By Paul Galligan and Meredith-Anne Berger

Seyfarth Synopsis: The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well.

Last week, in Karlo v. Pittsburgh Glass Works, No. 15-3435, the Third Circuit extended protections under the Age Discrimination in Employment Act (ADEA) to include discrimination based on age, regardless of whether the employees alleged to have been favored were also over forty.

The court’s precedential opinion held that a “subgroup” of employees over fifty had a cognizable claim under ADEA because the statute prohibits disparate impact based on age, and not whether the plaintiffs and comparators were just over forty. The court looked to the language in the statute, which “makes it unlawful for an employer to adversely affect an employee’s status . . . because of such individual’s age.”

The court examined the Supreme Court’s opinion in O’Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996), which held that the ADEA proscribes age discrimination, not forty-and-over discrimination.  Applying this interpretation to ADEA’s disparate impact provision, court held that it is “utterly irrelevant that the beneficiary of age discrimination was also over the age of forty.”  The court further held “the appropriate disparate impact statistics should be guided by the trait protected by the statute, not the population of employees inside or outside the statute’s general scope.”

The court noted that statistical evidence is not at risk of manipulation when used in the context of subgroups. So long as evidence is reliable under Daubert and can survive summary judgment if it indicates a “significant disparity,” as in any other disparate impact case, claims under ADEA will be upheld in accordance with the statute.  Furthermore, employers have a defense in that the employment decision was due to a “reasonable factor other than age.”

In so holding, the court created a circuit split, as its holding was contrary to decisions in the Second (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989)), Sixth (Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991)), and Eighth (EEOC v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999)) Circuits.  In Karlo, the court held that these decisions were based on policy considerations, rather than the plain meaning of the statute.

Despite its precedential holding, the court affirmed the district court’s decision to decertify the collective action because the plaintiffs failed to show they were sufficiently “similarly situated” to be appropriate for class treatment.

The Third Circuit has shaken up long-standing precedent and created a split among the circuits, such that now employers should not only evaluate its employment decisions for the effect on individuals over forty and under forty, but within subgroups of those over forty as well. Now, in the Third Circuit, simply showing that employees over forty were not subject to the allegedly adverse action may not be sufficient to defeat a disparate impact claim.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Workplace Counseling & Solutions Team or Workplace Policies and Handbooks Team.

 

 

 

By Paul Galligan and Samuel Sverdlov

iStock_000042612884_MediumSeyfarth Synopsis: The District Court of the Southern District of New York granted an employer’s motion for summary judgment on an employee’s failure to accommodate claims, holding that the plaintiff did not hold a bona fide religious belief, and failed to provide notice to the employer regarding his need for religious accommodation.

Requests for religious accommodations are challenging for employers because employers have limited means to determine the veracity of an employee’s religious obligations, yet risk liability for discrimination and retaliation under federal, state, and local laws if they outright refuse to accommodate an employee’s request for religious accommodation. In fact, more often than not, employers take an employee’s purported religious obligations at face value rather than asking the employee to justify their obligations.  In Bob v. Madison Security Group, Inc., the District Court for the Southern District of New York granted an employer’s motion for summary judgment on a pro se Plaintiff’s claims of failure to accommodate, retaliation, and unlawful termination under Title VII of the Civil Rights Act of 1964 (Title VII), New York State Human Rights Law (NYSHRL), and the New York City Human Rights Law (NYCHRL).

In Bob, the plaintiff was a Muslim security guard employed by Madison Security Group (Madison).  The plaintiff alleged that Madison refused to accommodate his religious beliefs – that he could not work on Fridays to observe the Sabbath.  The plaintiff alleged that despite his religious needs, the employer continued to schedule the plaintiff for Friday shifts.  When the plaintiff failed to report to any shifts that included hours on a Friday, his schedule was reduced and ultimately eliminated (though the employer contended that they have never formally terminated the plaintiff’s employment).

Madison denied any wrongful conduct, and moved for summary judgment on all of the plaintiff’s claims. With regard to the plaintiff’s failure to accommodate claim, Madison challenged whether the plaintiff actually held a bona fide religious belief preventing him from working on Fridays, and averred that in any case, they did not have notice of the plaintiff’s need for religious accommodation.

The court granted the employer’s motion. The court was convinced that the plaintiff did not hold a bona fide religious belief, given that Madison produced records from the plaintiff’s prior employer showing that the plaintiff regularly worked 8-hour days on Fridays, and the plaintiff himself testified during deposition that he could work on Fridays, but prefers not to.

The court was also persuaded that the plaintiff never put Madison on notice that he required a religious accommodation. The plaintiff alleged that he told his interviewer that he could not work on Fridays when he applied for the job, but Madison put forth evidence that they never employed the interviewer identified by the plaintiff.  Further, although the plaintiff often wrote to Madison to complain about working conditions, he never complained about being scheduled to work on Fridays.

Outlook

Although the employer prevailed in this case, employers generally should be cautious and risk- averse when dealing with employee requests for religious accommodation. Employers must remember that they have an obligation to reasonably accommodate religious requests absent an undue hardship, which can be difficult to establish.  Accordingly, we advise that employers engage in, and carefully document, the interactive process with employees requesting such an accommodation.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of the Firm’s Absence Management and Accommodations Team.

By Andrew S. Boutros, William L. Prickett, Christopher Robertson, and Craig B. Simonsen

Seyfarth Synopsis: What, if any, steps the government will take to appeal the Tenth Circuit’s Bandimer’s decision remains to be seen. The government may elect to petition the entire Tenth Circuit to hear the case en banc.  Or the government might ask the Solicitor General to petition the Supreme Court to grant certiorari to take up the issue and resolve this newly-formed circuit split once and for all.

A divided Tenth Circuit Court of Appeals has held that the U.S. Securities and Exchange Commission’s (SEC) in-house administrative law judges (ALJs) are not constitutionally appointed as required by the Constitution’s Appointment Clause, thereby increasing the likelihood that the U.S. Supreme Court will take up the issue to resolve a circuit split between two federal appellate courts. The ruling by the Denver-based federal appeals court, marked a setback for the SEC amid increased challenges by defendants who question the fairness of the agency’s administrative court system. Bandimere v. United States Securities and Exchange Commission, No. 15-9586 (10th Cir. December 27, 2016).

The holding in Bandimere also marked a significant departure from the D.C. Circuit, which in August 2016 upheld the constitutionality of the SEC’s use of in-house administrative judges. See Raymond J. Lucia Companies, Inc., et al. v. Securities and Exchange Commission, 832 F.3d 277, 281 (D.C. Cir. 2016).

In Bandimere, the Tenth Circuit considered whether the five ALJs working for the SEC were employees or inferior officers. The court concluded that, based on Freytag v. Commissioner of Internal Revenue, 501 U.S. 868 (1991), the SEC ALJ who presided over an administrative enforcement action against the petitioner David Bandimere was an inferior officer. Because the SEC ALJ was not constitutionally appointed, the Court held that the ALJ held his office in violation of the Appointments Clause. U.S. Const. art. II, § 2, cl. 2.

In his dissent, Circuit Judge Monroe McKay expressed his “fears of the probable consequences” that may “allow malefactors who have abused the financial system to escape responsibility.” Bandimere, p. 11. Judge McKay observed that the majority had “effectively rendered invalid thousands of administrative actions” through its potential impact on ALJs at agencies beyond the SEC.

In addition, the Wall Street Journal had previously studied the issue and demonstrated that over the last several years, the SEC has been sending more cases to its in-house ALJs, and in doing so, was “enjoying a higher success rate there than in federal courts.”  A U.S. Chamber of Commerce report expressed similar concerns, saying “the [SEC] preference for litigation of significant cases before administrative law judges has not been confined to insider trading violations.” Examining U.S. Securities and Exchange Commission Enforcement: Recommendations on Current Processes and Practices (July 2015), p. 14.

What, if any, steps the government will take to appeal the Tenth Circuit’s Bandimer’s decision remains to be seen.  The government may elect to petition the entire Tenth Circuit to hear the case en banc.  Or the government might ask the Solicitor General to petition the Supreme Court to grant certiorari to take up the issue and resolve the newly-formed circuit split once and for all.  In the meantime, many litigants who have received adverse rulings from the SEC’s ALJs are expected to dispute those rulings in federal court.  How the federal courts will handle such challenges remains an open question, but the uncertainly of the current state of affairs certainly presents an avenue worth exploring for many defendants who disagree with their SEC ALJ outcomes.

Those with questions about any of these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Seyfarth Shaw’s White Collar, Internal Investigations, and False Claims Team, Securities Litigation Team, or Whistleblower Team.

By Esther Slater McDonald

Seyfarth Synopsis: The New York Court of Appeals’ ruling on questions regarding the use of criminal convictions in hiring will impact employers and may impact the background screening industry, the temporary staffing industry, and other businesses requiring its affiliates or contractors to adhere to certain criminal history guidelines.

In Griffin v. Sirva, Inc., 835 F.3d 283 (2016), the United States Court of Appeals for the Second Circuit certified several questions to the New York Court of Appeals, seeking clarification on provisions of the New York States Human Rights Law relating to consideration of criminal convictions in hiring.

The Background Facts

Trathony Griffin and Michael Godwin worked for Astro Moving and Storage Company, a company providing local warehouse and transportation services in New York. Astro had an agency contract with Allied Van Lines to provide household moving services on behalf of Allied.  Pursuant to the contract, all Astro employees working on Allied jobs were required to pass criminal background checks.  Allied engaged a third party to conduct the background checks and to apply Allied’s adjudication guidelines.  Under Allied’s guidelines, a felony conviction for any sexual offense disqualified an individual from working on Allied jobs.  That disqualification applied only to Allied jobs; it did not prohibit an individual from working for Astro on non-Allied jobs.

Griffin and Godwin were employed by Astro. At some point, Astro required them to undergo background checks so that they could continue to work on Allied jobs.  The background checks revealed that both men had been convicted of felony sexual offenses and were designated as “Sexually Violent Offenders.”  According to Griffin and Godwin, Astro terminated them after receiving their background reports.

Sometime later, Griffin and Godwin sued Allied and Sirva, Inc., a holding company related to Allied, alleging that they had violated the New York State Human Rights Law by denying them employment because of their criminal convictions or, alternatively, by requiring Astro to deny them employment because of the convictions.

The New York State Human Rights Law

Section 296 of the New York State Human Rights Law.  Section 296(15) generally makes it unlawful for “any person, agency, bureau, corporation, or association … to deny … employment to any individual” because of a criminal conviction unless there is a direct relationship between the criminal offense and the employment at issue or the employment would involve an unreasonable risk to property or to the safety or welfare of individuals or the general public.  Section 296(6) also makes it unlawful for “any person to aid, abet, incite, compel or coerce” a violation of Section 296(15).

The Litigation

The district court entered judgment for Allied and Sirva.  The district court held that only employers can be liable for denying employment and that, to be liable for aiding and abetting a denial of employment, a business must be a joint employer of the individual denied employment.   The court determined that Allied and Sirva were not “employers” or “joint employers” of Griffin or Godwin.

On appeal, the Second Circuit cast doubt on the district court’s ruling and concluded that the New York State Human Rights Law may apply to Allied and Sirva even though they did not employ Griffin and Godwin. The Second Circuit stated that Section 296(15) applied to “any person, … corporation, or association,” and thus the Section may apply to companies other than employers.  Even if Section 296(15) is limited to “employers,” the Second Circuit concluded that the term “employer” could be read to encompass entities like Allied and Sirva.  Last, the Second Circuit stated that the standard for aiding and abetting liability was unclear and indicated that New York may have intended for the provision to have a broad reach that encompasses non-employers, including contracting parties, regardless of their intent.

Because New York courts have not determined who may be liable under Section 296(15) or addressed the scope of Section 296(6) liability for businesses, the Second Circuit certified the following issues to the New York Court of Appeals for it to decide:

(1) Does Section 296(15) of the New York State Human Rights Law, prohibiting discrimination in employment on the basis of a criminal conviction, limit liability to an aggrieved party’s “employer”?

(2) If Section 295(15) is limited to an aggrieved party’s “employer,” what is the scope of the term “employer” for these purposes, i.e. does it include an employer who is not the aggrieved party’s “direct employer,” but who, through an agency relationship or other means, exercises a significant level of control over the discrimination policies and practices of the aggrieved party’s “direct employer”?

(3) Does Section 296(6) of the New York State Human Rights Law, providing for aiding and abetting liability, apply to § 296(15) such that an out-of-state principal corporation that requires its New York State agent to discriminate in employment on the basis of a criminal conviction may be held liable for the employer’s violation of § 296(15)?

The New York Court of Appeals accepted the certification, and oral argument in the case is expected to occur later this year.

The Takeaway

Employers, staffing agencies, background screeners, and others should be watching Griffin v. Sirva, Inc. How the New York Court of Appeals will rule on the certified questions is uncertain.  The court could interpret Section 296 narrowly to apply only to employers, or the court could interpret the section broadly in a manner that expands liability to non-employers.  Regardless of the outcome, any ruling is likely to provide guidance to employers and others, which will enable businesses to better manage risk.

For more information on this or any related topic please contact the author, your Seyfarth attorney, or any member of the Background Screening Compliance & Litigation Team.

By Erin Dougherty Foley and Craig B. Simonsen

Seyfarth Synopsis: These new regulations require federal agencies to be “model employers” of individuals with disabilities. As such, they now must take specific steps that are “reasonably designed” to gradually increase the number of employees who have a disability.

We had blogged previously about the Equal Employment Opportunity Commission’s Advance Notice of Proposed Rulemaking (ANPR), inviting the public to comment on how it should amend its regulations implementing Section 501 of the Rehabilitation Act of 1973, and to clarify the federal government’s obligation to be a model employer of individuals with disabilities. 79 Fed. Reg. 27824 (May 15, 2014).

The regulations — which apply only to federal agencies — that previously implemented the Section 501 affirmative action requirement simply stated that the federal government shall be a “model employer of individuals with disabilities,” and that federal agencies shall “give full consideration to the hiring, placement, and advancement of qualified individuals with disabilities.”

While the “model employer” of individuals with disabilities provisions of Section 501 require affirmative action and non-discrimination in employment only by federal agencies, what the EEOC determines to be best practices for federal agencies may be a preview of how it will handle private sector disability claims and charges. The regulations imposed an obligation on federal agencies to be “model employers” of individuals with disabilities, but did not explain what federal agencies needed to do to comply with the obligation.

Now the Final Rule, 82 Reg. Reg. 654 (January 3, 2017), requires those federal agencies to take specific steps that are “reasonably designed to gradually increase the number of employees who have a disability as defined under Section 501, and the number of employees who have a ‘targeted disability,’ which is defined for purposes of this Rule to mean a disability that is either designated as ‘targeted disability or health condition’ on the Office of Personnel Management’s (OPM’s) Standard Form 256, or that falls under one of the first 12 categories of disability listed in Part A of Question 5 of the EEOC’s Demographic Information on Applicants form (Applicant Flow Form), until they meet specific goals set by the EEOC.”

Targeted disabilities are defined as “disabilities that the government has, for several decades, emphasized in hiring because they pose the greatest barriers to employment, such as blindness, deafness, paralysis, convulsive disorders, and mental illnesses, among others.”

The EEOC indicates that the New Final Rule is similar to the approach taken by the DOL’s Office of Federal Contract Compliance Programs in regulations issued to implement the obligation of federal contractors to engage in affirmative action for individuals with disabilities pursuant to Section 503 of the Rehabilitation Act of 1973, 29 U.S.C. 793 (Section 503). See for instance, 41 CFR pt. 60-741.45(a), establishing a 7% utilization goal for employment of qualified individuals with disabilities in each job group in the contractor’s workforce.  According to the EEOC news release, the regulations “set goals for federal agency workforces of 12% representation for individuals with disabilities, and 2% for individuals with ‘targeted’ disabilities.”

In addition, this New Rule requires agencies to provide personal assistance services (PAS) to employees who, because of targeted disabilities, require assistance in order to be at work or participate in work-related travel. PAS are services that help individuals with disabilities are to perform activities of daily living, including assistance with removing and putting on clothing, eating, and using the restroom.

The EEOC has also published a question-and-answer document for the new regulations.

The Rule provides federal agencies one year to make any necessary changes in policy, staff, or other aspects of their operations. The Rule is effective on March 6, 2017, and applicable on January 3, 2018.

The Rule specifically applies to federal employers. However, as noted above, this may also impact the EEOC’s handling of disability claims generally. The EEOC continues to make protecting individuals with disabilities a top priority. Employers that work on or seek to contract for government projects should vigilantly review their policies, procedures and practices to ensure that they are also acting as a “model” employer as that has been defined by the agency.

If you have questions regarding this New Rule or the topic of this post, please contact the authors, a member of Seyfarth’s OFCCP & Affirmative Action Compliance Team, or your Seyfarth attorney.

By Steve Shardonofsky and Tiffany T. Tran

iStock_000072969307_MediumSeyfarth Synopsis: In a somewhat rare interlocutory appeal, the Fifth Circuit reviewed and reaffirmed a 40-year old case holding that emotional distress and punitive damages are not available under the ADEA. This decision rejected the EEOC’s own interpretation and is welcomed news for employers doing business in the Fifth Circuit because damages under the ADEA will be limited to front and back pay. This victory may be short-lived, however, as we expect many plaintiffs will file claims under the corresponding state-law statutes, which typically do allow for the recovery of emotional distress and punitive damages. 

In Vaughn v. Anderson Regional Medical Center, Susan Vaughan, a nurse supervisor, alleged that her employer fired her in retaliation for raising age-discrimination complaints.  The district court dismissed Vaughan’s claims for pain and suffering and punitive damages under the Age Discrimination in Employment Act (ADEA) based on Fifth Circuit precedent, Dean v. Am. Sec. Ins. Co., 559. F.2d 1036 (5th Cir. 1977), barring such recoveries.  Noting that the EEOC and other circuits held divergent views on this issue, however, the district court certified the question for a rare interlocutory appeal, and the Fifth Circuit granted review.

The Fifth Circuit rejected Vaughan’s effort to distinguish Dean on the basis that the case involved age discrimination claims, as opposed to retaliation claims under the ADEA. According to the Court, Dean held “in unqualified terms” that the type of damages Vaughn sought are not recoverable “in private actions posited upon the ADEA.”  Because the ADEA contained a prohibition on retaliation since its inception, Dean was controlling unless some intervening change in law “undermine[d] its continued vitality.” The Fifth Circuit rejected Vaughn’s arguments on this issue as well.

Vaughn argued there was a change in law since Dean because of the 1977 amendments to the FLSA, which the Fifth Circuit has interpreted as providing remedies “consistent” with the ADEA. According to the Fifth Circuit, those amendments added language that was identical to the provision in the ADEA allowing for “such legal or equitable relief as may be appropriate,” which Dean had already interpreted as precluding emotional distress and punitive damages. These changes, the Court explained, “brought the FLSA’s remedies for employer retaliation into line with the ADEA’s remedies for similar conduct.”  Notably, however, this explanation seems to conflict with another decision (Pineda v. JTCH Apartments, LLC) issued by a different panel of the Fifth Circuit just a few days later, which held that plaintiffs may recover emotional distress damages in FLSA retaliation claims.

The Fifth Circuit also declined to give deference to the EEOC’s interpretation on this issue, finding that the agency’s reliance on a Seventh Circuit decision was unpersuasive because it mistakenly relied on the 1977 amendments to the FLSA, which the Court had already rejected. Even if  the Fifth Circuit had found the EEOC’s view persuasive, it would not be sufficient to displace Dean because it is not binding precedent. The transfer of ADEA administrative/investigative functions from the Secretary of Labor to the EEOC also did not constitute an “intervening change” in law to override precedent.

Given the apparent conflict between this case and the recent Pineda decision, we may see these issues reviewed by the full panel of the Fifth Circuit.  Because the case also creates a split among the circuits courts, we may also see intervention by the Supreme Court in the future.  Until the full panel or the Supreme Court rules on this issue, claims for emotional distress and punitive damages under the ADEA will be subject to dismissal, at least in the Fifth Circuit.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Team.

Compliance Concept on İnterface Touch ScreenThe Employment Law Lookout is taking a holiday break this week, but will resume delivering insightful discourse and updates on the day’s most pressing workplace issues next week.

In the meantime, we want to wish all of our readers, contributors, and editors a safe and happy (and warm) holiday season.  We hope you are able to spend time with family, friends, and loved ones and rest assured knowing that we’ll be on the lookout for more management insights to bring you in 2017.

Thank you and Happy Holidays.

By Andrew S. Boutros and Craig B. Simonsen

Graduation cap and books. The concept education. Stack of books,Seyfarth Synopsis: No differently than companies doing business overseasespecially in high-risk marketsAmerican colleges and universities who do business overseas face real risks of violating the Foreign Corrupt Practices Act and must be mindful of the enforcement landscape that applies to these criminal violations. Robust and effective compliance programs remain the antidote to the corruption scourge.

As reported in its recent SEC filing, Laureate Education, Inc., is under scrutiny for potential Foreign Corrupt Practices Act (FCPA) violations after it disclosed FCPA related conduct to the statute’s twin enforcers, the U.S. Department of Justice and the Securities and Exchange Commission. Seyfarth Shaw’s White Collar, Internal Investigations, and False Claims Team blogged previously about “FCPA Compliance-Recent Department of Justice Initiatives,” and how the DOJ had initiated a one-year pilot program to encourage entities to self-report violations of the FCPA and cooperate fully with federal prosecutors.

Set to expire in April 2017, any entity—whether public or private, for-profit or not-for-profit, a company or some other business organization, such as a higher education institution—contemplating self-reporting an FCPA violation to the DOJ needs to carefully consider participating in the pilot program. As part of that analysis, an organization naturally will need to weigh the pros and cons of voluntary self-disclosure, as well as the government’s expectation of full institutional cooperation, including complying with Department policies regarding the decision to prosecute business organizations (as reflected in  United States Attorneys’ Manual) as well as the still fairly recent and high-profile Yates Memorandum, which addresses individual accountability for corporate wrongdoing.

Here, we note an FCPA Professor blog about a Wall Street Journal article titled “American Colleges Pay Agents to Woo Foreigners Despite Fraud Risk.”  These pieces discuss the applicability of the FCPA to higher education institutions.   Specifically, the blog notes that in recent years, several U.S. higher education institutions have opened foreign campuses (either directly or through affiliates) in places such as China, India, and the Middle East—all regarded as high-risk regions for public and commercial corruption.  To open up campuses and do business in these parts of the world, the entities required relevant government approvals, licenses, permits, and certifications—no differently than a company needing government approvals to establish a manufacturing presence in a foreign country.  These government approvals require colleges and universities to interface with foreign government officials, which in turn increases the risk that higher education institutions will fold to pressures of commission or kickback requests, or hidden payments for expediency.

Opening foreign campuses is not the only area of FCPA risk that colleges and universities face. According to the WSJ article, American colleges and universities also face corruption risks when they interface with overseas third-party agents, again, no differently than any other traditional business organization.  Specifically, according to the WSJ:

Like many U.S. colleges, Wichita State University wants more foreign students but isn’t a brand name abroad.  So the school . . . , in late 2013[,] started paying agents to recruit in places like China and India. The independent agents assemble candidates’ documents and urge them to apply to the Kansas school, which pays the agents $1,000 to $1,600 per enrolled student.  Overseas applications “shot up precipitously,” says Vince Altum, Wichita State’s executive director for international education.  But there is a down side:  Wichita State rejected several Chinese applications this year from an agency it suspected of falsifying transcripts, Mr. Altum says, adding that it terminates ties with agencies found to violate its code of conduct by faking documents.  Paying agents a per-student commission is illegal under U.S. law when recruiting students eligible for federal aid—that is, most domestic applicants.  But paying commissioned agents isn’t illegal when recruiting foreigners who can’t get federal aid.  So more schools like Wichita State are relying on such agents, saying the intermediaries are the most practical way to woo overseas youths without the cost of sending staff around the world.  No one officially counts how many U.S. campuses pay such agents, most of whom operate abroad, but experts estimate at least a quarter do so.

Although few higher education institutions are for-profit companies, Laureate Education, Inc., is, and earlier this month the company made an eye-catching disclosure in an SEC Form S-1 filing about an $18 million (US) “charitable donation” in Turkey.

The disclosure states:

We are conducting an internal investigation of one of our network institutions for violations of the Company’s policies, and possible violations of the U.S. Foreign Corrupt Practices Act and other applicable laws….

As previously disclosed, during the fourth quarter of 2014, we recorded an operating expense of $18.0 million (the value of 40.0 million Turkish Liras at the date of donation) for a donation by our network institution in Turkey to a charitable foundation. We believed the donation was encouraged by the Turkish government to further a public project supported by the government and expected that it would enhance the position and ongoing operations of our institution in Turkey.  The Company has learned that the charitable foundation which received the donation disbursed the funds at the direction of a former senior executive at our network institution in Turkey and other external individuals to a third party without our knowledge or approval.

In June 2016, the Audit Committee of the Board of Directors initiated an internal investigation into this matter with the assistance of external counsel. The investigation concerns the facts surrounding the donation, violations of the Company’s policies, and possible violations of the FCPA and other applicable laws in what appears to be a fraud perpetrated by the former senior executive at our network institution in Turkey and other external individuals.  This includes an investigation to determine if the diversion was part of a scheme to misappropriate the funds and whether any portion of the funds was paid to government officials.  As of the date of this prospectus, we have not identified that any other officers or employees outside of Turkey were involved in the diversion of the intended donation….

We have been advised by Turkish counsel that, under Turkish law, a Foundation University may not make payments that cause a decrease in the university’s wealth or do not otherwise benefit the university. Given the uncertainty of recovery of the diverted donation and to mitigate any potential regulatory issues in Turkey relating to the donation, certain Laureate-owned entities that are members of the foundation that controls our network institution in Turkey have contributed an amount of approximately $13.0 million (the value of 40.0 million Turkish Liras on November 4, 2016, the date of contribution) to our network institution in Turkey to reimburse it for the donation.

As a result of the investigation, which is ongoing, we took steps to remove the former senior executive at our network institution in Turkey. Because of the complex organizational structure in Turkey, this took approximately one month and during that period our access to certain aspects of the business including the financial and other records of the university was interrupted.  The former senior executive is now no longer affiliated with our network institution and we again have access to the financial and other records of the university.

In September 2016, we voluntarily disclosed the investigation to the [DOJ] and the SEC. The Company intends to fully cooperate with these agencies and any other applicable authorities in any investigation that may be conducted in this matter by them.  The Company has internal controls and compliance policies and procedures that are designed to prevent misconduct of this nature and support compliance with laws and best practices throughout its global operations….  If we are found to have violated the FCPA or other laws governing the conduct of our operations, we may be subject to criminal and civil penalties and other remedial measures, which could materially adversely affect our business, financial condition, results of operations and liquidity.

Long gone are the days where the FCPA was viewed as practically applying only to large multinational companies with significant overseas business activity.  As the FCPA matures—and the FCPA bar and government enforcers continues to evolve alongside with it—a growing number of entities can expect to see the FCPA applied more widely to “non-traditional” organizations otherwise subject to the FCPA’s reach.  In the FCPA world, proactive compliance, monitoring, and risk-appreciation applies with equal vigor to educators, administrators, and trustees as it does to C-suite executives and corporate boards.  The old adage that “an ounce of prevention is worth a pound of cure,” should guide American colleges and educators in the same way it guides American businesses.  As higher education institutions teach and train our next generation of leaders, they, themselves, must lead by example in this ever-expanding fight against public and commercial corruption.

Seyfarth Shaw is a full-service firm with leading FCPA, white collar, and higher education practitioners. Those with questions about any of these issues or topics are encouraged to reach out to the authors, your Seyfarth attorney, or any member of the Seyfarth Shaw’s White Collar, Internal Investigations, and False Claims Team.

By: Ashley K. Laken, Esq.

Seyfarth Synopsis: NLRB rules that the operators of the Detroit Masonic Temple unlawfully refused to bargain with a union that represented various engineers and maintenance workers at the temple, even though none of the remaining members of the bargaining unit were union members.

NLRB Chairman Pearce and Members Miscimarra and McFerran unanimously ruled that the Masonic Temple Association of Detroit and 450 Temple, Inc. violated the National Labor Relations Act by refusing to bargain with Local 324 of the International Union of Operating Engineers for a successor collective bargaining agreement. Masonic Temple Association of Detroit, 364 NLRB No. 150 (Nov. 29, 2016).

Facts

The Union had represented employees at the temple since approximately 1968. The most recent collective bargaining agreement covering the temple expired in early 2010, and the Association began operating the temple shortly thereafter.  At the time, there were approximately ten members in the bargaining unit, two of whom were dues-paying Union members.  In mid-December 2010, the Union sent the Association a written request to bargain over a new CBA.  The Association did not respond, and in January 2011, the Union filed an unfair labor practice charge against the Association for refusing to bargain in good faith.  The parties entered into a settlement agreement, with the Association agreeing to recognize the Union and bargain in good faith as a successor employer, and they met approximately once per month between January 2011 and May 2011.

After the last negotiation session in May 2011, the Union was told that a new unnamed entity would take over management of the temple and that the Union should wait until the changeover to negotiate a CBA with that entity. In the fall of 2011, the Detroit Masonic Temple Theater Company took over management of the Temple, and the Union held one negotiation session with that entity in January 2012.  The Association and the Theater Company ended their relationship in November 2012, and shortly thereafter, 450 Temple Inc. took over management of the temple.

From late 2012 until January 2015, the Union made multiple attempts to restart negotiation discussions, but in January 2015, the President of the Association and 450 allegedly told the Union that because Michigan had become a right-to-work state and there were no longer any Union members working for the temple, he did not feel it necessary to and would not bargain with the Union. In response, the Union filed the unfair labor practice charge at issue in this case.

Board’s Decision

An administrative law judge found that the Association and 450 were a single employer, in part because the Association had 100% ownership of 450 and they operated out of the same office, and no exceptions were filed in response to that ruling. Thus, the Board’s decision did not address this issue.

Regarding the merits of the charge, the Association and 450 argued that they did not violate the Act because the Union was not the exclusive representative of a majority of employees in the bargaining unit, pointing to the fact that none of the employees in the bargaining unit were Union members. The Administrative Law Judge (and the Board) disagreed, observing that an employer may rebut the continuing presumption of an incumbent union’s majority status and unilaterally withdraw recognition only on a showing that the union has in fact lost the support of a majority of the employees in the bargaining unit, and that bargaining unit employees’ union membership status is not determinative of the employer’s obligation to bargain.  In other words, evidence of a desire to withdraw from membership in the union is insufficient proof that the union has in fact lost the support of a majority of the unit.

The Board found that there was no evidence of any action taken by the bargaining unit employees to express their lack of support for the Union, such as a petition to decertify the Union or statements by the employees that they no longer wanted to be represented by the Union. The Board ordered the Association and 450 to bargain with the Union on request and to post a notice to employees.

Employer Takeaway

The decision highlights the fact that there is a distinction between an employee’s desire to be a member of a union and his or her desire to be represented by a union.  Even if the majority of employees in a bargaining unit are not union members, that does not necessarily mean the union has lost its majority support.  Employers that have questions about the status of an incumbent union’s support should connect with their labor attorney to ensure they do not engage in conduct that would run afoul of the Act.

By Bridget M. Maricich

Seyfarth Synopsis: Though only an informal guidance, this resource document reminds employers of the EEOC’s expansive interpretation of what constitutes a reasonable workplace accommodation. Employers should continue to meaningfully engage in the interactive process with any employees seeking workplace accommodations for a physical or mental disability and assiduously document those efforts.

Citing an increase in charges of discrimination based on mental health conditions during fiscal year 2016, the EEOC released a “resource document” on December 12, 2016, explaining “workplace rights” for individuals with mental health conditions under the Americans with Disabilities Act (ADA).  The resource document – Depression, PTSD, & Other Mental Health Conditions in the Workplace: Your Legal Rights – is presented in a question and answer format intended for applicants and employees.  The informal guidance is a useful primer for understanding the EEOC’s expanding stance on employer obligations to provide reasonable workplace accommodations.

At first blush, the resource document is nothing new. In question 1, the EEOC reiterates that employers are prohibited from discriminating against applicants and employees because of a mental health condition.  The document also notes that employers do not have to hire or retain individuals who are unable to perform the essential functions of a job or who pose a direct threat. However, the Agency strongly caveats that employers must “rely on objective evidence,” “not myths or stereotypes,” that would indicate that an individual is unable to perform a job or poses a significant safety risk, even with a reasonable accommodation, before taking an adverse action against the individual.

Question 2 addresses the right of an applicant or employee to keep a mental health condition private. The EEOC notes that under the ADA, employers are only permitted to ask questions about the medical or health information of an applicant or employee when (1) an individual requests a hiring process or workplace accommodation; (2) when the employer requests medical information or testing post-offer, but pre-employment, provided everyone entering the same job category is subject to the same requirement; (3) when the employer is engaging in affirmative action for persons with disabilities; and (4) when there is “objective evidence” that the employee may not be able to do his or her job or poses a safety risk in the workplace because of his or her condition.

Questions 3 through 6 respond to hypothetical questions about when a reasonable accommodation may be required, how to request one, and the employer’s obligation to respond, even when no accommodation exists that permits an employee to fulfill the essential functions of a position. The EEOC’s responses here reveal the breadth of the Agency’s interpretation of the ever-vexing question of what constitutes a reasonable accommodation.  In the first instance, in response to Question 3, the EEOC, without using the word “disability,” states that an individual is entitled to a reasonable accommodation for “any mental health condition that would, if left untreated, ‘substantially limit’ your ability to concentrate, interact with others, communicate, eat, sleep, care for yourself, regulate your thoughts or emotions, or do any other ‘major life activity.’”   The EEOC notes that the mental health condition need not be either permanent or severe to constitute “substantially limiting” and that conditions like major depression, post-traumatic stress disorder (PTSD), bipolar disorder, schizophrenia, and obsessive compulsive disorder (OCD) should “easily qualify.”

The answer to Question 3 also provides broad, if imprecise, definition of reasonable accommodation, defining it as simply “some type of change in way things are normally done at work” and providing standard examples such as altered break and work schedules, quiet office space, changes in supervisory methods, along with some more controversial recommendations, such as choice of specific shift assignments and permission to work from home. And in Question 6, the Agency re-states the EEOC’s vague standard that an employee who is unable to perform the essential functions of his or her position, even with an accommodation, may be entitled to an indeterminate amount leave – independent of FMLA leave – that “will help you get to a point whether you can perform those functions.” The document also notes that failing leave, if an employee is “permanently” unable to perform his or her job, he or she may be entitled to job reassignment.  Importantly, the Agency does not caveat here that any request for reasonable accommodation must be fundamentally intended to facilitate the employee’s performance the essential functions of the job. Rather, the document implies that by virtue of having a mental health condition an individual or employee may be entitled to ask for some “change in the way things are normally done at work.”

Questions 4 and 5 fortunately return to well-worn ADA principles. The EEOC directs employees who need a reasonable accommodation to ask for one and encourages employees to do so before workplace difficulties arise because “an employer does not have to excuse poor job performance, even if it was caused by a medical condition or the side effects of medication.” The EEOC also notes that  employers are entitled to ask for health care provider documentation verifying the employee has a mental health condition and requires a workplace accommodation because of it.  The document provides the link to what it terms the “companion document” –The Mental Health Provider’s Role in a Client’s Request for a Reasonable Accommodation at Work .  The EEOC suggests that individuals provide the document to their health care providers when seeking medical documentation in relation to a request for a reasonable accommodation.  The document also reminds that if a reasonable accommodation, justified by relevant medical provider documentation, would help an employee do his or her job, the employer must implement it barring “significant difficulty or expense.”

Though only informal guidance, this resource document reminds employers of the EEOC’s expansive interpretation of what constitutes a reasonable workplace accommodation.   What does that mean for employers? Employers should continue to meaningfully engage in the interactive process with any employees seeking workplace accommodations for a physical or mental disability and assiduously document those efforts.  In light of this guidance, however, employers should strongly consider seeking trusted legal counsel before denying a requested accommodation or taking adverse action against an employee who has or is seeking an accommodation.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of the Firm’s Absence Management and Accommodations Team.