Tuesday, December 31, 2013

Limits on the reach of confidentiality clauses in settlements

A frequent issue in negotiating a settlement agreement is confidentiality. Once an employer makes a decision to pay for a settlement, that employer typically wants to get as much as it can for its payment. It wants to restrict the employee or former employee from saying or disclosing things that could be embarrassing or costly for that employer.
Hopefully, the issue is addressed early in the negotiations. Otherwise, the employer's counsel could wait until all the monetary terms are agreed upon, and then roll out all the conditions and restrictions that the employer would like to have. What are the odds that the employee would walk away from the agreed upon payment just to preserve a right of free speech for topics related to prior employment? Some employees who had the courage to make a legal complaint care enough about the freedoms of speech, petition and association to refuse restrictions on future disclosures. In other situations, the timing and pace of negotiations may prevent exchanges of the full text of a settlement agreement.
The Supreme Court has made clear that people can voluntarily give up their constitutional rights as part of a contract. D.H. Overmyer v. Frick Co., 405 U.S. 174 (1972) (approving a waiver of due process rights as part of a commercial cognovit note). Many factors can contribute to a determination about whether a particular waiver is valid, but in the context of an agreement that settles pending litigation, most courts will enforce the agreement even if it contains a waiver of constitutional free speech rights.
Even when there is no agreement, but a court-imposed protective order to facilitate discovery, the Supreme Court will enforce a restriction on free speech when that restriction serves the purpose of conducting or settling litigation. Seattle Times Co. v. Rhinehart, 467 U.S. 20 (1984).
However, a number of whistleblower and other statutory protections limit an employee's ability to waive a right to make protected disclosures. That is the essence of “protected activity.” The law “protects” certain rights to further the public interest. This issue came to the forefront when nuclear power companies offered whistleblowers large settlements in exchange for an agreement that the whistleblower would not make safety disclosures to the Nuclear Regulatory Commission (NRC). The idea that nuclear plants would be constructed and operated with dangers hidden by “hush money” agreements was too much to bear. Macktal v. Secretary of Labor, 923 F.2d 1150, 1155-1156 (5th Cir. 1991). Thereafter, the Department of Labor ordered that all whistleblower settlements must be reviewed by the Department and those that restrain “protected activity” would not be approved.
The federal Equal Employment Opportunity Commission (EEOC) has a similar policy that prohibits enforcement of agreements that restrain employees from filing or participating in charges of discrimination. The policy states:
Agreements that attempt to bar individuals from filing a charge or assisting in a Commission investigation run afoul of the anti-retaliation provisions because they impose a penalty upon those who are entitled to engage in protected activity under one or more of the statutes enforced by the Commission. By their very existence, such agreements have a chilling effect on the willingness and ability of individuals to come forward with information that may be of critical import to the Commission as it seeks to advance the public interest in the elimination of unlawful employment discrimination.
Employees can still agree to a settlement that gives up their right to receive monetary awards, but they cannot give up their right to file a complaint or to provide information to the EEOC.
Under the National Labor Relations Act (NLRA), the nature of what is “protected activity” is different than it is under other whistleblower laws. The NLRA protects the right of private sector employees to organize unions, and also to engage in other “concerted activities” for their mutual aid and protection. While disclosures to the NLRB are also protected, the main focus of the NLRA is to protect the right of employees to communicate with each other about how the boss is treating them, and how they can work together to improve their lot. For example, under the NLRA, it is unlawful for a covered employer to bar employees from sharing information about their compensation or treatment. Thus, a settlement agreement cannot restrain employees from sharing this same information with each other.
Some courts have also held that the public has a right to know about settlements that touch on the public interest. “There is a strong public interest in disclosure.” Cusack v. Bank United of Texas, 159 F.3d 1040 (7th Cir. 1998). See Public Courts vesus Private Justice: It's Time to Let Some SunShine in on Alternative Dispute Resolution by Laurie Kratky Dore (Chicago-Kent Law Review, Vol 81:463 2006).
In settling federal court matters with federal agencies, the Department of Justice has adopted a regulation setting out a general policy against confidentiality clauses. 28 CFR § 50.23. The policy reflects the government's obligation to account to its taxpayers for how their funds are spent. The regulation permits some exceptions, such as in matters involving national security, and in protecting personal information protected by the Privacy Act. However, this policy will not apply in administrative matters involving other federal agencies.
For federal employees, Congress created new limits on confidentiality agreements through Section 104(b) of the Whistleblower Protection Enhancement Act (WPEA), codified at 5 U.S.C. § 2302(b)(13). All new non-disclosure agreements (NDAs) with any federal agency must now contain the following notice:
These provisions are consistent with and do not supersede, conflict with, or otherwise alter the employee obligations, rights, or liabilities created by existing statute or Executive order relating to (1) classified information, (2) communications to Congress, (3) the reporting to an Inspector General of a violation of any law, rule, or regulation, or mismanagement, a gross waste of funds, an abuse of authority, or a substantial and specific danger to public health or safety, or (4) any other whistleblower protection. The definitions, requirements, obligations, rights, sanctions, and liabilities created by controlling Executive orders and statutory provisions are incorporated into this agreement and are controlling.
Federal agencies are now prohibited from enforcing any NDA, unless it contains the new notice. This effectively bars federal agencies from enforcing old NDAs that sought to restrain others from making disclosures to Congress, Inspectors General, or to anyone else authorized to receive other protected disclosures.
However, what is an employee to do if a federal agency seeks to violate this new law with a contractual term that bars the employee from making disclosures about perceived violations of law? While the agency is barred from enforcing that restraint, what is to keep the agency from attempting to discipline an employee from violating the NDA? If the agency chooses to impose serious discipline for the violation, the employee could appeal to the Merit Systems Protection Board (MSPB) (within 30 days of the unlawful discipline). Whatever the degree of punishment, the employee could go to the Office of Special Counsel (OSC) to complain about the violation of the WPEA. However, the OSC has discretion about which cases it will take. The extent to which federal employees have an inalienable right to free speech remains to be tested. The courage and determination of the employees to stand up for their rights will be the first test. Another test is whether the decision makers will value free speech as much as they value disposing of cases through a settlement.
By Richard R. Renner

Wednesday, December 18, 2013

Troubling Issues in Settlement Negotiations

Two troubling issues arise when federal government agencies are negotiating settlements of EEO and/or MSPB cases:

The first arises when an agency demands, as a condition of the agency entering into a settlement with the employee, that the employee resign or retire from the agency’s employment.  The second and related issue arises when the agency demands as a condition of settlement that the employee or former employee never apply for employment with that agency ever again or, in some more extreme cases (which are more rare), never apply for employment with the federal government.  (A third issue with respect to settlement agreements arises from the content of confidentiality clauses and the matter of what an employee can be prohibited from disclosing; however that is a subject for a future blog.)

Both of these demands by agencies can be considered as per se reprisal because they can be seen to arise from participation in protected activity; however, whether or not these demands actually constitute reprisal, the employee to whom the demands are presented will consider them as reprisal and/or evidence of the agency’s bad faith.  When an agency makes one or both of these requirements a condition of settlement, it clearly makes resolution more difficult.

With respect to the first issue - requiring the employee to resign or retire as a condition of settlement - in our experience the matter revolves around money.  If the employee is eligible to retire, many times the agency can sweeten the deal by giving the employee a retroactive promotion to give the employee a higher “high three.”  This is legal as long as the agency makes the required contributions to the OPM retirement fund.  If the employee is not eligible to retire, then a requirement that he/she resign usually is acceptable only if the agency is willing to pay the employee an additional sum of money.

With respect to the second issue, demanding that the employee never apply for employment with the sub-agency or to the federal agency as a whole (such as DOD or HHS) is probably over-reaching by the agency.  However, a narrowly drawn clause which limits where the employee cannot apply - for example, to the organization for which the employee works or did work - may be acceptable to both parties.

Written by June Kalijarvi

Monday, December 9, 2013

Sleeping on the Job? Wake Me Up!


Sidney Riddle worked for the Hubbell Lighting Company for more than two years as a manufacturing engineer.  He was diagnosed with fibromyalgia, and told the company. Because of his condition, Riddle began sleeping poorly, grew tired at work, and on one or two occasions fell asleep at his workstation.

In response, the company advised Riddle that he would be allowed to call in and take unscheduled leave any day that he felt too tired to work.  Moreover, the company instructed Riddle that if he had flare ups of sleep deprivation that caused him to feel sleepy at work, he should notify his supervisor and would then be allowed to take unscheduled leave to go home. Riddle responded by suggesting that if he should fall asleep, the boss should wake him up so that he could get back to work. 

The very next day, Riddle fell asleep at his desk.  He was sent home and suspended. Three days later Hubbell fired him.

Riddle sued under the Americans with Disabilities Act (ADA), alleging that he could ably perform the duties of his position if, when he fell asleep on the job, someone woke him up.  He alleged that waking him up was a reasonable accommodation under the ADA. In the suit Riddle sought reinstatement to his former position, back pay, front pay, benefits, $300,000 in damages for emotional distress and humiliation, interest, costs, and attorney fees.

To establish a prima facie case of failure to accommodate under the ADA, a plaintiff must show that he is disabled within the meaning of the statute, that his employer had notice of his disability, and that he can perform the essential functions of his position with reasonable accommodation.  This makes him a “qualified individual with a disability.”  To win, he must then show that his employer refused to make such an accommodation. 

Hubbell moved to dismiss the case, arguing that being required to wake up an employee is not a reasonable accommodation.   But the court found that it was too premature to decide such an issue in the pleading stage. That is, the court was unwilling to say that due to sleeping on the job Riddle was per se not a “qualified individual with a disability.”  Thus, the court denied Hubbell’s motion to dismiss Riddle’s ADA claim.  The case settled shortly after the court’s disposition.

This was just one district court judge’s preliminary opinion.  Since the case settled, we do not even have a finding that Hubbell violated the ADA.  When an employee is asking an employer to provide accommodations for a disability, both the employer and the employee must engage in the "interactive process," an ongoing dialog through which the employee makes known his or her limitations and requirements, and the employer considers what options it is obligated to make available and what options are feasible in the workplace.  But it is worth keeping in mind that when an employee advises his employer that he has a sleep disorder, the employer might just be required to wake him up.  

The case is Sidney Riddle v. Hubbell Lighting Co., U.S. District Court for the Western District of Virginia, Roanoke Division, July 30, 2013. 


--This blog entry was prepared by Elizabeth L. Newman, enewman@kcnlaw.com

Wednesday, December 4, 2013

Can Ignorance Be Bliss?

What happens to an employee who obtains a new position in his agency, only to be dismissed during his new probationary period?  In Boudreault v. Homeland Security, 2013 MSPB 91 (December 2, 2013), the Merit Systems Protection Board has recently reaffirmed that an employee who accepts a new position within the same agency must be informed if he will lose his appeal rights; if he is not informed in advance, then he will be deemed to have declined the new position.  However, the Board’s reasoning is questionable and it’s not clear that the decision will survive if it is reviewed by the U.S. Court of Appeals for the Federal Circuit.

The employee in this case was appointed to a Security Assistant position by the TSA in 2006.  In 2009, the employee applied and was accepted for the position of Federal Air Marshal, which resulted in a new probation, and he was terminated during his probationary period.  By law, probationers are not “employees” who have the right to appeal to the Board. 5 U.S.C. § 7511(a)(1)(A)(i).  The employee appealed anyway, arguing both that he wasn’t a probationary employee and that he should have been given appeal rights.

The Administrative Judge held that the employee acquired appeal rights while he was a Security Assistant in 2006-07.  The Judge also held that the agency did not inform the employee that he would lose his appeal rights when he accepted the Air Marshal position.  Because the Judge found that the employee would not have accepted the position had he known he was losing his appeal rights, she held that the employee lacked sufficient knowledge to have accepted the Air Marshal position voluntarily, and as the result he retained the appeal rights he acquired in the former position.  The Judge also held that the employee was entitled to a hearing “on the merits”.

The Administrative Judge’s decision was based on two earlier Board decisions, Exum v. Veterans Affairs, 62 M.S.P.R. 344 (1994), and Yeressian v. Army, 112 M.S.P.R. 21 (2009).  In Exum, the Board held that an agency should inform employees obtaining a new position of the effect of the change on their appeal rights, and it remanded the appeal to the judge for a determination whether the employee would have taken the position had she known she was losing those rights.  In Yeressian, the Board held that “an employee who has not knowingly consented to the loss of appeal rights in accepting another appointment with the agency is deemed not to have accepted the new appointment and to have retained the rights incident to his former appointment.” 112 M.S.P.R. at ¶ 12.

Both the employee and the Agency sought review of the Administrative Judge’s decision in this case: the employee because he didn’t believe he should have to have a hearing “on the merits” (see Thomas v. HUD, 78 M.S.P.R. 25 (1998), reversing an agency action where the agency failed to give the employee written notice and an opportunity to reply), and the agency because of a recent decision by the Federal Circuit, Carrow v. MSPB, 626 F.3d 1348 (Fed.Cir. 2010).  In Carrow, while not expressing an opinion regarding the Board’s decisions in Exum and Yeressian, the court held that they didn’t apply to an employee who was moving from one agency to another.  The court held that the statute said nothing regarding exceptions to the rule that probationers lacked appeal rights, and it refused to find one in Carrow.  The agency in this case argued that the same statute said nothing about an exception for employees moving from one position to another in the same agency, and that principle should be applied to this case as well.

In a split decision, the Board reaffirmed Exum and Yeressian and held that Carrow didn’t apply.  Accordingly, the Board affirmed the Judge’s decision to hold a hearing on the merits and remanded the case to her for that purpose. 

There are, however, serious questions about the Board’s decision.  First, as the dissent observed, what does Yeressian mean when it said that an employee who wasn’t informed that he would lose his appeal rights was “deemed not to have accepted the new appointment and to have retained the rights incident to his former appointment”?  Did the employee now hold the old position or the new one?  Was the appeal aimed at retaining the new position or the old one?  Second, again as the dissent observed, even though the court specifically declined to express an opinion about the wisdom of Exum and Yeressian, didn’t the court’s statutory analysis in Carrow mean that those decisions were not likely to be sustained?  And finally, if it was clear that the agency had failed to give the employee his rights to notice and a reply, which the Board noted results in automatic reversal, why was the Board remanding the case for a hearing “on the merits”?

Interestingly, the Board’s decision doesn’t mention an earlier Federal Circuit decision, Scharf v. Air Force, 710 F.2d 1572 (Fed.Cir. 1983).  In Scharf, the court held that an employee’s decision cannot be considered “voluntary” if it is made 1) under duress brought about by the Government; 2) under time pressure imposed by the Government; 3) the employee fails to understand the circumstances because of mental incompetence; or 4) the decision is based on agency misrepresentation or deception.  In those instances, the decision is held involuntary and is withdrawn.  In this case, the Board appears to be adding another factor – agency withholding of a significant fact that may be material to the decision.  If that is the case, it might have been easier for the Board simply to have said that, rather than creating an analysis that may not last.

Written by George Chuzi

Tuesday, November 26, 2013

Exercise v. Assistance Clauses Under the WPEA



This Wednesday the Whistleblower Protection Enhancement Act will celebrate its first birthday. The law dramatically strengthened the protections for federal employees who blow the whistle.

However, the U.S. Merit Systems Protection Board’s ruling in Mudd v. U.S. Dep’t of VeteransAffairs, 2013 M.S.P.B. 90 (Nov. 19, 2013), this past week shows that the scope of the Enhancement Act is still very much at issue.

The Board is an administrative body charged with adjudicating various complaints from federal employees. One of the Board’s functions is to help resolve certain allegations of whistleblower retaliation. A successful whistleblower claim must show that an employee suffered reprisal for engaging in activity that is protected under the law.

The Enhancement Act provides that a federal employee can base a whistleblower action on retaliation for the “exercise” of any complaint, appeal, or grievance right regarding whistleblower reprisal. 5 U.S.C. § 1221(a) (providing whistleblower action for reprisal in violation of 5 U.S.C. § 2302(b)(9)(A)(i)). It also provides a whistleblower action for “assisting” any individual in the exercise of such a right, regardless of the topic of the complaint, appeal, or grievance. Id. (providing whistleblower action for reprisal in violation of 5 U.S.C. § 2302(b)(9)(B)).

Under the law’s plain language, a whistleblower enjoys very different protections under the “exercise” and “assistance” clauses. The former protects only employees who bring whistleblower allegations, while the latter protects employees who assist in any complaint or grievance process. 

In Mudd, the employee argued on review that she engaged in protected activity by alleging violations of law and regulation in her own union grievance. Mudd v. U.S. Dep’t of Veterans Affairs, 2013 M.S.P.B. 90 (Nov. 19, 2013).

The Board agreed with the initial decision’s rejection of this contention. Id. at 4. Analyzing the exercise clause, the Board held that because the grievance did not allege whistleblower reprisal, the employee had no claim that she suffered retaliation for filing the grievance. Id. However, the Board ignored the assistance clause.

What an employee must do to assist the exercise of a right, so that the protection extends to any grievance process, remains unclear. Reading the assistance clause literally would render meaningless the law’s limitation of the exercise clause to whistleblower complaints. However, literal application of the exercise clause would exclude a whistleblower aiding her own cause from the assistance clause’s broad protections. This result contradicts the statute’s plain language that extends to assisting “any individual,” presumably including oneself.

The legislative history is helpful in understanding the likely resolution of this conflict. A Senate committee report indicates that Congress agreed with the Board’s understanding of the exercise clause as articulated in Mudd. S. Report 122-155.

Further, the committee report shows that Congress understood the assistance clause to apply only when an employee helps “another individual,” notwithstanding the fact that the law states “any individual.” Id. In other words, assisting “any individual” does not include assisting oneself. 

Therefore, the law may reserve the assistance clause’s broader protection for an employee who helps others vindicate their rights. 

A year after the Enhancement Act’s passage, the scope of whistleblower protections remains unclear. However, at least one thing is certain: prosecuting a successful federal employee whistleblower action remains fraught with pitfalls. Federal employees who believe they have suffered unlawful reprisal will likely benefit from the advice of experienced whistleblower counsel, such as the attorneys at Kalijarvi, Chuzi, Newman & Fitch. Further, when possible, whistleblowers should engage in clearly protected activity and not rely on the assistance clause.

written by Dallas Hammer

A Year Later, Questions Remain About WPEA's Protections


This Wednesday the Whistleblower Protection Enhancement Act will celebrate its first birthday. The law dramatically strengthened the protections for federal employees who blow the whistle.

However, the U.S. Merit Systems Protection Board’s ruling in Mudd v. U.S. Dep’t of Veterans Affairs this past week shows that the scope of the Enhancement Act is still very much at issue.
The Board is an administrative body charged with adjudicating various complaints from federal employees. One of the Board’s functions is to help resolve certain allegations of whistleblower retaliation. A successful whistleblower claim must show that an employee suffered reprisal for engaging in activity that is protected under the law.

The Enhancement Act provides that a federal employee can base a whistleblower action on retaliation for the “exercise” of any complaint, appeal, or grievance right regarding whistleblower reprisal. 5 U.S.C. § 1221(a) (providing whistleblower action for reprisal in violation of 5 U.S.C. § 2302(b)(9)(A)(i)). It also provides a whistleblower action for “assisting” any individual in the exercise of such a right, regardless of the topic of the complaint, appeal, or grievance. Id. (providing whistleblower action for reprisal in violation of 5 U.S.C. § 2302(b)(9)(B)).

Under the law’s plain language, a whistleblower enjoys very different protections under the “exercise” and “assistance” clauses. The former protects only employees who bring whistleblower allegations, while the latter protects employees who assist in any complaint or grievance process.

In Mudd, the employee argued on review that she engaged in protected activity by alleging violations of law and regulation in her own union grievance. Mudd v. U.S. Dep’t of Veterans Affairs, 2013 M.S.P.B. 90 (Nov. 19, 2013).

The Board agreed with the initial decision’s rejection of this contention. Id. at 4. Analyzing the exercise clause, the Board held that because the grievance did not allege whistleblower reprisal, the employee had no claim that she suffered retaliation for filing the grievance. Id. However, the Board ignored the assistance clause.

What an employee must do to assist the exercise of a right, so that the protection extends to any grievance process, remains unclear. Reading the assistance clause literally would render meaningless the law’s limitation of the exercise clause to whistleblower complaints. However, literal application of the exercise clause would exclude a whistleblower aiding her own cause from the assistance clause’s broad protections. This result contradicts the statute’s plain language that extends to assisting “any individual,” presumably including oneself.

The legislative history is helpful in understanding the likely resolution of this conflict. A Senate committee report indicates that Congress agreed with the Board’s understanding of the exercise clause as articulated in Mudd. S. Report 122-155.

Further, the committee report shows that Congress understood the assistance clause to apply only when an employee helps “another individual,” notwithstanding the fact that the law states “any individual.” Id. In other words, assisting “any individual” does not include assisting oneself.

Therefore, the law may reserve the assistance clause’s broader protection for an employee who helps others vindicate their rights.

A year after the Enhancement Act’s passage, the scope of whistleblower protections remains unclear. However, at least one thing is certain: prosecuting a successful federal employee whistleblower action remains fraught with pitfalls. Federal employees who believe they have suffered unlawful reprisal will likely benefit from the advice of experienced whistleblower counsel. Further, when possible, whistleblowers should engage in clearly protected activity and not rely on the assistance clause unless they were helping another employee.

Posted by Dallas Hammer

Wednesday, November 20, 2013

Processing Complaints of Discrimination by Lesbian, Gay, Bisexual, and Transgender (LGBT) Federal Employees

The EEOC has issued new guidance to federal EEO offices on processing complaints of discrimination by lesbian, gay, bisexual, and transgender employees.  In the EEOC's recent decision, Macy v. Dep't of Justice, EEOC Appeal No. 0120120821 (April 20, 2012), the Commission held that discrimination against an individual because that person is transgender is discrimination because of sex.  Therefore, the Commission advises federal agencies that "[c]omplaints of discrimination on the basis of transgender status should be processed under Title VII of the Civil Rights Act of 1964 and through the federal sector EEO complaint process at 29 C.F.R. Part 1614 as claims of sex discrimination."

With respect to EEO Counseling, the Commission states:  "In accordance with EEO Pre-Complaint Processing Procedures set forth in MD 110 Chapter 2, EEO Counselors should assist individuals in clearly defining their claims. Lesbian, gay and bisexual employees who believe they have been discriminated against because of their sexual orientation should be counseled that they have a right to file a complaint under the 1614 process, because they may have experienced sex discrimination, as described above."

The Commission also observed that Executive Order 13087 explicitly prohibits discrimination based on sexual orientation; therefore, federal agencies are instructed to maintain procedures permitting federal employees to file complaints of sexual orientation discrimination under the Executive Order.

In addition, employees can file complaints of sexual orientation and gender identity discrimination with the Office of Special Counsel (OSC) as these may constitute prohibited personnel practices over which the OSC has jurisdiction.

Kudos to the EEOC for providing guidance to federal EEO offices on how to properly process these types of claims.  Kalijarvi, Chuzi, Newman & Fitch can help you if you need assistance in the EEO process.

Monday, November 18, 2013

Supreme Court justices show support for Lawson

Last week, the Supreme Court heard oral argument in Lawson v. FMR. This is the first Sarbanes-Oxley (SOX) corporate fraud whistleblower case to be heard by the High Court. The transcript is now available here.

The issue is whether the text of SOX's whistleblower protection covers the employees of the contractors of publicly traded companies. The First Circuit Court of Appeals said, “no,” even though SOX says that it covers, “any officer, employee, contractor, subcontractor, or agent of such company[.]” The First Circuit said this phrase prohibits the contractors from firing the employees of the publically traded company, and has no effect on the contractor's treatment of its own employees. I criticized this decision when it was issued in this prior blog post.

University of Washington law professor Eric Schnapper presented the argument for whistleblowers Jackie Lawson and Jonathan Zang. Schnapper was able to get out four iron clad reasons why this text in SOX has to cover the employees of the contractors. No justice questioned these four iron clad reasons. These four reasons are, (1) it renders the statutory language regarding contractors virtually meaningless, (2) it renders that language with regard to contractors in the mutual fund industry literally meaningless, (3) it has the implausible consequence of permitting the very type of retaliation that we know Congress was concerned about – retaliation by an accountant such as Arthur Andersen, and (4) it renders incoherent the remedial provisions regarding the burden of proof and an affirmative defense.

While Justice Breyer gave him some tough questions about how far SOX's language would reach, he later suggested the First Circuit's narrow construction was too narrow. “Oh, that itself is a big limitation. Huge,” he said at page 40. At pages 44-45, he stated, “if, in fact, the fraud is related to the contract or by certain kinds of contractors who do investment work, who do all kinds of important work for the company, why shouldn't it be covered? I mean, and the language, of course, does say what I read, as you agreed. It says a contractor.”

Instead, Justice Alito resorted to “reductio ad absurdum,” the logical fallacy of taking an argument to an extreme to ridicule it. One of Schnapper's particular talents in Supreme Court advocacy is crafting the argument that gets the Court to rule for the employees without pushing the Court any farther than it needs to go. Schnapper applied his talent in redirecting Justice Alito to Lawson and Zang's position as accountants in the thick of the public company's deceptive disclosure. When Justice Alito pressed again, Schnapper noted that the different context could yield a different result. Schnapper thereby minimized the time spent on the unhelpful hypothetical and noted that the different contexts could lead to different results that have not been fully briefed in this case.

Justice Scalia called it “peculiar” to have a different rule for officers than for contractors. But he pointed to a way out by asking, “is it as much of a disaster as -- as your opponent suggests? That is to
say, would -- would a firing for something that had nothing to do with the securities laws be swept in?” Justice Scalia picked up on a point made by the National Employment Lawyers Association (NELA) and the Government Accountability Project (GAP) in their amicus brief (which I co-wrote with Scott Oswald, Kelly Kruse, Michael Anderson, Tom Devine and Rebecca Hamburg). A SOX case requires both coverage and protected activity, and very few of the covered employees have engaged in any protected activity.

To me, the scope of protected activity is sufficient to explain why the gardener is unlikely to face SOX liability. As a practical matter, OSHA received only 168 cases last year – even while the Department of Labor policy calls for covering the employees of contractors. So, we are not seeing any floodgate. Assistant Solicitor General Saharsky made this point during her portion of the argument.

Justice Scalia told FMR's attorney (at p. 35), “the problem that I have is if – if the statute does not cover contractors', subcontractors', firing of their own people, what - what coverage does it have? A subcontractor usually cannot fire somebody from the principal company that's traded on the exchange.”

Chief Justice Roberts asked (p. 42), “What about the butler who does, in fact, hear all this information about a conspiracy and wire fraud?” He is clearly thinking about the need to protect employees who do come forward with evidence of fraud.

Justice Sotomayor touched on the remedial purpose of SOX at pp. 41-42: “So doesn't that drama reduce itself if we accept the government's limitation that it has to do only with the fraud related to the public company? ... Because that was the center of this bill -- what motivated this bill.” At page 44, she addressed the deference issue noting that, “we're not being asked to give deference to the Petitioner. We're being asked to give deference to the government.” At page 49, FMR's attorney claimed, “Remember the overall purpose of the statute is disclosure by public companies. It is not protection of investors, as some at times have said.” Thankfully, the NELA/GAP brief explained how the purpose of SOX was to protect investors, and the whistleblower provision was a “crucial” part of serving that purpose.

Justice Alito (at page 45), asked FMR's attorney if there is any basis to limit the scope of protection to frauds by the publicly traded company. “It is not in the terms of the statute,” FMR's attorney conceded. That prompted Justice Scalia to say, “It's a very sensible limitation. Unfortunately, it's not there.”

Overall, the justices each expressed that they would be looking to apply the plain language of SOX to protect those employees SOX meant to protect.  Whether the Court will look for a "limiting principle" that is not in the text of SOX remains unknown, but the Court has good reasons to say that Lawson and Zang are covered and the coverage of others can be decided by the the Department of Labor, subject to future court review.




Wednesday, November 6, 2013

MSPB Reverses Removal Because Due Process Was Not Provided.

In Massey v. Department of the Army, 2013 M.S.P.B. 80 (Oct. 25, 2013), the Merit Systems Protection Board (MSPB) issued an important decision about the right of federal employees to Due Process of Law.

In Ms. Massey’s case, she was originally represented by the union.  The agency proposed to terminate her employment as a Nurse for medical inability to perform the duties of her position.  The human resources specialist instructed the union to “[p]lease ensure you are on [the deciding official's] calendar NLT COB on 7Feb12.”  On February 3, Ms. Massey informed the deciding official that she would be represented by an attorney.  On February 7, the attorney emailed the deciding official to schedule an oral reply.  A written reply was never submitted.  No one responded to Ms. Massey’s attorney’s request for an oral reply.  Instead, the deciding official issued a decision sustaining the charge and removing her.

Ms. Massey appealed to the MSPB.  Although she did not dispute that she was unable to perform the essential functions of her position, she argued that the agency should have tried harder to find her a position in which her chronic respiratory disorder would not be disabling.  She also asserted that the agency violated her right to due process when it did not allow her to respond orally to the proposal. 

The Administrative Judge sustained the agency’s charge, found that the agency did not discriminate against the appellant, and rejected Ms. Massey’s due process argument.  The Administrative Judge rejected Ms. Massey’s due process argument because he found that the agency provided Ms. Massey with numerous opportunities to respond to the charges and did not owe her an additional extension of time.   Ms. Massey petitioned for review of the Initial Decision.

The Board granted Ms. Massey’s Petition for Review, vacated the Initial Decision in part, reversed the agency’s removal action because it deprived Ms. Massey of due process, and affirmed the administrative judge’s finding that the agency did not discriminate on the basis of disability.

With respect to the due process issue, the Board relied upon Cleveland Board of Education v. Loudermill, 470 U.S. 532 (1985), which established that the “root requirement” of due process was an opportunity to be heard before being deprived of a significant property interest.  At a minimum, this requires that the employee have notice of the charges against her, an explanation of the employer’s evidence, and an opportunity, either in person or in writing, to present evidence and convince the decision maker that the proposed action should not be taken.

The Board disagreed with the Administrative Judge and relied upon Alford v. Department of Defense, 118 M.S.P.R. 556 (2013), in which it found a due process violation. In Alford, the agency gave the appellant two weeks to submit a written reply and to schedule an oral reply.   Two weeks after receiving the notice, the appellant sent a letter requesting an oral reply.  Two days after the letter was sent, but before it was received, the agency issued its decision.  The Board found that because the appellant’s request was timely, issuance of the decision violated the appellant’s due process rights. 

Similarly, in Ms. Massey’s case, the Board found that Ms. Massey timely requested an oral reply.  The agency’s notice of proposed removal allowed Ms. Massey to request an oral reply on the final day of the original response period. According to the Board, the “instruction to be ‘on [the deciding official’s] calendar’ by February 7, 2012, implies that February 7 was the new deadline for filing a written response or for requesting an oral reply.” (Emphasis in original).  If the agency considered February 7 to be the date by which the oral reply had to be completed, it should have stated this when it granted the extension.  Therefore, because the agency violated Ms. Massey’s due process rights, she was entitled to a new constitutionally correct removal procedure and the removal was reversed.

This is the kind of issue that Kalijarvi, Chuzi, Newman & Fitch looks for when we represent federal employees before the Board.



Wednesday, October 30, 2013

WHAT FACTS/EVIDENCE DISCLOSED DURING MEDIATION ARE NOT CONFIDENTIAL?

Consider this situation: our client, a native Chinese speaker, is assigned as a GS-14 law enforcement attaché for a US law enforcement agency at the US Embassy in Beijing. At the time she initially applied and was selected for the Beijing position the vacancy announcement and the position description required fluency in Chinese.  During her tenure, she receives good ratings but at the end of her tour she is denied an extension and rotated back to headquarters in the US. 

    The agency then advertises the Beijing position and a similar law enforcement attaché position in Germany for filling.  This time the vacancy announcements and position descriptions do not include a language requirement.  The client applies for both positions (Beijing and Germany) and is on the best qualified list for both but is not selected for either position.  The selectee for the Beijing position does not speak Chinese so the agency sends him to Chinese language training for approximately a year (at vast expense to the agency) and then he is sent to Beijing. 

    Client files an EEO complaint and ultimately the case is assigned for mediation and a confidentiality agreement is signed.  At mediation during a joint session with both parties there is a discussion of the reasons for not selecting the client for the Beijing position despite the fact that she is a native Chinese speaker. 

    The agency management official proffers that the agency “wanted to give someone else a chance” to serve in Beijing despite the fact that the selectee did not speak Chinese and required extensive and expensive language training and could not enter on duty in the Beijing position for over a year.  The management official is also asked the reasons for not selecting the client for the Germany attaché position and his response is that the selectee speaks fluent German.

    Three questions: First, during discovery can the client discover the factual bases for her non-selection for the Beijing and Germany positions.  The answer to that question is definitely “yes.”  5 U.S.C. 574(f) (the ADR statute) states
        Nothing in this section shall prevent the discovery or admissibility of any evidence that is otherwise discoverable, merely because the evidence was presented in the course of a dispute resolution proceeding.
    Thus, facts that were discoverable before the mediation session do not become confidential merely because they were presented as evidence during a joint mediation conference.  It is only things that are said or written during the mediation in private sessions that must be kept confidential.  Indeed, many agencies now include this disclaimer in their mediation statements and agreements.

    The second question is more interesting: Can the client make  a request for admission in discovery that states the following?
        Admit that the selectee for the Germany position was selected because he speaks fluent German.
    The answer is that one may make that discovery request.

    The third and final question is even more interesting: What if the agency proffers as the reason for the selection for the Germany position a reason or reasons that do not include the fact that the selectee speaks fluent German and/or denies the request for admission.  Can the client move to compel or otherwise attempt to force the agency to admit that it proffered the selectee’s fluency in German as its reason for selecting him for the Germany position during mediation?   The answer to this question also is “yes,” since the information was provided to all parties during the joint session of the dispute resolution proceeding.  See 5 U.S.C. § 574(b)(7).

Posted by June Kalijarvi.

Tuesday, October 22, 2013

Too Sick To Get to Work On Time?


If you always come late to work due to a serious illness, can your boss fire you?  Or must an employer allow this as a “reasonable accommodation” under the Americans With Disabilities Act?  This was the question recently considered by the U.S. Court of Appeals for the 2nd Circuit in New York.  The case is McMillan v. City of New York, 711 F. 3d 120 (2d Cir. 2013).

Rodney McMillan worked as a case manager for a New York city social services agency.  His job involved conducting annual home visits, processing social assessments, recertifying clients' Medicaid eligibility, making referrals to other social service agencies, and addressing client concerns. He also met with clients daily in the office.  He has schizophrenia, which is treated with medication.

The agency had a flex-time policy that allowed employees to arrive at the building anytime between 9:00 and 10:00 a.m. Due to elevator wait times, they were not considered late unless they arrived at the office after 10:15 a.m. When an employee was late, the boss could approve or disapprove the late arrival.  If it was approved, the employee could use his or her vacation or sick leave to account for the missed time. 

McMillan usually got up between 7:00 and 7:30 a.m., but his morning medications made him "drowsy" and "sluggish." As a result, he often arrived late to work, sometimes after 11:00 a.m. For a period of at least ten years, McMillan's tardy arrivals were either explicitly or tacitly approved. But when a new supervisor arrived, he refused to approve any more of McMillan's late arrivals. McMillan repeatedly asked whether he could have a later start time to avoid being disciplined for tardiness. But the boss responded that he could not have a later start time because it would mean that in order to put in a full day’s work, he would have to stay past 6 p.m., and this would not be allowed because no supervisor would be present.

As a result, the agency began to discipline McMillan for his late arrivals, first with a fine, then with charges of "Misconduct and/or Incompetence," and then with a recommendation that he be fired.  In response, McMillan formally requested accommodations for his disabilities, including a later flex start time that would permit him to arrive at work between 10:00 a.m. and 11:00 a.m. But the agency decided that McMillan's request for a later flex start time could not be accommodated because there was no supervisor at the office after 6:00 p.m. Ultimately, the City reduced the recommended sanction of termination to a thirty day suspension without pay.

McMillan sued.   He claimed that since the office was open until 10 p.m., the agency should have allowed him to work past 6 p.m. as an accommodation for his disability.  He also suggested that he could work through his lunch hour and still get his time in before 6 p.m.  The City did not allege that McMillan was a malingerer, and did not dispute that the only reason McMillan was unable to get to work by a specific time was the result of the treatment for his disability. But they maintained that neither allowing him to work through lunch nor staying after 6 p.m. was required as a reasonable accommodation.

The lower court agreed with the agency, holding that being able to work during the normal work day  was an “essential function” of McMillan’s job, and that the agency did not discriminate against him when it disciplined him for his tardiness.  As a result, the District Court granted summary judgment for the agency and did not let the case go to trial.

The 2nd Circuit disagreed with the lower court’s analysis.  Instead, it held that a fact-specific inquiry must be made into whether being physically present at work at all times was actually an essential function of every job:


The district court appears to have relied heavily on its assumption that physical presence is "an essential requirement of virtually all employment" and on the City's representation that arriving at a consistent time was an essential function of McMillan's position. While the district court's conclusion would be unremarkable in most situations, we find that several relevant factors here present a somewhat different picture: one suggesting that arriving on or before 10:15 a.m. — or at any consistent time — may not have been an essential requirement of McMillan's particular job. For many years prior to 2008, McMillan's late arrivals were explicitly or implicitly approved. Similarly, the fact that the City's flex-time policy permits all employees to arrive and leave within one-hour windows implies that punctuality and presence at precise times may not be essential. Interpreting these facts in McMillan's favor, along with his long work history, whether McMillan's late and varied arrival times substantially interfered with his ability to fulfill his responsibilities is a subject of reasonable dispute.

The 2nd Circuit ruled that McMillan should be given the opportunity to demonstrate to a jury that it would not have been an undue hardship to allow him to work past 6 p.m. unsupervised, especially since it was uncontested that some of the duties he performed during the day were unsupervised, such as home visits to clients.  The court also noted that it would not have been a hardship to allow McMillan to work through his lunch hour to make up the time he lost in the morning.

This case erodes the time-honored principle that an employer can require presence at work from 9-5 as a basic work requirement.  Instead, consideration as to what may be a reasonable accommodation must be made on a case-by-case basis, and an employer may have to modify as basic a requirement as an employee’s work start time. Many jobs may still require arriving at a specific time as an essential job function.  But in others, it may not be.  The ADA requires that the employee and employer engage in an “interactive process” to determine whether the employee’s request is reasonable and whether the employee’s needs can be met without causing undue hardship to the employer. 

    - this blog post was prepared by Elizabeth L. Newman.  She can be reached at enewman@kcnlaw.com.

Wednesday, October 9, 2013

NELA amicus brief seeks fair attorney fee award

Attorney fee awards make a difference in whether victims of illegal discrimination can get competent counsel to take their cases.  Even for those who have an income or savings to pay for an attorney depend on courts to reimburse them for their attorney's fees at the end of a case.  For those who cannot afford to pay for an attorney in advance, the attorney's opportunity to get a reasonable fee award from the court is their only hope of getting counsel.

That is why the decision of a federal judge in Alabama is so disturbing. Attorney Alicia Haynes has litigated the famous Ash and Hithon v. Tyson Foods case since December 1996. She prevailed in two jury trials, endured three appeals to the 11th Circuit (one of which was reviewed by the full court en banc), and made new law with the landmark decision in Ash v. Tyson Foods, Inc., 546 U.S. 454 (2006) (courts must recognize evidence of discrimination when white manager calls African-American adults "boy"). On March 19, 2013, the judge in Alabama refused to award fees for work on Ms. Hayne's fee petition, slashed the remaining hours by 80% across the board and awarded just $281,103.25, or 14% of the $1,981,678.00 originally sought. 

With attorney Margie Harris of Houston, Texas, I co-wrote a friend-of-the-court (or amicus) brief urging the 11th Circuit to vacate the fee determination and remand for a more detailed explanation of the reductions. We wrote the brief on behalf of the National Employment Lawyers Association (NELA). The brief asks the Court to keep an eye on the goal of encouraging competent attorneys to accept civil rights cases. The brief notes that failure to encourage competent attorneys to take contingent cases will lead to an increase in the number of claimants who proceed without attorneys.


We are indebted to Jonathan C. Puth, Richard T. Seymour  and Lenore C. Garon for their work in MWELA's amicus in West v. Potter, 717 F.3d 1030, 118 FEP 1661 (D.C. Cir. 2013). Their research on the growing number of people pursuing claims in court without an attorney was most useful. Thank you.

Our brief recalls the days when the Supreme Court said, “The right to representation by counsel is not a formality. . . . It is . . . the essence of justice.”  Kent v. United States, 383 U.S. 541, 561 (1966). 

Posted by Richard Renner.

Tuesday, October 8, 2013

WHAT WILL CLOSE NEXT IF THE SHUTDOWN CONTINUES?


After one week, the shutdown has already had dramatic effect on the economy, with some analysts estimating that it is costing approximately 300 million dollars per day so far.  Unfortunately, further negative consequences may result from the shutdown if a resolution is not reached soon.  The following government agencies and programs have been able to operate through the shutdown thus far, but may not be able to continue operations if the shutdown runs much longer:

Head Start:

Head Start officially closed on October 1, due to a lack of appropriations, but its programs operate based on grants that are distributed throughout the year.  The programs that were due to receive funding on October 1 were forced to shut down, which has thus far kept 5,000 children from receiving vital early educational services.  Unfortunately, more programs may run out of funding on November 1, depriving even more young children of these same educational services.  

Domestic Violence Programs:

The Office of Justice Programs disburses funds to rape crisis programs and domestic violence shelters across the country, but was unable to disburse any more funds after Friday, October 4.  Most of these types of programs and shelters are dependent on Office of Justice Program funding at least in part, so the shutdown will effectively withhold funding from programs aiding victims of rape and domestic violence from Monday, October 7, through the end of the shutdown. 

Food Programs:

The USDA Women, Infants, and Children program provides food to low income pregnant women, new mothers, and children.  The program currently has approximately 125 million in contingency funds to continue operation, but they believe that these funds may not last past October, at which point they will not be able to continue without a new appropriation.

Veterans Services:

Under current law, the Department of Veterans Affairs medical accounts are actually funded one year in advance.  Because of this, the VA will be able to pay for most of its medical programs through the shutdown.  Unfortunately, the same does not apply for its compensation and pension payments.  The Agency has informed Congress that if the shutdown lasts two to three weeks or more, it will run out of the resources it needs to make veteran’s benefit payments. 

Amtrak:

Amtrak is managed by a separate, for-profit company, but still receives large funding from the US government.  Additionally, the shutdown reduces travel to the DC area, which further reduces income.  According to former board members and analysts, if the shutdown lasts more than a few weeks, there is a legitimate question as to whether Amtrak may need to alter operations, including cutting routes. 

United States Patent and Trademark Office:

The USPTO operates primarily as a fee based agency, and is currently running on reserve funds from last year.  It currently estimates it has enough reserve funds to operate for approximately 4 weeks, at which point it will reassess its funding and determine whether it can continue to run.

The Supreme Court:

The Supreme Court is still in operation, but it is only guaranteed to run through October 11, after the Court hears 6 cases.  After the 11th, the Court is unclear as to whether it will have enough funding to remain operational. 

As is obvious from the above list, if the shutdown is allowed to continue, important services that provide funds to children, victims of domestic violence, and our veterans will all cease to operate.  Find your Congressman here and let them know that you believe the government should reopen immediately to prevent these devastating consequences.