Wednesday, May 22, 2013
This past Friday, the United State Supreme Court granted cert. in the case of Lawson v. FMR LLC. The case concerns whether the Sarbanes-Oxley Act (SOX), which protects employees of publicly traded companies from retaliation for reporting financial improprieties, also protects the employees of private contractors of those companies. In the case, two fund investment advisors blew the whistle on a publicly-traded mutual fund which contracted for their services. The First Circuit found that the fund advisors were not covered by SOX protections.
The Court had asked the U.S. Solicitor General's views on the case, and the SG recommended that the Court bypass the case in order to allow the issue to percolate among more circuit courts. The case, however, was granted.
Among the issues to be decided: whether protecting the employees of contractors is mandated under the plain meaning of SOX and whether a finding of no coverage for such employees will discourage whistleblowers from bringing financial fraud allegations to the attention of the public. It should also be an interesting case because it is one of the first to examine the whistleblower protections of SOX and will likely provide guidance on how broadly or narrowly SOX should be interpreted to protect whistleblowers in the financial services industry.
Thursday, May 16, 2013
In addition to the Third Circuit's divided, pro-Noel Canning decision this morning which Jeff has described here in his post from today, Washington has been busy with labor-oriented topics.
To wit, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on the five recently nominated members for the National Labor Relations Board (NLRB) (Democrats Mark Gaston Pearce, Richard F. Griffin, and Sharon Block, and Republicans Harry I. Johnson and Philip A. Miscimarra). Surprisingly, the hearing lacked histrionics from either side, and a vote is planned by the Senate commitee next week on May 22nd. My prediction would be to expect a party line vote sending the nominations to the Senate floor, where, of course, a Republican filibuster should be expected. It will be interesting to see how the GOP justifies this filibuster given that its complaints about the Obama administration surround the use of the recess appointment power, and now Obama is given them the nominees they asked for in the first place. There is some urgency here because the Board will lack a quorum as of August 27th, when Chairman Pearce's term expires.
In other news, the Senate HELP committee voted today 12-10 along party lines to forward the nomination of Thomas Perez to be Secretary of Labor. Perez, who is exceptionally qualified to hold this position based on previous positions in federal and state government (he is the assistant attorney general in charge of the Justice Department's Civil Rights Division and he formerly headed Maryland's Department of Labor, Licensing and Regulation), has been under GOP attack for his purported role as assistant AG for civil rights. Not sure what the GOP will do on the Senate floor. They might have a hard time holding together a filibuster on this one, especially since their allegations against Perez appear to have turned out to be all smoke and no fire.
In any event, busy day today in Washington D.C. And I have feeling, the fireworks have just started.
Tuesday, May 7, 2013
There has been much conversation of late about the Noel Canning NLRB recess appointment decision and whether it is likely to be heard by the U.S. Supreme Court. In the meantime, many are urging the Senate to confirm a full package of NLRB nominees (3 Ds, 2 Rs as is traditional).
On this basis, Lynn Rinehart at the AFL-CIO is asking academics to support confirmation of all five NLRB nominees:
As you know, we face a growing crisis in the enforcement of workers’ rights in the wake of Noel Canning and the stalemate in the Senate over NLRB appointments.
The Senate Labor Committee will hold a hearing next Thursday, May 16, on the five nominees to the NLRB.
In connection with that hearing, Erin Johansson at American Rights at Work is coordinating an academic sign-on letter in support of confirmation of the five-member bi-partisan package.
We urge you to add your name to the letter. You can sign by visiting this page.
Thursday, April 18, 2013
Friend of the blog and comparative and international LEL expert, Susan Bisom-Rapp (Thomas Jefferson) has kindly provided the following guest post. It is an excellent analysis of this week's Supreme Court decision in Kiobel v. Royal Dutch Peltroleum. In it, she explains the labor and employment law ramifications of this important decision:
The Irony of the Supreme Court’s Decision in Kiobel v. Royal Dutch Petroleum
Susan Bisom-Rapp (Thomas Jefferson School of Law)
Although not a case involving workers’ rights, the April 17th decision in Kiobel v. Royal Dutch Petroleum was long-awaited by those interested in whether transnational corporations (TNCs) can be sued in U.S. courts under the Alien Tort Statute (ATS) for human rights violations perpetrated against foreign workers laboring abroad. Rather than answer the question initially directed to the Court – Does the ATS confer jurisdiction over corporations? – the Supreme Court addressed a different question: Whether and under what circumstances may U.S. courts recognize an ATS cause of action for violations occurring within another sovereign territory? In a fractured and somewhat muddy decision, the Court limited ATS cases, at least where the defendants are foreign corporations, the wrongdoing occurs outside the U.S., and the claims do not touch or concern the territory of the United States. Even so, the Court left open enough questions that on the day the decision issued, workers’ rights advocates confidently opined that there is still a subset of viable ATS cases that may be brought against TNCs.
Kiobel was brought by Nigerian nationals against Dutch, British, and Nigerian corporations, which the plaintiffs argued aided and abetted the Nigerian government in committing human rights abuses as the latter sought to suppress environmental protests related to corporate oil exploration. All nine justices agreed that the case should be dismissed but the four justices of the Court’s liberal wing (Justices Breyer, Ginsburg, Sotomayor, and Kagan) disagreed with the reasoning of the majority (Justices Roberts, Scalia, Kennedy, Thomas, and Alito). A liberal wing concurrence was consequently written. Complicating matters, Justices Kennedy and Alito each filed a separate concurrence, and Justice Thomas joined Justice Alito’s concurrence.
No matter how you slice it, the Supreme Court’s decision in Kiobel is a win for TNCs. The Kiobel case will not proceed, and the Court announced new limitations on ATS claims. Ironically, however, and despite the limitations imposed by the Kiobel majority, it is the majority opinion, written by Chief Justice Roberts, which leaves the courthouse door open a bit and will likely be used by workers’ rights advocates in subsequent litigation. Before explaining why, some background on ATS claims on behalf of workers is necessary.
The ATS, legislation enacted in 1789 and signed into law by George Washington, confers federal jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” It was not until 1996, however, that suit was brought against a corporate defendant. That case involved the oil company Unocal, which was sued for allegedly aiding and abetting abuses by the Myanmar military, including the use of forced labor, committed in connection with the construction of a natural gas pipeline. Although that case settled, subsequent ATS cases brought on behalf of workers include suits against: Bridgestone-Firestone on behalf of children and adults who work on Firestone’s rubber plantation in Liberia; Chiquita by the families of pro-union workers murdered by Colombian paramilitaries; Coca-Cola for the murder and torture of Colombian union leaders; Nestle, Archer Daniels Midland, and Cargill relating to the trafficking of Malian children into Cote d’Ivoire for work on cocoa plantations; and mining company Drummond, regarding its subsidiary’s alleged involvement with the torture and murder of Colombian trade union leaders.
In 2007, that last case, Romero v. Drummond Co., Inc., became the first ATS case against a corporation to reach trial. Although the jury ruled against the plaintiffs, many TNCs and their advocates viewed the case as making real what had until then been a theoretical threat of corporate ATS liability. The status of corporate ATS liability, however, is contested. There is a split in the circuits that the Supreme Court had a chance to resolve in Kiobel. Rather than do that directly, the Court addressed a different issue – the extra-territorial reach of the ATS in suits brought against any person, natural or juridical.
For the Kiobel majority, this is a simple case resolved by the presumption against extraterritorial application of a statute. That well-known presumption provides that where Congress has not plainly expressed its intent that legislation apply beyond U.S. borders, the statute does not apply extraterritorially. Since the spare text of the ATS does not address the reach of the grant of federal jurisdiction for tort claims brought by aliens, the presumption, by barring claims such as those in Kiobel, precludes U.S. courts from creating conflicts with other nations and interfering with foreign policy. That the tort claims mentioned in the ATS are those “committed in violation of the law of nations” does not, argued the majority, imply reach beyond our borders since violations of international law norms can occur on U.S. soil. Indeed, two embarrassing incidents involving foreign ambassadors to the U.S. occurred just prior to passage of the ATS. At the time, U.S. officials were concerned there might not be a sufficient forum for hearing those claims.
As for what it would take to displace the presumption, Chief Justice Roberts notes that all ATS claims must “touch and concern” U.S. territory with “sufficient force.” Somewhat tantalizing, he opines that “[c]orporations are often present in many countries, and it would reach too far to say that mere corporate presence suffices.” Picking up on all that the majority opinion leaves unanswered, Justice Kennedy’s one paragraph concurrence notes that “the Court is careful to leave open a number of significant questions regarding the reach and interpretation of the [ATS].”
Rather than embrace the presumption against extraterritorial application, the liberal wing’s concurrence is driven by the principles of foreign relations law from which it draws international jurisdictional norms to determine when it is appropriate to apply U.S. law outside of U.S. territory. To that end, Justice Breyer, who wrote the concurrence, relies on the Restatement (Third) of Foreign Relations Law. The liberal concurrence argues that the statute provides federal district courts with jurisdiction not only when the torts occur in the U.S. but also when “the defendant is an American national” or “the defendant’s conduct substantially and adversely affects an important American national interest.”
While providing some useful language for workers’ rights advocates, there are two reasons I believe the liberal concurrence may be less helpful to them than the majority opinion coupled with Justice Kennedy’s concurrence. First, there may be a tendency among American judges to shy away from foreign relations law and the Restatement Third when they might easily make use of a presumption rooted in domestic law, and, I might add, that presumption is embedded in a majority opinion. Strategically, it may make sense for workers’ rights advocates to craft arguments using language that is familiar to American judges.
Second, Justice Breyer's example of “an important American national interest” does not track the fact patterns of the ATS corporate cases very well. His example is ensuring our country does not become a safe harbor for modern day pirates – those who commit heinous violations of international norms elsewhere and then seek safety on our shores. In the corporate ATS cases, the actual commission of human rights violations is rarely performed by the TNC in question. Gross human rights abuses in those cases usually have a direct connection to a foreign government. The corporate liability, if it were to lie, is vicarious. In short, the ill-fit of Justice Breyer’s example may limit the utility of the liberal concurrence leading to the irony that the more conservative majority opinion may ultimately be of greater use to workers’ rights advocates. The Kiobel decision was a disappointment for workers’ rights advocates but it was not as bad a decision as it could have been. The battle over corporate ATS liability continues, at least for now.
Monday, March 18, 2013
The Supreme Court today granted cert in Madigan v. Levin, an ADEA case from the 7th Circuit. Here is the issue:
Whether the Seventh Circuit erred in holding, in an acknowledged departure from the rule in at least four other circuits, that state and local government employees may avoid the federal Age Discrimination in Employment Act’s comprehensive remedial regime by bringing age discrimination claims directly under the Equal Protection Clause and 42 U.S.C. § 1983.
Tuesday, February 5, 2013
Michael Zimmer (Loyola-Chicago) and Sandra Sperino (Cincinnati) are currently drafting an amicus brief to be filed in University of Texas Southwestern Medical Center v. Nassar. This case addresses mixed motive issues in Title VII retaliation cases, and it is a pretty important issue. Michael and Sandra are interested in hearing from anyone who would like to comment on drafts of the amicus or who would be interested in signing or considering signing on to the finished brief. Please email Sandra at email@example.com if interested.
Kenneth Shiotani (National Disability Rights Network) gives us the news that the Department of Labor will be publishing its final rule on the recent amendments to the FMLA that expanded coverage to flight crews and family members of those in the military--for a refresher on those expansions, see here, here and here.
February 5, 2013 in Beltway Developments, Disability, Employment Discrimination, Labor and Employment News, Pension and Benefits, Public Employment Law, Worklife Issues | Permalink | Comments (0) | TrackBack (0)
And for some reform links, from the add paid leave camp: National Partnership for Women and Families Agenda for the 113th Congress. And from the reform abuse of leave camp: The U.S. Chamber of Commerce's Absence abuse and Medical Leave.
Thursday, January 24, 2013
Finally some sanity has returned to this insane world and Seth Harris (formerly a labor and employment law prof at New York Law School) and current Deputy Secretary of Labor has been named Acting Secretary of Labor with the departure of Hilda Solis. President Obama has not yet named a successor to Solis, but as far as I am concerned, I would just take the Acting title away from Seth and let him have at it.
You see, my friends, in my ideal world, law professors should run everything - especially the Labor Department. :>)
Wednesday, January 23, 2013
Outgoing Secretary of Defense Leon Panetta and Army General Martin Dempsey, Chairman of the Joint Chiefs of Staff are apparently going to announce tomorrow that they are lifting the ban on women serving in combat positions with a goal towards integration by 2016. In November, four servicemembers represented by the ACLU sued to lift the ban, arguing that women were already serving in most combat roles but just weren't getting recognized for it. Advancement to the highest levels of military service depends on service in combat.
This move comes via a recommendation from the Joint Chiefs of Staff, which earlier this month issued a "Women in Service Implementation Plan" calling for this change; that memo stated in part, "[t]he time has come to rescind the direct combat exclusion rule for women and to eliminate all unnecessary gender-based barriers to service."
For more information see the news stories here, here, here, and here. Mandatory regisration with the Selective Service Administration does not appear to be addressed by the recommendation; perhaps that is not widely enough seen to be a gender-based barrier to service.
This is a big step forward potentially for sex equality in the military, although full implementation will take some time. I hope that part of that implementation involves addressing the serious problem of sexual violence in the military as part of a comprehensive plan. I also think that the effect of this change in policy does a lot to expand women's rights more broadly in this country. To the extent that military service is one of the responsibilities of full citizenship, and I think most people agree that it is in at least some cirumstances, allowing women to serve the same way men do solidifies our claim to citizenship and authority to set national policy.
Monday, December 17, 2012
The Labor Department announced this past Thursday, the members of the new Whistleblower Protection Advisory Committee. The Committee wll consult with DOL on ways to improve an array of federal government whistleblower programs.
A number of law professors are members of the Committee, representing the general public. They include: Richard Moberly (Nebraska), Committee Chairwoman Emily Spieler (Northeastern), and Jonathan Brock (retired University of Washington).
For more information about the Whistleblower Protection Advisory Committee, you can read the DOL website page on the Committee (which comes under the jurisdiciton of OSHA).
Tuesday, December 4, 2012
Professors Stephanie Greene & Christine Neylon O'Brien (both Boston College Business) have just posted on SSRN their article (forthcoming 2013 American Business L.J.) Exceeding Authorized Access in the Workplace: Prosecuting Disloyal Conduct under the Computer Fraud and Abuse Act. Here's the abstract of this timely article:
If you spend time at work checking Facebook or shopping online you might be violating your employer’s computer policy. But you might also be committing a federal crime. For the past decade or so, courts have disagreed over the scope of the Computer Fraud and Abuse Act. Some courts have found that an employee who violates a workplace policy, breaches a contract, or breaches a duty of loyalty to his employer may be both civilly and criminally liable under this Act. Computers provide new opportunities for distraction at work; they also provide opportunities for dishonest behavior. While some behavior is clearly criminal, it is not always clear what type of behavior should be criminal under the Act, particularly as social norms about workplace habits and computer use are constantly evolving.
This article focuses on the variety of ways courts construe the Computer Fraud and Abuse Act which criminalizes some types of access to computers, detailing how courts continue to struggle with an accepted interpretation of what is, and what is not, criminal. A recent highly anticipated case, the Ninth Circuit’s en banc United States v. Nosal decision, reflects this discord. In a 9-2 decision, the court held that the ambiguous criminal statute should be given limited applicability because its general purpose is to punish hacking rather than acts such as misappropriation of confidential information. The decision expresses concern that a broad interpretation of the statute would criminalize a range of acts we all engage in on employer networks. The Ninth Circuit’s interpretation creates a notable split of opinion with the First, Fifth, Seventh and Eleventh circuit courts of appeal. More recently, the Fourth Circuit followed the reasoning of the Ninth Circuit’s narrow interpretation theory thereby furthering the division of opinion on this issue.
Readers who find this topic of interest should check out the upcoming NKU Law & Informatics Symposium on Labor/Employment Issues.
Thursday, November 29, 2012
From the Executive Summary to Decoding the Fiscal Cliff:
The waning days of 2012 and of President Obama’s final days of his first Administration provide him and the Democratic and Republican leadership of the Congress a unique challenge to resolve what has become the most critical domestic problem of the Nation, averting the fiscal cliff. To do so will require them to achieve what they have been unable to accomplish in his entire initial term in office, namely, overcoming sharply contrasting philosophies of government regarding the issues that underlie the fiscal cliff, i.e. tax policy and government expenditures. Solving the problem is further compounded by what had become a mantra of the President in his bid for reelection, taxing the rich more heavily to minimize cuts in programs benefitting the middle and lower classes. The argument of this article is that there are already enacted a considerable number of new tax measures that will begin to fall in 2013 only on the very taxpayers who are in the President’s target area, thus accomplishing Obama’s goal and greatly reducing the principal obstacle to the negotiators averting the fiscal cliff.
Surely not every one will agree with this line of argumentation, but it is a provocative commentary that deserves scrutiny.
Wednesday, November 14, 2012
Thanks to the good folks over at the U.S. Office of Special Counsel (OSC) for bringing to our attention that Congress just passed landmark legislation to strengthen protections for federal employees who blow the whistle on waste, fraud, and abuse in government operations.
The Whistleblower Protection Enhancement Act (WPEA) (S. 743) passed the U.S. Senate last night, and will be presented to the President for his signature soon. The House of Representatives passed identical legislation in September of this year.
Specifically, the WPEA provides OSC with additional tools to protect federal employees from unlawful retaliation. Provisions include:
• Overturning legal precedents that narrowed protections for government whistleblowers;
• Giving whistleblower protections to employees who are not currently covered, including Transportation Security Administration officers;
• Restoring the OSC’s ability to seek disciplinary actions against supervisors who retaliate; and
• Holding agencies accountable for retaliatory investigations.
Like OSC, I commend Congress and the President for promoting government accountability through enactment of this legislation. The hope is that federal employees will now be more willing to become the vanguard of the citizenry when it comes to shedding light on government abuse and waste, thereby ensuring more accountable and transparent government for all of us.
Wednesday, November 7, 2012
In light of President Obama's resounding re-election victory last night, and other developments in political races down the ticket, here are some of my initial thoughts on what might happen in labor and employment law area during a Second Obama administration:
First, I think the verdict is still very much out on whether there will be any significant changes regarding labor and employment legal initiatives in President Obama’s second term. It is interesting that the President did not spend too much time during the campaign, or in his victory speech last night, discussing worker rights or unions.
On the one hand, the Congress remains bitterly divided between the two parties which means that labor law reform in the form of the Employee Free Choice Act is highly unlikely, as well as updates to the employment discrimination laws, like adding sexual orientation as a protected classification under Title VII or addressing “qualified individuals” under the Americans with Disabilities Act. I also do not envision major changes to the FMLA or OSHA in a second term, though I suspect there will be additional attempts to amend the Equal Pay Act by trying to get the Paycheck Fairness Act passed.
On the other hand, there will be plenty of room for agency decisionmakers to work on the margins and within their own domains. On the employee benefit law front, I see significant developments concerning the promulgation of a broader definition of fiduciary status under ERISA and the promulgation of regulations regarding life income options under 401K pension plans. There might also be legislation addressing the current funding crisis surrounding multiemployer (Taft-Hartley) pension and welfare benefit plans. Of course, a second Obama administration will also mean further development of regulations under the Affordable Care Act (Obamacare), including those that impact the provision of employer-provided health benefits.
On the traditional labor front, I suspect that there will continue to be controversy over the selection of NLRB members. Nevertheless, expect an Obama Board (members continued to be recessed appointed) to continue to push for new election and posting rules, the development of more social media guidance, and the reconsideration of some important labor law issues (including issues involving the status of graduate assistants under the NLRA, employer captive audience meetings, and the Weingarten rights of non-union employees). The EEOC, for its part, may continue to consider a host of issues involving everything from LGBT rights to the steps necessary to accommodate the disabilities of employees.
So, expect much of the same as far as labor and employment law in a Second Obama term. Not much legislation, with most important developments happening through federal agency adjudications and rulemaking.
I should add two more notes. First, the United States Supreme Court could go through a fundamental change depending on which Justices leave the Court in the next four years. If President Obama is able to appoint a left-leaning bench, you might see many more pro-employee judicial decisions in areas as diverse as the class action treatment of employment discrimination claims, to the extent and nature of relief available under ERISA, to a reconsideration of burden-shifting proof schemes under Title VII and related employment discrimination laws.
Second, my analysis does not touch on the many labor and employment law developments that will likely happen on the state and local level. There was a decidely mixed bag for state-level developments in labor and employment law last night (see California and Michigan, for example). I would suspect that we will see many developments on the non-federal side of things revolving around everything from right-to-work legislation to public pension reform to attempts to restore/take away collective bargaining rights of public sector workers.
In any event, just my two cents and stay tuned!
Tuesday, October 23, 2012
The EEOC has issued a new fact sheet explaining how employment decisions related to employees who are victims of domestic violence, sexual violence, or stalking might violate Title VII or the ADA. From the fact sheet:
Because [Title VII and the ADA] do not prohibit discrimination against applicants or employees who experience domestic or dating violence, sexual assault, or stalking as such, potential employment discrimination and retaliation against these individuals may be overlooked. The examples provided in this publication illustrate how Title VII and the ADA may apply to employment situations involving applicants and employees who experience domestic or dating violence, sexual assault, or stalking.
The examples cover ways that treating victims in a particular way might constitute either disparate treatment, disparate impact, or retaliation. It's a good summary.
h/t Marcy Karin (ASU)
Saturday, September 15, 2012
Very interesting story brought to my attention by friend of the blog, Dennis Nolan. Apparently, according to a story reported by Eugene Volokh at the Volokh Conspiracy blog, the Office of Special Counsel (OSC) concluded that during one speech Health and Human Services (HHS) Secretary Kathleen Sebelius violated proscriptions in the Hatch Act concerning political campaigning in the federal employment sector.
One of the interesting questions is what the penalty should be for such a violation and does the OSC have the ability to enforce any type of penalty, such as a suspension from employment (as the statute requires in some instances for violations), against a high-ranking official in a coordinate branch of the government? The OSC letter itself concludes:
In light of the President’s constitutional authority, Congress has determined that violations of the Hatch Act by such officers be referred to the President “for appropriate action.” See 5 U.S.C. § 1215(b). Accordingly, OSC hereby submits this Report of Prohibited Political Activity, together with a response from Secretary Sebelius, to the President.
It also appears from the OSC report that by Sebelius and her office themselves reclassifying the offending speech as a political one, they may have cured some, or all, of the Hatch Act violation.
I must admit that I really am not familiar enough with this area of federal sector civil service law to hazard a guess of what might happen further, if anything, and would certainly appreciate any insights that readers have in the comments section.
Wednesday, September 5, 2012
The U.S. Equal Employment Opportunity Commission (EEOC) has released for public comment a draft of its Strategic Enforcement Plan (SEP). Comments must be submitted by 5:00 pm ET on September 18, 2012 at firstname.lastname@example.org or received by mail at Executive Officer, Office of the Executive Secretariat, U.S. Equal Employment Opportunity Commission, 131 M Street, NE, Washington, D.C. 20507. The Commission plans to vote on the draft plan at the end of this fiscal year.
. . .
For general inquiries about the plan, please email email@example.com or call (202) 663-4070/(TTY: 202-663-4494). For press inquiries, please contact the Office of Communications and Legislative Affairs at (202) 663-4191 or firstname.lastname@example.org. If you are seeking EEOC information, please call (202) 663-4900 or email@example.com. Further information about the EEOC is available on its web site at www.eeoc.gov.
And I got word of this from Commissioner Feldblum's twitter feed. If you don't follow her, you should: @chaifeldblum.
Tuesday, August 21, 2012
It’s pretty well established that, for the antidiscrimination statutes at least, there’s no personal liability, (a position which has always seemed questionable to me but as to which I’m in the distinct minority). The effects of this rule, however, can be blunted if an employer can obtain indemnification from the supervisor responsible for the violation. Such efforts are rare, but they are not unknown, and a recent example illustrates the point. Howard University v. Watkins, 2012 U.S. Dist. LEXIS 58863 (D.D.C. April 27, 2012), denied a former assistant dean’s motion to dismiss the university’s claims of indemnification and fraud.
The case arose out of a disabilities discrimination claim brought against Howard by one Goodwin, which settled for $253,000 in damages and attorneys’ fees. The university had terminated Goodwin, on Watkins’s recommendation for what she claimed were his “behavior problems”; Howard claimed it would not have done so had Watkins revealed her knowledge of Goodwin’s HIV status and that she had denied him a requested accommodation.
Looking to common law indemnification arising from express or implied contracts, the court found that Watkins would be liable if Howard proved its allegations. The court also upheld Counts for fraudulent concealment, fraud, and misrepresentation. The distinction between the various Counts suggests that the defendant might have been liable even if she had not been guilty of fraud, perhaps the discrimination itself.
Under this case, then, the true perpetrator would be responsible for all harm caused by an act of discrimination, presumably not only any settlement or judgment paid by the employer but also the employer’s own costs of the defense of an action. To the extent that employers can utilize indemnification, problems of agents’ pursuing their own interests rather than those of their principal would be reduced.
So why don’t employers frequently resort to indemnification? The obvious reason is that they have the usual remedy of firing the supervisor rather than pursuing an expensive claim that may well lead to an uncollected judgment. Few former “acting assistant deans of students” will be able to pay quarter million dollar judgment, and pursuit of the claim itself is costly (the case was filed in Maryland in 2006 and still had not been tried in the District of Columbia when the opinion was handed down).
Then there’s the question of employee morale. Few universities would want their deans to fear that they may be on the hook for far more than their annual salaries. In Watkins itself, the employer may well have thought that the defendant’s conduct was so outrageous that few other supervisors would feel threatened by the lawsuit. There might also have been a felt need to back compliance and human resources divisions by taking action against a supervisor who Howard thought had pulled the wool over the University’s eyes.
But beyond these concerns, the cause of action has its own problems. Northwest Airlines v. Transportation Workers Union, 451 U.S. 77 (1981), rejected indemnity or contribution under Title VII or the Equal Pay Act because it would disrupt the “comprehensive character” of statutory remedies. Watkins distinguished that precedent because it had recognized that indemnification might be permissible where state law provided the rule of decision and allowed for indemnification. Thus, it was critical to the case that (1) the DC Human Rights Act barred the underlying conduct; (2) the plaintiff in the original suit had sued under the DCHRA; and, apparently, (3) the Human Rights Act itself permitted individual liability, presumably because that statute’s comprehensive scheme would not be disrupted. This combination of circumstances will not always obtain.
Finally, there’s the question of whether the Howard gave Watkins the opportunity to approve the settlement. Even where a judgment is concerned, an indemnitor must prove that it mounted a reasonable defense before an indemnitee s liable. When a settlement is concerned, the indemnitor is also supposed to tender the defense to the indemnitee or at least give her the opportunity to respond to the proposed settlement.
Thanks to Joanna Solloway for her help with this.
Tuesday, June 19, 2012
The Supreme Court issued its opinion in Christopher v. SmithKline Beecham yesterday, holding that pharmaceutical representatives are exempt from the Fair Labor Standards Act's overtime provisions as outside salespeople. Justice Alito wrote the opinion of the majority (Roberts, Kennedy, Scalia, and Thomas joined). Here is the syllabus (warning, it's long):
The Fair Labor Standards Act (FLSA) requires employers to pay employees overtime wages, see 29 U. S. C. §207(a), but this requirement does not apply with respect to workers employed “in the capacity of outside salesman,” §213(a)(1). Congress did not elaborate on the meaning of “outside salesman,” but it delegated authority to the Department of Labor (DOL) to issue regulations to define the term. Three of the DOL’s regulations are relevant to this case. First, 29 CFR §541.500 defines “outside salesman” to mean “any employee . . . [w]hose primary duty is . . . making sales within the meaning of [29 U. S. C. §203(k)].” §§541.500(a)(1)–(2). Section 203(k), in turn, states that “ ‘[s]ale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Second, §541.501 clarifies that “[s]ales within the meaning of [§203(k)] include the transfer of title to tangible property.” §541.501(b). Third, §541.503 provides that promotion work that is “performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work,” whereas promotion work that is “incidental to sales made, or to be made, by someone else is not.” §541.503(a). The DOL provided additional guidance in connection with its promulgation of these regulations, stressing that an employee is an “outside salesman” when the employee “in some sense, has made sales.” 69 Fed. Reg. 22162.
The prescription drug industry is subject to extensive federal regulation, including the requirement that prescription drugs be dispensed only upon a physician’s prescription. In light of this requirement, pharmaceutical companies have long focused their direct marketing efforts on physicians. Pharmaceutical companies promote their products to physicians through a process called “detailing,” whereby employees known as “detailers” or “pharmaceutical sales representatives” try to persuade physicians to write prescriptions for the products in appropriate cases.
Petitioners were employed by respondent as pharmaceutical sales representatives for roughly four years, and during that time their primary objective was to obtain a nonbinding commitment from physicians to prescribe respondent’s products in appropriate cases. Each week, petitioners spent about 40 hours in the field calling on physicians during normal business hours and an additional 10 to 20 hours attending events and performing other miscellaneous tasks. Petitioners were not required to punch a clock or report their hours, and they were subject to only minimal supervision. Petitioners were well compensated for their efforts, and their gross pay included both a base salary and incentive pay. The amount of incentive pay was determined based on the performance of petitioners’ assigned portfolio of drugs in their assigned sales territories. It is undisputed that petitioners were not paid time-and-a-half wages when they worked more than 40 hours per week.
Petitioners filed suit, alleging that respondent violated the FLSA by failing to compensate them for overtime. Respondent moved for summary judgment, arguing that petitioners were “employed in the capacity of outside salesman,” §213(a)(1), and therefore were exempt from the FLSA’s overtime compensation requirement. The District Court agreed and granted summary judgment to respondent. Petitioners filed a motion to alter or amend the judgment, contending that the District Court had erred in failing to accord controlling deference to the DOL’s interpretation of the pertinent regulations, which the DOL had announced in an amicus brief filed in a similar action. The District Court rejected this argument and denied the motion The Ninth Circuit, agreeing that the DOL’s interpretation was not entitled to controlling deference, affirmed.
Held: Petitioners qualify as outside salesmen under the most reasonable interpretation of the DOL’s regulations. Pp. 8–25.
(a) The DOL filed amicus briefs in the Second Circuit and the Ninth Circuit in which it took the view that “a ‘sale’ for the purposes of the outside sales exemption requires a consummated transaction directly involving the employee for whom the exemption is sought.” Brief for Secretary of Labor as Amicus Curiae in In re Novartis Wage and Hour Litigation, No. 09–0437 (CA2), p. 11. The DOL changed course after the Court granted certiorari in this case, however, and now maintains that “[a]n employee does not make a ‘sale’ . . . unless he actually transfers title to the property at issue.” Brief for United States as Amicus Curiae 12–13. The DOL’s current interpretation of its regulations is not entitled to deference under Auer v. Robbins, 519 U. S. 452. Although Auer ordinarily calls for deference to an agency’s interpretation of its own ambiguous regulation, even when that interpretation is advanced in a legal brief, see, id., at 461–462, this general rule does not apply in all cases. Deference is inappropriate, for example, when the agency’s interpretation is “ ‘plainly erroneous or inconsistent with the regulation,’ ” id., at 461, or when there is reason to suspect that the interpretation “does not reflect the agency’s fair and considered judgment on the matter,” id., at 462. There are strong reasons for withholding Auer deference in this case. Petitioners invoke the DOL’s interpretation to impose potentially massive liability on respondent for conduct that occurred well before the interpretation was announced. To defer to the DOL’s interpretation would result in precisely the kind of “unfair surprise” against which this Court has long warned. See, e.g., Long Island Care at Home, Ltd. v. Coke, 551 U. S. 158, 170–171. Until 2009, the pharmaceutical industry had little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA. The statute and regulations do not provide clear notice. Even more important, despite the industry’s decades-long practice, the DOL never initiated any enforcement actions with respect to detailers or otherwise suggested that it thought the industry was acting unlawfully. The only plausible explanation for the DOL’s inaction is acquiescence. Whatever the general merits of Auer deference, it is unwarranted here. The DOL’s interpretation should instead be given a measure of deference proportional to its power to persuade. See United States v. Mead Corp., 533 U. S. 218, 228. Pp. 8–14.
(b) The DOL’s current interpretation—that a sale demands a transfer of title—is quite unpersuasive. It plainly lacks the hallmarks of thorough consideration. Because the DOL first announced its view that pharmaceutical sales representatives are not outside salesmen in a series of amicus briefs, there was no opportunity for public comment, and the interpretation that initially emerged from the DOL’s internal decisionmaking process proved to be untenable. The interpretation is also flatly inconsistent with the FLSA. The statute defines “sale” to mean, inter alia, a “consignment for sale,” and a “consignment for sale” does not involve the transfer of title. The DOL relies heavily on 29 CFR §541.501, which provides that “[s]ales . . . include the transfer of title to tangible property,” §541.501(b), but it is apparent that this regulation does not mean that a sale must include a transfer of title, only that transactions involving a transfer of title are included within the term “sale.” The DOL’s “explanation that obtaining a non-binding commitment to prescribe a drug constitutes promotion, and not sales,” Reply Brief for Petitioners 17, is alsounconvincing. Since promotion work that is performed incidental to an employee’s own sales is exempt, the DOL’s conclusion that detailers perform only nonexempt promotion work is only as strong as the reasoning underlying its conclusion that those employees do not make sales. Pp. 14–16.
(c) Because the DOL’s interpretation is neither entitled to Auer deference nor persuasive in its own right, traditional tools of interpretation must be employed to determine whether petitioners are exempt outside salesmen. Pp. 16–24.
(1) The FLSA does not furnish a clear answer to this question, but it provides at least one interpretive clue by exempting anyone “employed . . . in the capacity of [an] outside salesman.” 29 U. S. C. §213(a)(1). The statute’s emphasis on “capacity” counsels in favor of a functional, rather than a formal, inquiry, one that views an employee’s responsibilities in the context of the particular industry in which the employee works. The DOL’s regulations provide additional guidance. Section 541.500 defines an outside salesman as an employee whose primary duty is “making sales” and adopts the statutory definition of “sale.” This statutory definition contains at least three important textual clues. First, the definition is introduced with the verb “includes,” which indicates that the examples enumerated in the text are illustrative, not exhaustive. See Burgess v. United States, 553 U. S. 124, 131, n. 3. Second, the list of transactions included in the statutory definition is modified by “any,” which, in the context of §203(k), is best read to mean “ ‘one or some indiscriminately of whatever kind,’ ” United States v. Gonzales, 520 U. S. 1, 5. Third, the definition includes the broad catchall phrase “other disposition.” Under the rule of ejusdem generis, the catchall phrase is most reasonably interpreted as including those arrangements that are tantamount, in a particular industry, to a paradigmatic sale of a commodity. Nothing in the remaining regulations requires a narrower construction. Pp. 16–20.
(2) Given this interpretation of “other disposition,” it follows that petitioners made sales under the FLSA and thus are exempt outside salesmen within the meaning of the DOL’s regulations. Petitioners obtain nonbinding commitments from physicians to prescribe respondent’s drugs. This kind of arrangement, in the unique regulatory environment within which pharmaceutical companies operate, comfortably falls within the catchall category of “other disposition.” That petitioners bear all of the external indicia of salesmen provides further support for this conclusion. And this holding also comports with the apparent purpose of the FLSA’s exemption. The exemption is premised on the belief that exempt employees normally earn salaries well above the minimum wage and perform a kind of work that is difficult to standardize to a particular time frame and that cannot easily be spread to other workers. Petitioners—each of whom earned an average of more than $70,000 per year and spent 10 to 20 hours outside normal business hours each week performing work related to his assigned portfolio of drugs in his assigned sales territory—are hardly the kind of employees that the FLSA was intended to protect. Pp. 20–22.
(3) Petitioners’ remaining arguments are also unavailing. Pp. 22–24.
Justice Breyer dissented (joined by Justices Ginsburg, Sotomayor, and Kagan). He agreed that the Solicitor General's recent change in position was not entitled to any particular difference, but he would have analyzed the relevant regulations differently. The operative language in his reading required that the employee’s “primary duty” be “making sales within the meaning of section 3(k) of the Act.” That section of the Act provides that “‘Sale’ or ‘sell’ includes any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” 29 U. S. C. §203(k). Because the reps don't get any kind of contract or commitment from doctors to prescribe the drugs, Justice Breyer would have found them not to be outside salespeople. There's a bit more there, too, but I'll let you read it.
In my opinion, the dissent has the stronger reasoning and more classical plain meaning analysis. And I'm a little troubled that inaction alone could estop an agency from enforcing its statute or regulations when agencies have to make choices about where to spend limited resources--and especially where those agencies might depend on private complaints to initiate enforcement. At the same time, I'm sympathetic to the notice issues if this really is a change in interpretation, i.e. there had been an official statement that this was outside selling, and now the agency changed its mind. But that doesn't seem the case.