Thursday, March 24, 2011

U.S. Supreme Court: Oral Complaints Are Sufficient To Invoke Anti-Retaliation Provisions of the Fair Labor Standards Act

In Kasten v. Saint-Gobain Performance Plastics Corp., 09-834 (3/22/2011),the U.S. Supreme Court held that the anti-retaliation provision of the Fair Labor Standards Act (FLSA) protect employees who make oral complaints to an employer, when "a reasonable, objective person would have understood the employee to have put the employer on notice that the employee is asserting," his or her rights under the FLSA. This decision settles a disagreement that had existed among the Circuit Courts of Appeals as to whether oral complaints were sufficient, or whether the FLSA required an employee to file a written complaint before he/she could be protected from retaliation.

By way of background, the FLSA generally provides that employers that fall within its scope must pay non-exempt employees overtime pay at a rate of one-and-one-half the employee's regular rate of pay, for all hours that an employee works in excess of 40 in any week. Section 215(a)(3) of the Fair Labor Standards Act makes it illegal for an employer: "to discharge or in any manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee." 29 U.S.C. 215(a)(3). As mentioned above, the Courts of Appeals have been in disagreement as whether the phrase "filed any complaint," requires a formal written complaint, or encompasses informal oral complaints as well.

In this case, the employee, Kasten, had made various oral complaints to his employer about the physical location of time-clocks in his place of employment, which were located between the area where Kasten and his other co-workers would put on and take off their work-related protective gear, and the area where they performed their job duties. Kasten believed that this placement prevented the workers from receiving credit for time that they spent "donning and doffing" their required protective gear, which is a violation of the FLSA. Kasten claimed to have made repeated oral complaints about the time-clock location to his employer in accordance with the employer's internal grievance procedure, and orally complained to his shift supervisor that "it was illegal for the time clocks to be where they were," because of the employer's exclusion of "the time you come in and start doing stuff." Kasten also complained to a member of the HR department that if the location of the time clocks "were to get challenged," in court, the employer "would lose." He also told his lead operator that the location was illegal and that he "was thinking about starting a lawsuit about the placement of the time clocks."

Kasten alleged that these complaints led his employer to discipline, and ultimately, terminate him.

The lower courts had dismissed Kasten's claims of retaliation, holding that the FLSA did not protect "oral" complaints, but required an employee to file written complaints to an employer before he/she could take advantage of the FLSA's anti-retaliation provision.

The U.S. Supreme Court disagreed, and held that the FLSA's anti-retaliation provision protects both oral and written complaints. Finding that the text of the FLSA itself did not provide a conclusive answer to this issue, the Court's majority looked to the purpose and history of the FLSA, and concluded that limiting complaints by employees to only formal written complaints, would undermine the legislative purpose and intent of the Act, which was originally meant to protect illiterate and uneducated manufacturing laborers. The majority also noted that restricting complaints to only those in writing would prevent the Government agencies from using hotlines, interviews and other methods of receiving complaints from employees.

However, the Court did not go so far as to offer protection to all oral complaints, recognizing that the FLSA does require fair notice of alleged violations to be given to employers. Therefore, the majority held that while "fair notice" does not necessarily have to be in writing, an oral complaint will only be deemed to be "filed" under the anti-retaliation provision of the FLSA when "a reasonable, objective person would have understood the employee to have put the employer on notice that the employee is asserting," his or her rights under the FLSA. Under the facts of this case, the majority determined that Kasten's oral complaints to his employer and supervisors met this objective test, and thus allowed Kasten's suit to proceed.

You can read both the majority and dissenting opinions in Kasten v. Saint-Gobain Performance Plastics Corp., here: http://www.supremecourt.gov/opinions/10pdf/09-834.pdf

Monday, March 7, 2011

Store Manager Is FLSA Exempt, Says Employer. Not So Fast, Says Court.

In Pierce v. Dolgencorp, Inc., the U.S. District Court for the Middle District of Pennsylvania held that a Store Manager's claim that she was owed unpaid overtime wages under the Fair Labor Standards Act (FLSA) could be sent to a jury for determination. In so doing, the Court rejected the employer's arguments that the Store Manager had to be classified as an "executive employee" as a matter of law.

Cindy Pierce was originally hired by Dollar General as a cashier in 1998. In 2001, she was promoted to Store Manager, and continued to work in that capacity until June or July of 2003. As a Store Manager, Pierce was the only salaried employee and the only employee who was classified as "FLSA exempt" by Dollar General.

As a Store Manager, Pierce had at least one Assistant Store Manager (ASM) and one clerk, and managed a store budget of over 200 hours per week. When she was first hired as Store Manager, Pierce earned $355.77 per week. By April, 2002, she was earning $423.08 a week, and understood that her salary was meant to compensate her for however many hours she worked. Pierce's ASM was paid $6.20 per hour. Pierce testified that she usually worked 50 to 60 hours a week, and sometimes as much as 65 hours a week. As Store Manager, Pierce interviewed and hired employees without approval from her District Manager, trained employees, disseminated and enforced corporate policies, evaluated employee performance, disciplined employees, fired and promoted employees, ensured store security and safety, monitored sales, damages, employees and hours, directed employees' work assignments and scheduled employees' hours. Pierce 30%-50% of her time performing paperwork, and it took her 5-6 hours just to complete the employees' work schedules. Pierce was unquestionably the store's leader.

On the other hand, Pierce testified that she spent 4 - 6 hours everyday stocking shelves and on "truck days," (which occurred about twice a week) Pierce and her ASM spent 75% of her time unloading and inventorying the delivery to the store. It would normally take two days to have delivery items unloaded and stocked on store shelves. She also ran the store registers when needed. Pierce had to request permission to take days off from her District Manager, and the store layout was dictated by a "planogram," that was created and disseminated by the District Manager. Pierce testified that she did not have discretion to set up the store as she would have liked. Pierce also spent 5 - 6 hours a week sweeping the floors and doing other non-managerial work. Pierce received excellent reviews in the area of "payroll control," which she attributed to her personally working more hours and not hiring extra employees.

In June of 2003, Pierce resigned from Dollar General because of stress associated with her job. In March of 2004, she made claims against Dollar General for unpaid overtime wages.

Dollar General (a.k.a. Dolgencorp, Inc.), argued that Pierce was not entitled to overtime pay for the period in which she served as Store Manager because she was properly classified as an "executive" employee, which is exempt from the overtime requirements of the FLSA. Dollar General argued that as Store Manager, Pierce's primary duty was management, and that she spent most of her time engaged in management work. Dollar General filed a Motion for Summary Judgment on this point, seeking dismissal of Pierce's claims.

The District Court disagreed, and held that Pierce had presented enough evidence to allow a jury to determine whether she spent most of her time performing managerial or non-managerial work. Specifically, the Court found that: (1) based on her testimony, a jury could determine that Pierce spent 25% - 30% of her time doing paperwork, and the remainder of her time performing manual labor; (2) a jury could conclude that Pierce's non-managerial work, such as unloading trucks, stocking shelves and running the registers, was more valuable to Dollar General than her managerial duties, because it saved Dollar General the expense of having to hire additional employees to perform the same work, evidenced by the fact that Dollar General refused to grant her more employees for her budget; and (3) when the respective hourly rate of pay of Pierce and her ASM is compared, a jury could find that Pierce was actually paid comparatively less than her ASM for an equivalent amount of hours (approximately 96% of her ASM's salary). Therefore, the District Court denied Dollar General's Motion and held that Pierce's claims must be determined by a jury.

The lesson to be learned from this case is clear: job titles are not everything. Just because someone holds a "manager" position does not mean that that individual is automatically exempt from the overtime pay requirements of the FLSA. Indeed, as this case shows, even performing some managerial tasks and duties in the course of employment does not entitle an employer to rely upon an "executive" exemption in every instance. As the District Court noted, the focus in these types of cases will be on the employee's "actual day-to-day activities, as opposed to generic job descriptions or performance evaluations." Things are not always as they seem at first glance.

Wednesday, March 2, 2011

US Supreme Court Adopts "Cat's-Paw" Theory In Military Discrimination Case

In Staub v. Proctor Hospital, decided on March 1, 2011, the U.S. Supreme Court held, in the context of a case involving an employer's alleged violation of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), that "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." The significance of this opinion is two-fold: First, the Court through this opinion has explicitly sanctioned the applicability of "cat's-paw" theories of liability in an employment discrimination context. Second, there is nothing in the language of this decision that would suggest that the Court's analysis in this case is strictly confined to cases arising under USERRA. To the contrary, the Court itself acknowledges in the majority opinion that the operative statutory language of the USERRA, which prohibits an employer from denying employment or the benefits of employment to any person on the basis of that individual's membership in or obligation to a branch of the military, is "very similar to Title VII." As such, employees can now rely on this decision to advance "cat's-paw" theories of liability against employers in the traditional discrimination cases arising under Title VII.

In this case, Vincent Staub worked as a medical technician for Proctor Hospital under 2004 when he was terminated for allegedly violating a "Corrective Action" disciplinary warning that had been placed in his employment file by his supervisors, Janice Mulally and Michael Korenchuk.

While employed at Proctor, Staub was a member of the U.S. Army Reserve, which required him to attend drill one weekend per month and to train full time for two to three weeks per year. At Staub's subsequent employment discrimination trial, the jury determined that both Mulally and Korenchuk were hostile to Staub's military obligations. Specifically, Mulally had scheduled Staub for additional shifts without notice so that he would "pay back the department for everyone else having to bend over backwards to cover his schedule for the Reserves," and Mulally had also informed one of Staub's co-workers that Staubs's "military duty had been a strain on the department," and asked that co-worker to help her "get rid of" Staub. Korenchuk referred to Staub's obligations to the Reserves as "a bunch of smoking and joking and a waste of taxpayers' money," and was aware that Mulally was "out to get" Staub.

In January of 2004, Mulally issued Staub a "Corrective Action" disciplinary warning for purportedly violating a company rule that required him to stay in his work area whenever he was not seeing a patient. This warning required Staub to report to either Mulally or Korenchuk when he had no patients or when his patient testing was completed. Staub contended at trial that the company rule allegedly invoked by Mulally did not exist, and that even if it did, he did not violate it.

On April 2, 2004, one of Staub's co-workers complained to Proctor's vice-president of human resources, Linda Buck, and to Proctor's chief operating officer, Garrett McGowan, about Staub's unavailability and abruptness. McGowan directed Korenchuk and Buck to create a plan that would "solve Staub's availability problems." Before such a plan could be put in place, however, Korenchuk informed Buck that Staub had left his desk without informing a supervisor, in violation of his January Corrective Action notice. Relying upon this accusation (which Staub contended was entirely false), Buck reviewed Staub's personnel file and terminated him. Staub's termination notice stated that Staub had been terminated for violating the directive contained in Mulally's January Corrective Action notice.

Staub challenged his termination through Proctor's internal grievance procedures. Staub contended that his termination was improper because Mulally had fabricated the allegation underpinning the January Corrective Action notice due to her hostility towards his military obligations. Buck did not follow up with Mulally with respect to Staub's allegation, and did not reverse Staub's termination.

Staub then sued Proctor claiming a violation of the USERRA, alleging that his termination was illegal as it was motivated by hostility towards his U.S. Army Reserve obligations. Specifically, Staub argued that although Buck herself (who had actually terminated Staub), held no such hostility, Mulally and Korenchuk clearly did, and that "their actions influenced Buck's ultimate employment decision." Staub's claim proceeded to a jury trial, where the jury found in his favor and awarded him $57,640.00 in damages.

On appeal, the Seventh Circuit Court of Appeals reversed, holding that a "cat's-paw" theory of liability, such as the one that Staub had advanced in this case, could not be maintained unless the non-decisionmaker had exercised "singular influence," over the actual decisionmaker so that the decision to terminate was the "product of blind reliance." The Seventh Circuit held that since the evidence in this case showed that Buck was not "wholly dependent" upon either Mulally's or Korenchuk's advice, Staub had no cause of action under USERRA.

In a unanimous decision with two Justices concurring in the judgment, the Supreme Court reversed. The Court noted recognized that when creating a tort action under federal law, Congress "adopts the background of general tort law," including the concept of "proximate cause." In claims for intentional torts, for example, the Court noted that in order to be found liable, an individual must intend not only "the act itself," but "the consequences of the act." Therefore, adopting these tenets and applying them to the operative language of the USERRA statute, the Court held that: "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." As such, in order to prevail in such actions, a plaintiff cannot hold an employer liable simply by showing that the ultimate decisionmaker relied upon information that was (unbeknownst to the decisionmaker) prompted by discrimination. Rather, the plaintiff must prove that the originator of that discriminatory information created the information with the intent that such information would cause the plaintiff to suffer an adverse employment action.

The Court rejected Proctor's suggestion that the Court adopt a rule that a decisionmaker's independent investigation and rejection of an employee's allegations of discriminatory animus can insulate an employer from liability, as such an action would negate the effects of any prior discrimination. The Court held that "we are aware of no principle in tort or agency law under which an employer's mere conduct of an independent investigation has a claim-preclusive effect. Nor do we think the independent investigation somehow relieves the employer of 'fault.' The employer is at fault because one of its agents committed an action based on discriminatory animus that was intended to cause, and did in fact cause, an adverse employment decision." The Court also rejected Justice Alito's suggestion that an employer should be held liable only when it "should be regarded as having delegated part of the decisionmaking power to the biased supervisor."

While it reversed the decision of the Seventh Circuit, the Court explicitly left two questions unanswered: First, the Court expressed no opinion as to whether an employer could be held liable under such a "cat's-paw" theory of liability if a co-worker, rather than a supervisor, committed a discriminatory action that influenced a subsequent adverse employment action. Second, the Court acknowledged that in this case, Staub took advantage of Proctor's internal grievance procedures after having been terminated, but refused to comment on whether Proctor would enjoy an affirmative defense to liability had Staub not done so. Therefore, one is likely to see these issues being litigated in the lower courts in the future.

You can read the Supreme Court's full opinion in Staub v. Proctor here: http://www.supremecourt.gov/opinions/10pdf/09-400.pdf