Monday, July 6, 2015

The Continuing Goofiness of Illinois Non-Compete Law

This is a terrific opinion by an Illinois immediate appellate court that is well worth reading to get an understanding of the Grand Canyon-like fracture in Illinois noncompete agreements, and how courts are dealing with it.

The opinion lays out the application of what has recently been Illinois state courts' approach to the problem of adequate consideration for noncompete agreements, namely that an employee must be employed for at least two years after the effective date of the noncompete in order for there to be a valid contract.  The dissent, brilliantly in my opinion, reviews the entire history of this odd, bright line requirement, and notes the fact that federal courts in Illinois, with one notable exception, have consistently refused to enforce this two-year requirement.

Thus, the fracture. If you are an employee seeking to avoid the consequences of signing a noncompete agreement, and you haven't been employed for two years from the date of the agreement (and you didn't receive some other form of equivalent compensation to two years of employment), then you need to make a beeline for state court to file a claim for declaratory relief.  This type of claim allows the court to determine whether your noncompete is valid, and it's important that you, the employee, file before your employer figures out what's going on and files a breach of contract claim in federal court (assuming federal jurisdiction is available).  Illinois state courts will almost certainly enforce the two-year bright line test; if your employer can get to federal court first, then it will likely find a judge who will refuse to enforce the standard.

This is obviously intolerable.  But here in Illinois we specialize in working with the intolerable. There is a chance this divide will get fixed when the Seventh Circuit issues an opinion on a non-compete case later this year.  But there's also a chance the appeals court will kick the issue over to the Illinois Supreme Court for an advisory opinion, further delaying resolution.

In the meantime, non-compete clauses require some careful thought about enforcement.  I would tell employers to incorporate some type of declining bonus payout that erodes as the employee remains on the active rolls as consideration for any noncompete clause; if the employee leaves early, she gets a larger payout to support the non-compete agreement.  I think this will pass muster, based on this opinion, and others like it.

Sunday, July 5, 2015

No Need to Get Exhausted? 2d Circuit Opens a Door to No Charge EEO Litigation

Here's an interesting case from the federal Court of Appeals in New York concerning the requirements for exhaustion of administrative process before a lawsuit can proceed under Title VII. Plaintiff, an iron worker, alleged sex discrimination against his union based on his transgender status, along with several other federal complaints. His original charge was filed in 2007.  That claim was ultimately dismissed when plaintiff failed to file his lawsuit in less than than 90 days after the EEOC gave him a right to sue letter.

Plaintiff then filed a second lawsuit in 2011, alleging similar discriminatory claims. The district court kicked this lawsuit because plaintiff fail to file an administrative charge with the EEOC for any conduct occurring after the date of the 2007 charge.

This dismissal should not be a surprise to anyone - Title VII requires a plaintiff to file an administrative charge of discrimination with the EEOC, and requires that the EEOC process be completed, before a lawsuit can move forward. In litigation parlance, this is known as "exhausting administrative remedies", and a failure to do so is generally fatal to any Title VII lawsuit.

There are certain limited exceptions to this rule - a plaintiff can allege that he was somehow prevented from filing his charge of discrimination because of actions by his employer or incompetence by the EEOC that interfered with his ability to file.  Under these very limited circumstances, a plaintiff may have an equitable basis to proceed without first exhausting the administrative process.

And that's where it gets really interesting here. The Court of Appeals reversed the district court's dismissal of the gender discrimination claim, determining that it was possible that an equitable defense might exist. The equitable defense in question is a change in the law, specifically, the Court noted that after 2012, the EEOC determined that transgender discrimination was actually a form of gender discrimination and could be pursued under the statute.

I might note that when Title VII was originally passed, the prospect of gender orientation discrimination was never considered or intended by the drafters, and to this day the statute does not contain language making gender orientation a protected class. Transgender and homosexuality cases have been pursued by the EEOC on a "gender stereotyping" theory, which normally arises in a very limited set of circumstances. Plaintiff was careful to allege several of those circumstances in his later federal complaint.

So the case goes back to the district court to determine whether the plaintiff is excused from even filing a charge of discrimination on a set of facts going back 10 years because now the Commission believes that it can take these claims and process them.

This is a little disturbing, since theoretically the analysis opens the door to not only hundreds of gender orientation cases, but every other type of claim in which the executive agency's interpretation of the statue has evolved. Perhaps the appellate court did not mean that everyone with a gender orientation discrimination claim that got tossed prior to 2012 can now come back into court, but there is no limiting language in the opinion. This is another one of those situations in which I hope I'm reading too much into the Court's analysis.

Fascinating Insight Into the Hiring Process

This is a really interesting article about how hiring decisions frequently get made with respect to middle and upper level entry positions in professional organizations, such as law firms and banks.

When employment discrimination law was in its infancy, everyone recognized that a significant barrier to hiring minority candidates was the so-called "Old Boys Club" mentality in recruiting and hiring staff that essentially sought to hire people who looked like the interviewers. Apparently, notwithstanding the best efforts of the EEOC, internal training, videos, coaches, and lawsuits to eliminate this mindset, the trend is very much alive. The article documents studies showing how crucial it is to go to the right school and develop the right social mores because job interviewers who are the gatekeepers for these positions filter people immediately based on these type of factors.

If the article's conclusions are correct, then the so-called diversity efforts throughout the country are totally worthless because they focus on the wrong issue. I don't have an easy solution, but I think I have a better understanding of the problem after looking at this article and its underlying data.

Genetic Information Is Where You Find It--The Expansive GINA

Here's an interesting case out of the Eleventh Circuit that deals with the little-known Genetic Information Nondiscrimination Act, better known as "GINA". I say "little-known" not because the statue is obscure - in fact it's received plenty of publicity- but because employers as a whole seem manifestly unaware of the significant implications of the law. The case provides a useful standard for employers, and a cautionary tale about how even relatively straightforward employer enquiries can trigger statutory liability.

Plus the facts of the case are pretty entertaining. The employer shipped and stored food products for grocery stores in the area. Someone or someones unknown with a terrible sense of humor, or a bad sense of bathroom etiquette, began defecating in the company's warehouse. This is not exactly a practice that you want to encourage, particularly when you are shipping foodstuffs. The company launched an immediate investigation

Part of that investigation involved taking DNA swabs from employees in the affected warehouse and comparing them to, well, samples. The two plaintiffs were subject to this procedure, and were found not to be the culprits. However, they filed charges with the EEOC alleging that the employer violated GINA because it required them to provide genetic information and then illegally disclosed that genetic information to others.

The case eventually reached federal court, where both sides moved for summary judgment. The plaintiffs argued that the employer's use of DNA testing in the investigation was a plain violation of the language of GINA, which makes it an unlawful employment practice for "an employer to request, require, or purchase genetic information with respect to an employee." The employer argued that the term "genetic information" in the statute referred only to information relating to someone's propensity for disease or illness.  This, of course, was precisely what GINA was aimed at, but the court, apparently using proper methods of statutory construction, and not the Supreme Court's method in the King v. Burwell decision, went with the plain language of the statute. The court found that the request for genetic information from the employees was a GINA violation and entered judgement for the employees.

It's worth looking at the opinion for a nice view of how statutes are supposed to be reviewed by courts, but also as a general warning to employers that any type of genetic inquiry, forensic or otherwise, is suspect under this law. Moreover, off-hand comments about family traits are prohibited, as well. See my earlier blog post about how the NFL apparently violates this rule.

Most companies remain blissfully unaware of the requirements of the statute. This opinion is a nice wake up call for all of us.

Thursday, June 25, 2015

It's Always A Mistake to Rush an FMLA Decision

Except in the most exigent situations, I always tell clients not to make precipitous employment decisions. This is especially true in circumstances where the decision is irrevocable, such as a termination. And it's really, especially, true when dealing with an FMLA situation. The statute itself and the associated regulatory framework are simply too complex for most employers to make a snap judgment regarding someone's entitlement to FMLA leave, or, even worse, a termination decision based on a denial of FMLA benefits.

So if I had been on the phone with the employer in this case, I would've told it to hold up before terminating the employee in question, who, as it turned out, was suffering from an undiagnosed case of diabetes.  The employee needed time off from work for a diagnosis, and applied for FMLA leave. Unfortunately, the paperwork that she turned in was not properly filled out. The company apparently sent the employee a denial letter, but when she did not respond, the company terminated her for missing too much work.

Bad move. FMLA regulations specifically require a seven-day waiting period between notification of an insufficient FMLA certification form and any type of employment decision, including denial of FMLA leave.  In this case, the court found that the employer jumped the gun-it should have provided formal notice to the employee of its denial, and then ensured that she had a seven day grace period in which to respond.

The implications here are not particularly surprising-an employer must make certain that it crosses its Ts and dots its Is when moving on a denial of FMLA leave decision. The opinion is a thorough and well-reasoned assessment of why FMLA cases must be treated with particular care.

Friday, June 19, 2015

Specious Lawsuit Costs Big Bucks

But this time, at least the losing plaintiff has to pay a sizable chunk of the defense costs.
Ellen Pao lost a very high profile, "try the case in the media" sexual harassment lawsuit last year. She has now been ordered to pay more than  $250,000 in attorneys fees to the defense team.
I've often argued that the only effective way to cut down on people filing cases that have no basis in fact or law is to shift more of the the risk of losing to the plaintiff's side. This decision does exactly that, and I hope we see more of these kinds of awards when there are defense verdicts.

Wednesday, June 17, 2015

Supreme Court Muddies Up the Religious Waters

Every now and then the U.S. Supreme Court issues an opinion that is absolutely idiotic. It doesn't happen often; even when I disagree with the Court's holdings, I usually understand the reasoning and the ramifications of the case. This is especially true in employment law decisions. But the Court's latest pronouncement on Title VII religious accommodation in EEOC v. Abercrombie & Fitch Stores, Inc. makes me want to pick the phone up, call Justice Scalia's chambers, and ask him if he had been testing out D.C.'s new recreational marijuana law before he sat down to write the opinion.

The facts are a little confusing, but probably reflect a situation that is more common than we'd like to think. A young woman who was a practicing Muslim came to interview for a sales job at Abercrombie wearing a headscarf, something that was part of her religious practice. The store assistant manager rated the young woman as qualified but was concerned that the scarf would be inconsistent with Abercrombie's "Look Policy", which focused on the appearance of its sales staff as a way of reinforcing the company brand. The assistant manager talked to the store manager and informed him that she believed (but was not certain because she did not ask) that the headscarf was related to the young woman's faith. The store manager responded that the scarf was inconsistent with the Look Policy, as was all other headgear, religious or otherwise, and vetoed the hiring.

The EEOC took the case up, won liability on summary judgment (highly unusual), and then at a trial on damages won $20,000. On appeal the Tenth Circuit  reversed the district court, concluding that an employer cannot be liable under Title VII for failing to accommodate a religious practice, unless the applicant/employee tells the employer that an accommodation is needed.

The Supreme Court, with Justice Scalia writing for seven other justices, reversed the Tenth Circuit, noting that Title VII contains no requirement for employer knowledge of a religious accommodation before liability attaches.  Drawing a hard and fast line between Title VII's intentional prohibition against certain employer motives, versus the employer's knowledge of religious entanglement, Justice Scalia held that an employer cannot make an applicant's religious practice, known to the employer or otherwise, a factor in employment decisions. He then went on to say that Title VII does not demand neutrality with regard to religious practices, but rather that Title VII gives religious practices favored treatment, requiring employers to avoid infringing on religious practices whether they are known to be so or not.

I thought this was a crazy thing to say when I first read the opinion, and subsequent rereading of it has not changed my mind. In at least a hat tip to common sense, Justice Alito writes a very nice concurrence that requires the employer to have a suspicion that the practice motivating its decision is religious in nature before liability will attach.

Here's the problem with the Court's opinion-while mainstream religions such as Judaism (a yarmulke), Christianity (a crucifix), and Islam (a hijab, headscarf, or beard) manifest themselves in certain well-known ways, the EEOC takes the position that all kinds of strongly held beliefs are religions, even ones that do not outwardly proclaim themselves with recognized symbols or displays. It is quite possible to imagine a scenario where someone who is a Druid and works for a building contractor, is given an order to bulldoze trees from a construction site. Because he is an animist, the employee refuses. His refusal is not outwardly religious, and unless he has the presence of mind to volunteer his religious objection, it will not be obvious to the foreman, who is likely to simply fire the employee for refusing to carry out his instructions. Under these circumstances, an act of religious discrimination has occurred, according to Justice Scalia and his seven brothers and sisters.

Or even worse-someone who is a vegan attends his company's barbecue on the Fourth of July. The boss is cooking up hamburgers, and as the employee comes through the food line, the boss proceeds to scoop a burger, dripping with grease and animal protein, onto this person's plate. The employee takes the plate and promptly throws it into the trash because it's contaminated; the boss takes this action personally and terminates the employee the next day. Under the Scalia test, this is also religious discrimination.

Anyone who practices in this area could see this problem coming a mile away. I'm guessing none of the Justices' clerks practice in this area.  I'm hoping that this is one of those decisions that gets modified quickly by the Court.  Otherwise, the implications are highly problematic for almost any employer.