Foley & Lardner Labor and Employment Law Weekly Update (Week of May 9, 2011)

Rigid Leave Policies - A Formula for Liability
By Bennett Epstein

Companies often maintain a policy that provides that employment will terminate if an employee fails to return from a medical leave of absence within a given period of time. Generally, those periods appear to be generous, sometimes as long as a year. Employers reason that the employee had enjoyed the full FMLA benefits and thus the employee lacks statutory job protection. By the leave expiration date, the employee may have exhausted workers' compensation leave benefits. Employers sometime set the time limit to correspond with the commencement of long-term disability benefits, if they are available. Despite the seemingly long period of time, the employer must still recon with the ADA and its state and local equivalents.

Within the last few years, the EEOC has been aggressively pursuing employers who enforce inflexible medical leave policies, regardless of the length of the leave or whether medical leaves are treated in the same manner as other non-medical leaves.

The EEOC has taken the position that the ADA requires employers to provide a reasonable accommodation to employees with disabilities and the determination of a reasonable accommodation must be made on a case-by-case basis. Since the courts have recognized that granting a leave of absence might be a reasonable accommodation, the employer must engage in the interactive process, including considering requests for an extension of the leave or returning to work with an accommodation. The employer may then evaluate whether the requested accommodation imposes an undue hardship. The EEOC contends that inflexible leave policies ignore the obligation to make reasonable accommodations on a case-by-case basis.

Rather than maintaining an inflexible medical leave policy, companies should consider:

  1. Establishing a flexible or target expiration date for medical leave.
  2. Notifying employees within a reasonable period of time before the expiration of the leave period that the leave is about to expire.
  3. Inquiring whether the employee needs additional time off and, if so, how long. The employer may require the employee to provide a statement from a physician supporting the need for additional leave and the amount of additional time off required.
  4. Evaluating whether the employee's request for accommodation is reasonable and whether it can be granted without an undue burden.

Fifth Circuit Decides That Protection From a Hostile Work Environment Is Not a "Benefit of Employment" for Service Members Under USERRA
By Theodore T. Eidukas

Members of the armed forces are generally protected from discrimination in their employment by civilian employers under the federal Uniformed Services Employment and Reemployment Rights Act (USERRA). In addition to individual state laws that may protect service members, USERRA makes it illegal for an employer to deny a "benefit of employment" to a member of the armed forces based on such membership or the employee's performance of service. Its primary purpose being to encourage people to join the military reserves, USERRA claims have increased in frequency during the past decade as reservists have been called to long stints of active duty due to U.S. military commitments in Afghanistan and Iraq.

District courts and the federal Merit Systems Protection Board had concluded that employees could bring claims under USERRA based on allegations that employers had created a "hostile work environment" for employees who are members of the armed services - i.e., that claims could be brought where employers allowed harassment of or derogatory comments to be made to employees with respect to being a member of the military or due to their need for time away from work to perform military service. No circuit court had directly addressed the question of whether such conduct violated USERRA, however, until the Fifth Circuit's March 22, 2011 decision in Carder v. Continental Airlines, Inc., 636 F.3d 172 (5th Cir. 2011) [the enhanced version of this opinion is available to lexis.com subscribers] (Carder). In Carder, the Fifth Circuit held that employees cannot bring claims under USERRA based on allegations that an employer has created a hostile work environment through harassing, discriminatory, or degrading comments or conduct related to or arising out of the employees' military service.

The pilot claimants in Carder had alleged that the management of their employer, Continental Airlines, had placed "onerous restrictions" on taking military leave and made derisive and derogatory comments to the pilots regarding their military service. The Fifth Circuit affirmed the dismissal of a claim that this conduct created a hostile work environment prohibited by USERRA. The Fifth Circuit pointed to the fact that the language of USERRA did not expressly refer to protection from "harassment, hostility, insults, derision, derogatory comments or any other similar words." Further, the court relied upon the fact that in choosing the language for USERRA, Congress used the term "benefits of employment" rather than the phrase "terms, conditions, or privileges of employment" that were used in both Title VII and the ADA and previously used by the U.S. Supreme Court for deciding that those statutes allowed hostile work environment claims. The Fifth Circuit in Carder thus concluded that USERRA's protection of benefits of employment is narrower than the protection afforded by Title VII and the ADA, and did not allow for claims that an employer had created a hostile work environment based on service in the military.

The Fifth Circuit did leave open the possibility, however, that such conduct could form the basis of a constructive discharge claim under USERRA if it created working conditions that were so intolerable that a reasonable person would feel compelled to resign, acknowledging that such claims had been recognized by other courts. The court stated that its decision was meant to bar only actions for the "lesser levels of harassment that usually form the basis for hostile work environment claims."

AT&T Mobility LLC v. Concepcion- (More) Good News for Employers?
By John Douglas

The Supreme Court, led by Chief Justice John Roberts, continues to render decisions favorable to employers and continues to beat back attempts led largely by plaintiffs' attorneys and consumer activists to limit the use of mandatory arbitration as an alternative to civil litigation in court.

The latest chapter in this ongoing saga was written on April 27, 2011, when the United States Supreme Court announced its 5-4 decision in AT&T Mobility v. Concepcion. What was the case about and what - if anything - does it mean for employers?

In 2002, Liza and Vincent Concepcion had signed up for cell phone service from Cingular, receiving what was advertised as two "free" cell phones in the process. In the paperwork initiating service, they were required to agree to arbitrate any disputes they had with their new provider. They also were required at the time to pay $30.22 for "sales" tax for the imputed value of their two "free" cell phones.

The Concepcions apparently did not think paying $30.22 for "free" phones was fair and subsequently brought a claim for false advertising and fraud in federal district court in Southern California. In response to the Concepcions' complaint, pointing to their arbitration agreement, AT&T asked the federal court to compel arbitration of the lawsuit. And as the arbitration agreement had a provision that precluded class-based claims, any arbitration between AT&T and the Concepcions would have to proceed purely on an individual, rather than class, basis.

The Concepcions opposed AT&T's request, arguing the arbitration agreement's prohibition of class claims rendered the agreement "unconscionable," or illegal, and unenforceable, as a matter of California law. Their point was simple: By both requiring arbitration and precluding class actions, AT&T was in effect trying to insulate itself from attempts by consumers and their class action attorneys to aggregate many small individual claims into a class action with big enough damages at issue to make AT&T pay attention - and change its practice. In making this argument, the Concepcions pointed to a 2005 decision of the California Supreme Court in Discover Bank, which had found that arbitration agreements containing bans on class actions seeking aggregation of many small recoveries are generally unenforceable under California law as unconscionable "exculpatory" contracts.

The Concepcions were able to convince the trial judge to rule in their favor as well as the Ninth Circuit Court of Appeal, the federal court of appeal with jurisdiction over California. They could not, however, convince a majority of the Supreme Court. In an opinion written by Justice Scalia, a Supreme Court majority composed of the four "conservative" justices (Chief Justice Roberts plus Justices Scalia, Alito, and Thomas) and the "swing" justice (Justice Kennedy) found that the California Supreme Court's Discover Bank decision impermissibly "discriminated" against arbitration authorized by the Federal Arbitration Act and was therefore "preempted" by federal law.

The "liberal" members of the Court (Justices Breyer, Ginsburg, Kagan, and Sotomayor) disagreed. They felt that under the Federal Arbitration Act it was perfectly permissible for a state Supreme Court to find as a matter of state law that a general statute prohibiting unconscionable or exculpatory contract provisions could preclude the agreement provisions that AT&T had sought to enforce against the Concepcions.

What Does AT&T Mobility v. Concepcion Mean for Employers?

It is unlikely this case will be the last word on the issue. The Ninth Circuit Court of Appeal - which is dominated by "liberal" judges - has had a running battle with the Supreme Court for almost two decades regarding whether or not to expand mandatory arbitration, and the California state courts may well take another crack at invalidating class action waivers in arbitration agreements using another legal rationale not precluded by this new decision.

That said, so long as AT&T Mobility is not somehow circumvented, it may prove a tremendous boon for employers struggling to defend and prevent class action employment litigation.

Based on the behavior of the Justices during the oral argument of the case, it is already expected that the Supreme Court's upcoming decision involving a nationwide class action against Wal-Mart may throw some sand in the gears of a current juggernaut of class actions already attempting to raise claims of systemic discrimination based on sex and race. AT&T Mobility does the same thing. Particularly in the area of wage and hour class actions, AT&T Mobility should provide some long-awaited music for the ears of employers swamped by wave after wave of wage and hour class actions raising ever more technical, and "creative," legal theories.

How is this? Simply put, at least potentially, every employer big enough to face significant class action litigation risk (generally those with more than a couple dozen employees) can now have its employees sign an agreement to arbitrate as a condition of employment - and furthermore, require that any claim brought in arbitration be an individual one.

As with everything in life, there are pluses and minuses to arbitration. The one big minus - there is little if any, right of appeal - generally even if the arbitrator clearly makes a mistake. AT&T Mobility will not change this. The big pluses for arbitration have included the facts that it generally is cheaper and faster and much more private, and the risk associated with jury trials can be avoided. To these, AT&T Mobility adds another plus: An employer may be able to use it to eliminate class actions entirely. At least for some employers, that latter advantage could make the decision to institute mandatory arbitration the proverbial no-brainer. This much is clear - if an employer has not done so already, there seems to be no better time than now to give the mandatory arbitration option a very close look.

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