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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 and 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 and 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 and 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 and 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.

Common Mistakes Employers Make in Handling Complaints of Sexual Harassment

December 20, 2017

By Scott J. Wenner

Other parts of this series have covered the proper affirmative steps to take to prepare for, investigate and respond to charges of sexual harassment. It is equally important to address the opposite set of concerns. What is it that employers commonly fail to do properly, or at all, when an employee makes a complaint of sexual harassment?

1. Failure to Promptly and Competently Investigate. Too often employers that receive a complaint of sexual harassment investigate the charge in an untimely manner and/or use an internal resource who is untrained or otherwise unsuited to the task. Often these problems occur because the employer has limited resources that already are stretched thin, and does not assign a high enough priority to investigating the harassment complaint. A prompt and thorough investigation could limit, or even prevent, liability for sexual harassment under Title VII and many state laws as well. More importantly, a proper investigation could head off a lawsuit entirely and resolve an underlying problem.

2. Failure to Investigate Verbal Complaint as ‘Policy’ Requires Written One. Employers sometimes have harassment reporting procedures that contemplate submittal of a written complaint by the complaining employee. However, a verbal complaint sufficient to notify a supervisor of facts suggesting an incident of harassment is sufficient to trigger the employer’s duties to investigate and take effective action. Likewise, the complaining employee’s refusal to file the written complaint required by the harassment policy will not allow the employer to argue that the employee failed to avail herself of its sexual harassment prevention process – a defense to liability under Title VII.

3. Failure to Understand that Sexual Harassment Does Not Require Sexual Content. Although somewhat counterintuitive, a female who is subject to persistent harassment of a non-sexual nature because she is female can make a viable claim of sexual harassment – that is, harassment because of her sex. A female worker may be subject to harassment through slurs or other abusive conduct by a supervisor who does not treat males reporting to him in the same way, and if she complains about the harassment, it must be promptly and fully investigated as sexual harassment and remediated if found to have occurred.

4. Failure to Handle Confidentiality Issues Properly. It is not unusual for a complaining employee to seek an assurance of confidentiality, but an employer cannot promise complete confidentiality to a complainant and still fulfill its obligation to investigate fully and fairly. Further, even where absolute confidentiality was not promised to the complainant, employers often make the mistake of sharing too few details with the accused, thereby depriving him or her of a fair opportunity to respond, affecting both the fairness and the completeness of the investigation.

5. Failure to Protect the Complainant from Retaliation, Real or Perceived. Among the most perilous situations in which an employer can find itself occurs in the period after a current employee has complained of unlawful harassment or discrimination. Not only does this bring added tension to a workplace, but the situation also is fraught with the risk of real or perceived retaliation against the complainant. Yet often in these circumstances, without thinking of the big picture, a supervisor will discipline the complaining employee or take other action towards her that she perceives as harmful to her interests without first consulting with Human Resources. And, of course, the timing alone gives the employee a colorable claim of retaliation regardless of the true motives of the supervisor in question. Therefore, it is a serious mistake for HR to fail to alert supervisors of this risk during the investigation process so they will avoid taking any action the complainant might view as adverse, and also know to consult with HR before taking any such action. Both training and coordination are key to avoiding retaliation claims.

To avoid these costly mistakes, businesses are advised to thoroughly train their managers and employees and consult with counsel when incidents occur.

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

The materials posted on and 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.

7 Tips for Conducting Sexual Harassment Investigations in the Workplace

December 20, 2017

By M. Christine Carty

The drumbeat of press reports about sexual harassment in the workplace over the last few months has increased awareness among employees that workplace harassment is illegal and actionable, leading employers to brace for an anticipated increase in sexual harassment complaints.

Employers can limit their liability exposure and damages markedly if they have harassment prevention programs and complaint avenues in place. Conducting effective workplace investigations is a critical component of any reliable system for proactively handling these challenging issues.

1. Advance Training. Employers should ensure that HR staff who will be conducting harassment investigations have received recent and thorough training. The training should include instruction on how to conduct an interview, what documents to create, how to record the results of the interviews, and what expressions to avoid (e.g. use of the word “harassing” or “harassment” as this is a legal conclusion).

2. An Established Process and Prompt Response. Employers should respond to a complaint of sexual harassment within 24 hours, if at all possible, by informing the complainant what process will be followed, including the overall investigation steps, who will lead the process and what is expected of the complainant. Failure to respond quickly can be cited as an example of the employer’s lack of concern about sexual harassment generally and the complaining employee in particular, and a corresponding interest in protecting the alleged harasser. In order to respond promptly and comprehensively, the steps of a standard action plan should be established and written in advance. This includes who will be informed when a sexual harassment complaint is received (head of HR, legal, senior management, etc.). If HR staff will be conducting an investigation, decide in advance if the report will be prepared for and delivered to in-house or outside counsel under the attorney client privilege, or to management.

3. Who Will Conduct the Investigation? Employers should determine in advance, if possible, what types of complaints will be investigated by outside counsel or an independent investigatory firm. In general, complaints about senior managers and executives and/or egregious harassment allegations should not be handled by the HR department to insure impartiality and foster confidence in the fairness of the report/result. The employer may wish to consider retaining counsel who is not the usual outside counsel for employment matters, if the company is considering using the report as part of its defense. This will allow the attorneys who conducted the investigation to testify as to their process and conclusions without creating an ethical issue for the regular outside counsel who will be defending a discrimination charge or suit.

4. A Comprehensive Process. An employer should expect and provide the resources for the investigator to conduct a thorough investigation. Although a prompt response to a complaint is important, quickness should not equate to a rushed and incomplete investigation. The latter can result in criticism that the result was pre-ordained or botched – for either the complainant or the accused. This negative outcome can enhance an employer’s liability exposure, rather than mitigate it, and will erode confidence in the process. Interviewing the complainant is often the best first step as it should identify any corroborating witnesses and documents, and has the side benefit of demonstrating prompt action by the employer to the complainant. The complainant should be informed of the anticipated timing of the process, but not the details of the process, and every witness should be assured that there will be no retaliation by the employer for complaining or providing information, as the case may be.

5. Confidentiality Issues. The complainant cannot be guaranteed confidentiality as to her or his identity or the details of the alleged harassment. At most, the employer can provide assurances that some details may be treated confidentially and not shared, except on a need-to-know basis. Being clear about this point from the outset with the complainant is an important reason to interview the complainant first. Witnesses who are employees can be instructed to keep their statements to the investigator confidential and not to discuss them with others.

6. Written Report. An employer should require a written report, in all cases. The extent of the report will vary with the circumstances. A report, particularly one delivered to counsel, may simply summarize the results of the investigation and relevant documents, including the interviews, and stop short of expressing a view about whether “harassment” occurred. A report prepared by counsel may do both and may or may not make recommendations.

7. Confront the Proof. If there is any lesson to be learned from current events, it is that strong, appropriate action is required in response to corroborated harassment. Numerous news reports describe serial harassers whose conduct was known to senior management or boards of directors, some of whom were aware of or approved settlement agreements with the accusers. Some of those companies are now facing shareholder derivative actions and regulatory investigations. In all cases, the reputations of the organizations are at risk. If the company takes no action, issues a “letter to the file”, or the response appears weak compared to the extent of the harassment, at a minimum it will have a demoralizing effect on the female employees and, in the current media environment, may prompt a claim. If there is a subsequent credible harassment complaint, the employer’s liability and damage exposure in the second case will increase along with the reputational damage.

In summary, investigating sexual harassment complaints is not something that businesses should improvise. Organizational leaders should take steps now to review and strengthen their internal processes and training, so they can effectively respond to complaints, especially in light of recent public visibility and increased awareness of these issues.

For more information regarding this or other labor and employment issues, please contact M. Christine Carty of Schnader’s Labor and Employment Practices Group.   

The materials posted on and 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.

When should a business consider terminating an employee accused of sexual harassment?

December 20, 2017

By Jo Bennett

Repeated reports of sexual misconduct by high-profile men have put sexual harassment issues in the public eye. New allegations seem to be surfacing daily. Some of the accused have admitted to their conduct, some have admitted to some but not all of the conduct, and some have denied they did anything wrong. Companies that employ these men, however, have had a fairly consistent response – they have fired the accused harassers.

Under the federal law of workplace sexual harassment, an employer is obligated to take steps to prevent harassment in the first instance and to take action if an employee makes an internal complaint that she has been the target of harassment by a male employee. Federal courts have held that an employer taking these steps may avoid legal liability altogether if it is sued for sexual harassment – even if it does not terminate the harasser.

A court’s analysis of a sexual harassment claim typically does not focus on whether the employer terminated the alleged harasser. The legal analysis focuses on the position of the alleged harasser and whether the complaining employee suffered an “adverse employment action” by a harassing supervisor. Such adverse actions against the employee include termination, demotion, reassignment, or a decrease in pay.

Sexual harassment cases fall into three categories. First, where a harassing supervisor actually imposes an adverse action on the employee he targeted for harassment, an employer is automatically liable for sexual harassment under Title VII of the Civil Rights Act of 1964, the federal statute that prohibits sex discrimination in the workplace. Second, if the supervisor has not imposed a tangible action, an employer may escape legal liability altogether for sexual harassment if the employer has made efforts to prevent and correct harassment and the complaining employee has not taken advantage of the employer’s policy to prevent such harassment. Third, if the harasser is a co-worker, the employer similarly must take prompt and corrective action to stop the harassment. Under the court rulings, an employer’s action does not necessarily require that it fire the harasser to avoid liability.

But as the current stream of high-profile cases suggest – and as women have spoken out on social media about the behavior of men in Hollywood, the media and politics – companies are now ridding themselves of employees whose behavior has created both financial and reputational harm to the business. Many observers expect an increase of cases against men in more traditional industries.

Will companies – must companies – terminate the accused harasser? While, generally speaking, it is not illegal to terminate someone accused of harassment, termination is not required under the law. Companies may be tempted to impose a policy of zero tolerance for sexual harassment, firing anyone accused of any misconduct. Business leaders should consider whether termination in all cases could ultimately create unintended consequences within their workplace, possibly making female employees hesitant to complain, and thus limiting reports of inappropriate behavior. Different penalties and punishments may be needed as part of a comprehensive plan for responding to incidents of harassment.

The goal for all businesses should be to eliminate harassment. Establishing policies and practices to communicate the importance of this concern throughout the company should be a priority, including regular training at all levels about the impact of misconduct and the processes used for handling complaints. When a complaint occurs, a crucial first step involves quickly and effectively responding to the employee subject to harassment, investigating the complaint, and assessing the evidence. If the complaint is credible and the behavior alleged is egregious, termination is appropriate. But in instances where the alleged behavior is less than egregious, termination may not always be necessary or the most suitable penalty. Employers should consider the particular circumstances of each case and the overall long-term objective for preventing and ending sexual harassment in the business.

This is a very challenging issue for employers. Sexual harassment should never be ignored or shrugged off in the workplace. On the other hand, termination of every employee accused of any harassment is not required by the law and may not always be the best approach. Businesses should establish thorough and rigorous systems for preventing sexual harassment and responding to complaints, which is legally mandated. By openly and proactively managing these issues, employers can ensure a safe and professional workplace for everyone.

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 and 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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