Friday, January 23, 2015
There’s some reason to believe that employers are utilizing liquidated damages clauses in their employment contracts to a greater extent than previously. This makes sense from their perspective because damages from an employee’s breach of a term contract are often hard to prove to a sufficient degree of certainty. Even when some damages can be shown (for example, the increased cost of hiring a replacement), the employer may well feel that other harm remains uncompensated.
Enter the liquidated damages clause. I’ll skip the academic debate as to whether parties should be free to enter into such agreements free of special scrutiny and move right to the law on the subject, which (somewhat contradictorily) generally permits the parties to stipulate to damages from a breach only if they are a reasonable attempt to specify harm that is by its nature difficult or impossible of ascertainment after breach. Courts also differ on whether reasonableness is to be ascertained as of the time of the contract (foresight), at the time of breach (hindsight) or both. See Restatement of Contracts § 356.
One of the latest judicial encounters with a liquidated damages clause was in Kent University v. Ford (a 2-1 decision of the Ohio Court of Appeals) and involved (naturally) a coach. Although Kent State is not a basketball powerhouse, it recovered $1.2 million against its former coach, who in 2011 moved on to Bradley (also not a powerhouse). And, if you’re wondering, the Bradley Braves current record is 6-14. So poor Ford may be looking for another job soon, with a big judgment hanging over his head. Maybe he was smart enough to get Bradley to agree to indemnify him (Bradley was also sued by Kent State for tortious interference but it dismissed that claim once it obtained summary judgment against Ford).
The clause in question required Ford to pay Kent State his stated salary for each year he failed to keep his contractual commitment, which, in the event, was four years. As you might guess from the judgment, he was earning $300,000.
The Bradley offer paid him $700,000 a year, which suggests it was an efficient breach for Ford. Even if he had to pay the $1.2 to Kent State (rather than shift that cost to Bradley), he would net $1.6 million over the next four years rather than the 1.2 he would have earned had he stayed put. By the way Kent State is now 13-5 under the coach who replaced Ford there.
Setting a liquidated damage provision at the level of the employee’s compensation seems, to put it mildly, arbitrary. It is true that, as the court noted, there are a lot of damages that are simply unquantifiable (for example, whether a particular recruited athlete would not go elsewhere once the coach left, the financial significance of which depends both on how well that athlete would have played in a team sport and how such play might affect the gate). In other words, the damages are pretty clearly unascertainable, satisfying that prong of the usual test.
But the “reasonable effort” to estimate those damages seems plainly lacking although the opinion is more than a little confused on this point. One might think that the fact that Kent State did no “financial analysis” of possible harm (although it identified a number of headings where damage might occur) might be dispositive, but nope. The explanation might be a quirk in governing Ohio law, which does not explicitly focus on the reasonableness of the estimate. Instead, the court focused on whether the agreement was unconscionable, and found Ford a sophisticated party who had consulted with an agent and/or attorney. Nevertheless, the court also found the damages reasonable, even if only based on the additional cost of hiring a new coach – and to do so, it looked to Ford’s salary at Bradley. In other words, if Kent State had to hire a replacement for Ford because he left for a better paying job, a suitable replacement would cost more or less what Ford made elsewhere. Maybe true, but it’s still hard to see what that has to do with pegging damages at yearly salary.
There was a strong dissent, which may mean an appeal down the road to the state Supreme Court. That would provide an opportunity to clarify a muddy area. In the meantime the Kent State decision might give greater impetus to employer use of liquidated damages clause. Oh, and a final irony: more or less at the same time it was trying to enforce the basketball coach’s clause, Kent State was trying to invalidate a football defensive coordinator before another Ohio court in Fleming v. Kent State. While it lost on one issue, it may still prevail on others. Speaking of having one’s cake….
P.S. My apologize for not hyperlinking the two cases to a free source, but there's some problem in Ohio. The cites are: Kent State Univ. v. Ford, 2015-Ohio-41 (Ct. App.) and Fleming v. Kent State Univ., 17 N.E.3d 620 (Ohio Ct. App. 2014).
Wednesday, January 21, 2015
Christopher Tomlins has posted a review of Jean-Christian Vinel, The Employee: A Political History (University of Pennsylvania Press, 2013). Vinel teaches American History at Université Paris-Diderot, and his book traces the history of the legal definition of “employee” in US law. Here’s the abstract of the Tomlins essay:
This paper is a critical commentary on Jean-Christian Vinel’s 2013 book, The Employee: A Political History. In substance, Vinel’s book addresses the history and consequences of the failure of American unions to organize supervisory employees. However, as befits a book published in a series created “to reverse the fragmentation of modern U.S. history and to encourage synthetic perspectives on social movements and the state,” it ranges rather more broadly. Thus, the book is a legal and political history of a word (“employee”). It also attempts an intellectual history of American industrial relations theory, and of the course of labor relations law from the New Deal into the twenty-first century. It is also a brave effort to synthesize the distinct “critical” and “industrial realist” strains of labor relations history that spent the better part of the 1980s and 1990s, amid the unfolding, never-ending, crisis of American trade unionism, arguing over how to interpret the legacy of the New Deal’s collective bargaining policy. And it is an effort at a critique of both those positions (although Vinel’s sympathies are ultimately with the realists.) Finally, while indubitably an American history, The Employee is intermittently comparative. This commentary assesses sympathetically Vinel’s efforts, but parts company from his conclusions.
For a prior review of Vinel’s book, see here.
Saturday, January 17, 2015
The economy is stronger and the labor market is tightening, putting workers in a much better negotiating position over wages. This fact has not been lost on much of the workforce. A new study discussed over at CNN.Money reveals that over a third of workers plan to quit their current employment and seek other work if they are not given a raise this year. From the article:
"Those most likely to walk? Employees under age 35 and employees making less than $50,000. But that doesn't mean more seasoned or better paid workers are just going to suck it up. A full 36% of those between the ages of 35 and 44 say they'll look elsewhere for a job if they don't get a pay hike, as would 31% of those making more than $100,000."
It is clear that there are definitive expectations out there for higher wages in this coming year as we have finally turned a corner in the economy. It will be interesting to see whether these expectations are actually met as employers are likely leery of another downturn.
-- Joe Seiner
Friday, January 16, 2015
Today, the White House announced a set of new initiatives to expand paid family leave. Among the plans:
- Healthy Families Act: proposed legislation that would require employers to allow employees to earn up to 7 days of paid sick leave per year.
- A start-up fund to help states create their own paid leave plans for their employees.
- Improved data collection through the Department of Labor.
- Proposed legislation to create paid parental leave for federal employees.
- Expanding coverage of FMLA.
- Expanding tax credits and federal funding for child care costs.
- Increased funding for family care for elderly and disabled family members.
- Improving enforcement of equal pay laws
This is an aggressive set of proposals, some of which are obvious nonstarters in the current Congress. It's nice to see the President bringing attention to the issue though; however, I'd like more emphasis in the press on the limits of the FMLA that currently exists. For instance, few people seem to realize that it only applies to employers with 50 or more employees.
Thursday, January 15, 2015
There is an interesting article over at the Wall Street Journal which looks at how several large companies are starting to work with their employees to chart out a career path. Apparently, these employers are attempting to combat worker turnover by helping to create internal options for employee growth. As the job market begins to tighten with the growing economy, this approach makes sense for employers to help attract and keep their top talent. From the article:
"Big companies ... are hiring career counselors, training some managers to give job advice and launching in-house career centers similar to those found on college campuses. Other companies . . . are taking steps to better market internal job opportunities and make clear what it takes to land a new position. As the hiring market heats up, the idea is to help workers plot their next few jobs and learn how to ascend the corporate ladder—preferably without having to leave the company."
This is an interesting trend and certainly one that signals a return to a more worker-friendly environment.
-- Joe Seiner
Wednesday, January 14, 2015
If you are teaching individual employment law this semester, there is a great case in Michigan that will provide a goldmine of different subject-matter areas for you to explore. The case touches on the trifecta of social media, the first amendment, and unemployment benefits. In the matter, an attorney for the Michigan Attorney General's office had posted anti-gay comments on facebook and his own blog about a University of Michigan student that is openly gay and was president of the student government. The attorney, Andrew Shirvell, was fired by the state for these comments. An Ingham County judge ruled in favor of providing Shirvell benefits, but the judge's decision was overturned (3-0) by a unanimous appellate court ruling. From the article at The Detroit Free Press:
"Attorney General Mike Cox's office received more than 20,000 complaints [about the attorney]. "Shirvell's conduct undermined one of the department's specific missions — i.e. the integrity of its anti-cyberbullying campaign," said judges Stephen Borrello, Christopher Murray and Peter O'Connell. 'By employing an individual such as Shirvell, whose conduct Cox agreed amounted to bullying, the department undermined its own message.'"
The article and case itself are worth a read, as this is obviously a complex legal matter that will extend beyond an unemployment benefits dispute.
- Joe Seiner
Tuesday, January 13, 2015
The Supreme Court heard oral argument today in Mach Mining v. EEOC, which you might remember from some of our prior posts (also here) and a guest post by Commissioner Feldblum. The transcript has been posted on the Supreme Court's website, and you can read it here. The case was about the EEOC's concilation process and whether that process is judicially reviewable.
I've read through and have some initial impressions. Even though the EEOC is the respondent here, I'm going to start with its arguments because there was significantly more back and forth with the Justices and the EEOC than with the Justices and counsel for the employer, Tom Goldstein. The EEOC has taken an understandable but difficult position, that it cannot file suit unless it has tried and been unable to conciliate on terms it desires. The EEOC asserted that it had a duty to attempt to conciliate, but that essentially, as long as it sent a letter to the employer notifying it that the EEOC had found cause to believe discrimination had occurred in connection with the charge and asking the employer to get in touch, that duty was satisfied. Counsel for the EEOC conceded that this did not seem to be much for judicial review, but argued that even in courts that used a minimal good faith standard, those courts were getting bogged down in mini-trials attempting to assess the quality of the conciliation efforts, something the statute provides no sort of standards for, since the statutory language gives the EEOC has the sole discretion to decide whether any potential terms of resolution are acceptable to it. Counsel for the EEOC was pressed repeatedly to articulate what should be required to ensure that the EEOC actually attempted to conciliate. Chief Justice Roberts, especially was wary of trusting the word of the agency that it had acted in good faith, and Justice Breyer was as well, although to a lesser degree.
With counsel for the employer, the Justices focused primarily on how to frame the issue as a matter of administrative law, since the statute contains no standards for review, nor does it define this conduct as a final agency action. Additionally, the statute requires that the EEOC keep conciliation matters secret and prohibits information about the conciliation process to be used as evidence at trial.
In terms of Supreme Court bingo, predicting how the Justices will vote, I feel fairly confident that Chief Justice Roberts would vote to overturn the Seventh Circuit. I also feel fairly confident that Justices Ginsburg, Sotomayor, and Kagan are more sympathetic to the EEOC's position but might be willing to create some kind of standard more than what the Seventh Circuit required. Justice Kennedy questioned the employer's counsel pretty heavily, and Justice Breyer and Justice Scalia did the same for both sides.
One last observation. Developing a specialty in Supreme Court litigation will make you one smooth advocate. As a former appellate advocate, I have to say that Tom Goldstein (of Goldstein & Russell also founder of SCOTUSblog)'s argument was incredible to read.
Monday, January 12, 2015
Publix Grocery Stores, one of the largest grocery chains in the South, is now offering same-sex health benefits to its employees, according to an article over at CNN Money. From the article:
"The grocery chain [even operates] in three states that ban same-sex marriage: Alabama, Georgia and Tennessee . . . even employees in those states can enroll their spouses in the company's health and dental plans -- as long as they were married in a different state."
This is a progressive move by a major employer, and it may signal other changes in this area. It will be interesting to see if other companies follow suit.
-- Joe Seiner
International Society for Labour & Social Security Law
Capetown, South Africa, Sept. 15-18, 2015
More information here, but discounted early bird registration ends on January 31st, so if you're interested, act soon.
Hat tip to Steve Willborn
Thirteen former United Airlines (UAL) flight attendants say they were improperly fired last year after refusing to work on a Boeing Co. (BA) 747 jumbo jet that had “menacing” images drawn below its tail.
The attendants say they had a right to disobey orders to make the July 14 San Francisco-to-Hong Kong trip after the words “bye bye” were found written in an oil slick on the fuselage, according to a complaint to the U.S. Occupational Health and Safety Administration. Two faces, one smiling and one “devilish,” were drawn nearby, according to the complaint.
At issue is the extent to which the images represented a security risk, as alleged by the attendants. According to the complaint, the workers saw a “serious” threat, while United inspected an auxiliary power unit near the drawings, found nothing suspicious and trivialized the incident as a “joke.”
Saturday, January 10, 2015
A unanimous California Supreme Court clarified that on-call employees required to spend time at their worksites and under the employer’s control are entitled to compensation for all hours, including sleep time. In addition, the Court unequivocally held that state wage and hour law does not implicitly incorporate the federal standard unless state law and the wage orders contain an express exemption similar to that found in federal law. The Women's Employment Rights Clinic of Golden Gate University weighed in as amicus on behalf of low-wage worker advocates and Prof. Hina Shah argued before the Cal. Supreme Court. The LA Times ran a story on this dramatic development.
Friday, January 9, 2015
As student football players at Northwestern University press forward with their case at the National Labor Relations Board, the Michigan legislature has amended its statute governing public-employee collective bargaining to exclude student athletes at Michigan’s public universities. The amendment, now in effect, added the underlined text:
An individual serving as a graduate student research assistant or in an equivalent position, and a student participating in intercollegiate athletics on behalf of a public university in this state, or any individual whose position does not have sufficient indicia of an employer-employee relationship using the 20-factor test announced by the internal revenue service of the United States department of treasury in revenue ruling 87-41, 1987-1 C.B. 296 is not a public employee entitled to representation or collective bargaining rights under this act.
Michigan Complied Laws 423.201(1)(e)(iii). (Although the text of this provision also excludes graduate student research assistants, a federal district court declared that exclusion to violate article IV, section 24, of the Michigan Constitution. Toth v. Callaghan, 995 F. Supp. 2d 774 (E.D. Mich. 2014).)
Thursday, January 8, 2015
image from eeoc.gov
The EEOC will hold a public meeting on January 14, 2015 at 9:30 a.m. at its agency headquarters in Washington, DC to explore the continuing problem of workplace harassment. The meeting will examine the reasons for the problem, and look at employer best practices in this area. The press release, attached below, identifies the well-respected panelists scheduled for the meeting:
"The Commission will hear from invited panelists on the persistent problem of workplace harassment as well as best practices for employers to prevent and address harassment. The Commission is scheduled to hear from the following confirmed panelists during the meeting:
- Carol Miaskoff, Acting Associate Legal Counsel, EEOC, Office of Legal Counsel
- Fatima Goss Graves, Vice President for Education and Employment, National Women's Law Center
- Patricia Wise, Partner, Niehaus Wise & Kalas Ltd
- Laudente Montoya, Charging Party/Class Member, EEOC v. Dart Energy Corp. et al.
- Sean Ratliff, Acting Supervisory Trial Attorney, EEOC Denver Field Office
- Jane Kow, Employment Lawyer and HR Consultant/Trainer, HR Law Consultants
Seating is limited, and the EEOC encourages visitors to arrive 30 minutes before the meeting in order to be processed through security and escorted to the meeting room. Visitors should bring a government-issued photo identification card to facilitate entry into the building."
This looks like it will be a very informative meeting. If you live in the DC area, it would be well worth making the trip out to the EEOC.
-- Joe Seiner
Wednesday, January 7, 2015
Does Title VII disparate-impact law violate the Equal Protection Clause of the US Constitution? In Ricci v. DeStefano (2009), Justice Scalia wrote separately to strongly suggest that that it did. Now, in a new paper, Reva Siegel argues that disparate impact’s constitutionality is implied by the Court’s opinion in Fisher v. University of Texas at Austin (2013). Her paper: “Race-Conscious But Race-Neutral: The Constitutionality of Disparate Impact in the Robert Court,” posted here. More from the abstract:
In Fisher, the Court has demonstrated that government may change the selection standards in competitive processes without triggering strict scrutiny if the government acts (1) with a race-conscious goal of promoting equal opportunity; (2) the government requires a selection standard that is appropriate for the context; and (3) the standard does not classify individuals by race. These principles are satisfied in the ordinary case of voluntary disparate impact compliance in which an employer specifies conditions for employment in advance of evaluating applicants for the job in question, as well as in prospective remedies that courts ordinarily order for violations of Title VII.
Fisher clarifies that the problem in Ricci was New Haven’s procedurally irregular means of complying with disparate impact law: the government discarded the test results of a group of applicants who had invested significant time in studying for a promotion exam, and explained this decision in terms which left the disappointed applicants with the impression that government was discarding their scores to advance the interests of another racially defined group. By avoiding a constitutional judgment and finding New Haven’s manner of complying with the statute unlawful disparate treatment, Justice Kennedy warns that interventions designed to heal social division should be implemented in ways that endeavor not to aggravate social division.
Disparate impact law can promote equal opportunity, increase employee confidence in the fairness of selection criteria, and so reduce racial balkanization; but for disparate impact law to do so, Justice Kennedy seems to be saying in Ricci, disparate impact law needs to be enforced with attention to all employees’ expectations of fair dealing.
The paper is forthcoming in Alabama Law Review 66(3) (2015).
Saturday, January 3, 2015
There is more good news on the workplace pay front. The New Year saw increasing minimum wage levels across the country. With the beginning of the new year, twenty states raised their minimum wage levels, which will now exceed the federal minimum wage in all of these jurisdictions. These wage increases will help millions of workers take home higher paychecks. There is an interesting article from the Economic Policy Institute website which looks at the minimum wage rate in various states across the country. From the article:
“On January 1st, 20 states will raise their minimum wages, lifting the pay of over 3.1 million workers throughout the country. New York, meanwhile, will have already raised its minimum wage on December 31st. In nine of these states . . . the minimum wage . . . is “indexed” for inflation . . . The increases in the other 11 states, plus DC, are the result of changes to minimum wage laws—either legislation passed by state lawmakers or referenda passed directly by voters at the ballot box."
These increases will help workers across the country. It will be interesting to see if the federal law changes in response to these state actions.
- Joe Seiner
Missing 2014 already? Here are the top five Workplace Prof Blog posts from 2014 (by number of page views):
- Hot Goods and Economic Duress: Part I
- Teaching Employment and Labor Law
- Supreme Court grants cert in EEOC v. Abercrombie
- Preemption Laws and Goldilocks
- Criminalizing “Opposition” Conduct?
If you've got a favorite from the past year, let us know.
Monday, December 29, 2014
A new report over at marketplace.org suggests that workers expect higher wages in 2015. While the unemployment rate has dipped in recent months, wages have remained stagnant, resulting in frustration among workers. This new report, however, indicates that the workforce anticipates a bright new year, with wages rising above inflation. From the marketplace.org article:
"For years, Americans expected an annual raise of anywhere from 2.5 to 3 percent. The recession brought that number down to 0.2 percent by June 2009, and inflation wiped out most wage gains that have occurred since. But recently, people have become more optimistic. In December, Americans said they expect a raise . . . above inflation."
Let's hope that these expectations are met, and that we have some higher salaries next year!
-- Joe Seiner
Monday, December 22, 2014
As we all know, there has over the last few decades been substantial controversy in this country as to whether obesity is an impairment (or even a disability) for purposes of protection under the Rehabilition Act or the ADA. In an interesting new decision from the European Court of Justice, the court ruled that obesity can be a disability requiring workplace accommodations. From the U.S. News & World Report:
"The European Court of Justice, considering a Denmark case involving a 350-pound child-care worker who says he was fired because of his obesity, ruled that employers must make accommodations if it is determined that someone’s weight is, indeed, interfering with the ability to do his or her job. While the court did not deem obesity as a disability under the law, it said such severely overweight workers could be called disabled if their condition prevents a “full and effective participation in professional life.”"
This case provides an interesting comparative look at the issue. It is doubtful, however, whether such a case will have any impact (or persuasive value) on U.S. Law.
-- Joe Seiner
Friday, December 19, 2014
Big Day at NLRB: General Counsel Issues Joint-Employer Complaint Against McDonald's and NLRB Issues Decision Changing Religious and Faculty Exemption Doctrines
A couple of big NLRB actions today. In the first, and as expected, the General Counsel issued consolidated complaints against McDonald's, alleging that the company is a joint employer along with its franchisees and therefore liable for numerous unfair labor practices (some of which have already been found to be meritorious). This is likely part of the GC's push in Browning-Ferris to revise the joint-employer doctrine, as well as a more aggressive argument that corporate control over franchises warrants joint-employer status. As far as the practical effect for the Board's recent moves, this case and Browning-Ferris is unparalleled. As much as the religious and faculty issues today are interesting and email captures the public's attention (and mine), far more companies and employees could be impacted by changes to the joint-employer doctrine. So this is one well worth watching.
In the second issue today, the Pacific Lutheran decision, the NLRB is getting a lot of bang for its buck, as it is changing two doctrines. The first is a new Catholic Bishop analysis for determining when religious schools and faculty should be exempt from NLRB jurisdiction. Under the new Pacific Lutheran standard, the NLRB will only decline jurisdiction when a university or college shows that it "holds itself out as providing a religious educational environment" (a requirement adopted from the D.C. Circuit's Great Falls decision) and shows that "it holds out the petitioned-for faculty members as performing a religious function." This latter requirement means that faculty must perform a "specific role" in the creation or maintenance of the school's religious education, as shown by evidence that might include job descriptions, employment agreements, faculty handbooks, and statements by the university. This new standard is likely to decrease the number of schools that can enjoy the religion exemption, although it's not clear to me at this point how big that effect will be.
The second is a revision of the Yeshiva University standard for determining when university faculty are managerial employees exempt from NLRA coverage. The NLRB describes this revision as an attempt to provide more guidance and predictability for parties concerned about the application of Yeshiva. The analysis is focused on Yeshiva's requirement that managerial faculty have broad and substantial decision-making authority, which the Board attempts to capture with five categories of university decision-making. Three of the categories are deemed more important to the university as a whole ("primary"): academic programs, finances, and enrollment management. The other two categories are less important to the university as a whole ("secondary"): academic policy and personnel policy and decisions. When determining whether faculty have control over these decisions, the Board will look to the actual exercise of control or ability to effectively recommend decisions. The result seems like to expand the number of faculty who will be covered by the NLRA, but the extent to which that's true will have to wait for its application in more cases.
A busy and important day for the NLRB. But, I don't expect it to be the last such day this year.
Hat Tip: Patrick Kavanagh
The US Department of Justice now reads Title VII of the Civil Rights Act of 1964 to prohibit employment discrimination “based on gender identity, including transgender status.” In a memo to DOJ components and the US Attorneys, dated December 15, 2014 (and available here), the Attorney General reasoned:
The most straightforward reading of Title VII is that discrimination “because of ... sex” includes discrimination because an employee's gender identification is as a member of a particular sex, or because the employee is transitioning, or has transitioned, to another sex. As the Court explained in Price Waterhouse, by using “the simple words ‘because of,’ ... Congress meant to obligate” a Title VII plaintiff to prove only “that the employer relied upon sex-based considerations in coming to its decision.” 490 U.S. at 241-242. It follows that, as a matter of plain meaning, Title VII’s prohibition against discrimination “because of ... sex” encompasses discrimination founded on sex-based considerations, including discrimination based on an employee’s transitioning to, or identifying as, a different sex altogether. Although Congress may not have had such claims in mind when it enacted Title VII, the Supreme Court has made clear that Title VII must be interpreted according to its plain text, noting that “statutory prohibitions often go beyond the principal evil to cover reasonably comparable evils, and it is ultimately the provisions of our laws rather than the principal concerns of our legislators by which we are governed.” Oncale v. Sundowner Offshore Servs., 523 U.S. 75, 79 (1998).
Accordingly, DOJ “will no longer assert that Title VII's prohibition against discrimination based on sex does not encompass gender identity per se (including transgender discrimination).” (The memo added: “’Sex-stereotyping’ remains an available theory under which to bring a Title VII claim, including a claim by a transgender individual, in cases where the evidence supports that theory.”)