Racial Harassment Plaintiff Asked Supreme Court To Clarify Supervisor Liability Under Title VII
In June of 1998, the U.S. Supreme Court handed down two cases involving claims of sexual harassment under Title VII of the Civil Rights Act of 1964 which defined the circumstances under which an employer was liable for harassment committed by a supervisor. In Faragher v. City of Boca Raton, 524 U.S. 775 (1998) and Burlington Indus., Inc. v. Ellerth, 524 U.S. 742 (1998), the Supreme Court ruled that employers are strictly liable for harassment inflicted by supervisors, but they can assert an affirmative defense when the harassment does not result in a tangible employment action. However, if the harasser is not a supervisor, the employer is only liable if it was negligent in either discovering or remedying the harassment. In a recent case involving racial harassment under Title VII, a plaintiff has petitioned the Supreme Court to accept her case to determine the proper definition of supervisor. If the Supreme Court accepts the case and renders a determination, the case could have far reaching impacts on employers.
Specifically, in the case of Maetta Vance v. Ball State University, et al., a dining services employee and the only African American in her department at Ball State University (“Ball State”) alleged that employees in her department created a hostile work environment by making racially offensive comments to her, including using racial epithets and making veiled threats of physical harm. She eventually filed suit in Federal District Court. The District Court dismissed the case in favor of the defendants and Ms. Vance appealed to the Seventh Circuit Court of Appeals, alleging that three supervisors, Kimes, Adkins, and Davis harassed her on account of her race. The court found that Kimes and Adkins did not engage in the type of conduct required to support a hostile work environment claim. On the subject of Davis, the court ruled that although Davis held the title of supervisor, he did not have supervisory authority over Ms. Vance because he did not have the power to directly affect the terms and conditions of her employment, including the right to hire, fire, demote, promote, transfer, or discipline her. Consequently, the Seventh Circuit evaluated Ball State’s liability to Ms. Vance under the co-worker theory of liability and found that there was no basis for liability because Ball State took prompt and remedial action in response to Ms. Vance’s complaints of racial harassment.
Ms. Vance has filed a petition asking the Supreme Court to take her case in order to determine whether the definition of supervisor applied by the lower courts in her case was proper. Ms. Vance maintains that the Seventh Circuit’s narrow definition of supervisor conflicts with other circuit courts of appeal which have found that the authority to direct an employee’s daily activities is sufficient to confer supervisory status under Title VII. Ms. Vance wants the Supreme Court to establish a uniform definition of supervisor for purposes of employer liability. The Supreme Court has asked the U.S. Solicitor General to weigh in on the petition.
If the Supreme Court accepts the case and adopts the broader definition of supervisor adopted by some circuit courts, it could result in heightened liability for employers. Employees who merely direct the daily activities of employees, without any meaningful input to direct the terms and conditions of employment, would be deemed supervisory agents of the employer, subjecting the employer to a heightened standard of liability in harassment cases under Title VII.
Letters of Intent: Start Your Potential Merger Off on the Right Foot
It is advisable to start a potential merger and acquisition through the execution of a letter of intent (LOI). With limited exceptions (such as transactions involving public companies), it is usually advisable to confirm that the parties actually have a “meeting of the minds” by setting forth the most material terms in an LOI early on in the transaction
process.
The argument against negotiating an LOI is that the parties may be expending time on a preliminary document when the time could otherwise be used to negotiate definitive transaction documents. However, most parties are unwilling to expend the time, effort and expense to investigate a proposed transaction without an LOI. An LOI is usually a useful guide for the negotiation of definitive transaction documents and the negotiation of an LOI can help identify points on which the parties thought they were in agreement but, in fact, were not; in some cases, the parties even realize that they are so far apart on certain issues that they, in fact, “have no deal”. One final caveat is that parties can gain a bargaining advantage, or can make unwitting concessions, on key issues in an LOI which may, in effect, block negotiation of these issues later on in the process. Thus, it is always a best practice to involve a party’s advisors early on in the process and certainly before execution of an LOI.
The level of detail to be included in an LOI is always a question, i.e. the parties want to include enough detail so as to address the most important deal points without getting into so much detail such that the parties instead should have moved immediately to attempting to negotiate definitive agreements.
The topics that are often included in an LOI are as follows:
• Transaction Structure
- Sale of stock (includes a merger)
- Sale of assets
> What assets are to be sold?
> What liabilities are to be assumed?
• Purchase Price
- Adjustment mechanism against a target measure, e.g. working capital?
- Timing of payment
- Form of payment
- Escrow?
- Earnout/contingent payment?
• Key conditions precedent
- Financing?
- Required consents
• Non-competition, employment and consulting agreements
• Deal-specific terms
- Indemnification limitations
- “Social issues” such as post-closing treatment of Seller’s employees
- Break-up fee
- Timing
- Confidentiality and public announcements
- Non-solicitation of other proposals (a “no-shop”)
- Non-binding nature
• Exceptions for expenses, confidentiality and public announcements and no shop.
Dispute Resolutions: Know Your Options
It is a fact of life that disputes will occur in any business relationship. The disputes can range from small to large. While disputes are a part of doing business, a party can control how disputes are resolved through contractual agreements. Issues such as who decides, where does a dispute get heard and how quickly does it get resolved can be addressed in a contract.
Traditionally, parties involved in a contract dispute have the ability to sue each other in court. The trend today is away from the court system toward different alternative dispute resolution techniques. Confusion arises due to the multiplicity of options available through the alternative dispute resolution arena.
Before discussing the alternatives, it is worth taking a moment to examine our traditional civil litigation system. An advantage of the litigation system is that it operates strictly according to law – Judges are lawyers who learn to analyze problems through legal precedent and statute.
There are also various appeal options available to the parties which will enable them to have any incorrect legal rulings overturned. As such, if a party will rely on strong legal arguments to win it’s case, the court system is often a good option.
Court systems also tend to be more black and white – there are winners and losers. A jury or a judge, whichever is utilized, will often take less of a “split the baby” compromise approach to a verdict. This is both an advantage and a disadvantage, of course, depending on which side of the dispute or the verdict one occupies.
What is certain is that the discovery process in our civil litigation system can be quite time consuming and expensive. Often, discovery costs far exceed that of the trial and other aspects of the case. This does prompt an eventual wearing down of the parties and a settlement of the dispute through negotiation, not trial and verdict.
Arbitration, on the other hand, offers some advantages of speed and informality. Generally, the discovery process is less protracted, although filing fees with certain arbitration organizations coupled with a tendency to proceed with some form of discovery process similar to the court system have tended to drive up the cost of arbitration. If an arbitration provision is desirable, and the parties truly wish to save costs as the primary goal, provisions regarding the limitation of discovery and the like should be written into the contractual ADR provision.
This ability to modify and customize the dispute resolution mechanism is a hallmark of ADR. Specifically, the parties can determine who hears the dispute (e.g., a particular industry specialist such as a panel of engineers). There is typically no appeal, which gives an advantage of finality (small consolation to a losing party however).
The parties are really limited only by their desires and imagination, although agreements that clearly overreach against one party or the other, or if one party has much greater bargaining power than the other, may not be enforced. The overwhelming tendency however is to enforce the alternative dispute resolution provisions agreed to by the parties.
ADR is not always perfect. If the parties wish to limit the provisions of the ADR process in order to save costs, they should be prepared to reap the consequences of proceeding to a hearing without a full understanding of each party’s evidence. This can at times result in somewhat arbitrary results. Further, in contrast to the court system, arbitrations often can result in compromise decisions as a result of an arbitrator’s attempt to be “fair,” often born of their desire to operate in good faith to both parties.
Finally, a contractually mandated mediation/settlement conference can also be employed. A settlement conference is just that – the parties sit down with an unbiased mediator, skilled in facilitating compromise, in an effort to resolve the dispute without further litigation. This is often a good idea, although the timing may not be effective. For example, if it is mandated that the parties immediately have a mediation prior to any form of litigation, the mediation may in fact be premature. The parties are in a dispute – they obviously have not been able to come to terms based upon the information available to them at that time. It may require some period of litigation before the parties are able to materially change their position or modify it in order to arrive at a compromise. As such, parties should think carefully about requiring a mediation too early in the process, before the parties are prepared to compromise.
In short, ADR and trial through the judicial court system present two parallel, and at times contrasting, forums in which parties can resolve their disputes. The dispute resolution mechanism of the parties can be prestructured so that it meets the party’s needs – a business can take control over the way in which disputes are resolved. There are a number of issues to consider when making decisions on the dispute resolution process. This article is far from exhaustive as to all the issues, but rather begins to provide a very basic outline of some of the factors. In later articles, we will flesh out a variety of scenarios in order to improve the understanding of this important issue, to assist you in making the right choice for your business.
EEOC Warns Against Use of Criminal Records to Deny Employment
In a settlement likely to have long-lasting implications for employers nationwide, Pepsi Beverages Company has agreed to pay $3.13 million to resolve charges stemming from its policy against hiring applicants who had been arrested and/or convicted of certain minor offenses. The Equal Employment Opportunity Commission (“EEOC”) determined that Pepsi’s policy adversely affected over 300 black applicants, in violation of Title VII of the Civil Rights Act. Pepsi will also provide job offers and training to many of these applicants. The Pepsi investigation is part of a nationwide EEOC crackdown on hiring policies that can hurt black and Hispanic applicants. The “use of arrest and conviction records to deny employment can be illegal,” according to the EEOC, “when it is not relevant for the job,” because it can limit opportunities for minorities with higher arrest and conviction rates. The agency has indicated that it “hope[s] that employers with unnecessarily broad criminal background check policies take note of this agreement and reassess their policies to ensure compliance with Title VII.”
Pennsylvania employers are already prohibited from having blanket policies regarding criminal background checks. Under Pennsylvania law, Title 18 section 9125, an applicant’s convictions may be considered only to the extent to which they relate to the available position, and employers must notify applicants if their criminal background played a role in the decision not to hire them.
The Pennsylvania Human Relations Commission has opined that employers “must be able to show that inquiry into conviction is substantially related to an applicant’s suitability to perform major job duties” and that the criminal background check is, thus, required by “business necessity.” The EEOC’s statements surrounding the Pepsi settlement potentially takes this constraint nationwide.
Given these developments, employers should ensure that hiring practices conform to some “relevance” standard for criminal background disqualifications. The EEOC has stated, for example, that a recent theft conviction may be relevant to a bank teller position, while a years-old drunk driving conviction is likely not relevant to a clerical position. Employers should take steps to ensure that those in charge of hiring have access only to aspects of an applicant’s criminal background deemed relevant to a given position or that criminal background checks are not performed until late in the hiring process after a conditional offer is made. An individualized analysis should then be undertaken to ensure that the age and circumstances of the conviction, the available position, and any interim conduct suggesting rehabilitation of the applicant are
adequately taken into account.
NLRB Limits Scope of Non-Union Arbitration Agreements
Many employers require their employees, as a condition of employment, to sign agreements stating that any dispute arising from their employment will be settled through arbitration, without resorting to the courts. In D. R. Horton, Inc. and Michael Cuda, the employer required employees to agree that all employment disputes would be determined “exclusively by final and binding arbitration.” Further, the agreement specified that employees could not consolidate their claims with those of other employees, that they could not proceed as a class or collective action with other employees and they waived “the right to file a lawsuit.”
Employee Michael Cuda retained a lawyer to file a nationwide class action on the ground that Horton was misclassifying employees as exempt from the Fair Labor Standards Act (“FLSA”) and failing to provide overtime. When the employer sought to invoke the arbitration agreement, Cuda filed an unfair labor practice charge with the National Labor Relations Board (“NLRB”) arguing that the arbitration agreement was invalid under the National Labor Relations Act (“NLRA”).
On January 3, 2012 the NLRB agreed, holding as follows:
- The law protects the right of employees to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection;
- This aspect of the law protects the right of employees to improve the terms and conditions of employment through channels outside the immediate employee/employer relationship;
- The right to engage in concerted activities includes the right to join together to pursue workplace grievances, including through litigation.
Accordingly, because the arbitration agreement in question required employees to refrain from bringing collective or class claims in court, that agreement illegally prevented employees from engaging in the type of collective action protected by the law. The Board held, “We find that the [arbitration agreement] expressly restricts protective activity.”
The employer argued that a decision by the NLRB to prohibit this type of arbitration agreement violated the Federal Arbitration Act (“FAA”), which provides for a liberal federal policy favoring arbitration agreements. However, the NLRB held that an arbitration agreement, even if favored under the FAA and Supreme Court decisions, could not require employees to give up substantive rights afforded them in another statute, and that the right to seek redress in the courts is a “core substantive right protected by the National Labor Relations Act.”
The holding in this case protects only the right of employees to raise “class and collective claims” in the courts. The NLRB expressly held that employers remain free to require arbitration agreements with employees, and to insist that such arbitration be conducted on an individual basis only, without recognizing a joint or collective claim. Further, this ruling applies only to statutory employees, not to supervisors and managers who are without the protections of the NLRA. Finally, the decision recognizes that employers may continue to require employees to waive the right to seek “redress” for their individual claims against the employer, and require those claims be asserted only through arbitration.
Employers who currently have arbitration agreements with their employees should now have them examined to ensure that they do not prohibit employees from bringing or joining collective or class actions in court when they have employment related disputes. Those agreements should also be reviewed if they allow class or collective action claims, but only in arbitration, or if they involve an agreement entered into by employees which was not a condition of employment (i.e., a purely voluntary agreement).
Because of the argument that the application of the NLRA in this case conflicts with the FAA, there is a likelihood that the courts will address this issue in the future, and employers who wish to maintain arbitration agreements will need to follow the continuing course of this case.
