By Randel K. Johnson, Michael T. Dunn, and Mark A. Katzoff

Seyfarth Synopsis: On August 23, the Securities and Exchange Commission (the “Commission”), in a release entitled “Modernization of Regulation S- K Items 101, 103, and 105”, proposed changes to Regulation S-K significantly revising disclosure requirements that registrants are required to follow, including those relating to “human capital,” the focus of this blog.  84 Fed. Reg. 44358.

While the text of the proposed regulation itself appear to be reasonable in scope, pending further analysis, it is important that this language be read against ongoing developments in this area and the disclosure questions in the proposed rules with respect to which the Commission has solicited public comments as part of the rulemaking process. Without close attention by the business community to the rulemaking process, it’s possible that the disclosure requirements could be expanded, perhaps significantly, beyond the disclosure currently contemplated by the proposed rules.

There has been growing pressure to require companies, similar to that in the so-called ESG (environmental, social, and governance) areas, to disclose increasing amounts of information with regard to their workforces.  See, for example the July 6, 2017 petition to the SEC by the Human Capital Management Coalition indicating that necessary categories of disclosure should include workforce demographics; workforce stability; workforce composition; workforce skills and capabilities; workforce culture and improvement; workforce health and safety; workforce productivity; human rights commitments and their implementation; and workforce composition and incentives.  The International Organization for Standardization has issued guidelines setting out even broader expectations for companies to meet.  See ISO 30414.

The proposed regulation discusses much of this background but adopts a principles-based approach in lieu of a prescriptive test,  by requiring disclosure, to the extent “material,” of  “A description of the registrant’s human capital resources, including in such description any human capital measures or objectives that management focuses on in managing the business (such as, depending on the nature of the registrant’s business and workforce, measures or objectives that address the attraction, development, and retention of personnel.”)  See the proposed new Item 101(c)(2)(ii) of Regulation S-K.  Importantly, this formulation retains the requirement for materiality that is generally applicable to most public company disclosure requirements under Regulation S-K specifically and the federal securities laws generally, and leaves to the registrant a degree of judgment on how to appropriately respond.  As it is the registrant which intimately knows its business and how its workforce underpins the success of that business, this seems an appropriate approach.

However, Commission requests for comment numbers 21 through 24 in particular, open the door to whether more prescriptive requirements should be included in the final rule and whether or not generally the test for disclosure should be more encompassing.   If one reads the record discussed in the proposed rules and the comments submitted, there is no question, as night follows day, that certain groups will be pressing for much broader and intrusive disclosure requirements, see e.g., footnotes 17, 166 and 172.  Without here going into how detailed public information about workforce profiles and management policies could be misused by competitors or the plaintiffs’ bar, and possibly lead to an inundation of information which buries useful information for investors, see, generally, “Essential Information: Modernizing Our Corporate Disclosure System”, US Chamber, Center for Capital Markets, it will be important for the business community to participate in this rulemaking and make its views known to offset what will likely be many comments forcefully advocating for broader, prescriptive disclosure.

The comment period closes October 22.

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 Labor & Employment, Workplace Policies and Handbooks Teams, or Securities Litigation Team.

By Annette Tyman and Michael L. Childers

Seyfarth Synopsis: Last week the EEOC submitted a status report in the litigation concerning the EEO-1 Component 2 submissions for 2017 and 2018.  While employers scramble to meet the aggressive September 30th deadline imposed by the Court, the EEOC notified the Court that the portal would remain open after September 30th and that it “will continue to accept data as long as the Court’s order is in effect.” 

As we have previously reported, the Court required the EEOC to collect two years of data by September 30, 2019 and ordered that the data collection would not be deemed to be complete until a certain threshold number employers (i.e., the percentage of filers equals or exceeds the average percentage of filers for the last four EEO-1 reporting cycles) submit the required reports.  As of September 25, 2019, only 39.7% of eligible filers have submitted their reports.  Accordingly, the EEOC informed the court that the portal will remain open until the Court-ordered target response rate is reached. While the portal will remain open and will accept reports after September 30, the EEOC encourages all filers to submit their EEO-1 Component 2 reports as soon as possible.

We will continue to update you on this issue as more information becomes available.

If you would like further information, please contact Annette Tyman at atyman@seyfarth.com or Michael Childers at mchilders@seyfarth.com.

 

 

 

 

By Alexander J. Passantino

Seyfarth Synopsis: The U.S. Department of Labor announced its final rule updating and revising the regulations issued under the Fair Labor Standards Act (FLSA) regarding the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA’s minimum wage and overtime pay requirements. The Department simultaneously announced its formal rescission of the 2016 final rule.

The final rule updates the salary and compensation levels needed for workers to be exempt:

  • The standard salary level has been increased from the currently-enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker). The Department is updating the standard salary level set in 2004 by applying to current data the same method used to set that level in 2004—i.e., by looking at the 20th percentile of earnings of full-time salaried workers in the lowest-wage census region (then and now the South), and/or in the retail sector nationwide.
  • The total annual compensation level required for highly compensated employees has been increased from the currently-enforced level of $100,000 to $107,432 per year. This compensation level equals the earnings of the 80th percentile of full-time salaried workers nationally.
  • Employers are permitted to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level. If an employee does not earn enough in nondiscretionary bonus or incentive payments in a given year (52-week period) to retain his or her exempt status, the Department permits the employer to make a “catch-up” payment within one pay period of the end of the 52-week period.

The effective date for the changes is January 1, 2020. The Department rejected calls to automatically update the salary levels, instead expressing its intention to update the standard salary and highly compensate employee total annual compensation levels more regularly in the future through notice-and-comment rulemaking.

In addition, the final rule updates the special salary levels for employees in Puerto Rico, the U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands ($455 per week), as well as the special base rate for employees in the motion picture producing industry ($1,043 per week).

The final rule does not:

  • change the regulatory text for primary duty;
  • revise the tests for the duties required of executive, administrative, or professional employees;
  • amend the salary basis test;
  • apply any new compensation standards to doctors, lawyers, teachers, or outside sales employees; or
  • make any changes to the computer employee exemption (other than the salary increase, as may be applicable).

Employers will need to meet the new levels by the effective date and should begin making preparations to do so. In the meantime, various groups–including workers’ advocates and others purporting to represent public interests–previously have threatened to pursue litigation to enjoin the final rule from going into effect. We will keep you updated of further developments.

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

 

By Kevin Fritz and Latoya Liang

Seyfarth Synopsis: In a recent decision, the Seventh Circuit agreed with the Fourth Circuit in holding that a plaintiff who is legally barred from using a credit union’s services cannot demonstrate an injury in fact that can support standing to sue.  

The plaintiff in Carello v. Aurora Policeman Credit Union, a blind man, sued the Aurora Policeman Credit Union under Title III of the Americans with Disabilities Act (ADA) alleging its website was not accessible to him through screen reader software. The plaintiff alleged both dignitary and informational harm.  The District Court dismissed the case for lack of standing. On appeal, the Seventh Circuit Court of Appeals affirmed, finding neither of these alleged harms satisfied the injury-in-fact requirement to confer standing.

The Court found that the plaintiff could never be a member of the Credit Union because the Illinois Credit Act requires that membership to a credit union be only open to groups of people who share a “common bond.” Accordingly, the Aurora Policeman Credit Union limits its membership to specified local city and county employees, of which the plaintiff was neither.  Instead, the plaintiff was a “tester,” visiting websites solely for the purpose of testing (and suing for) ADA (non)compliance.

While the Seventh Circuit said that dignitary harm can sometimes be a cognizable injury, it concluded that not all dignitary harms are sufficiently concrete to be injuries in fact to confer standing to sue.  The Seventh Circuit said Illinois law prevented the plaintiff’s dignitary harm from ever materializing into a concrete injury because the Illinois Credit Act was a neutral legal barrier, making it impossible for the plaintiff to ever be a customer, and eliminating the personal impact of the injury.  Simply stated, without a connection between the plaintiff and the Credit Union that distinguished him from other members of the public, the plaintiff’s harm was too abstract.

The Seventh Circuit also rejected the argument that that the Credit Union caused the plaintiff informational harm by failing to make the text on its website accessible to his screen reader.  The Court noted that an informational injury only occurs when a defendant refuses to provide a plaintiff with information that a law entitles him to obtain and review for some substantive purpose.  Here, the plaintiff was only complaining about not being able to easily access the information which is publicly available on the website.

The Seventh Circuit’s position echoes two Fourth Circuit decisions which we reported on here.  While plaintiffs will undoubtedly try to limit the significance of these cases, they clearly send a message that judges in these circuits are giving website accessibility cases a hard look before allowing them to move forward.  The plaintiff’s bar will likely respond by avoiding these jurisdictions and filing in more plaintiff-friendly jurisdictions where some district courts have held that the inability obtain information about a business that a plaintiff could never actually patronize is an injury-in-fact sufficient to establish standing.

Edited by: Minh Vu and Kristina Launey

By Dion L. Beatty and Erin Dougherty Foley

Seyfarth Synopsis: In affirming summary judgment in favor of AutoZone, the Second Circuit rules that a sales associate did not provide enough evidence to satisfy her burden of proof for sex discrimination, retaliation and hostile work environment. This decision is significant because the court agreed that it was proper for a judge to exclude the former employee’s flawed deposition testimony as evidence.

Can an employer terminate someone for making crude comments made to a co-worker? In the Second Circuit thankfully the answer is still “Yes.” In Bentley v. AutoZoners, LLC, AutoZone Northeast, LLC, Case No. 18-2441, the Second Circuit affirmed the district court’s grant of summary judgment against a former AutoZone employee’s state law claims of sex discrimination, retaliation, and hostile work environment.

The plaintiff worked as a sales associate and was fired after an investigation revealed that she had made very crude comments to another employee. There was no dispute over the comments she made, which were against company policy. She had also claimed that the employee she made the crude comments to had sexually harassed her and also that he was her supervisor. Both she and the co-worker were terminated. The court rejected the argument that he was her supervisor, eliminating the claim that AutoZone had vicarious liability for his actions. In a summary judgment motion, Bentley argued that her deposition testimony created a dispute of facts that should be tried in court.

The district court judge granted summary judgment in favor of AutoZone on the grounds that her deposition testimony was so contradictory and flawed that it essentially could not be used for evidence to dispute facts and that absent the deposition, she could not meet her burden to show discrimination.

The Second Circuit affirmed the lower court’s decision and held that all of plaintiff’s claims failed on the merits, and that her deposition testimony could not be used as evidence to create a factual dispute. The Second Circuit also held that Bentley’s claims failed because she could not demonstrate that her firing was pretextual, she could not show a hostile work environment because the employee who made the comments to her was not a “supervisor” and there was no evidence that the employer knew about these comments before its investigation one month before her firing and following the investigation they promptly fired the employee who made the comments to her. The court also found that plaintiff’s deposition testimony could not be used as evidence that AutoZone knew about sexist comments being made to her before its investigation because it was too contradictory and inconsistent.

Here are some key takeaways from this case:

  • In the Second Circuit, deposition testimony that is contradictory and inconsistent can be excluded as evidence in considering summary judgment.
  • Proving pretext requires more than just questioning the timing of a discharge or the severity of the misconduct that warranted the discharge.
  • The burden for what qualifies as a “supervisor” is much higher than directing an employee’s work. That person must have the ability to make tangible employment actions against an employee.

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

 

By Benjamin D. Briggs, Joshua M. HendersonPatrick D. JoyceAdam R. Young, and Craig B. Simonsen

Seyfarth Synopsis:  The Nanotechnology Research Center (NTRC), part of the National Institute for Occupational Safety and Health (NIOSH), has identified new safety hazards from the expanding nanotechnology industry.

We have previously blogged on future issues related to the safety of automation and technology in the workplace, including, National Safety Council Congress: Executive Forum Industry 4.0 – EHS in the Future of the Workplace, Future Enterprise – Workplace Safety Compliance Comes to the Forefront for Expanding Healthcare IndustryA Global Perspective on the Future of Wearable Technology, and Robotics, Automation, and Employee Safety for the Future Employer.

One of the potential safety issues facing employers relates to the use of nanomaterials and processes involving nanotechnology in the workplace. In a recent publication  (NIOSH Publication Number 2019-147, August 2019), the NTRC summarized its research aimed at understanding the potential effects on human health of exposure to engineered nanomaterials and seeking to develop methods to control or eliminate exposures.

According to NIOSH, nanoparticles are extremely small particles (between 1 and 100 nanometers, 10-9 m) that are designed to have certain new or unique characteristics, like strength, elasticity, or reactivity.  The concept is that these new and unique characteristics or properties make advanced materials and products possible.

The U.S. Occupational Safety and Health Administration (OSHA) has published a Fact Sheet, Nanotechnology: Working Safely with Nanomaterials (OSHA FS-3634 – 2013) to educate the public on safety hazards related to nanomaterials.  The Fact Sheet indicates that “workers who use nanotechnology in research or production processes may be exposed to nanomaterials through inhalation, skin contact, or ingestion.  The “fact sheet” provides basic information to workers and employers on the most current understanding of potential hazards associated with this rapidly-developing technology and highlights measures to control exposure to nanomaterials in the workplace.”

The OSHA Fact Sheet notes that “some examples of workplaces that may use nanomaterials include chemical or pharmaceutical laboratories or plants, manufacturing facilities, medical offices or hospitals, and construction sites.”

The NTRC Publication focuses on these areas from an occupational safety and health perspective to assist industry in preparing for the future by:

  • Increasing understanding of potential health risks to workers making and using nanomaterials.
  • Preventing occupational exposures to nanomaterials.
  • Evaluating potential worker health risks from advanced material and manufacturing processes.

For instance, the NTRC prioritizes the growing number of engineered nanomaterials for laboratory and field research, focusing on the ones that have the greatest potential for exposure and harm to workers.  NTRC conducts field investigations and epidemiological studies for a realistic understanding of exposure and risks to nanomaterial workers.  It also issues recommendations on how to use engineering controls and personal protective equipment to mitigate exposure to engineered nanomaterials, along with providing nanomaterial businesses with “guidance” on how to keep workers safe.

In that continuing effort, the NTRC recently published its “Continuing to Protect the Nanomaterial Workforce: NIOSH Nanotechnology Research Plan for 2018-2025.” (NIOSH Publication Number 2019-116, January 2019).  This Plan seeks to be “a roadmap to advance (1) understanding of nanotechnology-related toxicology and workplace exposures and (2) implementation of appropriate risk management practices during the discovery, development, and commercialization of engineered nanomaterials along their product lifecycle.”

Employer Takeaway

As we continue to move boldly into the future of nanotechnology, industries must make sure employees are knowledgeable and trained to work safely with these materials and the related processes and machines.  Company policies and training materials must be updated to adjust to these new hazards.

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 Workplace Policies and Handbooks Teams.

By Michael Tamvakologos and Elizabeth Tan

Seyfarth Synopsis: An enforceable restraint of trade can be a key business asset, giving an employer time to recover when a senior employee has left the business for a competitor. Like a good insurance policy, it’s a big relief to have it when you need it.

Australian law regarding restraints of trade has its history in 19th Century England and the prevailing concerns of that time.  Of course the law has developed incrementally since then. However, by and large, an employee restraint protects certain interests within defined geographical boundaries such as a city, state or country.  This made sense in a bricks and mortar world of commerce, but how can employers protect their interests in the modern digital economy?

We have worked with a range of clients to protect their interests across borders. Novel thinking is required to draft employment restraints so that they are effective within the established legal framework.  Our Australian Partners have litigated hundreds of restraint of trade cases and have developed a deep understanding of the issues and what it takes to win.  We share some thoughts below:

  1. Ensure restraints protect the right cyber micro-markets

Cyber-markets can be broken down into many possible divisions: by country location, product or service, individual seller/retailer website, personal characteristics of the consumer (age, gender, occupation, hobbies) among other things. What this means is there are sections within any market which a departing employee may lawfully target which will not affect an employer’s current business.  Say, for example, an employer operates an online gambling business for rugby and AFL which serves clients in Australian capital cities but does not offer services for online horse racing in the UK.  A departing employee might be able to set up a competing website, also operating geographically from Australia, to offer online gambling in UK horse racing. The cyber micro-markets are different, so the two companies are not competing in that market.  But there is room for a restraint to work in areas of overlap subject to the terms of the restraint covering the correct cyber micro-markets.

  1. Confining an employer’s cyber-trade interest to its client list

Where an employer provides a range of services in a cyber micro-market, the most efficient and clear way to protect its interests – for example, the legitimate interest of client connections, may be naming particular clients in a market, along with other appropriate terms.  This type of drafting can be effective to protect relationships built with particular clients situated within defined boundaries.

  1. Enforcing cyber-market restraints where an employee engages in cyber-trading within the boundaries of an enforceable geographic restraint

Essentially, this means that an employer who reasonably restrains employees by geographical restraints is to be entitled to have this capture cyber-business within the geographical restraint.  For example, an employer can protect its interest in client connections regarding their telemedicine counselling services provided to public and private hospitals in, say, Sydney and Melbourne against former employees providing competing services to customers in these locations for a certain period of time, but would not be entitled to restrain a former employee from providing the same services to patients in aged-care homes in Perth, Adelaide or the United States.  A restraint will be effective so long as it is well drafted and ensures that providing services to clients through the internet within this geographic boundary is prohibited.

The above framework for drafting restraints supports the following public policy benefits:

  • Ensuring a level of trade and (not unfair) competition while offering reasonable protection of an employer’s legitimate interests; and
  • Allowing markets to grow and prosper for the benefit of consumers.

Keep enforcement front of mind where cross-border litigation is a possibility

A cyber-restraint, like the internet itself, is a global construct.  But courts are country and state based and their jurisdiction is usually limited by geography.  That made sense when most trade was local but can be problematic when trying to enforce a restraint across borders.

A 2017 decision of the Western Australia Supreme Court provides an example.  Naiad, a U.S. employer sought an interlocutory injunction to restrain a defecting employee from operating a competing business in Western Australia. After grappling with the applicable law and jurisdiction, the Court concluded that the reasonableness of the restraint was governed by US (Connecticut) legal principles (given particular terms of the contract) but the grant of an injunction was governed by Western Australian law.

The situation is complicated because some countries (for example, Australia and the United Kingdom) have arrangements in place to recognise each other’s Court judgments and orders meaning that international litigation encounters less problems.  But this is not so as between many other countries.  The upshot is that it is important to consider how a restraint term will be enforced up front. Otherwise, there may be a right but no real way to achieve a remedy.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Labor & Employment or International Employment Law Teams.

By Benjamin D. Briggs, Brent I. ClarkIlana R. Morady and Craig B. Simonsen

Seyfarth Synopsis: The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) published this week a notice of proposed rulemaking (NPRM) on changes to “hours of service” (HOS) rules to “increase safety on America’s roadways.”  84 FR 44190 (Aug. 22, 2019).  The proposal, if adopted, would update existing regulations for commercial motor vehicle (CMV) drivers.  

FMCSA’s proposed rule– which is designed to alleviate “unnecessary burdens” placed on drivers while maintaining safety — suggests five “key revisions” to the existing HOS rules:

  • The Agency proposes to change when drivers need to take their 30-minute break. Instead of requiring the break in the first eight hours of on-duty time, the agency has proposed requiring the break within the first eight hours of drive time, offering drivers more flexibility in its use.
  • The Agency proposes to modify the sleeper-berth exception to allow drivers to split their required 10 hours off duty into two periods: one period of at least seven consecutive hours in the sleeper berth and the other period of not less than two consecutive hours, either off duty or in the sleeper berth. Neither period would count against the driver’s 14‑hour driving window.  The proposal provides this illustration: a driver could decide after taking a 3-hour break (or any off-duty or sleeper berth break of at least 2 consecutive hours) [and] pair it with a sleeper berth break of 7 hours, (thus totaling 10 hours off duty).
  • The Agency proposes to allow one off-duty break of at least 30 minutes, but not more than three hours, that would pause a truck driver’s 14-hour driving window, provided the driver takes 10 consecutive hours off-duty at the end of the work shift.
  • The Agency proposes allowing drivers to extend their 14-hour on-duty period by up to two hours in the event of adverse conditions, such as weather or congestion.
  • The Agency proposes a change to the short-haul exception available to certain commercial drivers by lengthening the drivers’ maximum on‑duty period from 12 to 14 hours and extending the distance limit within which the driver may operate from 100 air miles to 150 air miles.

The public comment period will be open for 45 days, until October 7, 2019.

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) TeamWorkplace Counseling & Solutions Team, or the Workplace Policies and Handbooks Team.

By Linda C. Schoonmaker and Brian A. Wadsworth

Seyfarth Synopsis: In affirming summary judgment in favor of the defendant in an Family and Medical Leave Act (FMLA) interference and retaliation case, the Fifth Circuit reinforced the importance of documenting performance issues and following internal policies. This case serves as a good reminder for employers to continue to document performance issues and follow or, if necessary, revise internal company policies.

In Tatum v. Southern Co. Svcs, Inc., Cause No. 18-40775, the Fifth Circuit affirmed the district court’s grant of summary judgment against a former employee’s claims of interference and retaliation under the FMLA.

Plaintiff Brandon Tatum worked as an operations technician at Defendant Southern Co. Svcs. Inc.’s biomass power generation facility. As early as 2013, Southern began noting issues with his work performance. Namely, his lack of professionalism in interacting with his supervisors and colleagues. Over a number of years, Southern documented Tatum’s inappropriate behavior, which included the use of profanity, repeatedly interrupting safety meetings, and making sarcastic comments to his co-workers. When Tatum’s behavior reached a crescendo, Southern’s plant manager warned Tatum that a future confrontation with a co-worker could lead to his termination. Southern’s plant manager also contacted human resources to “discuss escalating Tatum’s discipline level.”

After this censure, Tatum attended a doctor’s appointment. Tatum learned that his blood pressure was dangerously high and his doctor instructed him to cease work until his blood pressure returned to normal. Tatum informed Southern of this instruction. Later that day, Tatum also informed Southern that he had observed a co-worker create a potentially fatal safety risk approximately one month earlier and included pictures of this risk. Tatum had previously boasted to a co-worker that these photographs of a potentially fatal security risk constituted “[j]ob security” for Tatum.

Southern subsequently informed Tatum that he was eligible for FMLA leave, but then terminated him for his failure to reform his behavior or to timely report the safety concern he raised and documented with photographs.

In affirming summary judgment in favor of Southern, the Fifth Circuit found that Southern had stated a legitimate, nondiscriminatory reason for his termination and that Tatum did not present evidence of pretext. The Court noted that Southern had provided Tatum with “years of counseling and coaching by his supervisors,” but that his behavior did not improve. In addition, he also delayed in reporting a potentially fatal safety risk for more than a month. Similarly, Tatum could not demonstrate pretext based on an assertion that two promotions during his tenure with Southern controverted Southern’s documenting of his improper behavior. To the contrary, the Court found that Southern “unsurprisingly fired him” when he “refused to correct his behavior … [or] disclose a safety concern in a timely manner.”

The Court also disagreed with Tatum’s claim that Southern denied him the same opportunities as other employees. The two other employees who also witnessed the potentially fatal safety risk only received training, not termination. Unconvinced by Tatum’s argument, the Court noted that Southern did not have to be objectively correct in assessing whether Tatum was purposely dishonest about his delay in reporting the safety violation, it only had to have a good-faith belief that dishonesty existed. Southern met this standard when one of its employee’s testified that Tatum claimed that he kept the photographs of the violation for “[j]ob security.”

Lastly, the Court looked at Southern’s internal policies and disagreed with Tatum’s argument that Southern failed to follow such policies by not “hearing his side of the story.” The Court found that there was no internal “policy guaranteeing an employee the right to be heard before termination.” To the contrary, Southern’s policies provided that it could terminate an employee “at any time for serious infractions ….” Thus, Southern did not violate any of its policies in terminating Tatum.

Takeaways

While the Fifth Circuit does not break any new ground in Tatum, it does reinforce a few key issues that employers should remain cognizant of:

  • Always document performance issues, even if they are not significant enough to warrant immediate action.
  • Follow relevant internal company policies and, if they are not consistent with the manner in which the company conducts business, revise and update those policies to accurate reflect the way in which the company conducts business.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Labor & Employment Team.

By Lennon B. Haas and Kevin M. Young

Seyfarth Synopsis: In Sellars v. CRST Expedited, Inc. Case No. C15-117-LTS (July 15, 2019), the Northern District of Iowa held that employer responses to sexual harassment complaints need not deter harassment by other employees, where the employer lacks notice that those other employees might engage in harassing behavior.

Background

CRST Expedited, Inc. is a long-haul trucking company with more than 3,000 drivers. Two drivers staff each truck. One person drives while the other rests. When drivers join CRST, “lead drivers” train rookies, who become “co-drivers” after completing training. At new driver orientation, CRST provides new drivers copies of its written policies prohibiting sexual harassment and retaliation and trains them on those policies. Those policies also outline available reporting mechanisms, and detail how CRST will respond to complaints.

The three women who filed the case worked for CRST as drivers. Each alleged that she experienced multiple episodes of harassment from multiple different lead drivers. Each complained to CRST. When they did so, CRST followed its policy by, among other things, assigning them to work with a new lead driver who had not been accused of harassment and ensuring that the alleged harasser would not be paired with another female driver. The eventual plaintiffs alleged, however, that some of the new lead drivers with whom they were paired harassed them as well.

All three women ultimately left CRST and later joined together to sue on behalf of similarly situated female truck drivers. They asserted hostile work environment, retaliation, and constructive discharge claims on behalf of the class and as individuals. Because it decertified the class in a previous order, the Sellars court only addressed the individual plaintiffs’ claims.

The Court’s Analysis

The three Plaintiffs file suit under Title VII, which prohibits sex-based discrimination that creates a hostile or abusive work environment. To prevail on such a claim, a plaintiff must establish five elements. This case turned on the element requiring a plaintiff to show that her employer “knew or should have known of the harassment and failed to take prompt and effective remedial action.”

Plaintiffs first tried to show that CRST had constructive knowledge of their harassment by pointing to prior sexual harassment lawsuits against the Company, and one employee’s suggestion that CRST install cameras on its trucks. The court rejected this argument, reasoning that past harassment complaints cannot speak to an employer’s knowledge of current incidents unless the past and current occurrences involve the same alleged harassers. Employers need not foresee employee misconduct, the court noted, absent some indication it would occur.

Plaintiffs also argued that CRST’s response to their complaints was inadequate because the Company failed to prevent future harassment. The court disagreed, finding it significant that after Plaintiffs complained, CRST followed its policy by (1) promptly removing them from the truck with the alleged harasser ; (2) marking the alleged harasser as “male only”; (3) paying for any necessary lodging and return fares; and (4) pairing Plaintiffs with new lead drivers who had never been accused of harassment. That response, the court observed, prevented the alleged bad actor from harassing the Plaintiff or any other women and quickly addressed the immediate circumstances surrounding the harassment.

In reaching this conclusion, the court rejected the Plaintiffs’ reliance on Ninth Circuit precedent that requires an employer’s remedial responses to deter future harassers. Instead, the court concluded that imposing liability on CRST would punish the Company for failing to respond to an employee action that had not occurred and that CRST had no reason to suspect would happen. That, said the court, “is liability without end” and exceeds Title VII’s requirement that employers have knowledge of the harassment and respond reasonably. Measuring CRST’s response instead by what it knew at the time of the complaints and how it acted in response, the court found CRST was entitled to summary judgment.

Lessons Learned

CRST escaped liability despite some evidence of persistent sexual harassment issues involving its lead drivers. Key employer takeaways include:

  • It is important to develop, implement, and consistently enforce written sexual harassment policies that swiftly address reports of harassment; remedy the circumstances that lead to complaints; and prevent future abuse by credibly accused harassers.
  • It is equally important to ensure that new employees receive those policies, receive training on the policies, and that all employees receive periodic reminders about the policies.
  • Finally, it is advisable to periodically review and revise policies, particularly when a complaint serves in some way as notice of a potential deficiency in your existing response.

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