An employee who claimed an agreement he entered to arbitrate all employment related claims was unconscionable has his challenged rejected as the Court found the arbitration agreement to be neither procedurally or substantively unconscionable.

In the case of Fox v. Computer World Services Corp., et al. (2013), when Plaintiff Phillip Fox (“Fox”) began his employment with Computer World Services Corp. and C2 Essential, Inc. (joint employers of Fox and collectively referred to as “Defendants”) he electronically signed a number of forms, one of which was an arbitration agreement.  The arbitration agreement provided that the parties agreed to arbitrate, inter alia, any claims alleging violation of federal and state statutes.  Approximately eighteen months after he began working for Defendants, Fox’ employment was terminated.  Fox alleged that his job termination was in violation of the Age Discrimination in Employment Act, and also alleged retaliation and violations of the District of Columbia Human Rights Act.  Fox refused to arbitrate his claims and instead sued Defendants in state court.  Defendants removed the case to federal court and also filed a motion to dismiss and to compel arbitration.    

For his part, Fox challenged the arbitration agreement and claimed it was procedurally unconscionable because it was buried within a larger series of employment documents; it was presented to him on a take it or leave it basis; and, he did not understand that by acknowledging the arbitration agreement he was agreeing to the terms within the agreement.  Fox also challenged the agreement because he signed it electronically.  The Court rejected each of these arguments and found that the Agreement to Arbitrate was presented in a separate document and the title of the document was in all caps and in bold font.  In addition, the Court found that immediately before the signature line of the agreement was an acknowledgement, again in all caps, which stated that the signatory read and understood the terms of the agreement and was been provided the opportunity to discuss the agreement with legal counsel.  Finding that Fox had a choice as to whether to enter the agreement, acknowledged that he read and understood the agreement and was given a chance to consult legal counsel, the Court found the arbitration agreement was not procedurally unconscionable. 

Fox also raised a number of substantive challenges to the arbitration agreement, including challenging the agreement on the grounds that it contained a fee-sharing provision wherein all parties were required to share the fees and costs of the arbitrator in an amount and manner determined by the arbitrator.  While the Court easily disposed of most of Fox’ substantive challenges to the arbitration agreement, the fee- sharing issue raised by Fox and whether forcing him to go through arbitration would be prohibitively expensive was not so easily resolved.  Ultimately, the Court found that the risk that Fox might incur prohibitive costs was too speculative to invalidate the agreement.  The Court relied on the fact that Defendants had waived the fee-sharing provision in the agreement, and that the agreement (although somewhat ambiguous) appeared to allow the arbitrator discretion as to how to allocate fees and costs. Therefore, Fox’ argument as to what portion of those fees he would have to bear were too speculative to deem the arbitration agreement substantively unconscionable.  The Court held that the arbitration agreement was enforceable and compelled Fox to arbitrate his claims.

Written By Malik K. Cutlar 

An employee who alleged she was subjected to a sexually harassing work environment, gender discrimination, and retaliation under Title VII of the Civil Rights Act of 1964 (“Title VII”) filed a Charge with the Equal Employment Opportunity Commission (“EEOC”). However, almost all of the facts supporting the employee’s Charge were put in the EEOC intake questionnaire and letters to the EEOC, rather than in the EEOC Charge Form. As such, only the claims and facts set forth in the Charge were considered by the Court and they were insufficient to state the discrimination and retaliation claims raised by the employee.

In the case of Balas v. Huntington Ingalls Industries, Inc. (2013), the United States Fourth Circuit Court of Appeals affirmed a ruling from the Eastern District of Virginia that the Plaintiff, Karen Balas, could not maintain claims which were solely asserted in her EEOC questionnaire and in letters to the EEOC. The Court ruled that an administrative charge serves a vital function in the process of [potentially] remedying unlawful employment practices because it serves to alert the employer of the alleged wrongs committed; allows for an investigation into the alleged wrongful activity by the employer and the EEOC; and allows for the EEOC to seek conciliation between the parties if it finds merit to the charges. The Court reasoned that since a plaintiff’s employer is not put on notice as to the claims and facts alleged in the EEOC questionnaire or in letters privately written by a plaintiff to the EEOC, only those claims formally made part of the EEOC Charge were allowed to move forward in a lawsuit against an employer.

Although not contractually required to do so, many employers offer their management-level employees aseverance package in the event of a reduction-in-force or some other non-disciplinary event which requires an employer to terminate a relationship with a managerial employee. The terms and compensation contained in severance packages usually depend upon salary, years of service, and work performance and/or value of the employee to the employer. However, if an employee can show that the terms of a severance package offered to them are less favorable than those offered to other, similarly situated employees, the employee may be able to state a claim for discrimination.

In the case of Gerner v. City of Chesterfield, Virginia (2012), the United States Court of Appeals for the Fourth Circuit reversed a lower court ruling from the Eastern District of Virginia and found that although a severance agreement is offered upon employment termination and is not a contractual right, it is nevertheless an employment benefit upon which a discrimination claim may lie. Finding that the district court judge (Hudson, J.) erred in his analysis of the legal standard, the appellate court held Title VII protects current and former employees from discrimination, as well as those who have not been hired and have been discriminated against in the hiring process. Further, the Court found that Ms. Gerner's allegations that she was offered a less favorable severance package than her male counter-parts under the City’s reduction-in-force plan, were sufficient to allege an adverse employment action for a gender discrimination claim. In making its ruling, the Court relied upon U.S. Supreme Court precedent and decisions from other Circuit Courts.

This decision by the Fourth Circuit, which is the highest federal appellate court for Virginia, Maryland, West Virginia, and the Carolinas, is a reminder to employers that they must be vigilant in making sure that employment benefits (even severance packages which are often viewed as “voluntary” or “discretionary”) are provided on an equitable basis. Alternatively, employers must make sure that they have a strong, non-discriminatory, reason for any difference in the provision of such benefits among similarly situated employees.

© Copyright, PCT Law Group 2012, all rights reserved.

Written by Malik Cutlar

The Fourth Circuit Court of Appeals allowed a former city employee’s sexual harassment and retaliation claims to proceed to trial by reversing a lower court ruling which granted summary judgment in favor of the employer. Plaintiff Katrina Okoli, formerly an executive assistant for John P. Stewart, the director of Baltimore’s Commission on Aging and Retirement, filed a lawsuit alleging sexual harassment hostile work environment, quid pro quo sexual harassment, and retaliation. In the case of Okoli v. City of Baltimore, et al., Plaintiff Okoli alleged that over a four month span, Defendant Stewart repeatedly sexually propositioned her; told her of his alleged sexual exploits; asked her about her underwear; fondled her leg underneath a table on several occasions; and forcibly tried to kiss her when they were alone in a conference room. Okoli alleged that she rejected such advances by Stewart and also twice complained about the harassment to officials within the City government, as well as wrote a letter to Baltimore’s then-mayor Martin O’Malley concerning the harassment. Okoli was fired by Stewart just hours after her letter was received by the mayor’s office.

For its part, the City contended (and apparently the lower court agreed) that Stewart’s conduct was sporadic and infrequent and did not rise to the level of a hostile work environment. Further, the City argued that Okoli’s work had deficiencies, and that she was going to be fired even before she wrote the letter complaining of Stewart’s behavior. Additionally, the City argued, Okoli’s letter was non-specific and did not state that she was being “sexually” harassed by Stewart, only “harassed.” Therefore, they argued, Okoli did not engage in protected activity under Title VII to warrant a retaliation claim against the City.

The Appellate Court disagreed and held that the statements attributed to Stewart were both severe and pervasive. In addition, the Court held that a plaintiff need not mention the “magic words” of “sex” or “sexual” to effectively advance a sexual harassment complaint. Citing decisions from other circuit courts, the Court held that the complainant only need put the employer on notice that unlawful behavior is afoot. Okoli’s use of the words “unethical,” “degrading and dehumanizing” in her letter complaining about Stewart’s behavior were enough to raise a sexual harassment complaint. Finally, the Court determined that the district court erred in concluding that simply because Stewart had a document on his computer that pre-dated Okoli’s letter, such document was a termination letter. Stewart modified the computer document three times before delivering it to Okoli as a termination letter just hours after her sexual harassment complaint reached the mayor’s office. Under those facts, the Court concluded that there was sufficient evidence to infer that Stewart did not intend to fire Okoli prior to receiving word that she complained about his behavior to the mayor and his staff.

The Fourth Circuit Court of Appeals hears appeals involving Virginia employment cases.

Written by Malik Cutlar

A Virginia Federal Court jury recently determined that Virginia Tech violated the Equal Pay Act, and awarded back pay to two women employees of its fundraising office. The Equal Pay Act is a federal law amending the Fair Labor Standards Act, which prohibits employers from paying unequal wages to women and men for doing the same or substantially similar work.

To establish a case under the Equal Pay Act, an employee must establish that:

• different wages are paid to employees of the opposite sex;
• the employees perform substantially equal work on jobs requiring equal skill, effort and responsibility; and
• the jobs are performed under similar working conditions.

However, an employee who proves all the above elements may still not prevail. A business may avoid liability if it establishes that such payment was made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any other factor other than gender.

In the Virginia Tech cases, the two women claimed their starting salaries were lower than the men who did the same work. In its defense, Virginia Tech countered that the men had more experience when hired.

Both sides presented extensive statistical evidence. According to the plaintiff’s economist, men’s salaries involved with Virginia Tech’s fundraising were an average of 15% higher. Virginia Tech’s expert analyzed the experience and duties of the employees, and determined there was only an 8% difference.  Tech's expert concluded that this difference could be linked to gender, but opined that there was a chance it occurred randomly since the disparity was not statistically significant.

Notably, one of the women testified that when she inquired about the pay differential between her and her male predecessor, the senior regional director of major gifts replied that her predecessor had a family to support.  In addition, the Judge identified other statements that tend to show Virginia Tech's animus toward the women when he previously denied Virginia Tech's motion for summary judgment.

How does your company prevent potential liability under the Equal Pay Act? Businesses should evaluate its pay structure, including policies regarding seniority systems, merit systems and incentive systems in light of the prohibition of gender pay disparity. An effective way to prevent managers and supervisors from making compensation decisions based on a protected category under the discrimination laws is to establish and implement a comprehensive job evaluation system.  As the lawyers for the women argued during the trial in this matter - if Virginia Tech "had good policies, we wouldn't be here." 

By Angela France

As summer quickly approaches, businesses begin receiving an increasing number of offers for unpaid internships. As many businesses already know, there are many advantages to using an intern – unpaid internships may help fuel growth for your company and also provide an opportunity to mentor young professionals. However, unpaid interns can create legal troubles for the unwary business owner. Federal labor laws governing internships provide that the relationship has to benefit the intern more than the company. If it doesn’t, then the business must comply with the Fair Labor Standards Act (“FLSA”) by paying minimum wages and possibly overtime.

The U.S. Department of Labor’s Wage and Hour Division outlined a list of criteria to determine whether a trainee or intern is an “employee” under the FLSA, and thus, must comply with Federal wage laws.

The following criteria provide guidance in evaluating internship programs for for-profit organizations, but it is important to note that each program is unique and must be carefully examined:

• the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
• the training is for the benefit of the trainee;
• the trainees do not displace regular employees, but work under close observation;
• that the employer that provides the training derives no immediate advantage from the activities of the trainees and on occasion the employer’s operations may actually be impeded;
• the trainees are not necessarily entitled to a job at the completion of the training period; and
• the employer and the trainee understand that the trainees are not entitled to wages for the time spent in training.

If your company’s internship program does not satisfy all of the above criteria, your interns may be considered “employees” under the FLSA. Hiring an intern, which qualifies as an “employee” may cost your company thousands in unpaid wages and legal fines!

So, how do you ensure compliance? Establish a written internship program outlining the terms and structure of the relationship in a way that the intern is receiving the full benefit of the learning experience, and ensure that your managers and other employees properly implement it.

By Angela France

Federal employee Robert T. Perry (“Perry”) had a long-running legal battle with his federal employer, the Pension Benefit Guaranty Corporation (“PBGC”). After three lawsuits, two of which were settled, Perry’s claims of hostile work environment and retaliation have now been dismissed on summary judgment.

The case, Perry v. Gotbaum, was the third lawsuit brought by Perry against the PBGC and centered around Perry’s allegations that the PBGC discriminated and retaliated against him based upon a Settlement Agreement entered into by the parties to settle the first two lawsuits. As required under the Settlement Agreement, the PBGC provided Perry with a grade and step increase in salary, paid for $10,000 worth of training, paid Perry a lump sum of $60,000, and placed him on Leave Without Pay (“LWOP”) Status for a time-period not to exceed six months. In addition to proving Perry with a salary increase and training, it appears that the impetus behind the Settlement Agreement was to provide Perry with an opportunity to find employment outside of the PBGC and give him a lump sum payment during his job search. Per federal government regulations, the personnel actions required under the Settlement Agreement had to be documented using a federal government Standard Form 50 (“SF-50”). 

In his third lawsuit, Perry complained, inter alia, that the comments section of the SF-50 forms used to process the personnel actions included information referencing his prior lawsuits and the Settlement Agreement. According to Perry, such comments would have a chilling effect on his ability to seek employment outside of the PBGC because it would be clear that he had engaged in protected activity. Further, Perry complained that the PBGC had used a more generic code when processing SF-50 forms for other employees, and therefore he should have been afforded the same treatment. 

While the Court agreed with Perry that he engaged in protected activity regarding his prior lawsuits and the resulting Settlement Agreement, the Court ruled in favor of the PBGC finding that the Agency actually went back and corrected the SF-50 forms to respond to Perry’s concerns about the remarks placed on the forms. Further, since the Settlement Agreement was not confidential and had been filed with the Court, it was a public record and Perry could not base his claims of a retaliatory and/or discriminatory disclosure upon information that was generally available to the public. In addition, the Court found that there was no basis to find the PBGC’s “honest mistake” was an attempt to hamper Perry’s future job opportunities since it was in the Agency’s interest to have Perry find employment outside of the PBGC as soon as possible. As such, the Court dismissed Perry’s federal employment discrimination and retaliation claims.

It should be noted that the legal standard applied by the Court in this public sector case applies to private sector Virginia businesses as well.

Written by Malik Cutlar

In an unpublished decision, the Fourth Circuit Court Appeals recently held that an employer may be liable for third-party harassment by a customer if the employer knew or should have known of the harassment and failed to take appropriate actions to halt it. The evidence of repeated complaints to supervisors and managers by the employee created a triable issue as to whether the employer had notice of the harassment, and thus, the Appeals Court allowed this claim to go forward to trial.

In EEOC v. Cromer Food Services, Incorporated, a route driver for a southeastern vending machine company alleged he suffered daily sexual harassment at the hands of two housekeeper employees of one of the company’s largest customers – a hospital. According to the driver, the harassment began after a co-worker left a note in the hospital cafeteria calling him gay. Following this incident, the two male hospital employees allegedly began harassing him with unwanted sexual comments.

The driver claims he complained to numerous people at CFS, including his supervisor, his direct supervisor, another supervisor, a manager of the company, and the chairman of the Board. As the harassment continued, he took more drastic measures by reporting the harassment directly to a human resources professional at the hospital and to the supervisor of the two hospital employees. But, the hospital employees were unrelenting.

In response to this lawsuit, the company asserted that it did not have actual or constructive knowledge of the harassment because the complaints by the driver were vague and insufficiently detailed for action to be taken. In addition, the company pointed out that the employee failed to report the harassment to its President in accordance with the company’s written sexual harassment protocol.

The Fourth Circuit reversed the trial court’s dismissal of the claim. In doing so, it noted that the District Court focused on only one snippet of the driver’s deposition testimony which stated that he did not provide details of the harassment to the company. The Appeals Court acknowledged that although anti-harassment law requires notice to the employer – it should not require it to be pellucid.

The Fourth Circuit also pointed out the flaws in the employer’s approach in this matter. The Court stated that harassment claims could not be avoided by utilizing a “see no evil, hear no evil” strategy, and it criticized the protocol requiring reports to be made to the President by recognizing that such requirement may likely intimate an employee. Moreover, the Court drew attention to the fact that management failed to report the harassment up the chain of command as required by company policy.