If You've Ever Been Taken to Task By Judge Posner ...

Then you will have to appreciate his opinion in Sylvester v. SOS Children's Villages Illinois, Inc. (7th Cir. 7/12/06) where in re-examing the prima facie test for retaliation he turns his sometimes caustic pen to an earlier opinion from his own court. The opinion in Stone v. City of Indianapolis Public Utilities Division, 281 F.3d 640, 644 (7th Cir. 2002), had a special purpose:

We limit this published opinion to a question on which clarification is needed. It is the proper standard for summary judgment when a plaintiff claims that he was retaliated against for complaining about employment discrimination.

In re-examining the test for retaliation he now notes that Stone contains "misleading dictum," which fortunately the Court in a number of other opinions had "sensibly disregard[ed]."

Rather harsh language about a fellow jurist it seems -- until you remember -- the author of that clarification in Stone was none other than -- Judge Posner.

In addition to that irony, if you practice in the 7th Circuit you need to review today's updated clarification as it may indicate at least a subtle shift in the Court's test for reviewing summary judgments in retaliation, and in all likelihood, discrimination cases as well.

2nd Circuit Dodges Questions on Leave as Reasonable Accommodation -- And a Bigger Problem

While hinting at the potential problems with requests for leaves of absence as reasonable accommodations under the Americans with Disabilities Act, the 2nd Circuit avoided most of those issues when it reversed an employer's summary judgment on that issue. Instead it held the district court drew an improper inference that the employee had requested an indefinite leave of absence -- in its view of the appropriate inferences, a jury could conclude the employee asked for a two week leave of absence to see a specialist. The Court could not say such request was for an unreasonable accommodation, given that the employer improperly failed to consider it. Graves v. Finch Pruyn & Company, Inc. (2nd Cir. 7/12/06) [pdf].


But in a footnote discussing the question of leaves of absence as accommodations, the Court commented:

We note, however, that the idea of unpaid leave of absence as a reasonable accommodation presents Â?a troublesome problem, partly because of the oxymoronic anomaly it harborsÂ? Â? the idea that allowing a disabled employee to leave a job allows him to perform that jobÂ?s functions Â? Â?but also because of the daunting challenge of line-drawing it presents.Â?

The Court also wanted to make sure it did not foreclose a second shot at summary judgment by the employer, noting:

On remand, Finch Pruyn should be allowed to move for summary judgment based upon insufficient assurance of GravesÂ?s successful return to work. At this stage, we decline to consider this argument without benefit of the district courtÂ?s analysis.

Some might see this as a little bit of passing the buck back to the district court, perhaps to do its "dirty work" for it. However, I think it may be more a symptom of how difficult it is for courts (not to mention employers) to deal with the ADA -- trying to balance the apparent breadth of the law, with a desire not to allow it to overwhelm both employers and the courts.

The problem lies in one of the fundamental aspects of the ADA -- whether an employee is disabled -- is an after the fact determination. As our ten plus years of history now makes clear, it is frequently not until the appellate court weighs in, that we know the answer to that basic question. However, the obligations of the employer under the ADA depend on it - if the employee is not disabled, no obligation; if the employee is disabled, then the employer had obligations. Finding out five years after the employment decision was made is hardly helpful. (Nor does it seem quite fair that an employer has to make that decision in a short period of time, whereas the courts have difficulty making it after years of litigation and with as much time as they choose to take.)

Is there any solutiondilemmat dilemna short of treating every close case as a disability? If not, is that really what Congress intended?

Before the Scandal Hits - Someone Knows -- And Might Just Make a Copy

At least that's the developing story line in a lawsuit brought by Stephen Landry, the former head of Human Resources for Sycamore, bringing Sycamore into discussions about the scandal du jour -- companies backdating stock options.

The Lakeland Ledger.com website has a detailed story from the Associated Press, Memo: Sycamore workers discussed manipulating stock option grants, and Landry's claim he was terminated for opposing the backdating practices. For those interested in the backdating issue, the money quotes are about an internal memo attached to one of Landry's pleadings:

the memo says Ed Zaval, a vice president of customer service, "was promised his stock option grant would be issued at the low of the quarter price." It said his actual start date was Jan. 2, 2001, but the low for the quarter was Dec. 21, 2000, at $29.125. Under the category, "action," the memo says to "change Ed's date of hire to reflect 12/21/00 and his stock option should be granted 12/21/00."Under "risk assessment," the memo reads: "Low risk. Senior level employee and the risk of exposure to this agreement is low. No audit risk."

But for me, and for all employers, I think the real money quote is how Landry had a memo written after his termination. According to the story:

Landry's attorney, Kevin Powers, said a colleague of Landry's found the 2001 memo on a fax machine, made a copy and gave it to Landry.

That has a ring of truth -- in two different lawsuits I have handled documents obtained in just that way appeared as attachments to court pleadings. Never underestimate the power of a copying machine.

A hat tip to WSJ's LawBlog for the alert to this story.

Sticks and Stones ... But Words Can Be Costly Too - $4.5 Worth

Two employers have recently been reminded of an important lesson -- defamation is not just a concern of media entities. And those claims can be serious as juries in Maine and Texas recently made clear -- returning MDV's for the loss of a good name.

In Maine, it was Merrill Lynch on the wrong side of a Portland verdict, Jury awards nearly $3M in Maine defamation case. Although it is hard to tell exactly what happened from the news reports, it appears Merrill Lynch was sued for complying with a statutory duty to report about the conduct of a broker.

Things were complicated however with some contradictory internal materials according to the news story:

At least two letters from Merrill Lynch attorneys defended Galarneau's handling of the account that was in question. And an internal review of her conduct found no wrongdoing, Galarneau's lawyers said.

From my experience what may well have happened -- in response to a claim of wrongdoing by the broker, the company initially defended the actions; then after some more digging, more information about the broker's conduct was uncovered, decision to terminate made and required statutory report was filed. At trial, they get beat up with evidence of their initial actions. A classic Catch 22 for the employer it would seem.

In central Texas another of those situations that seems to occur more than you would think was also being played out - the employee you are convinced is stealing, but somehow it can't (or doesn't) get proved. A car dealer found out the hard way those accusations can boomerang when an employee accused of stealing was no-billed by a grand jury. It wasn't the end of things at the Coryell County courthouse however -- Tranum loses $1.5 million civil case.

Costly reminders that there are always two sides to every story -- and being on the down side of one accusing an employee of wrong doing is not a good place to be.

Update: The initial verdict in the Maine case has now made its way through post-trial motions and been decided by the appellate court. Although the Court affirmed the basic defamation holding, it did strike the $2.1 million punitive damage award, leaving a verdict of $850,000 intact. Galarneau v. Merrill Lynch (1st Cir. 10/12/07).

1st Test of SOX Preliminary Reinstatement Saga Continues

The ongoing saga of David Welch, who more than 2 years ago was "reinstated" under Sarbanes Oxley, continues with his filing of a motion in federal district court to force his former employer Cardinal Bankshares to take him back as CFO. A magazine with an interetest in the subject, CFO.com, has the latest development, Feds Back Sarbox Whistle-blower.

Last Thursday, Welch accepted the challenge from Cardinal Bankshares and filed a motion in district court to compel his reinstatement and the DOL has intervened to support that effort. (For those wanting some context, see a time line of the fight beginning with Welch's termination in October, 2002 at Latest Step in First SOX Reinstatement Case).

Although this is not the first time this matter has been addressed by the federal courts, it appears that there may not be procedural outs that have been used to avoid ruling on the merits, so stay tuned, perhaps, for a substantive decision on reinstatement rights under Sarbanes-Oxley. It is important to remember that this procedural battle is being fought before there is a final ruling that Cardinal Bankshares has violated the whistleblower provisions of SOX. And that of course is what bothers the employer but what Welch and the DOL argue is possible.

3rd Circuit - Make Sure the EEOC Charge Is Verified Before Responding

A school district thought it had hit a home run -- obtaining dismissal of a sexual harassment lawsuit because the plaintiff's EEOC charge wasn't verified, as required by Title VII and the implementing regulations. And although I have often said (tongue in cheek) that while anyone can win on the facts, it takes a real lawyer to win on a technicality, it is hard to argue with the 3rd Circuit's conclusion here:

Under the circumstances of this case, the School District’s motion to dismiss on the basis of Buck’s failure to verify her charge seems like “an afterthought, brought forward at the last possible moment” to preclude “consideration of the merits”; it can prevail “only from technical compulsion irrespective of considerations of practical justice.” [cite omitted] Given our determination that the verification requirement is not an inflexible bar to suit, but a statutory requirement of the initial charge, with non-compliance amenable to equitable considerations, we cannot countenance this result. Accordingly, we hold that where, as here, an employer has actual notice of a discrimination charge and chooses to respond to the merits of the claim before the EEOC without asserting lack of verification as a defense it waives its right to secure dismissal of the federal court proceedings on that basis. [emphasis added]

Buck v. Hampton Township School District (6/30/06) [pdf] .

Although I haven't given much thought to whether there is a legal argument against the underlying premise, that the requirement for verification is not jurisdictional, given the outcome in Arbaugh v. Y & H Corp. (S. Ct. 2/11/06) [pdf] where a unamininous Supreme Court took less than six weeks after oral argument to pour out a similar "technicality" -- holding the 15 employee requirement of Title VII was not jurisdictional -- I doubt such research would be fruitful.

Since it is hard to imagine that if raised, it would not be corrected, Buck probably consigns another "technicality" to the dustbin. A hat tip to the DLR for alerting me to Buck.

5th Circuit Clarifies 2 FMLA Damage Elements

Last Friday the 5th Circuit upheld a contested FMLA termination case, but remanded for retrial on 2 damage elements. It found the Court erred by not using the FLSA/ADEA model for insurance benefits and retirement payout. Lubke v. City of Arlingon (5th Cir. 6/30/06) [pdf].

On insurance the correct standard is:

Either actual replacement cost for the insurance, or expenses actually incurred that would have been covered under a former insurance plan. The lost “value” of benefits, absent actual costs to the plaintiff, is not recoverable.

At his termination, Lubke received a payout of his pension. The 5th Circuit rule under the FLSA/ADEA, now applicable to the FMLA, is:

An employer’s portion of retirement and other payments made to a terminated employee must be deducted from an award of lost wages and benefits in ADEA discrimination cases.

Slowly, but surely, the courts are beginning to fill in the gaps of our newest employment law. 13 years after its passage, some might say -- about time.