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Eighth Circuit weighs in on Shifting Reasons doctrine

In a recent post, this blog discussed an Eleventh Circuit case on the Shifting Reasons doctrine, in which a plaintiff argues that their case warrants a trial because the employer has provided shifting reasons, suggesting the real reason was an unlawful intent. As noted in our prior blog post, this is one of the most common arguments plaintiffs make in response to a motion for summary judgment.

Now it’s the Eighth Circuit’s turn, and like the its sister, the Eleventh Circuit, the Eighth Circuit rejected the plaintiff’s claim of shifting reasons, holding that an employer can “elaborate” on its reason, provide additional examples or flesh out its reason, without it being considered “shifting reasons.”

(I)t is well-established that a employer may elaborate on its explanation
for an employment decision. Evidence of a substantial shift in an employer’s explanation for a decision may be evidence of pretext, but an elaboration generally is not.

(Citations omitted.)

In this case, when Rock-Tenn fired Rooney, it told him the reason was poor performance with regard to his “interaction with coworkers” and “failure to support” one particular client. Then after he sued, it gave as additional examples his (alleged) poor performance as to other clients. The Court held that was not a shift in the reason for his discharge, just further explanation.

These two Circuit Court decisions illustrate how common the Shifting Reasons doctrine is used by plaintiffs and the need for plaintiffs to show a true shift in the reason, not simply an elaboration of the reason.

Source: Rooney v. Rock-Tenn Services, Inc. (8th Cir. 1/9/18).

Court, not arbitrator, decides if class arbitration is available

Where employers have entered into pre-dispute arbitration agreements with their workers, who decides if the workers can force the company to arbitrate class claims: a judge or an arbitrator? The answer can often drive the entire case. If an arbitrator gets to decide the question, it means the case effectively goes to the arbitrator, even if just for that issue. An employer that entered into an arbitration agreement, which does not permit class actions, finds itself having to arbitrate a class action, or at least having to arbitrate whether it should have to arbitrate a class action.

This was the reasoning by the Eighth Circuit in a recent decision where it observed that sending the case to the arbitrator, if even for just that one issue, would mean “(t)he benefits of arbitration are substantially lessened in a class arbitration proceeding.” Accordingly, the court joined the Third, Fourth and Sixth Circuits, holding that judges in court should decide, as a threshold of any arbitration action, whether any given arbitration agreement permits class actions. This leaves the California Supreme Court the lone holdout for the more plaintiff-friendly position that would send the case to an arbitrator.

Source: Catamaran Corp. v Towncrest Pharmacy

Eighth Circuit holds purchaser liable for seller’s WARN violation

WARN is the federal law that, when applicable, requires 60-day notice before a plant closing or mass layoff. When terminations occur as part of the sale of a business, WARN provides that sellers are responsible for WARN compliance up to and including closing, purchasers thereafter. It is not uncommon for asset purchase agreements to flesh out that general rule.

In this case, the asset purchase agreement unambiguously confirmed that general rule. It even included language excluding liabilities for WARN and expressly providing that purchaser did not assume any WARN liability.

Seller terminated employment of individuals, not hired by purchaser, without giving the 60-day notice. Citing WARN’s general rule and the purchase agreements, the purchaser moved to be dropped from the case, but the Eighth Circuit disagreed. The court held that, generally, a buyer in an asset purchase agreement can buy the assets without being liable for the seller’s violation of WARN, but the Eighth Circuit drew a line between an asset purchase agreement that is “merely a sale of assets” versus the sale of assets that is really — in the mind of the Eighth Circuit — the sale of the business “as a going concern.” The court held that this purchaser had bought the assets as a way of buying the business “as a going concern” and therefore was responsible for seller’s WARN violation.

Celadon’s liability turns on whether the APA (asset purchase agreement) constituted a sale of assets or a sale of a business as a going concern.

Purchaser emphasized the clear language in its purchase agreement, but the court held that language had at best a “binding effect as between (purchaser) and (seller)” but “the protections that the WARN Act affords employees are not determined by contract.” In other words, the purchaser could not contract its way out of statutory liability for seller’s WARN violation.

Next purchaser argued that it hadn’t really bought the business as a “going concern.” It noted it had not either acquired seller’s accounts receivable or required an automatic transfer of seller’s employees. The court held those distinctions were not sufficient.

The Eighth Circuit’s decision is surprising to many. It remains to be seen if it will be followed by other courts.

It may also be limited to one particular, relatively unusual fact noted by the Eighth Circuit. The agreement required the seller’s workers “to remain employed for 14 days following the date of the sale.” Thus, the Court held that it was purchaser who “as the statutory employer, not (seller), caused the employment loss” “at the expiration of this 14-day period.”

The case is a reminder to purchasers to consider WARN when engaged in asset purchase agreements.

The case was Day v. Celadon Trucking Servs., 827 F.3d 817 (7/15/16).