By Jennifer L. Mora and Adam R. Young

Seyfarth Synopsis:  Employers considering a tolerant attitude towards recreational cannabis in the workplace should consider safety hazards and legal liabilities. 

In the heyday of the two-martini lunch, employers regularly tolerated alcohol in the workplace or employees presumably impaired by alcohol returning to work.  Over the succeeding decades, employers began to concentrate on the business and legal liabilities imposed by drug and alcohol use and impairment in the workplace — including increased absenteeism, mistakes, sexual harassment, workplace violence, and accidents/injuries.  Employers also discovered that their insurance companies claimed exemptions for certain claims if the employee that created the issue had been consuming alcohol at work. As a result, employers largely began to adopt policies that prohibited employees from using or being under the influence of alcohol (and drugs) while at work.  Most employers since have prohibited alcohol and drugs entirely or restricted alcohol to occasional company Christmas parties and social functions.

While we have not seen a mainstream resurgence of alcohol consumption in the workplace, we have noticed a distinct trend of some collaborative and creative workplaces, including co-working environments, to expand access to alcohol in the workplace, often with bars and kegs onsite.  Employers who elect to allow “drinking at work” are well-advised to implement policies regarding such use and consider a variety of safety and other issues that could result, including how to handle intoxicated employees, whether to provide transportation for employees to drive home, tracking and limiting consumption, defining the times during the day when drinking is and is not allowed, and handling complaints lodged against employees.  With the legalization of recreational marijuana in many states, some employers with permissive alcohol regimens are confronting whether they will treat marijuana as they treat alcohol.  How will they address workplace use and impairment?

Marijuana is unlawful under federal law and employers have the right to prohibit its possession, use, and impairment by employees in the workplace (or while on company time).  But some employers (often in creative fields) are considering relaxing their prohibitions on cannabis or even allowing cannabis in the workplace.  They often hope to attract newer generations of workers who may have a positive impression of cannabis and its contributions to creative and productive output in the workplace.  Employers must consider — are the liabilities that potentially result when an employee uses cannabis at work the same as or greater than those associated with alcohol use? Can an employer even allow this if it wants to? To what extent “weed at work” starts to become as mainstream as alcohol at work remains to be seen, but there are several considerations that employers might want to ponder.

  • One way in which alcohol and cannabis are the same is in the context of occupational safety hazards. Cannabis is a psychoactive drug that impairs decision-making, motor skills, and response time. As we have previously blogged, according to highly-respected safety professionals, employees who are impaired by cannabis present a safety risk in the workplace, particularly if they work in positions that are “safety-sensitive,” where an impairment will put the employee, coworkers, clients, or third parties at a risk of serious physical harm or death. On account of the risks to occupational safety and health posed by workplace cannabis use, the National Safety Council advises that employers adopt a zero tolerance policy for cannabis use in safety-sensitive positions.
  • Employers subject to the federal Drug-Free Workplace Act cannot allow employees to use any controlled substance in the workplace lest they risk losing their government contract. Although more states are enacting recreational and medical cannabis laws, cannabis still is illegal as a matter of federal law and, thus, employers with government contracts should not consider permitting the use of cannabis or controlled substances at work.
  • Employers may have better control of alcohol consumption at work if they make the alcohol available and have a procedure in place to ensure that only a certain amount of alcohol is consumed. Indeed, some employers use a “kegbot,” which is an app that requires employees to login each time they get a drink, which helps the employer track what and how much the employee drank. Some employers have a bar with a server that tracks and monitors consumption. If an employer allows employees to consume cannabis while at work, there simply is no way for the employer to know the strength of the cannabis being consumed or how much. While well-intentioned, this approach may be inadvisable with cannabis products. The employer providing or dispensing marijuana at work may be committing felonious possession with intent to distribute a Schedule I drug under federal law.
  • Under the Occupational Safety and Health Act’s “general duty clause,” employers must furnish “employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to its employees.” If an employer knowingly tolerates the use of an illegal and impairing drug, such as cannabis, even for medical purposes, while an employee performs hazardous tasks (e.g., driving a forklift), this might create an impermissibly hazardous environment and potential liability for a General Duty Clause violation. We have not yet seen a similar citation issued by federal OSHA or a state plan.  Some state plans also have regulations that prohibit employees from being under the influence of drugs or alcohol, which could be the basis of a further citation.

Accordingly, employers are struggling to address the new hazards of widespread use of recreational cannabis and its many risks to the workplace.  While not all employers are continuing drug testing for cannabis, employers would be wise to consider the many legal liabilities associated with permitting cannabis in the workplace.

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

By James L. Curtis, Mark A. Lies, II, Adam R. Young, and Craig B. Simonsen

Seyfarth Synopsis:  First American case reported of deadly new Chinese coronavirus.

The Centers for Disease Control and Prevention (CDC) has indicated that it is closely monitoring an outbreak caused by a new 2019 Novel Coronavirus (2019-nCoV) (coronavirus) first identified in Wuhan, Hubei Province China.

Reuters reports that the virus has claimed nine lives and infected at least 470 people in China. The South China Morning Post reports that the “National Health Commission of China confirmed 900 people are still under medical observation.”  “The outbreak has been linked to Wuhan’s Huanan Wholesale Seafood Market, which has since been closed. Weeks after the market in the city in central China became ‘ground zero’, the authorities said human-to-human transmission played a role in the outbreak.”  The CDC indicates that human-to-human transmissions is likely, but the precise method and likelihood of transmission is unclear.

The CDC announced the first case in the United States in Washington State on January 21, 2020.  The patient travelled to the United States from Wuhan on January 15, 2020.  The patient sought care at a medical facility, where the suspected coronavirus was identified.

As widely publicized, on January 17, 2020, the CDC began implementing public health entry screening at San Francisco (SFO), New York (JFK), and Los Angeles (LAX) airports.  It later added entry health screening at Atlanta (ATL) and Chicago (ORD).  The CDC has also activated its Emergency Operations Center to better provide ongoing support to the coronavirus response.  The CDC is working closely with Washington State and local partners.  A CDC team has been deployed to support the ongoing investigation in Washington State, including potentially tracing close contacts to determine if anyone else has become ill.

The CDC warns travelers in an “Alert – Level 2, Practice Enhanced Precautions,” that:

  • Person-to-person transmission of coronavirus is occurring.
  • Preliminary information suggests that older adults and people with underlying health conditions may be at increased risk of severe disease from this virus.
  • Travelers to Wuhan, China, should avoid contact with sick people, animals (alive or dead), and animal markets.
  • Travelers from Wuhan to the United States, and other countries, may be asked questions about their health and travel history upon arrival.

Employers would be wise to keep abreast of the CDC website updates on this outbreak.  Employers whose employees travel to China for work should take action to notify employees of the health risks, including the latest information from the CDC.  Health services employers who potentially encounter the coronavirus should work with legal counsel to ensure that they have made proper notifications to public health authorities and have appropriately trained and protected their employees from occupational exposures.  If employees are exposed there may be legal implications under the Americans with Disabilities Act (ADA), the Family and Medical Leave Act (FMLA), and state workers compensation laws.

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

By Michael Wexler, Robert B. Milligan, and Daniel Joshua Salinas

Seyfarth Synopsis:  On Tuesday, January 28 at 12:00 p.m. Central, in the first installment of the 2020 Trade Secrets Webinar Series, Seyfarth attorneys will review noteworthy legislation, cases and other legal developments from across the nation over the last year in the area of trade secrets and data theft, non-competes and other restrictive covenants, and computer fraud. Plus, they will provide predictions for what to watch for in 2020 and provide an overview of the material law changes in Seyfarth’s 2019-2020 Non-Compete Desktop Reference.

Seyfarth attorneys Michael Wexler, Robert Milligan, and Joshua Salinas will address the following topics:

  • Significant new federal and state court decisions and legislation on non-compete and other restrictive covenants that may impact their enforcement
  • Discussion of legislative and regulatory efforts to narrow use of non-competes and how companies should respond and the likelihood and impact of potential federal legislation
  • The Defend Trade Secrets Act and tips for navigating the law and an overview of what we know now that it’s been in effect for more than 3 years
  • Recent trade secret misappropriation decisions
  • Noteworthy data breaches and criminal prosecutions for trade secret misappropriation, data theft, and computer fraud matters and discussion of lessons learned
  • Best practices for updating agreements and policies to adequately protect company assets and trade secrets, including addressing the challenge for multi-state employers of an increasing divergence of state laws

REGISTER HERE

If you have any questions, please contact Colleen Vest at cvest@seyfarth.com and reference this event.

*CLE Credit for this webinar has been awarded in the following states: CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

By Minh N. Vu

Seyfarth Synopsis:  ADA Title III lawsuits flooded federal courts in 2019 and will likely continue to do so in 2020 with new theories for the courts to consider. 

We are still tallying up the end-of-year numbers, but the number of ADA Title III lawsuits filed in federal courts by the end of November 2019 (10,206) exceeded the number of such lawsuits filed in all of 2018 (10,163).  California courts continue to be the busiest with roughly 43% of the lawsuits, with New York and Florida courts taking second and third place with  24% and 18% of the market share, respectively.  With plaintiffs and their lawyers constantly conjuring up new claims, businesses are not likely to see any relief from these types of suits in 2020.

What types of lawsuits are trending now?

Braille Gift Card Lawsuits.  Starting in October of 2019, more than a dozen blind plaintiffs represented by five attorneys have filed at least 243 lawsuits in the Southern and Eastern Districts of New York alleging that retailers and other businesses have violated the ADA and New York state and city laws by failing to offer for sale gift cards that have all the information printed on the cards shown in Braille. These cases are assigned to at least twenty-nine different judges. A firm in southern California has also jumped on the bandwagon, filing Braille gift card lawsuits in California state court and sending out a number of pre-suit demand letters. Most defendants are digging in for a fight so we expect to see many motions to dismiss filed in the first quarter of 2020.

Website and Mobile App Accessibility Lawsuits.  Although we are still tallying the numbers, lawsuits alleging inaccessible websites and mobile apps accounted for at least a fifth of the total number of ADA Title III lawsuits filed in federal courts in 2019. Most plaintiffs in these cases are blind and claim that the websites in question do not work with their screen reader software which reads website content aloud. A much smaller number of plaintiffs are deaf and are suing about the lack of closed captioning for online videos.

Plaintiffs continue to file these website and mobile app accessibility lawsuits, though the rate at which they were being filed seemed to slow down in the fourth quarter of 2020. The change may be attributable to the fact that some of the lawyers who were filing many of these website accessibility suits in New York have turned their attention to Braille gift card lawsuits.

The big news from 2019 on the website accessibility front was the U.S. Supreme Court’s refusal to hear Domino’s appeal from a Ninth Circuit Court of Appeals decision allowing a blind plaintiff to pursue his lawsuit against the pizza chain for having an allegedly inaccessible website and mobile app. Businesses had hoped that the Supreme Court would hear the case and perhaps take some action to curtail the tsunami of website and mobile app lawsuits.

In 2019, Plaintiffs also made significant headway in persuading California state courts that inaccessible websites violate the state’s non-discrimination statute, including one appellate affirmation of a judgment in favor of blind plaintiff. In fact, one California Superior Court judge decided that the ADA applies to websites of businesses with no physical location where customers go. In reaching this conclusion, this California judge rejected federal Ninth Circuit precedent that the ADA only applies to websites of public accommodations with a nexus to a physical location.

Hotel Accessibility Information on Reservations Websites.  A number of plaintiffs filed lawsuits against hotels for allegedly failing to provide sufficient information about the accessibility of their accessible guest rooms and common areas on their websites, as required by the ADA Title III regulations, to allow travelers with disabilities to make informed decisions about whether a hotel meets their needs. In response to this flurry of lawsuits, many hotels have updated their websites to provide the required information. Now some plaintiffs are filing lawsuits alleging that hotels are not making accessible rooms available for sale on websites operated by third party online travel agencies.

Accessible Hotel Room Dispersion.  Title III of the ADA requires hotels to provide accessible rooms in a range of different room types (e.g. rooms with two beds, premium views, suites) so that people with disabilities have room choices that are comparable to those offered to people without disabilities. One plaintiff in particular has filed more than a hundred lawsuits under this theory, and we have no reason to think she will stop in 2020.

Inaccessible Facilities.  Historically the most prolific category for accessibility lawsuits, we have continued to see in the lawsuit filing numbers and in our practice many lawsuits about allegedly inaccessible physical public accommodations facilities such as hotels, retail stores, restaurants, and shopping centers in 2019. We do not expect this to change in 2020.

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Be sure to subscribe to our ADA blog to receive notices of developments throughout the year!

Edited by Kristina Launey

By Lennon B. Haas and Kevin M. Young

Seyfarth Synopsis: In Flaherty v. Entergy Nuclear Operations, Inc., ___ F.3d ___, No. 18-1759, 2019 WL 7046367, at *1 (1st Cir. Dec. 23, 2019), the First Circuit struck a terminated nuclear plant security officer’s self-serving affidavit opposing summary judgment and held that he was not qualified for his position, and thus could not establish a prima facie case of disability discrimination, because his failure to disclose a medical diagnosis demonstrated untrustworthiness and a lack of reliability, both of which his job required.

Background

In 2005, military veteran Mark Flaherty applied for and received a nuclear security officer position with Entergy at a nuclear power station. The U.S. Nuclear Regulatory Commission (NRC) requires that such officers attain and hold special clearances. To obtain and retain the clearance, an individual must, among other things, “provide high assurance” of trustworthiness and reliability and pass annual assessments that evaluate those same traits.

In July 2012, Flaherty filed a claim for disability benefits with the VA based on chronic fatigue syndrome (CFS), PTSD, and other medical issues. Three weeks later, he failed to disclose on Entergy’s annual medical assessment any of the symptoms or conditions for which he was seeking VA benefits. He repeated his failure to disclose in his 2013 and 2014 assessments as well.

In 2015, Entergy asked Flaherty to work overtime. Flaherty refused, claiming he would be too tired to work. Still without knowledge of Flaherty’s medical issues, Entergy suspended him for three days. At that point, Flaherty complained to Entergy’s ethics hotline.

It was only then that Flaherty revealed that he had CFS. That triggered a hold on his clearance and an investigation, which revealed his failures to disclose his conditions. Based on those failures, Entergy found Flaherty untrustworthy and unreliable, and thus unable to hold his clearance. Entergy terminated him.

Flaherty sued for, among other things, disability discrimination. He claimed Entergy terminated him because of his CFS. Entergy moved for summary judgment, arguing Flaherty was not qualified for his position because his failure to disclose CFS until after his suspension demonstrated a lack of the trustworthiness and reliability that his clearance required. Flaherty opposed with an affidavit that, according to Entergy, contradicted Flaherty’s prior testimony about when he was diagnosed with CFS and when he first disclosed it. Agreeing with Entergy, the district court struck the affidavit and held that Flaherty failed to establish that he was qualified for his role because he violated NRC regulations requiring that officers be trustworthy and reliable. The First Circuit affirmed.

The Court’s Analysis

The ADA prohibits employers from discriminating against a “qualified individual on the basis of disability.” Qualified means that an individual can perform the essential functions of his or her position with or without accommodation. Flaherty’s ability to show qualification turned on the timing of his CFS diagnosis disclosure, and that timing turned on his affidavit.

The court first observed that plaintiffs cannot resist summary judgment with testimony that contradicts, without satisfactory explanation, clear answers to unambiguous questions at a deposition. Flaherty’s deposition testimony—he told Entergy about his CFS only after his suspension—said the court, was clear and in response to the unambiguous question: “You never told anyone you had CFS until April 29, 2015, correct?” To explain his contradictory affidavit, Flaherty argued that he misunderstood the question to reference when he disclosed his CFS to his supervisors, not his employer more broadly. The court rejected that explanation, noting that Flaherty had an attorney present at the deposition, the question made no mention of supervisors, and Flaherty had a chance to correct his testimony but declined to do so. Without a sufficient explanation for the testimonial discrepancy, the court affirmed the striking of Flaherty’s affidavit.

Without his affidavit saying that he disclosed his CFS to Entergy prior to April 2015, Flaherty’s discrimination claim crumbled. He conceded that he had to maintain his clearance to remain qualified for his position. He also implicitly conceded that a failure to disclose CFS would support Entergy’s conclusion that he was untrustworthy and unreliable. Without an affidavit to unwind his earlier deposition testimony, the undisputed facts supported only that conclusion. Given that finding, the court found that Flaherty was unqualified for his position and thus could not establish a prima facie case of disability discrimination.

Lessons Learned

Entergy obtained summary judgment even though Flaherty was plainly disabled and even though his unaccommodated disability arguably led to his termination. Key employer takeaways include:

  • Clearly define job prerequisites and anticipate possible alternatives that would achieve the same business result. The trust and reliability requirements that disqualified Flaherty were clearly spelled out and not susceptible to accommodation. Entergy was able to rely on them to avoid a costly trial.
  • Be skeptical and push back against factual assertions where appropriate, including by moving to strike when unexplainable contradictions appear.

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

By James L. Curtis, Mark A. Lies, II, Adam R. Young, Ilana R. Morady, and Craig B. Simonsen

Seyfarth Synopsis: The U.S. Occupational Safety and Health Administration (OSHA) has issued a standard interpretation cautioning employers on the use of headphones to listen to music on a construction site.

Many employers permit the use of headphones and music in a variety of industrial and construction settings, presumably to improve employee morale and retention. Other employers play music across the workplace with speakers and stereos, such as in a warehouse or operating room. Industry safety sources warn any benefits gained from the use of headphones in the workplace will be overshadowed by safety hazards. Specifically, headphones can present a safety hazard when operating large machinery by impeding the operator’s awareness of surroundings.

There are numerous instances of serious accidents and fatalities where employees were violating rules and wearing headphones, often while operating powered industrial trucks and other vehicles. In the warehousing environment, listening to headphones presents essentially the same risks as distracted driving. The risk is not only to the operators, but also pedestrians who may be in the nearby area. Another risk is that loose headphones can become caught in machinery or pose an electrical hazard.

In Federal OSHA’s recent standard interpretation, OSHA finds that “there is no specific OSHA regulation that prohibits the use of headphones on a construction site.” However, while the use of headphones on a construction site may be permissible at managerial discretion, such use may create or augment other hazards apart from noise. First, OSHA notes that the added decibels from headphones may cause a hazard to employee hearing and may undermine a hearing conservation program. Second, OSHA notes the related risks of distraction and inability to hear equipment, alarms, or warnings. OSHA cautions that “listening to music may produce a safety hazard by masking environmental sounds that need to be heard, especially on active construction sites where attention to moving equipment, heavy machinery, vehicle traffic, and safety warning signals may be compromised.”  OSHA further explains that “struck-by hazards are one of the four leading causes of death in construction.

OSHA has issued citations to employers following industrial accidents where employees have operated equipment (such as forklifts) while wearing headphones and have been unable to hear horns or other audio warnings. OSHA has cited the employers for failure to adequately train forklift operators or for failure to use the horn or other safety devices. Other OSHA regulations require employers to train employees about audio warning devices, for example, fire alarms, and to have the ability evacuate the workplace. Headphones can create a serious impediment to timely evacuation and result in a tragedy.

The recent standard interpretation echoes other warnings about the use of headphones in the workplace. In its “Protecting Yourself from Noise in Construction” booklet, OSHA indicates that “neither portable music player headphones nor hearing aids are substitutes for hearing protective devices.” In its “Agricultural Safety Fact Sheet,” OSHA directs employers to “instruct workers and operators not to use personal mobile phones, headphones or any items that could create a distraction”, and “never wear earbuds or headphones when working near farm vehicles and equipment.”

In addition, employers have a general duty under the Occupational Safety and Health Act to provide work environments free from any recognized hazard likely to cause serious injury or death. The guidance from OSHA is confused — OSHA advises employers to disallow headphone use where it is used in a way to create a recognized hazard. But the employees with the headphones control the volume and content. Accordingly, employers likely have no knowledge of whether employee music choices would create a hazard. OSHA’s ambivalent enforcement position leaves open the possibility that  an accident with a distracted employee using headphones could result in a General Duty Clause citation to the employer. In terms of safety and OSHA compliance, employers would be wise to limit headphone use and train employees not to use headphones or music in a way that creates a distraction or inhibits their ability to hear alarms or equipment.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Seyfarth Workplace Safety and Health (OSHA/MSHA) Team.

By Matthew Gagnon and Alexandra Oxyer

Seyfarth Synopsis: In an unusual opinion considering an issue raised by the plaintiff for the first time on appeal, the Second Circuit clarifies that unlike under the Equal Pay Act, Title VII plaintiffs need not show “equal work for unequal pay” to succeed on a pay discrimination claim. This case demonstrates that plaintiffs have options when bringing such claims and underscores the different challenges employers face under the different statutory schemes.

On December 6, 2019, the Second Circuit Court of Appeals vacated in part a summary judgment ruling that had dismissed a plaintiff’s pay equity claims against her former employer. The plaintiff had alleged, in relevant part, violations of the Equal Pay Act (“EPA”) and Title VII related to the setting of her compensation. The District Court for the Eastern District of New York dismissed her claims because she had failed to prove she performed equal work for unequal pay, as she was the only employee in her position at the company. After consideration, the Second Circuit vacated the District Court’s order related to the Title VII claim, clarified the standard for Title VII discriminatory compensation claims, and remanded the case back to the District Court for further proceedings.

Case Background

Plaintiff filed her lawsuit in 2014 alleging violations of the EPA, Title VII, the Pregnancy Discrimination Act, the whistleblower protections of the Consumer Product Safety Improvement Act, and related provisions of New York state law. In sum, Plaintiff’s complaint claimed that Defendant had paid her less because of her gender, retaliated against her when she brought forward concerns about her disparate pay and potential Consumer Product Safety Act violations, and terminated her because she was pregnant. Defendant filed a motion for summary judgment on Plaintiff’s claims in March 2017.

In March 2018, the District Court granted the motion for summary judgment. After analyzing Plaintiff’s pay discrimination allegations, the District Court held that Plaintiff’s Title VII claims, like claims brought under the EPA, required her to show “positions held by her purported male comparators [were] substantially equal to her position.” Lenzi v. Systemax, Inc., No. 18-979, 2019 WL 6646630, at *6 (2d Cir. Dec. 6, 2019) (internal citations omitted). Plaintiff could not make this showing because she was the only employee who held her job title and duties, so her Title VII claims were dismissed. The District Court further noted that Plaintiff had not presented evidence of discriminatory intent in the determination of her pay, as is also required for Title VII wage disparity claims.

Plaintiff subsequently appealed the District Court’s order to the Second Circuit. Notably, in the briefing of the summary judgment motion to the District Court, both Plaintiff and Defendant had agreed that Title VII disparate pay claims shared the same standard as EPA claims but required an additional showing of discriminatory animus; however, on appeal, Plaintiff challenged the District Court’s holding that Title VII discriminatory compensation claims, like EPA claims, required a showing of equal work for unequal pay.

The Court’s Decision

In evaluating the dismissal of Plaintiff’s Title VII claims, the Second Circuit first addressed Plaintiff’s failure to challenge Defendant’s argument at the summary judgment stage that a pay discrimination claim under Title VII required a showing that the Plaintiff’s position was substantially equal to the positions held by her purported comparators (in fact, the Plaintiff adopted this standard in her own briefing on the issue). While the Second Circuit recognized that “[s]uch a concession ordinarily precludes a party from advancing a different argument on appeal,” it ultimately decided that it would exercise its discretion to consider the Plaintiff’s later argument that such standard was not appropriate. Id.

The Second Circuit then acknowledged that one of its opinions from 1995, which held that“[a] claim of unequal pay for equal work under Title VII . . . is generally analyzed under the same standards used in an EPA claim,” is commonly used by district courts in their analyses of Title VII pay discrimination claims. Id. (quoting Tomka v. Seiler Corp., 66 F.3d 1295, 1312 (2d Cir. 1995)). The Court expressed a desire to “take this opportunity to clarify that a Title VII plaintiff alleging a discriminatory compensation practice need not establish that she performed equal work for unequal pay,” as is required by the EPA. Id. at *7 (emphasis added). While affirming that a plaintiff could bring a claim for equal work for unequal pay under Title VII if they could show a discriminatory animus behind the pay determination, the Court emphasized that such a claim was not the only kind of Title VII claim available related to pay.

The Second Circuit gave examples of several variants of disparate pay claims that could be alleged under Title VII that would not require an equal work for unequal pay showing: “[f]or example, an employer might hire a woman for a unique position in the company, but then pay her less than it would had she been male . . . [s]imilarly, if an employer used a transparently sex-biased system for wage determination, women holding jobs not equal to those held by men would be denied the right to prove that the system is a pretext for discrimination [if required to make such a showing].” Id. Ultimately, the Second Circuit rejected the notion that plaintiffs can only succeed on discriminatory pay claims under Title VII if there is an employee of the opposite sex in an equal position earning a higher rate of pay.

The Court concluded its holding by reiterating that “all Title VII requires a plaintiff to prove is that her employer ‘discriminate[d] against [her] with respect to [her] compensation . . . because of [her] . . . sex.” Id. (quoting 42 U.S.C. § 2000e-2(a)(1)). Discriminatory pay claims can be brought successfully under Title VII even if the plaintiff cannot show a purported comparator of the opposite sex earning a higher wage (provided that the challenged pay rate is not based on seniority, merit, quantity or quality of production, or any other factor besides sex). The Second Circuit then found that the Plaintiff had sufficiently shown discriminatory intent with respect to her pay and vacated the District Court’s order granting summary judgment on her Title VII claim.

Implications For Employers

The Second Circuit’s opinion is, in effect, a reaffirmation of the U.S. Supreme Court’s 1981 holding in Washington County v. Gunther. 452 U.S. 161 (1981) (“[C]laims for sex-based wage discrimination can also be brought under Title VII even though no member of the opposite sex holds an equal but higher paying job.”). However, this case serves as a good reminder that employers should not expect to rely exclusively on the fact that there is no comparator in an equal position as a defense to a pay discrimination claim. Plaintiffs in such positions have options as to how to structure their theory of the case. And the oft-repeated mantra that Title VII is to be interpreted in line with the EPA clouds important, substantive differences between those two statutory schemes. When performing pay equity audits or setting employee compensation, employers should be mindful of those differences, particularly employers with more specialized positions or smaller operations that may have only one or two employees in senior leadership roles or performing the same kind of work. Such employers may also want to check market analyses and reporting when setting compensation. This case shows how pay equity claims can be brought even where there are no purported comparators, perhaps especially when it comes to high-level or specialized positions that are unique within a company.

Please feel free to reach out with any questions to the author, your Seyfarth attorney, members of Seyfarth’s Pay Equity Group, or the Group’s co-chairs Christine Hendrickson and Annette Tyman.

By Robert A. Fisher, James M. Hlawek and Michael E. Steinberg

Seyfarth Synopsis: On November 27, 2019, the United States Court of Appeals for the First Circuit held that, under Massachusetts law, a terminated employee asserting a claim for being deprived of lost compensation in breach of the implied covenant of good faith and fair dealing must demonstrate that the lost compensation was clearly related to past services that were already performed. The Court concluded that a former executive’s implied covenant claim failed where he had made progress in achieving, but had not fully achieved the milestone that would have entitled him to additional equity compensation under his employment agreement.

Under Massachusetts law, the general rule is that at-will employees may be terminated at any time for any reason or no reason at all, and with or without notice. But what about an employee close to receiving a bonus or some form of equity compensation? Some might see terminating such an employee as inequitable under certain circumstances. Accordingly, Massachusetts courts have allowed terminated at-will employees close to receiving a bonus or other compensation to bring claims for breach of the implied covenant of good faith and fair dealing. The claim is generally limited to instances where the at-will employee is terminated without cause and where the employee has been deprived of compensation that is clearly related to services that the employee has already performed.

In its recent decision in Suzuki v. Abiomed, Inc., the First Circuit clarified the narrow scope of such implied covenant claims. The defendant, a company that designs, manufactures, and markets medical devices, hired plaintiff in April of 2010 as its vice president of Asia. In this position, the plaintiff was responsible for shepherding one of the company’s heart pumps through the Japanese regulatory approval process. The plaintiff executed an offer letter and non-disclosure agreement which provided for, among other forms of compensation, the issuance of shares of the company’s common stock, but only upon approval of the heart pumps by a Japanese regulatory agency. The documents specified that the plaintiff must be actively employed at the time of the regulatory approval to receive the equity award. The documents also made clear that the plaintiff’s employment could be terminated at any time and for any reason, subject to a 28-day written notice provision.

After significant delays in obtaining Japanese approval of the heart pumps, Abiomed fired the plaintiff. Although the plaintiff took steps towards obtaining regulatory approval for Abiomed, he had not obtained regulatory approval at the time he was fired. Abiomed, therefore, did not pay him the equity compensation. Abiomed did not obtain regulatory approval for another fifteen months after the plaintiff was fired.

The plaintiff brought suit against Abiomed in the United States District Court for the District of Massachusetts, claiming that, in not paying the equity compensation, Abiomed breached the implied covenant of good faith and fair dealing. The plaintiff’s argument was that he had worked towards regulatory approval and was entitled to be compensated for that. The district court granted summary judgment to Abiomed, concluding that the plaintiff did not have a valid implied covenant claim because he was not on the brink of earning the equity compensation at the time he was fired.

On appeal, the First Circuit first found that despite the fact that the plaintiff’s employment could only be terminated with 28 days written notice, the plaintiff was still an at-will employee. Thus, the plaintiff could bring an implied covenant claim if he could establish that he had been deprived of compensation clearly related to services that had already been performed. However, the court found that, while the plaintiff did some groundwork to achieve regulatory approval, Abiomed still had to do significant work — fifteen months’ worth of work — after the plaintiff’s discharge to obtain approval. The court further found significant that regulatory approval was not inevitable when the plaintiff was fired. In short, the equity compensation at issue was for obtaining regulatory approval, and the ultimate achievement of regulatory approval was not clearly related to services that the plaintiff had performed before he was fired. Therefore, the First Circuit agreed with the district court in ruling against the plaintiff.

This decision serves as a reminder that employees who are fired while on the brink of receiving a bonus or other compensation may have a claim under the implied covenant of good faith and fair dealing, but only under limited circumstances. To avoid such a claim, employers who fire an employee on the brink of receiving bonuses or similar compensation should carefully review whether the employee may have earned the compensation based on services that the employee has already performed. While the plaintiff in Suzuki did not have a viable claim because achievement of the compensation milestone was not inevitable when he was fired, the result may have been different if achievement of the milestone had been inevitable or imminent at that time.

Tags: First Circuit, equity compensation,

 

 

By Robert A. Fisher, James M. Hlawek and Michael E. Steinberg

 Seyfarth Synopsis: On November 27, 2019, the United States Court of Appeals for the First Circuit held that, under Massachusetts law, a terminated employee asserting a claim for being deprived of lost compensation in breach of the implied covenant of good faith and fair dealing must demonstrate that the lost compensation was clearly related to past services that were already performed. The Court concluded that a former executive’s implied covenant claim failed where he had make progress in achieving, but had not fully achieved the milestone that would have entitled him to additional equity compensation under his employment agreement.

Under Massachusetts law, the general rule is that at-will employees may be terminated at any time for any reason or no reason at all, and with or without notice. But what about an employee close to receiving a bonus or some form of equity compensation? Some might see terminating such an employee as inequitable under certain circumstances. Accordingly, Massachusetts courts have allowed terminated at-will employees close to receiving a bonus or other compensation to bring claims for breach of the implied covenant of good faith and fair dealing. The claim is generally limited to instances where the at-will employee is terminated without cause and where the employee has been deprived of compensation that is clearly related to services that the employee has already performed.

In its recent decision in Suzuki v. Abiomed, Inc., the First Circuit clarified the narrow scope of such implied covenant claims. The defendant, a company that designs, manufactures, and markets medical devices, hired plaintiff in April of 2010 as its vice president of Asia. In this position, the plaintiff was responsible for shepherding one of the company’s heart pumps through the Japanese regulatory approval process. The plaintiff executed an offer letter and non-disclosure agreement which provided for, among other forms of compensation, the issuance of shares of the company’s common stock, but only upon approval of the heart pumps by a Japanese regulatory agency. The documents specified that the plaintiff must be actively employed at the time of the regulatory approval to receive the equity award. The documents also made clear that the plaintiff’s employment could be terminated at any time and for any reason, subject to a 28-day written notice provision.

After significant delays in obtaining Japanese approval of the heart pumps, Abiomed fired the plaintiff. Although the plaintiff took steps towards obtaining regulatory approval for Abiomed, he had not obtained regulatory approval at the time he was fired. Abiomed, therefore, did not pay him the equity compensation. Abiomed did not obtain regulatory approval for another fifteen months after the plaintiff was fired.

The plaintiff brought suit against Abiomed in the United States District Court for the District of Massachusetts, claiming that, in not paying the equity compensation, Abiomed breached the implied covenant of good faith and fair dealing. The plaintiff’s argument was that he had worked towards regulatory approval and was entitled to be compensated for that. The district court granted summary judgment to Abiomed, concluding that the plaintiff did not have a valid implied covenant claim because he was not on the brink of earning the equity compensation at the time he was fired.

On appeal, the First Circuit first found that despite the fact that the plaintiff’s employment could only be terminated with 28 days written notice, the plaintiff was still an at-will employee. Thus, the plaintiff could bring an implied covenant claim if he could establish that he had been deprived of compensation clearly related to services that had already been performed. However, the court found that, while the plaintiff did some groundwork to achieve regulatory approval, Abiomed still had to do significant work — fifteen months’ worth of work — after the plaintiff’s discharge to obtain approval. The court further found significant that regulatory approval was not inevitable when the plaintiff was fired. In short, the equity compensation at issue was for obtaining regulatory approval, and the ultimate achievement of regulatory approval was not clearly related to services that the plaintiff had performed before he was fired. Therefore, the First Circuit agreed with the district court in ruling against the plaintiff.

This decision serves as a reminder that employees who are fired while on the brink of receiving a bonus or other compensation may have a claim under the implied covenant of good faith and fair dealing, but only under limited circumstances. To avoid such a claim, employers who fire an employee on the brink of receiving bonuses or similar compensation should carefully review whether the employee may have earned the compensation based on services that the employee has already performed. While the plaintiff in Suzuki did not have a viable claim because achievement of the compensation milestone was not inevitable when he was fired, the result may have been different if achievement of the milestone had been inevitable or imminent at that time.

 

By Condon McGlothlen, Marc Jacobs, and Adam R. Young

Seyfarth Synopsis:  Earlier this month, Governor Pritzker signed into law SB 1557, revising the Recreational Cannabis Law to expand permissible marijuana testing and related adverse action.

The Original Legalization Bill As Enacted

The Illinois Cannabis Regulation and Tax Act (410 ILCS 705) (the “Legalization Act”) legalizes recreational cannabis for Illinois adults starting January 1, 2020. The Legalization Act specifically allows Illinois employers to enforce “reasonable zero tolerance or drug free workplace policies, or employment policies concerning drug testing, smoking, consumption, storage, or use of cannabis in the workplace or while on call provided that the policy is applied in a nondiscriminatory manner.” The Act also permits employers to prohibit employees from being under the influence of or using cannabis in the employer’s workplace or while on call. Further, the Act (i) allows employers to discipline or terminate an employee who violates the employer’s workplace drug policy, and (ii) specifically insulates employers from liability for disciplining or terminating employees based on the employer’s good faith belief that the employee was either impaired at work (as a result of using cannabis) or under the influence of cannabis while at work.

However, when the Legalization Act was passed in November, it threatened to increase exposure for Illinois employers who test for marijuana and act on a positive test result. First, the Legalization Act created a potential cause of action for applicants who test positive for marijuana at the post-offer, pre-employment stage, and are therefore rejected for hire. The Act expressly amended the Illinois Right to Privacy in the Workplace Act, which prohibits discrimination against employees for their use of “lawful products” outside of work (defined as lawful products under state law), to include cannabis and marijuana. Because applicants have not started working, applicant testing could only detect marijuana use outside the workplace. Return-to-duty drug testing raised similar issues, typically detecting off duty drug use during a leave.

Second, employers who test current employees, e.g., post-accident or based on reasonable suspicion, faced new exposure if a discharged employee claimed the employer lacked a “good faith belief” that the employee had been impaired by or under the influence of cannabis.  For example, if the employer discharged some employees who tested positive but not others, a discharged employee could claim the employer lacked a “good faith belief” regarding impairment. Alternatively, because there currently is no legally or medically accepted definition of what constitutes “impairment” (or being “under the influence” of marijuana), the former employee could assert: (i) he or she was not in fact impaired at work; (ii) a positive test result alone cannot prove otherwise; and (iii) the employer still acted based solely on the test result, thus showing it lacked a good faith belief regarding the employee’s impairment.

Eleventh Hour Amendments Protect Employer Drug Testing

With the January 1, 2020 deadline approaching, Illinois business community representatives raised numerous concerns with lawmakers and proposed revising the Act to clarify permissible drug testing and limit possible causes of action against employers. On December 4, 2019, Governor Pritzker signed amendments into law that (among other things) provide:

Nothing in this Act shall be construed to create or imply a cause of action for any person against an employer for:

(1) actions taken pursuant to an employer’s reasonable workplace drug policy, including but not limited to subjecting an employee or applicant to reasonable drug and alcohol testing, reasonable and nondiscriminatory random drug testing, and discipline, termination of employment, or withdrawal of a job offer due to a failure of a drug test.

P.A. 101-0593, Sec. 705-10(50)(e)(1). This new provision is separate from the Act’s safe harbor for decisions based on the employer’s good faith belief that an employee was impaired or under the influence of marijuana while performing his or her job duties.

With regard to pre-employment, post-offer testing, the Legalization Act amendments seemingly eliminate employer liability for revoking an offer due to a positive marijuana result. The Legalization Act as amended explicitly permits “withdrawal of a job offer due to a failure of a drug test.” Section 705-10(50)(e)(1). Potential employer liability under the Right to Privacy in the Workplace Act for rejecting applicants who test marijuana-positive also effectively has been eliminated. While the original law amended the Privacy in the Workplace Act to permit discrimination claims founded on the use of “lawful products” (e.g. cannabis) outside work, the Privacy in the Workplace Act specifically invokes 705-10(50)(e)(1) of the Legalization Act. With that section amended, Privacy in the Workplace Act claims related to marijuana testing should no longer be viable.

For post-accident, random, or other forms of current employee testing, the amended Legalization Act better protects employer interests by expressly limiting causes of action based on discipline or termination on account of a failed drug test. However, the statute still contains language regarding an employer’s “good faith belief”. Employees may therefore still pursue litigation alleging such a belief is required for lawful termination, and that the employer lacked this requisite belief in discharging the individual.

Employer Takeaways

Given imminent cannabis legalization, many Illinois employers are presently updating their policies and procedures.  Other states’ experience suggests Illinois employers may soon confront increased recreational marijuana usage, as well as additional workplace marijuana possession, use, and impairment.  Employers should consult outside counsel for help in revising policies and addressing new marijuana challenges in the workplace.

Medical marijuana developments present another set of challenges for employers in many states, Illinois included. Those issues are not impacted by the Legalization Act as amended.

The Illinois amendments both clarify and expand employer options by comparison with the original Legalization Act. Fundamental questions remain across the country, however, about how employers should view marijuana and its effect on work. Is widespread marijuana use in one form or another inevitable, in which case should employers continue investing the time, effort, and expense associated with rigorous pre-employment and employee testing efforts? Or is that question misguided because it ignores employer needs (safety and productivity among others) to test for other drugs no matter what happens with marijuana-related developments? Either way, recent marijuana developments and related uncertainty about developments to come are forcing companies to re-think when to test, whom to test (what positions or job categories), what to test for, and how to make sure decisions based on test results comply with the varied but generally expanding protections for both recreational and medical marijuana use.

In a sense, Illinois employers caught a break with the Legalization Act amendments —  a break not only from the original Legalization Act, but also from a larger state law trend towards always requiring employers to prove impairment to justify adverse action based on marijuana use. This follows from the widely recognized view that  a marijuana-positive result by itself says virtually nothing about impairment at work. Though it may no longer be required in Illinois, a best practice for employers who test current employees for marijuana is to establish a strong record of impairment independent of a marijuana-positive result. That would include thorough, contemporaneous documentation of the reasons employees are sent for reasonable suspicion testing. It could include an accident investigation report that rules out non-drug-related causes where circumstances warrant that conclusion.

Marijuana testing may remain a valuable tool for helping employers maximize productivity, reduce turnover, and avoid workplace accidents and injuries. But it is only one tool, and one met with skepticism if not outright antipathy in a growing number of jurisdictions. For now, Illinois is no longer among those. In this uniquely evolving area (many would say industry), however, change is the only agreed upon constant.

For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA), or Cannabis Law Practice Team, or the Employment Law Practice Group.