Tuesday, October 18, 2016

OSHA issues a new policy on gag clauses in settlement agreements

The Department of Labor’s Occupational Safety and Health Administration (OSHA) recently issued a memorandum announcing its new policy against gag clauses in settlement agreements. OSHA’s memorandum restates the long-running policy against restraints on protected activity, but goes farther in assuring that whistleblowers preserve their right to receive awards that are intended to encourage them to report violations.

In the early years of the Department of Labor whistleblower protection program, nuclear power companies would offer substantial monetary settlements to whistleblowers in exchange for their agreements not to make any disclosures – including disclosures of nuclear safety problems -- to the Nuclear Regulatory Commission (NRC). After the 1979 Three Mile Island and 1986 Chernobyl incidents, the Department of Labor and the courts became more sensitive to the danger of “hush money” settlements. One court would not allow the Secretary of Labor to merely excise the gag clause from a settlement agreement. Macktal v. Secretary of Labor, 923 F.2d 1150, 1155-1156 (5th Cir. 1991). My December 31, 2013, blog post reviews the prior law on gag clauses in settlements.

In 1989, the NRC adopted its first policy to require licensees to maintain a culture of compliance. That policy has now evolved into the Safety Culture Policy Statement. It requires nuclear plants to actively encourage employees to report safety concerns and assure that they are timely and effectively remediated.  As a result, the number of whistleblower cases arising from the nuclear industry has declined significantly.

In 2010, the Dodd-Frank Act upped the stakes in corporate fraud whistleblower cases by creating a statutory right to an award for whistleblowers whose disclosures result in substantial SEC or CFTC recoveries. Congress was rightly concerned that the 2002 Sarbanes-Oxley Act had failed to prevent the 2008 mortgage fraud scandals that plunged us into the Great Recession. After Dodd-Frank, whistleblowers have received over $100 million in awards from the SEC for providing information that lead to over $500 million in recoveries by the SEC.

Some companies still have not adopted the culture of compliance and continue to look for ways to discourage employees from reporting known violations. Companies are now barred from adopting overly broad confidentiality policies or agreements that make employees think they cannot make reports to the government. Last year, the SEC fined KBR $130,000 for imposing such a gag clause on its employees.

In response, some companies began requiring departing employees to waive their right to any whistleblower award as a condition of receiving their severance. That requirement made clear that, rather than boosting compliance by encouraging employees to report misconduct, it exemplified a culture of suppression by discouraging employees from coming forward with information. It is also now illegal.

In August, 2016, the SEC fined Health Net $340,000 for including in a settlement agreement a provision that the employee waived any SEC whistleblower award. “Financial incentives in the form of whistleblower awards, as Congress recognized, are integral to promoting whistleblowing to the Commission,” said Antonia Chion, Associate Director of the SEC Enforcement Division.  “Health Net used its severance agreements with departing employees to strip away those financial incentives, directly targeting the Commission’s whistleblower program.” 

Seeking to extend this doctrine to the settlements reviewed by the Department of Labor, the Government Accountability Project petitioned for a new rule against approving Health Net-style settlements.  OSHA agreed and issued the memorandum to its regional offices. OSHA will now disapprove any settlement that:
  • Restricts protected activities, including reports of dangers to the government
  • Requires notice to the employer before making disclosures to the government (such a requirement has the effect of giving the crooks warning that the cops are in pursuit
  • Makes the whistleblower promise that no disclosure has been made to the government (which undercuts the right to make a confidential disclosure to the government
  • Waives any monetary award for whistleblowing
The policy also provides that OSHA will closely scrutinize liquidated damages provisions that are disproportionate or unaffordable. Where settlement agreements contain confidentiality clauses that apply “except as provided by law,” OSHA will propose the following clarification:

"Nothing in this Agreement is intended to or shall prevent, impede or interfere with complainant's non-waivable right, without prior notice to Respondent, to provide information to the government, participate in investigations, file a complaint, testify in proceedings regarding Respondent's past or future conduct, or engage in any future activities protected under the whistleblower statutes administered by OSHA, or to receive and fully retain a monetary award from a government-administered whistleblower award program for providing information directly to a government agency."

With this provision, employees will better understand their legal right to speak up, provide information about dangerous conditions and violations of the law, and apply for and receive whistleblower awards.

One of GAP’s attorneys issued this statement on the new policy:

De facto gag clauses undermine the operation and frustrate the intent of the whistleblower protection laws that DOL enforces by chilling or discouraging employees from disclosing to regulatory and enforcement agencies information about threats to public health and safety, financial fraud, consumer safety, food safety, nuclear safety, transportation safety, and other vital public concerns.

Employers have the opportunity to be proactive in assuring that their policies protect employees who raise compliance concerns, and that their personnel practices actually reward those who speak up. Particularly for employers regulated by the SEC, now is a good time to learn a lesson from the nuclear industry.

Tuesday, September 27, 2016

KCNF Partner Richard Renner Argues for Strong Whistleblower Protections

Last month, the Department of Labor’s Administrative Review Board (ARB) held a very rare event – it convened an en banc oral argument. The ARB hears appeals of cases arising under various worker protection laws. In most situations, three administrative appeals judges from the ARB decide a case on written briefs submitted by the employer and the worker’s attorneys. However, in the recent case of Palmer v. Canadian National Railway/Illinois Central Railroad Company, (ARB No. 16-035, ALJ No. 2014-FRS-154), the Chief Administrative Appeals Judge determined that the appeal should be decided en banc (meaning, all five judges on the ARB should decide the case) with supplemental briefing and oral argument. The ARB also invited simultaneous amicus briefs from interested third parties. KCNF Partner Richard Renner recognized the importance of the case and the questions presented on appeal and filed a brief in the matter.

Railway conductor Kenneth Palmer injured his arm while on the job. He reported the injury, per railway rules, even though his supervisor tried to talk him out of it. His supervisor then launched a formal investigation to see if Palmer violated any company rules when he got injured. His supervisor determined that a month before his injury, he had run through a switch. Even though other conductors had run through switches in the past without reprimand, and that it was undisputed that his mistake did not result in any damage or harm, the railway held a formal disciplinary hearing on the incident. In the days after the hearing, railway managers exchanged e-mails about Palmer and decided to terminate him. The e-mails revealed that company officials considered his injury report while making the decision to fire Palmer.

A trial was held in front of an administrative law judge (ALJ) who, after hearing the evidence presented by both sides, found that the railway terminated Palmer due to his reporting of his injury in contravention with a federal law called the Federal Railroad Safety Act (FRSA).

The railway appealed to the ARB and argued that the ALJ had applied the wrong burdens of proof. In a case under FRSA, an employee first needs to establish three elements: (i) that he or she engaged in a protected activity, like reporting an injury or safety concern; (ii) that he or she suffered an unfavorable personnel action, like termination; and (iii) that the protected activity was a ‘contributing factor’ to the unfavorable personnel action. 49 U.S.C. § 42121(b) (part of “AIR 21” which the FRSA incorporates). A contributing factor is any factor, either considered by itself or with other factors, that affects the outcome of the decision. Araujo v. N.J. Transit Rail Operations, Inc., 708 F.3d 152, 158 (3d Cir. 2013). An employee needs to prove these elements by a preponderance of the evidence, which means, in this situation, he must show that it is more likely than not that his report of injury was a contributing factor in the railway’s decision to terminate him.

After the employee shows this, the employer has the burden to prove by “clear and convincing evidence” that it would have taken the same unfavorable personnel action in the absence of the employee’s protected activity. 49 U.S.C. § 42121(b). The clear and convincing evidence standard is much harder to meet than the preponderance of the evidence standard. In short, the railway needed to show if Palmer never reported his injured arm, it was highly probable the railway would have still terminated him for the switch run-through.

The ARB asked the parties to file supplemental briefs addressing the extent to which an ALJ can consider an employer’s justification evidence – here, evidence regarding the switch run-through – in deciding the contributing factor element of an employee’s unlawful retaliation claim under the FRSA. The ARB also invited amicus curie, or “friend of the court” briefs from interested groups not directly associated with Palmer’s case.

When KCNF Partner Richard Renner heard about the case, he knew a reversal by the ARB would have far reaching and negative implications on whistleblowers’ rights. With this in mind, he filed a brief and received a timeslot to present his position at the oral argument. The KCNF brief notes how the text of the FRSA statute would permit the ARB to consider the employer’s evidence on causation at the contributing factor stage – but only if that evidence is clear and convincing. In other words, the ARB could permit an ALJ to consider the two stages in reverse order. However, the KCNF brief also noted that when the MSPB actually tried the same reversal of order in federal sector WPA cases, Congress amended the WPA to require the MSPB to consider the whistleblower’s evidence first. Other groups represented at the argument included three members of Congress, the U.S. Department of Labor, the railroad industry trade association, labor unions, and the National Employment Lawyers’ Association.

Only four of the five ARB judges are involved in deciding the case; the fifth judge recused himself due to a conflict of interest in the matter. The sitting judges peppered all the attorneys with difficult questions and did not make it clear to those in the courtroom which way they were leaning.

It is unclear when the ARB will issue its decision in this matter, but one thing is likely – the ARB’s holding will affect many more workplace whistleblowers than just Kenneth Palmer.

This blog was written by Sarah Martin.

(Photo of Richard Renner before the ARB.)

Thursday, September 22, 2016

Seventh Circuit Upends EEOC Decision on LGBT Coverage

On July 28, 2016, the Court of Appeals for the Seventh Circuit failed to follow the Equal Employment Opportunity Commission’s (“EEOC” or “Commission”) holding in Baldwin v. Department of Transportation: that sexual orientation discrimination is a form of sex discrimination, cognizable under Title VII. Like many courts since Baldwin, the Seventh Circuit held that the “writing on the wall is not enough” to overrule its prior precedent; the Commission’s position on what qualifies as sex discrimination under Title VII, the court’s abhorrence to “condone” discrimination “solely based on who [a person] date[s], love[s], or marr[ies],” and courts’ inconsistent applications of Title VII to claims of sexual orientation discrimination were not enough for the Seventh Circuit. As discussed infra, this decision represents a step in the wrong direction for safeguarding civil rights under Title VII.

On July 15, 2015, the EEOC issued a groundbreaking decision in Baldwin, finding that Title VII includes claims of sexual orientation discrimination. KCNF Associate Valerie Chastain analyzed this case in her July 22, 2015 blog post, The EEOC’s Evolution of Justice for LGBT Workers.

In Baldwin, complainant worked as a Supervisory Air Traffic Control Specialist and was not selected for a permanent position as a Front Line Manager because he was gay. Complainant’s supervisor, who was involved in the selection process for the permanent position, had made several negative comments about complainant’s sexual orientation, e.g., that complainant “was a distraction in the radar room” when he mentioned his male partner in conversations. On appeal of the Agency’s determination that the EEOC did not have jurisdiction over complainant’s sex discrimination claim (because the claim was based on complainant’s sexual orientation), the Commission concluded that, because sexual orientation is inherently a sex-based consideration, an allegation of discrimination based on sexual orientation states a cognizable claim under Title VII of the Civil Rights Act of 1964—the federal statute prohibiting discrimination against an employee on the basis of race, color, religion, sex, and national origin.

At its core, “Title VII’s prohibition of sex discrimination means that employers may not ‘rel[y] upon sex-based considerations’ or take gender into account when making employment decisions.” In Baldwin, the Commission went to great lengths to show that this protection applies equally in sex discrimination claims brought by lesbian, gay, and bisexual individuals. In describing the “inescapable link” between sexual orientation discrimination and sex discrimination, the Commission made the following comparisons:
First, sexual orientation discrimination “necessarily entails treating an employee less favorably because of the employee’s sex.” The question being: would the employee have been treated differently if the employee’s sex was different?

Second, sexual orientation discrimination “is associational discrimination on the basis of sex.” That is, the employer takes the employee’s sex into consideration by treating him or her differently for associating with a person of the same sex.

Third, sexual orientation discrimination “necessarily involves discrimination based on gender stereotypes.” Specifically, sexual orientation discrimination and harassment are “often, if not always, motivated by a desire to enforce heterosexually defined gender norms.”
Notwithstanding the Commission’s reasoning, courts have refused to stray from traditional notions of “sex” discrimination: excluding sexual orientation and sexual preference. As the Supreme Court held in Oncale v. Sundowner Offshore Services, Inc., however, “statutory prohibitions often go beyond the principal evil [they were passed to combat] to cover reasonably comparable evils, and it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.” (In Oncale, the Court ruled that same-sex harassment is actionable under Title VII). In fact, protecting against sexual orientation discrimination under Title VII would not create a new class of covered persons. For example, when the Court decided that Title VII protected persons discriminated against because of their employer’s gender stereotypes, it “did not thereby create a new protected class of ‘masculine women.’”  Courts should go where the principles of Title VII direct and the Commission held—applying existing Title VII principles to encompass sexual orientation discrimination.

Recently, the Seventh Circuit recognized the incongruity of denying sexual orientation claims while allowing gender non-conformity claims—which courts recognize as a form of sex-based discrimination under Title VII. In Hively, appellant worked as a part-time adjunct professor. Despite qualifying for full-time employment, the college refused to interview her for any of the six full-time positions for which she applied between 2009 and 2014 and did not renew her part-time employment contract in July 2014. Alleging that she had been blocked from full-time employment without good cause because of her sexual orientation, appellant filed a sexual orientation discrimination complaint with the EEOC. The college’s defense was that Title VII does not apply to claims of sexual orientation discrimination. Although the court made it clear that it does not condone discrimination in any form, it found itself constrained by its prior decisions—claiming that Congress had a very narrow understanding of the term “sex” when it passed Title VII—and dismissed Hively’s claim for failure to state a claim. Significantly, however, the court noted that it “would be remiss” not to cogitate on the EEOC’s recent decision in Baldwin, in which it concluded that sexual orientation is inherently a sex-based consideration.

Citing Baldwin, the court questioned whether there is any real distinction between gender non-conformity and sexual orientation discrimination, noting that, at most, the borders are imprecise.
Discrimination against gay, lesbian, and bisexual employees comes about because their behavior is seen as failing to comply with the quintessential gender stereotype about what men and women ought to do—for example, that men should have romantic and sexual relationships only with women, and women should have romantic and sexual relationships only with men. In this way, almost all discrimination on the basis of sexual orientation can be traced back to some form of discrimination on the basis of gender nonconformity.
Unsurprisingly, courts’ attempts to differentiate between sex discrimination and sexual orientation discrimination have resulted in “a jumble of inconsistent precedents.” One court flatly held that no line exists between sex discrimination and sexual orientation discrimination. Courts that try to draw a distinction between actions which constitute discrimination on the basis of sexual orientation and discrimination on the basis of gender non-conformity either:
1) Dismiss a gender-nonconformity claim outright if there is “any hint of a claim that the employer also engaged in sexual orientation discrimination.” This is the process followed by the Second, Third, Sixth, and Seventh Circuits, New York, Florida, Georgia, and New Jersey. The absurd result being that “the law protects effeminate men from employment discrimination, but only if they are (or are believed to be) heterosexuals.” Thus, when determining whether a claim for gender non-conformity can stand, “the critical fact under the circumstances is the actual sexual orientation of the harassed person.”

2) Try to “tease the two apart” and look “only at those portions of the claim that appear to address cognizable gender non-conformity discrimination.” This is the process followed by the Third and Fifth Circuits and Florida. Attempts to “identify behaviors that are uniquely attributable to gay men and lesbians[, however,] often lead to strange discussions of sexual orientation stereotypes.” For example, in Prowel v. Wise Business Forms, Inc., a factory worker who described himself as both gay and effeminate succeeded in having his case heard by producing just enough evidence of harassment based on gender stereotypes, as opposed to sexual orientation. Specifically, Prowel convinced the court that he displayed stereotypically feminine characteristics by testifying that “he had a high voice, did not curse, was well-groomed, neat, filed his nails, crossed his legs, talked about art and interior design, and pushed the buttons on his factory equipment ‘with pizzazz.’”
As shown by courts’ methods for addressing sex discrimination claims that include an element of sexual orientation discrimination, attempting to separate gender non-conformity claims from sexual orientation claims creates
an uncomfortable result in which the more visibly and stereotypically gay or lesbian a plaintiff is in mannerisms, appearance, and behavior, and the more the plaintiff exhibits those behaviors and mannerisms at work, the more likely a court is to recognize a claim of gender non-conformity which will be cognizable under Title VII as sex discrimination.
As it stands, Title VII protects gay, lesbian, and bisexual people only to the extent that they do not deviate from society’s stereotypical norms about how they should look or act, i.e., that gay men are effeminate and lesbian women are masculine. It is illogical “to entertain gender non-conformity claims under Title VII where the non-conformity involves style of dress and manner of speaking, but not when the gender non-conformity involves the sine qua non of gender stereotypes—with whom a person engages in sexual relationships.”

Furthermore, with the passage of the Defense of Marriage Act (“DOMA”), the conflicting case precedent creates the
paradoxical landscape in which a person can be married on a Saturday and then fired on Monday for just that act. For although federal law now guarantees anyone the right to marry another person of the same gender, Title VII, to the extent it does not reach sexual orientation discrimination, also allows employers to fire that employee for doing so.
To overturn circuit precedent, the Seventh Circuit required that a “compelling reason,” such as when
the rule has proven to be intolerable simply in defying practical workability . . . whether related principles of law have so far developed as to have left the old rule no more than a remnant of abandoned doctrine . . . or whether facts have so changed, or come to be seen so differently, as to have robbed the old rule of significant application or justification[.]
Given this requirement, it is perplexing that the court’s lengthy recitation of how current applications of Title VII have led (and continue to lead) to incompatible results and utter confusion was not enough for it to hold that Title VII, as currently applied, is “intolerable simply in defying practical workability.” Although the Seventh Circuit admitted that the EEOC’s interpretation of Title VII, as the enforcing agency, is entitled to some level of deference, citing Griggs v. Duke Power Co. (administrative interpretation is entitled to “great deference”)), the court failed to “delve into a discussion of the level of deference [] owe[d] to the EEOC’s rulings” because it ultimately concluded that Title VII does not reach sexual orientation discrimination.

The Seventh Circuit’s cursory treatment of the Commission’s position—that sexual orientation claims are cognizable under Title VII as a form of sex discrimination—is inconsistent with the Supreme Court’s holding in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. In Chevron, the Court stated that
considerable weight should be accorded to [an agency’s] construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative interpretations has been consistently followed by this Court whenever decision as to the meaning or reach of a statute has involved reconciling conflicting policies, and a full understanding of the force of the statutory policy in the given situation has depended upon more than ordinary knowledge respecting the matter subjected to agency regulations.
Where Congress “has not directly addressed the precise question at issue,” the “question for the court is [only] whether the agency’s answer is based on a permissible construction of the statute.” The court cannot substitute its own construction of a statutory provision for that of the agency. Thus, in the absence of a Supreme Court decision or a change in legislation to clarify “sex” discrimination as inclusive of sexual orientation discrimination, courts should defer to the Commission’s decision in Baldwin. That did not happen here.

In response to the Seventh Circuit’s refusal to acknowledge her claim for sexual orientation discrimination, Hively filed a petition for rehearing en banc “to secure and maintain uniformity of the law” on August 25, 2016.

On August 29, 2016, the EEOC filed an amicus brief in support of Hively’s Petition. In its brief, the Commission reaffirms its position that claims of sexual orientation discrimination are cognizable under Title VII as claims of sex discrimination because such claims “necessarily involve consideration of a plaintiff’s sex, gender-based associational discrimination, and sex stereotyping.” The Commission also argues that the jumble of inconsistent precedents set by the courts defies practical workability and is inconsistent with two Supreme Court decisions: Oncale v. Sundowner Offshore Services, Inc. (statutes must be interpreted as written even when the language goes beyond the principal evil Congress sought to address) and Price Waterhouse v. Hopkins (Title VII makes sex “irrelevant” in employment decisions). To date, the Seventh Circuit has not made a decision on whether it will revisit the issue.

Today’s society recognizes that people are heterosexual, homosexual, or bisexual. Consistent with this change in public policy, the EEOC and Supreme Court have recognized, as noted supra, that federal laws apply equally to all persons, regardless of sexual identity. Any interpretation of Title VII that fails to recognize this diversity of sexual identity fails to cover the reasonably comparable evils as violations of Title VII’s prohibition of “sex” discrimination and cannot stand.

This blog was written by Aaron Herreras.

(Photo is of Ms. Hively and her counsel.)

Tuesday, August 30, 2016

EEOC Loses its first-filed Transgender Discrimination Case against Religious Freedom Restoration Act defense

On August 18, 2016, the Equal Employment Opportunity Commission (EEOC) lost its first case filed on behalf of a transgender employee alleging sex stereotype discrimination in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc.


Anthony Stephens began working for R.G. & G.R. Harris Funeral Homes, Inc., (“Harris”) in October 2007 and served as its Director. During Stephens’ employment with Harris, Stephens presented himself as a male.  

 On July 31, 2013, however, Stephens submitted a letter to his supervisor, Thomas Rost, who is also Harris’ owner, informing him that “[he] had decided to become the person [his] mind already [was]” and the first step would be to “live and work full-time as a woman for a year.” Stephens informed Mr. Rost that after August 26, 2013, Stephens would be identifying himself as Amiee Australia Stephens.

In response, on August 15, 2013, Mr. Rost terminated Stephens’ employment with Harris because Stephens dressing as a female would violate Harris’ policy that required male and female employees to wear a suit and tie, or a skirt and a jacket, depending on their biological gender. Mr. Rost testified, “We have a dress code that is very specific that men will dress as men.” “He was no longer going to represent himself as a man. He wanted to dress as a woman.”

Procedural Background

After his termination from Harris, Stephens filed a charge of discrimination with the EEOC alleging sex and gender identity discrimination. On June 4, 2014, the EEOC issued a cause finding in Stephens’ favor, and on August 25, 2014, the EEOC filed suit on Stephens’ behalf in the Eastern District of Michigan, alleging sex stereotype discrimination in violation of Title VII of the Civil Rights Act of 1964, as amended (Title VII).

The EEOC brought two claims against Harris. First, the EEOC claimed that Harris violated Title VII when it terminated Stephens from his employment because he was a transgender individual, because he was transitioning from male to female, and because he did not conform with Harris’ sex or gender-based preferences, expectations, or stereotypes. Second, the EEOC claimed that Harris violated Title VII by providing clothing allowance or work clothes to male employees, but not to female employees. (The Court dismissed the EEOC’s second claim because it was not raised by Stephens in the initial EEOC charge and it did not affect Stephens directly.)

Cross-Motions for Summary Judgment

After the closing of discovery, both parties moved for summary judgment, requesting the Court to rule in their favor without the need for a trial. In regards to the EEOC’s motion, the Court found that the EEOC had in fact presented direct evidence of sex stereotype discrimination, which was rare in employment cases, to support a finding in favor of the EEOC. However, Harris’ motion presented two defenses that protected it from liability. 

First, Harris argued that it was not liable because enforcing its sex-specific dress code did not constitute impermissible sex stereotype. The Court rejected this defense because the EEOC was not challenging Harris’ sex-specific dress code policy in its lawsuit. Second, however, Harris argued that it was exempt from liability because the Religious Freedom Restoration Act of 1993 (RFRA) prohibited the EEOC from applying Title VII to force Harris to violate its sincerely-held religious beliefs. This posed a problem for the EEOC.

The RFRA Defense

The RFRA prohibits the government from substantially burdening a person’s exercise of religion even if the burden results from a rule of general applicability, unless the government demonstrates that application of the burden to the person (1) furthers a compelling government interest and (2) is the least restrictive means of furthering that interest. The purpose of the RFRA is “to provide a defense to persons whose religious exercise is substantially burdened by the government.” 42 U.S.C. § 2000bb(b)(2). The RFRA includes for-profit corporations as “persons” and the EEOC as a government agency.

Here, Harris had the initial burden of showing that compliance with Title VII imposed a substantial burden on its ability to conduct business in accordance with its religion, and it was successful in doing so. The evidence showed that Mr. Rost had been a Christian for thirty-five years; that Harris’ mission was to “honor God”; that God had called him to serve the grieving; and that he believed that sex was an immutable God-given gift and not a social construct. Mr. Rost also testified that he would be violating God’s commands if he were to allow Stephens to deny his sex and that he would feel compelled to sell his business if he allowed Stephens to dress as a female while at work.

Accordingly, the Court held that “to enforce Title VII, by requiring [Harris] to provide a skirt or allow an employee born a male to wear a skirt at work would impose a substantial burden on Rost’s ability to conduct business in accordance with his sincerely-held beliefs.” Therefore, Harris was exempt from Title VII liability, unless the EEOC could show that compliance with Title VII by allowing Stephens to wear a skirt at work furthered a compelling government interests and that it was the least restrictive means of furthering that interest.

Here, the Court held that the EEOC could not meet its burden. First, the EEOC did not show a compelling government interest as to the “particular person burdened,” in this case, Harris. Yet, because the Court was at “a loss” of how it was “supposed to scrutinize” this first prong, it assumed that the EEOC had met its burden. Second, the EEOC did not provide a “focused to the person” analysis of how the burden on Harris’ religious exercise was the least restrictive means of eliminating clothing gender stereotypes at Harris. In fact, the EEOC offered no discussion of how it had explored the possibility of any solutions, other than just taking the position that Harris was required to allow Stephens to wear a skirt while at work to express his gender identity.  The Court noted that if the EEOC’s intent was to eliminate sex stereotype at work, the EEOC did not propose a gender-neutral dress policy, which could have been less restrictive for Harris.

Therefore, because the EEOC did not meet its burden in showing that allowing Stephens, as a biological male, to wear a skirt while working at Harris to match his gender identity was the least restrictive means in furthering the government’s compelling interest of eliminating sex stereotypes at work, the RFRA provided Harris with a defense to Title VII liability.


This is a big loss for the EEOC, but perhaps the battle does not end there, since the EEOC still has the right to appeal to the U.S. Court of Appeals for the Sixth Circuit.

While this decision has negative implications for the development of employment rights for the LGBTQ community, it is important to note that Harris’ RFRA defense does not apply to suits between private parties. In other words, if a private employee (and not the EEOC) sues a private employer alleging sex stereotype discrimination under Title VII, that employer cannot successfully raise the RFRA defense, which may only be used against the government. 

This case has takeaways for both employees and employers. LGBTQ employees need to keep in mind that discrimination “because of sexual orientation” or “because of gender identity” is not an independent and cognizable claim under Title VII. Rather, it must be brought under the theory of sex stereotype, as Stephens did here. As for employers, it is clear that sex-specific dress code policies pose a problem, if not exposure to a lawsuit. While the EEOC did not challenge the sex-specific dress code policy in Harris, employers’ dress code policies must remain gender-neutral. 

This blog was written by José Galvan

Wednesday, August 10, 2016

Debt Collectors Have a Whistleblower Protection

Last month, the Consumer Financial Protection Bureau (CFPB) announced its plans to issue new regulations for the debt collection industry.  CFPB’s notice states, “Debt collection generates more complaints to the CFPB than any other financial product or service.”

The CFPB’s proposed rules would help consumers by increasing the requirements that debt collectors must meet to document the correct amount of a debt, increasing the consumer’s opportunities to dispute a debt, making more specific the rules against repetitive and harassing contacts, and requiring that consumers requests to limit communications apply to subsequent collectors working on the same debt.

However, the CFPB’s notice makes no mention of a relatively new legal protection for the employees of debt collection firms.  Since the 2010 enactment of the Dodd-Frank Act (which created the CFPB), employees of debt collection firms have had a legal protection against retaliation whenever they raise concerns about violations of consumer rights.

The way that Congress enacted this protection has made it so obscure that hardly anyone has ever noticed it and I am not aware that anyone has ever used it.

Congress passed the Dodd-Frank Act in the wake of the 2007-08 fiscal crisis.  Our financial markets, here and around the world, ground to a halt as widespread fraud in the consumer mortgage market came to light. Within a decade of passing the Sarbanes-Oxley Act in 2002 (SOX), Congress was rightfully concerned that our systems were inadequate to detect the frauds that could be so harmful. 

As part of the Dodd-Frank Act, Congress created the Consumer Financial Protection Bureau (CFPB) believing that a dedicated watchdog could protect our markets from future crises in a way that SOX had not. CFPB would have independent power to protect consumers from frauds and other mistreatment and thereby have eyes and ears in the consumer financial markets.

As a young legal aid lawyer, I counseled many consumers who were distressed by harassment from debt collectors. They suffered symptoms of stress similar to those of domestic violence victims. They felt shame and embarrassment. They felt powerless to stop the abuse. They lose sleep, suffer medical problems and are constantly anxious about how to make it stop.  I could explain how the harassment was illegal, and sometimes that would lessen their immediate anxiety. A few clients were willing to let their harassment become the basis of a lawsuit to hold the collectors accountable for their actions. While my clients’ recoveries would be immensely satisfying for them, it became just a cost of doing business for the collections firms that continued their practices against other consumers who didn’t know or would not use their legal rights.

In creating the CFPB, Congress wisely understood that one of the best sources of information about frauds and violations would be the employees that companies use to carry out their misdeeds. Therefore, in Section 1057, Congress created a whistleblower protection for the employees in all the industries that CFPB would regulate. As I walk with you through this section of law, I suspect that you will quickly see that it is convoluted and difficult to discern the actual meaning.

Now codified at 12 U.S. Code § 5567(a), this protection bars any “covered person or service provider” from terminating or “in any other way discriminat[ing] against,” “any covered employee” “by reason of the fact that such employee or representative … has” —
(1) provided, caused to be provided, or is about to provide or cause to be provided, information to the employer, the Bureau, or any other State, local, or Federal, government authority or law enforcement agency relating to any violation of, or any act or omission that the employee reasonably believes to be a violation of, any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;

(2) testified or will testify in any proceeding resulting from the administration or enforcement of any provision of this title or any other provision of law that is subject to the jurisdiction of the Bureau, or any rule, order, standard, or prohibition prescribed by the Bureau;

(3) filed, instituted, or caused to be filed or instituted any proceeding under any Federal consumer financial law; or

(4) objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of, or enforceable by, the Bureau.
The key to understanding the significance of this section, particularly subsections (1) and (4), is understanding the scope of “this title” and what is “subject to the jurisdiction of, or enforceable by, the Bureau.”  The answer is contained in 12U.S.C. § 5481(14). There, the Dodd-Frank Act lists all the laws that are now within CFPB’s jurisdiction. They are:

the Alternative Mortgage Parity Act of 1982, 12 U.S.C. § 2801; Consumer Leasing Act of 1976, 15 U.S.C. § 1667; most of the Electronic Funds Transfer Act, 15 U.S.C. § 1693; Equal Credit Opportunity Act, 15 U.S.C. § 1691; Fair Credit Billing Act, 15 U.S.C. § 1666; most of the Fair Credit Reporting Act, 15 U.S.C § 1681; Home Owners Protection Act of 1998, 12 U.S.C. § 4901; Fair Debt Collection Practices Act, 15 U.S.C. § 1692; parts of the Federal Deposit Insurance Act, 12 U.S.C. § 1831t(c)-(f); parts of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6802-09; Home Mortgage Disclosure Act of 1975, 12 U.S.C § 2801; Home Ownership and Equity Protection Act of 1994, 15 U.S.C. § 1601 note; S.A.F.E. Mortgage Licensing Act of 2008, 12 U.S.C. § 5101; the Truth in Lending Act, 15 U.S.C. § 1601; the Truth in Savings Act, 12 U.S.C. § 4301; section 626 of the Omnibus Appropriations Act, Pub. L. No. 111-8; and the Interstate Land Sales Full Disclosure Act, 15 U.S.C. § 1701

For my purpose in this blog, this list explicitly includes the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692. Each of these laws, however, now has the same explicit whistleblower protections for any employees who want to raise concerns about the violations of the consumer’s rights.

By placing the whistleblower protection in this provision of the Dodd-Frank Act, and making its application dependent on finding and understanding each reference, Congress did make it harder for practitioners to find and use the law.  In other whistleblower laws, the provision protecting whistleblowers is a part of the law that is being enforced.  For the FDCPA, one has to know to look in the CFPB statute to find the employee protection.

As a legal aid lawyer, I fantasized about how great it would be if the employees of the debt collectors I sued could have a legal protection for refusing to abuse and harass the debtors. Most of them are paid on commission, so it was in their interest to continue whatever tactics would get consumers to pay the most. Would the CFPB protection today allow a debt collector to refuse to engage in harassment, but still pursue a claim for the commissions that would have been earned but for that refusal?  This question remains unanswered as there are no reported cases enforcing this protection for debt collectors.

Perhaps the CFPB will consider an addition to their final rules for debt collectors.  They could require debt collection firms to post the Department of Labor’s fact sheet for CFPB whistleblower claims.  Then debt collectors could learn about their protections and the 180 day time limit to file retaliation complaints.

If there are debt collectors, or other employees in the consumer financial industry, looking for advice about their rights, or concerned that they have suffered retaliation, they are welcome to apply to our offices for legal advice and representation.

Friday, July 29, 2016

Title VII’s reach to protect employees is co-extensive with breadth of employers’ retaliation

A recent case out of California demonstrates that Title VII’s anti-retaliation protections of employees are just as broad as some employers’ destructive sweep to get rid of “problem” employees. In Equal Employment Opportunity Commission v. Zoria Farms, Inc., the court on July 22, 2016, ordered Z Foods, Inc., (the successor corporation to Zoria Farms) to pay $1,470,000 in compensatory and punitive damages to several female employees who had been sexually harassed by two supervisors, and to male and female employees who were terminated after they either complained about the harassment or were merely related to the persons who had complained.

Title VII makes it “an unlawful employer practice for an employer…to discriminate against any individual with respect to [her] compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” “‘Discriminatory conduct includes harassment,’” Zoria Farms (quoting Meritor Savings Bank v. Vinson), when that harassment occurs because of sex.” Id. (citing Oncale v. Sundowner Offshore Servs.). An employer violates Title VII when it subjects an employee to harassment that constitutes a hostile work environment. A hostile work environment based on sex exists when there is unwelcome conduct that is based on the plaintiff’s sex, which is sufficiently severe or pervasive to alter the plaintiff’s conditions of employment and to create an abusive work environment, and which is imputable to the employer. Boyer-Liberto v. Fontainebleau Corp. In measuring the severity of the harassing conduct, “the status of the harasser may be a significant factor–e.g., ‘a supervisor’s [harassment] impacts the work environment far more severely than use by co-equals.’” Id. “‘…[A] supervisor’s power and authority invests his or her harassing conduct with a particular threatening character.’” Id. (quoting Burlington Indus., Inc. v. Ellerth).

In Zoria Farms, the court granted the EEOC’s unopposed motion for default judgment and found that the EEOC had set forth prima facie claims of sexual harassment. Over a two-year period, Rosa Mendez’s supervisor Martin Ramirez made inappropriate comments to her, such as how good she looked in pants, he dreamed about having sex with her, she had a beautiful body, he desired her breasts, he liked the way her breasts moved when she walked, he was imagining her naked, and he thought about what it would be like to have sex with her. Ramirez also inappropriately touched Mendez: he would walk by and brush up against her or stand next to her while rubbing up against her; he would come up from behind her and grab her buttocks or fondle her breasts. He also often propositioned Mendez, telling her that if she had sex with him, he would offer her a better employment position. Ramirez also sent Mendez to remote areas of the work facility so that he could further harass her. This terrified Mendez, as she had heard rumors that he had raped other female employees in similar, isolated areas. In these isolated areas, he grabbed her from behind with both hands. Mendez complained about Ramirez’s behavior to Martha Sanchez, the Human Resources Manager, and to Jill Brooks, the Plant Manager. Mendez told them that she refused to go to isolated areas because she knew Ramirez was going to try to sexually assault her. Rather than defend or protect Mendez, Sanchez and Brooks told her that she was being insubordinate for refusing to obey Ramirez’ orders, and subsequently wrote her up for being insubordinate. Mendez was not the only female employee whom Ramirez sexually harassed.

That Ramirez’s harassment altered the conditions of Mendez’s employment was unquestionably clear to the court: His conduct caused her to experience feelings of anxiety and stress, which led to her having difficulties sleeping and recurring nightmares. After her complaints to Human Resources and the Plant Manager went unanswered, her feelings of depression, sadness, anxiety, stress, and humiliation continued. She had to force herself to go to work. Her feelings of depression became so intense that she attempted suicide in October 2007.

Supervisor Francisco Guerra sexually harassed Rocio Guevara and other female employees. Guerra placed harassing telephone calls to Guevara, solicited her to go on dates with him, made numerous comments about her body, told her he was in love with her, offered to promote her if she went out with him, and leered at her. With regard to the other female employees, Guerra identified which of them were good at oral sex, discussed sexual positions, propositioned female employees with offers of promotion in exchange for sex, threatened their continued employment unless they acquiesced to his advances, leered at their buttocks, subjected them to unwanted touching, and enlisted other female employees to solicit female employees on his behalf.

The court found the two supervisors’ harassing actions were imputable to the employer because it utterly failed to take appropriate remedial action to stop the harassment after numerous employees complained of the harassment. An employer is “strictly liable for the supervisor’s harassing behavior if it ‘culminates in a tangible employment action,’ but otherwise may escape liability if two conditions are met: (1) the employer exercised reasonable care to prevent and correct any harassing behavior, and (2) the plaintiff unreasonably failed to take advantage of the preventive or correction opportunities the employer offered. Boyer-Liberto.

Not only did Mendez and Rocia Guevara complain about the sexual harassment, but numerous other male and female employees complained as well. In April 2008, Mendez and several of her co-workers participated in a meeting to talk to management (Human Resources Manager Sanchez and Plant Manager Brooks) about Ramirez’s conduct. Ramirez was thereafter terminated. Sanchez and Brooks assured the employees that they should not worry about losing their jobs.

In order to establish a prima facie case of retaliation under Title VII, a plaintiff must demonstrate that: “(1) she engaged in a protected activity under Title VII; (2) defendants were aware of the activity; (3) plaintiff was subject to an adverse employment action; and (4) there was a causal nexus between plaintiff’s protected activity and the adverse employment action.” Burt v. Maple Knoll Communities, Inc. An “adverse employment action ‘constitutes a significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change in benefits.’” Id. (quoting Burlington Indus., Inc.).  The causal connection can be established when the employer treated the plaintiff differently than similarly-situated employees, or when the adverse action was taken shortly after the plaintiff’s exercise of protected rights. Id.

In June 2008, Mendez and all of her co-workers who participated in the April 2008 meeting were terminated. Another employee, Maria Coronado, complained to Human Resources about Ramirez sexually harassing her and other female employees. On one occasion in 2007, she saw Ramirez trying to grab and kiss Mendez against her will. Upon seeing Coronado, Ramirez released Mendez, but he thereafter began criticizing Coronado’s work. Coronado was terminated after she participated in the April 2008 meeting with management to discuss Ramirez’s conduct.

Mireya Torres, another Zoria Farms employee, witnessed Ramirez harassing Mendez. She was upset about Ramirez’ conduct towards Mendez and attempted to limit the time Mendez had to spend alone with him. She attended the April 2008 meeting with management to discuss Ramirez’ conduct. A few weeks later, she was terminated.

Bacilia Barajas also worked at Zoria Farms and witnessed Ramirez harassing Mendez. He encouraged Mendez to complain to Sanchez about Ramirez’s harassing conduct, which Mendez did. Nothing was done about Mendez’ situation, though. Barajas also saw Ramirez harassing other female employees. When Ramirez became aware that Barajas had witnessed his behavior, Ramirez became more aggressive toward Barajas and assigned him more strenuous work. Barajas attended the April 2008 meeting and was shortly thereafter terminated.

The court found that the EEOC had sufficiently pled the retaliation claims, as employees had reported Ramirez’ and Guerra’s conduct to Human Resources and the Plant Manager. See Brooks v. City of San Mateo (reporting sexual harassment to supervisor constitutes protected activity), and were shortly thereafter terminated.

What is most interesting about this case is the extent to which Z Foods went to eradicate not only the complaining employees, but also employees who were related to the complaining employees. Title VII allows for third-party retaliation claims for plaintiffs who are within the “zone of interests” sought to be protected by Title VII. See Thompson v. North Am. Stainless, L.P. Title VII’s “zone of interests” includes employees, as the purpose of Title VII is to protect employees from their employers’ unlawful actions. Id. In Thompson, the Supreme Court held that a third-party retaliation claim under Title VII was properly made by an employee who was terminated after his fiancée filed a claim of discrimination with the EEOC against the same employer. The Court reasoned that “Title VII’s antiretaliation provision prohibits any employer action that ‘well might have dissuaded a reasonable worker from making or supporting a charge of discrimination.’” Id. (quoting Burlington N. & Santa Fe Ry. Co. v. White). The Court in Thompson stated, “[w]e think it obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiancée would be fired.” Id. The Court declined to identify a fixed-class of relationships for which third-party reprisals are unlawful because “‘the significance of any given act of retaliation will often depend upon the particular circumstances.’” Id. (quoting Burlington).

In October 2008, Arnulfo Guevara reported Guerra’s sexual harassment of his sister Rocia Guevara to John Zoria, a manager with Z Foods. Zoria told Guevara to tell the women to find a way to submit a complaint against Guerra. Zoria then called Guevara back, asked him how long the harassment had been going on, then told Guevara not to say anything. In November 2008, Guevara was fired.
Carlos Garcia is Arnulfo Guevara’s brother-in-law, and also worked at Zoria Farms. In May 2009, the Assistant Plant Manager began asking Garcia questions about Guevara, and asked him whether he knew that Guevara had filed a charge of discrimination with the EEOC. In August 2009, Garcia was terminated. The court found that Garcia’s termination as a result of his association with Arnulfo Guevara was sufficiently pled to establish a third-party retaliation claim under Title VII and Thompson.

In awarding not only compensatory but also punitive damages against Z Foods, the court considered that it “did not have or did not enforce an anti-discrimination policy, failed to take action in response to numerous complaints, and permitted and ratified multiple violations of Title VII prohibitions on harassment and retaliation.” Z Foods. The court concluded that, “[a]s these intentional acts deprived these claimants of their civil rights, a punitive damages award of $200,000 per individual – or $1,800,000 total – is appropriate.” Because the predecessor employer, Zoria Farms, had already settled for $330,000, the court held Z Foods as the successor employer jointly liable for the balance of $1,470,000.

This case should send an unequivocal message to employers who insist on eradicating not only problematic complaining employees–but also their relatives– that such conduct is prohibited under Title VII and will result in significant damages awards against them.

This blog was written by Valerie Chastain. 

Tuesday, July 19, 2016

Knowing Where You Come From: Perception of National Origin Discrimination

It turns out it may be national origin discrimination even if the harassers don’t actually know where you’re from.

In June 2016, the EEOC issued Proposed Enforcement Guidance on National Origin Discrimination and opened the document for comments until July 5th.  Both the Proposed Guidance and the submitted comments are available online.

One point that drew considerable attention was the guidance on “Perception” discrimination, which the Proposed Guidance describes as follows:
Perception: Employment discrimination based on the belief that an individual (or her ancestors) is from one or more particular countries, or belongs to one or more particular national origin groups. For example, Title VII prohibits employment discrimination based on the perception that someone is from Middle Eastern countries or is of Arab ethnicity, regardless of how she identifies herself or whether she is, in fact, from one or more Middle Eastern countries or ethnically Arab.
Proposed Guidance, p. 6. In support, the Guidance cites a case of an Indian man inaccurately and derisively called at work an “Arab” or “Taliban.” Id. at note 26.  In that case, the Fifth Circuit reversed a Texas court’s summary judgment granted to the defendant because “none of the alleged harassment related to the fact that [the Appellant] is from India.”  E.E.O.C. v. WC&M Enterprises, Inc., 496 F.3d 393, 401 (5th Cir. 2007).  The Appeals Court, citing both the EEOC’s own guidelines and a number of district court cases, concluded that even erroneous conclusions as to a person’s place of origin can provide a basis for a national origin discrimination claim.  As one decision cited by the court said, “The plaintiff may still establish a cause of action under the Civil Rights Act despite the defendant’s mistaken belief that his ethnic characteristics are those of a person of Italian, rather than Greek, descent.”  Id.  (quoting Kanaji v. Children’s Hosp. of Philadelphia, 276 F. Supp.. 2d 399, 401-04 (E.D. Pa 2003) ).

In comments to the EEOC’s proposed guidelines, the Equal Employment Advisory Council (“a nationwide association of employers organized in 1976 to promote sound approaches to the elimination of employment discrimination”) objected that “perceived discrimination” was nowhere to be found by language or implication in Title VII.  EEAC comments, p. 4.  Quoting the language of the statute at 42 U.S.C. § 2000e-2(a), the EEAC declares that “Nowhere does the statute state explicitly, or even imply indirectly, that ‘perceived’ national origin is a legally-protected characteristic.”  Id.  While it is admittedly difficult to prove a negative, the EEAC does not even attempt to support the declaration that the implication of “perception discrimination” is lacking in the language of Title VII.

Moreover, the EEAC’s objections to the guidance on “perceived” national origin discrimination ignore last year’s Supreme Court decision in EEOC v. Abercrombie & Fitch Stores, Inc., 135 S.Ct. 2028 (2015), which placed on employers the burden of demonstrating that Title VII precludes the use of “perceived” discrimination.  In that 8-1 decision (Thomas dissented in part), the Court explained that, “It is significant that § 2000e–2(a)(1) does not impose a knowledge requirement.”  Id. at 2032.  Abercrombie’s defense that it had chosen not to hire a hijab-wearing applicant without knowing that  any religious significance attached to the hijab she wore was insufficient to defend against the EEOC’S claim of religion-based disparate treatment.  The Court made clear that Title VII’s prohibition of intentional discrimination “prohibits certain motives, regardless of the state of the actor’s knowledge.  Motive and knowledge are separate concepts.”  Id. at 2033.   Thus, an actor who intends to discriminate may do so even if his knowledge of the person’s protected category is imperfect.

This is not true, the Court reminded us in Abercrombie, in another civil rights law.  In the Americans with Disabilities Act, an employer’s knowledge of a worker’s disability is a prerequisite to a finding that the employer failed to accommodate that worker.  Id. at 2032-33 (“the Americans with Disabilities Act of 1990 defines discrimination to include an employer's failure to make “reasonable accommodations to the known physical or mental limitations” of an applicant. § 12112(b)(5)(A) (emphasis added)”).  However, the ADA expressly provides for disparate treatment claims based on a claim that the employee was “perceived” to be disabled, thus permitting a finding of intentional discrimination even when the employer’s conduct is based on faulty – and even incorrect – information.

Nevertheless, the Court’s holding in Abercrombie makes clear that the EEOC’s guidance on perceived national origin discrimination is sound.  Intentional discrimination requires intent, but not knowledge. The flawed perception of where a person is from or his or her ethnicity is sufficient to support a claim for discrimination.  As in many other areas of the law, ignorance is no defense.

Written by Mary Kuntz