Monthly Archives: July 2015

WRONGFUL TERMINATION: EMPLOYERS CANNOT HIDE BEHIND THE AT-WILL DOCTRINE

I often hear the terms “at-will” and “right to work” used interchangeably and/or incorrectly.  The most common misuse:  “This is a right to work state, so I can fire an employee any time!”  Not so fast.

This article discusses what these common employment terms really mean.  Equally important, it  provides businesses with a user friendly guide to when they may — and may not — terminate employees.

“RIGHT TO WORK” HAS NOTHING TO DO “AT-WILL” EMPLOYMENT

Arizona is one of a number of states that has a “right-to-work” provision in its Constitution.  Article XXV of the Constitution states:

“No person shall be denied the opportunity to obtain or retain employment because of non-membership in a labor organization, nor shall the State or any subdivision thereof, or any corporation, individual or association of any kind enter into any agreement, written or oral, which excludes any person from employment or continuation of employment because of non-membership in a labor organization.”

This provision, effective since 1946, prohibits unions from requiring employers to hire only union employees. An Arizona statute restates this language verbatim.

Thus, “right to work” is a term that has little or nothing to do with “at-will” employment (described below).  It is a term that deals strictly with unions — restricting their ability to force employees to join and pay union dues.  Right to work laws are rarely invoked these days — particularly in Arizona, which has a relatively low union presence.

AT-WILL EMPLOYMENT:  EMPLOYERS HAVE SIGNIFICANT POWER IN FIRING EMPLOYEES, BUT LOSE THAT POWER WHEN THEY FAIL TO FOLLOW THE LAW 

“At-will” employment means that the employee may be terminated from employment at any time for any lawful reason or for no reason.  Similarly, at-will employees may resign at any time for any or no reason.

Despite the much heralded strength of the at-will doctrine, Arizona businesses are held liable for wrongful discharge if employees establish any one of the following:

  • Breach of a written contract
  • The termination was in violation of an Arizona statute
  • The termination was in retaliation for the employee’s reasonable disclosure of the employer’s violation of state law.  A retaliation claim requires (1) a reasonable disclosure of information, (2) that the disclosure be made to a supervisor with authority to investigate or the employee of a state entity, (3) that the employee believes that the employer is violating or will violate the Arizona constitution or Arizona statutes, (4) that the employee’s belief is reasonable, and (5) that the employer “terminated the employment relationship” because of the disclosure.
  • The termination was in retaliation for the refusal by the employee to commit an act or omission that would violate the Constitution of Arizona or the statutes of Arizona
  • The termination was in retaliation for the exercise of rights under the workers’ compensation statutes
  • The termination was in retaliation for service on a jury
  • The termination was in retaliation for the exercise of voting rights
  • The termination was in retaliation for the exercise of free choice with respect to non-membership in a labor organization
  • The termination was in retaliation for service in the national guard or armed forces

FEDERAL LAWS WHICH ALSO PROVIDE A VARIETY OF CLAIMS DESPITE THE AT-WILL DOCTRINE

There are many federal laws which also provide at will employees with claims for wrongful discharge.  I have brought and defended claims under the following laws, among others:
  • Title VII, which prohibits discrimination based on race, color, religion, sex, or national origin
  • The Age Discrimination in Employment Act of 1967 (ADEA), which protects individuals who are 40 years of age or older
  • The Americans with Disabilities Act of 1990, which prohibits employment discrimination against qualified individuals with disabilities
  • The Pregnancy Discrimination Act, which prohibits discrimination on the basis of pregnancy, childbirth, or related medical conditions
  • The Genetic Information Nondiscrimination Act of 2008, which prohibits employment discrimination based on genetic information about an applicant, employee, or former employee
  • The Family Medical Leave Act, which entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave
  • The Fair Labor Standards Act, which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards
  • The False Claims Act, which imposes liability on persons and companies (typically federal contractors) who defraud governmental programs
  • Sarbanes Oxley, which protects employees of public companies who ‘blow the whistle’ by reporting conduct that they reasonably believe constitutes a violation of federal law relating to financial, securities or shareholder fraud

PRE-TERMINATION QUESTIONS EVERY EMPLOYER SHOULD ASK

A business can always find a purported “reason” to fire an employee.  Before that decision is made, however, the business should consider:

  • Might the employee have damaging information regarding the company’s affairs, including knowledge of illegal, unethical, or otherwise improper conduct by ownership or management?
  • What is the employee’s documented past work record? If it is good — no written discipline coupled with raises and/or favorable reviews and comments —  then the termination may be deemed pretextual.
  • Is there any record of the employee complaining or uncovering improper conduct by the company? If so, the risk of a pretext finding rises dramatically.
  • What are the chances the now ex-employee will bring a lawsuit against the company? What sort of claims can be brought and what is the company’s potential exposure?
  • How will the ex-employee appear before a jury? Does he or she have an exemplary past?
  • How will your own employees and ex-employees appear? Do they uniformly support your position or will some provide evidence against you?
  • What will it cost in dollars, time, and bad publicity to defend a lawsuit?
  • Can there be collateral damage (lost sales, contracts, or clients; government investigations; penalties, etc.)?

Failing to identify and correctly answer these questions can result in massive pain.

CONCLUSION

The “at-will” doctrine affords employers with a great deal of autonomy in making employment decisions.  However, there are limits to an employer’s power — limits that are well-defined in state and federal laws.

Businesses should at least know of the existence of laws that can be applied against them; then, they will be able to make informed, logical, and defensible employee decisions (please see The Dark Side of Employee Discipline for a discussion of common employer mistakes).

Management training is critical when it comes to knowing the law.  Ensure that your managers are trained by legal counsel on an annual basis.  This preventive maintenance will enable management to (1) know current laws and (2) spot potential issues as they arise.  No one wants to learn the law only as the result of an EEOC charge or whistleblower lawsuit.

In sum, businesses can easily avoiding creating their own pain by knowing the law and following it.  This week’s video — “My Own Prison” by Creed — evokes the type of pain that can be felt by as a result of poor employment decisions:

 

 

 

 

 

WHY IS HOOTERS ALLOWED TO DISCRIMINATE BY HIRING ONLY WOMEN?

Ever walk into a restaurant or bar and see only women servers?  Or only male servers? Or only young servers?  Me too.  But is it legal to hire only women, or only men, or only young workers?  Read on for the answers — paying particular attention to the video at the end of the article, which highlights a significant exception to the general law against discrimination.

TITLE VII GOVERNS THE HIRING PRACTICES OF MOST EMPLOYERS

Title VII of the Civil Rights Act of 1964 prohibits employment practices that discriminate on the basis of race, color, religion, sex, or national origin.  Nevertheless, a discriminatory employment practice, such as the sex-based hiring practice hiring only women (or men), may pass legal muster if sex is a bona fide occupational qualification or “BFOQ.”

Title VII’s narrow exception provides:

“[I]t shall not be an unlawful employment practice for an employer to hire and employ employees … on the basis of … sex … where … sex … is a bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise.”

The Supreme Court has emphasized that “[t]he BFOQ defense is written narrowly, and this Court has read it narrowly.”  The BFOQ defense applies to “special situations” where employment discrimination is based upon “objective, verifiable requirements” that “concern job-related skills and aptitudes.” An “occupational qualification” means a “qualification[ ] that affect[s] an employee’s ability to do the job.”

The BFOQ defense “may be invoked only when the essence of the business operation would be undermined by hiring individuals of both sexes.”  To justify discrimination under the BFOQ exception, an employer must show, by a preponderance of the evidence, that: (1) the “job qualification justifying the discrimination is reasonably necessary to the essence of its business”; and (2) that “sex is a legitimate proxy for determining” whether an employee has the necessary job qualifications.  In light of these demanding legal standards, BFOQs are few and far between.
BASED ON A 1997 SETTLEMENT, THE EEOC IS HANDS-OFF WHEN IT COMES TO HOOTERS’ HIRING PRACTICES

In 1997, Hooters agreed to pay $3.75 million to settle a lawsuit filed by men who were denied jobs by the restaurant chain, which is known for its voluptuous and scantily clad female bartenders and servers.

The settlement permitted Hooters to continue attracting customers with a female staff of Hooters Girls. But the chain also agreed to create other  jobs, like bartenders and hosts, that must be filled without regard to sex.

Hooters is still subject to attack that its practices are discriminatory against men.  But it appears that the EEOC will take no action given the 1997 settlement.  In any event, Hooters remains defiant against any attacks on its culture.  Its website reads:

“You may or may not know that Hooters has taken some flak over the years. We’ve endured our share of frivolous lawsuits, but none have put a dent in our ability to provide some good, old-fashioned fun in a casual atmosphere free from the intervention of outside parties with nefarious motives. It took awhile, but we finally worked the word “nefarious” into casual conversation. The point is, we’re proud of who we are. Yes, we have a pretty face. And sex appeal is part of our thing, but it’s not the only thing.”

OTHER EMPLOYERS, INCLUDING RESTAURANTS, AIRLINES, AND OTHER BUSINESSES CONTINUE TO LEARN HARD LESSONS

Hooters ability to hire only women for certain positions is very rare.  Much more common are the cases of Lawry’s Restaurants Inc. and Southwest Airlines.   Each had a practice of hiring only females (for server and flight attendant positions, respectively).  Each was sued and changed its practice.

The EEOC sued Lawry’s and later reported that the west coast steakhouse chain agreed to settle the lawsuit for more than one million dollars. The legal action arose from a complaint by one of the restaurant’s busboys. He claimed that he had been denied a higher-paying server position because of his gender. The EEOC investigation determined that Lawry had prohibited men from working as servers since 1938 and based its policy on tradition. Since Lawry’s instituted the policy over seventy years ago, female servers had dressed in costumes from the 1930s and 1940s. The EEOC determined that despite the policy’s roots in tradition and history, the practice of only hiring women for server positions adversely affected male employees and applicants on the basis of their sex.

Southwest readily conceded that its refusal to hire males was intentional.  Southwest contended, however, that the BFOQ exception to Title VII’s ban on sex discrimination justified its hiring only females for the public contact positions of flight attendant and ticket agent.

A court, however, rejected Southwest’s position:

“Southwest’s position knows no principled limit. Recognition of a sex BFOQ for Southwest’s public contact personnel based on the airline’s “love” campaign opens the door for other employers freely to discriminate by tacking on sex or sex appeal as a qualification for any public contact position where customers preferred employees of a particular sex.  In order not to undermine Congress’ purpose to prevent employers from “refusing to hire an individual based on stereotyped characterizations of the sexes,” a BFOQ for sex must be denied where sex is merely useful for attracting customers of the opposite sex, but where hiring both sexes will not alter or undermine the essential function of the employer’s business.

Rejecting a wider BFOQ for sex does not eliminate the commercial exploitation of sex appeal. It only requires, consistent with the purposes of Title VII, that employer’s exploit the attractiveness and allure of a sexually integrated workforce. Neither Southwest, nor the traveling public, will suffer from such a rule.

To recognize a BFOQ for jobs requiring multiple abilities, some sex-linked and some sex-neutral, the sex-linked aspects of the job must predominate.  An illustration of such dominance in sex cases is the exception recognized by the EEOC for authenticity and genuineness. In the example given, that of an actor or actress, the primary function of the position, its essence, is to fulfill the audience’s expectation and desire for a particular role, characterized by particular physical or emotional traits. Generally, a male could not supply the authenticity required to perform a female role. Similarly, in jobs where sex or vicarious sexual recreation is the primary service provided, e.g. a social escort or topless dancer, the job automatically calls for one sex exclusively; the employee’s sex and the service provided are inseparable. Thus, being female has been deemed a BFOQ for the position of a Playboy Bunny, female sexuality being reasonably necessary to perform the dominant purpose of the job which is forthrightly to titillate and entice male customers.  One court has also suggested, without holding, that the authenticity exception would give rise to a BFOQ for Chinese nationality where necessary to maintain the authentic atmosphere of an ethnic Chinese restaurant.”

INDUSTRIES IN WHICH THERE ARE LEGITIMATE BFOQS UPON WHICH EMPLOYERS MAY RELY

In many industries, it is difficult to imagine any jobs that would qualify as BFOQs. However, the “unique context of prison employment,” is one area where courts have found sex-based classifications justified. In one case, the Court held that, in the context of a maximum-security facility “where violence is the order of the day” and sex offenders were interspersed with other prisoners, a female guard’s sex may “undermine her capacity to provide the security that is the essence of a correctional counselor’s responsibility.”

Another example of bona fide occupational qualifications are  mandatory retirement ages for bus drivers and airline pilots, for safety reasons. Further, in advertising, a manufacturer of men’s clothing may lawfully advertise for male models. Religious belief may also be considered a BFOQ; for example, a religious school may lawfully require that members of its faculty be members of that denomination, and may lawfully bar from employment anyone who is not a member.

While religion, sex, or national origin may be considered a bona fide occupational qualification in narrow contexts, race can never be a BFOQ. However, the First Amendment will override Title VII in artistic works where the race of the employee is integral to the story or artistic purpose.

Bona fide occupational qualifications generally only apply to instances in which the BFOQ is considered reasonably necessary to the normal operation of a particular business. For example a Catholic college may lawfully require such positions as president, chaplain, and teaching faculty to be Catholics, but membership in the Catholic Church would generally not be considered a BFOQ for occupations such as secretarial and janitorial positions.

CONCLUSION

The Lawry’s, Southwest Airlines, and Ruby Tuesday case previously discussed by the HR Law Insider, represent cautionary tales for businesses.  Only in very limited circumstances can an employer justify a discriminatory hiring practice. The ability to market a company’s image through employees’ physical appearances is generally not going to satisfy the BFOQ defense.

Moving forward, cultural shifts are certain to add complexity to the BFOQ issue.  For example, in a recent case a transgender employee who was born physically female filed a discrimination lawsuit because the employer took the position that only a man was allowed to do his job: watching men urinate into plastic cups at a drug treatment center.

In short, employers should exercise extreme caution when making employment decisions that turn on an employee’s gender or other protected status.

For further information on this or other employment law topics, including hiring employees that fit your work culture, contact Art Bourque at Bourque Law Firm.

SPECIAL NOTE:  Title VII applies only to businesses with 15 or more employees.  Thus, the business highlighted in the video below was able to hire only men of a certain ethnic background:

DOL ISSUES NEW WARNING: DO NOT MISCLASSIFY WORKERS AS INDEPENDENT CONTRACTORS

The United States Department of Labor (DOL) and other government agencies are aggressively pursuing businesses who misclassify employees as independent contractors.

On July 15, 2015 the DOL announced that it will be further cracking down on businesses that misclassify workers.  The DOL also provided guidance as to how businesses should determine whether workers are employees or independent contractors.  This HR Law Insider edition helps businesses interpret the DOL’s guidance in order to ensure compliance with the law (and avoid costly penalties).

THE DOL AND OTHER GOVERNMENT AGENCIES ARE ON A MISSION

On Monday the DOL proclaimed:

“The DOL continues to receive numerous complaints from workers alleging misclassification, and the Department continues to bring successful enforcement actions against employers who misclassify workers.  In addition, many states have acknowledged this problematic trend and have responded with legislation and misclassification task forces.  Understanding that combating misclassification requires a multi-pronged approach, the DOL has entered into memoranda of understanding with many of these states, as well as the Internal Revenue Service.  In conjunction with these efforts, the DOL believes that additional guidance regarding the application of the standards for determining who is an employee under the Fair Labor Standards Act (FLSA ) may be helpful to the regulated community in classifying workers and ultimately in curtailing misclassification.”

Thus, businesses should immediately evaluate all of their independent contractor relationships with counsel — ensuring that each relationship has been properly classified.

THE STANDARD TO DETERMINE WHETHER A WORKER IS AN EMPLOYEE OR INDEPENDENT CONTRACTOR:  THE DOL’S TEST FAVORS FINDING THAT WORKERS ARE EMPLOYEES  

The FLSA’s definition of “‘employ’ includes to suffer or permit to work.” This “suffer or permit” concept has broad applicability and is critical to determining whether a worker is an employee and thus entitled to the FLSA’s protections.  An “entity ‘suffers or permits’ an individual to work if, as a matter of economic reality, the individual is dependent on the entity.”

The Supreme Court has developed a multi-factor “economic realities” test to determine whether a worker is an employee or an independent contractor under the FLSA.  The factors typically include: (A) the extent to which the work performed is an integral part of the employer’s business; (B) the worker’s opportunity for profit or loss depending on his or her managerial skill; (C) the extent of the relative investments of the employer and the worker; (D) whether the work performed requires special skills and initiative; (E) the permanency of the relationship; and (F) the degree of control exercised or retained by the employer.

The DOL’s guidance states that “applying the economic realities test, most workers are employees under the FLSA.”

In undertaking the test, each factor is examined and analyzed in relation to one another, and no single factor is determinative.  The factors should be considered in totality to determine whether a worker is economically dependent on the employer, and thus an employee.  The factors should not be applied as a checklist, but rather the outcome must be determined by a qualitative rather than a quantitative analysis. The application of the economic realities factors is guided by the overarching principle that the FLSA should be liberally construed to provide broad coverage for workers, as evidenced by the Act’s defining “employ” as “to suffer or permit to work.”

In applying the economic realities factors, courts have described independent contractors as those workers with economic independence who are operating a business of their own. On the other hand, workers who are economically dependent on the employer, regardless of skill level, are employees covered by the FLSA.  “Ultimately, in considering economic dependence, the court focuses on whether an individual is ‘in business for himself’ or is ‘dependent upon finding employment in the business of others.’”

CONCLUSION

The DOL concluded its new guidance with the following message/warning to employers:

“In sum, most workers are employees under the FLSA’s broad definitions. The very broad definition of employment under the FLSA as “to suffer or permit to work” and the Act’s intended expansive coverage for workers must be considered when applying the economic realities factors to determine whether a worker is an employee or an independent contractor.  The correct classification of workers as employees or independent contractors has critical implications for the legal protections that workers receive, particularly when misclassification occurs in industries employing low wage workers.”

In my experience, the DOL has been true to its word:  audits and penalties are on the rise.  This week’s DOL pronouncement is a clarion call to employers that enforcement will further increase.  Companies should thus conduct audits with counsel now to either (1) reclassify improperly classified workers or (2) make changes that will cause improperly classified workers to properly fit within their existing classification.

This week’s HR Law Insider video touches on just one reason state and federal governments strongly enforce the proper classification of employees: