Labor and Employment Update - Fall 2009

EMPLOYEE LEAVE CAN RAISE FMLA AND/OR ADA ISSUES

In the recent decision Erdman v. Nationwide Insurance Company, the Third Circuit Court of Appeals provided important guidance on issues related to employee work leaves including: 1) employee eligibility for leave under the Family and Medical Leave Act (“FMLA”); 2) when an employee is considered to have engaged in protected activity for the purposes of establishing an FMLA retaliation claim; and, 3) when an employee may have a claim under the Americans with Disabilities Act (“ADA”) for discrimination on the basis of “association” with a disability. 

The plaintiff in Erdman was a long term employee who was terminated shortly after having requested leave under the FMLA to care for her child with Down syndrome.  Erdman’s attorney claimed that her termination violated the FMLA’s anti-retaliation provision, as well as the ADA’s protection against an employer unfairly treating an employee based on such employee’s association with a disabled individual.  The threshold issue for the Court was whether or not Erdman had met the FMLA’s eligibility requirements of having worked a minimum of 1250 hours in the previous twelve months.  Specifically, the Court analyzed whether time worked by Erdman at home could be considered toward her minimum hour requirement under the FMLA.  Relying on the FMLA’s interpretation that an employer need only have actual or constructive notice of an employee’s hours worked at home in order for such hours to be included in the minimum hour calculation, the Court found Erdman eligible for FMLA leave based on Nationwide’s constructive knowledge of her work from home.  Notably, the hours which the Court considered to qualify Erdman for leave were not even paid time, but “comp” time used exclusively toward her vacation accrual. 

With regard to Erdman’s retaliation claim under the FMLA, the Court clarified that an employee need not have actually begun to take a leave under the FMLA in order to establish a claim for interference or retaliation under the statute.  In the Court’s own words “it would be patently absurd if an employer who wished to punish an employee for taking FMLA could avoid liability simply by firing the employee before the leave begins.”  Based on this critical ruling, employers must be aware that any adverse actions taken against an employee who has simply requested FMLA leave may be perceived as retaliation or interference against that employee under the statute.   An employee having actually commenced an FMLA leave in order to have an actionable claim is no longer the case.

Yet another important aspect of the Erdman opinion was its discussion of an employee’s ability to claim what is called “remedial eligibility” under the FMLA.  Erdman argued that, regardless of the number of hours she had actually worked, Nationwide’s failure to notify her either way of her FMLA eligibility precluded Nationwide from later arguing that Erdman was ineligible.  The Court rejected this argument and pointed to a recent amendment to the FMLA which removed the remedial eligibility provision, resulting in the definitive disallowance of otherwise non-eligible employees pursuing FMLA claims based on a employer’s failure to respond to a request for leave. 

Turning to Erdman’s ADA “association” claim, the Court rejected the notion that Nationwide discriminated against Erdman based on her association with her disabled daughter.  Specifically, the Court noted “there is a material distinction between firing an employee because of a relative’s disability and firing an employee because of the need to take time off to care for a relative.”  The Court then concluded that Erdman failed to show that Nationwide had been motivated to terminate her based on her daughter’s disability, rather than her stated intention to take time off from work. 

The business considerations for employers following the Erdman decision are several.  In order to avoid confusion, clear policies related to off-site work hours should be established and include a requirement that employees obtain authorization from supervisors for any outside time.  In addition,  any questions from employees regarding authorization of time worked outside the office should be promptly reviewed and addressed. 

AN EMPLOYEE’S THEFT OF COMPANY FILES IS NOT “PROTECTED ACTIVITY” UNDER NJLAD
A New Jersey appellate court recently held in Quinlan v. Curtiss-Wright Corp., that an employee’s actions in copying and using confidential Company documents as part of her gender discrimination lawsuit against the Company would not be considered “protected activity” that would support a “retaliation” claim under the New Jersey Law Against Discrimination (“NJLAD”).

In Quinlan, a human resources manager with over 20 years’ seniority filed suit after a male coworker, with far less experience, received a promotion instead of her, to the position of Vice President of Human Resources. Upset by the promotion of her less-tenured male colleague, Quinlan complained to the Company (although she did not – at least initially – allege gender discrimination). In response, the Company explained that it had decided to promote the male candidate on the strength of several HR initiatives that he had implemented while at the Company.

Dissatisfied with the Company’s explanation for her being passed over for the promotion, Quinlan made use of her far-ranging access to the Company’s confidential HR records to begin gathering evidence that she believed would support a claim for gender discrimination at the Company. In so doing, Quinlan gathered over 1800 documents – many containing personal information such social security numbers, wages, home addresses, etc. for Company employees – and provided copies of the documents to her attorney. A lawsuit was then filed under the NJLAD alleging gender discrimination in pay and promotions. During discovery, Quinlan’s attorney produced copies of the 1800 or so documents that Quinlan had accessed. The Company apparently made no immediate move to address the issue of the copied documents with Quinlan (who was still employed in an HR capacity), although there appears to have been some discussion as to how the issue should be handled.

A few weeks later, during the deposition of the male employee who had been promoted to the VP of HR position, Quinlan’s attorney confronted him with a copy of his recently prepared performance evaluation. The evaluation had apparently been created shortly before the deposition was held (after the original 1800-document production) and, indeed, the VP claimed to have never seen it before. The Company’s attorneys objected strenuously to the use of the document at the deposition. Shortly thereafter, Quinlan was terminated for theft of confidential documents. Quinlan’s attorney amended her complaint to assert a claim for “retaliation” – based on an assertion that her use of the documentary evidence at the deposition was “protected activity” under the NJLAD and that the Company had clearly taken action against her based on such protected activity.

The NJ trial court permitted the retaliation claim to go to the jury, holding and instructing the jury that while the “theft”/copying of Company documents was not “protected activity,” her attorney’s use of such documents during the deposition was protected activity. (In so holding, the trial court appeared to go so far as to entertain the idea that the Company had actually tried to entrap Quinlan to act in the way she did, by knowingly placing a tantalizing “smoking gun” document within her reach; indeed, the trial court considered that “[a]n employer cannot lay traps for its employees by tantalizing them with such documents, enticing them to send a copy to their lawyer, and then claim their lawyer’s use of the document is wrongful.” 

After the first trial resulted in mistrial, the second jury found in favor of Quinlan, awarding her over $10 million in damages, including punitive damages.

On appeal, the appellate court reversed the trial court’s holding with respect to the attorney’s use of stolen Company documents during the deposition – holding that Quinlan’s copying/use of Company confidential documents was not protected activity under the NJLAD. In so holding, the appeals court noted that the Company had a strong confidentiality policy, which the plaintiff had signed. The court also reviewed holdings in other federal and state courts, where courts had generally held that only in circumstances where the documents came into plaintiff’s hands through inadvertent means (i.e., where the plaintiff was “innocent” of wrongdoing) would the subsequent use of such Company confidential documents be considered “protected activity.” The Quinlan appeals court also explicitly rejected the trial court’s distinction between “taking” the documents and “using” them at deposition, holding that such a rule would only encourage employees to engage in wrongful activity. (The Quinlan court, however, held that the plaintiff could still, however, maintain her claim that her termination was in retaliation for her original filing of the complaint – even though she was fired over 7 months after originally filing the complaint, and had received a raise and bonus in the interim.)

In light of this opinion, New Jersey (and other) employers should carefully review their confidentiality policies to ensure that they are adequate in scope to afford necessary protection in the event a current employee – particularly an employee with access to sensitive/confidential information – decides to gather evidence/file a lawsuit against the Company. In constructing such confidentiality policies, companies also should review the levels and scope of access granted to particular employees – making sure that employees are only granted access to information for which they have a direct need to use as part of their daily activities. 

The Quinlan case is also instructive as to the dangers of “retaliation” claims in general, and the particular difficulty of avoiding such claims when lawsuits are threatened and/or filed under anti-discrimination statutes by current employees. In such instances, companies take particular care and to seek guidance of counsel before deciding to terminate or take disciplinary action against such employees – as there are numerous instances where weak/spurious discrimination claims are ultimately defeated/thrown out, but an employer is nevertheless held liable – sometimes for significant sums – based on the plaintiff’s ability to establish that he/she was “retaliated” against for pursuing the original claim.

SUPREME COURT LETS STAND A $36.5 MILLION FLSA OVERTIME AWARD

On October 5, 2009, the U.S. Supreme Court declined to hear a case in which a $36.5 million overtime award was assessed against Family Dollar Stores. (Family Dollar Stores, Inc. v. Morgan, U.S., No. 08-1287 cert. denied Oct. 5, 2009). In its petition for review, Family Dollar argued that the trial court had improperly certified a collective action under the Fair Labor Standards Act and that the Eleventh Circuit had improperly affirmed that certification. The Supreme Court, by declining to hear the case, rejected Family Dollar’s argument.

The plaintiffs in the case, 1,424 managers employed by Family Dollar, filed the suit demanding unpaid overtime on the basis that their actual job duties were not “executive” duties, such that they would be considered exempt employees for purposes of the FLSA. At trial, the evidence clearly showed that the managers spent between 80 and 90 percent of their time doing non-managerial tasks, such as unloading trucks, running cash registers, stocking merchandise and cleaning. Family Dollar argued that collective actions under the FLSA are categorically prohibited when the employer raises the executive exemption affirmative defense, because the question of whether an employee may be considered an executive for purposes of the FLSA is an individualized and fact-specific inquiry that depends upon the details of each manager’s specific job duties and the actual work he or she performed.

On appeal, the Eleventh Circuit rejected Family Dollar’s argument, holding that the trial court had relied upon significant and well-developed evidence showing that the managers were similarly-situated both in conditionally certifying the collective action and when denying Family Dollar’s motion for decertification three years later. By declining to review the case, the Supreme Court also rejected Family Dollar’s argument.

Employers who treat site managers as exempt should audit the job duties being undertaken by those managers. In order to qualify for the “executive exemption” under the FLSA, the following must be true:

1.      The employee’s primary duty is management of a recognized department or subdivision, and

2.      The employee’s primary duty is to customarily and regularly direct the work of 2 or more full-time employees or the equivalent (e.g. at least four part-time employees working at least 20 hours per week), and

3.      The employee possesses the authority to hire and fire employees, or whose suggestions are given substantial weight in such decisions, including promotions, and

4.       The employee customarily and regularly exercises discretionary power involving the comparison and evaluation of possible courses of conduct in acting or making decisions after the various possibilities have been considered.

The Labor and Employment Group represents and counsels employers in all aspects of the employment relationship, including EEO litigation, union avoidance, negotiations, arbitrations, executive compensation, corporate transactions, and non-competition/non-solicitation agreements, as well as compliance with federal and state laws such as the Family and Medical Leave Act, the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act, the Fair Labor Standards Act and the Occupational Safety and Health Act.

This document is published for the purpose of informing clients and friends of Klehr Harrison about developments in the areas of labor, employment and benefits, and should not be construed as providing legal advice on any specific matter. For more information about this publication or Klehr Harrison, contact Charles A. Ercole, Chair of the Labor and Employment Group, at (215) 569-4282 or visit the firm’s Web site at www.klehr.com.