Settlement Gone Bad - Law Firm Now In Defendant's Box

The law firm of Leeds, Morelli & Brown has won the first round of a law suit by their former clients claiming the firm sold them out in their class action suit against Nextel. According to the story in the Denver Post, the firm agreed to a two year consulting agreement with Nextel, for a cool $2 million. What makes that appear even more unusual was that the individual claims of the employee/plaintiffs were still to be resolved. Still, the law firm won the first round of a trial in Arapahoe County District Court. Stay tuned, appeal promised.



Even more interesting is this link to Eichen, Levinson (self described as personal injury trial lawyers) who are again in their own words
aggressively investigating this matter [which refers to their description of a similar case involving Prudential and solicitation of employees of several other firms, not Nextel]. If you or a friend or family member retained Leeds Morelli in any discrimination matter, and you were not told of the millions of dollars of up-front legal fees they received before you recovered a dime, and if you were never told of secret lucrative ‘back end’ consulting deals Leeds Morelli got from some of the very defendants they were supposedly suing, then call us at EICHEN LEVINSON, or email us your information, so that we may take steps to help you.
Is it too much to hope that all of the firms engaged in class solicitation will turn on each other?

The Worst of All Worlds - Recanting of Management Witness Comes Too Late, But He Still Ends Up Convicted of Perjury

Sometimes things just don't work out. After Forest River, a manufacturer of recreational vehicles was hit with a $320,000 sexual harassment verdict, one of its management employees who had been accused of the harassment changed his story. Although during deposition and trial he denied any sexual relationship, after the verdict he admitted that he had a consensual affair with the plaintiff. The judge unfortunately did not believe him, refused to set aside the verdict and referred the matter to the U.S. Attorney for an investigation of possible perjury. Last Monday, the story was completed when he pled guilty to perjury. The eTruth, the on line site of the Elkhart, Indiana Truth has the story. Actually, since sentencing hasn't occurred, probably too early to say the story is complete. Not too early, to say it is a pretty strange tale.

Trade Secrets in the World of Tropical Fish - A Better Deal at Petco than Wal-Mart?

Given the vaunted power of Wal-Mart in demanding low prices from its suppliers, perhaps the most amazing thing about Fox v. Tropical Warehouses, Inc. (Tx.Ct. App. - Fort Worth 11/20/03) is that Petco could command a better price from their wholesale tropical fish supplier than the Arkansas based powerhouse. But more importantly from an employment law standpoint, the case is a good illustration of some general principles of Texas trade secret law in a definitely non-high tech context. It also shows the common sense of a Texas appeals court, which reached what seems to be an imminently fair result in modifying a temporary injunction, while still upholding the integrity of trade secret law.

Something to Be Thankful For From Congress - Health Savings Accounts for All

Lost in all the hoopla about the new Medicare bill and presciption cards for "seniors" (or at least I didn't hear much about it) is the expansion of Health Savings Accounts (HSA), which is much like an IRA. In the past they were available only on a limited basis, but now are potentially open to anyone. The major news organizations are talking about it today including an article in the Guardian and a brief description in a USA Today story.



Since I am certainly no benefits lawyer, I had the temerity to summarize a brief summary by one of my colleagues who is a benefits lawyer, Peter Kelly. Since it is a summary of a summary, you can be sure any errors are mine, not Peter's. The highlights, without any of the really technical stuff, as I understand them are:



Employees who select a high deductible coverage for their healthcare insurance may establish an HSA. A coverage option will qualify as a high deductible at any level of deductible of $1,000 or more for self-only coverage ($2,000 for spouse/family coverage).



Employees, employers and even family members can contribute to an employee's HSA The overall limit on the amount that can be deducted each year is the lesser of the deductible or a dollar limit. For employees under 55, the dollar limit is $2,250 plus COLA for self-only coverage and $4,500 plus COLA for spouse/family coverage. If COLA applies for 2004 (and the legislative history indicates it might) the 2004 limits could be as much as $2,600 and $5,150, respectively. In addition the annual contribution for employees aged 55 or more is increased by $500 (a differential that increases by $100 each year until it is $1,00 per year more in 2009).



An HSA is much like an IRA. It is a tax exempt, individual account that must be invested with a bank, insurance company or other entity approved by the Treasury Department. (Just wait for the ads from the brokerage companies to start rolling out.) As long as amounts withdrawn are only used to pay for medical expenses they will not ever be taxed. HSA's may not be used to pay insurance premiums other than COBRA coverage costs or Medicare premiums (Medicare itself, not Medigap). Virtually any other medical cost is permitted. The accounts are vested, and like any IRA completely portable.



HSA's may be offered through cafeteria plans. Like IRA contributions, HSA contributions may be made at year end or even early in the following tax year.



According to the politics, it was the HSA provision that got a number of conservative Republicans to go along with the otherwise sweeping expansion of a government program. I can't help but think of one of the early champions of HSA's who never saw them come to pass while he was still the senior Senator from Texas, Phil Gramm.. Maybe that will be a bright spot in his week, as I hope he has a bad Friday as Texas crushes his beloved Aggies.

No One Ever Said The Legislative Process Was Simple- White Collar Exemption Rulemaking Survives

Earlier this fall, in a highly publicized vote the Senate passed the Harkin amendment barring the Department of Labor from moving forward with its proposed amendments to the white collar exemption regulations of the Fair Labor Standards Act of 1938. Then, the House of Representatives, which had earlier passed a spending bill without such restrictions, passed a non-binding instruction to the House conferees to accede to the Senate position. At that point, many, if not most, supporters of reform tossed in the towel. But the threat of a presidential veto, which the White House stuck to, and continued efforts by the business community, resuscitated the regulation process. MSNBC has the story of the brass knuckle in-fighting that occurred before this result was reached.



Although the ability of the DOL to continue the process has survived, the fight is by no means over. When the DOL issues its final proposed regulations, you can expect a true political donnybrook over the regulations complete with all the hot air that can be mustered in a presidential campaign year. Assuming no other legislative barriers, after the regulations are published in final form in the Federal Register, the only mechanism to keep them from becoming effective is for Congress to veto them within 60 days under the Congressional Review Act, a 1996 bill that has been rarely used. Assuming however a Bush administration that shows the same backbone that it took to revive them through the legislative process, an actual veto of a Congressional act to nullify the regulations would have to be overridden by a 2/3 majority vote in each House.



One other scenario would be a delay in getting the final regulations written and approved by the various regulatory agencies, prior to publishing. If there were to be a Democratic presidential installed before the regulations are actually published, they could be withdrawn by the new administration. One would assume having come this far and put so much political capital on the line for the regulatory process, that this Administration will ensure that the lights will be burning late at the DOL, and other agencies, to ensure there is no possibility of that happening.



The bottom line is that although it is way too soon to say that the regulations will be law, and for certain there will be some changes in the regulatory stage, it may be time to brush up on the major concepts, as change may be coming. After 40 years, hardly too soon.



Some Employment Litigation Highlights - Or Was That Lowlights?

Overlawyered.com takes a look at some of the not so Great Moments in Discrimination, including a kind mention of our reference to the weird and wacky cases of the year surveyed by the California Chamber of Commerce.

No Microsoft Result for ExxonMobil - Contract Workers Not Covered By Benefit Plans

A challenge by employees of third parties who worked for Mobil prior to its merger with Exxon, sued for benefits under cerain Mobil benefit plans. Some of the workers had worked in their contractor capacity for as long as 10 years. Often they worked right alongside Mobil workers, with their employer of record being the only difference. However, since the plans themselves provided that the employees were not covered, the Court held that the administrator's determination to that effect was not invalid, even applying a sliding scale because of the potential conflict of interest of the administrator. MacLachlan v. ExxonMobile (5th Cir. 11/20/03) [pdf]. Sensibly enough, the Court rejected the plaintiff's argument that "emerging judicial doctrine" supported their position, finding instead that "Whether these cases are the vanguard of an emerging judicial doctrine is a matter for the legal academy; they do not help us decide the appeal now before us: whether, on the facts of this case, the administrator abused his discretion." And that answer, which must have made the folks at Irving headquarters smile with relief, is no.

What I Have Been Saying About Performance Appraisals For A Long Time

You won't find many experienced management employment lawyers arguing with the general thesis articulated in at least the title of Performance Appraisals Don't Work. The reason - been burned by them too many times, as the now ex-employee's best evidence.

Another Way For Plaintiff To Lose At McDonnell Douglas, Concede A Different But Not Illegal Reason

If the plaintiff argues that there is a different reason than the one articulated by the employer in response to its burden of production, it is enough to sink their own discrimination claim according to the 10th Circuit. Neal v. Roche (10th Cir. 11/17/03) [pdf]. Here plaintiff did not get a promotion she desired. Instead a white candidate was selected because of "her experience as a purchasing agent, her knowledge of the cost centers and the process through which a major portion of the hospital budget is spent."



Plaintiff challenged that, claiming the real reason was that she was selected in order to protect her from a layoff, since her position was being eliminated. Relying on cases approving the legality of 'cronyism', the Court noted this was a narrow example where proving pretext alone was not enough to get past summary judgment. Where plaintiff concedes a reason for the action, that while different from that voiced by the employer, is not discriminatory, plaintiff loses. The lesson, prove pretext, but be careful of what you allege the real reason is.

5th Circuit - Court Must Consider Unequal Application of Job Standards at Prima Facie Stage

The question has been raised in light of the Supreme Court's decision in Costa whether the McDonnell Douglas shifting framework remains viable. See Johnson v. Pepsi-Cola General Bottlers of Iowa, Inc. for a long discussion by Chief Judge Max Bennett of the Northern District of Iowa on that issue.



Even while that debate is ongoing, the 5th Circuit finds occasion yesterday to refine its application of McDonnell Douglas. Johnson v. State of Louisiana. (5th Cir. 11/14/03) [pdf]. The district court had granted summary judgment because none of the plaintiffs had shown that they met the objective qualifications for the positions that they sought. It did not consider that the state had not required that the two applicants who received the position to meet those standards. It argued that was not required to be taken into account at the prima facie stage, and since the applicants could not show they were qualified, thus creating a prima facie case there was no need to go further.



There is a problem with that analysis according to the 5th Circuit, which adopts the reasoning of two cases from the 11th Circuit. The money quote is:
The district court believes it should address the unequal application of the objective requirements at a later stage of the case, but this solution would disallow courts from remedying this type of discrimination. A plaintiff would never reach the later stage of the case if the unequal application were not addressed at the prima facie stage. Allowing an employer to point to objective requirements in arguing that a plaintiff is unqualified, even though the requirements were not applied to other employees, would subvert the intent of Title VII and McDonnell Douglas.
Notwithstanding this flaw in the lower court's reasoning, the Court did uphold the summary judgment for all but one of the plaintiffs.

Ever Wonder What the Bright Line for Age Discrimination Is - A Survey By the 6th Circuit

Answering a question that has probably been burning at least in the back of your mind, the 6th Circuit after surveying its sister circuits, decided that hereafter, in the 6th Circuit when an employee is replaced by a person less than 6 years younger, they can't meet the fourth element of a prima facie case of age discrimination, at least without some special showing. Grosjean v. First Energy Corp. (6h Cir. 11/13/03).



What they found in checking out the other circuits,was the bright line in the 7th Circuit of 10 years, Hartley v. Wisc. Bell, 124 F.3d 887 (7th Cir. 1997), and that most other circuits followed the Hartley rule. Summing up, their standard is "also at least as lenient towards plaintiffs as all decisions of our sister circuits with the exception of the standard-less Ninth Circuit and the three-year-standard Eleventh Circuit."





Additional Focus On AIDS/HIV Discrimination - ACLU Task Force

The ACLU has issued a task force report based on a survey of 40 community based AIDS service providers, finding a wide range of continuing discriminatory practices reported not only in employment, but in areas of housing, and medical care. The Report, HIV & Civil Rights co-incides with a renewed educational and litigation effort spearheaded by the ACLU AIDS project. Among the areas singled out for attention in the employment area are food service and health care.

Criminal Malicious Prosecution Cases in Texas Now Harder - Texas Supreme Court

Although not strictly an employment law issue, employers are sometime (in fact more and more it seems) confronted with questions of whether certain information should be presented to police or other law enforcement officials. One underlying concern has always been a suit for malicious prosecution. The law has been relatively clear that one would not be guilty for malicious prosecution unless it is shown that they presented information that they knew was false to the police. However, leaving that kind of determination in the hands of a third party fact finder is enough to discourage some from taking the chance. Last week, the Texas Supreme Court added one other barrier to a successful claim for malicious prosecution when, without hearing oral argument, it reversed and rendered a verdict favoring plaintiffs in a malicious prosecution case. King v. Graham (Tex. 11/7/03). In King the Court held that it was not only necessary to show the defendants had provided false information, but that the false information had been the reason that the prosecution action was initiated. Here, there was evidence that the prosecuting authority did not rely only on the defendants' information, so that it failed the necessary "but for" test.

Not All the Crazy Employment Cases Come From California

but the good folks at the California Chamber of Commerce have collected the highlights this year. Hard to pick a favorite among this group.

Avoiding The Hanging Jury - And We Are Not Just Talking About the Law West of the Pecos

I often tell clients that my goal when trying an employment law case is to win, but a close second is to make sure that we don't lose big. And in employment law cases that usually means don't give the jury the ammunition or desire for a large punitive damage award. Even if you can (and you often can) get them reversed or lowered on appeal, it still makes for an uncomfortable period of time while that judgment is hanging around your head and on your balance sheet. Dr. Joni Johnston, who has been linked to before here, makes that same point and some ways to avoid it in her lexisONE article on The Role of Emotions in Punitive Damage Decisions.

5th Cir. - Disparate Impact Theory NOT Available in Age Discrimination Cases

While the Supreme Court was grappling with the complexities of the ADEA in another context yesterday, today's 5th Circuit decision in Smith v. City of Jackson, Mississippi (5th Cir. 11/13/03) holding that the theory of disparate or adverse impact is not available in age discrimination cases is an important victory for employers. If the decision were different, any neutral practice that adversely impacted those over 40, would have to be justified as a business necessity. Although a plus for employers, it is unlikely to be the last word since Judge Stewart dissented, and there is a split among the circuits over this precise issue.



In fact the Supreme Court granted certiorari on this particular issue once before in Adams v. Florida Power , but then one month after oral argument (transcript of argument here) dismissed the case finding certioriar to have been improvidently granted. (Meaning in all likelihood, after thinking about it, we don't want to tackle this one yet.) Although it may not be Smith v. City of Jackson, sooner or later, it is a major issue that ultimately will be decided by the Supreme Court.

Supreme Court Takes Up Age Discrimination Class Warfare - The Forty Year Olds vs. Those Over 50

What has been dubbed a reverse discrimination case is being argued today before the Supreme Court. The suit, General Dynamics v. Cline pits a group of those between the ages of 40 to49 who were not eligbile for retiree benefits unless they were 50 or older on a July 1, 1997 The argument at its very simplest is: 1) we are over 40, so it is illegal to discriminate against us because of our age; 2) we are not getting a benefit solely because of our age, therefore 3) the defendant is guilty of age discrimination. Obviously it is a lot more complicated than that, but I think that pretty well sums up what it is all about.



As you can see from the post at the Benefits Blog, a decision finding age discrimination would create all kinds of havoc with benefit plans. For a look at the consequences and why the Court shouldn't uphold the decision of the 6th Circuit see the amicus brief [pdf] in support of granting the writ of certiorari filed by numerous pro-employer groups. The decision was by a divided court, with the deciding vote cast by my old friend from summer clerkship days at Vorys, Sater in Columbus, Justice Guy Cole. He summed up where he stood as follows:
In short, the result we reach today strikes me as counterintuitive. But, the clarity with which Congress spoke convinces me that the ADEA permits younger workers in the protected class to sue their employers for age discrimination that favors older employees. Also, although a close call, I do not believe that our result violates Supreme Court precedent. For those reasons, I agree to reverse the district court's dismissal of plaintiffs' ADEA claims.
Whether he correctly anticipated the Supreme Court's view remains to be seen. One prophecy of my own, if Justice Thomas writes the decision, General Dynamics is doomed.

Employer v. Competing Employee - The Personal Side of the Story

Covenants not to compete and employee loyalty litigation seems to be an ever more present part of the business world these days. But there is a personal side, really on both sides. The Milwaukee Journal Sentinel has the story of a shoot out in an unlikely business, the printing of church bulletins. It is a good picture of what I call the soft dollar cost of litigation.

Your Tax Dollars At Work - GAO's Concerns About the U.S. Commission On Human Rights

If you remember seeing news stories and headlines that made you think things were not going all that well at the U.S. Commission on Civil Rights, there is more fuel for that fire in a recently released report [pdf] from the General Accounting Office.

What Managers Know Deep Inside, But Forget Sometimes....

say when defending against an organizing drive. At that point it's always easy to point to money or benefits as the reason a third party is making headway with your employees. But deep down, most know what has now been confirmed, again, in a recent survey by Accountemps. The critical key to job satisfaction is the relationship with the boss. Yahoo Finance has a summary of the survey and some key points. And although this survey was among white collared executives, if you think it doesn't also apply to blue collar, pink collar and no collar jobs, you are only kidding yourself.

Latest Violence In the Workplace - Westchester, Ohio 2 Dead, 3 Injured

Another grim story. ABC News report on an incident at the Watkins Motor Line facility near Cincinnati. CBS News' report has more details, including that the apparent shooter was a former employee.

Intermediate Texas Appellate Courts - Tougher on Plaintiffs Than Defendants

Thanks to Howard Bashman for the pointer to the Houston Chronicle story reporting on, of all things, a law review article by two of the fine appellate lawyers at my former firm, Haynes and Boone. The article promises to be campaign fodder for those seeking some liberalization of the courts, and no doubt will be severely questioned by those who are happy with the current state of affairs. In fact, the story has the first inkling that both have begun. What will be most interesting is to see how many who comment on it in the future will have actually read it. If so, it may be the first 'sell out' of a South Texas Law Review edition in some time.

FLSA Collective Action - Parties Opt In to Action Not Claims According to the 11th Circuit

Although you can sympathize with a district court who was probably trying to clear his docket of a bothersome case, his theory didn't work. Here a FLSA claim was turned into a collective action when hundreds of former employees opted in to the suit. At the time they opted in, there were two claims of FLSA violations. A third was later added. The district court granted summary judgment on all three causes of action. The 11th Circuit affirmed on two but remanded on the third. Then is when the district court got in trouble. Instead of ruling on the merits, it dismissed the third claim on the basis that the parties had not re-opted into the action after the third FLSA claim was added, so they were not parties to the only claim that remained. A clever idea, but the 11th Circuit couldn't find any support for it, and so sent it back to the trial court for yet another attempt at resolution. Prickett v. DeKalb County (11th Cir. 11/5/03) [pdf]. Another indication of how time consuming and tricky FLSA collective actions can be.

More On How the 11th Circuit Dodged Deciding Tough Questions Under Faragher/Ellerth

Professor Grossman of Hofstra University echoes my earlier report on how the 11th Circuit dodged some key questions under the Faragher/Ellerth affirmative defense in its recent Walton v. Johnson & Johnson decision. Her findlaw column goes a step further, arguing that the 11th Circuit was wrong. Employers relying on Walton for protection in similar circumstances should understand the questions were dodged on narrow procedural grounds, by a court that may have felt something about this particular case didn't merit the result that Professor Grossman argues is required. The next case with similar facts might well turn out differently.

Hospital Has Big Overtime Bill For Not Watching the Fine Points of FLSA

HR Next has the story of Mount Sinai Hospital Medical Center in Chicago's agreement to pay over $600,000 in back pay for overtime following an audit by the Wage and Hour division of the DOL. The hospital's blunder - they just paid overtime after 80 hours every 14 day pay period. Wage and Hour is normally determined on a 7 day workweek period, but there is an exception for hospitals which allows a 14 day work period, but to qualify an employer must pay the greater number of overtime hours figured over 80 hours in the 14 day period or after 8 hours in a day. 29 CFR § 778.601. The period covered 18 months and the payment amount doesn't appear to include liquidated damages which would have been likely if this had been a case brought as a collective action.



It points out the benefits of not only paying close attention to the wage and hour regulations, but also to the advantage of considering working through the DOL if you have a problem rather than waiting for a plaintiffs' employment lawyer to pick you off.

Ergonomics Rules Go Down To Defeat In Washington State

Although I have not had to deal with ergonomic rules (or the threat of them) very often, they are a big concern to many employers. To this point there has been more talk about them than action. The Washington state experience seems to be a good example. A comprehensive set of rules was enacted, but implementation was postponed. After other battles, the latest was a well funded initiative opposing them. which was apparently successful yesterday. The Seattle Post-Intelligencer has the story. Could be interesting that the rules wouldn't fly with the general public, or it could just be another example of what occurs in the sometimes wacky world of initiative.

6th Cir. Spends Little Time In Allowing Both KY Teacher Disability Pension and ADA Claim

Jumping quickly to the position that where the contention is that the employee could have continued in her position if the employer made a reasonable accommodation, which it didn't, the 6th Cir. not only came out differently on the issue of whether an ADA claim was barred because of a claim under the KY disability pension statute than the 3rd Circuit did a month ago in dealing with a similar question, (see earlier Jottings post) but also took a whole lot less time in doing so. Justice v. Pike County Bd of Education (6th Cir. 11/4/03) [pdf].

Electronic Communication of Policies Sufficient - No Need For Paper According to the 6th Cir.

Although the bulk of the opinion deals with when the "reasonable expectations" of an employee are sufficient to imply something other than an at will status under Michigan law (certainly not close here), the money quote in Mannix v. County of Monroe (6th Cir. 11/3/03) [pdf] for those who worry about whether posting policies on a computer network will be sufficient is as follows: "Uncontradicted evidence establishes that the County did provide reasonable notice, in that it undertook steps reasonably calculated to reach the affected employees. Considering the advancement and ubiquity of electronic corporate communications, we will not induce a return to older practices by imposing a paper receipt requirement." Amen.

6th Cir. - Participation In Internal Investigation Related to EEOC Charge Protected Under Participation Clause

Where an employee was named as a witness to an incident that led to an EEOC charge being filed, and subsequently told the employer that he did see the incident and would so testify, the activity was protected under the participation clause of Title VII. Abbott v. Crown Motor Co. (6th Cir. 11/3/03) [pdf]. In a case of first impression for the Circuit, the court held that participation in an internal investigation linked to a filed EEOC charge was participation. The court also found that statements allegedly made by the employer near the time of the termination that he was going to get back at those who were involved in the charge and that the plaintiff was fired for sticking his nose where it didn't belong, plus a negative reference given in violation of the company's own policy, were sufficient to reverse the trial court's summary judgment. Retaliation seems destined to be one of plaintiffs best causes of action.

Making It Easier To Complain - Coming Soon An EEOC Call Center

Although I haven't seen a mention of it in the regular press, the Daily Labor Report (subscription required) is reporting that the EEOC is voting to set up a national call center which would apparently take discrimination complaints. It would be on a 2 year trial basis and would employ contractor employees. (I can see the ads now, Telemarketers - Tired of Selling Steak Knives - Come Listen To Employees Complain). The U.S. Newswire did have a storyl ast week which focused on the opposition of the AFGE union to many of the proposed changes.



The call center is just one of a number of internal changes being proposed by the Chair, Cari Dominguez to the full five member Commission. Following confirmations of Naomi Earp (who had been sitting under a recess appointment and who was originally opposed by the NAACP), Leslie Silverman and Stuart Ishamaru by the Senate last Friday, the EEOC is now at full strength for the first time in a number of years. The fifth member is Paul Steven Miller.

Diabetes and the ADA - Check Out EEOC Fact Sheet

As diabetes becomes a more common medical issue - another aging of the workforce issue? - the EEOC has released Questions and Answers About Diabetes in the Workplace and the Americans with Disabilities Act (ADA).

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