In Hively v. Ivy Technical Community College, 853 F.3d 339 (7th Cir. 2017) the Seventh Circuit Court of Appeals recently became the first federal appellate court to rule that Title VII prohibits discrimination based on sexual orientation. With its en banc ruling from the full panel of Seventh Circuit judges, the Court has created a split with other federal appellate courts that may set up an ultimate showdown in the Supreme Court.
Ms. Hively, an adjunct professor at Ivy Technical Community College, sued the college under Title VII, asserting that she was denied a full-time professor position and her adjunct contract was not renewed because she is a lesbian. Initially, the federal district court dismissed her lawsuit, finding that she did not state a viable legal claim because sexual orientation is not a protected class under Title VII. On appeal, a 3-judge panel affirmed the district court’s determination, observing that although questions existed as to the viability of the claim, the panel was bound by prior Seventh Circuit precedent holding that discrimination on the basis of sexual orientation was not protected by Title VII.
Not content with the panel’s decision, Hively sought en banc consideration by all 11 judges of the Seventh Circuit. The Court agreed to en banc rehearing and rendered its 8-3 decision holding that discrimination on the basis of sexual orientation is a form of sex discrimination that is covered by Title VII. The majority acknowledged that it could not “amend” Title VII to add new protected classes, but found that discrimination on the basis of sexual orientation was a subset of discrimination on the basis of sex, which is specifically included in the statute. It did so, at least in part, by evaluating whether the college would have treated her differently if she were a man married to a woman rather than a woman married to or living with a woman. Further, the Court considered the college’s treatment of her based on her failure to conform to standard female stereotypes because she is not heterosexual, noting that sex stereotyping has previously been determined to be a form of sex discrimination.
Although the Hively decision is only binding in federal courts in the Seventh Circuit (Illinois, Indiana, and Wisconsin), it does give rise to the prospect of Supreme Court consideration given that every federal court to have previously addressed the issue has held that Title VII does not protect against sexual orientation discrimination. And the decision may be indicative of a trend about which employers should be aware as they consider their employment decisions and workplace policies.
Unless and until the issue proceeds to the Supreme Court and is ultimately decided there, a split in legal interpretation exists that means the law may be somewhat different for employers depending on their geographic location. Nonetheless, it is clear in the Seventh Circuit “that discrimination on the basis of sexual orientation is a form of sex discrimination” that is prohibited by Title VII. And employers should be vigilant in monitoring legal developments and interpretations as they may impact employment decisions and policies.
Amidst loss and devastation, Hurricane Harvey triggers timely consideration of property damages claims from “forces of nature” under Texas insurance policies.
With the widespread devastation wrought by Hurricane Harvey through a large swathe of South Texas, insurance companies will undoubtedly be on the receiving end of numerous policy claims from property owners. Although it may initially seem too soon or too insensitive to turn to concerns over property claims while the storm still rages, an important change in Texas law demands timely consideration of the issue.
A new Texas law governing insurance claims, House Bill 1774, becomes effective this Friday, September 1, 2017. This statute adds Chapter 542A to the Texas Insurance Code, titled “Certain Consumer Actions Related to Claims for Property Damage.” The statute specifically applies to claims regarding property damage or loss caused in any part by “forces of nature.” Although the initial focus of the bill was on lawsuit abuse from hailstorm litigation, its broad scope includes weather events such as earthquakes, wildfires, floods, tornados, lightning, and, of timely interest, hurricanes.
Importantly, changes to Texas insurance law include the imposition of stricter pre-suit notice requirements, inspection requirements, and limitations on attorneys’ fees and interest. Further, the new law will reduce penalties against insurance companies that are determined to have failed to pay valid claims, paid less than amounts due, or failed to timely pay claims. With respect to potential litigation, the new law imposes stricter notice requirements for plaintiffs’ attorneys and, in the event the policyholder ultimately prevails, reduces the amount of penalty interest for failing to promptly pay a claim from 18% to about 10% (5% above prejudgment interest established under Finance Code).
Insurance companies, therefore, face somewhat less liability exposure under the new law and there are elevated hurdles for plaintiffs to overcome in pursuing litigation.
Consequently, the timing of policyholder claims is critical to the law applicable to the insurance companies’ processing of those claims. That is, for a policyholder to take advantage of existing Texas law, and the enhanced penalties contained therein, the policyholder must file a claim in writing and advise the insurance company of the facts relating to the claim by this Thursday, August 31, 2017. Otherwise, House Bill 1774 will likely govern such claims filed on or after September 1st.
To the extent litigation arises relating to claims for property damage or loss caused in any part by “forces of nature,” including Hurricane Harvey, the timing of the policyholder’s claim will be key to how litigation proceeds and the insurance company’s liability exposure.
In the Fifth Circuit, Attendance May be an Essential Function of Most Jobs and Telecommuting is Not Necessarily a Reasonable Accommodation
With the advent of an increasingly interconnected economy and advancement in technology permitting employees to, in many cases, work seamlessly from home, employers are increasingly facing requests from allegedly disabled employees to permit long-term and/or permanent telecommuting as a reasonable accommodation for their alleged disabilities. Under the ADA, of course, employers must generally engage in an interactive or collaborative process with the employee claiming to be disabled to accommodate the known limitations of an employee’s disability, if possible; assuming the employee can perform the essential functions of the job.
But in light of existing technology, is open-ended telecommuting a reasonable accommodation?
Probably not, at least in the Fifth Circuit.
In Credeur v. State of Louisiana, the Fifth Circuit recently concluded that in most cases employers are not obligated to permit telecommuting as a reasonable accommodation. And, importantly, the Court reaffirmed the proposition that it is, in the first instance, within employers’ sound discretion to identify the “essential functions” of their jobs, which may include attendance. Those “essential functions” are critical to the analysis because to be “qualified” under the ADA, the employee must be able to perform the essential functions of the job with or without reasonable accommodation.
The Court’s determination arose in the context of a lawsuit brought by a litigation attorney in the State of Louisiana’s Office of the Attorney General who sued when her request for indefinite telecommuting was rejected. She argued that working in the office was not an essential function of the job and, following complications from a kidney transplant, working from home was necessary. The Fifth Circuit, however, noted that “regular work-site attendance is an essential function of most jobs” and particularly where the job is interactive and involves a significant degree of collaboration or teamwork. Further, the Court noted that it must give the greatest weight to the employer’s judgment as to the job’s essential functions. The employee’s subjective judgment does not create a genuine dispute of material fact sufficient to withstand the employer’s motion for summary judgment.
That is, it is not enough for the employee to merely proffer her opinion that it isn’t necessary to be in the office or that a particular employer requirement is unnecessary. Instead, the Court does not allow employees to define their jobs’ essential functions based solely on their own personal opinions, viewpoints, and experience.
“Construing the ADA to require employers to offer the option of unlimited telecommuting to a disabled employee would have a chilling effect. Rather than offer such benefits, companies would tighten their telecommuting policies to avoid liability. The ADA does not require an employer to ‘reallocate essential functions’ to accommodate an employee with a disability.”
Notwithstanding the favorable Fifth Circuit assessment of the issue, employers should approach such situations cautiously. In all likelihood, a court’s assessment will be a case-by-case determination predicated upon the specific job at issue, the tasks involved, and prior analysis of the issue by the employer. To that end, employers would be well advised to revisit their job descriptions and their policies with respect to telecommuting employees.
Credeur v. State of Louisiana, No. 16-30658 (5th Cir., June 23, 2017)
Sixth Circuit Determines Employer Cannot Be Held Liable Under Title VII for Sexual Harassment By Manager Who Lacked Actual Authority to Take Tangible Employment Action
In a sexual harassment lawsuit brought by the EEOC, the Sixth Circuit last week affirmed the lower court’s summary judgment for the employer, concluding that “[b]ecause [the manager] did not take any tangible employment action against his co-workers and indeed had no authority to do so, the manager was not a supervisor under Title VII and thus [the employer] cannot be liable for the conduct alleged.” EEOC v. AutoZone, Inc., No. 16-6387 (6th Cir. June 9, 2017).
The EEOC filed suit against AutoZone based on allegations that a store manager had sexually harassed several store employees. Importantly, neither the district court nor the court of appeals relied on the accused harasser’s job title – store manager – to impose vicarious liability on the company. Instead, the courts were persuaded by the store manager’s actual job duties and responsibilities, which did not include the authority to fire, demote, promote, transfer or otherwise impose adverse employment action against employees.
Whether the store manager was a supervisor is critical to an employer’s vicarious liability under Title VII. As the Sixth Circuit explained, employers are vicariously liable for a supervisor’s sexual harassment without any showing of employer negligence if the agency relationship (e.g., status as supervisor) aided the harassment. If the alleged harasser is not a supervisor, however, the employer may be held liable if it was negligent in controlling working conditions (i.e., knew or should have known of the harassment but failed to take prompt and appropriate corrective action). And the Court noted that an employee is a “supervisor” for purposes of vicarious liability under Title VII if he or she is empowered by the employer to take tangible employment actions against the victim.
In this case, the Sixth Circuit reviewed the evidence of the store manager’s authority and found that he was not a supervisor for purposes of Title VII liability. He did not have authority to take tangible employment action against the victims. AutoZone did not, for example, empower the store manager to fire, demote, promote, or transfer any employees. Although the store manager could initiate the disciplinary process and recommend demotion or promotion, his recommendations were not binding, and his ability to influence the district manager did not suffice to turn him into his victims’ supervisor. Nor did his ability to direct the victims’ work at the store or his title as “store manager” make him the victims’ supervisor for purposes of Title VII.
An important takeaway from this opinion for employers is the prospect of focusing courts on the actual authority of management-level personnel, or, more precisely, the lack of such authority, as a legal defense to vicarious liability under Title VII. Whether, regardless of job title, the accused harasser has actual authority to take tangible employment action against his victims may be critical to the employer’s legal defense.
Last Monday, the Colorado Supreme Court, affirming the lower court’s ruling, issued a decision essentially upholding condominium developers’ right to require arbitration of construction-defect disputes. See Vallagio at Inverness Residential Condo. Ass’n v. Metro. Homes, Inc., et al., Case No. 15SC508 (CO Sup. Ct.) (June 5, 2017). The Court’s 5-2 decision last week, combined with recent state legislation (House Bill 1279) requiring approval by a majority of condominium owners to pursue legal action against condominium developers, may reinvigorate what has been a dormant market for the better part of a decade.
The dispute presented to the Colorado Supreme Court concerned a so-called “right to consent” in which the condominium developer attempted to contractually retain a perpetual right to consent to any subsequent homeowners association’s proposed amendments to the community’s declarations regarding arbitration for construction-defects claims. In short, the condominium developer included contract language preventing homeowners associations from subsequently removing arbitration requirements without its consent (i.e., the original declaration required binding arbitration of construction-defect claims and prohibited any amendment to the binding arbitration provision without the developer’s consent).
The underlying litigation was the product of construction defect claims asserted by unit owners. Unable to resolve their claims informally, the unit owners voted to amend the property declaration to remove the arbitration provision and the homeowners association then filed a lawsuit against the developer. In response, the developer moved to compel arbitration, arguing that the arbitration provision deprived the district court of jurisdiction and that the unit owners’ attempt to amend the provision was invalid because they failed to secure its consent. The homeowners association asserted that the right to consent was invalid under the Colorado Consumer Protection Act (CCPA) and the Colorado Common Interest Ownership Act (CCIOA), the latter of which governs rules between developers and property owners in communities with shared walls.
The Colorado Supreme Court, however, concluded that developers can, in fact, retain a perpetual right to consent. In arriving at its decision, the Court reviewed the language of the CCPA and the CCIOA, as well as the legislative intent underlying each statute. The majority determined that although the CCIOA bars developers from requiring thresholds higher than 67 percent of residents to make changes to contracted declarations, nothing in either law prohibits a developer from including a provision perpetually requiring its consent for particular amendments. Indeed, according to the majority opinion, such an outcome is consistent with the CCIO language and Colorado public policy favoring alternative dispute resolution, including arbitration.
Consequently, according to the Court, the developer is entitled to binding arbitration of construction-defect claims arising from the development and the homeowners cannot modify or amend the associated provisions without the developer’s consent.
As with non-compete agreements, employers are increasingly relying on non-disclosure agreements (“NDAs”) to protect their valuable, confidential information. Because of the importance of the underlying issues at stake in attempting to enforce NDAs (e.g., trade secrets and other competitively valuable information), it is important for employers to evaluate enforceability up front and appropriately invest time and money in proactively considering collateral issues that often arise in the NDA context. Some of those collateral issues include the following:
- Definition of confidential information. Rather than relying exclusively on general or nebulous terminology in the NDA, employers should, to the extent possible, attempt to set forth the type and/or categories of information subject to the NDA with some measure of particularity. Obviously it is best not to include what purports to be a comprehensive list, but some effort toward specificity in the type of information subject to the NDA will go a long way towards improving the chances of enforceability.
- Scope of confidential information. Employers should craft their NDAs to only encompass legitimately confidential or trade secret information. Overly broad NDAs that expansively encompass public or non-confidential information are less likely to be judicially enforced should litigation arise.
- Preserve confidentiality of the information. In addition to defining the information as confidential in the NDA, the employer must separately take steps to safeguard the confidentiality of that information. If the employer does not, it becomes increasingly likely that a court may conclude that the information is not really confidential or competitively sensitive and is not entitled to protection under the NDA.
- Protect trade secrets. Oftentimes, the definition of “confidential information” subject to a valid, enforceable NDA will differ in some respects from the scope of “trade secrets” protected by state and/or federal law. Employers should consider those differences, if any, in drafting their NDAs and in considering whether additional agreements are necessary to ensure legal protection of their trade secrets.
- Varying levels of protection may be necessary. Depending on the industry and type of information at issue, the NDA may need to be more specifically tailored to account for heightened levels of protection required for certain types of confidential information (g., health records, consumer date, personal identifying information). In such cases, the NDA should address the heightened protection and include contingencies for return and/or destruction of all data at the conclusion of employment, as well as data security and breach notification.
- Social media implications. Employers and employees alike should be aware of the impact of NDAs on social media accounts. In one recent case, for example, a former employee of a global recruiting and staffing firm was required to remove thousands of her LinkedIn contacts based on her former employer’s argument that those contacts actually belonged to the employer and not to the employee individually.
In preparing their NDAs, employers should consider these issues to ensure that the resulting agreement adequately addresses their concerns and does so in a manner most likely to be enforceable should litigation arise.
Harassment and discrimination complaints in the workplace have become increasingly common in recent years. As such, most employers will face such a complaint by one of their employee at some point during the operation of their business. How the employer responds may be critical to the potential imposition of liability (and to the employer’s legal defense).
Almost invariably, the employer will be best served by taking the complaint seriously and conducting an objective, thorough investigation into the allegations. Although the specific allegations at issue will dictate the precise nature of the ensuing investigation, employers would be well served following some general guidance for workplace investigations:
- Respond promptly. Rather than allowing the complaint to languish or delaying the response, employers should initiate an investigation promptly after receiving the complaint, and inform the complainant that it is doing so. A timely response suggests the employer takes the complaint seriously and keeping the complainant informed of the process may build better good will or minimize animosity toward the company itself.
- Confidentiality. To the extent possible, the employer should keep the allegations and the investigation confidential. Undoubtedly, word will spread that something is going on, but the employer should do its best to keep a lid on the investigation, its subject matter, and material learned.
- Objectivity. The employer should conduct an objective, unbiased investigation. To that end, consideration should be given to retaining a neutral third-party like a lawyer or HR consultant to conduct the investigation rather than another employee. Otherwise, the employer may face criticism that the investigation was a sham with a desired outcome already in mind or that it was necessarily unfair because of the investigator’s connection to the company and/or employees involved.
- No-Conflicts Authority. The investigator should have the authority to fully investigate the complaint and report accordingly on his/her findings and be free from conflicts of interest with respect to the complainant and/or others involved in the complaint. The employer should not, for example, have an investigator investigating claims against his/her supervisor or someone in his/her direct line of supervision.
- Competence. The employer should ensure that the investigation is conducted by a competent investigator. Whether the person has been formally trained in workplace investigations or HR practices, the investigator should be experienced in the field and have the skills and ability to conduct a meaningful, informed investigation.
- Thorough. The investigation should be thorough in exploring the validity (or lack thereof) of the complaint. This means, at a minimum, interviewing key people (complainant, alleged harasser, witnesses) and reviewing relevant documentation. In many instances, for example, it is not enough to simply interview the complainant and alleged harasser, and leave it at that. The employer must ensure that a real investigation is conducted that actually attempts to determine the merit, if any, to the complaint.
- Follow Policy. Oftentimes, employers have written policies with respect to discrimination, harassment, complaints, and appropriate responses. In conducting the investigation, the employer should ensure that the investigator follows and applies company policy.
Although a diligent, prompt investigation may not absolutely prevent the filing of a formal charge of discrimination or lawsuit, it may ultimately provide an affirmative defense curtailing liability.
Oftentimes, it is to employers’ benefit to implement a robust documentation policy with respect to their employees. Whether an employee requests FMLA time, mentions a disability that makes her job more difficult or raises the specter of discrimination or harassment after adverse employment action, documentation may be the key to limiting or avoiding legal liability.
But employers need not wait until employees are actually on the payroll. Indeed, employers can take several steps at the preliminary stage of employment – the employment application – to try to head off problems down the road. Some things employers should consider:
- At-will Disclaimer. Employers should consider including a statement in the application advising applicants that the application is not intended to and does not create a contract or offer of employment, and that any ensuing employment will be on and at-will basis that may be terminate at the will of either party. Such language may be useful in defending a claim of breach of contract or assertions that there was an offer of guaranteed employment.
- Non-Discrimination Statement. Employers should include language informing applicants that the employer is an equal opportunity employer that does not discriminate in hiring based on federally-protected (and state-protected) classifications.
- Exclude background check acknowledgement. Because the Fair Credit Reporting Act requires the disclosure of an employer’s intent to obtain a background check be in a stand-alone document, employers should exclude any such acknowledgement or notification from the application itself and prepare a separate, stand-alone document.
- Exclude disability and medical questions. In the application, employers would be wise to avoid questions asking about applicants’ disabilities and/or medical conditions. Not only would such inquiries run afoul of EEOC guidance, and potentially the ADA and similar state laws, including such questions in the application may later be offered as evidence that the information was used as a factor in hiring.
- Caution regarding criminal history. Exploring prior arrests and convictions is a thorny area fraught with peril for employers. A number of states and localities have passed so-called “ban the box” laws prohibiting employers from asking about applicants’ criminal history on employment applications. Likewise, the EEOC suggests not asking about convictions on job applications, but, if employers do, to limit the inquiry to convictions for which exclusion would be “job related for the position in question and consistent with business necessity.” And asking about arrests becomes even more problematic because an arrest alone does not demonstrate the applicant actually engaged in criminal conduct. Employers should carefully consider how to navigate existing federal, state, and local law with respect to seeking criminal history information, if at all, from job applicants.
- Avoid age-related inquiries. Although an applicant’s experience may be relevant to a job qualification, employers should be careful about asking for graduation dates or other information that reveals the applicant’s age. Problematically, such inquiries that enable the hiring manager to guess or estimate the applicant’s age, when unrelated to job qualifications for the position, may lead to assertions of discriminatory intent on the basis of age under the ADEA.
- Avoid marital and familial status inquiries. Asking questions about an applicant’s marital status, number/age of kids, or provisions for childcare may give rise to assertions of discrimination on the basis of sex. Also, marital or familial status may be a protected class under state law.
- Avoid citizenship inquiries. Federal law prohibits discrimination against an applicant because he or she is not a US citizen. Rather than asking about citizenship and giving rise to the possibility of a discrimination claim, in the employment application, employers should consider limiting their inquiries to asking whether the applicant is legally qualified to work in the US.
Employment applications are, typically, of critical importance in the hiring process and constitute employers’ first – and maybe only – contact with applicants. For the many applicants who are not hired, employers should best position themselves proactively for the prospect of potential legal liability arising from the decision not to hire. Carefully constructing the employment application may go a long way in preventing claims or, at a minimum, better positioning the employer to defend any such claims that arise.
Expansion of Employment Discrimination Coverage: Title VII May Prohibit Sexual Orientation Discrimination
Title VII of the Civil Rights Act of 1964 provides the foundation for the federal prohibition of discrimination and harassment on the basis of race, color, religion, sex, or national origin in employment. See 42 U.S.C. 2000e-2(a). But notwithstanding the many developments in the area of LGBT rights over the last several years, it remains an open question under federal law whether employers can discriminate against employees on the basis of sexual orientation. That is, it has been unclear whether Title VII prohibits sexual orientation discrimination.
Last month, however, the United States Court of Appeals for the Seventh Circuit, sitting en banc, rendered a landmark decision in which it concluded “that discrimination on the basis of sexual orientation is a form of sex discrimination” covered by Title VII. Hively v. Ivy Tech Community College of Indiana, No. 15-1720 (7th Cir. April 4, 2017). The Seventh Circuit is the first federal appeals court to rule in this manner and in doing so expressly contradicted recent decisions from the Second and Eleventh Circuits, setting up a potential showdown in the Supreme Court to finally resolve the issue.
The case itself is fairly straightforward. Ms. Hively, who is openly gay, claimed that Ivy Tech Community College, her employer, denied her a full-time teaching position and refused to renew her employment contract based on her sexual orientation. The federal district court initially dismissed the case and a three-judge panel of the Seventh Circuit affirmed based on existing precedent that sexual orientation was not a protected class under Title VII. But the Seventh Circuit agreed to reconsider the issue en banc and reversed, finding that Title VII does, in fact, prohibit discrimination on the basis of sexual orientation.
Employers operating in the Seventh Circuit (e.g., Illinois, Indiana, and Wisconsin) should operate under the assumption that Title VII prohibits discrimination on the basis of sexual orientation. At least unless and until the Supreme Court determines otherwise. For the rest of the country, the law, at least in terms of the scope of Title VII, is not settled yet and employers would be wise to carefully consider the issue as they make employment decisions.