Tag Archive for: Tenth Circuit

Tenth Circuit expands possible successor liability for a purchaser especially if their purchase agreement contains a due-diligence clause

Generally, the purchase of a business can be done in two ways: (1) a so-called “equity deal” where the stock in a corporation (or other ownership interest if the business is not a corporation) is acquired or (2) an “asset deal” in which only the assets of a business are acquired. In an equity deal, the business itself never changes, just its owners, so the business remains liable usually for whatever its liabilities were prior to the transaction; in other words, the acquisition doesn’t affect the business, or its liabilities, just its ownership. Partially for that reason, asset deals are often pursued instead. In an asset deal, the goal is to acquire only the assets of the business, so the buyer can start its own new business fresh. Recognizing that might not be fair to creditors (including victims of wrongdoing by the business) if for example the “new” business is anything but fresh and is instead a simple continuation of the old business even in name, the courts have long imposed a test for successor liability.

In a recent decision titled EEOC v. Roark-Whitten Hopitality 2, LP, the Tenth Circuit summarized that test, as follows:

The longstanding common law rule outside of the Title VII context has been that “where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor.” W. Tex. Ref. & Dev. Co. v. Comm’r of Internal Revenue, 68 F.2d 77, 81 (10th Cir. 1933) (citing federal and state cases). There are “four well recognized exceptions” to this general common law rule. Id. Those include: “(1) [w]here the purchaser expressly or impliedly agrees to assume such debts; (2) where the transaction amounts to a consolidation or merger of the corporations; (3) where the purchasing corporation is merely a continuation of the selling corporations; and (4) where the transaction is entered into fraudulently in order to escape liability for such debts.”

When considering whether to impose successor liability, the Tenth Circuit has adopted nine factors, none of which alone should generally be controlling but all of which should be weighed in context of a particular case’s circumstances:

1) whether the successor company had notice of the charge,

2) the ability of the predecessor to provide relief,

3) whether there has been a substantial continuity of business operations,

4) whether the new employer uses the same plant,

5) whether he uses the same or substantially the same work force,

6) whether he uses the same or substantially the same supervisory personnel,

7) whether the same jobs exist under substantially the same working conditions,

8) whether he uses the same machinery, equipment and methods of production and

9) whether he produces the same product.

As one sees, the first factor is whether the successor had “notice.” The Tenth Circuit has cautioned this factor is not controlling, alone, either way, and, further, that in deciding whether “notice” existed, courts should not limit the evidence to cases of actual notice.

In Roark-Whitten, according to the Court’s decision, the sales agreement at-issue contained “a due diligence provision that afforded SGI thirty days in which to investigate, in pertinent part, the liabilities of the business.” The plaintiff claimed that, if the purchaser had properly exercised due diligence, it would have learned of the employment law liability exposures at-issue.

Despite a strong dissent to the contrary, a 2-judge majority in this panel decision ruled that the plaintiff had adequately pled sufficient facts against at least one of the purchasers at-issue. The case contained allegations of especially unusual and vivid employment law violations, as well as relatively unusual allegations of fact regarding the diligence process itself, and a rather unique and complicated set of facts involving the transactions that were at-issue. Given the dissent, it is arguable that this 2-judge panel holding is likely to be viewed as limited to the constellation of alleged facts at-issue, especially since the case was decided on a motion to dismiss, meaning the issue was only whether the claims were sufficiently pled to start the lawsuit. In other words, the Tenth Circuit did not hold that as an evidentiary matter, issues of fact were raised, must less did its ruling suggest liability might exist.

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Tenth Circuit rules that, at least for some jobs, time spent turning on computers is work time under FLSA

The Tenth Circuit ruled that, at least for the jobs in the case before it, the time that employees spent turning on computers was compensable work time, which, for non-exempt workers, must be paid and must count towards overtime.

First the court held that the time counted as work time (or in the words of FLSA law, “compensable” time) because the employees did their work on the computers and had to boot them up to do their jobs:

In sum, we reach the same conclusion that the district court did: The preshift activities of booting up a computer and launching software are integral and indispensable to the CCRs’ principal duties of servicing student loans by communicating with borrowers over the phone and by email. Busk, 574 U.S. at 36; see also Jackson v. ThinkDirect Mktg. Grp., Inc., No. 16-cv-03449, 2019 WL 8277236, at *4 (N.D. Ga. Dec. 9, 2019) (explaining that “requirement of logging in and out of electronics systems needed to process calls is at least integral to the work of answering phone calls” (quoting Gaffers v. Kelly Servs., Inc., No. 16-cv-10128 (E.D. Mich. June 2, 2016)). Booting up a computer and launching software is “an intrinsic element of” servicing student loans and communicating with borrowers because the data and tools necessary to those principal duties exist on the computer. Busk, 574 U.S. at 35. Likewise, Nelnet could not have eliminated these activities “without impairing the employees’ ability to complete their work.” Id. Such integral and indispensable activities are compensable under the FLSA.

Next the court rejected the argument that such time was de minimis (so small it needn’t be counted). The court held it was not de minimis because (a) it could be estimated by the company (b) and occurred with “consistent regularity, (c) even though it could be considered, according to the court, indeed a small amount in the aggregate.

Moreover, because Nelnet’s ability to estimate the amount of time at issue and the consistent regularity with which the CCRs perform these activities weigh more heavily than the relatively small size of the claims in this case, the de minimis doctrine does not apply to excuse Nelnet’s obligation to pay its employees for their work.

In reaching its holding, the Tenth Circuit emphasized that it was expressly noting its decision does not necessarily reach so far as teleworking during the pandemic.

Nelnet also raises general policy concerns about the application of the FLSA in our modern and digital age, including during the COVID-19 pandemic, when telework is increasingly common.

But we need not speculate about the FLSA’s application to teleworkers or the pandemic’s broad implications for our digital age. We need only decide the case before us, which doesn’t concern teleworking.

Source: Peterson v. Nelnet Diversified Solutions, LLC, case no. 19-1348 (10th Cir. 10/8/2021).

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Tenth Circuit holds employer need not, under ADA, accommodate challenges that an employee’s disability imposes “outside the workplace unrelated to an essential function or a privilege of employment”

The Tenth Circuit recently decided a case involving an employee who required a flexible work schedule to do her job. She suffered from a disability related to her vision. She lived 60 miles from the workplace and relied on family and friends for rides to and from work. Her ability to make it to work on time proved a challenge. The company attempted to allow her to work a flexible work schedule, but that also proved unsuccessful, when her actual schedule became “erratic,” which “contributed to low patient satisfaction scores,” “less than stellar” performance evaluations. She sked the company to continue allowing her the flexible work schedule or even to work remotely full time. The company declined.

The Tenth Circuit held that her request to work remotely or on a flexible work schedule would, if granted, have accommodated “her transportation barrier (which was) a problem she faces outside the workplace unrelated to an essential job function or a privileged of employment.” The company could not control where she lived or when she was able to find rides with friends or family. She was in that sense like all employees, whether disabled or not, and nothing in the ADA imposes on an employer the obligation to grant accommodations that solve workers’ personal off-duty challenges. “(E)mployers have no obligation under the ADA to accommodate disabled employees for problems they face outside the workplace unrelated to the essential job functions of their positions or privileges of employment merely because they are disabled.”

Together with another recent Tenth Circuit case, the decision suggests how the courts may approach litigation that may arise as a result of the impact of the coronavirus pandemic on the workplace.

Source: Unrein v. PHC-Fort Morgan, Inc., — F.3d — (10th Cir. 4/8/2021).

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Tenth Circuit rejects argument that statutory offer of settlement in Colorado impliedly released other claims much less future lawsuits

Colorado law, CRS 13-17-202, allows defendants in litigation to make what is called a statutory offer of settlement. In a statutory offer of settlement, a defendant in litigation may offer to pay the plaintiff a certain amount in settlement of the claims being litigated, which, if not accepted, the plaintiff must beat at trial, in other words, not only win at trial but obtain an even greater award in the verdict, otherwise the plaintiff becomes liable for the defendant’s actual costs. Colorado law provides that the offer of settlement may not include any other non-monetary term; it must be a pure offer to settle for a sum certain.

In this case, the plaintiff sued his former employer in Colorado’s federal court, alleging wrongful discharge. The defendant extended an offer of settlement in the amount of $100,000.00. The company advised he accepted the offer but noted that he waived no other rights, including the right to bring future lawsuits. The company said, wait, not so fast, it had intended its offer of settlement to require the plaintiff to settle all claims he might have had “without any qualifications.”

Although that was the company’s asserted intent, the Tenth Circuit noted that the company failed to say in its offer of settlement that other lawsuits and claims needed to be released. Further the Tenth Circuit noted, even if it had, that Colorado statutory offer of settlement process does not permit non-monetary terms to be included in the offer. Thus, the Tenth Circuit rejected the defendant’s argument.

Furthermore, the Tenth Circuit rejected the trial court’s analysis of the issue as well. The trial court had ruled that the plaintiff and his former employer had failed to reach a “meeting of the minds.” The Tenth Circuit held that Colorado’s statutory offer of settlement process did not require a “meeting of the minds” or even judicial involvement for the settlement to be effective. Rather, the statutory process required merely that a defendant extend an offer under CRS 13-17-202, which the Tenth Circuit held this company had, and that, within the statutory deadline, the plaintiff accept that offer, which the Tenth Circuit held this plaintiff had. At that point, the settlement was effective: the company owed plaintiff $100,000; in exchange the plaintiff’s claims in that lawsuit should have been dismissed as settled; however, no other settlement or release occurred, thus the company was indeed at risk that plaintiff might file future lawsuits.

It is noted that the company may still have some protection against future litigation. Under different principles (including claim preclusion, issue preclusion and res judicatta), the settlement and dismissal with prejudice of one lawsuit precludes the assertion of the same claims or substantially similar related claims.

Source: Oldenburg v. American Motor Insurance Co., Inc., — F.3d —, case no. 20-1209, 2021 BL 25071 (10th Cir. 1/26/21).

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Tenth Circuit holds no adverse employment action is required in a failure-to-accommodate case

The Americans with Disabilities Act recognizes several types of claims that a disabled worker might file against their employer. Typically statutory employment claims include a requirement that the plaintiff prove an adverse employment action, meaning that they suffered harm to their employment, such as being discharged, promoted or other material impact on the significant terms and conditions of employment. The adverse employment action element poses a threshold against de minimis claims.

The Tenth Circuit held that a disabled plaintiff who asserts their employer failed to provide a reasonable accommodation need not prove an adverse employment action. In the case before it, the jury found that, even if the employer may have failed to reasonably accommodate the plaintiff’s disability, it did not result in her discharge, demotion or other harm to the terms and conditions of her employment. Initially a panel of the Tenth Circuit affirmed, but, re-hearing the case en banc, the Tenth Circuit held, over a strong and sizable dissent, that no adverse employment action need be proven because a failure-to-accommodate is itself actionable.

Source: Exby-Stolley v. Weld County, No. 16-1412, — P.3d —, 2020 BL 417137 (10th Cir. 10/28/20)

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Tenth Circuit tightens up on Title VII claims

In a case titled Sanderson v. Wyoming Highway Patrol, the Tenth Circuit tightened up on a plaintiff’s ability to bring Title VII claims.

First, the Tenth Circuit affirmed summary judgment on the plaintiff’s retaliation claim because she had not alleged it in her EEOC Charge of Discrimination. In her EEOC Charge, she’d alleged retaliation after she was demoted, but when she sued, she added a claim for retaliation based on events before her demotion. Because her EEOC Charge did not allege the latter, the Tenth Circuit held she had failed to exhaust Title VII’s administrative requirements.

Second, the Tenth Circuit affirmed exclusion of her offered expert “who, based on her own experience (not experience specific to the employer), would have testified about gender stereotypes in law enforcement.” The Tenth Circuit agreed with the trial court that no expert testimony is appropriate on such a topic “because gender stereotypes are within the jur(y)’s common knowledge and experience.”

Third, the Tenth Circuit then ruled for the plaintiff, reversing summary judgment, holding a jury trial was warranted on her claim of a hostile work environment based on her sex. The Tenth Circuit held that persistent “rumors … that she engaged in sexual relationships with colleagues and supervisors,” allegations by coworkers that she’d engaged in “flirting with non-colleagues” while on duty, were sufficient to warrant trial, especially where she’d once been ordered “to answer her radio when she was ‘douching,'” which was of course a clearly derogatory (alleged) comment on the basis of her gender. In addition she’d offered circumstantial evidence suggesting her colleagues excluded her because of her gender, where for example one coworker had bought everyone a breakfast burrito but her.

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Expert testimony not required to prove a “disability,” some of the times

The Tenth Circuit held that a plaintiff doesn’t always need to have a medical expert to confirm the plaintiff’s medical condition rises to the level of a “disability” protected by the Americans with Disabilities Act.

When is a medical expert required? “(W)]here injuries complained of are of such character as to require skilled and professional persons to determine the cause and extent thereof,” and that question needs to be asked by each court in each individual case. This seemingly circular standard — expert medical testimony is required when it is necessary to understand the medical condition — was somewhat clarified by the Tenth Circuit when the Court contrasted such cases, at least, against those where the disability is “obvious.”

In short, the Tenth Circuit’s decision makes clear that expert medical testimony is likely always helpful to a plaintiff, might sometimes be required but isn’t always, and no plaintiff, or defendant, will know until the trial court, after undertaking a case-by-case analysis decides in any given case.

Source: Tesone v. Empire Marketing Strategies, case no. 19-1026 (10th Cir. 11/8/19).

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Unpaid interns may not enjoy protection under anti-discrimination laws

The Tenth Circuit held that an unpaid intern did not enjoy any protection under Title VII (the nation’s leading anti-discrimination and anti-retaliation law). Congress wrote such laws to protect “employees,” and the Court reasoned an entirely unpaid intern failed to meet a threshold test for proving he or she is an employee because such an intern receives no “remuneration” from the putative employer.

In this case, the plaintiff held an unpaid internship at a hospital as part of her school’s requirement that she complete at least 480 hours of such an internship. She was not paid. She argued that she, nonetheless, received “remuneration” because the internship helped meet her credit requirement and also because many interns found jobs later with the same companies. The Tenth Circuit rejected the idea that either constituted “remuneration.”

Ms. Sacchi has cited no cases, nor could we find any, where only a professional certification and pathway to employment satisfied the threshold-remuneration requirement.

We also decline the invitation to conclude that all interns are protected by Title VII, the ADA, and the ADEA. Aplt. Br. at 24-27. Even if a laudable goal, this is a task for Congress.

Employers are cautioned that a different law, the Fair Labor Standards Act, requires interns to be paid in many circumstances.

Source: Sacchi v. IHC Health Services, Inc., 918 F.3d 1155 (10th Cir. 2019).

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Tenth Circuit holds plaintiff’s case insufficient even though supervisor kept a special file on the plaintiff in case he some day decided to “pull the race card”

The Tenth Circuit held a plaintiff failed to establish a case worthy of trial, entering summary judgment for lack of evidence of discrimination, even though the plaintiff submitted evidence his supervisor had kept a special file on him because, plaintiff contends the supervisor admitted, he feared plaintiff would some day “pull the race card.”

The plaintiff, who was African-American, sued because he’d been denied a promotion. That same supervisor had evaluated the candidates for promotion and was part of the 4-person panel that decided not to promote plaintiff.

The Tenth Circuit held, first, that the supervisor’s having kept a special file on plaintiff was not an indication of discrimination. This was true even though the evidence suggested the supervisor hadn’t kept such a file on any other individual. The Tenth Circuit held further that it was non-discriminatory even if the supervisor had said he was keeping the special file because he feared plaintiff would “pull the race card.” The Tenth Circuit said that admission suggested merely that the file was
“a precautionary measure, not a symptom of invidious animus.”

Then, the court held, even if other evidence did suggest a discriminatory animus, the plaintiff had failed to prove that the supervisor’s animus had somehow infected the other three panelists.

Employers are cautioned this case illustrates a difficult tension in the current status of analyzing motions for summary judgment. It remains to be seen whether future courts will agree that keeping a special file only on a minority worker is somehow non-discriminatory simply because the supervisor fears the worker will “play the race card.” Indeed the Tenth Circuit itself did not identify the decision for official publication, saying it was “not binding precedent,” although it can nonetheless be cited “For its persuasive value.”

Source: Sasser v. Salt Lake City, case no. 17-4198 (10th Cir. 5/20/19).

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Third Circuit expounds on class actions in wage claims

A class action is a way for one or more persons to sue on behalf of a voluminous group of similarly situated persons. The idea is that the claim may not be financially worthwhile for one or a few people to prosecute, but where many people have suffered the same wrong, it makes sense for them to litigate the claims all at once, just as it is more efficient for the courts and defendant.

Wage claims are often for relatively small amounts, when one considers only one plaintiff, but can be for huge amounts when prosecuted on behalf of a claim. Wage claims though aren’t technically called a class action. Wage claims are prosecuted under the Fair Labor Standards Act (FLSA), which provides for “collective” actions; whereas, class actions are prosecuted under Rule 23 of the Rules of Civil Procedure.

What’s the difference between a class action and a collective action? Well, there aren’t many, but the few differences there are, are indeed significant. The biggest difference is conceptual and practical. In a class action, the judge declares a “class,” and members can opt out if they don’t wish to be part of the lawsuit. In a collective action (a FLSA wage claim), the judge declares the potential class, but members have to opt in to become part of the lawsuit.

There are other significant differences in terms of the procedures and standards court follow at the start of the case. Those differences can drive significant outcomes in terms of settlement strategies and litigation approaches.

Still, the differences can be as subtle as they are sometimes significant, triggering relatively frequent litigation in the courts. The Tenth Circuit has, for example, said, in a 2001 decision (Thiessen) that there is “little difference in the various approaches”  under Rule 23 for class actions versus FLSA for collective actions. However the Third Circuit, in a recent decision, Reinig v. RBS Citizens, N.A., held the differences, though often slight, are significant enough that an appeal involving the one did not give it jurisdiction to consider issues related to the other. The Third Circuit, therefore, declined to decide whether certification of a collective action under FLSA was appropriate, even though it did decide that certification of a class under Rule 23 was inappropriate. The court left the collective action certification for the lower court and later litigation.

In so ruling, the court did, though, hold that the class action Rule 23 certification — the issue on appeal before it — had been improper. The Court clarified that, in order to prove that the plaintiffs’ lawsuit alleging “off the clock” work was appropriate for class certification, Rule 23 required them to prove that they, and the requested class members, could all show that their rights were violated using the same evidence of liability. It was not sufficient to prove that they had all been wronged by the same employer, that they had all been shorted wages to which they should have been entitled, or even that they had all been shorted in the same way. Rule 23, the Third Circuit held, requires that they prove they, and the requested class, could establish their cases using common evidence.

As for the merits of their claim, the Third Circuit opined that, to prove an off-the-clock work claim, the plaintiffs would need to show they had worked off the clock, which constituted overtime, and that the employer had at least “constructive knowledge” of the same. The court did not explain what would constitute “constructive knowledge.”

To satisfy their wage-and-hour claims, Plaintiffs must show that: (1) pursuant to Citizens’ unwritten “policy-to-violate-the-policy,” the class MLOs performed overtime work for which they were not properly compensated; and (2) Citizens had actual or constructive knowledge of that policy and of the resulting uncompensated work.  See Kellar v. Summit Seating Inc., 664 F.3d 169, 177 (7th Cir. 2011) (citing Reich v. Dep’t of Conservation & Natural Res., 28 F.3d 1076, 1082 (11th Cir. 1994)); see generally Davis v. Abington Memorial Hosp., 765 F.3d 236, 240–41 (3d Cir. 2014).  Thus, to satisfy the predominance inquiry, Plaintiffs must demonstrate (1) that Citizens’ conduct was common as to all of the class members, i.e., that Plaintiffs’ managers were carrying out a “common mode” of conduct vis-à-vis the company’s internal “policy-to-violate-the-policy,” and (2) that Citizens had actual or constructive knowledge of this conduct.  See Sullivan, 667 F.3d at 299; Dukes, 564 U.S. at 358; see also Tyson Foods, Inc., 136 S. Ct. at 1046 (explaining that, although a plaintiff’s suit may raise “important questions common to all class members,” class certification is proper only if proof of the essential elements of the class members’ claims does not involve “person-specific inquiries into individual work time [that] predominate over the common questions”).  

The Third Circuit’s holding that class and collective actions are sufficient different that it lacked jurisdiction over issues re the one even though it had jurisdiction over issues re the other firmly establishes a split among the Circuits on the issue. Interested readers may wish to check if either party seeks Supreme Court review.

Source: Reinig v. RBS Citizens, N.A., case no. 17-3464 (3rd Cir. 12/31/19).

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Tenth Circuit holds that the False Claims Act protects only individuals who are employed at the time of retaliation

The Tenth Circuit held that the False Claims Act (FCA) protects only individuals who are employed at the time of the alleged retaliation. In this case, the employee left the employer complaining of what she believed were violations of the False Claims Act. She then entered into a settlement, in which she promised not to disparage her former employer. The company believed she proceeded to do just that — disparage it — and sued. She responded by, well, suing, alleging that the company’s lawsuit against her was retaliation prohibited by the FCA. The Court held that the FCA did not apply to her claims. The Court held that that FCA protects “only persons who were current employees when their employers retaliated against them.” Since, by that point, she was a former employee, she was no longer protected by the FCA; even if the company’s lawsuit were construed as retaliation, it was not retaliation prohibited by the FCA.

However, the Tenth Circuit cautioned that its ruling doesn’t mean all “former employees” lack FCA protection. Instead the question is whether the individual was employed at the time of the alleged retaliation. “If that condition is met, it doesn’t matter whether the employee remains a current employee of the employer when suing.”

Source: Potts v. Center for Excellence in Higher Education, case no 17-1143 (10th Cir. 2018)

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Tenth Circuit reaffirms Adverse Employment Action element of discrimination claims, including failure-to-accommodate claims under the ADA

The Tenth Circuit reaffirmed that plaintiffs must prove they suffered an Adverse Employment Action in all discrimination claims, including claims alleging a failure to accommodate under the ADA.

(A)n adverse employment action is an element of a failure-to-accommodate claim 
To establish an Adverse Employment Action, the plaintiff must prove more than that she suffered a “a mere inconvenience or an alteration of job responsibilities.” Rather, the Tenth Circuit held she must prove that she suffered harm to “a term, condition, or privilege of employment.”
Source: Exby-Stolley v. Board of County Commissioners, (10th Cir. 2018). 
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Tenth Circuit holds that FLSA’ anti-retaliation provision reaches farther than its other clauses

The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. Most notably it includes requirements such as minimum wage, overtime and child labor laws. Those provisions apply onto to an “enterprise” that is engaged in interstate commerce. It also prohibits retaliation against workers who exercise FLSA rights. In a recent case, the Tenth Circuit held that the anti-retaliation provisions apply more broadly than the rest of FLSA.

As the Court explained the bulk of FLSA applies only to “‘an enterprise engaged in commerce.’ 29 U.S.C. § 207(a)(1). ”Commerce’ means trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.’ § 203(b).”

However, the anti-retaliation provision of FLSA does not refer to an enterprise engaged in commerce. It states that “it shall be unlawful for any person . . . to discharge or in any other manner discriminate against any employee because such
employee has filed any complaint . . . related to [FLSA].” § 215(a)(3) (emphasis added). A person is defined as “an individual, partnership, association, corporation, business trust, legal representative, or any organized group of persons.” § 203(a).

Accordingly, the Tenth Circuit held that the anti-retaliation provision in FLSA reaches farther than its other protections to apply to any “person,” not just an “enterprise,” that engages in retaliatory conduct.

Source: Acosta v. Foreclosure Connection, Inc., — F.3d —, case no. 2:15-CV-00653-DAK (10th Cir. 8/15/18).

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Tenth Circuit holds that failure to exhaust is an affirmative defense not a jurisdictional defect in Title VII claims

The Tenth Circuit has reversed longstanding precedent to, now, hold that a plaintiff’s failure to exhaust the administrative charge requirements of a Title VII claim is a mere affirmative defense, not a jurisdictional defect. What’s the difference? The courts have jurisdiction to hear the circumstances surrounding the failure to exhaust when it is asserted as an affirmative defense. In this case, the plaintiffs apparently had failed to exhaust; however, they pointed to a prior stipulation by the defendant in which the company had agreed that they had in fact exhausted. The trial court had originally ruled, in line with the Tenth Circuit’s longstanding precedent, that a failure to exhaust is jurisdictional and that it, therefore, lacked jurisdiction over the claims and could not, as a result, entertain argument over the stipulation. The Tenth Circuit remanded, holding that the failure to exhaust was merely an affirmative defense, and as such the trial court is authorized to consider the stipulation.

Source: Lincoln v. BNSF Railway Co., case no. 17-3120 (10th Cir. 8/17/18).

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Want to hear my thoughts on recent developments at the Supreme Court?

Great morning today discussing the resignation of Justice Kennedy and other recent developments.

Source: 850 KOA, Colorado’s Morning News.

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Religious accommodation need not preserve overtime opportunities

The Tenth Circuit recently decided a case where the plaintiff’s requested religious accommodation gave him the time he needed off for religious reasons but meant losing overtime. The Court held the employer did not have to allow him to work more later in the week to make up for the lost overtime.

The worker had asked for Saturdays off as a religious accommodation. The employer agreed. However, because Saturdays were the day of the week when the worker (and the other workers apparently) worked overtime, it left him with no overtime opportunity. Wanting to keep his Saturdays off, he asked to be allowed to make up the lost hours by working overtime on Sundays. The employer refused.

The Tenth Circuit recognized that granting the worker his requested accommodation of Saturdays off had cost him his overtime opportunities but held that the company was not required to allow him to work make up hours on Sundays. The Court held that an accommodation is reasonable if it allows the plaintiff “to engage in his religious practice despite the employer’s normal rules to the contrary.” Here letting him take Saturdays off allowed him to engage in his religious practices. The Court rejected the argument that Title VII required the company to then allow him to work make-up overtime on Sundays.

Though (the plaintiff) may have requested an opportunity to make up his overtime hours on Sunday, Title VII did not require (the company) to offer (his) preferred accommodation.

The case illustrates Title VII’s basic principle that a worker may be entitled to a reasonable accommodation of his religious practices, and so long as it is effective at allowing him to engage in his religious beliefs, it need not be his preferred accommodation, even where the difference means lost pay opportunities.

Source: Christmon v. B&B Airparts, Inc., case no. 17-3209 (10th Cir. 5/24/18).

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“Spiritual coercion,” “volunteers” and children under federal wage laws

Two recent decisions by the U.S. Circuit Court of Appeals address the applicability of federal labor laws to church volunteers. The Fair Labor Standards Act (FLSA) is the nation’s leading wage-hour law. FLSA requires a minimum wage, overtime pay and prohibits child labor. FLSA applies only to “employees.” Volunteers are generally not considered to be “employees;” therefore, FLSA generally does not apply to volunteers. These two recent cases addressed these concepts in the context of church volunteers.

One case was decided by the Sixth Circuit, Acosta v. Cathedral Buffet, Inc. It involved a restaurant, operated by a church, on the church’s campus, that was open to the public and staffed in part by church volunteers.

The other case was decided by the Tenth Circuit, Acosta v. Paragon Contractors Corp. It involved a pecan ranch, at which church members, including children, harvested pecans.

In both cases, the Courts held the businesses were commercial enterprises subject to FLSA, and that the church members were doing work. Thus both courts were called to decide if the church members were truly volunteering their time, such that FLSA did not apply to their work. Both courts looked to a 1985 Supreme Court decision, Alamo Foundation, where the Supreme Court held that a volunteer is, among other things, someone who works “without promise or expectation of compensation” and “for his own personal purpose or pleasure.” And, there, the Courts split. The Sixth Circuit held that the church members were volunteers, and the Tenth Circuit held they were not.

Why did the Courts split? The Sixth Circuit decided its case after the Tenth Circuit, and it held that the difference was because (a) the Tenth Circuit case involved children and (b) the Tenth Circuit case involved more than “spiritual coercion.”

Under Alamo Foundation, a worker cannot be held a “volunteer” if his work is coerced. A person who is coerced into working is not working purely “for his own personal purpose or pleasure.” The Sixth Circuit held that, in the Cathedral Buffet case, the workers, who were adults, were working because they felt it was expected of them to be “faithful stewards of God’s grace in its various forms.” The Sixth Circuit held that, even if such religious dogma was considered to be coercive, it is “spiritual coercion,” and as such insufficient to transform a volunteer into an “employee” under FLSA. However, the Court held that in the Tenth Circuit’s case, the workers were children and, further, in its own case, the Tenth Circuit highlighted facts suggesting more than mere spiritual coercion. For example, the Tenth Circuit pointed to evidence, including “one child (who) stated that if she had not worked, she would have lost her family and been kicked out of the community.”

Non-profits that benefit from the work of volunteers, especially church-related non-profits, should carefully review these two new cases.

Source: Acosta v. Cathedral Buffet, Inc., case no. 17–3427 (6th Cir. 4/16/18); Acosta v. Paragon Contractors Corp., case no. 17-4025 (10th Cir. 5/13/18).

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Bad faith required for spoliation instruction, holds Tenth Circuit

There is a general requirement that parties not destroy evidence; bolstering that, there is a specific requirement in EEOC regulation 29 CFR 1602.14 that employers preserve personnel records for 1 year and that the parties in an EEOC charge preserve evidence until final disposition of the charge.

In this case, the EEOC and plaintiffs argued that an Excel file contained information that was allowed to be destroyed as the file was routinely updated. Additionally notes of a meeting were at-issue. The employer’s witnesses testified that they did not know how the records had been lost and, further, that, even if they hadn’t been destroyed, they had never contained evidence relevant to the case at-issue. The EEOC argued it should, nonetheless, be entitled to a presumption that the records would have been helpful to its case, and further that the jury should be so instructed. Such an instruction is called a “spoliation” instruction.

The Tenth Circuit reviewed its precedents and held that, first, a litigant must show the destroying party did so in bad faith. Merely allowing records to be destroyed is not sufficient to warrant a spoliation instruction. The EEOC responded that, unlike general litigants, it should, even despite the lack of bad faith, be entitled to a spoliation instruction because, whatever the employer’s intent had been, it had allowed the records to be destroyed in violation of that regulation. The Tenth Circuit rejected the argument that a spoliation instruction should be a remedy for such a violation absent bad faith, noting that was especially true where, as here, the EEOC and plaintiffs failed to produce any evidence countering the employer’s evidence that, if the records had been preserved, there was nothing helpful to the EEOC and plaintiffs in them.

Source: EEOC v. JetStream Ground Services, Inc., case no. 17-1003 (10th Cir. 12/28/17).

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Tenth Circuit reaffirms need for irreparable harm to obtain injunction in trade secrets case

Both federal and state law (respectively, the Defend Trade Secrets Act (DTSA) and Colorado’s Uniform Trade Secrets Act (CUTSA)) authorize a company to obtain a preliminary injunction against a former employee who is using or threatening to use its trade secrets. The Tenth Circuit recently reaffirmed that, among the requirements for such an injunction, is proof of irreparable harm. (The other requirements are (1) substantial likelihood of success once the merits of the case are decided, (2) the threatened injury outweighs the harm of the injunction, and (3) the injunction will not be adverse to the public interest.)

To be “irreparable” the harm that will be suffered but for the preliminary injunction must be the kind that cannot be reversed, repaired or even compensated for in damages.

In this case, the trial court found that the harm the former employer would suffer if no injunction was issued could be compensated for in damages. In other words, quoting the trial court, it could be “reasonably quantified” in terms of dollars, and such an award of damages “would have adequately made (the company) whole.” Typically that is enough to show such harm is not “irreparable” and therefore a preliminary injunction should be denied.

However, the trial court decided that no showing of actual harm was necessary to prove the irreparable harm element; it decided that the element of irreparable harm could instead be presumed. The court so decided “because both the DTSA … and the CUTSA … provide for injunctive relief.”

The Tenth Circuit reversed. The Tenth Circuit held that legislatures can create presumptions of irreparable harm but to do so they need to say so. Both DTSA and CUTSA lack such language. They merely allow for injunctive relief:

DTSA and CUTSA … merely authorize and do not mandate injunctive relief and thus do not allow a presumption of irreparable harm.

Without a presumption of irreparable harm and lacking proof of irreparable harm, the Tenth Circuit reversed.

The case illustrates the need to prove irreparable harm, in order to obtain a preliminary injunction in cases involving trade secrets. The case is also a reminder that irreparable harm cannot exist where monetary damages will make the plaintiff whole.

Source: FIRST WESTERN CAPITAL MANAGEMENT COMPANY v. MALAMED, Court of Appeals, 10th Circuit 2017 – Google Scholar

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The advice of legal counsel does not immunize an employer against later employment lawsuit

An Oregon trial court recently held that the advice of legal counsel does not immunize an employer against a later employment lawsuit. The employee lodged complaints involving sexual harassment and workplace safety concerns. The employer consulted with legal counsel, who advised, on the basis of her being an at-will employee, that the employee could be terminated. Further, the employer testified his attorney told him the company not only could but should terminate her. “According to (an owner of the employer), the attorney referred to Plaintiff as ‘a troublemaker’ and advised Morse to terminate her.” That owner testified the company would not have terminated her if the attorney hadn’t given his blessing.

The court recognized Tenth Circuit precedent in favor of an employer in a similar situation, but in that situation, the attorney recommended the plaintiff’s request for a shift assignment be denied because a similar request was already at-issue in a different pending lawsuit. In other words, the attorney recommended the employer treat the employee uniformly with its prior practice. Because, in following the attorney’s advice, the company’s “motive” was to treat its employees uniformly, the Tenth Circuit held its motive did not include a retaliatory/unlawful intent. The Tenth Circuit simply held the company had acted for a lawful reason — one that its attorney had articulated — and not even in part an unlawful reason. In so ruling the Tenth Circuit clarified that the advice of counsel was not itself a defense; it was simply evidence that supported the presence of a lawful motive.

To be sure, an employer cannot immunize itself from Title VII liability by following the advice of its lawyers. Still, given the facts of this case, the City was not required to compromise its defense of Lollis’s claims simply to accommodate McGowan’s subjective desire for a change in shifts. In sum, this record does not support a conclusion that the City’s reason for denying McGowan a shift change was pretextual. The City’s temporary refusal to grant McGowan’s request for a shift change was perhaps reactive, but cannot be said on this record to have been retaliatory.

Here, there was no similar reasoning available to the employer. If the company’s attorney had really advised that at-will employment somehow permitted an otherwise illegal discharge, that would have been incorrect. If the attorney really had somehow come to a legal conclusion the plaintiff was a “troublemaker” who should be fired, that again would only have confirmed a retaliatory motive. The fact that the company (allegedly) consulted with an attorney did not — unlike the Tenth Circuit case — suggest it had anything but an unlawful intent: The intent to retaliate against a troublemaker.

The case is a reminder that employers should consult with experienced legal counsel but not anticipate doing so can somehow immunize an employer against the consequences of unlawful actions. But, as in the Tenth Circuit case, the consultation with a lawyer can be used as evidence, when appropriate, of a lawful motive.

Source: Bloomberg Law – Document – Aichele v. Blue Elephant Holdings, LLC,, No. 3:16-cv-02204-BR, 2017 BL 405999 (D. Or. Nov. 13, 2017), Court Opinion

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Tenth Circuit reaffirms indefinite leave request is not a reasonable accommodation

The Tenth Circuit recently reaffirmed that a request for indefinite leave is not a reasonable accommodation under the ADA. Although the plaintiff provided some information about her need for leave, she failed to provide any sense of the anticipated duration of her disability. Instead she “informed her supervisor at Kelly on a Monday morning that she planned ‘not to come to work this week at all’ and indicated she would need additional time off for ‘some appointments and tests’ and for ‘five times of radiation.’” The Tenth Circuit held that was insufficient.

The accommodation Plaintiff requested would have required GE either to go without someone working at the receptionist position it had contracted with Kelly to staff (requiring others at GE to take over Plaintiff’s duties at the receptionist desk while still carrying out their own job duties), or to accept a supertemporary employee or employees who would fill in for Plaintiff for the week she wanted off and for whichever other additional times she needed to take off for tests, appointments, “times of radiation,” and other cancer-related reasons, while letting Plaintiff return to take over her temporary job position whenever she was free and felt up to attending work.

The case is a good reminder to employers of the value (and legal requirement under the ADA) of the interactive process. By communicating with the plaintiff and hearing her full request, the employer was able to gauge the legal reasonableness of her request under the ADA and determine it to be insufficient.

Source: Punt v. Kelly Services

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Employer may share in tips if it does not claim a tip credit, at least in Tenth Circuit

The Fair Labor Standards Act (FLSA) is the country’s leading wage-hour law. Among other things, FLSA imposes a federal minimum wage. The federal minimum wage is a baseline; states and local governments are free to adopt higher minimum wages. Employers can, even under federal law, pay tipped employees a lower minimum wage if certain conditions are met. One condition is that the employer not share in the tips. To put it (overly) simply), tips can be pooled among other tipped employees, but not with the company or management.

What if the employer decides it wants the tips and doesn’t care about claiming the tip credit? In other words, can a company take some or all of the tips so long as it pays the full applicable minimum wage? The Tenth Circuit read the law and held, yes, in Marlow v. The New Food Guy, Inc., 861 F.3d 1157 (10th cir. 2017) (Employer that does not claim tip credit may take share of tips; FLSA’s prohibition against same is merely a condition for claiming a tip credit). The U.S. Department of Labor and Ninth Circuit say otherwise. See Oregon Restaurant & Lodging Assoc. v. Perez, 816 F.3d 1080 (9th Cir. 2016) (Employer may not whether or not a tip credit is claimed).

While the Tenth Circuit’s opinion is clear, well reasoned and based on the language of FLSA, employers outside the Tenth Circuit should be aware of the distinction in the event they wish to share in tips.

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Tenth Circuit reaffirms disability and accommodation requirements

The Tenth Circuit reaffirmed the requirements an employer faces when a less than clear employee presents with a potential disability. In this case, the plaintiff had a pacemaker but otherwise no restrictions and needed no accommodations at work. He required a battery replacement to the pacemaker, and the procedure left him with an infection. He took FMLA leave then, while on leave, informed his employer he wouldn’t be able to return for an additional week after his FMLA leave expired.

He did not say he had a disability, but the Tenth Circuit held that the company knew enough to know that he did. The Tenth Circuit rejected the argument that, with his pacemaker, the plaintiff had no restrictions. The court noted that established ADA law requires courts to consider the plaintiff’s condition without the benefit of ameliorative treatments, like a pacemaker (medication, eyeglasses, etc.). But for the pacemaker, the court held that the company knew enough to know the plaintiff’s condition would have beenbad enough to constitute a protected disability.

With regard to the fact that he was entitled to no more FMLA leave, and with regard to the fact that he never actually asked for extra leave at the end of his FMLA leave, the Tenth Circuit held he’d effectively put the company on notice that it should have engaged in the ADA-required interactive process while he was on his FMLA leave. Even though he didn’t ask for extra leave, the company should have discussed with him whether his disability required a reasonable accommodation, and if it had done so, one potentially reasonable accommodation would have been an additional unpaid week’s leave.

Indeed, the facts of the case began even earlier with an OSHA investigation that the plaintiff maintained he’d been suspected of starting by anonymously complaining to OSHA. He sued for that as well, and the Tenth Circuit held that the foregoing, and other alleged conduct, could have been part of a claim for OSHA retaliation as well (under a Kansas law that recognizes such claims as public policy violations). Therefore, he was allowed to proceed on both his ADA and wrongful discharge claims.

The case is a good illustration to employers of the need to fully consider, in consultation with legal counsel, known information, even when a plaintiff seems otherwise fine, only suffers what seems to be a temporary setback and is himself less than clear about what he needs from the company.

Source: Yinger v. Postal Presort Inc., — F.3d —, case no. Court of Appeals, case no. No. 16-3239 (10th Cir. 6/8/17)

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Tenth Circuit holds conflicting arbitration agreements mean no arbitration agreement

The company and a worker entered into six agreements, each of which contained an arbitration provision. While there was no doubt the parties intended to arbitrate any disputes between them covered by the agreements, the arbitration provisions were not identical. They differed in their details.

The agreements contain conflicting arbitration provisions. See Aplt. App. 167–87. Suffice it to say the conflicts involve (1) which rules will govern, (2) how the arbitrator will be selected, (3) the notice required to arbitrate, and (4) who would be entitled to attorneys’ fees and on what showing.

The Tenth Circuit held those differences were “irreconcilable” and as such established that there had been no meeting of the minds. Worse, as is often in contracts, there was no clause saying which agreement would control over the others in the event of a conflict. Accordingly the Court refused to compel arbitration.

The decision reminds parties to review all their agreements and to keep the terms of their arbitration provisions, in particular, consistent.

The case was Ragab v. Howard, case no. 15-1444 (10th Cir. 11/21/16).

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Quid Pro Quo and Hostile Work Environment, both, just sexual harassment, by a different name

Federal and state law prohibit sexual harassment. The courts have articulate two common types of sexual harassment: quid pro quo (where someone is asked to provide sex in exchange for a job benefit or punished on the job for not providing sex) and hostile work environment (where someone is subjected to “severe or pervasive” mistreatment because of their sex/gender). Whatever the kind of civil rights violation, a complaint of sexual harassment must first be lodged with the EEOC (or appropriate state agency) before a lawsuit can be filed.

In this case, the employee filed a the required administrative charge of sexual harassment but described only a hostile work environment, then when he later sued, he added quid pro quo allegations. The trial court held it was too late; he should have done so in his administrative charge. The Tenth Circuit disagreed holding that, under Title VII’s charge requirement and under federal pleadings standards, the employee’s allegations of sexual harassment were sufficient to put the employer on notice of any kind of sexual harassment, whether quid pro quo or hostile work environment. The court explained that quid pro quo and hostile work environment are just two different examples of sexual harassment.

The case was Jones v. Needham, case no. 16-6156 (10th Cir. 5/12/17).

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Tenth Circuit restates summary judgment test with extensive discussion of multiple ADA and general employment law doctrines

The Tenth Circuit restated the test for granting summary judgment in favor of employers, and in doing so extensively discussed multiple doctrines frequently raised in such motions, including the honest belief doctrine, the adequacy of an employer’s investigation and the reasonableness of requested accommodations. With the regard to the last doctrine, the court noted that, as a matter of law, when workers advise their employers of a disability and request an accommodation after they have engaged in workplace misconduct, it is not a reasonable accommodation to ask that such misconduct be excused due to their disability. The court cited its 2004 precedent, Davila v. Quest Corp., Inc., for the proposition that “excusing workplace misconduct to provide a fresh start/second chance to an employee whose disability could be offered as an after-the-fact excuse is not a required accommodation under the ADA.” The Court concluded that “a denied request for retroactive leniency cannot support an accommodation claim.”

The case was DeWitt v. Southwestern Bell Telephone Co., 845 F.3d 1299 (10th Cir. 2017).

 

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Employer’s investigation held reasonable under FCRA by Tenth Circuit

The FCRA (Fair Credit Reporting Act) is the federal law that governs background checks. Employers of DOT-covered drivers must run and participate in a background checking program.

In this case, the company had reported the plaintiff for an “Unsatisfactory Safety Record” because, while driving for the company, a speed monitoring device had reported him as driving at least 4 miles over the speed limit in a 7-day period, for which the company had issued him a “Serious Warning.” With that entry on his record, when the driver later applied to another company, his application was rejected because of that report. Accordingly he requested, pursuant to his FCRA rights, that the company re-investigate the matter and clear his record. The company reviewed its records and refused to clear the entry. The driver sued and demanded a jury trial.

The Tenth Circuit joined the First, Seventh and Ninth Circuits in holding that a jury trial is not automatically required to determine the reasonableness of every re-investigation. The Tenth Circuit then held that an investigation could be reasonable if the company did no more than “rely on its own records.” The company was not required to go back and review the original speed monitoring device’s logs. “(T)he scope of a reasonable investigation turns on the information about the dispute that the furnisher has received.”

(A)n investigation does not have to be exhaustive to be reasonable; (the company) may balance the costs and benefits of engaging in additional procedures.

The case was Maiteki v. Marten Transport Ltd., 828 F. 3d 1272 (10th Cir. 2016).

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Beware asking one question too many

When the plaintiff applied for short-term disability benefits, he told the insurance company that he suffered from stress, anxiety and an addiction to prescribed narcotics. He was granted the requested medical leave of absence, took the leave, returned to work, received a write-up and resigned. He sued his employer for a number of alleged violations.

First, he claimed he’d been subjected to a hostile work environment because of his alleged disability. He said the hostile work environment included being “sarcastically belittled” and called “a baby.” The Court dismissed the claim, holding his allegations were not severe enough to violate the Americans with Disabilities Act (ADA), even if true.

Second, he claimed he’d been discriminated against because he’d been “regarded as” disabled when the company had allegedly required him to pass a drug test and to remain in the drug testing program for five years. The Court dismissed that claim as well, noting that he was the one who had asked for leave due to substance abuse and that the evidence established the employer treated others who did the same in the same way.

Finally, he argued that the company had wrongfully required him to disclose all legally prescribed medications he was using. Here, the Court held, if true, the employer had gone too far. The ADA strictly limits companies’ ability to request medical information, and the Court remanded the case for the lower court to determine what had actually happened. The Court noted that the f company could still provide it complied with the ADA’s rules. In short, the employer will have to prove it had a “business necessity” for the request and that the request was job-related given the plaintiff’s individual duties.

Employers are reminded to consult with experienced counsel when confronted with difficult cases involving leaves, disabilities, addiction and safety concerns.

The case was Williams v. FedEx Corporate Services, — F.3d — (10th Cir. 2/24/17).

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Tenth Circuit refuses to enforce EEOC subpoena

The Tenth Circuit refused to enforce an EEOC subpoena denied where the EEOC’s subpoena requested information regarding the employer’s treatment of other employees. The request exceeded the scope of the purely individual-oriented charge, no EEOC charge had been filed and the employer had not put its treatment of other employees at-issue in its position statement.

The case was EEOC v. TriCore Reference Laboratories, — F.3d — (10th Cir. 2/27/17).

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