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Supreme Court Rules Auto Service Advisors Are Overtime-Exempt

April 2, 2018

By Michael J. Wietrzychowski

On April 2, 2018, the U.S. Supreme Court issued its opinion in Encino Motorcars v. Navarro, holding that service advisors employed at auto dealerships are exempt from overtime pay requirements under the Fair Labor Standards Act (FLSA).

The case involved a Mercedes-Benz dealership in California and its current and former service advisors, whose job duties include meeting customers to hear concerns about their cars, suggesting repair and maintenance services, and selling new or replacement parts. In 2012, the service advisors sued for back pay, alleging Encino violated the FLSA by failing to pay them overtime. They relied on a 2011 rule from the Department of Labor which interpreted “salesman” to exclude service advisors. However, the Lower Court dismissed the case, agreeing with Encino that service advisors fall under the “salesman” exemption to the FLSA, which exempts from overtime: “any salesman, partsman or mechanic primarily engaged in selling or servicing automobiles.”  Subsequently, the Ninth Circuit reversed, but the U.S. Supreme Court vacated the decision and remanded the case to the Ninth Circuit, asking the court to decide the case without reference to the 2011 rule that the Supreme Court deemed procedurally defective.

With these instructions, the Ninth Circuit again held that the service advisors were covered under the FLSA overtime requirements.  The decision again was appealed to the U.S. Supreme Court, which overturned the Ninth Circuit, concluding that service advisors fall under the salesman overtime exemption.  The Supreme Court explained that service advisors are “salesmen” because they sell customers services for their vehicles and that they are “primarily engaged in servicing automobiles” because they are integrally involved in the servicing process, even though they do not manually repair the vehicles.

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowskico-chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Sixth Circuit Decision: Title VII Protects Transgender Workers

March 9, 2018

By Jo Bennett

On March 7, the Court of Appeals for the Sixth Circuit issued an opinion in EEOC v. R.G. & G.R. Harris Funeral Homes, Inc. holding that discrimination based on transgender status and transitioning identity is sex discrimination under Title VII of the Civil Rights Act of 1964.

The case concerns Aimee Stephens, a funeral director at R.G. & G.R. Harris Funeral Homes, Inc., who was terminated after informing owner Thomas Rost that she intended to transition from male to female.  Stephens filed a complaint with the Equal Employment Opportunity Commission (EEOC), and after an investigation, the EEOC brought suit against the funeral home for unlawful sex discrimination in violation of Title VII. The district court granted summary judgment to the funeral home, and this appeal followed.

A large part of the opinion dealt with the Religious Freedom Restoration Act (RFRA), which prohibits the government from burdening an individual’s exercise of religion absent a compelling governmental interest. The district court had agreed with the funeral home that RFRA trumps Title VII, but the Sixth Circuit held otherwise, noting that a religious claimant cannot rely on presumed biases to establish a burden, nor is he burdened by merely employing a transgender person. The court noted, “Bare compliance with Title VII—without actually assisting or facilitating Stephens’s transition efforts—does not amount to an endorsement of Stephens’s views” and “the fact that Rost sincerely believes he is being compelled to make such an endorsement does not make it so.”

The decision is the first in the nation to address the issue of whether Title VII’s prohibition against discrimination based on sex includes gender identity bias without a showing that the worker did not conform to traditional gender stereotypes. This makes it easier for workers in Kentucky, Michigan, Ohio and Tennessee to bring discrimination claims.

This decision follows a Second Circuit opinion filed last week, which held that sexual orientation discrimination is banned under Title VII.

For more information regarding this or other labor and employment issues, please contact Jo Bennettco-chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

2nd Cir Rules Sexual Orientation Discrimination Covered Under Title VII

February 27, 2018

By Jo Bennett

On Monday, in Zarda v. Altitude Express, Inc., the Court of Appeals for the Second Circuit joined the Seventh Circuit in holding that sexual orientation discrimination is banned under Title VII of the Civil Rights Act of 1964.

Donald Zarda was a skydiving instructor employed at Altitude Express. He brought a discrimination charge with the EEOC alleging he was fired after disclosing to a client that he was gay. He subsequently brought a federal lawsuit alleging sex stereotyping in violation of Title VII and sexual orientation discrimination in violation of New York law. The District Court granted summary judgment to the defendants on the Title VII claims.

In resolving this appeal, the court cited evolving legal doctrine, including the EEOC’s 2015 decision holding that sexual orientation is a sex-based consideration as well as Supreme Court decisions that Title VII prohibits discrimination based on traits that are a function of sex, such as life expectancy and non-conformity with gender norms. The court was further guided by the Supreme Court’s view that Title VII covers not only the “principal evils” that Congress was concerned with when it enacted the Civil Rights Act, but also “reasonably comparable evils” as well. Applying that view, the court ruled that sexual orientation discrimination constitutes a form of discrimination “because of … sex,” in violation of Title VII.

Both the Department of Justice and the EEOC filed amicus briefs in the Zarda case. DOJ argued that Title VII does not extend to sexual orientation discrimination, while the EEOC argued that it does. Meanwhile, and as we discussed here, the Supreme Court in December declined to hear a similar case out of the Eleventh Circuit, in effect leaving in place a decision that Title VII does not cover sexual orientation discrimination.

In addition to the Circuit and Executive Branch splits, a patchwork of state and local laws governs sexual orientation discrimination as well.  As we have advised before, employers should continue to enforce policies that protect LGBTQ workers.

For more information regarding this or other labor and employment issues, please contact Jo Bennettco-chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

3d Circuit Clarifies Standard in FCA Retaliation Cases

February 26, 2018

By Jo Bennett

In a precedential decision, the Third Circuit Court of Appeals held that the “but-for” standard applies in retaliation cases filed under the False Claims Act (FCA).

The False Claims Act prohibits retaliation against employee whistleblowers who engage in protected activity.  Under the FCA, the Third Circuit noted, an employee is entitled to relief if she was “discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts.”

In Difiore v. CSL Behring, LLC, decided in January, Marie Difiore claimed that CSL retaliated against her for voicing concerns that the company was marketing drugs for off-label use. At trial, the judge instructed the jury that the protected activity must be the “but-for” cause of adverse actions against DiFiore.  The jury found for CSL. On appeal, the question was which causation standard applies to the “because of” language in the statute. DiFiore argued that the FCA required only that her protected activity be a motivating factor in the adverse action.

To resolve the case, the Third Circuit looked to two Supreme Court cases: Gross v. FBL Fin. Servs., Inc. which held that the words “because of” in the Age Discrimination in Employment Act required the “but-for” standard, and Nassar v. University of Texas Southwestern Medical Center, which held that the word “because” in Title VII of the Civil Rights Act also required the “but-for” standard in Title VII retaliation cases.  Following this precedent, as well as its own cases interpreting Gross and Nassar in the context of FMLA retaliation claims, the Third Circuit concluded that to find retaliation, the protected conduct must be the “but-for” cause of the adverse employment action.

For more information regarding this or other labor and employment issues, please contact Jo Bennett, co-chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

New Tax Law Quashes Deduction for Some Sexual Harassment Settlements

January 3, 2018

By Jo Bennett

Payments made pursuant to a confidential settlement of sexual harassment allegations will no longer be a permissible tax deduction for business under a little-noticed provision in the Tax Cuts and Jobs Act.  The tax law permits the deduction if the settlement agreement does not contain a non-disclosure provision.

The provision is not clear whether a company may deduct legal fees incurred before settlement, or whether some or all of the fees are deductible if there are claims in addition to a claim of sexual harassment.  There is no discussion in the congressional record concerning these issues.

The new tax provision states that “[n]o deduction shall be allowed under this chapter for— (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.”

Settlement agreements for workplace claims, including workplace sexual harassment claims, routinely include non-disclosure provisions.   Congress revised the Code in response to the very public conversation about the prevalence of sexual harassment.

As details of the provision circulated, some tax experts have opined that the law might also have negative tax consequences for claimants.  As they note, in many settlements, a company typically issues a payment to the claimant’s lawyer and to the claimant, then issues a Form-1099 to both the claimant and to her counsel for the payment to the claimant’s lawyer.  The claimant was permitted to deduct the amount of the counsel fees from her taxable income.

If this interpretation is correct, these observers suggest that because the statute prohibits any deduction “under this chapter” (i.e., the Internal Revenue Code), a claimant who reaches a confidential settlement agreement of a sexual harassment claim will have to pay taxes on the gross amount of the settlement, not the net amount the claimant actually received.  Others have noted that because the provision is contained in that portion of the tax code relating to “ordinary and necessary trade or business expenses,” it  should not be read to impose a tax on what would be “phantom income” for the claimant.

Counsel for businesses must take this new tax provision into account when resolving claims of sexual harassment or sexual abuse.

For more information regarding this or other labor and employment issues, please contact Jo Bennett, co-chair of Schnader’s Labor and Employment Practices Group.   

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

SCOTUS Declines to Hear Sexual Orientation Discrimination Case

December 22, 2017

By Jo Bennett

The United States Supreme Court has denied certiorari in the case of Evans v. Georgia Regional Hospital, in effect leaving in place an Eleventh Circuit ruling that Title VII of the Civil Rights Act of 1964 does not cover discrimination based upon sexual orientation.

Jameka Evans, a former security officer at Georgia Regional Hospital, brought suit alleging discrimination for gender non-conformity, sexual orientation discrimination, and retaliation. The district court dismissed all her claims. On appeal, the Eleventh Circuit acknowledged that Evans, a gay woman, was denied equal pay or work and harassed, but affirmed the dismissal of her sexual orientation claim, citing binding precedent from the 1979 case of Blum v. Gulf Oil Corp.

However, while the lower court had called the gender non-conformity claim “just another way to claim discrimination based on sexual orientation,” the appellate court disagreed.  It held that discrimination based on failure to conform to a gender stereotype is sex-based discrimination, which is expressly permitted under Title VII. The case now goes back to district court, where Evans will likely amend her complaint to flesh out this cause of action.

As we previously discussed here, the Obama administration EEOC filed its first two sexual orientation suits under Title VII in March of 2016.  One of the suits, against Pallet Companies, settled in July of 2016.  Just last month, a federal judge ordered Scott Medical Health Center to pay $55,500 over harassment of a gay employee in the second suit. Meanwhile, the Trump Justice Department (contrary to the EEOC’s position) argued in a case before the Second Circuit that Title VII does not include sexual orientation discrimination. The Circuit Courts are split on the issue and will remain so until the Supreme Court weighs in.  Adding to the confusion is a patchwork of state and local laws governing sexual orientation discrimination.  In light of this situation, employers should continue to enforce policies that protect LGBTQ workers.

For more information regarding this or other labor and employment issues, please contact Jo Bennett, co-chair of Schnader’s Labor and Employment Practices Group.   

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

5 Steps to Prepare Your Company for Workplace Harassment Complaints

December 20, 2017

By Michael J. Wietrzychowski 

The issue of sexual harassment has captured nationwide headlines as women and men have come forward to report sexual harassment by high profile public figures. Media attention to these events may lead to an increase in the number of harassment complaints in many workplaces. This is a serious issue, and not addressing it properly will adversely affect employee retention and recruitment as well as leave companies vulnerable to significant legal expenses and related costs. Business leaders should act now on the following key points to prepare and strengthen their programs addressing workplace harassment complaints:

1. Review and update workplace harassment policies. Official policies are the first place that employees and managers go for guidance. Make sure needed policies are updated, that they clearly define the types of conduct that are inappropriate, and provide employees with guidance on what to do and who to see in the event they believe they either witnessed or were a victim of harassing behavior.

2. Ensure that workplace harassment policies are widely distributed to all employees. Depending on your business, this may include paper distribution, email distribution, or other means that guarantee all employees have received the policies. It is recommended that employees sign off that they have received the policies and understand their contents. It is also a good practice to regularly remind employees of these policies and related human resources matters through HR group meetings.

3. Regularly train supervisors and human resources professionals on handling workplace harassment complaints. All employees responsible for management of the company should be trained on their specific role once they become aware of a workplace harassment complaint.

4. Make workplace harassment complaints a priority. Managers and Human Resources professionals are constantly stretched thin with the many hats that they wear on any given day. At times the consequence is that unanticipated matters, such as workplace harassment complaints, are not prioritized. However, the law requires that employers take “prompt remedial action” to address workplace harassment complaints or else face the legal consequences of not doing enough in a timely fashion. Therefore, businesses must make it a company-wide priority to address complaints as soon as they are reported.

5. Keep your insurance carrier informed. Many employers have Employment Practices Liability Insurance that covers claims of workplace harassment once litigation or administrative action is threatened. These policies generally require that companies notify the insurance carrier of such threats as soon as possible, or risk losing coverage. Businesses should have a process in place to ensure that insurance reporting requirements are met.

Of course there are many additional steps that companies should take to be prepared, given the increased visibility of these issues. By focusing on the priorities identified here, business leaders can begin to proactively plan for and manage these challenging matters. For additional details, see the other articles in this blog series by Schnader.

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowski, co-chair of Schnader’s Labor and Employment Practices Group.   

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

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