is an public or third-party interest in having a diverse jury pool or preserving human life. iii. Even if there is an at-will agreement, the law should not give effect to contract if it adversely affects third parties. iv. One way courts have limited tort is when there are obvious thirdparty effects. a. Even where a statutory touchstone has been shown, there still must be an inquiry if there are effects on the public or third parties.
General Employment Law - Timmons Fall 2003 Page 17 of 60 6. Four Categories i. Refusal to violate the law. ii. Exercising a statutory right or Exercising a Public Right a. Right of self-defense 1). Bank manager fired for defending himself when he was attacked by a subordinate. b. Right to freedom of speech 1). Free Speech under U.S. Constitution only restricts governmental prohibitions on free speech. 2). Could argue that this speech would impact public interest by limiting information about problems with the company. iii. Fulfilling a public obligation. iv. Whistleblowing 7. Courts try to strike a balance between employer‟s interest in running their business and being able to predict liability WITH employee‟s rights in job security WITH public‟s interest. 8. Problems p. 150-151 i. An employee scheduled to work at 3PM was in a car accident at 1PM and taken to the hospital where he was not released until 5PM. He was fired. a. Does not appear to be any source for the public policy. b. Also, does not seem to have third-party effects. c. Finally, it is difficult to fit this one into a category. ii. An employee was brutally beaten and raped off-work by her estranged husband. To avoid dealing with the situation, the employer fired her. a. Public policy against spousal abuse. b. Public policy in favor of protecting victims of spousal abuse. c. Source could be statutes that helped or protected victims of crime. d. Court said this case was more about the private interests of employee versus broad public interests. e. Court also had trouble placing the discharge within one of the four categories. iii. Facts changed to indicate that employee was fired for consulting an attorney about employment issue. a. Would point to public policy of people being able to speak to an attorney with regard to legal rights. b. Some jurisdictions have constitutional provisions. c. There may even be codes of professional responsibility that could be used as a source. d. Third-party effects on persons in same position as employee would be affected are NOT enough. Must be
General Employment Law - Timmons Fall 2003 Page 18 of 60 outside of individual employer and employee and those similarly situated. 1). Ask whether, if parties contracted for the provision, it would be upheld. e. Courts facing this type of case have reached different results. f. Employee in this scenario could not say that actions were required by, but only consistent with, public policy. 1). If all employee can do is say that actions were consistent with or encouraged by public policy, some courts have not allowed claim. 2). This view requires that refusing a command to violate public policy is the only way to bring claim. 3). Other courts have taken a broader view that allows claim if public policy encourages action or is consistent with actions of discharged employees. 9. Courts have the most difficulty where the employee is exercising a statutory right. i. When statute gives employee right to do something clearly related to employment, courts are more sympathetic to claim. 10. In arguing that a discharge was in violation of public policy, you must make clear that there are third-party effects on the public. 11. Balla v. Gambro, Inc. i. Clear public policy is protection of public from unsafe medical products. ii. Source is FDA regulations that prohibit sale of unsafe products. iii. Category in this case is whistleblowing. iv. Third-party effects would be any person who would use unsafe medical products. v. The Court held that there was no claim. a. Rationale is that public policy tort is not needed to protect the public interest because attorney had pre-existing duty to report. vi. Some courts in some cases look for “jeopardy” a. Will public policy really be jeopardized if the tort is not recognized. vii. In this case, Illinois rules adequately protect the public from unsafe products without invoking tort of wrongful discharge in violation of public policy. viii. To encourage employees to look at the greater social interest, courts created the tort of wrongful discharge in violation of public policy. ix. Illinois Supreme Court indicates that plaintiff was not faced with choice to keep his job or to report violation.
General Employment Law - Timmons Fall 2003 Page 19 of 60 a. In-house counsel had no choice but to report the violation under the rules of professional conduct. x. California case came to the opposite conclusion. xi. If professional rules only indicate that attorney has choice as to report, in order to encourage the protection of others from unsafe products, courts will allow tort in order to encourage. 12. Hypo i. Plaintiff is suing private employer in Maryland for wrongful discharge in violation of public policy for firing her because of her gender. ii. Source is Maryland Fair Employment Practices Law iii. Question is why would employee sue under wrongful discharge in violation of public policy instead of actual statute? a. Damages may be more favorable for tort instead of statute. 1). Damages may even be limited by statute. b. Difference is statute of limitations. c. Difference in standards. d. Statute may not even create a private cause of action. 1). Statute may indicate conduct is criminal but not provide a remedy for the employee who was injured. e. Most state employment statutes limit their coverage to employers with a certain number of employees, while common-law tort does not require a specific number of employees. 1). Employer would then have an argument that source of public policy is not applicable and that recognizing tort would interfere with intent of legislature to limit the cause of action to cases where the employer has a certain number of employees. i). Courts have reached varying conclusions as to this argument. iv. In jurisdictions that have statutes that set out remedy, this can be harmful to being able to bring common-law cause of action for wrongful discharge in violation of public policy. v. How would you argue that court should not recognize public policy tort? a. Public policy AND remedy are embodied in the statute and thus, there should not be a tort remedy. 1). Plaintiff would respond that the legislature could indicate that statutory remedy is exclusive and since it is not, common-law tort should still be valid. 2). Many states have held that where source is a statute that contains a remedy for its violation,
General Employment Law - Timmons Fall 2003 Page 20 of 60 even if the remedy is limited, the plaintiff cannot state a public policy tort claim. b. Another argument is that there is less of a problem with “jeopardy”. Since the statute provides a remedy, there is an incentive for the employer and employee to abide by the public policy. 13. Adler v. American Standard Corp. i. Court says that Adler did not point to a violation of a clear public policy. ii. Adler had claimed that bribery and falsification of corporate records was going on. a. Adler‟s source of public policy was criminal code and just the general feeling that incidents were violative of public policy. iii. Court seems to insist that if employee is to go forward under whistleblower theory, he must show actual violations. iv. On remand, Adler won but the Court of Appeals reversed. a. Court indicated that Adler was an internal whistleblower. b. The court holds that internal whistleblower is not protected by tort of wrongful discharge in violation of public policy. v. Some courts have stayed with the view that internal whistleblowers are not protected. a. Rationale is that there must be third-party effects in order for there to be a violation of public policy. b. Even if prices charged by the company could impact public consumers, courts likely do not find the tort. vi. Courts are more likely to find for internal whistleblowing when there are obvious third-party effects (impact on public health or safety). 14. Johnston v. Del Mar Distributing Co. i. If Johnston had called ATF and said her company was shipping a gun illegally. Why would court still have not found that she had cause of action? a. Texas statute only recognized whistleblowing by public employees, not private employees. ii. Previous case had held that the narrow exception to EAW covers only the discharge of the employee for the sole reason that the employee refused to perform an illegal act. iii. This court extends this exception to protect employees who make a reasonable, good faith inquiry into an illegal act because to NOT extend the exception would force an employee either subject herself to discharge or remain ignorant and face possible criminal sanctions if the activity turned out to be illegal. iv. Different courts take different view as to whether employee who reasonably and in good faith believed that activity was illegal is protected. a. Most courts allow this to state a cause.
General Employment Law - Timmons Fall 2003 Page 21 of 60 b. Some courts only protect if the employee is actually correct on facts and law. v. Some states have enacted statutes spelling out when whistleblowers are protected from discharge. a. NY has statute that protects all whistleblowers but only if employee is correct as to facts and law. vi. Different states take different views on whether internal and external whistleblowers are protected. vii. Sarbanes-Oxley Act only covers whistleblowing employees in publicly traded company and must be complaining of only certain types of conduct. Covers both internal and external whistleblowing. Allows a reasonable and good faith belief that illegal activity is occurring. D. Intentional Infliction of Emotional Distress 1. Agis v. Howard Johnson Co. i. Part of what is going on here is the public and arbitrary manner in which the firing was done. ii. Just because employer has the right to fire employee for good reason, bad reason, or no reason at all, does not allow them to fire for sport. iii. IIED is frequently added into employment complaints; usually, they are not the primary claim. iv. Courts are usually very resistant to claims arising out of the fact of discharge. v. Courts are more receptive to these claims when they are based on the manner of the discharge. vi. Court lays out elements of IIED claim a. Intent 1). Court indicates that intent can be satisfied by intent to cause emotional distress or if defendant knew of should have known that emotional distress was likely to occur from conduct. i). Most courts do not allow intent to be satisfied by negligence. Must be satisfied by intent or recklessness (deliberate disregard of a high degree of probability that emotional distress will follow). 2). Cases generally do not turn on intent element. b. Extreme and outrageous conduct 1). Usually, this is where the cases turn on. 2). Courts usually hold that defendant‟s conduct was not extreme and outrageous as a matter of law. The claim never goes to the jury. 3). Conduct is more likely to be extreme and outrageous if defendant knew of special sensitivities and still performed conduct.
General Employment Law - Timmons Fall 2003 Page 22 of 60 c. Conduct causes the plaintiff‟s distress d. Plaintiff suffers severe emotional distress vii. In jury instructions, judge would want to limit damages to the compensation for the emotional distress suffered as a direct result of the conduct. 2. Bodewig v. K-Mart, Inc. i. Lesson of this case is that the customer is not always right. ii. Court reasons that where there is a special relationship between plaintiff and defendant, IIED claim is appropriate because intent element is satisfied by special relationship. iii. Most courts do not use this reasoning. E. Misrepresentation 1. Elements i. Misrepresentation ii. Defendant has knowledge of falsity (scienter) iii. Intent to induce reliance iv. Plaintiff must actually and reasonably rely on the misrepresentation v. Resulting damages in form of pecuniary loss 2. Lazar v. Superior Court i. Plaintiff was able to challenge discharge on idea of misrepresentation. 3. Difficult to establish knowledge of falsity and reasonable reliance. F. Tort of Intentional Interference with Employment Relationship 1. Elements i. Existing or prospective business relationship a. EAW constitutes an existing or prospective business relationship. b. Not necessary to have contract of employment for a definite term. ii. Defendant‟s knowledge of that relationship iii. Intentional interference by defendant that causes a termination of the relationship iv. Absence of privilege or justification on part of the defendant v. Actual damages resulting from defendant‟s conduct 2. Success or failure will generally turn on the absence of privilege or justification on part of the defendant. 3. Courts are all over the board as to if a plaintiff‟s supervisor or co-worker qualifies as a third-party interference. i. In Georgia, this claim is allowed. ii. Courts in Georgia have said that employees who have power to discharge employee on their own do NOT qualify as third parties. iii. Co-worker would be considered a third-party if they interfered. 4. Most interesting element is privilege or adequate justification. i. Defendant will be privileged or justified in interfering in the employment relationship if defendant acted reasonably in pursuit of
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General Employment Law - Timmons Fall 2003 Page 23 of 60 interests equally or more important than the plaintiff‟s interest in his or her job. 5. Kumpf v. Steinhaus i. Kumpf had argued that jury should have been instructed that if the predominant reason for actions of defendant. ii. Court indicates that if there was interference with the relationship iii. Most courts have not followed this greed is always privileged iv. Most courts have found that actions are not privileged if interfering employee is motivated by her own self-interests, malice, or ill-will. Good Faith Limitations on Employment at Will A. Fortune v. National Cash Register Co. 1. Contract indicated that Fortune was terminable at will. 2. Court indicates that under express terms of contract, employer did not breach. 3. Jury found employer liable under doctrine of good faith and fair dealing. 4. Term is implied in every contract. 5. Court is NOT saying that violation of covenant of good faith and fair dealing results from every termination without just cause. 6. Termination to avoid paying commissions that employee has earned IS a breach of covenant of good faith and fair dealing. 7. When one party deprives the other of the benefit of their bargain, this is bad faith. 8. Court is looking at good faith as a question of opportunistic timing. i. Cannot fire employee right before pension vests. ii. Firing an employee for using sick pay that she has earned deprives the employee of the benefit of their bargain. 9. Is it inconsistent with doctrine of employment at will to recognize covenant of good faith and fair dealing? i. Answer depends on how broadly the covenant of good faith and fair dealing is viewed. ii. If we define good faith more narrowly, it is not inconsistent. a. Courts that allow the covenant construe it narrowly. iii. If we define good faith more broadly, it is highly inconsistent. iv. Most courts do not follow covenant of good faith and fair dealing in employment arena. v. This is probably the least popular exception to EAW. B. Murphy v. American Home Products 1. Employee fired at 59 y/o after he threatened to reveal illegal accounting practices and also he did not engage in the alleged improprieties. 2. Several causes of action i. Tort of wrongful discharge in violation of public policy. a. Court believes that this is province of the legislature. b. Public policy would have been whistleblowing. c. Would have had trouble with third-party effects. ii. IIED
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General Employment Law - Timmons Fall 2003 Page 24 of 60 a. Claim fails because of lack of extreme and outrageous conduct. iii. Prima facie tort iv. Breach of Employment Contract a. Plaintiff tries to indicate by saying that he had a duty to disclose the illegal practices, the employer had a duty to deal in good faith. b. One reason that is inconsistent with good faith is firing an employee for doing what he was told or doing his job well. 3. Court indicates that there are some reasons that are so inconsistent with good faith and fair dealing that they constitute bad faith. C. Foley v. Interactive Data Corp. 1. This case is about damages. 2. Breach of implied covenant of good faith and fair dealing gives rise to only contract damages, not tort damages as has been done in insurance cases. 3. Court indicates that this is a contract claim. 4. Objective of contract is to enforce agreement between parties and objective of tort is to vindicate social wrongs. 5. Do not want to limit employers ability to get rid of employees by creating a fear of tort damages. 6. Generally, breach of covenant of good faith and fair dealing results in contract damages, except in the context of insurance. 7. Court indicates that there is a special relationship between insurer and insured that is not present with employee and employer. 8. Insurer and Insured are at odds financially, thus courts will try to compensate with tort damages. 9. Employee and Employer are less at odds. 10. Wrongful discharge in violation of public policy argument fails because of a lack of a public policy and lack of third-party effects. 11. Could argue that part of employee‟s job was to report things that could impact the company and should not be able to fire employee for doing his job. Georgia Employment Law A. OCGA § 34-7-1 1. Determination of term of employment; manner of termination of indefinite hiring. i. If a contract of employment provides that wages are payable at a stipulated period, the presumption shall arise that the hiring is for such period, provided that, if anything else in the contract indicates that the hiring was for a longer term, the mere reservation of wages for a lesser time will not control. An indefinite hiring may be terminated at will by either party. B. Barker v. CTC Sales Corp. 1. Appellant alleged
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General Employment Law - Timmons Fall 2003 Page 25 of 60 i. Promise of employment was not for an indefinite term because “until insolvency” is a definite term. 2. Court indicates that a promise of employment for an indefinite term is terminable at will. 3. Appellant also argues Detrimental Reliance/Promissory Estoppel i. Court indicates that DR/PE is not applicable when there is a promise of employment for a definite term. 4. How would you argue that there was a misrepresentation? i. Knowledge of falsity would be difficult to prove. ii. Reliance on the promise is pretty apparent. 5. Georgia does not recognize misrepresentation. C. Georgia Ports Authority v. Rogers 1. Employee Manual Case i. Manual indicated that after probationary period, employee could only be terminated under certain conditions. ii. Court indicated that manual as a whole did not indicate that employment was only terminable for cause. iii. If employment is for an indefinite period, it is terminable at will. iv. Only if there is employment for a definite period would court have found that it could not be terminated for anything except cause. v. It is the accepted law in Georgia that an additional compensation plan offered by an employer and impliedly accepted by an employee by remaining in employment constitutes a contract between them. D. Garmon v. Health Group of Atlanta 1. Two Causes of Action i. Wrongful discharge ii. Tortious interference by supervisor 2. Wrongful discharge i. Claims that hospital‟s policies regarding termination were enforceable and failure to comply with those policies resulted in wrongful discharge. ii. Court says employee is at-will and thus, can be terminated at any time. 3. Tortious Interference i. Supervisor in this case had authority to fire and thus was not tortious interference by third-party. E. Only thing in Georgia, if you are not a public employee, unless there is a contract of employment for a definite term, there is no job security. Three Approaches to EAW for Future A. Sticking with general EAW but using exceptions such as we have discussed. B. Stick with general EAW and use NO exceptions. C. Montana Approach 1. Mandates good cause for employment termination 2. EAW is not general rule in Montana 3. General rule is that there must be good cause for termination.
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General Employment Law - Timmons Fall 2003 Page 26 of 60 4. Legislation was actually a compromise because it limits damages that can be obtained – typically, will not get tort damages. D. International Approaches 1. Most countries are not EAW 2. Georgia is like no other U.S. state because there are no exceptions to EAW. Employee Free Speech and Political Protections A. Federal Constitution only restricts governmental actions, except with regard to the 13th Amendment regarding slavery. B. Public Employees 1. Public employee speech was not always viewed as having 1 st Amendment protections. i. Courts drew a distinction between rights and privileges. 2. Pickering v. Board of Education i. Supreme Court clearly rejected rights vs. privilege distinction. ii. This is an example of Unconstitutional Conditions doctrine. iii. Cannot condition employment on employee giving up all of speech rights. iv. Question is how much State can restrict free speech of employees without violating 1st Amendment. 3. Connick v. Myers i. Myers was discharged for refusing to take a transfer and for distributing a survey. ii. Court indicates that only one of Myer‟s questions had a public concern – the question regarding whether employees feel pressure to work on political campaigns. iii. Court uses balancing test that balances employee‟s right of free speech versus the employer‟s need for efficiency. iv. The threshold question in any public employee free speech case is whether the speech is of public concern. a. If there is no public concern, the analysis is over and there is no free speech issue. b. If there is a public concern, the balancing of the employee‟s right to free speech on matters of public concern versus the right of the State to promote efficiency of its operations. v. Public Concern a. Look at 1). Content 2). Form 3). Context vi. In this case, the survey was an employee grievance of private concern. vii. In terms of State‟s interest, the court indicates that the speech might impact work of employee and co-workers and also impact work relationships.
General Employment Law - Timmons Fall 2003 Page 27 of 60 viii. The important thing to remember is that this is a balancing test. If the public concern was higher, the State‟s interest must be higher. ix. What if Myers had not been fired for questionnaire, but for giving quote to newspaper that indicated that employees in DA‟s office lacked confidence in superiors and suffered from low morale? a. Would increase the public concern. 1). Reason is that public would have concern in the efficiency of the DA‟s office in prosecuting offenders, etc. b. Might however increase the interest of the employer by impacting working relationships. x. Balancing test tends to be pro-employer. xi. Time/Place/Manner is important in terms of the speech. 4. Rankin v. McPherson i. Plaintiff was fired for indicating that she hoped that presidential assassination attempt had been successful. ii. Court indicates firing violated employee‟s 1 st Amendment rights. iii. Threshold Question of Public Concern a. Court indicates it is a matter of public concern because it is criticizing presidential policies. 1). Whether the speech is inappropriate is irrelevant. iv. Court determines that interest of employee outweighs State‟s interest in protecting efficiency of public services. a. Reasons 1). Private setting. 2). No evidence of interference. 3). No damage of discrediting office. 4). Court also indicates that the employee was a relatively low level employee with no policymaking authority or public contact. v. One thing to take away from this case is that if speech is of a public concern it will require more in terms of employer‟s interest. a. Core value of right to free speech is that it must be of public concern. vi. Insults or slurs do not necessarily rise to level of public concern when the statement is not an attempt to start a dialogue. a. Hitler and bank teller example. vii. Most courts have interpreted Supreme Court decisions on public employees‟ free speech as requiring public concern, no matter when/where/how statement is made. 5. Shahar v. Bowers i. First would have to fire because of her speech. ii. Would show that she was fired because she told people she was married. iii. Would indicate that issue of same sex marriage is a matter of public concern.
General Employment Law - Timmons Fall 2003 Page 28 of 60 iv. Attorney General would argue that they had an interest in upholding Georgia‟s laws against same-sex marriage. 6. One of the problems with these arguments regarding free speech is that the harder one argues that the matter if of public concern, the higher the employer‟s interest. 7. Rutan v. Republican Party i. Holding in case was that certain employment decisions based on party affiliation violate the First Amendment. ii. Previous Cases a. Elrod v. Burns: Democrat Sheriff fired employees who were hired under Republican Sheriff. Employees argued that patronage dismissals violated 1 st amendment. Supreme Court rejected the interest of the need to insure an efficient and effective government – court said there are other means for sheriff to do this. Sheriff also pointed to need for employees who are politically loyal so that new sheriff‟s policies can be carried out. Court said that patronage dismissals are ok if employee being dismissed holds a policymaking or confidential position. b. Branti v. Finkel: Plaintiffs were assistant public defenders and were fired when a new public defender of a different party was elected. Court did not want to allow patronage dismissals of assistant public defenders, so they changed the test. New test: Patronage dismissal is ok if party affiliation is an appropriate requirement for the performance of employee‟s particular job. It was not appropriate here. iii. Under most cases, patronage dismissal is appropriate if it is a policymaking or confidential requirement. iv. This case is different from other cases because other cases were about the previous dismissals of employees. v. Some argued that holdings of Elrod and Branti should be limited to patronage dismissals, not hiring, promotion, etc. vi. Court rejected this; said same rule applies whether talking about hiring or dismissals. 8. We have talked about claims based on 1 st Amendment: i. Speech ii. Political affiliation – this is a tougher standard for the state / employer to win. 9. Court is tougher on government when government tries to discharge employee based on political affiliation rather than based on employee‟s speech. 10. Tests of Branti and Elrod is a bright line standard, but it creates a very narrow category of cases where firings are appropriate. 11. In the speech cases, there is a balancing test.
General Employment Law - Timmons Fall 2003 Page 29 of 60 12. It is thought that employee‟s interest is higher in political affiliation cases than speech cases because we‟re talking about the core of what the 1st amendment wants to protect in political affiliation cases. i. Courts don‟t like these cases because it does impede the functioning of government. ii. Also, speech can cause disruption; it seems less likely that an employee‟s mere belief for most cases that it would disrupt employee‟s ability to do the job. 13. Courts have said that DAs can hire ADAs based on party affiliations because prosecutors make policy decisions and were elected based on their policies; so this is ok for ADAs because it is a policymaking position, but not public defenders (public defenders have more job security in this sense than ADAs do). 14. 1st thing to decide in 1st Amend cases are whether this is a speech case or a political affiliation case. i. Government will argue that it is a speech case. ii. Public employees are usually. going to want to argue that the case is a political affiliation case rather than a speech case, because government is more limited in political affiliation cases. C. Politics and Speech Rights in Private Work Cases 1. Novosel v. Nationwide i. Plaintiff was fired because he refused to participate in a lobbying effort; he worked for an insurance company that had an interest in the lobbying effort for passage of a law. ii. Plaintiff is not a public employee and is at will. iii. He needs to argue that his discharge falls into one of the exceptions for discharge of employment at will; he argues violation of tort of wrongful discharge in violation of public policy. iv. Plaintiff says the clear public policy is the public policy favoring freedom of public expression. v. His source for the public policy is the federal and state Constitutions. vi. Employer would argue that 1 st Amendment only applies to government inference with political expression, not private interference. vii. Would there be 3rd parties effects if this discharge was allowed? a. Yes – if employers with a lot of employees were allowed to terminate people for refusing to lobby legislature, this would really distort the legislative process. viii. It does not seem like employers could get away with this, but there is a state action requirement to the 1 st Amendment – can‟t get around this. ix. 3rd Circuit does not pay any respect to the state action requirement of 1st Amendment. a. Note: almost all state constitutions have a state action requirement as well.
General Employment Law - Timmons Fall 2003 Page 30 of 60 x. The 3rd Circuit cites 1st Amendment as source of public policy, but also offers other sources of public policy xi. “The definition of a clearly mandated public policy as one that strikes at the heart of a citizen‟s social right, duties and responsibilities appears to provide a workable standard for the tort action . . .” The court‟s reasoning is not convincing. xii. After Novosel, the Pennsylvania courts said that the 3 rd circuit had gotten it all wrong; other state courts have not followed Novosel, either. a. They have said that if the only source for public policy is the constitution, a state action must apply. b. Most courts have said that Constitution cannot be source of public policy tort for private employees. 2. Timekeeping Systems, Inc. i. Good representative case for law in this area. ii. NLRA does protect employees in non-union employees. iii. Protection comes from §7 and §8 of Act. a. §7 1). Employees have right to self-organization, etc. 2). Employees have right to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection. b. §8(a)(1) 1). It is an unfair labor practice for an employer to interfere with an employee‟s in the exercise of the rights guaranteed in §7 of the Act. c. It is an unfair labor practice for an employer to interfere with employee‟s rights to engage in concerted activities for purpose of mutual aid or protection. d. Employees file charges with NLRB. There is no private cause of action. e. NLRB investigates and files a complaint if it finds the claim has merit. f. Remedies include reinstatement and backpay, as well as penalties, fines, etc. g. An employee must satisfy three requirements 1). Action must be concerted. i). Must be engaged in with or on the authority of other employees and not solely on behalf of employee himself. ii). NLRA is intended to foster method of collective bargaining, so the activity that Act seeks to protect is pre-organizational, as well as organizational. iii). Do not have to have conscious goal of actually evolving to collective bargaining.
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General Employment Law - Timmons Fall 2003 Page 31 of 60 2). Purpose is for mutual aid or protection. i). Protects employees who seek to improve terms and conditions of employment or who otherwise seek to improve their lot as employees. ii). Terms and conditions of employment is very broad. iii). Question is “what was employee‟s goal?” 3). Employee must use permissible means. i). Such speech is protected unless it is found to be so violent or of such serious character as t render the employee unfit for further service. Employee Privacy Rights On and Off the Job A. On-the-Job Privacy Claims 1. O’Conner v. Ortega i. This is a 4th Amendment case. ii. Search of doctor‟s office to secure state property and to gather evidence for investigation. iii. Doctor sued, alleging violation iv. Threshold question is whether plaintiff-employee had a reasonable expectation of privacy. a. Activities carried out in public have no reasonable expectation of privacy. v. In this case, the office was private and did not include stuff for common access. vi. The court also noted that hospital did not have policy discouraging the bringing in of personal, private effects. vii. Once it is determined that there is a reasonable expectation of privacy, the second question is whether the search was reasonable. a. General 4th Amendment rule is that search of private property without consent is unreasonable absent a search warrant and probable cause. b. Court indicates that warrant requirement is unduly burdensome and disruptive. c. Court indicates that probable cause requirement is also not required. 1). Where there is an investigation search, probable cause is unworkable. d. Court holds that public employer searches for purpose of must be reasonable under the circumstances. 1). Must be reasonable in its inception. i). There must be reasonable grounds to believe that the search will turn up evidence of misconduct or that search is necessary for a non-investigatory work-related purpose such as to retrieve a needed file.
General Employment Law - Timmons Fall 2003 Page 32 of 60 2). Must be reasonable in its scope. i). A search will be reasonable in its scope when the measures adopted are reasonably related to the objectives and where the means of the search are not excessively intrusive in light of nature of misconduct. e. Courts will frequently balance government‟s interest in conducting the search against plaintiff-employee‟s expectation of privacy. 2. Advances in technology have led to increased claims of 4 th Amendment violations. 3. K-Mart Corp. v. Trotti i. Private employer. ii. Tort of invasion of privacy or intrusion upon seclusion. a. The intentional intrusion upon the solitude or seclusion of another that is highly offensive to the reasonable person. iii. Court indicates that if employee furnishes their own lock, there is an expectation that the locker and its contents would be free from intrusion and interference. iv. Some courts have held that intrusion must be into a matter or an area in which the employee had expectations of privacy. v. If there is warning, employee might not be able to claim that they had an expectation of privacy. vi. The invasion is what is actionable and can be challenged, not the disciplinary action taken by the employer. a. Plaintiffs who are disciplined after invasion of privacy, they argue that discipline after an attempted or successful invasion of their privacy violates public policy. 1). Some courts have said that privacy right is not a public policy, it is simply a personal right. In other words, there will have to be third-party effects. 4. Other means for employees to assert privacy claims i. Wiretapping Statute a. Broadly prohibits most electronic surveillance by private persons, including the interception of telephone calls. 1). Exception is listening on an extension phone in the ordinary course of business. i). In the employment context, this is resolved by determining if ER had legitimate business interest in the conversation. ii. Electronic Communications Privacy Act a. Bans the interception or disclosure of electronic communications. 1). Exception is the interception in ordinary course of business.
General Employment Law - Timmons Fall 2003 Page 33 of 60 i). Must be a legitimate business interest B. Off-Work Privacy Claims 1. Constitutional Limits on Public Employers Control over Off-Work Conduct by Employees i. Constitutional rights at issue come from Due Process Clause of 5 th and 14th Amendments a. Provides that federal and state governments shall not deprive individuals of life, liberty, or property without due process of law. b. The Supreme Court has indicated that Due Process Clause provides substantive rights, as well. c. Substantive prevents government from unconstitutionally invading individuals right. d. Analysis 1). 1. Is the right fundamental? 2). 2. Did the government significantly interfere with or unduly burden that interest? 3). 3. If both are yes, the interference is unconstitutional unless the government can pass the compelling interest test. 4). 4. Compelling Interest test requires governments to have a compelling interest and narrowly tailored. 5). If answer to 1 or 2 above, government need only satisfy rational basis test 6). Rational basis test is much more deferential and requires the court to uphold unless it was aimed at legitimate government interest and as long as the means were rationally related to the interest. e. Abortion is fundamental liberty interest. f. Intensely personal decisions are more likely to be found to be fundamental. ii. Attorney representing professor who has affair with student a. Could also argue that there were contractual preventions b. Could also argue if there were statutes that provided for rights for employees. c. Could also look at how individuals are treated – is there disparate treatment between sexes, etc. iii. Attorney representing a school district who fire EE with facial hair. a. Could not argue that it was a fundamental right. b. Could argue rational basis but it is difficult. iv. Attorney representing a school district who had no nepotism policy and transferred a teacher. a. Implicates a fundamental interest. b. However, does not significantly interfere with or unduly burden interest.
General Employment Law - Timmons Fall 2003 Page 34 of 60 c. Rationale is that teacher could stay married and teach somewhere else. d. Would then have to determine if it passes rational basis test. e. Government interest would be to prevent friction and violence in workplace, prevention of pre-judging students, etc. 2. Private Employers and Off-Work Privacy Claims i. Brunner v. Al Attar a. EE alleges wrongful discharge in violation of public policy. b. Texas court said there were only two exceptions that qualified for this treatment. 1). Termination for refusal for perform illegal acts. 2). Termination to avoid payment of pension benefits. c. How would argue that this falls into category for WDIVPP. 1). Would argue that there was a public policy in favor of volunteering or prevention of AIDS. d. Could argue that there are third-party effects on persons who benefit from the volunteer work. ii. Rulon-Miller case a. EE‟s may have contractual basis, express or implied, to prevent an employer from discharging for off-work conduct. iii. Depending on jurisdiction, EE may be able to seek relief based on statute that protects EE from discharge due to off-work conduct. C. Drug Testing 1. Constitutional Challenges to Drug Testing i. National Treasury Employees Union v. Von Raab a. Customs Service wanted to require urinalysis test for drugs for certain people. b. Employees covered 1). Direct involvement in drug interdiction 2). Carrying a firearm 3). Handling classified material c. Court indicates that the first two categories are OK for drug testing. d. Rationale is that even though employees have a right to be free from unreasonable search and seizure. e. Court applies balancing test 1). Where fourth amendment intrusion serves special governmental needs beyond ordinary law enforcement, there is a balancing test 2). Balance individual‟s privacy expectation against government‟s interest.
General Employment Law - Timmons Fall 2003 Page 35 of 60 3). Determine whether it is impractical to require a warrant or some individualized suspicion that this employee was using drugs. f. Union representing employees alleged it tested employees when there was no reason to believe they were using drugs. g. Court concludes government‟s interest was very high. 1). Customs officers could be bribed, need unimpeachable integrity. 2). Court indicates that officers must be anti-drugs. 3). Court indicates that officers who use guns must be anti-drugs – might impair judgment if on drugs. h. Court indicates that employees have a reduced expectation of privacy because of the nature of their jobs. i. Court indicates that Service might have too broadly defined the persons who handle classified material and who should be subjected to drug testing. j. Skinner case upheld the drug and alcohol testing of railroad employees after an accident. 1). Skinner was easier because there was evidence of drug and alcohol use in railroad industry. 2. Firefighter drug testing hypo i. Many cases have held this to be reasonable ii. Government interest in protection of public. iii. Lowered employee interest and could reasonably expect to be tested for drugs. 3. Private Employees i. Not much legal protection. a. Some state statutes b. Common law tort of invasion of privacy/intrusion upon seclusion. ii. Luedtke v. Nabors Alaska Drilling, Inc. a. Two brothers sue private employer over discharge due to refusal to take drug tests. b. Court indicates that if circumstances showed lack of notice or unreasonableness of the testing, there might be a cause of action for invasion of privacy. c. Court also indicates that there is a public policy in favor of employee‟s right to withhold certain private information from employer and a balancing test is used to determine if there was an intrusion. 1). In this case, the safety factor tipped the scale in favor of drug testing. d. With regard to intrusion upon seclusion, the court indicates that since brothers refused to take the test, there was no intrusion.
General Employment Law - Timmons Fall 2003 Page 36 of 60 e. As far as the test one brother took, it was given voluntarily and thus there was no intrusion upon seclusion. iii. Most courts have rejected a public policy tort claim in this context. D. Polygraphs and Honesty Testing 1. Employee Polygraph Protection Act i. Public sector employees can be tested a. Rationale is that there are other protections for public employees. ii. Allows even private employers to use testing to investigate into specific instances of economic loss or injury to employer‟s business but not to use for hiring. 2. Paper and Pencil Honesty Testing i. Soroka v. Dayton-Hudson Corp. a. Most states do not have a constitutional right of privacy that protects EVERYONE, not just government employees. b. Court relies on this to rationalize the holding that the questionnaire violated the privacy of the employee. c. Other courts have suggested that a basis for challenging is the common-law tort of invasion of privacy/intrusion upon seclusion. ii. Other Case Where Sales Employees Were Asked to Fill Out Questionnaire a. Court said that there was a public policy but that the employer had an interest. iii. Courts typically look at whether employer had any legitimate interest in knowing the private information. 3. Negligent Hiring i. Two ways in which employers can be held liable when their employee commits a tort. a. Vicarious Liability – Respondeat Superior 1). Employee-employer relationship 2). Tort must have been committed while employee was acting within scope of employment. b. Direct Negligence – Negligent Hiring 1). Can also be negligent hiring, training, or retention. ii. Thatcher v. Brennan a. Employee salesman got in fight with person. b. Court indicates that the assault was outside the scope of employment. c. Traditional rule is that employee is acting within scope of employment when he is acting in furtherance of duties owed to employer and where employer could exercise control over employee.
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General Employment Law - Timmons Fall 2003 Page 37 of 60 d. Some courts now indicate the rule is whether acts of employee were so connected to employment so as to justify employer bearing the risk and loss. e. Negligent hiring 1). Court indicated that tests alone are not sufficient to put the employer on notice. 2). Court also indicates that there had been a significant time gap between the testing and the assault negates proximate cause. f. It might be proper in some jobs to conduct personality tests. 1). People who deal with children or other especially sensitive groups. g. Objective evaluation of past behavior through criminal background check is perhaps less intrusive than personality testing. Employer References – Defamation and Other Torts A. Any disclosure by an employer of information about an employee. B. Tort of Invasion of Privacy – Public Disclosure of Private Facts 1. Two major ways it differs from defamation. i. Defamation is concerned with false information. ii. Public disclosure of private facts requires publicity, defamation requires simple publication. a. Publicity relates to the dissemination to the public at large. b. Some courts have held that publicity requirement can be satisfied by disclosure to a group of persons with whom the person has a special relationship. c. Courts have indicated that employees have special relationship with their co-workers. 2. Elements of Tort i. Publicity was given to the disclosure of facts. a. Must be to public at large unless the court accepts the special relationship understanding of publicity. ii. Facts are private, not public. iii. Highly offensive to the reasonable person. iv. Matter publicized is not newsworthy or a legitimate public concern. C. Defamation 1. Elements of Defamation i. False statement ii. Defamatory meaning iii. Publication 2. Elbeshbeshy v. Franklin Institute i. Court indicates that the language of “lack of cooperation” could be defamatory because it indicates to others that the plaintiff is insubordinate, obnoxious, and antagonistic. ii. Employer probably also argued that they did not publish the information.
General Employment Law - Timmons Fall 2003 Page 38 of 60 a. Majority rule is that publication element of defamation is met even if the communication is within the corporation. b. Minority rule is that there is no publicity when the communication is done within the corporation. c. Doctrine of Compelled Self-Publication 1). Applies when discharged employee can demonstrate that a.)he was compelled to tell prospective employers the reasons for his discharge and b.)that former employer could have reasonably foreseen the need to reveal the information. 2). Minority view. Courts reason that justice and fairness require this. d. Some courts have even said that when employer gives no reason for termination, defamation may be inferred from circumstances. iii. Just because giving reasons for termination might give rise to defamation claims should not mean that employers should not give reasons. 3. Zinda v. Louisiana Pacific Corp. i. Zinda was fired for falsifying employment forms. ii. Zinda sued for defamation after the employer published a newsletter indicating why he had been fired. iii. Trial court did not instruct jury on defense of qualified privilege. iv. Conditional privilege exists when the speaker and listener have a common interest. v. Defamatory statement which are made in furtherance of common property, business, or professional interests. vi. Privilege can be lost – it is qualified. vii. Plaintiff argued that employer lost privilege due to excessive publication. a. Employees often took newsletter home. b. Persons other than employees saw newsletter. viii. The jury had to find that statement was false in order for plaintiff to win and they did. ix. Can lose qualified privilege by a. Acting with malice – knowing statement was false or acting with reckless disregard as to the statement‟s truth or falsity. b. Acting with a purpose outside the common interest. 1). For instance, in this case, if it could be proved that real reason Zinda was fired was because of the products liability suit he had filed. c. Excessive publication of statement. 4. Sigal Construction Corp. v. Stanbury i. What would we take from this case?
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General Employment Law - Timmons Fall 2003 Page 39 of 60 a. Employers should never give references. However; this may be an overreaction. b. It is in employers interest c. It is beneficial to have policy regarding content and who can respond to requests for references. ii. Qualified privilege is not lost when references are given. Generally, employers have a common interest in the free exchange of information regarding job applicants. iii. Should the defense of qualified privilege be available when the doctrine of compelled self-publication is used? a. Yes. A former employer in a compelled self-publication theory would still be liable – the only difference is in the mode of communication of the defamatory statement. iv. Court finds that employer lost qualified privilege because they acted with “malice” – they knew the statement was false or they acted in reckless disregard as to the truth or falsity of the statement. v. In this case, the defendant knew he had no facts upon which to base the statements. vi. Will a former employer who gives bad reference about an employee be able to avoid defamation liability because they say “In my opinion”? a. No. In Milkovich case, Supreme Court held that any statement, including a statement of opinion, can constitute defamation if it reasonably implies a false assertion of fact. b. Individual states can decide whether opinions constitute defamation. vii. Suppose employer suspected EE of drug use and gave test which employee failed. EE was fired for drug use. It is later determined that drug test was not correct. a. What it comes down to is whether truth goes to accuracy of statement or whether it goes to truth of underlying implication. b. Cases have gone both ways. Anti-Discrimination A. Major way in which law regulates employment relationship. B. Two Theories 1. Disparate Treatment i. Disparate Treatment = Intentional Discrimination a. Treating employees differently based on protected classification OR b. “Neutral” rule adopted for discriminatory purpose. 1). Example - Employer has rule that jobs are not given to primary caregivers – would be facially neutral but employer intends to prevent females from holding jobs. ii. Disparate Impact
General Employment Law - Timmons Fall 2003 Page 40 of 60 a. Facially neutral employment practice that is not adopted for a discriminatory purpose but that nonetheless had a disproportionate negative effect on persons of a protected group. C. Disparate Treatment 1. Slack v. Havens i. Four black women were asked to do heavy cleaning. ii. Refused to do work. iii. White co-worker with less seniority was not asked to do the work. iv. White supervisor who made racial comments. v. Black employees were fired. vi. Taking race out of this, would the employees have any claim. a. EAW b. Might be able to claim breach of contract. vii. Absent an individual term contract or some type of implied contract right, employees have no right to refuse to perform any assigned task. viii. Title VII makes assigning duties based on someone‟s race illegal. ix. Even if the cleaning was included in job description, if assignment was made because of race, it is prohibited. x. Discrimination does not have to be motivated by ill will to be violative of Title VII. xi. The key to Title VII is differential treatment caused by a prohibited factor, regardless of the reason for the differential treatment. a. Good motives are not a defense. xii. Still a violation to treat women differently because of gender. xiii. There is a narrow exception to Title VII a. Bona Fide Occupational Qualification (BFOQ) 1). If sex, national origin, or religion are valid qualifications for a job, an employer might not be liable under Title VII for discrimination. 2). NOT available for RACE! 3). BFOQ is actually written into Title VII. xiv. Fewer cases today have the “smoking gun” of actual direct evidence of racial discrimination. xv. There can also be cases of racial discrimination when employers engage in stereotyping. a. Cannot use a protected class as a proxy, even if it is proven statistically, is more efficient, etc. b. Cannot assume that each individual conforms to norms. xvi. Must have prejudice affecting terms of employment to show that racial views affected how employees were treated in order to fall under Title VII. 2. Sexy Secretary Hypo i. Boss preferred secretary who was good looking and brought him coffee.
General Employment Law - Timmons Fall 2003 Page 41 of 60 ii. Jury found for ugly secretary who was fired. iii. Court of Appeals reversed, indicating that Title VII did not cover this. iv. Rationale might be wrong if executive did not have same expectations of male staff as of female staff. 3. McDonnell Douglass Corp. v. Green i. Black employee of McDonnell Douglas who was laid off. ii. Protesting lay-off, he participated in a stall-in and also a lock-in. iii. Applied for re-employment and was denied. iv. The plaintiff claimed he was not rehired because of his race and participation in civil rights activities. v. Employer claimed that he was not hired because vi. Court establishes a procedure for determining whether an employer violates Title VII. vii. Procedure a. Plaintiff must establish prima facie case of race discrimination 1). Plaintiff belongs to racial minority 2). Applied for and was qualified for job for which employer was taking applications 3). Rejected 4). Position remained open and employer continued to seek employees. b. Burden shifts to Employer to articulate legitimate, nondiscriminatory reason for its action. c. Burden shifts back to plaintiff to prove that the employers reason is simply a pretext. viii. General Statement of Prima Facie Employment Discrimination Case Under Title VII a. Member of a Protected Class 1). EVERYONE is a member of a protected class. 2). Except for age discrimination – only persons over 40 qualify as members of this protected class. b. Qualified for Position c. Adverse Employment Action 1). Not hired 2). Fired 3). Not promoted 4). Demoted 5). Etc. d. Replaced by Someone Outside Protected Class 1). Courts sometimes state differently depending on circumstances. ix. Purpose of prima facie case is to create a presumption of discrimination. If employer says nothing, employer loses.
General Employment Law - Timmons Fall 2003 Page 42 of 60 a. Idea is that plaintiff has to put in enough proof that absent an explanation by employer, discrimination can be implied. b. Must demonstrate at least that employer cannot cite the two most common reasons for adverse employment actions. 1). Lack of qualifications 2). No opening x. McDonnell Douglas indicated that unlawful activity against it by the plaintiff was a legitimate, non-discriminatory reason. xi. Plaintiff would have to show that the reason was merely a pretext. a. Plaintiff could prove by showing that others were treated differently. b. Could also point to pattern of discrimination. xii. How to prove that plaintiff was qualified a. Minimal qualifications required b. What others in job possessed xiii. Legitimate means “non-discriminatory” a. Does not require good reason. b. However, a jury is more likely to believe a good reason is not discriminatory if it is a good reason (profit maximization, etc.). c. Jury will be more suspicious with what is thought to be an arbitrary reason. xiv. Lower courts have differed as to qualification prong in establishing prima facie case. a. Majority view is that the plaintiff need show only minimal qualifications. xv. Cases really end up turning on whether the plaintiff can prove that the employer acted on pretext. 4. St. Mary’s Honor Center v. Hicks i. Plaintiff is a correctional officer who is disciplined, demoted, and ultimately fired. ii. Plaintiff claims this occurred because of his race. iii. Makes prima facie case a. Plaintiff is a member of protected class; b. He was qualified for job; c. There were adverse employment actions; d. And he was replaced by someone outside of class. iv. Employer asserted as its legitimate reason for firing was insubordination and work related misconduct v. The District Court judge is acting as trier of fact and did not believe employer‟s alleged reasons for firing. a. Plaintiff was only supervisor that was disciplined for his actions and co-workers committed worse infractions and were not disciplined
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General Employment Law - Timmons Fall 2003 Page 43 of 60 The District Court said that Plaintiff did not carry burden to show that what employer asserted as a reason was not true; district court did not think race discrimination was the real reason for the firing. a. Trial court thinks that Plaintiff was fired because of personal dislike, not race discrimination. b. Court noted that the racial makeup the workplace remained the same; it also appeared that the new management just wanted a clean slate of employees. At trial court level, Plaintiff proved prima facie case; employer asserted legitimate non-discriminatory reason; trier of fact did not believe reason, but did not think that real reason was race discrimination; found for Defendant employer. The Court of Appeals reversed the decision and found for Plaintiff a. Held that once Plaintiff proved that all of the employer‟s proffered reasons were pretextual, then Plaintiff was entitled to judgment as a matter of law. Legal issue before the Supreme Court was about pretext a. If the trier of fact does not believe employer‟s articulated reason, does the trier of fact have to find for Plaintiff? The case is about „how do you prove pretext?‟ and the effect of P showing that employer‟s legitimate non-discriminatory reason is not believable? One option is that the effect of that is judgment for Plaintiff is required (this is what Court of Appeals said). Majority of Supreme Court reversed Court of Appeals a. Did not think that the effect was that judgment for Plaintiff was required. Majority reached conclusion because the Plaintiff at all times retains the burden of persuasion on the ultimate issue in the case a. There is a difference between finding that employer‟s reason was not believable and finding that the employer had discriminated. It‟s easy to establish a prima facie case under McDonnell. It‟s not enough for the trier of fact to just disbelieve the employer‟s asserted reason; trier of fact must find that employer discriminated against Plaintiff. a. Plaintiff can‟t win unless he convinces the trier of fact that he was discriminated against – this is the ultimate issue The Dissent said this imposes an unreasonable burden on Plaintiffs; whole point of McDonnell-Douglas is to narrow the issue and make it easier for Plaintiff to show discrimination when there is not direct evidence. Employer here never said that the decision was motivated by personal dislike; thus Plaintiff could never disprove this. It‟s wrong for employer to be in a better position by lying than for the employer to remain silent.
General Employment Law - Timmons Fall 2003 Page 44 of 60 xix. Big Question after Hicks was „if a judge is faced with a motion for summary judgment on a case of discrimination and the judge finds that a reasonable fact finder could conclude that the employer‟s asserted legitimate non-discriminatory reason is false, is the judge always required to deny motion for summary judgment and let it go to the jury?‟ a. The Courts of Appeals were very split on this issue; there is language in the majority of opinion of Hicks suggesting both yes and no answers. xx. Options left to courts: a. Judgment for Plaintiff always permissible (no summary judgment for Defendant). b. Judgment for Plaintiff never permissible unless there is additional evidence of discrimination (summary judgment for Defendant). c. Judgment for Plaintiff sometimes permissible even if no additional evidence of discrimination. xxi. Court resolved this question in Reeves case. 5. HYPO: You are a juror in a Hicks type of case. Plaintiff has shown prima facie case, employer has asserted legitimate reason, and you do not believe that reason. Are there any circumstances by which you would not find the employer liable for race discrimination? Under what circumstances do we think an employer would not give the real reason, but the real reason is not discrimination? i. If there was evidence that similarly situated employees were not treated badly, you might find for Defendant employer (like Hicks). ii. You might think that the real reason was embarrassing (i.e.: nepotism), but not discrimination, so you might find for Defendant employer. iii. Employer could have made mistake; employer‟s reason could be based on some petty reason (i.e.: just does not like Plaintiff). 6. Will there be many cases when the jury will disbelieve the employer‟s reason but will not find that the real reason was discrimination? 7. What evidence will make you believe that employer‟s decision was more likely than not influenced by race discrimination? i. The answer to this depends on your personal belief of the prevalence of race discrimination – do you believe that discrimination is a logical inference in the absence of some other kind of believable reason. ii. In Hicks, the majority says that just because employer gave untrue reason for its actions does not necessarily mean that employer acted because of race discrimination. 8. Reeves v. Sanderson Plumbing Products, Inc. i. Judge found that rational fact finder could conclude that asserted reason is false.
General Employment Law - Timmons Fall 2003 Page 45 of 60 ii. Supreme Court says that when employer‟s reason is not believable, judgment for Plaintiff is almost always permissible and summary judgment for Defendant employer should almost always be denied iii. Court said that additional independent evidence of discrimination is not usually required, but sometimes it might be. iv. In advising employers, you should tell them they don‟t want to be in position of having stated a reason, but the reason is not believable or not true. a. This often happens when employers think they are being nice (i.e.: tell worker they are being fired because they are eliminating position, when that is not in fact the truth). v. Under the combo of Hicks and Reeves, the law is that it‟s very bad if employer gives a reason that is not true; but courts are still granting summary judgment to employer in reality fairly often. 9. What does pretext mean? i. Hicks case indicated it is not enough for trier of fact to disbelieve, they must find real reason was discriminatory. ii. Sufficient Evidence for Reasonable Jury to Find that Employer‟s Stated Reason a. Reeves case held that usually but not always, evidence that ER‟s reason is not believable would allow. 10. Price Waterhouse v. Hopkins i. Female associate of accounting firm was denied partnership. ii. Trial court found that firm denied partnership based on lack of interpersonal skills. iii. Title VII is not for-cause legislation. a. Eliminates only certain reasons for employment decisions. b. Balance between employee rights and employer interests. iv. This is a mixed-motive case. a. One factor was interpersonal skills. b. The other factor was gender. v. Main issue addressed by the Court in this case is how to decide whether Title VII is violated when employer is motivated by both permissible and impermissible reasons. vi. Mixed Motive Cases a. Plaintiff must prove discriminatory factor played a motivating factor in employment decision. b. Burden then shifts to employer to demonstrate, by a preponderance of the evidence, that they would have made the same decision regardless of the discriminatory motive. vii. O‟Connor Concurrence a. Difference from plurality is that mixed motive only applies where there is direct evidence of discrimination. viii. Civil Rights Act of 1991 Overruled this Case
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General Employment Law - Timmons Fall 2003 Page 46 of 60 a. Violation of Title VII established by plaintiff proving that some protected trait was a motivating factor for some employment decision. b. If employer can prove that they would have made same decision regardless of discrimination, it will limit remedies available to plaintiff. 1). Plaintiff will only get a declaration that Title VII has been violated and they can get attorney‟s fees. Law USED to be a. Mixed motives approach only applied when plaintiff could prove by direct evidence that illegitimate reason was a factor in decision. b. If plaintiff had circumstantial evidence, proof of pretext must be shown by the plaintiff under the McDonnell Douglas decision. TODAY a. Supreme Court held this summer that a plaintiff can prove mixed motives by circumstantial evidence. b. Seems to indicate that McDonnell Douglas is irrelevant. Things to Take Away from Price Waterhouse a. Can have evidence of sex discrimination based on sex stereotyping. 1). Court held it violates Title VII to make employment decisions based on whether a person meets accepted stereotypes. How might you try to prove that decision would have been the same even if there was no discrimination because of gender? a. Looking at past decisions. Under new Supreme Court decision, courts must answer two questions: a. Could a reasonable jury believe that the defendant‟s asserted legitimate non-discriminatory reason is pre-text for a discriminatory reason? b. Could a reasonable jury believe that the defendant‟s asserted legitimate non-discriminatory reason, while true, is not the only factor and that protected trait was also a motivating factor for decision? If answer to either question is yes, court should not grant summary judgment. Some plaintiffs might not want a mixed motives instruction because it allows the jury to find for both the employer and plaintiff, and thus, limit the damages available to the plaintiff. Strategically, plaintiff‟s have to determine if possibility of jury coming back in favor of plaintiff under a mixed motives instruction is worth the risk that the jury could find for both employer and plaintiff.
General Employment Law - Timmons Fall 2003 Page 47 of 60 11. Western Airlines v. Criswell i. Challenge to Western Airlines prohibition on flight engineers continuing to work after age 60. ii. This is a violation of the ADEA. iii. Employer would have to show that there was a BFOQ that required this. iv. Western claimed that safety was the reason for this. v. BFOQ Standard a. Two Part Test 1). Whether the job qualifications that employer invokes to justify discrimination are reasonably necessary to the essence of the employer‟s business. i). Court made clear that safety will sometimes, but not always, be justification for BFOQ. ii). Safety of third parties will be justification for BFOQ when they are part of the essence of the business. 2). Employer is compelled to rely on discriminatory factor as a proxy for the stated reason. i). Can prove validity of proxy by a). Substantially all persons in the group excluded by the employer would not be able to perform the job; OR b). Impossible or highly impractical to evaluate employees individually as to whether they are not able to perform the job. vi. Discrimination on the basis of pregnancy is considered to be discrimination on basis of gender. vii. Customer preference could only be taken into account when it goes to the essence of the business. a. If business was topless dancing, it would be OK to discriminate against men. D. Disparate Impact 1. Another theory of discrimination under Title VII. 2. Disparate Impact i. Facially neutral employment practice that is not adopted for a discriminatory purpose but that nonetheless had a disproportionate negative effect on persons of a protected group. 3. Griggs v. Duke Power Co. i. Duke Power applied same rules to both black and white employees. a. Had to have high school diploma and pass two standardized tests. ii. Court of Appeals held that Duke did not have intent to discriminate.
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General Employment Law - Timmons Fall 2003 Page 48 of 60 a. However, prior to effective date of Title VII, black employees were treated differently than whites. b. After implementation, Duke got rid of rules that facially discriminated and implemented rules that had the effect of discriminating against blacks. All things being equal, plaintiffs would rather have disparate treatment claim. a. No jury trials under disparate impact. b. Lower damages under disparate impact. Supreme Court indicates that bad intent is not required for discrimination claim under Title VII. a. Under Civil Rights Act practices, procedures, or tests which are neutral on their face or neutral in intent but operate to maintain status quo of prior discriminatory practices. After plaintiff proves the disparate impact, employer can assert affirmative defense that the requirements are a business necessity. Is disparate impact limited to those groups that have suffered from past societal discrimination? a. No. Examples include physical fitness or stature requirements which disparately impact females. Would it be fair for an employer adopt rule that employee be 5‟7” or taller and there was no legitimate business reason for the requirement? a. No. Like intentional discrimination, it is unfair to penalize a protected class based on something they cannot control, especially where the requirement cannot be shown to have an effect on job performance. Real question is whether disparate impact theories should be limited to effects caused by past societal discrimination AND to effects that excluded individual cannot control. a. Courts have been reluctant to engage in determining whether there is individual control. How would you argue that requirement is job related and consistent with business necessity? a. Courts will look closely to see that there is a match between what employer is requiring and what is needed for the business. Establishing Disparate Impact Claim a. Standard is plaintiff has to prove that employment practices leads to a disparate impact on members of a protected class. b. Burden then shifts to employer to prove that requirement is job related and is consistent with business necessity. c. Even if employer proves this, plaintiff can still win if they can show that there are other practices that do not have a
General Employment Law - Timmons Fall 2003 Page 49 of 60 discriminatory impact available to meet the employer‟s needs. xi. There has been some argument that conditions of employment should only be allowed to go under disparate treatment, not disparate impact. E. Religious Discrimination 1. Chalmers v. Tulon Company of Richmond i. Extremely religious employee sent religious note to boss accusing him of unspecified immoral conduct. ii. Boss‟s wife thought boss was cheating on her and became very upset. iii. Also, employee sent a letter to another employee telling her she was sick because God was upset at her for having an illegitimate claim. iv. Did not state a disparate treatment claim. v. Chalmers brought a claim that Tulon did not reasonably accommodate her religious beliefs. vi. Title VII allows suit for religious discrimination for failure to reasonably accommodate her religious conduct. vii. Any accommodation that imposes an undue hardship on employer‟s business. a. Supreme Court has interpreted this to mean anything more than de minimus cost to the employer is undue hardship. viii. Prima Facie Religious Accomodation Claim a. Plaintiff has bona fide religious belief that conflicts with an employment requirement. b. Plaintiff provided notice to employer of his or her bona fide religious belief. 1). Gives employer chance to accommodate the religious employee. c. Employer fails to make reasonable accommodation for the employee‟s religious needs. ix. Chalmers loses because just because she is a Christian does not mean she was going to send crazy letters and thus, the employer was not on notice. x. Court also indicates that EE‟s conduct was not that which could be accommodated by the employer. xi. Reasonable accommodation does not have to be the accommodation that the employee desires. xii. If there is something other than religious reasons behind co-worker or customer backlash, it is probably more likely that courts will side with management. F. Disability Discrimination 1. Martinson v. Kinney Shoe Corporation i. Prima Facie Case of Disability Discrimination a. Prove disability b. Qualified individual
General Employment Law - Timmons Fall 2003 Page 50 of 60 c. Adverse employment action caused by disability ii. Trial court found that Kinney did not discharge because of epilepsy, they discharged because of seizures. iii. Appellate court says that to fire for seizures is to fire for a disability because seizures are a part of disability of epilepsy. iv. Courts have drawn a distinction between discharging an employee because of misconduct caused by disability and discharging because of the disability itself. Discharging because of misconduct is OK; discharging because of the disability itself is NOT OK. v. Appellate court indicated that employee was not a qualified employee. Could not perform job WITH or WITHOUT reasonable accommodation. vi. Individual is qualified if they can perform essential functions of the job with or without reasonable accommodation. vii. Court says one of the essential functions of a shoe salesman is store security. viii. Court says ADA does not require employer to hire another employee to perform essential functions that disabled employee cannot perform. ix. The class of persons protected under the ADA is narrow. The only ones protected are qualified individuals with disabilities. 2. Sutton v. United Air Lines, Inc. i. Issue in case is whether, in determining whether an individual is disabled, should they be evaluated in corrected condition. ii. Disability is defined as a. A physical or mental impairment that substantially limits one or more of the major life activities of such individual; b. A record of such impairment; or c. Being regarded as having such an impairment. iii. Court finds that the plaintiff‟s disability did not substantially limited one or more of the major life activities because impairment is determined by looking at individuals in corrected condition. iv. Rationale for this decision a. If Congress had intended to include persons with correctable impairments, the number of people would have been much higher. b. ADA requires individualized determination and if viewed when uncorrected, this would lead to non-individualized determination. c. ADA language is written in present tense and this would indicate that using corrected condition. v. Result of ruling is that these plaintiffs are unprotected from discrimination based on their disability. vi. Disability definition that uses “being regarded as having a disability” is hard to satisfy.
General Employment Law - Timmons Fall 2003 Page 51 of 60 vii. Person is disabled under the Act if employer regards the person as having a disability. viii. Plaintiffs asserted that employer regarded them as having a disability as to the major life activity of working. ix. Court held that the plaintiffs were not substantially limited in working because employer must regard the employees as substantially limited in a broad scope of working. x. It is not enough for employer to regard the employee as substantially limited in major life activity of “seeing”. xi. For “regarded as” definition of disability, will have to show that employer has severe prejudice as a result of disability. Essentially, must show why the employer was motivated to make the adverse decision. a. Very difficult to prove in practice. 3. Hypos i. Pregnancy is not an impairment because it is temporary; thus, it is not considered a disability. ii. Broken leg is also temporary and thus is not considered a disability. iii. Acrophobia (fear of heights) is not limiting enough to be a disability. iv. Left-handedness is not an impairment. v. Person who takes medication for panic/anxiety disorder. Courts have disagreed as to whether panic/anxiety disorder substantially limits a major life activity. Side effects of medication could also cause a substantial limitation on a major life activity. 4. Vande Zande v. State of Wisconsin Department of Administration i. Complaint of plaintiff in this case is the employer‟s failure to reasonably accommodate. ii. Plaintiff is a paraplegic. iii. Employer did do some things in accommodation. iv. Employee argues that employer refused to lower sink. a. Court holds that the duty of reasonable accommodation is satisfied when the employer does what is necessary to enable the disabled worker to work in reasonable comfort. v. Employer also forced employee to spend 16.5 hours of sick leave. Employee argued that reasonable accommodation would be for employer to forgive the use of sick leave. a. Court holds that an employer is not required to accommodate a disability by allowing the disabled worker to work, by himself, without supervision, at home. b. Some courts have phrased this differently. Some courts hold that regular attendance at work is an essential function of every job. In essence, the employee is not a “qualified individual”. vi. Court says that the definition of reasonable accommodation is that the employer must be willing to consider making changes in its
General Employment Law - Timmons Fall 2003 Page 52 of 60 ordinary work rules, facilities, terms, and conditions in order to enable a disabled individual to work. vii. Plaintiff has burden of proving that accommodation is reasonable and then burden shifts to employer to prove affirmative defense of undue hardship on conduct of employers business. viii. More than a de minimus burden is required under ADA. 5. Hypo i. Employee with Turrets syndrome who has outbursts of racial epithets. a. The first question to be considered is whether the syndrome constitutes a disability. b. The next question is whether employee is qualified individual – could he perform essential functions of job with or without reasonable accommodation. c. The final thing to consider is whether there are reasonable accommodations that could be made. 1). In this case, other employees might have claims for racial harassment. 6. Barth v. Gelb i. Undue hardship issue is reached only after an accommodation has been proven to be reasonable. ii. Effects on morale of other employees in making the reasonable accommodation can be looked at as a factor in determining undue hardship. 7. Privacy and the ADA i. ADA imposes additional privacy-based restrictions on employer conduct. ii. Who can sue for violation of ADA‟s privacy rules? a. Consensus is that any affected person can sue – do not have to be a qualified individual. iii. Categories a. Restriction on what employer can ask or otherwise find out about an employee. 1). Restricts when an employer can require a medical examination or make a medical inquiry that may reveal a disability or the nature and extent of the disability. i). Applicants a). Employers are not allowed to conduct a medical examination or inquiry into disability or nature/extent of disability. b). Any questions that might reveal a disability are not allowed.
General Employment Law - Timmons Fall 2003 Page 53 of 60 c). Employers are allowed to inquire into ability of employee to perform job-related functions. d). Employers may ask employee to describe how, with or without reasonable accommodation, the employee will be able to perform the essential functions of the job. ii). After Offer of Employment But Before Starting Work a). Employer may require a medical examination or inquiry. b). Can condition employment on successfully passing the examination. c). Must do for ALL employees given offers. iii). Current Employees a). Employer may require a medical examination or inquiry only if jobrelated and consistent with business necessity. b). Individual inquiry on an as-needed basis. b. Restriction on what employer can tell or otherwise disclose about an employee. 1). Information obtained through medical examinations as above must be kept separate and treated as a confidential record. 2). Supervisors and managers may be informed as to disability. 3). If the government asks about it, it must be provided. 4). Confidentiality extends to information voluntarily given to employer. 5). Hypo i). What can employer tell employees who complain about special treatment? a). Must not disclose any medical information in response. b). Cannot indicate that they are providing a reasonable accommodation. c). EEOC suggests that the employer say “Acting in compliance with federal law”.
General Employment Law - Timmons Fall 2003 Page 54 of 60 XIV. Employee Duties and Responsibilities A. Duty of Loyalty and Trade Secrets 1. Taking Customers and Employees i. Jet Courier Service v. Mulei a. Employee started a competing business. b. Employer sued for breach of duty of loyalty. c. Duty of loyalty arises as a matter of law in every employment relationship. d. The law of agency indicates that agents are subject to a duty to his principal to act solely for the benefit of the principal in all aspects of agency. e. Employee cannot actively compete with employer. f. However, employee can prepare to compete. g. Standard for determining whether it was preparation or active competition. 1). Mere advisement that person is leaving is OK. 2). Solicitation for the competing business is not OK. h. Applies to both customers and employees. i. Can solicit co-employees even if the employees were atwill. j. Relevant factors to determine if solicitation occurred: 1). Nature of employment relationship; 2). Impact or potential impact of the employee‟s actions on employer‟s business; 3). Extent of any benefits promised or inducements made to co-workers to obtain their services for the new competing enterprise. k. Even if the employer breaches first, that does not allow employee to violate duty of loyalty. l. General rule is that an employee is not entitled to compensation during the time he is engaged in breach of duty of loyalty. 1). This would be the extent of damages. 2). If paid monthly, would not be entitled to pay for any month in which employee violated duty of loyalty. ii. MAI Systems Corp. v. Peak Computer, Inc. a. Also involves departing employee who brings customers to new enterprise. b. Employee did not solicit prior to leaving. c. Nonetheless, court holds employee liable. d. If an employer wants to challenge employment action after employee has left, breach of duty of loyalty does not apply. e. Employer bases claim on misappropriation of trade secrets. 1). Extends beyond current employment.
f. g.
h. i. j.
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General Employment Law - Timmons Fall 2003 Page 55 of 60 Majority of states have adopted Uniform Trade Secrets Act (UTSA) which codifies basic principles of common-law. Trade Secrets 1). Information, including a formula, pattern, compilation, program, device, method, technique, or process, that: i). Derives independent economic value, actual or potential, from not being generally known to the public or to other person who can obtain economic value from its disclosure or use; and ii). Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Court finds that MAI‟s customer database constitutes a trade secret. Must also show misappropriation in order to prove claim. Definition of Misappropriation 1). Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or 2). Disclosure or use of a trade secret of another without express or implied consent by a person who: i). Used improper means to acquire knowledge of the trade secret; or ii). At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was: a). Derived from or through a person who had utilized improper means to acquire it; b). Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or c). Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or iii). Before a material change of his or her position knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or by mistake. Court indicates that to show use of database, employee who remembers the database and uses it to contact those customers. Court says solicitation constitutes misappropriation.
General Employment Law - Timmons Fall 2003 Page 56 of 60 m. The key, according to the court, is that the employee used what he remembered to solicit the customers. n. In general, the common-law allows ex-employees to contact customers of their old employer. o. The more difficult and expensive to compile a customer list or the more confidential the list is kept, the more likely a court will find that it is a trade secret. 2. Trade Secrets in Information i. Pepsico, Inc. v. Redmond a. Employee did not start actively competing while employed – no duty of loyalty issues. b. No evidence that he had used trade secrets after he left. c. Doctrine of Inevitable Disclosure 1). Pepsi established that Redmond had been privy to significant trade secret information. 2). Pepsi argued that Redmond would be making strategic decisions for Quaker. 3). Court found that Redmond could not help but rely on Pepsi‟s trade secrets and it was inevitable that the disclosure would happen. 4). Plaintiff may prove a claim of trade secret misappropriation by demonstrating that defendant‟s new employment will inevitably lead him to rely on the plaintiff‟s trade secrets. d. Applies whether employee quits OR is fired. e. Doctrine of Inevitable Disclosure is very controversial. ii. Earthweb, Inc. v. Schlack a. Earthweb sued seeking to enjoin former employee Schlack from commencing employment with competitor. b. Court finds Doctrine of Inevitable Disclosure inapplicable 1). Rationale i). Doctrine should be confined to narrow area because it binds employee to a non-competition covenant that they did not agree to. a). If employer wants this kind of protection, employer should contract for it. ii). Factors to consider in determining whether to use Doctrine include: a). Whether employers are direct competitors. i. Same of very similar products or services. b). Whether employee‟s new position is the same or very similar to old position so that employee could not
General Employment Law - Timmons Fall 2003 Page 57 of 60 help but rely on trade secrets from previous employer. c). Whether trade secrets at issue are highly valuable to both employers. iii). Employment agreement actually contained a covenant not to compete. a). This hurt Earthweb‟s claim for inevitable disclosure. b). Covenant was narrow and would not have prevented Schlack from working for new employer. c. Court finds that the employers in this case are not direct competitors. B. Enforcement of Non-competition Clauses 1. REM Metals Corp. v. Logan i. Non-competition agreement forbade competing with company for one year. ii. Court found the covenant unenforceable. iii. Reason is that courts are hesitant to restrict competition. iv. Rationales for Regulating Non-Competition Clauses a. Not good for economy b. Employees should not be able to bind themselves in ways that prevent them from leaving the company. v. Laws vary greatly from state to state. a. For example, CA forbids unless you are selling your business. vi. General rule in most states is that covenants are only enforceable if they are reasonable. vii. Since they are contractual, must be supported by consideration. viii. Also, must not be unconscionable, achieved by duress, etc. ix. Factors affecting reasonableness a. Covenant must be reasonable in time and geographic area; b. No greater than is required for the protection of the legitimate interests of employer; 1). General training of employee is not a legitimate interest that would support a covenant not to compete. 2). Existence of trade secrets, information, or relationships that pertain peculiarly to the employer or other special circumstances may be legitimate interest that would support a covenant not to compete. i). Entertainer or an athlete might be a special circumstance supporting a covenant not to compete. c. No too harmful to general public;
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General Employment Law - Timmons Fall 2003 Page 58 of 60 d. Not unreasonably burdensome to the employee. x. Georgia does enforce covenants not to compete but very narrowly. 2. Karpinski v. Ingrasci i. Covenant prevented employee from practicing oral surgery or dentistry within 5 counties forever. ii. Court found no problem with geographic restrictions. iii. Court also did not have problem with unlimited time period. a. Enforcing a covenant not to compete with an unlimited time period is very difficult. iv. Court found that scope of covenant in terms of what party could do was invalid. v. Court chose to sever the portion that was unreasonable. vi. Courts vary in response to unreasonable provisions. a. Some courts strike all if any part is unreasonable. 1). Georgia b. Most courts will do blue-pencil. 3. Outsource International, Inc. v. Barton & Barton Staffing Solutions i. Court indicates that Illinois has two alternative grounds to find a covenant reasonable and necessary to protect a legitimate interest of the employer. a. Near-Permanent Relationship Test 1). With customers is included in this. 2). But-for OSI‟s good name in staffing business, Barton would not have been able to get the customers he did. b. Confidential Information Test 4. In order to have an enforceable covenant not to compete in Georgia, there must be a defined geographic area at the time agreement is signed and employee must work in that geographic area. i. Very tough to draft an effective covenant not to compete in Georgia. Wage and Hour Legislation A. Fair Labor Standards Act (FLSA) of 1938 1. Three primary provisions i. Minimum wage ii. Premium pay for overtime work (time and one-half x regular rate of pay) in excess of 40 hours per week. iii. Child labor B. Coverage Issues 1. Only applies when there is an employee-employer relationship. i. Does not apply to independent contractors. 2. Statute contains many exemptions from coverage. i. Very fact-driven evaluation as to exemptions. ii. Most important is white collar exemption for executive, administrative, and professional employees. a. Have earnings, duties, and salary requirements. b. Salary Basis
General Employment Law - Timmons Fall 2003 Page 59 of 60 1). Must be paid on salary basis to qualify for exempt status. 2). Salary cannot be subject to variation based on quality or quantity of work product. i). In other words, cannot dock employee. c. Duties 1). Long Test 2). Short Tests – Only short test is relevant because earnings requirement is so low. i). If employees make at least $250 per week, they will be exempt if they satisfy short test. ii). An employee is an exempt executive employee if they make at least $250 AND primary duty is managing enterprise, department, or subdivision thereof AND supervises work of 2 or more people. iii). An employee is an exempt administrative employee if they make at least $250 AND primary duty is work related to managerial policies or general business operations AND if work requires exercise of discretion and independent judgment. iv). An employee is an exempt professional employee if they make at least $250 AND primary duty involves work requiring knowledge obtained through scientific or specialized study AND if work requires exercise of discretion and judgment. C. Interpretation Questions 1. Working Time or Compensable Time i. Must be paid at least minimum wage for working time. ii. Must also be paid overtime for all hours over 40 in one week. iii. Supreme Court has Defined Working or Compensable Time As a. Whenever physical or mental exertion is controlled or required by employer and is pursued necessarily and primarily for its benefit. iv. Activity that is integral and indispensable to principal activity performed for the employer. v. If activity is preliminary or post-principal it will not be. vi. Time during coffee breaks or vii. Time spent during meal periods is not compensable. viii. Time spent walking from time clock to area where work is performed is not compensable. ix. Time spent driving from home to place where emergency service is required is compensable. x. On-Call Time
General Employment Law - Timmons Fall 2003 Page 60 of 60 a. Dispute is often as to whether time spent waiting is compensable. b. Decision turns on whether employee can use on-call time effectively for his own purposes. c. These types of cases are often litigated. 2. Determination of Regular Rate of Pay i. Court will calculate regular rate by determining earnings received in the week (including commissions and bonuses) MINUS any statutory exclusions DIVIDED by hours of working time EQUALS regular rate of pay. ii. Statutory exclusions a. Gifts b. Health and pension contributions c. Any premium pay that employer is providing for holidays, etc. d. Discretionary bonuses iii. Wages include the reasonable cost for facilities customarily furnished to employees may be considered part of their wages BUT only if they are for benefit of employee, not the employer. iv. Employee has an incentive to have regular rate to be low only if it would make it fall below minimum wage – Employee who is getting more than minimum wage, however, would want to maximize regular rate of pay so that when overtime occurred, it would be multiplied by the higher regular rate of pay. v. Long-term effect of this is that employers will tend to adjust how employees are paid. Employer will need to insure that each employee receives the minimum wage and will eliminate bonuses, fringes, etc. in order to keep compensation equal. 3. When, if ever, can employer satisfy overtime responsibility for payment of overtime by providing fringe benefits? i. Generally, an employer cannot satisfy obligation under FLSA to pay employee time and a half for overtime hours by providing fringe benefits. ii. Public employers can provide employees compensatory time off from work in lieu of overtime pay. a. Must be agreed to on front-end. b. Must receive 1.5 hours of compensatory time off for every hour over 40 worked in a week.