Wednesday, October 26, 2016

Does Title VII cover sexual orientation discrimination claims? An update

In July 2015, this blog discussed the decision of the Equal Employment Opportunity Commission (“EEOC” or “Commission”) in Baldwin v. Department of Transportation, in which the Commission held for the first time that under certain circumstances, Title VII of the Civil Rights Act of 1964 ("Title VII") covers claims of sex discrimination on the basis of sexual orientation. Specifically, in Baldwin, the EEOC held that a person could demonstrate sex discrimination on the basis of orientation as a violation of Title VII if the treatment at issue: (1) would not have occurred but for the individual's sex; (2) was based on the sex of the person(s) the individual associates with; and/or (3) was premised on the fundamental sex stereotype, norm, or expectation that individuals should be attracted only to those of the opposite sex. Because Baldwin was the result of an administrative complaint brought by a federal employee, it is technically applicable only to federal government employers. The subject of this blog is to analyze the extent to which Baldwin has been adopted by federal courts. The short answer is: not yet.

The Courts of Appeals have been confronted with this issue, but seem slow to go beyond their legal precedent when it comes to defining what constitutes "sex" discrimination under Title VII. In May 2016, the Fourth Circuit issued its decision in Hinton v. Virginia Union University, in which it refused to defer to the EEOC's Baldwin decision, proclaiming that, "[it] is explicitly the law of the Fourth Circuit that Title VII does not protect against discrimination based on sexual orientation." The Fourth Circuit rejected Hinton's argument that Baldwin displaced the Fourth Circuit's earlier decision in Wrightson v. Pizza Hut, in which the Fourth Circuit held that "Title VII does not afford a cause of action for discrimination based upon sexual orientation." The Fourth Circuit stated that EEOC interpretations of Title VII are entitled to deference only to the extent that they "have the power to persuade." To determine the persuasive effect of Baldwin, the Fourth Circuit noted that it had cited Wrightson approvingly, even after Baldwin was issued, in Murray v. N. Carolina Department of Public Safety (a 2-page unpublished decision, in which the court cited Wrightson in dicta, and in a footnote). In Hinton, the Fourth Circuit also looked at district court decisions which had followed Baldwin, but dismissed those decisions as unpersuasive because those decisions did not follow the law of their respective circuits. The court did not explain how, under this standard of review, it could ever defer to an administrative decision if there were legal precedent to the contrary.

More fundamentally, the Fourth Circuit appears to have strained to rely on Wrightson, which in fact is consistent with Baldwin. In Wrightson, in which a heterosexual male claimed he was sexually harassed by his homosexual supervisor and homosexual co-workers, the Fourth Circuit specifically held that “a claim under Title VII for same-sex ‘hostile work environment’ harassment may lie where the perpetrator of the sexual harassment is homosexual.” Indeed, the court emphasized that Wrightson:
[D]oes not allege that he was discriminated against because he is heterosexual. He specifically alleges in his complaint that he was discriminated against 'because of his sex, male…' [This allegation] is more than adequate when coupled with his allegations that the harassers were homosexual and that other males (and no females) were the targets of the harassment. Of course, even had Wrightson alleged that he was discriminated against both because he was heterosexual and because he was male, he would still state a claim under Rule 12(b)(6). As the Supreme Court recognized in Price Waterhouse v. Hopkins, a Title VII cause of action lies even though the discrimination against the employee is not 'solely' because of the employee's sex, as long as the employee's sex was a cause of the discrimination." In Price Waterhouse, the Supreme Court stated that, "we know that the words 'because of' [in Title VII] do not mean 'solely because of'; we also know that Title VII meant to condemn even those decisions based on a mixture of legitimate and illegitimate considerations." 
In other words, in Wrightson, the Fourth Circuit anticipated the EEOC’s pronouncement in Baldwin that a claim of sex discrimination based on sexual orientation will lie under Title VII. Yet, it dismissed Hinton's sex orientation discrimination claim because Hinton failed to also allege that he was discriminated against on the basis of his sex, not just his sexual orientation. Wrightson and Hinton reflect the Fourth Circuit’s determination to address claims of sexual orientation discrimination only if they are tied to a claim of sex discrimination in violation of Title VII. For whatever reason, Hinton did not allege sex discrimination in his complaint, and he may not have asked either the district court or the appeals court for leave to amend the complaint to add such a claim. That choice appears to have led to the adverse decision. In Hinton, the court went on to conclude that the reprimands issued to Hinton did not constitute “adverse employment actions” sufficient to invoke Title VII. That the court undertook this adverse employment action analysis in light of the “evolving state of the law" concerning sexual orientation discrimination claims may be a harbinger of more enlightened decisions from the Fourth Circuit.

Recent events at the Seventh Circuit suggest it may be evolving more rapidly than the other federal circuit Courts of Appeal. On October 11, 2016, it granted a petition to rehear en banc its July 28, 2016 decision in Hively v. Ivy Tech Community College. (See our September 22, 2016 blog, "Seventh Circuit Upends EEOC Decision on LGBT Coverage.") In its July 2016 panel decision, the Seventh Circuit reluctantly held that due to its precedent, an adjunct professor's claims of sexual orientation discrimination were not cognizable under Title VII. However, throughout the 42-page opinion, the court painstakingly outlined the quagmire of conflicting decisions which courts have issued on this topic. Citing the Price Waterhouse decision, which makes it illegal to discriminate on the basis of sex stereotypes, the Seventh Circuit panel observed that, "[i]t seems illogical to entertain gender non-conformity claims under Title VII where the non-conformity involves styles of dress or manner of speaking, but not when the gender non-conformity involves the sine que non of gender stereotypes-with whom a person engages in sexual relationships." The panel concluded its opinion by inviting the full Seventh Circuit to take another look at its precedent: "Perhaps the writing is on the wall…But writing on the wall is not enough. Until the writing comes in the form of a Supreme Court opinion or new legislation, we must adhere to the writing of our prior precedent…."

On October 11, 2016, the Seventh Circuit granted Hively's petition for a rehearing en banc. Oral arguments are scheduled for November 30, 2016. In support of the petition, five members of Congress submitted an amici curiae brief. These five members of Congress are all co-sponsors of the Equality Act of 2015. The Equality Act of 2015 expressly adds "sexual orientation" and "gender identity" to Title VII, and it defines "sex" to include "sexual orientation and gender identity." The Equality Act was referred to the Subcommittee on the Constitution and Civil Justice on September 8, 2015, but has gone nowhere since. As in many other areas of the law, if Congress is unable to act due to ideological paralysis, it may be up to the courts to fill the void. Given the EEOC’s leadership on this issue, the judicial remedy may come sooner than later.

Written by Valerie A. Chastain

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Monday, October 24, 2016

Dreadlocks and Title VII’s Definition of Race

Chastity Jones’ employment with the customer service company Catastrophe Management Solutions (CMS) ended before it began when she refused to remove her dreadlocks.   She charged discrimination based on race under Title VII, but the trial court dismissed the case under Fed.R.Civ.P. 12(b)(6).  Last month, the Eleventh Circuit affirmed that decision, issuing an opinion that broke no new ground as to grooming policies under Title VII, but which raised substantial questions as to when a grooming policy may implicate the protections of Title VII.

Grooming requirements, such as the one that CMS relied upon to reject Ms. Jones’ application, have generally been upheld as non-discriminatory under Title VII.   Title VII prohibits discrimination based on immutable characteristics such as race, color, sex and national origin.  However, as the Fifth Circuit explained over 40 years ago:

Equal employment opportunity may be secured only when employers are barred from discriminating against employees on the basis of immutable characteristics, such as race and national origin….But a hiring policy that distinguishes on some other ground, such as grooming codes or length of hair, is related more closely to the employer’s choice of how to run his business than to equality of employment opportunity…Hair length is not immutable and in the situation of employer vis a vis employee enjoys no constitutional protection.  If the employee objects to the grooming code he has the right to reject it by looking elsewhere for employment, or alternatively he may choose to subordinate his preference by accepting the code along with the job.

Willingham v Macon Tel. Pub. Co.  Relying on Willingham, the Eleventh Circuit in Catastrophe Management Solutions held that Ms. Jones’ dreadlocks, like hair-length, were not immutable and were not protected under Title VII.  

Before reaching this holding, however, the court paused to consider whether Ms. Jones’ dreadlocks might be considered as hair texture, because “[D]iscrimination on the basis of black hair texture (an immutable characteristic) is prohibited by Title VII, while adverse action on the basis of black hairstyle (a mutable characteristic) is not." The court cites in support two non-precedential cases.   The Seventh Circuit sitting en banc, recognized a claim for racial discrimination based on the plaintiff’s allegation that she was denied a promotion because she wore her hair in a “natural Afro.”   Jenkins v Blue Cross Mut. Hosp. Ins., Inc.  The court in Jenkins, however, does not discuss in any detail the distinction between hair texture and style.  The Eleventh Circuit also cited Rogers v. American Airlines, Inc., which considered the question of cornrows and noted that

Plaintiff may be correct that an employer’s policy prohibiting the “Afro/bush” style might offend Title VII and section 1981.  But if so, this chiefly would be because banning a natural hairstyle would implicate the policies underlying the prohibition of discrimination on the basis of immutable characteristics.

(Emphasis added.) Rogers, however, distinguished the corn-rows from a “natural hairstyle,” which it says would be protected under Title VII:

An all-braided hair style is an “easily changed characteristic,” and, even if socioculturally associated with a particular race or nationality, is not an impermissible basis for distinctions in the application of employment practices by an employer. 

Rogers also noted that multiple courts have upheld policies limiting male facial hair despite the fact that racially-linked differences made compliance with such policies more difficult for African Americans. 

In Catastrophe Management Solutions, the Eleventh Circuit raised the distinction between hair texture and hair style seemingly in order to consider whether dreadlocks were a “natural hairstyle” -- like the Afro in Rogers -- and so protected as a physically immutable marker of race. It observed, however, that the plaintiff “did not allege that dreadlocks themselves are an immutable characteristic of black persons," and concluded that the fact that “dreadlocks are a ‘natural outgrowth’ of the texture of black hair does not make them an immutable characteristic of race.” Accordingly, when CMS asked Ms. Jones to cut her dreadlocks, the court held, they did not intentionally discriminate against her based on race.

Without question, and as the court noted, “the distinction between immutable and mutable characteristics of race can sometimes be a fine (and difficult) [line].”  In the end the Eleventh Circuit returned a decision in Catastrophe Management Solutions that was consistent with previous rulings on Title VII and hair style.  Ms. Jones’ dreadlocks were mutable and, therefore, if she wanted to work at CMS she could choose “to subordinate [her]preference by accepting the [grooming] code along with the job.” Nevertheless, the court helpfully drew attention to a way forward for persons seeking Title VII protection for what are arguably “natural” hairstyles. 

This blog was written by Mary Kuntz.

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.