Labor and Employment Update - Summer 2017

THE SUPREME COURT UPHOLDS USE OF ARBITRATION CLAUSES IN CONTRACTS

Recently, the United States Supreme Court reaffirmed its policy in favor of the arbitration of disputes. In Kindred Healthcare, the Court sided with a nursing home’s use of forced arbitration agreements in nursing home admissions.

In a 7-1 decision, the justices overturned a Kentucky Supreme Court decision that refused to enforce the arbitration agreements. The Court held that the Federal Arbitration Act protects Kindred’s right to use arbitration rather than litigation to settle disputes with nursing home residents and their families. Beverly Wellner and Janis Clark had signed the agreements with power of attorney on behalf of their relatives.

When Wellner and Clark’s relatives died, the women sued Kindred for negligence and wrongful death, alleging that Kindred provided a substandard level of care. The nursing home moved to dismiss the lawsuits, arguing that the arbitration agreements prohibited them from bringing their disputes to court. The Kentucky Supreme Court declared the agreements invalid. The court said power of attorney must expressly allow an agent to deprive the principal of the right to access the courts.

In delivering the majority opinion, Justice Elena Kagan said the lower court’s “clear-statement rule” fails to put arbitration agreements on an equal plane with other contracts.

“By requiring an explicit statement before an agent can relinquish her principal’s right to go to court and receive a jury trial, the court did exactly what this Court has barred: adopt a legal rule hinging on the primary characteristic of an arbitration agreement — namely, a waiver of the right to go to court and receive a jury trial,” she said.

In a dissenting opinion, Justice Clarence Thomas claimed the Federal Arbitration Act (FAA) does not apply to proceedings in state courts. “In state-court proceedings, therefore, the FAA does not displace a rule that requires express authorization from a principal before an agent may waive the principal’s right to a jury trial. Accordingly, I would affirm the judgment of the Kentucky Supreme Court,” he said.

The ruling concurs with previous decisions from the Supreme Court related to arbitration agreements. Since the mid-1980s the high court has ruled against any state laws that appear to preempt the Federal Arbitration Act. The court continues to favor arbitration clauses in contracts of all kind – including employment contracts.

By:  Charles A. Ercole
cercole@klehr.com

POST-TERMINATION CONDUCT CAN SUBJECT EMPLOYER TO CLAIMS OF RETALIATION

Generally, it should be no surprise to employers that their actions leading up and relating to their decision to terminate an employee could subject them to claims of discrimination, harassment and/or retaliation. And employers should ensure, to the greatest extent possible, that termination decisions are based entirely on legitimate business reasons. Some employers may not appreciate, though, that their post-termination conduct towards a former employee, under certain circumstances, could form the basis of a claim for unlawful retaliation under Title VII and/or the Age Discrimination in Employment Act (ADEA), as well as other statutes with similar anti-retaliation provisions. This became apparent to the defendants in a recent Eastern District of Pennsylvania case, Roe v. The McKee Mgmt. Assocs., Inc.

In that case, the plaintiff, Carolynn Roe, was fired “for performance” when she was 70 years old and after she had worked for the defendants for nine years. At the time of her termination, defendants’ attorney and their Human Resources representative told Roe that she could collect unemployment and that defendants would provide her with a good reference for future employment. Roe was asked to sign a general release of the defendants, but she declined to do so.

Shortly after her termination, Roe applied for and began receiving unemployment benefits. Also, her attorney informed the defendants that Roe intended to file an age discrimination claim in connection with her termination. One week after learning of Roe’s intentions, the defendants took steps to contest unemployment and, as a result, Roe stopped receiving benefits. A month later, defendants offered to withdraw their objection to her receiving unemployment benefits if she would sign a general release in their favor. Roe, again, declined to sign such a release.

Roe filed an age discrimination claim against defendants and moved the Court for permission to amend her complaint to add a retaliation claim under the ADEA. In Roe’s proposed amended complaint, she asserted that defendants retaliated against her in violation of the ADEA when they conditioned their withdrawal of their contest of her unemployment benefits on her signing a release of her ADEA claim, contested unemployment only after she told them she would file an ADEA claim, and refused to provide her with the favorable reference that she had been promised. Defendants opposed, contending that Roe could not plead that she had engaged in protected activity because refusing to sign a general release is not protected activity as a matter of law. Defendants also argued that Roe had not suffered an adverse employment action because she was not employed by the company at the time it contested her unemployment application and failed to provide her with an reference.

The Honorable Mark A. Kearney started the analysis by explaining that, to state a retaliation claim under the ADEA, Roe had to plead that: (1) she engaged in protected conduct; (2) she was subject to an adverse employment action after such conduct; and (3) there is a causal link between the two. While the court did agree with defendants that refusing to sign a release that includes all types of claims in addition to ADEA claims is not protected activity because that conduct is not sufficiently specific to rise to the level of opposing conduct protected by the ADEA, the court still found other protected activity. For example, the court held that, stating an intent to sue an employer for age discrimination, even after termination, as Roe had done, is protected activity.

In addition, the court ultimately found that Roe had sufficiently pled that she suffered an adverse employment action. In so doing, the court relied on a United States Supreme Court decision, Burlington No. & Santa Fe Ry. Co. v. White, which expanded the definition of “adverse employment action” under Title VII. In Burlington, the Court held that an adverse employment action is any conduct that would dissuade a reasonable employee from filing a charge of discrimination. Given that the anti-retaliation provisions in Title VII and the ADEA are virtually identical, Judge Kearney applied this definition to Roe’s ADEA retaliation claim. As such, the court held that defendants’ act of contesting Roe’s right to unemployment benefits, as well as refusing to give her a promised favorable employment reference (which impacted her ability to obtain subsequent employment), were adverse employment actions.

Take away: Employers must understand that refusing to provide a promised favorable reference and/or taking steps to contest unemployment benefits can constitute adverse employment actions under the broad definition of that term enunciated by the Supreme Court. Under certain circumstances, these post-termination actions regarding a former employee after he/she has engaged in protected conduct can make an employer vulnerable to claims for retaliation under Title VII, the ADEA, and other statutes with similarly written anti-retaliation provisions.

By:  Lee D. Moylan
lmoylan@klehr.com

EMPLOYMENT IN PENNSYLVANIA IS AT-WILL, MOST OF THE TIME

Many Americans are familiar with the general rule that employment in this country (and in the Commonwealth of Pennsylvania) is at-will. An employee can therefore quit, or be fired, for any reason or no reason, as long as it is not an unlawful reason. Unlawful reasons include a termination based on race, religion, gender, national origin, age, or pregnancy. There are, however, lesser known and rarely applied exceptions, including for whistleblowers.

Pennsylvania private sector employees are not protected by a whistleblower statute. In the early 1970’s, the Pennsylvania Supreme Court nonetheless recognized a public policy exception to the at-will employment doctrine for certain types of private sector whistleblowing.  (Geary v. United States Steel Corp.). The exception protects employees from termination for complying with the law or exercising a statutory right.  The resulting wrongful discharge claim is quite narrow.  An employee is not protected merely for acting with good intentions or for opposing unlawful conduct by other employees or in areas outside of the employee’s responsibilities.

Since Geary, Pennsylvania courts have rarely permitted wrongful discharge claims to proceed, applying the exception when:

• An employee was terminated for reporting violations of federal law, as required by statute. Field v. Philadelphia Elec. Co.
• An employee was terminated for receiving workers’ compensation benefits.  Shick v. Shirey.
• A father was terminated for allowing his son to obtain workers’ compensation benefits.  Rothrock v. Rothrock Motor Sales, Inc.
• An employee was terminated for filing an unemployment compensation claim.  Highouse v. Avery Transp.
• An employee was terminated for performing jury duty.  Reuther v. Fowler & Williams, Inc.

Recently, two teachers were permitted to pursue wrongful discharge claims because they were purportedly fired for planning to report child abuse, despite being legally required to make such a report. Krolczyk v. Goddard Sys., Inc. (May 23, 2017).

A wrongful discharge claim is rarely available in Pennsylvania. Employers should nonetheless be wary when terminating Pennsylvania employees for exercising their statutory rights or complying with the law.

By:  Matthew J. McDonald
mmcdonald@klehr.com