Ignoring a complaint based on a technical defect can cost employers big money
May 15th, 2012 | Lorene Park | Add a Comment
Thanks to the inaction of in-house counsel, an employee who filed a discrimination complaint naming AIG Life Brokerage, an internal division of her employer, as the defendant, obtained a default judgment against her employer, American General Life Companies, in the amount of $373,443 (Conner-Cooley v AIG Life Brokerage, D. Wis., May 10, 2012, Adelman, L). Defense counsel, who had been involved in the prior EEOC proceedings filed by the employee, knew that the complaint had been filed and that the employee was seeking default judgment. However, counsel failed to appear in the case until after the default judgment was entered against AIG Life Brokerage, believing that the employer had not been properly served with process due to the misnomer of the defendant on the complaint and to the fact that the employer’s registered agent for service of process, Corporation Service Company (CSC), sent a form letter rejecting service based on its policy that the name on the complaint must match its files. Apparently second-guessing that determination, counsel filed a motion to set aside default.
In denying the motion, the court pointed out that American General did not point to any facts showing that the misnomer created any reasonable doubt or confusion about who it was that the employee intended to sue. To the contrary, the record indicated that CSC knew exactly who the employee was suing. In addition, when the EEOC issued its right-to-sue letter, which it forwarded to American General, it identified the defendant as AIG Life Brokerage so the employer had a head’s up that it was likely going to be sued and that it might be under the name AIG Life Brokerage. In the end, the court concluded that American General was served with sufficient process.
The court also pointed out that there is no provision of law allowing a defendant or its authorized agent to reject a properly served summons. Thus, CSC’s “rejection” of that service had no legal effect. The court upheld the default judgment and ruled that it could be enforced against American General, which had “been the defendant all along.”
With this illustrative tale in mind, in-house counsel should not assume that a court will find that a technical misnomer in a complaint and summons is sufficient reason to ignore it when counsel knows very well who is the intended defendant. In this case, it was an expensive lesson.
Continuation of at-will employment sufficient consideration for an agreement to assign intellectual property to employer
May 14th, 2012 | Ron Miller | Add a Comment
The Wyoming Supreme Court can down squarely on the side of employers in a dispute concerning the ownership of two patents for a baffle system on oil field pumps in Preston v Marathon Oil Co. On a question certified from the Federal Circuit, the Wyoming high court was asked whether the continuation of at-will employment was sufficient consideration for an employment agreement that contained a provision requiring the assignment of intellectual property to an employer.
A federal district court had ruled that the employee was the sole inventor of two patents, but that a “Employee Agreement” was a valid contract that required him to assign his ownership interests to the company. On appeal, the Federal Circuit certified the question of additional consideration to the Wyoming high court.
Employee inventions. Several months after the employee began his employment he signed a document entitled “Employee Agreement” which contained the intellectual property provision. It was undisputed that the employer did not provide any additional consideration to the employee for signing this document beyond continued employment. Approximately two months after the employee ceased his employment he filed a patent application for his invention of the baffle system. He was listed as the sole inventor. The employer filed a patent application for a similar invention that named both the employee and a former coworker as co-inventors. The employee filed suit for patent infringement and a declaration that he was the sole inventor of the patent awarded to the employer. The employer counterclaimed, asserting that the employee had agreed to assign his rights in the first patent pursuant to the employee agreement.
Generally an invention is the property of the inventor who conceived, developed and perfected it. Thus, the mere fact that the inventor was an employee at the time of the invention does not mean that the inventor is required to assign the patent rights to the employer. However, if job duties include the responsibility for inventing or for solving a particular problem that requires invention, any invention created by the employee during the performance of these responsibilities belongs to the employer. Typically, an employee who is not hired to invent is the owner of any invention discovered during employment. Nevertheless, when an employee who was not hired to invent does invent something as part of his work duties, the employer is given a “shop right” to use the invention.
In this instance, there was no indication that the employee’s specific job duties included inventing the baffle system. So, under the general rule, the employee would be the owner of his invention and the employer would be entitled to use the invention under the “shop right” principle. However, the “Employee Agreement” included the intellectual property agreement requiring him to assign his invention to the employer.
Adequacy of consideration. Thus, the Wyoming Supreme Court was faced with deciding whether an at-will employee’s assignment of intellectual property rights to his employer must be accompanied by additional consideration, beyond the continuation of his employment, to be enforceable. As an initial matter, the court noted that there is a split of authority on the question of whether additional consideration is required to support post-employment assignment of intellectual property. The court rejected the employee’s contention that its decision in Hopper v All Pet Animal Clinic, Inc, which involved a covenant not to compete given by an employee after commencement of her employment, supported his contention that consideration in addition to continued at-will employment is necessary to support a post-employment assignment of intellectual property rights.
Rather, the court noted that it closely scrutinized covenants not to compete, employing a rule of reason analysis, to ensure that there is a proper balance between the competing interests of the employer and employee. The court observed that the requirement that a covenant not to compete must be supported by reasonable consideration separate from continued at-will employment was based, in part, on the sanctity of the right to earn a living. Because restraints on trade that attend non-competition agreements that limit an employee’s ability to earn a living, are not present for intellectual property assignment agreements, no additional consideration is required to support an employee’s post-employment agreement to assign intellectual property to his employer.
With patent assignment agreements, employees remain free to work for “whomever they wish, wherever they wish, and at whatever they wish, subject only to the requirement that the employee assignment to the employer any work product relating to the employer’s business developed by the employee while he or she was employed by the employer. Because of those differences, agreements to assign patents do not have to be supported by separate consideration. Thus, the certified question was answered in the affirmative.
Are your unpaid interns actually employees protected by wage and antidiscrimination laws?
May 11th, 2012 | Pamela Wolf | Add a Comment
Employers should take a closer look at whether “interns” working in exchange for experience or to meet educational or licensing requirements are actually “employees” — there is a world of difference between the two. If interns are really employees, they may be protected by labor and antidiscrimination laws and employers may be at risk for violating those and other laws.
A lawsuit filed by New York plaintiffs’ firm Outten & Golden underscores what has become a growing problem in a down economy. In February, the firm filed a suit in the Southern District of New York asserting that the Hearst Corporation illegally employed hundreds of unpaid interns in violation of federal and state wage law (Wang v The Hearst Corporation, No. 12 Civ. 0793). The putative class action was filed on behalf of a former intern at Harper’s Bazaar, who alleged that she regularly worked more than 40 hours per week, and sometimes as many as 55 hours per week, without compensation while working at the magazine last year. According to the complaint, the publisher’s unpaid interns were not paid minimum wages or overtime for the work they performed, in violation of the Fair Labor Standard Act and New York Labor Law. The suit also alleged recordkeeping violations.
FLSA coverage. The status of unpaid interns, and their proper classification under the FLSA and other labor laws, has been the focus of Department of Labor (DOL) enforcement and compliance assistance efforts in recent years. The DOL’s Wage and Hour Division has issued Fact Sheet #71, laying out six criteria to guide employers in determining whether private sector interns must be paid minimum wage and overtime under the FLSA. An FLSA exception may apply to interns who receive training for their own educational benefit if the training meets certain criteria. The determination of whether an internship or training program meets this exclusion depends on the facts and circumstances of each program.
FLSA checklist. Employers with unpaid interns in the workplace should consider the following questions to determine whether the FLSA applies to a particular intern:
Is the internship, even though it includes actual operation of the facilities of the employer, similar to training which would be given in an educational environment?
Is the internship experience for the benefit of the intern?
Does the intern work under close supervision of existing staff without causing displacement of regular employees?
Is there a lack of immediate advantage to the employer providing the training; are its operations occasionally actually impeded?
Is it understood that the intern is not necessarily entitled to a job at the conclusion of the internship?
Do the employer and the intern both understand that the intern is not entitled to wages for the time spent in the internship?
If the answer is “yes” to all of the questions above, the factors set forth by the DOL are likely met and an employment relationship would not exist under the FLSA. Therefore, the FLSA minimum wage and overtime provisions would not apply to the unpaid intern.
Federal antidiscrimination laws. Whether an unpaid intern is protected from discrimination by Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay Act, or the Genetic Information Nondiscrimination Act, likely turns on the question of whether the intern receives “significant remuneration” in some form, according to a recently released EEOC informal discussion letter. Interns who receive significant remuneration are likely covered by federal antidiscrimination laws.
Discrimination checklist. Employers with unpaid interns should consider the following questions to determine whether an intern receives significant remuneration or is otherwise protected by federal antidiscrimination laws:
Does the intern receive significant remuneration in any form, including pension, group life insurance, workers’ compensation, or access to professional certifications?
Does the intern receive significant benefits from an educational institution because of her volunteer work with the employer (not including academic credit, practical experience, or scholarly research)?
Is the work done by the intern required for regular employment or does it usually lead to paid employment with the same employer?
If the answer is “yes” to either of the first two questions, the intern likely receives significant remuneration as characterized in the EEOC letter, and is thus likely protected by federal antidiscrimination laws. An affirmative answer to the last question likewise means that the intern is covered by federal antidiscrimination laws regardless of whether the intern receives significant remuneration. Employers should also keep in mind that applicants and participants in training and apprenticeship programs are protected from discrimination related to the selection and participation process.
Years of repeated derogatory slurs for homosexuals created hostile work environment based on sexual orientation
May 9th, 2012 | Deborah Hammonds | Add a Comment
Evidence that a male employee heard repeated derogatory slurs was sufficient to show he was subjected to a hostile work environment based on his sexual orientation and the Connecticut Supreme Court ruled a trial court did not abuse its discretion in finding his employer liable for allowing it to continue (Patino v Birken Manufacturing Company). Affirming judgment for the employee, the court also ruled that the award of $94,500 in damages was supported by the evidence and was not excessive.
Background. The employee worked as a machinist from 1977 until his termination in 2004. Beginning in 1991, he became the subject of name-calling on the shop floor of his employer’s industrial plant. The name-calling consisted of derogatory slurs for homosexuals in Spanish, and in Italian and English. He claimed to have heard such words ‘‘very often,’’ sometimes even ‘‘two or three times a day.’’ The derogatory words were not spoken to his face, but were made in his presence, such as directly behind his back while he was operating machinery. Despite his complaints to his supervisor, the harassment continued over a period of many years before the employee filed suit under state law. Following a jury trial, the jury returned a verdict in favor of the employee. The employer then filed a motion to set aside the verdict and a motion for remittitur, both of which the trial court denied. The trial court thereafter rendered judgment in accordance with the verdict.
Claim covered by statute. As an initial matter, the court rejected the employer’s argument that Gen Stat Sec. 46a-81c (1) does not provide for hostile work environment claims. Reviewing the text of the statute, the court noted that while the statute does not itself define the phrase “terms, conditions or privileges of employment,” such silence does not necessarily equate to ambiguity. Examining the phrase “hostile work environment,” the court also looked to Connecticut case law analyzing Sec. 46a-60 (a) (1), the state’s broader antidiscrimination statute, which employs the identical phrase ‘‘terms, conditions or privileges of employment’’ as Sec. 46a-81c (1) and also predates that statute. Having concluded in previous cases that the legislature intended to create a cause of action for hostile work environment claims by prohibiting employers from discriminating ‘‘in terms, conditions or privileges of employment’’ under Sec. 46a-60 (a) (1), the court concluded that use of the same phrase in Sec. 46a-81c (1) evinces a similar intent with respect to sexual orientation discrimination. As a term of art with a fixed legal meaning in both federal and Connecticut antidiscrimination law, the phrase ‘‘terms, conditions or privileges of employment’’ appears in Sec. 46a-81c (1) for the specific legislative purpose of permitting hostile work environment claims under that statute.
Evidence supported verdict. The employer’s argument that even if the statute allows such claims, there was insufficient evidence to support the jury’s determination was also rejected. There was evidence that derogatory comments were made multiple times per week, sometimes several times a day, over a prolonged period of time, despite the employee’s repeated complaints to his supervisors. The employee testified that his coworkers constantly yelled slurs in his presence as he worked on the shop floor. He meticulously recorded each incident in his diaries, which were admitted into evidence for the jury to consider in reaching its verdict. Based on this evidence, the court concluded there was no abuse of discretion in the trial court’s conclusion that the jury reasonably could have determined that the employee was subjected to a hostile work environment.
The fact that the derogatory comments complained of in this case were not always directed specifically at the employee and appeared to be the product of a “locker-room office culture,” does not shield the employer from liability “because discriminatory conduct need not be directed at a particular plaintiff in order to support a finding of a hostile work environment.”
Regardless, the court concluded that there was sufficient evidence from which a jury could find that the remarks were, in fact, directed at the employee. He testified that his coworkers uttered derogatory slurs near him in particular. Additionally, his diary entries explain that his coworkers regularly yelled homosexual slurs upon seeing the employee while working on the shop floor and sometimes even made eye contact with him while doing so. The employer’s assertion that such evidence was insufficient to establish a HWE because the slurs were spoken in languages in which the employee was not fluent or because a word may have multiple meanings was also rejected. The court noted that aside from failing to raise the argument before the trial court, the “notion that one must be fluent in a language in order to know that a particular word has a derogatory meaning defies common sense.”
At any rate, most of the slurs were in English or Spanish, which the employee did speak fluently. Finally, the court rejected the employer’s contention that the employee must not have found the environment hostile because he chose to work, rather than take all the paid vacation days available to him. The court noted, again, that this argument was not raised before the trial court, in addition to pointing out that the employer failed to cite to any authority for the proposition that employees must take every opportunity offered to them to avoid their workplace in order to assert a HWE claim. The court strongly disagreed with the suggestion that the employee’s claim was “undercut by his strong work ethic or ability to withstand harassment on the job.” As such, there was no abuse of discretion in finding sufficient evidence existed to support the jury’s verdict for the employee.
Damages award. Giving every reasonable presumption in favor of the verdict’s correctness, the court concluded that there was no abuse of discretion in the trial court’s determination that the employee presented sufficient evidence to support the damages award. The jury reasonably could have credited the employee’s testimony that the harassment he experienced over the period of more than two years at issue devastated and overwhelmed him, making him feel angry, sad, humiliated, and diminished. The employee also testified that he had difficulty sleeping and, in at least one of his letters to the company’s vice president and general counsel, he stated that the stress was so overwhelming that his body would shake and his work product suffered as a result.
Furthermore, given the sustained nature of the discrimination described by the employee, the severity of the hostility he experienced, and the continued failure of his employer to remedy the situation, the trial court did not abuse its discretion when it concluded that the award was not excessive or shocking when compared to verdicts awarded under similar circumstances. Accordingly, the jury’s verdict for the employee was affirmed.
Complexities in LGBT employment rights create legal quagmire for employers
May 4th, 2012 | Lorene Park | Add a Comment
The rights of individuals who are lesbian, gay, bisexual, or transgender (LGBT), and of those who simply do not conform to society’s gender stereotypes, differ sharply by state, and the lines being drawn continue to shift at both the state and federal levels. Indeed, just this spring, Maryland and Washington joined Connecticut, the District of Columbia, Iowa, Massachusetts, New Hampshire, New York, and Vermont in recognizing same sex marriages. More recently, the federal Equal Employment Opportunity Commission (EEOC) issued a decision clarifying its position that Title VII protects transgender individuals from discrimination.
Given the complexities of the issues involved and the rapidly changing nature of this area of law, it’s quite a challenge for employers to keep up. Further clarification is needed as to the protections afforded LGBT individuals under discrimination laws, as well as the effect of LGBT status on family leave and other employee benefits. In the meantime, employers should keep an eye out for further developments.
Discrimination
Although many states prohibit discrimination based on sexual orientation, federal courts generally hold that Title VII does not (e.g., Jantz v Emblem Health, SDNY, 2012). However, federal courts have held that Title VII prohibits discrimination based on gender stereotypes. For example, the Third Circuit ruled that a self-described “effeminate” gay man who spoke in a high voice, was well-groomed, sat like a woman, and was called “Princess” by coworkers, could proceed with his claim because the alleged harassment was based on his nonconformity with the masculine stereotype, not sexual orientation (Prowel v Wise Bus. Forms, Inc, 3d Cir. 2009). Courts have noted that the distinction between sexual orientation and stereotypes creates analytical problems, since stereotypes about how men and women should behave often overlap with notions about sexuality.
In some cases, gay and lesbian employees have alleged religious discrimination based on the fact that they do not share coworkers’ views that homosexuality is a sin. Courts have rejected such claims, ruling that the alleged bias was based on sexual orientation, not religion (e.g., Pedreira v Kentucky Baptist Homes, 6th Cir. 2009). On the other hand, one federal district court recently upheld a professor’s religious bias claim where her religion required rejecting homosexuality and she was denied a position in a department staffed by faculty who support the LGBT community (Gadling-Cole v West Chester University, EDPa 2012). The court rejected the university’s position that her claim was actually based on her (heterosexual) sexual orientation and not her religion.
Retaliation
Federal courts are split on whether Title VII extends to retaliation claims by employees who allegedly suffered an adverse employment action after opposing sexual orientation bias. The Ninth Circuit and district courts in the Second Circuit have held that it does, while the Sixth and Seventh Circuits have held otherwise. A federal district court in New York recently explained the analytical difficulties (Birkholz v City of New York, EDNY 2012). In that case, a gay school counselor was denied certain benefits after complaining about what he believed to be unlawful sexual orientation bias, including being banned from working with fifth graders and required to leave his office door open. The court dismissed his Title VII bias claim but upheld his Title VII retaliation claim, stating that even though sexual orientation is not a protected status under Title VII, it is a protected status under New York law and a “layperson should not be required to expertly parse the overlapping provisions of federal, state, and local civil rights laws to determine” which make sexual orientation bias unlawful.
Employee benefits
There is a complex relationship between state and federal law with respect to employee benefits as well. In April, a federal district court in Minnesota ruled that a benefits fund breached the terms of the plan by terminating the enrollment of an employee’s spouse after deciding that the spouse, who is transgender, was not legally married to her husband because she was not female at birth (Radtke v Miscellaneous Drivers & Helpers Union Local No 638, DMinn 2012). The spouse had sex-reassignment surgery and changed her birth certificate before the marriage, and was recognized as female under federal and state law, as shown by her birth certificate, social security card, and driver’s license; thus her marriage was valid, determined the court.
In another example, a Michigan federal court dismissed an employee’s FMLA claim because Michigan does not recognize same-sex marriage and her claim was based on her employer’s failure to approve leave to care for her same-sex partner who had brain cancer (Copeland v Mid-Michigan Regional Medical Center, ED Mich 2012). Because her partner was not a “spouse” in Michigan, she was not entitled to the FMLA leave. Likely, a court in a state recognizing same-sex marriage would have ruled otherwise.
At least with respect to the birth or adoption of a child, the scope of the FMLA is less confusing. The U.S. Department of Labor has clarified that the FMLA allows employees to take leave for the birth of, to bond with, or to care for, the child of a domestic partner, even if the employee has no biological or legal relationship with the child.
Navigating the quagmire
Faced with these uncertainties and changes in the scope and application of federal and state laws, employers have few options. The usual advice applies: create and enforce a policy prohibiting discrimination, include it in handbooks, and train employees and managers. Employers should also tread carefully until there is clarification on their obligations if a conflict arises between the rights of LGBT employees and those whose religion requires rejecting LGBT lifestyles. Encourage workplace neutrality, and to the extent individuals cannot work together, be sure that any solution to resolve the conflict is applied fairly and does not result in an “adverse employment action” such as a reduction in hours. Finally, monitor changes in this area of law and respond accordingly.
