Chicago School of Economic Analysis in 1st Cir. FMLA Case

Deciding that two related entities are not one employer for purposes of the FMLA, the 1st Circuit relied heavily on the type of economic analysis more regularly seen in the 7th Circuit. Engelhardt v. S.P. Richards Co. (1st Cir. 12/22/06) [pdf]. The primary argument for combining the two in order to reach the magic 50 employees within 75 mile radius number needed for coverage, was that S.P. Richards used employment forms and policies of its parent company, Genuine Parts Company.

The Court even quoted the most famous practitioner of the Chicago School, Judge Posner:

Firms too tiny to achieve the realizable economies of scale or scope in their industry will go under unless they can integrate some of their operations with those of other companies, whether by contract or by ownership. The choice between the two modes of integration is unrelated to the exception. Take contractual integration first. A firm too small to have its own pension plan will join in a multi employer pension plan or will in effect pool with other employers by buying an insurance policy. . . . It will hire an accounting firm to do its payroll rather than having its own payroll department. It may ask the Small Business Administration for advice on how to maximize its profits by pruning its least profitable operations. None of these forms of contractual integration would subject tiny employers to [liability], because the integration is not of affiliated firms. Why should it make a difference if the integration takes the form of common ownership, so that the tiny employer gets his pension plan, his legal and financial advice, and his payroll function from his parent corporation without contractual formalities, rather than from independent contractors?

The bottom line — no integrated employer, no liability.

The Pesky World of Torts Strikes Again

Most of the time employment lawyers delve in the statutory world — discrimination, retaliation, harassment — all created by a legislative body. But there also exists the common law, developed over hundreds of years, rarely in the employment context. Still there is no workplace wall that excludes the common law, a fact that more often than employers would like leaves them at risk.

Negligent misrepresentation is one such common law cause of action which occasionally pokes its head in the employment law setting. A recent example, The First Marblehead Corp. v. House(1st Cir. 12/22/06) [pdf] shows just how costly words spoken, or in this case unspoken, have the potential to be.

House, along with other employees, received a memo from the General Counsel of Marblehead outlining the terms of his stock options, including a provision that they could be exercised over a period of 10 years. Shortly after that memo, the General Counsel realized he should also have noted that upon termination of employment, an employee had only 3 months to exercise the options. Realizing his error, he submitted another memo noting it was important that it be given to all employees who had received the first memo.

By now it is no surprise that the 2nd memo never made it to House. He quit, the 3 months passed, and six years later when the company went public, options with a face value of $75,000 when issued were now worth over $7 million. Not surprisingly House attempted to exercise the options, First Marblehead resisted, and litigation ensued.

Bottom line House lost his breach of contract and promissory estoppel claims, since under Delaware law those causes of action cannot prevail if they would run counter to a written plan approved by the Board of Directors. But House gained at least a temporary victory when the Circuit reversed the district court's grant of summary judgment on his negligent misrepresentation claim. According to the court under Massachusetts law, House had to show that Marblehead:

1. in the course of [its] business,
2. supplie[d] false information for the guidance of others
3. in their business transactions,
4. causing and resulting in pecuniary loss to those others
5. by their justifiable reliance on the information, and
6. with failure to exercise reasonable care or competence in obtaining or communicating the information.

Top that off with Massachusetts case law making it clear that a failure to disclose can be a "misrepresentation" and there is another valuable lesson why employers' — and their lawyers — forget about the common law of torts at their peril.

Too Good to Be True - D.C. Circuit to Rehear Controversial Tax Case

For those in the employment law world who were heartened by the D.C. Circuit's decision that the taxation of compensatory damages recovered in a suit against an employer was unconstitutional — that relief may turn out to be temporary. In August of this year, when the court decided Murphy v. IRS (8/22/06) [pdf], there was hope that settlement of employment law cases would be cheaper, at least in the D.C. Circuit — since no money would be owed for taxes, a lower settlement amount would put the same net dollars into the plaintiff's pocket.

But that prospect is now on hold as the panel has on its own motion vacated its earlier opinion, issued a new briefing schedule, and ordered it to be re-argued on April 23rd. Ross Runkel at Ross' Employment Law Blog has this prediction:

Never underestimate the governments' power to tax. I expect that if the panel does not change its position, then the whole court will sit en banc and hold that the tax passes constitutional muster.

He also notes that much more detail and background can be found at the The Tax Prof Blog's post, D.C. Circuit Panel Agrees to Rehear Murphy.

The Press and Employment Law Litigation

As a relatively young lawyer I was involved in a lengthy trial in Laredo, Texas involving a junior college and one of its faculty members. At the time Laredo had two daily newspapers, the Laredo Express Times and the Laredo News.

Being a small town, where litigation was second only to politics as a spectator sport, the trial was subject to front page and lengthy press coverage by both papers. As I would go back to the hotel and read the papers' stories of the previous day's happenings one could hardly tell they were covering the same trial, and in fact, neither of them was very close to what actually happened in the court room.

I couldn't help but remember that experience as I noticed the very different headlines appearing about a recent Phoenix case brought by the EEOC against Go Daddy, one of the leading domain registration companies. Here's a google news search as of Wednesday morning:

1. Go Daddy Made to Pay Former Employee — Web Host Industry Review - 26 minutes agoDecember 20, 2006 -- (WEB HOST INDUSTRY REVIEW) -- A federal court ruled on Friday that Web host Go Daddy Software (godaddy.com) should pay damages to an ...
2. Jury Agrees Web Host GoDaddy Did Not Discriminate — Tophosts, Canada - Dec 19, 2006December 19, 2006 – A US District Court jury of eight women returned its verdict in just four hours today, finding GoDaddy.com® did not discriminate against ...
3. Go Daddy ordered to pay ex-employee $390,000 — KOLD-TV, AZ - Dec 19, 2006PHOENIX Go Daddy Group has been ordered by a federal court jury to pay 390-thousand dollars damages to a former employee. Jurors ...
4. Go Daddy ordered to pay former employee — East Valley Tribune, AZ - Dec 19, 2006By Tony Natale, AP. A federal court jury of eight women agreed with the US Equal Employment Opportunity Commission that an employee ...
5. Federal Jury Agrees Unanimously - GoDaddy.com Did Not Discriminate — PR Newswire (press release), NY - Dec 18, 2006SCOTTSDALE, Ariz., Dec. 18 /PRNewswire/ -- A US District Court jury of eight women returned its verdict in just four hours Friday ...
6. Muslim wins $390,000 in Go Daddy bias case — Arizona Republic, AZ - Dec 18, 2006Go Daddy Group Inc. wrongfully terminated a Muslim employee from Morocco for complaining of discrimination and must pay the man ...
7. Go Daddy ordered to pay ex-employee $390,000 — AZ Central.com, AZ - Dec 18, 2006SCOTTSDALE - Go Daddy Group Inc. wrongfully terminated a Muslim employee from Morocco for complaining of discrimination and must ...
8. Jury finds GoDaddy did not discriminate — Phoenix Business Journal, AZ - Dec 18, 2006A US District Court jury found that GoDaddy.com did not discriminate when it denied a management position to Youssef Bouamama, a Muslim Moroccan who speaks ...
9. Jury awards $390K to Muslim fired by Scottsdale company —Tucson Citizen, AZ - 9 hours agoAP. PHOENIX - Go Daddy Group Inc. wrongfully terminated a Muslim employee from Morocco when he complained of discrimination and must ...
10. Go Daddy ordered to pay ex-employee $390,000 —KVOA.com, AZ - Dec 19, 2006PHOENIX Go Daddy Group has been ordered by a federal court jury to pay 390-thousand dollars damages to a former employee. Jurors ...
11. Federal Jury Agrees Unanimously - GoDaddy.com Did Not Discriminate — Domain informer, IL - Dec 19, 2006A US District Court jury of eight women returned its verdict in just four hours Friday, finding GoDaddy.com® did not discriminate against a former employee. ...
12. Go Daddy ordered to pay ex-employee $390,000 — KVOA.com, AZ - Dec 19, 2006PHOENIX -- Go Daddy Group Inc. wrongfully terminated a Muslim employee from Morocco when he complained of discrimination and must ...
13. Jury finds GoDaddy did not discriminate — Milwaukee Business Journal, WI - Dec 18, 2006A US District Court jury found that GoDaddy.com did not discriminate when it denied a management position to Youssef Bouamama, a Muslim Moroccan who speaks ...
14. Jury finds GoDaddy did not discriminate — Charlotte Business Journal, NC - Dec 18, 2006A US District Court jury found that GoDaddy.com did not discriminate when it denied a management position to Youssef Bouamama, a Muslim Moroccan who speaks ...
15. Go Daddy ordered to pay ex-employee $390,000 — Arizona Republic, AZ - Dec 18, 2006SCOTTSDALE - Go Daddy Group Inc. wrongfully terminated a Muslim employee from Morocco for complaining of discrimination and must ...
16. Jury finds GoDaddy did not discriminate — Bizjournals.com, NC - Dec 18, 2006A US District Court jury found that GoDaddy.com did not discriminate when it denied a management position to Youssef Bouamama, a Muslim Moroccan who speaks ...

Just from the headlines it would appear that the EEOC won 10 times and Go Daddy won 6. And the truth is -- all the headlines are technically correct.

But to really understand, it helps to know that the EEOC alleged that the employee was both discriminated against and then retaliated against when he complained about discrimination. As not infrequently happens, the jury rejected the discrimination claim, but found retaliation. A result so frequent it explains of why many employment lawyers call "retaliation" the most dangerous cause of action.

And of course, if truth be told, one has to give some credit to Go Daddy's spin in their press release:

Federal Jury Agrees Unanimously - GoDaddy.com Did Not Discriminate

Godaddy.com Pleased with Court Victories - Plans News Conference

EEOC's press release to come.

Employers Pick Up Another Defense for Employee's Computer Antics

Although one might shudder on learning that a California court was getting first shot at the question of whether an employer was protected from responsibility for it's employees internet communications, this time it turned out ok. Delfino v. Agilent Technologies, Inc. (Cal. App. - 6th Dist. 12/14/06) [pdf] . In fact in reading the opinion you might even think you weren't in California.

The court was affirming a summary judgment that had been granted Agilent in a lawsuit for intentional and negligent infliction of emotional distress brought by two individuals, Delfino and Day, who were on the receiving end of threatening emails sent via an Agilent employee's company provided connection to the internet. Among its other defenses, Agilent raised the protection of §230 of the Communications Decency Act of 1996.

In order to qualify for protection, Agilent had to show:

1. the defendant [is] a provider or user of an interactive computer service;
2. the cause of action treat[s] the defendant as a publisher or speaker of information; and
3. the information at issue [is] provided by another information content provider.

Noting that it was "aware of no case that has held that a corporate employer is a provider of interactive computer services under circumstances such as those presented here," the Court nevertheless did so.

While the use of the CDA as a defense is the most important aspect of the case, it is interesting reading and shows how far some people are willing to go in using the intnernet for their personal battles. Apparently the underlying dispute arose when Delfino was terminated from Varian Medical and Day resigned two months later in support, all of which was followed by a bitter lawsuit.

The Agilent employee whose conduct was in question here was alleged to have sent emails to Delfino and Day including the following:

‘It’s coming [expletive], and you won’t see it. I seriously hope you have health insurance because you’re going to get your ass stomped by me and some friends. The best part will be you won’t be able to prove it was me. I already have proof I was somewhere else. You can look forward to all your fingers getting broken, several kicks to the ribs and mouth, break some teeth, and a cracked head. Also, your car will be trashed and your computer destroyed. Maybe set your place on fire so you can be evicted. If your [expletive] is there, she’ll take a little ride to the parts of San Jose where they don’t speak [E]nglish . . . Die, [expletive]. You’ll wish you had.’

In his defense, the employee claimed he had been frustrated in part because of the more than 28,000 internet postings of Delfino and Day about the former employer or some of its employees. Those postings were the subject of prior litigation which included a decision by the California Supreme Court finding a judgment in excess of $750,000 against Delfino and Day for their internet postings was void. Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180.)

On second thought — it is pretty clear it is California.

A hat tip to Jon-Erik G. Storms at Storm's California Employment Law for alerting me to the case. His analyis is here.

Back In Session, Soon — The Texas Legislature

Although most of the political talk of late has been about what will happen with the new Democratic controlled Congress, the 80th session of the Texas legislature convenes less than a month from now. Texas lawmakers have been busy pre-filing legislation. As of yesterday, in the one month since bills could be filed more than 550 had been.

Among the pre-filed bills are those that would raise the minimum wage:

• HB 49 (2 steps, $6.25 and $7.25);
• HB 193 ($6);
• HB 236 ($6.15);
• HB 262 (2 steps, $6.65, $7.65 and then indexed using the CPI);
• HB 338 (3 steps, $5.85, $6.55, $7.25),

plus all would adopt the federal minimum wage if it were higher.

There is a bill that would extend protection against discrimination in employment on the basis of gender identity or orientation, HB 307.

A couple of the bills would impose various penalties on employers who have undocumented employees:

• HB 325, precluding house builders of more than 100 houses from participating in the statutory dispute resolution program;
• HB 351, prohibiting a grant from the Texas Enterprise Fund

There is a bill designed to gather information about big employers who do not provide health care insurance by obtaining information from applicants for charitable health care about their or their spouse's employers, HB 338.

Although not employment related, there are two anti-bullying bills applicable to educational institutions — a likely first step before moving the concept to the workplace:

• HB 68, creating an anti-bullying hot line. Bullying is not defined.
• HB 163, using bullying as a grounds for removing school from a public school class. The definition of bullying sounds very much like the tort of intentional infliction of emotional distress with one key change. Omitted is the "outrageous conduct" requirement which is supposed to allow judges to act as gatekeepers so that the tort is used only in the most egregious circumstances.

A more complete list of bills that employers might be interested in by sponsor and legislative description follows:

• HB 34 Solomons. Relating to the prohibition of certain payments or other inducements regarding a workers' compensation claim; providing an administrative violation.
• HB 38 Solomons. Relating to the requirement that applicants for certain licenses be eligible for employment in the United States.
  HB 48 Chavez. Relating to distributions from the employment and training investment holding fund.
  HB 49 Chavez. Relating to the minimum wage.
• HB 59 Isett, Carl. Relating to the management, security, and protection of personal information and governmental records; providing a criminal penalty.
• HB 68 Leibowitz. Relating to the creation of an anti-bullying hotline.
• HB 129 Truitt. Relating to defamatory statements posted on Internet websites.
• HB 163 Raymond. Relating to bullying as a ground for removing a public school student from class and placing the student in a disciplinary alternative education program.
• HB 193 Guillen. Relating to the minimum wage.
• HB 236 Alonzo. Relating to the minimum wage.
• HB 262 Coleman. Relating to the minimum wage.
• HB 307 Farrar. Relating to the prohibition of employment discrimination on the basis of sexual orientation or gender identity.
• HB 325 Leibowitz. Relating to construction projects employing undocumented workers.
• HB 327 Leibowitz. Relating to the minimum wage.
• HB 338 Leibowitz. Relating to the collection and reporting of employment information regarding beneficiaries of certain health care services and employee health benefit plan coverage.
• HB 351 Anchia. Relating to prohibiting a grant from the Texas Enterprise Fund to a recipient who employs an undocumented worker.
• HB 360 Straus. Relating to venue in civil actions brought under the federal Employer's Liability Act or the Jones Act.
• SB 21 Nelson. Relating to the imposition of additional inspection and background and criminal history check requirements for day-care centers.
• SB 53 Zaffirini. Relating to the civil liability of an employer or former employer of a mental health services provider who engages in the sexual exploitation of a patient or former patient.
• SB 54 Zaffirini. Relating to health benefit plan coverage for certain prosthetic devices, orthotic devices, and related services.
• SB 115 Van dePutte. Relating to certain political activities by a labor organization or an affiliate of a labor organization that receives state funds; providing a criminal penalty.
• SB 142 Zaffirini. Relating to the eligibility of certain victims of family violence for unemployment compensation.
  

What Is It About Art Teachers? Part II

This past summer the biggest news in Austin seemed to be about the nude photo's of an Austin art teacher. See, What Happens When the Art Teacher Is the Model? That case was resolved, but the art scene has shifted to Richmond, Virginia where another art teacher's website has gotten him into trouble. It also has led to what may arguably be the biggest groan of a headline of the year, the AP's Teacher in Crack Over Butt Art.

It seems that Stephen Murmer, a popular art teacher in the Chesterfield County Schools, is also an artist, selling his paintings for up to $900. But like Tamara Hoover, it was a website that got him to trouble. More specifically it was his video demonstrating his particular painting technique — "plastering his posterior and genitals with paint and pressing them against canvas" — which did him under.

Although leading to all sorts of bad puns, "cheeky creations" etc. it does raise a serious question about an employer's right to discipline for an employee's legal, if somewhat unusual, off-work behavior. The ACLU is looking at the case for Murmer.

This is not new ground for Murmer as a description of his technique and how it came to be appeared here in a May 2, 1999 post on the blog Stare. Although none of the art shows up for me, you can attempt to check out his paintings here.

Hat tip to Howard Bashman's How Appealing post.

First "Bullying" Case Goes Down in Flames

When Dr. Daniel Raess, an Indiana heart surgeon, was sued as a "bully" for his conduct in the operating room and the result was a $325,000 verdict, it caused a flourish of publicity, in part because the expert witness for the plaintiff was Dr. Gary Namie, whose foundation, the Workplace Bullying & Trauma Institute, is a leading proponent for anti-bullying legislation. Check out my initial post, Is My One Man Quest Against Bullying Failing? "Bully case verdict ..."

That testimony has now come back to haunt the plaintiff, as it was the basis for the reversal of the verdict by the Indiana Court of Appeals last Friday, Raess v. Doescher (Ind. Ct. App. 12/8/06) [pdf]. And there was no question what the case turned on:

The following issue is dispositive: whether the trial court committed reversible error in allowing a witness to label Raess a "workplace bully."

The answer to that question was a clear — yes:

The confusion caused by Namie’s testimony is illustrated by the emphasis placed upon the testimony by Doescher’s counsel. Trial counsel referred to Raess as a "bully" in his opening statement, and in closing argument he referred to "bullying" numerous times. Counsel concluded his rebuttal closing argument by stating, "We ask for a verdict in favor of Joe Doescher. And, yes, that’s a verdict against workplace bullying and against the workplace bullying incident." .... In this case, where (1) the "workplace bullying" evidence had no probative value, (2) the evidence of assault was thin, (3) the verdict was almost completely dependent upon whom the jury chose to believe, and (4) trial counsel asked for a verdict on "workplace bullying," the label established by Namie’s testimony results in unfair prejudice to Raess by confusing and misleading the jury as to the issue.

If needed, the court drove one more nail into the "bullying" claim by holding that the trial court erred in not giving an instruction proposed by Dr. Raess that there was no such cause of action as "bullying":

"Workplace bullying" is not an issue in this matter, nor is there any basis in the law for a claim of "workplace bullying."

In other words, you are not to determine whether or not the Defendant, Daniel Raess, was a "workplace bully." The issues are as I have instructed you: whether the Defendant assaulted the Plaintiff, Joseph Doescher on November 2, 2001, and whether that assault constituted intentional infliction of emotional distress.

It's not a total loss for plaintiff however, as the case is sent back for retrial. If that happens, no doubt there will be less "bullying talk" and my guess, no Dr. Namie.

The case is of more than passing interest to me as I am going to be speaking on the topic, Bullying In the Workplace: The Newest Litigation Threat? at the SHRM National Conference in Las Vegas this June.

Update: On 4/8/08 the Indiana Supreme Court reversed this decision and reinstated the trial court's judgment against the surgeon. See, Bullying Indiana Style Makes a (Limited) Comeback.

The Jury That Really Did Ask For A Calculator

I am not quite sure what the legal equivalent of urban myth is, but surely the jury that asked for a calculator would have been a prime candidate for that category, whatever it is called. Of course even urban myths often have a foundation in fact, and today's report of a $3 million dollar verdict from a federal district court in Michigan includes the following:

The jury of seven women and one man, though, needed only about four hours to figure out their unanimous verdict, asking U.S. District Judge Sean F. Cox first for a calculator after a couple of hours and then for instructions on how to fill out the verdict form.

I can only imagine how it must have felt on the defense side of the table after that request.

The plaintiff was a former state court clerk who alleged she had been fired following the election of a new judge, ironically in the same year she was named Employee of the Year. At least for a few days, before post-trial motions and appeals begin to work their way, Michele Horton can at least contemplate her good fortune:

The award, of which $2 million was for punitive damages, represents what Horton, who had worked at the court for 14 years, would have earned in about six decades of employment.

The two week trial offered a view into the inner workings of a court system, and from the details in the Macomb Daily story, Ex-court clerk wins $3 Million, it was not a very pretty one.

Today's MDV report is the first in awhile, but that reflects more on my lack of posting than the lack of verdicts. A number of MDV posts are still sitting in draft form — hopefully over the holidays I will catch up.

BlackBerry and Driving - An Employer's Problem?

It was at least for one employer (and no doubt it's insurer)according to the Chicago Sun Times story, $4 mil. award in BlackBerry car accident. According to the story lead:

A 71-year-old Arlington Heights woman will get $4.1 million because a van driver last year ran a red light and crashed into her while he was looking down at his BlackBerry, attorneys said Friday.

Ironically, the employee was looking not at a text message, but using the BlackBerry as a navigational device because he was lost. Common sense tells us that multi-tasking (which according to some is a misnomer*), when one of the tasks is driving is a potential problem. Since the other task is often some sort of communication associated with their job — it becomes another problem for employers.

*The ubiquity, pervasiveness and mobility of new technologies encourage a simultaneity of activities that goes beyond anything our culture has heretofore ever known. Indeed, the ability to engage in multiple tasks concurrently seems to be the very essence or core motivation for the development of such technologies.Yet there is a long tradition of psychological and media communication research that indicates that our ability to engage in simultaneous task is, at best, limited (Fisch, 2000; Lang, 2000), and at worst, virtually impossible (James, 1890; Woodsworth, 1921; Broadbent, 1958). The Laptop and the Lecture:The Effects of Multitasking in Learning Environments, Journal of Computing in Higher Education.

A Longing for the Cold War? HR Spies?

Maybe it's a temporary thing, but between the new James Bond movie and a Russian spy being killed by radiation poisoning, I thought I was having a cold war flashback when I saw the headline — HR spies inflitrate companies in search of employees.

The Boston Business Journal story detailed how such operatives were working:

The Indian newspaper The Hindu reported that employees were being planted as spies in rival firms for as little as a week. Perpetrators of this inside job were charged with accessing the company's employee databases and downloading names and contact information. After accomplishing this covert operation, the newspaper said, the spies returned to their original employers and collected a handsome reward. The data would later be sifted to identify potential job candidates that might be convinced to jump ship and join the ranks of the competition.

I never cease to marvel at the new challenges that serve to keep the world of human resources interesting.

Smoker's Suit Hits a Nerve

When you think of The Scott's Company you probably think about issues with your lawn (assuming that you think of them at all). But this winter, they are in the news for an employment matter. As with a few other companies, Scott's has adopted not just no smoking, but a no smoker policy.

Which led to the following, as summed up in the lead in a Boston Herald story:

A Buzzards Bay man peed into a cup and lost his job when the Scott Co. discovered he’d been inhaling more than the chemicals he sprayed on lawns - he was allegedly smoking cigarettes - according to a lawsuit he filed.

You might not be surprised to know that the employee has filed suit alleging violations of his privacy rights, but what is a unusual is the response it has caused. One web site, Do No Evil , already has more than 200 posts — although mixed, most comments were along these lines:

Our freedom is being chipped away at, little by little, always in the name of a perceived good. Allowing this to go on will at some point in time transform us to semi zombies at the beck and call of the righteous ones. Everything we do will become sanctioned for the "good of all". Free will, free expression, free movement, free thought will cease to exist as we know it today. Is this really the road we wish to travel on ???

Out of the Jungle did some great work in coming up with additional sources on the whole issue, and offered this point of view:

I am a non-smoker who is very grateful for the societal changes that reduce my exposure to second-hand smoke. But even I found it pretty disturbing that an employer would think it right to control employees' private behavior. It leads to all sorts of disturbing scenarios that have been raised as testing for various diseases and genetic pre-disposition for disease became possible.

A hat tip to Jon Coppelman at The Worker's Comp Insider for his post, Where There's Smoke, You're Fired, Revisited.