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Employment Law Memo 08/31/2018
LawMemo - First in Employment Law

*** Featured Cases ***

*** Capsules ***

*** Featured Cases ***

8th - Discharging bank employees with criminal convictions was a business necessity; alternative practice was not proved to be effective.

Williams v. Wells Fargo Bank (8th Cir 08/29/2018)
http://case.lawmemo.com/8/williams10.pdf

Ten African Americans and Latinos sued Wells Fargo Bank claiming that the bank's practices relating to employees' and applicants' prior criminal records created a disparate impact on the basis of race in violation of Title VII and the Iowa Civil Rights Act. The trial court granted summary judgment for the bank; the 8th Circuit affirmed.

Federal law forbids a bank from employing a person who has been convicted of certain crimes, but waivers are available, and banks are allowed to "sponsor" waivers. Over a period of 27 months the bank terminated 136 African Americans, 56 Latinos, and 28 white employees because of prior convictions – without informing them of the availability of waivers and without offering to sponsor waivers.

The 8th Circuit held that the bank's policy of summary exclusion was a business necessity, especially in light of the possibility of daily fines of $1 million. Plaintiffs claimed that the racial impact would be reduced if the bank gave notice of the need for a waiver, granted leave to apply for a waiver, and sponsored waivers. However, the court found that plaintiffs' statistics failed to show that this would result in a reduced racial impact.

9th - Nationwide ADA injunction remanded for further review and findings.

EEOC v. BNSF Railway Co (9th Cir 08/29/2018)
http://case.lawmemo.com/9/eeoc7.pdf

EEOC sued claiming that the employer violated the Americans with Disabilities Act (ADA) by requiring an applicant, whom the employer regarded as impaired, to pay for an MRI. The trial court held in favor of the EEOC and granted a nationwide injunction. The 9th Circuit affirmed liability, but remanded on the issue of whether the injunction should be nationwide.

The employer made a job offer contingent upon a post-offer medical exam, which revealed a prior back injury. Although the applicant's physician and the employer's subcontractor's physician reported that the applicant was fit for the job, the employer required the applicant to provide an MRI (costing more than $2,500) at his expense. The applicant declined, and the employer treated that as declining the conditional offer.

The 9th Circuit found that the EEOC established that the employer perceived the applicant as disabled, that he was qualified, and that conditioning the job offer on the applicant procuring an MRI at his own expense was impermissible. It would be OK to require all applicants to pay for an MRI, but it is not permissible to request an MRI at the applicant's cost only from persons with a perceived or actual impairment or disability.

On the question of a nationwide injunction, the 9th Circuit vacated the injunction because "the district court did not make factual findings or articulate its reasoning, and so we cannot yet properly review the scope of the injunction." The court remanded the case for further review and findings to be made by the district court.

*** Capsules ***

3rd - Retiree health benefits in MOU were not arbitrable for lack of MOU arbitration provision, and retiree benefits were not incorporated into CBA's arbitration provision.

Cup v. Ampco Pittsburgh Corp (3rd Cir 08/29/2018)
http://case.lawmemo.com/3/cup.pdf

The union and Cup, retired union member, sued the employer and the plan for healthcare benefits alleging, on behalf of Cup and other similarly-situated workers who retired before March 1, 2015, in three courts: (I) a non-substantive claim compelling arbitration under section 301 the Labor Management Relations Act (LMRA), (II) a claim to enforce the collective bargaining agreement (CBA) under section 301, and (III) in the alternative, a claim under section 502(a) of ERISA. The trial court granted the union's motion to compel arbitration as provided in the CBA. The 3rd Circuit reversed and remanded.

The court had to determine if it had jurisdiction based on whether the trial court's order compelling arbitration and administratively closing this case was final. The court noted that the trial court also dismissed all of the other claims without prejudice. For these reasons, the court held that the order compelling arbitration was final for purposes of 28 USC Section 1291 and the Federal Arbitration Act.

The employer argued that this dispute was not subject to arbitration under Section 6 of the CBA, because retiree health benefits were not covered by the CBA. The court agreed. Former employees like Cup, who retired before the CBA went into effect on March 1, 2015, were not "employees" under the CBA. The union argued that section 19 of the CBA implicitly incorporated the Memorandum of Understanding (MOU) which discussed retiree health benefits and expressly includes "Medical Insurance" as an included "Other Plan." The court found that section 19 of the CBA did not incorporate the MOA because mere reference to another contract or document was not sufficient to incorporate its terms into a contract; there must be an express intent to incorporate, and there was no such expression here. The court further observed that the CBA suggested an intent not to incorporate the MOA, as language expressly incorporating other agreements could be found elsewhere in the CBA with express incorporation language – the parties' knew how to incorporate and did not do so with the MOA. Thus retiree medical benefits was not arbitrable and the trial court erred when it granted the union's motion to compel arbitration. The union may pursue its substantive claims in Counts II and III on remand.

7th - Job applicant sufficiently alleged an informational injury to establish standing to pursue FCRA violation by the employer for not providing copy of background report.

Robertson v. Allied Solutions (7th Cir 08/29/2018)
http://case.lawmemo.com/7/robertson.pdf

After the employer revoked a job offer, job applicant Robertson, in a class action, sued the employer for violation of the Fair Credit Reporting Act (FCRA) alleging a notice claim, failure to furnish clear and conspicuous disclosure forms, and an adverse-action claim, employer took action based on her background check without first supplying a copy of the report or a written summary of her FCRA rights. In the light of Spokeo, Inc. v. Robins, 136 SCt 1540 (2016) and Groshek v. Time Warner Cable, Inc., 865 F3d 884 (7th Cir 2017), the trial court dismissed the entire case for lack of standing. The 7th Circuit affirmed in part on the notice claim, and reversed in part on the adverse-action claim and remanded. The only issue here as to standing was whether Robertson suffered a concrete injury with respect to her adverse-action claim.

Robertson argued, by withholding her background report the employer limited her ability to review the basis of the adverse employment decision and impeded her opportunity to respond. The court concluded that Robertson alleged enough at this stage to demonstrate standing under Article III; her injury was concrete and particular to her, and the remaining criteria for standing (causation, redressability) were also present. The court held only that Robertson had adequately alleged that what the employer divulged was insufficient under the FCRA, and that she was entitled from an Article III standpoint to press her adverse-action claim.

8th - Taxi drivers lose tortious interference claim against Uber.

Vilcek v. Uber USA (8th Cir 08/30/2018)
http://case.lawmemo.com/8/vilcek.pdf

Taxi drivers brought a class action against Uber claiming tortious interference with a valid business expectancy. The 8th Circuit affirmed the trail court's dismissal for failure to state a claim. The drivers claimed that Uber used drivers who did not comply with the St. Louis taxi commission's rules, and that taxi drivers' revenues decreased by 30-40 percent. The 8th Circuit did not decide whether the taxi drivers had a valid business expectancy, because the drivers did not allege the absence of justification, which is one of five elements of a claim for tortious interference with a business expectancy. Uber has a legitimate economic interest, because Uber and the taxi drivers are direct competitors. Therefore, the drivers must show that Uber used improper means such as threats, violence, trespass, defamation, misrepresentation of fact, restraint of trade, or any other wrongful act recognized by statute or the common law. The alleged improper means was disregarding the taxi commission's rules. However, that was not enough because the legislature did not provide for a private cause of action to enforce commission rules.

8th - Agreed upon attorney fees in settlement agreement was fair and reasonable.

Melgar v. OK Foods (8th Cir 08/29/2018)
http://case.lawmemo.com/8/melgar.pdf

In federal trial court, the individual plaintiffs alleged the employer failed to pay certain wages in violation of Arkansas state law and the Fair Labor Standards Act (FLSA). The trial court approved the settlement agreement as to the amount awarded the plaintiffs, but the trial court, sua sponte, reduced the attorney's fees, costs, and expenses from the agreed upon $87,500.00 to $22,500.00. The 8th Circuit reversed in part and remanded with instructions to award plaintiffs the agreed upon fees.

In light of the settlement history, and the employer's lack of participation in this appeal, the case presented two questions for the court's review: (1) did the trial court have a duty or a right to review the settlement agreement, and (2) if so, under what standard of review. Because neither party discussed whether trial court approval was required, the court did not address the first question. As to the second question, in light of the need to focus on multiple factors and not just one, and in light of the strong likelihood that the parties' agreement was reasonable, the court found that any required review by the trial court was light and the award in this case was not outside the range of what would be approved. The court concluded the parties' agreed-upon attorneys' fees of $87,500.00 was fair and reasonable.

FL - Non-compete agreement expired.

Tarantola v. Henghold (Florida Ct App 08/30/2018)
http://case.lawmemo.com/fl/Tarantola3.pdf

Tarantola M.D. appealed from the trial court's order denying her motion to terminate a temporary injunction. In her third appeal regarding the non-compete agreement she entered into as part of her employment with the medical practice, the Florida Court of Appeal agreed the trial court abused its discretion and reversed.

The issue was whether or not the website Dr. Tarantola established and used in May of 2015 constituted advertising or marketing activity. If it did, then the temporary injunction should not be terminated. If it did not, the temporary injunction should be terminated either February 10, 2018 or thirty days after that date. The trial court determined the website did constitute "advertising or market activity" prohibited by the non-compete agreement and extended the injunction at least an additional 134 days from the date of the order denying Dr. Tarantola's motion.

The court found that the trial court abused its discretion in considering and relying upon the screenshots of the website as proof the website was in existences in May 15, 2015. The court concluded the record was void of any evidence establishing the website's existence in May 2015, and any such finding was based on mere speculation. The court also agreed with Dr. Tarantola that the website did not constitute improper advertising or marketing in violation of the non-compete agreement. The court found the two-year non-compete period expired thirty days after February 10, 2018.

LA - Sufficient evidence presented for discharge of police officer.

Cormier v. City of Lafayette (Louisiana Ct App 08/29/2018)
http://case.lawmemo.com/la/cormier1.pdf

Cormier, discharged police officer, appealed the judgment of the trial court upholding the Civil Service Board decision to discharge him. The Louisiana Court of Appeal affirmed. Cormier was discharged for removal, whiting out certain information, and dissemination of a confidential police document, which eventually was attached to an appellate brief of another discharged police officer. The court found no error in the Board's decision to uphold Cormier's discharge; found that the Internal Affairs Investigation was conducted in a timely manner; and found that the Lafayette Municipal Fire and Police Civil Service Board acted in good faith and statutory cause in finding that there was sufficient evidence to discharge Cormier's employment with the Lafayette Police Department.

MD - Court adopted balancing test between First Amendment rights and delay in litigating case to determine order of trial between related criminal and civil cases.

Heffington v. Moser (Maryland Ct App 08/30/2018)
http://case.lawmemo.com/md/Heffington.pdf

The appeal presented a question of first impression in Maryland: whether, and under what circumstances, a plaintiff in a civil case who was also the defendant in a related criminal prosecution was entitled to a stay of the civil case so as not to penalize her for invoking her Fifth Amendment privilege against self-incrimination. Employee sued the employer in a tort action for defamation based on false statements to the police, the employer's insurer, and others that the employee had stolen money from the employer and engaged in identity fraud. Subsequently the employee was indicted by a grand jury for one count of theft and four counts of identity fraud. The employee filed a motion to stay the civil action for purposes of the Fifth Amendment which the trial court denied. At the civil trial, the employee moved for a mistrial, which was denied, and rested without putting on evidence. The trial court granted judgment in favor of the employer. The Maryland Special Appeals Court vacated the judgment of the trial court.

The employee contended the trial court abused its discretion by denying the motion to stay because it did not properly weigh the employee's constitutional privilege against self-incrimination against the employer's interest in an expeditious trial of the claims against it. The employer responded: first, the issue was not preserved because the employee acquiesced in the trial court's granting the motion for judgment against her; second, it lacked merit because the employee waived her Fifth Amendment privilege by not actually taking the stand and invoking it at trial and by not invoking it at her deposition; and, third, the trial court did not abuse its discretion by denying the motion to stay given that it was filed on the eve of the trial and the criminal case could last for years.

First, the court found that the employer acquiesced in the process the employee's lawyer proposed.

Second, For the same reason, at no time did the employer object to the employee's invoking the Fifth Amendment issue without taking the stand or assert, as they do now, that the employee had to invoke the privilege on the stand and allow the jurors to draw a negative inference from that. Regarding the employee's deposition testimony without claiming the Fifth Amendment privilege, in light of the uncertainty regarding potential criminal charges at the time of the employee's deposition and the change in circumstances brought about by her indictment, the court held that the employee did not waive her Fifth Amendment privilege, for purposes of trial, by testifying before trial at her pre-indictment deposition.

Third, the majority of jurisdictions have adopted a test which balances the competing rights of a plaintiff to exercise his privilege against self-incrimination and of a defendant to adequately defend the claim brought against him. The court adopted the modern trend and hold that in ruling the employee's motion to stay, which, more specifically, was a request to stay the trial of the case where discovery was completed, it was incumbent upon the trial court to balance the employee's Fifth Amendment right against self-incrimination and her Article 19 right to access to the courts against the employer's right to a timely resolution of the claims against it without harm to its defense. The court concluded the trial court did not balance the parties' competing interests, and by not applying the proper legal standard in ruling on the motion to stay, the court abused its discretion.

MI - County was not subject to collective bargaining during financial emergency under Act 436, but was subject to unfair labor practice charges during the emergency.

Wayne County v. AFSCME Local 3317 (Michigan Ct App 08/28/2018)
http://case.lawmemo.com/mi/wayne1.pdf

The County, in the midst of a financial emergency, entered into a consent agreement with the State Treasurer under the Local Financial Stability & Choice Act (Act 436) where the County was temporarily given a reprieve from being subject to mandatory collective bargaining under the Public Employment Relations Act (PERA) for a period of approximately three years. The union filed various unfair labor practice (ULP) charges with Michigan Employment Relations Commission (MERC) against the County, all of which, while filed at different times and pertaining to different conduct occurring before and during the three-year period, were pending after the County's obligation to engage in collective bargaining ceased. MERC concluded that the ULP charges were properly before the administrative law judge (ALJ) for determination whether the charges stated a claim upon which relief could be granted and, if so, to decide whether the union established the charges at an evidentiary hearing. The Michigan Court of Appeals affirmed. The issue was whether MERC had subject matter jurisdiction to adjudicate ULP charges during the collective-bargaining suspension three-year period.

The court explained that the Legislature conferred on MERC the power and authority to adjudicate ULP charges, MCL 423.216, and it did not withdraw that power in Act 436 within the setting of financial emergencies. Under the plain and unambiguous language of Act 436, mirrored in the consent agreement, the County was not subject to the requirement or mandate to engage and participate in collective bargaining during the collective-bargaining suspension period. The court specifically noted the Legislature did not express in Act 436 that local governments were not to be subjected to ULP charges during a collective-bargaining suspension period or that MERC could not exercise its subject-matter jurisdiction over ULP charges during that timeframe. In sum, the court held that nothing in the language of Act 436, let alone clear and unambiguous language, revealed a legislative intent to divest MERC of its subject-matter jurisdiction to adjudicate UPL charges during a collective-bargaining suspension period.

WA - Summary judgment in trade secret and confidentiality case is reversed.

Modumetal v. XtaIic Corp (Washington Ct App 06/25/2018)
http://case.lawmemo.com/wa/Modumetal.pdf

[Published 08/22/2018] John Hunter Martin left Modumetal Inc. to work for Xtalic Corp. Xtalic subsequently filed two patent applications describing processes in an area that both companies had been researching. Modumetal brought claims for trade secret misappropriation, breach of confidentiality obligations, and breach of contract against Martin and Xtalic. The trial court granted Xtalic's motion for summary judgment; the Washington Court of Appeals reversed.

After Martin went to work for Xtalic, Xtalic filed patent applications which Modumetal claimed contained confidential information and trade secrets. Xtalic pushed back with several arguments: that Modumetal failed to specify its trade secrets with particularity; lack of evidence of misappropriation; the information was in the public domain; Martin worked on fundamentally different metals, chemistry, and processes at Xtalic than he did at Modumetal; Martin had nothing to share because his Modumetal research was unsuccessful; the mere fact that patent claims cover processes attempted by a member of a research team at a prior employer, does not allow an inference of misappropriation; Xtalic independently developed the processes it sought to patent. However, as to each of these arguments, the court found that there was sufficient evidence – especially testimony from Modumetal's expert witness – to overcome summary judgment.

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Editor: Ross Runkel, Ross@LawMemo.com. Copyright 2018 by LawMemo, Inc., PO Box 9182, Portland, OR 97207, (503) 227-1500. We are sending Employment Law Memo three times per week. To unsubscribe, reply to this email with the word "REMOVE" in the subject line.

 

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