Tag Archives: employment

Favorite Firing: Always Assume an Employee Can State A Claim Against an Employer


This “favorite firing” story isn’t about some salacious or quirky set of facts. It involves whistleblowing under the Dodd-Frank Act—hardly a sexy topic. But the situation serves as a good reminder that there is always some reason that an employee can sue his or her employer. Thus, employers need to have good reasons for taking action against employees, and they need to stand ready to justify what they have done.

whistle-clip-art-176817The Facts: Daniel Berman was fired from his position as finance director of Neo@Ogilvy LLC (“Neo”) in April 2013, after working there for two-and-a-half years. He was responsible for Neo’s financial reporting and compliance functions. He claimed that he discovered various fraudulent accounting practices and that he had reported these violations to others within the company. He alleged that a senior officer got angry at his reports and that as a result he was fired. After his termination Mr. Berman reported his allegations to the parent company’s Audit Committee, and later provided information to the SEC, but prior to the termination he had only reported the potential fraud internally.

A few months later, Berman sued Neo, alleging that he had been discharged in violation of the whistleblower protection provisions of section 21F of Dodd–Frank and in breach of his employment contract. See Berman v. Neo@Olgivy LLC, et al (2d Cir. Sept. 10, 2015).

The legal question in the case became whether Mr. Berman was a whistleblower and could therefore state a cause of action against Neo and its parent company. Under Section 21F(h) of the Exchange Act, which was added in the Dodd–Frank Act, employers are prohibited from retaliating against employees for reporting violations of the Exchange Act. Subsection 21F(a)(6) defines “whistleblower” to mean “any individual who provides “information relating to a violation of the securities laws to the [SEC].”

However, subdivision (iii) of subsection 21F(h)(1)(A)(iii) does not limit protection to those who report wrongdoing to the SEC. This subdivision (iii) expands the protections of Dodd–Frank to include the whistleblower protection provisions of Sarbanes–Oxley, and those provisions, which contemplate an employee reporting violations internally, do not require reporting violations to the SEC.

Since Mr. Berman did not report any potential violations to the SEC until after his discharge, the court had to decide whether his internal reports could give rise to a cause of action against Neo.

Neo and its parent company filed a motion to dismiss, and the District Court granted that motion, dismissing the Dodd-Frank claims, because Mr. Berman had not reported any potential violations to the SEC until after his discharge. (His breach of contract claim was also dismissed.)

Mr. Berman appealed the dismissal of the Dodd-Frank claims. After an extensive analysis of the tension between the two sub-sections of the Exchange Act created in the Dodd-Frank Act, the Second Circuit reversed and reinstated these claims.

The Moral: The specifics of the Second Circuit’s analysis are less interesting than the end result—this employee’s cause of action against his employer survived. Of course, the facts in the case remain to be proven. Neo will have an opportunity to show that he was not fired because he raised the possibility of fraudulent accounting practices to others within the company. But in the meantime, Neo will have to devote significant legal expenses and management time to defending a lawsuit.

I would hope that Neo had not relied on competing definitions of “whistleblower” in making the decision to discharge Mr. Berman. I would hope there is more to the story than what was revealed in the parties’ briefs on a motion to dismiss. The moral is that employee lawsuits can usually survive a motion to dismiss, and employers need to have solid facts to support their termination of employees. And the case is a reminder that retaliation claims are difficult to overcome.

When have you been surprised by a claim that an employee brought against his or her employer?

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Proposed Changes to Overtime Regulations Don’t Update Wage Laws Sufficiently


Obama SOTUIn his State of the Union speech on January 28, 2014, President Obama promised to use his regulatory authority and executive orders to bypass Congress when they could not reach a deal. He has begun to follow through aggressively on this promise in the labor arena.

This call for new regulations to cut back on the FLSA exemptions from overtime is the subject of this post.

imagesIn general, the FLSA requires overtime pay for workers who work more than 40 hours/week, unless they fit into one of several categories of employees who are “exempt” from FLSA requirements. The largest exempt categories are for executive, administrative, and professional employees.

In his March 13 memorandum, President Obama stated:

. . . regulations regarding exemptions from the Act’s overtime requirement, particularly for executive, administrative, and professional employees (often referred to as “white collar” exemptions) have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.

Therefore, I hereby direct you [DOL] to propose revisions to modernize and streamline the existing overtime regulations. In doing so, you shall consider how the regulations could be revised to update existing protections consistent with the intent of the Act; address the changing nature of the workplace; and simplify the regulations to make them easier for both workers and businesses to understand and apply.

Labor experts expect that the Department of Labor will increase the salary threshold for these exempt workers from $455/week to somewhere in the neighborhood of $970/week.

I’m not adverse to an increase in the salary threshold. The current threshold of $455/week has been quite low, equating to $24,000/year, and was last increased ten years ago.

However, I have two concerns about changing the FLSA regulations—the first that it won’t improve workers’ wages as the President said, and the second that it doesn’t get at the heart of the problems with the FLSA.

1.  Businesses will change their hiring practices in response

An increase in the salary threshold of the anticipated magnitude will greatly expand the number of workers eligible to receive overtime pay. But businesses will not stand still in response.

Rather than increase the overtime wages they have to pay, many businesses are likely to change the way they structure jobs. They may pay their supervisory workers overtime and hire fewer non-supervisory workers to offset the overtime paid to the supervisors. They may hire more workers, but work them fewer hours to avoid the extra cost of overtime. They may cut back everyone’s hours to keep labor costs the same. Businesses are not likely to let an increase in overtime pay increase their cost structures increase without any response.

As one commentator stated,

“Employers should begin to consider, however, how increases to the required salary level and revisions to the duties tests under the “white collar” exemptions may impact long-standing staffing and compensation models for a wide range of employees.”

These changes may or may not be good for the economy. But if President Obama thinks more workers will automatically get “the protections of overtime” with an increase in the salary threshold, he is wrong. Some workers may find their pay cut when their hours are reduced.

2.      FLSA is out of date in many respects

My second concern is that we are missing a big opportunity to improve our wage laws overall. The FLSA was adopted in 1938 in response to the Great Depression. The labor market has changed substantially in the last 76 years, and many aspects of the FLSA regulations do not fit today’s labor market.

One issue that many employers and employees alike have requested is additional flexibility on the definition of “work week” and the ability to offer “compensatory time off” in lieu of overtime wages. For example, defining a two week period of 80 hours, rather than a single week of 40 hours, and permitting employees and employers to agree to flexible schedules, or occasional fluctuations, across that longer period of time before overtime is payable.

Moreover, we no longer live in a world where most employers do all their work at the employer’s place of business. Many workers do some work from home, or at least answer work-related calls and emails. Policing overtime work is increasingly difficult, and if the new regulations do not address the problems of monitoring employees’ working hours will set employers up to pay for time they never intended employees to work.

Any regulatory change that only addresses the narrow issue of the salary threshold for white collar exemptions is missing a huge opportunity to update one of our nation’s core labor laws.

Many of the broader changes in the FLSA would require statutory change, and the President cannot address these problems unilaterally. But it would be a big step forward if President Obama worked with Congress to bring the FLSA into the 21st century, offering changes that employers want in addition to increasing overtime and minimum wage levels as Democrats want. Rather than unilateral executive actions, we need a bipartisan approach to updating work rules across the board.

What aspects of the FLSA do you think are out of date?

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Favorite Firing: High-School Guidance Counselor Terminated for Writing Sexually Explicit Book


My recent posts in the “Favorite Firing” series have dealt with poor management decisions leading to terminations that are difficult to defend. (See here and here.) But “favorite firings” also arise when employees engage in behavior that leads to the immediate reaction “What was he (or she) thinking?” Today’s case is one of those.

teeth-dirty-old-man1In Craig v. Rich Township High School District 227 (7th Cir. 2013), a high school guidance counselor and coach published a book entitled It’s Her Fault, in which he wrote about his own sexual exploits and argued that women should be submissive and should use sex to get power in relationships.

Not surprisingly, the School District did not look favorably on this book by a man who provided guidance counseling services to students of both genders and coached young female basketball players. They fired Mr. Craig. He sued, claiming that he was fired in retaliation for publishing this book in violation of his First Amendment right of free speech. Thankfully, he lost his case, when first the trial court and then the Seventh Circuit dismissed his claims.

The Facts: Because the case was dismissed out of hand, there were no factual disputes. Mr. Craig published a book that was sexually explicit. According to the Seventh Circuit, the book repeatedly discussed sexually provocative themes and used sexually explicit terminology. Not only was it explicit in describing sexual anatomy and recommending certain practices, it also advocated that women should be submissive to men and should paradoxically use sex to secure power in relationships.

Furthermore, Mr. Craig admitted in his book that he objectified women in his own relationships, while stating that women were too emotional and unable to develop strong relationships. What young woman who read of these opinions by Mr. Craig—or of his “weakness for cleavage”—would want him as her guidance counselor or coach? Too icky.

The School District admittedly fired him because of the book and because they believed he was not an appropriate counselor for high-school children. The charges against Mr. Craig included that:

(1) the publication of Craig’s book  “ha[d]  caused disruption,  concern, distrust and confusion among members of the School District  community;” (2) Craig violated the School Board’s Policy  “prohibit[ing]  conduct that  creates ‘an intimidating, hostile,  or  offensive  educational  environment;”  and (3) “Craig failed to present [himself as] a positive role model and failed to properly comport himself in accordance with his professional obligations  as  a public teacher.

Mr. Craig claimed that his book was protected by First Amendment rights and that the School District had fired him wrongfully.

The Moral: The trial court dismissed the case, stating that Mr. Craig’s book was not a matter of public concern, and therefore was not protected by the First Amendment. The Seventh Circuit affirmed the dismissal, but used different reasoning. The Seventh Circuit said that the book was of public concern, because it dealt with “adult relationship dynamics.”

However, the Seventh Circuit agreed with the result in the trial court, holding that the School District had the right to fire Mr. Craig because of its interest in providing educational and counseling services in an unintimidating and non-sexualized atmosphere. Mr. Craig’s authoring and publishing of his book prevented him from teaching and counseling in the non-threatening environment the school wanted to create.

At the heart of the Seventh Circuit’s opinion is the language:

The school district reasonably predicted that “It’s Her Fault” would disrupt the learning environment at Craig’s school because some students, both female and male, who learned of the book’s hypersexualized content would be reluctant to seek out Craig’s advice.

It is a relief to find that the Seventh Circuit upheld the School District’s right to set the tone of its educational environment. In truth, the holding of the Seventh Circuit was stronger than the lower court’s holding. The lower court based its ruling on the specifics of Mr. Craig’s book, while the Seventh Circuit affirmed the School District’s ability to prescribe how its students are taught.

The Seventh Circuit did place limits on the School District. The court stated that it was balancing the School District’s interest in offering public education and counseling services in a non-sexual climate against Mr. Craig’s right to express himself. I would hope, however, that in future cases, school districts would be given broad abilities to structure their educational environments in ways they think most conducive to learning.

For another commentary on this case, see Paul Porvaznik’s article, 7th Circuit Dismisses Guidance Counselor’s First Amendment Suit Involving Tawdry Relationship Book (the ‘actually, please DO quit your day job’ post).

For a complete list of my “Favorite Firing” posts, click here.

What do you think of the Seventh Circuit’s opinion in this case?

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Be Proactive To Be Productive . . . and To Keep Your Job


mgr empeI came across this article on LinkedIn last week by J.T. O’Donnell, Founder & CEO of CAREEREALISM.com, titled Boss Labels Employee “Under-Achiever” For This…. It blew my mind—both because of the naïveté of the employee and because of the curmudgeonly-ness of the boss.

Here is how Ms. O’Donnell described the situation:

I spoke to a manager recently who was very upset. Why? She went to an employee with a new task and the employee commented aloud, “Good. I’ve been looking for something to do. My work’s been light lately.” The manager was infuriated by this statement. She couldn’t believe this was the first she was hearing about the employee’s lack of work to do. She started having daily meetings with the employee to check on her workload and now felt like she had to babysit to ensure she had enough to do. Her final comment was, “She better not expect a raise or promotion any time soon. I’m seriously thinking about letting her go.” [emphasis and quotation marks in original]

What Employees Should Do When Their Work Is Low

If you’ve ever been in a job where you had nothing to do, you know how wasteful that feels and how quickly you become bored. Thankfully, I haven’t been in that position since I was in a summer job in college, where I had to seek out work to do.

I was a temporary file clerk working for a group of engineers. Many days I went from engineer to engineer asking for work. Someone could usually find something for me to do. And when overtime was available one weekend, I got the assignment over other clerical employees with more experience. I believe I got the recognition—and the extra pay—because I had been proactive during the week.

So I suggest that if you are bored and underutilized in your job, seek out more to do.  Don’t sit around waiting for your boss to give you something, like the employee described in this article.

To be productive, particularly in a boring or dead-end job, you need to seek out your own work. Be proactive.

Ms. O’Donnell gave the same advice in her LinkedIn article, and I used to tell my kids the same thing at the dinner table when they were in entry-level jobs in high-school.

And if as an employee you have some legitimate reason for not seeking out work, then keep it to yourself! Don’t give your manager a reason to think you’re a deadbeat. But those situations should be rare.

The only time I found myself in that position was the day before I was scheduled to go on maternity leave and wouldn’t be back for three months. That’s how serious I think it needs to be before you deliberately let your workload drop.

What Bosses Should Do When They Find an Underworked Employee

The boss described in Ms. O’Donnell’s article downgraded the employee for not being proactive, and Ms. O’Donnell agreed with this position, saying

We are all businesses-of-one. Our job is to make sure our customer (a/k/a our boss) always feel like they are getting the best deal. We must deliver customer satisfaction, or be at risk of being replaced.

While I agree that employees should be proactive (as described above), as a manager I would probably have given the employee—particularly a young employee in an entry-level position—one bite at the apple. I’d give one strong coaching that the employee must come to his or her manager when needing work before writing them off. One coaching could salvage the employee, and I think it’s worth it.

I would feel better about an employee who came to the job already knowing to be proactive. But I recognize that not everyone has a mother who coaches them at the dinner table.

What would you have done, as employee or manager, in this situation?

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Workplace Investigations by Outside Counsel – Make Sure They’re Done Right


MP900302920In a June 18, 2013, post on Win-Win HR, entitled Workplace Investigations: $300,000 in Sanctions Highlights Risks of Using Employer’s Regular Counsel, Lorene Schaefer highlighted a case in which an outside law firm’s investigation into a claim of discrimination led to an award of $300,000 in sanctions, plus other penalties against the employer and its law firm. See EEOC et al. v. Spitzer et al

After the Supreme Court’s recent decision in Vance v. Ball State (see the Vance opinion here and my earlier post here), workplace investigations into discrimination, harassment, and other employee claims, will be even more important. After Vance, courts will analyze fewer cases under a strict liability theory. More cases will depend on prompt and complete investigations to avoid findings that the employer was negligent and therefore liable for the bad conduct of the plaintiff’s managers and co-workers.

In the Spitzer case, the outside attorney failed to produce his notes of the investigation during discovery. When the judge learned of this omission, he came down hard on both the defendant employer and on its outside law firm.

I have hired outside counsel to conduct investigations, both when I was in-house counsel and when I was an HR executive. In my consulting life, I have also been the investigator in workplace complaints acting under the auspices of another attorney.

When I hired an outside attorney to investigate, we always discussed whether the case was likely to result in litigation, and whether our usual outside law firm should do the investigation or whether we should hire another attorney for the sole purpose of investigating and potentially testifying at a later trial. If litigation was likely, or if we wanted to reserve our usual firm for trial, we found another attorney to use as the investigator. Only when litigation was less likely, or when we thought prior knowledge of the company was critical to the investigation, did we use our regular trial counsel, knowing that if the case did go to litigation, we would have to bring another firm up to speed to represent us in court.

MP900302921The Win-Win HR article contains an excellent analysis of the Spitzer case and of the legal and tactical issues in workplace investigations. Here is my brief advice for employers:

1.   Make sure your attorney investigator is well qualified to conduct the investigation.

a.   The investigator needs to know the law and get up to speed on your business (to the extent relevant)

b.   The investigator needs to be comfortable interviewing employees at all levels of the organization – complaining party, alleged harassers or discriminators, witnesses, and possibly upper management.

2.   Remember that one primary reason for conducting these investigations is to prepare for later litigation. Keep your litigation strategy in mind from the beginning.

a.   Make sure that any documents created during the investigation are accurate and unlikely to harm your case. (In Spitzer, the attorney notes that were not produced included a note next to one witness’ remarks saying “BAD for US”.)

b.   Also, the investigator should have the personality to make a good witness.

3.   Discuss with your attorney whether he or she should be an investigator or trial counsel in the case. Don’t believe the attorney if he or she wants to be both.

What issues have you seen in using attorneys to investigate workplace wrongdoing?

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Employer Liability for Supervisors’ Actions


OOn November 26, 2012, the U.S. Supreme Court heard arguments in a case that raises the issue of who is a supervisor under Title VII of the Civil Rights Act of 1964. The answer will determine the extent to which an employer is vicariously liable for harassment in the workplace. This might seem like a simple question, but there are many definitions of “supervisor” under various employment laws and the common law.

The case in question, Vance v. Ball State University, involves an African American employee, Maetta Vance, who alleges another employee, Saundra Davis, subjected her to a racially hostile work environment.  The employer, Ball State University, investigated, but could not reconcile the two employees’ competing version of events, and therefore did not discipline Davis. Ball State clearly took prompt action to investigate, even though its response was not what Vance wanted.

Vance sued. The lower courts dismissed the case, finding that Davis was not Vance’s supervisor.  According to these lower courts, Davis did not fit the definition of a “supervisor,” because she did not have the power to hire, fire, demote, or discipline Vance. Therefore, the university was not automatically liable for Davis’s actions, and its prompt investigation absolved it of any negligence.

Vance appealed to the Supreme Court, claiming that Davis was in fact a supervisor and therefore an agent of Ball State, that the university was strictly liable for any actions by Davis, and that Vance should be permitted to pursue her lawsuit.

The Equal Employment Opportunity Commission (EEOC) says a supervisor is anyone who has authority to direct daily work activities — like making working assignments and schedules — or to recommend employment actions. It doesn’t matter whether the person can hire or fire or discipline. Many Circuit Courts of Appeals have accepted this broad definition of “supervisor.”

The last time the Supreme Court addressed employer responsibility for harassment by its employees was in Faragher v. City of Boca Raton, 524 U.S. 775 (1998), and Burlington Industries Inc. v. Ellerth, 524 U.S. 742 (1998). In those decisions, the Supreme Court held that in cases of harassment under Title VII, employers are vicariously liable for acts of supervisors, who are deemed to be agents of the employer and to therefore act in the employer’s stead.

By contrast, the Court said that employers are not automatically liable for the actions of non-supervisory employers. For the employer to be liable for harassment by non-supervisors, the employer must be found to have known about the harassment and not taken appropriate action to correct it and to prevent future harassment.  The employer must have appropriate and well-communicated channels for reporting harassment, investigate promptly, and take appropriate corrective action when harassment is found.

Unfortunately, employment law today is a cobble of statutory and common law concepts. Statutes such as Title VII, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Fair Labor Standards Act, and a myriad of other federal, state and local laws, contain some definitions. But behind these statutes stand common law cases on “master and servant” and “agency.” The master and servant of common law England each owed duties to the other. Agents owed duties to their principals. Those concepts often still apply in employment law today, as the Supreme Court held in Farragher and Burlington Industries. Thus, under the common law, it made sense to differentiate between the acts of managers (who could be “agents”) and other employees.

In the modern corporate workplace, however, almost no individual employee can act alone, particularly not in hiring, disciplining, and firing other employees. Even high-level managers with the title of Vice-President must involve Human Resources managers in making employment decisions under most corporate employment policies. These policies are typically well-documented and communicated. Employees are well-aware that if they have complaints about their managers, they should talk to HR.  Why, then, should a rogue VP make a company automatically liable for harassment, even when the employee has not filed a complaint with HR?

If an employer has good policies and follows those policies to investigate and respond to claims of discrimination and harassment (including making the employee whole for costs and losses arising from the discrimination or harassment), the company is doing all it can. There will be bad actors in any organization, and firing them should suffice.

Let’s hope the Supreme Court looks at the realities of the modern workplace – which has been developed in response to the many statutes and court decisions protecting employees – in deciding when a corporation should be automatically responsible when managers violate policy.

What do you think? Please leave a comment below.

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Favorite Firings – Next in the Series: Fired for Donating an Organ


Would you donate a kidney to your brother?

Here’s a recent Missouri case that makes me wonder “what was this employer thinking?” I don’t think all terminations resulting from an employee’s medical issue are against public policy. But in most cases, showing a little compassion is the right thing for an employer to do. Managers should think long and hard before firing an employee with a serious medical situation.

The Facts: In Delaney v. Signature Health Care Foundation, No. 97419, 2012 LEXIS 694 (Mo. App. E.D., May 22, 2012), Norton, J., the Missouri Court of Appeals decided that Phyllis Delaney had been wrongfully terminated for taking time off to donate a kidney to her brother.

Ms. Delaney worked for Signature Health Care Foundation as a data entry clerk. When her brother needed a kidney transplant and she was a match to provide him with a kidney, Ms. Delaney told her employer that she would be off work for four weeks. According to Ms. Delaney’s allegations, Signature Health first approved her absence, then changed its mind three days before surgery and fired her.

Missouri is an employment-at-will state, which means that an employer can fire an employee for any reason, or for no reason, but not for an illegal reason. Missouri recognizes a “public policy” exception to the employment-at-will doctrine – an employer may not fire an employee for a reason that is contrary to well-established public policy in the state. Specifically, the Court of Appeals in Delaney said:

“Missouri Courts have recognized four categories of the public policy exception to the at-will-employment doctrine. Specifically, an employee has a cause of action when he or she has been discharged for: (1) refusing to perform an illegal act or an act contrary to a strong mandate of public policy; (2) reporting the employer or fellow employees to superiors or third parties for their violations of law or public policy; (3) acting in a manner public policy would encourage; or (4) filing a claim for worker’s compensation. Hughes v. Bodine Aluminum, Inc., 328 S.W.3d 353, 356 (Mo.App.E.D.2010).” 

In her lawsuit, Ms. Delaney claimed that Signature Health had wrongfully terminated her employment in violation of Missouri’s public policy encouraging organ donation. Signature Health won a dismissal of the lawsuit in the lower court, but the Missouri Court of Appeals reversed.

Based on a review of several Missouri statutes, the Court of Appeals held that Missouri public policy does encourage organ donation. Therefore, firing an employee because he or she is an organ donor gives the employee a claim under the public policy exception to Missouri’s employment-at-will doctrine. Ms. Delaney deserves her day in court, according to the Court of Appeals, and she will now have an opportunity to prove that in fact she was discharged because she had decided to donate the kidney to her brother.

The Moral: Before managers decide to fire an employee, they should take a step back and think about how the termination would look to an outsider. I always told managers to ask themselves how the case would look in the newspaper, or if they were telling their mother about the situation. If you don’t want to explain yourself to the public or to your relatives, then the termination is probably not a good idea.

In this case, would any rational manager want to explain that they fired a woman because she was going to give her brother a kidney?

In addition, managers should consider whether there are any statutes or regulations that might support a public policy claim like in the Delaney case. If there is any question, talk to an attorney who specializes in employment law.

Ms. Delaney has not yet won her case. It might be that the employee’s absence in this case would truly cause the employer a hardship, and the employer might be able to prove that public policy does not require them to endure the hardship to support her organ donation. But Signature Health had better be able to prove some defense that overcomes the policy in favor of organ donation at trial. Could they not have hired a temporary data entry clerk for the work that Ms. Delaney would miss for four weeks?

In my opinion, they are facing an uphill battle in the court of law and in the court of public opinion. What do you think about this situation?

* * *

I’m still soliciting ideas for stories on workplace terminations to publish. If you have an interesting situation, please email me or leave a comment below. But please disguise the facts to protect the innocent (and not-so-innocent) unless the situation is well-publicized, and then include a link to support your story. I will only publish verified stories.

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