HR That Works Blog

A group of attorneys figured they had found a financial bonanza and filed a class action lawsuit against Starbucks hoping to get a $200 statutory penalty for each of 135,000 job applicants because Starbucks’s preprinted job application allegedly violated provisions of this marijuana reform legislation.  During the first administration of Governor Edmund G. Brown, Jr., in the mid-1970s, the California Legislature reformed the state’s marijuana laws to require the “destruction” by “permanent obliteration” of all records of minor marijuana convictions that were more than two years old. Employers were prohibited from even asking about such convictions on their job applications, with statutory penalties of the greater of actual damages, or $200 per aggrieved applicant.

Plaintiffs alleged Starbucks failed to adequately advise job applicants not to disclose minor marijuana convictions more than two years old. (See Lab. Code, §§ 432.7, subd. (c), 432.8.) Not surprisingly, none of the plaintiffs had been convicted of a marijuana-related crime. But they contended that California law allowed any job applicant to receive a minimum statutory penalty of $200 per applicant if they filled out an improper job application. This would of course result in a $26 million or so verdict and one heck of a payday for the lawyers! Kinda like those dozens of class action notices you get every year in the mail that you toss because you may get a new pair of jeans or discount on your next purchase…and oh, by the way, the lawyers get $10 million or so. Even though they generally say you don’t have to do anything if you don’t want to opt out, you never see another correspondence or a dime! What a gimmick. That’s not justice as I see it. Thankfully the court agreed.

In the first round of appeals the court held the plaintiffs did not have standing to represent the proposed class because none had any marijuana convictions to reveal. They declined to turn the legislation into a “veritable financial bonanza for litigants like plaintiffs who had no fear of stigmatizing marijuana convictions.” They thought that was the end of it…but it wasn’t.

The same trial court that allowed the case to proceed in the first place didn’t get the appellate court’s message and it allowed an amended complaint that would only include those guilty of the crime to file the lawsuit. But of course they asked to review all 136,000 applicants to find who those alleged victims where (known as a fishing expedition). The trial court allowed that discovery too. In a witty and stinging opinion the court posed the issue thus: “Can a purported remedy cause the very disease it is supposed to prevent? In this so-called “headless” class action, the answer regrettably is yes.”

In shutting down round 2, it held that “providing for the disclosure of job applicants with minor marijuana convictions, the discovery order ironically violates the very marijuana reform legislation the class action purports to enforce. We fail to understand how destroying applicants’ statutory privacy rights can serve to protect them. We reverse the discovery order.”

Unfortunately, Starbucks is not completely off the hook. According to the court: “Starbucks’s job applicants who had marijuana convictions know about their own previous convictions and about the fact that they had applied for a job at Starbucks. They are free to effectuate the legislative purposes underlying Labor Code section 432.8 by bringing individual actions, filing, if necessary, through Doe pleadings, and recovering not only actual damages or a statutory penalty, whichever is greater, but also attorney fees. (See Lab. Code, § 432.7, subd. (c)….

“The newly defined class does not include Starbucks’s applicants who have sustained actual damages, such as lost wages, or damage to reputation, which exceed $200. Thus, ‘truly’ aggrieved applicants are not prejudiced in any way by the dismissal of a class action which does not even purport to cover them.” In other words, if you can prove you were not hired and didn’t get another job for a while, you may have a better than $200 case.

And of course, there may be a round 3 that is brought to the California Supreme Court.  We wait with bated breath.

You can read the decision at http://www.courtinfo.ca.gov/opinions/documents/G043650.PDF

Those of you who are California employers can take comfort in the fact the HR That Works sample Job Application has this disclaimer in about two year old marijuana convictions. If you are not using ours then better check yours!

On March 1, 2011, the U.S. Supreme Court unanimously held in Staub v. Proctor Hospital (.pdf) that an employer can, in certain circumstances, be held liable for employment discrimination based upon the bias of a supervisor who influenced, but did not make, the ultimate employment decision.  The Court struck down a narrow version of this so-called “cat’s paw” argument, under which the employer could be held liable only if the biased supervisor exerted a “singular influence” over the ultimate employment decision.  Unfortunately, the Court’s decision provides little guidance for employers as to what steps they can take to avoid liability for “cat’s paw” claims.

Background

Vincent Staub worked for Proctor Hospital as an angiography technician until his termination in 2004.  During his employment, Staub was a member of the United States Army Reserve, which required him to attend drill one weekend per month and to train full-time for two to three weeks per year.  According to Staub, both his supervisor, Janice Mulally, and Mulally’s supervisor, Michael Korenchuk, were hostile to these military obligations.  Staub claimed that Mulally was actively seeking to get rid of him, and that Korenchuk was aware of her efforts.  In January 2004, Mulally issued a disciplinary directive to Staub that required him to report to Mulally or Korenchuk when he had no patients or when the angio cases were completed.  Around April 2004, Korenchuk reported to Linda Buck, Proctor’s vice president of human resources, that Staub left his desk without informing a supervisor in violation of the disciplinary directive.  Buck relied on the accusation and, after reviewing Staub’s personnel file, decided to fire him.

Staub filed a grievance challenging his termination, claiming that Mulally fabricated the allegations that had resulted in the disciplinary directive because of her hostility to his military obligations.  After discussing the matter with another personnel officer, and without conferring with Mulally, Buck upheld her termination decision.

Staub subsequently sued Proctor Hospital under the Uniformed Service Employment and Reemployment Rights Act of 1994 (USERRA), claiming that his discharge was motivated by hostility to his military obligations.  Staub did not argue that Buck harbored any hostility to his military obligations, but that Mulally and Korenchuk’s hostility influenced Buck’s ultimate employment decision.  A jury found in favor of Staub, finding that his military status was a motivating factor in the decision to discharge him.  However, the Seventh Circuit Court of Appeals reversed the jury verdict, holding that Staub’s claim could not succeed unless the biased supervisor exercised such a “singular influence” over the decisionmaker that the decision to terminate was the product of “blind reliance.”  Because Buck took other factors into account in making the termination decision, the Seventh Circuit held that Proctor Hospital was not liable.

The Court’s Ruling

The Supreme Court unanimously reversed the Seventh Circuit’s decision.  In a majority opinion joined by six Justices, Justice Scalia wrote that the Seventh Circuit’s narrow view of the “cat’s paw” theory “would have the improbable consequence that if an employer isolates a personnel official from an employee’s supervisors, vests the decision to take adverse employment actions in that official, and asks that official to review the employee’s personnel file before taking the adverse action, then the employer will be effectively shielded from discriminatory acts and recommendations of supervisors that were designed and intended to produce the adverse action.”  Thus, the Court held that “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”

In a separate concurring opinion joined by Justices Alito and Thomas, Justice Alito wrote that an employer should not be held liable “where the officer with formal decision making responsibility, having been alerted to the possibility that adverse information may be tainted, undertakes a reasonable investigation and finds insufficient evidence to dispute the accuracy of that information.”  The majority, however, declined to adopt a hard-and-fast rule that the decisionmaker’s independent investigation and rejection of the employee’s allegations of discriminatory animus shielded the employer from liability.  While not foreclosing the possibility that such an investigation could shield an employer from liability, majority observed that even with such an investigation, the biased adverse action could remain a causal factor in the dismissal if the decisionmaker took the biased action into account without determining that the adverse action was, apart from the supervisor’s recommendation, entirely justified.

Insights for Employers

This case is a clear victory for plaintiffs and plaintiffs’ attorneys, particularly in jurisdictions such as the Seventh Circuit (which encompasses Illinois, Indiana and Wisconsin) that had previously adopted more limited versions of the “cat’s paw” theory.  While the case addresses a claim under USERRA, the Court’s decision makes it clear that the same analysis is likely to apply under nearly all federal laws prohibiting discrimination and retaliation in employment.

In light of the Court’s opinion, it is clear that having HR or a higher-level manager review an employment decision will not necessarily absolve an employer of liability for the bias of a subordinate.  Nevertheless, this case makes meaningful review of employment decisions by HR and management even more vital, as the best way to avoid a lawsuit is to ensure that supervisors’ recommendations are well-supported and that questionable actions are reversed or postponed until they can be properly supported.  Further, it is now all the more important to ensure that even first-line supervisors receive effective training regarding equal employment laws and how to properly document and support employment decisions. 

Article courtesy of Worklaw Network firm Franczek Radelet.

The Dallas Morning News has reported this verdict at http://www.dallasnews.com/sharedcontent/dws/news/healthscience/stories/DN-nassar_27pro.ART0.State.Edition2.9be4f96.html . I’m sure there will be an appeal and perhaps attempt to settle the case, but either way it’s going to cost millions. UT is one of the top academic medical centers in the world. Should the verdict stand, it’s the equivalent of losing at least $4 million in funding needed to teach students and conduct research. While every employer that gets wacked with a verdict like this claims innocence, (even after the verdict), fact is they had to make some serious HR type mistakes to warrant such a judgment.

In the case of Ernster v. Luxco, the plaintiff sued for age discrimination when she was terminated from her employment and replaced by a younger worker. The plaintiff was hired by the company as a marketing rep and treated as an independent contractor. Since only employees can sue for discrimination (at least in Iowa) she argued that she was in fact an employee. In reviewing the facts the court said she just may be and that it is an issue for a jury to decide.

Here’s the point: The plaintiff comes very close to the definition of an employee even though she was treated like an independent contractor. Now the fate of this business is in the hands of lawyers and 12 people in a jury box! To read the case go to http://www.ca8.uscourts.gov/opndir/10/02/091200P.pdf.

In its 2005 decision, Smith v. City of Jackson, the U.S. Supreme Court stated that disparate impact claims (involving employment actions that have a disproportionately negative impact on a protected class) are recognized under the Age Discrimination in Employment Act (ADEA), but further explained that such claim is not stated where the employer shows that its decision was based on a “reasonable factor other than age” (RFOA) even though the impact of the decision disproportionately affects older workers. The EEOC has now issued proposed revisions to the ADEA regulations regarding the meaning of “reasonable factors other than age.”

Facts and Circumstances. The proposed regulation is intended to clarify the scope of the RFOA defense. Under the proposed revision, whether an employment practice is based on RFOA is determined by the facts and circumstances of each case. The regulation also defines “reasonable factor” to mean “one that is objectively reasonable when viewed from the position of a reasonable employer . . . under like circumstances.” An employer seeking to use the RFOA defense must show that the employment practice was (1) “reasonably designed to further or achieve a legitimate business purpose” and (2) “administered in a way that reasonably achieves that purpose in light of the facts and circumstances that were known, or should have been known, to the employer.”

Reasonableness. The proposed regulation provides a non-exclusive list of factors deemed relevant to the reasonableness determination:

- Whether the employment practice and the manner of its implementation are common business practices;

- The extent to which the factor is related to the employer’s stated business goal;

- The extent to which the employer took steps to define the factor accurately and to apply the factor fairly and accurately (e.g. training, guidance, instruction of managers);

- The extent to which the employer took steps to assess the adverse impact of its employment practice on older workers;

- The severity of the harm to individuals within the protected age group, in terms of both the degree of injury and the numbers of persons adversely affected, and the extent to which the employer took preventive or corrective steps to minimize the severity of the harm, in light of the burden of undertaking such steps; and

- Whether other options were available and the reasons that the employer selected the options it did.

Other than Age. The EEOC also proposes a non-exclusive list of factors for determining whether a factor is “other than age”:

- The extent to which the employer allows its supervisors to utilize unchecked discretion to assess employees subjectively;

- The extent to which supervisors were asked to evaluate employees based on factors known to be subject to age-based stereotypes; and

- The extent to which supervisors were given guidance or training about how to apply the factors and avoid discrimination.

The proposed revisions to the ADEA regulations are now open for public comment for 60 days from the date of publication. Once the comment period has expired, the EEOC will take some time to consider the comments before issuing final regulations.

Appellant, Amgen, Inc. (Amgen), hired respondent, attorney Darrell G. Dotson. The employment contract was accompanied by an arbitration agreement and an appendix containing arbitration procedures. One of the provisions states: “Each party shall have the right to take the deposition of one individual and any expert witness designated by another party . . . . Additional discovery may be had where the arbitrator selected pursuant to this agreement so orders, upon a showing of need.” Four years later, Amgen terminated Dotson’s employment, and Dotson filed a complaint for wrongful termination. Amgen moved to compel arbitration and Dotson objected. The trial court found that the provision concerning witness depositions was flawed, declined to sever the provision, and denied the motion. We conclude that the language permitting the arbitrator to expand discovery upon a showing of need removes any taint of “unconscionability” from the agreement. Accordingly, we reverse.

http://www.courtinfo.ca.gov/opinions/documents/B212965.PDF