ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Tuesday, July 28, 2020

“Trade Secret” as an End Run Around Non-Compete and Non-Solicitation Restrictions?

Tesla recently sued its competitor, Rivian, claiming that Rivian was poaching its former employees and encouraging them to misappropriate Tesla’s trade secrets.  What struck me was that many of the alleged trade secret misappropriation claims in the complaint (available here ) involved information relating recruitment and retention efforts, including compensation.  Tesla’s employees sign an NDA that requires them not to disclose Tesla’s “Proprietary Information” which is defined rather broadly to include “all information, in whatever form and format, to which have access by virtue of and in the course of" employment and encompassing, “technical data, trade secrets, know-how,…plans, designs,. .. methods, processes, data, programs, lists of or information relating to, employees, suppliers…financial information and other business information.” 

Note that the definition of “proprietary information” is greater than “trade secret” so that the employee’s contractual obligation is greater than it would otherwise be under trade secret law alone.  Perhaps not surprisingly, Tesla filed breach of contract claims against the individual defendants (the former Tesla employees) as well as an intentional interference of contract claim against Rivian.

In a case involving Fidelity, a former employee left Fidelity to join Merrill Lynch.  The employee allegedly took information regarding customer accounts and also contacted Fidelity clients and tried to solicit their business. That employee’s contract included a non-solicitation clause that stated that he would not “directly or indirectly … solicit in any manner or induce or attempt to induce any customer or prospective customer with whom Employee had personal contact or about whom Employee otherwise learned during the course of the Employee’s employment with the Fidelity Companies.”

In both cases, the alleged trade secrets involved information that could be referred to as relational and closely tied to the services side of the business, rather than the product development or technical side.  The Tesla employment contracts are governed by California law which essentially finds non-compete and non-solicitation clauses unenforceable.  The Fidelity contract, on the other hand, was governed by Georgia law which permits non-solicitation clauses if they are reasonable (i.e. if the employee had worked with the client while employed at Fidelity) but takes a tougher stance on non-compete clauses (although not as tough as California).

These two situations led me to wonder whether companies are using confidentiality clauses in their employment agreements as a way to achieve the same result as a non-compete and/or non-solicitation clause.  As states have increasingly restricted or, in the case of California, essentially prohibited the enforceability of non-compete clauses and non-solicitation clauses, companies seem to be increasingly leaning on trade secret law and confidentiality clauses in employment agreements to keep their former employees from joining competitors.

July 28, 2020 in Commentary, In the News, Labor Contracts | Permalink | Comments (0)

Monday, June 29, 2020

Supreme Court of Canada Finds Uber's Arbitration Agreement Unconscionable

Supreme_Court_of_Canada_-_LogoDavid Heller, the plaintiff in Uber Technologies, Inc. v. Heller is an Uber driver who provides food delivery services in Toronto.  When he signed up to work for Uber, Mr. Heller was required to sign Uber's services agreement, which provided for dispute resolution through mediation and arbitration in the Netherlands.  We looked it up.  The Netherlands is far away from Toronto.  It's a different country entirely.  In addition, in order to participate in the Dutch arbitration process, Mr. Heller would have to pay administrative and filing fees of US$14,500, plus whatever other costs he would incur in connection with the proceeding.  The fees alone would come to about 2/3 of Mr. Heller's annual income.  The arbitration fee might as well be $1 million.

Dr. EvilIn 2017, Mr. Heller initiated a class action suit against Uber (right), alleging violation of Canadas Employment Standards Act (ESA).  Uber moved to stay the litigation in favor of Dutch Arbitration.  Mr. Heller responded that the arbitration provision was unconscionable and that it attempts to contract around mandatory provisions of the ESA.  The trial court granted Uber's motion, leaving it to the Dutch arbiter to determine the issue of unconscionability.  The Court of Appeal reversed, noting that Mr. Heller would never get such a determination if he could not afford the cost of the arbitration.  By a vote of 8-1, the Supreme Court of Canada agreed wit the Court of Appeal.

The Court's finding of unconscionability focused on two aspects of Uber's services agreement.  First, the agreement imposes prohibitive fees for initiating arbitration.  Second, those fees are hidden in the fine print of a complex contract of adhesion.

Speaking of hidden terms, the Court buries in paragraph 50 of its 100-paragraph majority opinion the following hint to future corporate litigators:

If Uber had adduced evidence of Dutch law, then under the two exceptions to arbitral referral recognized in Dell, this Court would have had to grant the stay in favour of an arbitrator determining the unconscionability argument.

If I am reading this correctly, Uber would have won if it had insisted on its choice of law clause, which specified that its services agreement applicable in Toronto is to be governed by Dutch law.  Welcome to the gig economy, Mr. Heller.

The Court then proceeded to apply Canada's law of unconscionability to the agreement between Uber and Mr. Heller.  The Court found that both elements of the Canadian test for unconscionability were met.  There was a clear inequality of bargaining power, and the arbitration clause was clearly improvident.

The lone dissent sounded in theories of freedom of contract.

June 29, 2020 in Labor Contracts, Recent Cases | Permalink | Comments (0)

Friday, June 26, 2020

Concluding Guest Post by Joshua Silverstein on Bostock

HOUGHTS REGARDING BOSTOCK V. CLAYTON COUNTY, THE U.S. SUPREME COURT DECISION HOLDING THAT TITLE VII PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION AND TRANSGENDER STATUS.

Silverstein  Josh -- Official PictureFinal Guest Post (for now) by Joshua Silverstein (left)

Part I is here.

Part II is here.

Part III is here.

Part IV is here.

Part V: Textualism vs. Original Expected Application and Some Concluding Thoughts.

There is one other argument in Bostock that warrants analysis.  The defendants and Justice Alito (below, right) contend that no person in 1964 and for many years after anticipated that Title VII bars employment discrimination based on sexual orientation and transgender status.  Maj. Op. at 23, 26; Alito Dis. at 4, 6, 33, 35.  But statutes (and constitutional provisions) are regularly applied beyond the scope of circumstances “expressly anticipated” by the enactors, especially when the statute is broadly written, as is the case with most civil rights laws.  Maj. Op. at 24, 30.  And Title VII in particular “has repeatedly produced unexpected applications,” including results that were long rejected by the courts before being accepted.  Maj. Op. at 29-30.  For example, courts denied claims of sexual harassment brought under Title VII for years before finally concluding that sexual harassment in indeed unlawful under the statute.  There is thus nothing that unusual about federal courts finally realizing today that Title VII bans discrimination based on sexual orientation and transgender status as forms of sex discrimination after rejecting that position for more than five decades.  And to find otherwise by relying on the expectations of the enactors and/or the public at large “seeks to displace the plain meaning of the law in favor of something lying beyond it,” Maj. Op. at 26, which is improper under textualist statutory interpretation.

AlitoThe idea that a law can apply in ways that a legislature could never have intended or in ways the public could not have foreseen strikes some people as surprising.  But it is a natural feature of any practice employing general rules of conduct, including both law and games. 

Consider a very simple example.  Suppose a state legislature passes a law saying that all buildings made of concrete are entitled to a tax break.  Suppose further that the legislature and every citizen in the state is absolutely convinced at the time of enactment that there are only fifteen concrete buildings in the state.  Thus, they all expect the tax break to apply exclusively to the fifteen existing concrete buildings.  Five years after the law is passed, another building is discovered that was made of concrete.  Everyone missed it previously because the building was constructed decades ago and the concrete was covered by a metal sheath that was subsequently removed.  Under the language of the statute, the owners of that building are entitled to the tax break.  And the fact that the legislature and the populace never expected any other concrete buildings to receive the tax break is simply irrelevant.

Here is a more sophisticated example.  The 14th amendment to the U.S. Constitution, which provides that all persons are entitled to equal protection of the laws, generally bars racial discrimination.  But the drafters of the amendment believed that this prohibition did not bar racially segregated schools.  Indeed, the very same Congress that drafted the 14th Amendment, segregated the schools in Washington DC.  This reflected the general understanding of the equal protection clause held throughout the country in 1868.  And thirty years later in 1896, the Supreme Court ruled that racial segregation was constitutional in Plessy v. Ferguson.  But the Court reversed this decision in Brown v. Board of Education in 1954.  Living constitutionalists have no trouble explaining that result because they believe that constitutional text can change in meaning over time.  But even originalists, who contend that the meaning of each constitutional provision is fixed at the time of its adoption (much like a statute), generally accept that Brown was correctly decided.

While originalists have developed a number of arguments for why Brown is right under their theory, the one I find most persuasive is analogous to my concrete building example.   The drafters of the 14th Amendment, the general American citizenry in the late 1860s, and the Supreme Court in 1896, all believed that the 14th amendment allowed segregated schools not because of the meaning of the words “equal protection of the laws,” but because they believed as an empirical matter that it was possible for racially segregated schools to be equal.  How can segregated schools violate equal protection if the schools are in fact equal?  By 1954, however, we had learned that, as an empirical matter, racially segregated schools are essentially always unequal.  And the Supreme Court expressly relied on social science evidence in arriving at this conclusion in the Brown opinion.  The meaning of “equal protection” did not change between 1868 and 1954.  Rather, our factual understanding changed, just as in my concrete building example.  In the case of racially segregated schools, we learned that separate-but-equal schools are effectively an impossibility.  And thus, to treat people of all races equally, as required by the Fourteenth Amendment, segregated schools must be outlawed.  Likewise, in the case of tax breaks for concrete houses, we learned that another concrete building existed.  Thus, to comply with the law as written, the sixteenth building that no one believed existed must receive the tax break.

The concrete building example and Brown v. Board demonstrate a basic point about statutory and constitutional interpretation: laws can apply in ways never contemplated by the enactors and society at large because those persons were mistaken about key facts relating to the law.  In these types of cases, the meaning of the law doesn’t change.  The ordinary meaning of the words is exactly the same at the point of enactment and the subsequent point of application.  What changes in the intervening period is our understanding of the facts.  Put simply, unchanged legal meaning combined with changed facts often leads to different and unanticipated legal results.

This analysis extends to Bostock and discrimination based on sexual orientation and transgender status discrimination.  The mistake Congress, lawyers, judges, and most everyone else made in 1964 (and for decades afterwards) was that we failed to appreciate that, as a conceptual matter, it is impossible to discriminate on the basis of sexual orientation or transgender status without also discriminating on the basis of sex.  That is a conceptual mistake rather than an empirical mistake.  But a mistake is a mistake, and the impact on legal analysis generally will be the same regardless of the precise type of mistake.  To use phrasing that parallels what I wrote in the last paragraph, unchanged legal meaning combined with changed concepts often leads to different and unanticipated legal results.  Hence the holding in Bostock.

One might ask in response, how could so many people have missed a conceptual problem like this for so long?  See Kav. Dis. at 20 (“Did the Court in all of those sexual orientation cases just miss the obvious answer—and overlook the fact that sexual orientation is actually a form of sex discrimination?  That seems implausible.”).  The answer is that we make mistakes all the time as a society generally and within the legal system specifically, including over points we now deem obvious.  Isn’t it now clear that racially segregated schools can never be equal?  We got that one wrong for 90 years.  Isn’t it now obvious that sexual harassment is a form of sex discrimination?   We got that one wrong for several years too.  Universal or nearly universal mistakes are all too common in our culture, particularly when it comes to outsider groups, such as racial minorities and sexual minorities that have faced striking levels of discrimination throughout history.

Indeed, Justice Alito explained that the concept of “gender identity . . . was essentially unknown” in 1964.  Alito Dis. at 3.  Likewise, he wrote that “in 1964, homosexuality was thought to be a mental disorder, and homosexual conduct was regarded as morally culpable and worthy of punishment.”  Alito Dis. at 28; see also Alito Dis. at 28-33 (offering multiple examples of the poor treatment homosexuals have faced in America).   Given these points, it would be surprising if America of the last 50 years was not critically mistaken about numerous aspects of sexual orientation and gender identity, including their relationship to sex.  And because our understanding of sexual orientation and transgender status is constantly and rapidly evolving, we should expect that many more “obvious” factual and conceptual beliefs concerning these subjects will be overturned in the coming years.

June 26, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Thursday, June 25, 2020

Guest Post by Joshua Silverstein on Bostock, Part IV

THOUGHTS REGARDING BOSTOCK V. CLAYTON COUNTY, THE U.S. SUPREME COURT DECISION HOLDING THAT TITLE VII PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION AND TRANSGENDER STATUS.

Silverstein  Josh -- Official PictureA Guest Post by Joshua Silverstein (left)

Part I is here.

Part II is here.

Part III is here.

Part IV: Supplemental Thoughts Regarding the Majority’s Conceptual Claim About Discrimination Based on Sexual Orientation or Transgender Status.

This post sets forth my own analysis designed to bolster the majority conceptual claim in  Bostock that discrimination based on sexual orientation or transgender status necessarily involves discrimination based on sex.  To keep today’s discussion to a manageable length, I focus on sexual orientation and largely set aside transgender status.

Let’s start by returning to Justice Gorsuch’s key example.   Recall that the defendants and Justice Alito objected to that example by contending that proper analysis requires changing the sex of the employee (from male to female), while preserving the sexual orientation of the employee (homosexual), so that only one characteristic of the employee has been altered rather than two.  That means that we must shift from a male attracted to men to a female attracted to women.  Notice that while this does keep sexual orientation constant when altering the employee’s sex, it still results in a second change to the employee: the sex of the people the employee is attracted to is different.  Under the initial facts, the employee is attracted to men.  In the revised facts that we shift to in order to test for but-for causation, the employee is attracted to women.  This is an extremely important factual change.

The defendants and Justice Alito assert that changing the sex of the employee in the key example but not changing the sex of the people the employee is attracted to alters two things—both the employee’s sex and the employee’s sexual orientation.  The but-for causation test asks whether sex standing alone makes a difference, so we must only change one thing—the sex of the employee.  In addition to the majority’s response discussed yesterday, which I find persuasive, my point today is that changing the sex of the employee and keeping sexual orientation constant also alters two things—the employee’s sex and the sex of the people the employee is attracted to. 

On the surface this suggests that we have to decide which alteration enables us to better apply the but-for test: (1) change the employee’s sex, but keep the employee’s sexual orientation constant (homosexual), as the defendants and Justice Alito argue, which necessarily also changes the sex of the people the employee is attracted to; or (2) change the employee’s sex, but keep the sex of the people the employee is attracted to constant (men), as the majority initially argues, which necessarily also changes the employee’s sexual orientation.  How do we decide?  In my view, there is no logical way to do so.  But it doesn’t matter.  That is because the lack of grounds to decide which way to alter the hypo itself further demonstrates the unavoidable conceptual connection of sex and sexual orientation (and transgender status).

Think about it this way.  It is logically impossible to change the sex of the employee in the majority’s key example without changing either the employee’s sexual orientation or the sex of the people the employee is attracted to.  In other words, it is impossible to change only the sex of the employee in a hypo that attempts to test whether sex or sexual orientation is the but-for cause of an adverse employment decision.  We must also change either the employee’s sexual orientation (and thus not change the sex of the people the employee is attracted to) or the sex of the people the employee is attracted to (and thus not change the sexual orientation of the employee).  If sex is that closely connected to sexual orientation—if it is literally impossible to construct an employment discrimination hypothetical involving sex and sexual orientation in which the only fact that gets changed is the sex of the employee—then it should not be surprising that discrimination based on sexual orientation necessarily involves discrimination based on sex.  To once again use the majority’s language, sex is “inextricably bound up” with sexual orientation (and transgender status).

Note that I agree with the majority’s concession that “homosexuality and transgender status are distinct concepts from sex.”  Maj. Op. at 19.  And there certainly isn’t a perfect overlap between the various types of discrimination.  Most obviously, not all types of sex discrimination involve sexual orientation or transgender status discrimination.  But the majority’s point—correct in my view—is that even though you can have sex discrimination without sexual orientation or transgender status discrimination, you cannot have sexual orientation or transgender discrimination without having sex discrimination.  (Think Venn diagrams where discrimination based on sexual orientation or transgender status are circles inside the circle that constitutes sex discrimination.)

Tomorrow’s final post addresses why Title VII can prohibit discrimination based on sexual orientation and transgender status even though no one in 1964 believed that the statute would have this impact.

June 25, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Wednesday, June 24, 2020

Guest Post by Joshua Silverstein on Bostock, Part III

THOUGHTS REGARDING BOSTOCK V. CLAYTON COUNTY, THE U.S. SUPREME COURT DECISION HOLDING THAT TITLE VII PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION AND TRANSGENDER STATUS.

Silverstein  Josh -- Official PictureA Guest Post by Joshua Silverstein (left)

Part I is here.

Part II is here.

Part III: The Dissents’ Response to the Majority’s Conceptual Claim About Discrimination Based on Sexual Orientation or Transgender Status, and the Majority’s Reply.

Unsurprisingly, the defendant-employers in Bostock and both dissents challenge the majority’s conceptual claim that discrimination based on a person being homosexual or transgender is always based on sex as well.  Justice Kavanaugh says very little on this point, so between the two dissents, I focus here on Justice Alito’s.  Justice Alito (right) Alitooffers a number of arguments that sexual orientation and transgender status discrimination do not inherently involve sex discrimination, nearly all of which I find completely unpersuasive (see, e.g., Alito Dis. at 9-10).  But one argument has some merit, and it is the same argument offered by the defendants and implied by Justice Kavanaugh.  Alito and the defendants assert that the majority’s key example that I discussed in yesterday’s post is invalid.  Recall that the majority stated that there is only one difference between the two employees in the hypo: sex.  The majority further stated that if we change only the sex of the employee from male to female, the employee would not be terminated, showing that sex is the but-for cause of the dismissal.

The defendants and Justice Alito respond that this is not so; there are actually two differences between the male and female employees in the hypo: (1) sex, and (2) sexual orientation.  Alito Dis. at 14-15.  Because both employees are attracted to men, the male is homosexual and the female is heterosexual.  And if we change the male employee into a female, but leave the employee attracted to men, we are not just changing the employee’s sex from male to female.  We are also changing the employee’s sexual orientation from homosexual to heterosexual.  “If the aim is to isolate whether a plaintiff’s sex caused the dismissal, the employers stress, we must hold sexual orientation constant—meaning we need to change both his sex and the sex to which he is attracted.” (emphasis added)).  Maj. Op. at 21.  And if we change the employee from a man attracted to men to a woman attracted to women, the employee would still be fired due to the employee’s sexual orientation.  It follows, the defendants and Justice Alito claim, that only sexual orientation, and not sex, plays a causal role in the termination.  After all, “[h]ow could sex be necessary to the result if a member of the opposite sex . . . [would] face the same outcome from the same policy?”  Maj. Op. at 21-22.  Put another way, firing employees based on sexual orientation or transgender status results in men and women being treated exactly the same; such policies, the defendants assert, “have the same adverse consequences for men and women.    Maj. Op. at 21; accord Alito Dis. at 15-17, 40 (“An employer who discriminates equally on the basis of sexual orientation or gender identity applies the same criterion to every affected individual regardless of sex.”); see also Kav. Dis. at 12-13 (implying the same point).  Ergo, no sex discrimination.

The majority replies principally with a reductio ad absurdum argument—an argument that the premises of one’s opponents lead to an absurd conclusion that all would reject.  The structure of the argument is as follows: The reasoning of the defendants and Justice Alito necessarily results in sex not being a but-for cause when an employer makes adverse employment decisions based on traditional gender roles.  But since no one believes that to be the case, no one could accept the argument of the defendants and Justice Alito that sex is not a but-for cause when an employer makes an adverse employment decision based on sexual orientation or transgender status.  Let me explain.

The central piece of the majority’s reply is the following example: Suppose an employer wants to “revive workplace gender roles of the 1950s.  He enforces a policy that he will hire only men as mechanics and only women as secretaries.”  Maj. Op. at 22.  If the employer denies a qualified woman a position as a mechanic, sex discrimination is clear under the but-for standard of Title VII since a qualified man would have received that job.  The same is true if the employer denies a qualified man a position as a secretary.  The reasoning of the defendants and Justice Alito with respect to sexual orientation and transgender status commits them to respond that there is a problem with this conclusion, just as they contend there is a problem with the majority’s key example discussed yesterday.  “By comparing the woman who applied to be a mechanic to a man who applied to be a mechanic, we’ve quietly changed two things: the applicant’s sex and her trait of failing to conform to 1950s gender roles.”  After all, a man applying to be a mechanic is actually following 1950s gender roles.  Maj. Op. at 22-23.  A proper comparison, under the reasoning of the defendants and Justice Alito, thus requires changing both sex and gender non-conformity.  This means that “[i]nstead of comparing a disappointed female applicant to a man who applied for the same [mechanic] position, the employer would say, we should compare her to a man who applied to be a secretary.  And because that jobseeker would be refused too, this must not be sex discrimination,” but rather only discrimination based on failing to conform to traditional gender roles.  Maj. Op. at 23.  More precisely, the defendants and Justice Alito are logically committed to the proposition that sex was not a but-for cause of the decision not to hire the female who sought to be a mechanic (or the male who sought to be a secretary); the only cause was non-compliance with traditional gender roles.  Maj. Op. at 23.

But, the majority observes, “[n]o one thinks” that termination based on traditional gender roles is permitted by Title VII.  Maj. Op. at 23.  To the contrary, everyone admits that sex is a but-for cause when an adverse employment decision is based on traditional gender roles.  Termination based on either sexual orientation or transgender status is indistinguishable from termination based on traditional gender roles.  Therefore, sex must be a but for cause in all three circumstances.  And thus Title VII legally bars all three types of dismissal—again, those based on gender non-conformity, sexual orientation, and transgender status—for precisely the same reason.

Note that the majority’s analysis here is grounded, in part, on the fact that Title VII is concerned with discrimination against individual men and women on the basis of sex.  Even if an employer treats men as a class the same as women as a class, the employer can still be unlawfully discriminating on the basis of sex.  Maj. Op. at 7-8, 11-12.  To illustrate, “an employer who fires a woman, Hannah, be­cause she is insufficiently feminine and also fires a man, Bob, for being insufficiently masculine may treat men and women as groups more or less equally.  But in both cases the employer fires an individual in part because of sex.  In­stead of avoiding Title VII exposure, this employer doubles it.”  Maj. Op. at 9.  That helps to explain why it is no defense to liability for sex discrimination that an employer treats homosexual (or transgender) men and women in exactly the same manner.  Maj. Op. at 11-12.  An employer that fires both men and women due to sexual orientation (or transgender status) has doubled its liability rather than eliminated it.  Maj. Op. at 12.

In tomorrow’s post, I will supplement the majority’s reasoning with some of my own thoughts regarding the conceptual connection between discrimination based on sex and discrimination based on sexual orientation and transgender status.

June 24, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Tuesday, June 23, 2020

Guest Post by Joshua Silverstein on Bostock, Part II

THOUGHTS REGARDING BOSTOCK V. CLAYTON COUNTY, THE U.S. SUPREME COURT DECISION HOLDING THAT TITLE VII PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION AND TRANSGENDER STATUS.

Silverstein  Josh -- Official PictureA Guest Post by Joshua Silverstein (left)

Part I is here.

Part II: Exploring the Majority’s Conceptual Claim about Discrimination Based on Sexual Orientation or Transgender Status.

To see why the Bostock majority concluded that adverse employment decisions based on sexual orientation or transgender status are necessarily also based on sex, start by returning to the language of Title VII.  The statute bars adverse employment actions “because of” various characteristics, including race and sex.  “Because of” is understood to establish a “but-for” causation standard.  Maj. Op. at 5.  “[A] but-for test directs us to change one thing at a time and see if the outcome changes.  If it does, we have found a but-for cause.”  Maj. Op. at 5.  In other words, if changing a person’s sex and nothing else would reverse an adverse employment decision, then the employee’s sex was a but-for cause of the decision.  To illustrate, if employer A would not have fired employee X if X were a man rather than a woman—and no other facts are changed—then X’s sex was a “but-for cause” of the dismissal.  The employer fired X “because of” X’s sex in violation of Title VII.  Maj. Op. at 9.

Two notes of elaboration are in order.  First, sex need not be the sole basis for an adverse employment decision.  Indeed, sex (or any other characteristic identified in Title VII) need not be the primary cause.  As long as sex is a but-for cause of the decision, then the decision is barred under Title VII.  Maj. Op. at 5-6, 10-11.  Second, an employer need not specifically intend to discriminate based on sex.  It is thus irrelevant that an employer was consciously concerned only with homosexual or transgender status when terminating an employee.  Once again, if sex is a but-for cause of a decision, then Title VII makes the decision unlawful.  Maj. Op. at 17-18.

In light of this analysis, here is how Justice Gorsuch (right) Associate_Justice_Neil_Gorsuch_Official_Portrait_(cropped_2)described the requirements of Title VII: “[A]n employer who intentionally treats a person worse because of sex—such as by firing the person for actions or attributes it would tolerate in an individual of another sex—discrimi­nates against that person in violation of Title VII.”  Maj. Op. at 7; accord Maj. Op. at 9 (“An employer violates Title VII when it intentionally fires an individual employee based in part on sex.”).  Under that rule, Justice Gorsuch continued, “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against that individual based on sex.”  Maj. Op. at 9.  Gorsuch demonstrates this point with an example that is the heart of the entire majority opinion, and thus I will refer to it as the “key example” throughout the rest of these posts.

“Consider, for exam­ple, an employer with two employees, both of whom are at­tracted to men.  The two individuals are, to the employer’s mind, materially identical in all respects, except that one is a man and the other a woman.  If the employer fires the male employee for no reason other than the fact he is at­tracted to men [i.e., on grounds of sexual orientation], the employer discriminates against him for traits or actions it tolerates in his female colleague [i.e., attraction to men].  Put differently, the employer intentionally singles out an em­ployee to fire based in part on the employee’s sex, and the affected employee’s sex is a but-for cause of his discharge.”  Maj. at 9-10 (bracketed language added).   (The majority offers another essentially identical example involving a transgender person at the same location in the opinion.)

To unpack this, the only distinguishing feature between the two employees in this hypothetical, the majority argues, is their sex.  The two individuals have comparable abilities, skills, and other traits, including that both are sexually attracted to men.  If the employer fires the man for being attracted to other men, but not the woman for being attracted to the exact same people (men), then the employer has necessarily taken adverse employment action against the man “because of such individual’s . . . sex.”  The man’s sex is a “but-for cause” of his termination because if we changed his sex and nothing else—if we changed the man into a woman and left everything else constant, including who the employee is attracted to—he would not have been fired.  That violates Title VII.

According to the majority, this example demonstrates that “homosexuality and transgender status are inextricably bound up with sex.”  Maj. Op. at 10.  Any time an employer makes an adverse employment decision based on sexual orientation or transgender status, the employer is inherently making the decision, at least in part, based on sex; sex is at least one but-for cause of the decision.  And adverse employment decisions based on sex are forbidden by the plain language of Title VII.

Note that the crucial point here is not one of linguistic meaning.  As I said yesterday, there is no dispute between the majority and the dissenters over the meaning of the word “sex.”  Nor is there any dispute over the meaning of any other term in Title VII.  Maj. Op. at 25 (“[T]he employers agree with our understanding of all the statutory language . . . .  Nor do the dissents offer an alternative account about what these terms mean.”).   The majority’s claim is conceptual.  Discrimination on the basis of sexual orientation or transgender status is conceptually tied to discrimination on the basis of sex.  To repeat, the majority’s point is that “it is impossible to discriminate against a person for being homosexual or transgender without discriminating against the individual based on sex.”  Maj. Op. at 9 (emphasis added); accord Maj. Op. at 10 (“[T]o discriminate on these grounds [sexual orientation and transgender status] requires an employer to intentionally treat individual employees differently because of their sex.”) (emphasis added).  And that is not a claim about the meaning of Title VII.  The two dissents spend many pages challenging the majority as to the meaning of various terms in the statute.  See, e.g., Alito Dis. at 4-5, 21-28, 33, 35; Kav. Dis. at 5-21, 24-25.  But all of that analysis is irrelevant if the majority is correct about the conceptual connection between (1) sex discrimination, and (2) sexual orientation and transgender status discrimination.

One final note for today: One might plausibly conceptualize the dispute in the case as being about the meaning of “because of” in Title VII, or about the nature of the “but-for cause” test.  But there really is no disagreement about the meaning of “because of,” nor any dispute over what constitutes but-for causation.  Instead, I think the case is best understood as concerning whether but-for causation is actually satisfied when a person is fired because of homosexuality or transgender status.  The majority claims the answer is yes, and does so for conceptual reasons.  The defendants and the dissent, as I will explain in tomorrow’s post, claim otherwise.

June 23, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Monday, June 22, 2020

Guest Post by Joshua Silverstein on Bostock, Part I

THOUGHTS REGARDING BOSTOCK V. CLAYTON COUNTY, THE U.S. SUPREME COURT DECISION HOLDING THAT TITLE VII PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION AND TRANSGENDER STATUS.

A Guest Post by Joshua Silverstein (left)

Part I: Justice Gorsuch’s Textualism and the Critical Conceptual Issue in Bostock.

Silverstein  Josh -- Official PictureIn Bostock v. Clayton County, the U.S. Supreme Court held that Title VII, the principal federal employment discrimination statute, bars discrimination on the basis of sexual orientation and transgender status.  In this and the following posts, I provide rather detailed comments regarding the legal analysis in the case as a supplement to articles and blog posts I’ve seen across the web that focus on other aspects of the decision.

Title VII makes it “unlawful . . . for an employer to . . . to discriminate against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.”  (Emphasis added.)  The plaintiffs in the various lawsuits that constitute the Bostock case argued that the prohibition on discrimination based on “sex” also bars discrimination based on sexual orientation and transgender status.  The Supreme Court agreed by a 6-3 margin, with the four liberals and Chief Justice Roberts joining the majority opinion written by Justice Gorsuch (pictured, right).  Justice Alito wrote a dissent, joined by Justice Thomas, and Justice Kavanaugh wrote a separate dissent.  I think the majority’s position is more persuasive and thus I believe the case was correctly decided. 

In this first post, I lay out some basic principles of statutory interpretation and provide an overview of the critical conceptual issue at the center of Bostock.

Associate_Justice_Neil_Gorsuch_Official_Portrait_(cropped_2)Justice Gorsuch adopts a textualist approach to the construction of statutes in the majority opinion.  Under textualism, courts interpret “a statute in accord with the ordinary public meaning of its terms at the time of its enactment.”  Maj. Op. at 4.  Legislative history regarding (1) what the adopters of the law intended it to mean, (2) what they sought to accomplish in passing the law, and (3) how they understood the scope of the law (i.e., to what cases they expected it to apply), is not controlling.  Indeed, legislative history isn’t even relevant if the statutory language is clear.  It is “the provisions of our laws rather than the principal concerns of our legislators by which we are governed.”  Maj. Op. at 14.

The primary justification for textualism is that it advances the rule of law.  An essential feature of the rule of law is that people are governed by the rules of law, and not by something else that may be undiscoverable by the citizenry, such as what legislators think about the rules.  “The people are entitled to rely on the law as written, without fearing that courts might disregard its plain terms based on some extratextual consideration.”  Maj. Op. at 24 (emphasis added).

Note that this doesn’t mean that legislative history is always irrelevant.  If a law is ambiguous, many judges believe that legislative history can be used to assist in resolving the ambiguity.  Maj. Op. at 24.  This history can, for instance, explain how at least some competent users of English understood the words of a statute.  See Kav. Dis. at 16.  But what legislative history cannot do, among other things, is override clear statutory language.

The principles of textualism required the Supreme Court in Bostock to determine the ordinary public meaning of Title VII in 1964, the year the statute was adopted.  Maj. Op. at 4.  And if the statute’s language is unambiguous, then what members of Congress intended or expected Title VII to accomplish (or not accomplish) by including “sex” in the law is irrelevant to the analysis.

Critically, however, the central issue in the case is not the ordinary meaning of “sex” in the mid 1960s.  All nine of the justices agreed with the defendants that the word “sex” does not include sexual orientation and transgender status as a matter of linguistic meaning.  See Maj. Op. at 5 (“[W]e proceed on the assumption that ‘sex’ . . . refer[s] only to biological distinctions between male and female.”); Alito Dissent at 5; Kavanaugh Dissent at 11.

Instead, the case primarily turns on the conceptual relationship of discrimination based on sex to discrimination based on sexual orientation and transgender status.  In the majority’s view, sex discrimination is necessarily connected to both sexual orientation discrimination and transgender status discrimination.  More specifically, the majority found that it is impossible to discriminate on the basis of sexual orientation or transgender status without also discriminating on the basis of sex.  Here is one of Justice Gorsuch’s statements of this point: “An employer who fires an individual for being ho­mosexual or transgender fires that person for traits or ac­tions it would not have questioned in members of a different sex.  Sex plays a necessary and undisguisable role in the decision, exactly what Title VII forbids.”  Maj. Op. at 2 (emphasis added).  Accordingly, when an employer makes an adverse employment decision because of an employee’s sexual orientation or transgender status, the employer has discriminated against the employee “because of such individual’s . . . sex,” in violation of Title VII.

Tomorrow’s post explores the reasoning underlying Justice Gorsuch’s claim that discrimination based on sexual orientation or transgender status necessarily involves discrimination based on sex.

June 22, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Monday, June 15, 2020

Title VII Protects LGBTQ Workers! So Says SCOTUS 6-3 in Bostock

Associate_Justice_Neil_Gorsuch_Official_Portrait_(cropped_2) 1920px-Gay_flag_8.svgWe interrupt our regular blogging to bring you this BLOCKBUSTER DECISION from the U.S. Supreme Court.

In a 6-3 opinion authored by Justice Gorsuch, SCOTUS, the Supreme Court affirmed decisions of the 2nd and 6th Circuit allowing Title VII claims brought by people alleging discrimination based on sexual orientation or gender identity to proceed..  Justice Gorsuch's commitment to textualism clearly informed his opinion:

Those who adopted the Civil Rights Act might not have anticipated their work would lead to this particular result. Likely, they weren’t thinking about many of the Act’s consequences that have become apparent over the years, including its prohibition against discrimination on the basis of motherhood or its ban on the sexual harassment of male employees. But the limits of the drafters’ imagination supply no reason to ignore the law’s demands. When the express terms of a statute give us one answer and extratextual considerations suggest another, it’s no contest. Only the written word is the law, and all persons are entitled to its benefit.

The opinion is 33 pages long.  The dissents, with appendices, take up an additional 135 pages.  There is much to digest, but this is a very important decision affecting employment contracts and conditions of employment nationwide.

June 15, 2020 in Current Affairs, Famous Cases, Labor Contracts, Recent Cases | Permalink | Comments (0)

Thursday, June 4, 2020

Non-Compete Unenforceable Against Fired and Re-Hired Employee

1st CircuitRussomano v. Novo Nordisk, which the First Circuit decided this week, is a cautionary tale.  When Novo Nordisk (NN) hired Thomas Russomano, the terms of his contract prohibited him from working for a competitor for one year after his employment with NN ended and prohibited him from disclosing confidential information.  NN briefly laid off Russomano on August 3, 2018, a Friday.  When NN rehired him in a new position the following Monday, he was not required to sign a new non-compete and confidentiality agreement.  

When Russomano left the company in early 2020 to work for a competitor, he sought assurances that NN would not seek to enforce its non-compete and confidentiality agreement.  NN refused to grant such assurances.  Russomano sought a declaratory judgment in state court.  

NN responded by removing the case to federal court, filing counterclaims, and bringing a third-party suit against Russomano's new employer, alleging tortious interference unfair competition, and misappropriation of trade secrets.  NN then brought a motion seeking a temporary restraining order and preliminary injunction to enforce its non-compete and confidentiality agreement.  NN claimed that Russomano was never laid off but merely transferred to a different position within the company.  The District Court denied the motion, finding that NN was unlikely to succeed on the merits, and the First Circuit affirmed. 

The District Court's key finding, which the First Circuit upheld, as that NN unambiguously terminated Russomano's employment on August 3, 2018 and unambiguously made a new offer of employment to him on August 6, 2018.  Russomano's obligations under his non-compete and confidentially agreement accordingly terminated in August 2019.  Despite the lack of ambiguity in the relevant documents, the First Circuit checked its work against extrinsic evidence and found the extrinsic evidence consistent with the unambiguous documents. Russomano's employment was terminated.  He was then offered a new position under new terms and conditions which did not include the non-compete and confidentiality agreement.

 

June 4, 2020 in Labor Contracts, Recent Cases | Permalink | Comments (0)

Friday, May 22, 2020

Reading the Covid-Related News on Bloomberg

A few stories caught my eye this week.  

First, Paige Smith and Robert Iafolla bring us news that refusing to wear a mask at work can cost you your job.  Companies that are re-opening are following CDC guidelines by requiring that returning workers wear masks.  

The story suggests that there has been little resistance from workers; on the contrary,  workers are more likely to complain that their employers are taking too few precautions against contagion rather than too many.  There are apparently religious and medical exemptions (don't those usually require face coverings rather than prohibit them?), but workers cannot claim a free-speech right to refuse to wear a mask.  So long as the requirement that employees wear masks is generally applicable and generally enforced, with appropriate accommodations where reasonable, it is likely to survive any legal challenge.

Two quick points: first, I am always struck by the lack of outrage at private actors who do things that spark outrage when the government does them, even though the private actors are motivated by profit and the government is motivated, at least in part, by concerns like public safety or national security.  The supposed difference is that workers consent to their terms of employment, but when you combine the ubiquity of at-will employment, form employment contracts that eliminate recourse, and a 15% unemployment rate, it is hard to take seriously claims that workers give meaningful consent to terms of employment. Nancy Kim and I explored this topic in the context of data-mining in connection with consumer contracting in a pre-Covid world.

Second, I wonder if the Bloomberg article underestimates the power of the argument that refusing to wear a mask is symbolic political speech.  When I go shopping these days, only about half of the people in the store wear masks.  Their refusal to do so puts me and other shoppers at risk.  It's possible that they just don't know where to get a mask (try Etsy!), but it is hard not to view their choice not to wear mask as a statement, and perhaps they view my mask as a mark of my self-subordination to the nanny-state as well. 

What do you do if you need to have someone to do some work in your home, and they show up without a mask?  Do you tell them to leave and come back with a mask?  Do you hide in the bathroom until they finish and then disinfect all surfaces with which they might have come in contact?  Do you leave a Yelp review and give them a low rating in the public health and safety category?  Confronting them seems like borrowing trouble.  They have access to the same information that you have.  Telling adults that they've made a poor decision (or implying that they have) rarely goes over well.

Meanwhile, Jef Feeley and Joshua Fineman report on another acquisition now on hold because of the pandemic.  In Forescout Technologies Inc. v. Ferrari Group Holdings LP, 2020-0385, Delaware Chancery Court (Wilmington), Forescout, a cybersecurity company, is claiming that private equity group, Advent International, ought not to be permitted to back out of its $1.9 billion deal to acquire Forescout.  Forescout claims that Advent assumed the risks associated with any possible impact that the pandemic might have on the deal.  According to the report, this is one of at least nine deals that resulted in Covid-related litigation in May, including $10 billion in disputed mergers and acquisition deals that landed in Delaware's Chancery Court during one seven-day period in May.  "Material adverse effect" clauses need to be carefully drafted or they will be carefully scrutinized by a court or arbiter.

May 22, 2020 in Conferences, Current Affairs, Labor Contracts | Permalink | Comments (1)

Thursday, May 14, 2020

The Irony of Efficiency and Mass Arbitration

Readers of this blog know that mandatory arbitration clauses lurk in all kinds of standard form contracts, including those that govern the relationship between companies and their workers (whether these workers are classified as independent contractors or employees). Arbitration clauses combined with class action waivers are a powerful way for companies to prevent workers from suing over workplace disputes.  But in February,* U.S. Judge William Alsup issued an order compelling arbitration against a company that was trying to wriggle out of it.

That company was Door Dash which faced arbitration claims from 5,879 workers who disputed their labor classification and had clicked to agree to the terms of the company’s terms, which contained a “Mutual Arbitration Provision.”  This was a contract that Door Dash had drafted, so what was the problem? 

The American Arbitration Association (AAA) requires that individuals pay a filing fee of $300 and companies pay a filing fee of $1900.  That’s over $11,000,000 in arbitration filing fees for Door Dash.  Door Dash isn’t the first company to be faced with mass arbitration claims and hefty filing fees.  Over 12,000 Uber drivers filed arbitration claims against Uber. The non-refundable filing fee for each claim was $1500 so that filing fees alone would cost Uber over $18,000,000.  Rest assured, there will be more such claims.  Many, many more.

For years, defenders of standard form contracts and mandatory arbitration clauses have argued that their efficiencies should override fairness and consent problems.  Now that plaintiffs attorneys are discovering how to use software to file claims more efficiently and on a mass scale, companies are discovering what it’s like to be on the receiving end of efficiency.   

Judge Alsup’s motion notes the irony of companies trying to wriggle out of their own TOS:

 “For decades, the employer-side bar and their employer clients have forced arbitration clauses upon workers, thus taking away their right to go to court, and force class-action waivers upon them too, thus taking away their ability to join collectively to vindicate common rights.  The employer-side bar has succeeded in the United States Supreme Court to sustain such provisions. The irony, in this case, is that the workers wish to enforce the very provisions forced on them by seeking, even if by the thousands, individual arbitrations, the remnant of procedural rights left to them.  The employer here, DoorDash, faced with having to actually honor its side of the bargain, now blanches at the cost of the filing fees it agreed to pay in the arbitration clause.  No doubt, Door Dash never expected that so many would actually seek arbitration.  Instead, in irony upon irony, DoorDash, now wishes to resort to a class-wide lawsuit, the very device it denied to the workers, to avoid its duty to arbitrate.  This hypocrisy will not be blessed, at least by this order.”

Ouch.  And bravo.

 

*I know, it’s May now, but it’s been a crazy couple months, don’t you agree?

May 14, 2020 in Commentary, Current Affairs, Labor Contracts, Recent Cases | Permalink | Comments (0)

Wednesday, May 6, 2020

Nancy Kim on Force Majeure Clauses on NPR's "Here and Now"

Nancy_kimThere I was, minding my own business, listening to "Here and Now" on NPR from WBUR in Boston, when the words "force majeure" pricked up my ears.  The report began by noting that New York's Metropolitan Opera had laid off its union workers, invoking a force majeure in the company's contract with its workers.

To further inform its listeners about force majeure clauses, the show sought the sage counsel of our own Nancy Kim!  You can read the story and listen to the interview with Nancy here.

May 6, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts | Permalink | Comments (0)

Tuesday, May 5, 2020

Ben Davis on the Executive Order Pertaining to Meat & Poultry Processing Plants

DavisBen Davis, of the University of Toledo College of Law, has posted Worker Endangerment in the Meat Industry During COVID-19 on Jurist.  The post comments on the President's Executive Order relating to the food supply chain. The Executive Order was a response to the closing of some meat and poultry processing plants in response to outbreaks of COVID-19 at the plants. 

The executive order suggests that the plants closed due to state action and alleges that state regulations "may differ from or be inconsistent with interim guidance recently issued by the Centers for Disease Control and Prevention (CDC) of the Department of Health and Human Services and the Occupational Safety and Health Administration (OSHA) of the Department of Labor."  Ben's post makes clear why state regulations might differ with CDC and OSHA guidances, which are filled with what he calls "mealy-mouthed phrases" but I would call weasel words.  Basically, the guidances say that, ideally, plant operators should consider allowing workers  to socially distance themselves if feasible.   If states imposed stricter guidelines, they saved lives.

It is not true that state action is the cause of the closures.  Rather, the companies are closing their plants on their own.  I didn't know that lying in executive orders was a thing now, but I concede, that was very retro thinking.  Moreover, workers do not want to work in unsafe conditions, and thus the Executive Order many not have any effect, according to this CNN report.

According to the Executive Order, the closures "threaten the continued functioning of the national meat and poultry supply chain, undermining critical infrastructure during the national emergency."  As a pescatarian, I can only say, "Really?"  

But I digress.

Reynolds AbbottBen's post highlights the precarious predicament that workers might face as a result of the Executive Order.  They may face a Hobson's choice of returning to an unsafe work environment or losing their unemployment benefits.  Ben cites to reports that some governors, like Iowa's Kim Reynolds (left) and Texas's Greg Abbott (right), are threatening to withdraw such benefits from workers who "voluntarily quit."  The issue goes beyond the plants and could affect workers in many areas of the economy that are opening up before their workers feel safe returning to their jobs.

May 5, 2020 in Commentary, Contract Profs, Current Affairs, Food and Drink, In the News, Labor Contracts | Permalink | Comments (1)

Friday, July 5, 2019

Black family fires racist contractor

For very good reason, a black family fires a contractor who showed up for a job with a confederate flag on his truck in GA.  This raises issues of whether one can simply terminate a contract once entered into (one cannot with out at least having to pay damages, potentially in the form of wasted time and gas money here) or whether this was simply an at-will contract that can be terminated (that does not seem to be the case here.).  At any rate, isn't it incredible that in 2019, some "proud Southerners" still have to display their pride in such a blatantly tone deaf manner?  Racism ought to be a thing of the distant past, but clearly is not.  Shameful! 4543a520-9d01-11e9-b3ff-b4c8c3c3f024

July 5, 2019 in Commentary, Current Affairs, In the News, Labor Contracts, True Contracts | Permalink | Comments (0)

Wednesday, June 26, 2019

Don't rely on vague promises that you'll be "taken care of"

I had been paying attention to this case out of the Western District of Washington, Moi v. Chihuly Studio, Inc., Cause No. C17-0853RSL (behind paywall), because it raises interesting copyright authorship issues. The case is a lawsuit brought by a person who was one of Chihuly's assistants, who create artwork in Chihuly's name under Chihuly's supervision. The plaintiff worked for Chihuly in this way for fifteen years, until a falling-out between Chihuly and another of the assistants resulted in the deterioration of the plaintiff's relationship with Chihuly as well. The plaintiff filed this lawsuit alleging co-authorship of 285 artworks and requesting compensation for his work on them. You can read more about the lawsuit here

As I said, I was paying attention to this case for the copyright authorship analysis, which follows the Aalmuhammed test and finds that, because the plaintiff did not exercise control, he is not an author of the artworks, despite his copyrightable contributions to the artworks. The authorship test analysis also considers the lack of contract between the plaintiff and Chihuly as indicating that Chihuly did not intend to share authorship with the plaintiff. 

That same lack of contract dooms the plaintiff's attempt to seek compensation for his work. Because there's no contract, the plaintiff's cause of action is promissory estoppel, but Chihuly's promises over the years to compensate plaintiff by keeping track of which artworks plaintiff had contributed to were, in the court's view, too vague to constitute promises that the plaintiff could have relied on. The plaintiff confessed that he had no idea what his eventual compensation might be or when he would receive it, just that he trusted Chihuly to treat him "fairly." Promises forming the basis of promissory estoppel need to be clear and definite, and Chihuly's statements were simply too vague. Considering that plaintiff couldn't even say what they meant, the court refused to enforce them. 

This is, once again, a lesson in making sure you have a clear and complete understanding with someone, and not just vague platitudes. 

June 26, 2019 in Celebrity Contracts, Commentary, Current Affairs, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, June 24, 2019

Another consideration discussion

I just blogged about a consideration case last week, and now here's another one out of Illinois, Johnson v. Illinois Alcohol & Other Drug Abuse Professional Certification Association, Nos. 4-18-0562 4-18-0575 cons (behind paywall). This case concerns an at-will employment contract that was later modified to include a definite retirement date. The defendant argues that there was no consideration for this modification of the contract, and thus it's not binding. However, the court notes that Johnson gave up his ability to work for the defendant beyond the retirement date and that that served as consideration for the modification of the employment contract. There were also some changes in job duties and title as well as an additional agreement reached on how sick and vacation days would be used over the remainder of the employment term. All of this was sufficient to show that both parties bargained for things from the other in this new binding contract. 

June 24, 2019 in Labor Contracts, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Monday, June 17, 2019

If you don't pay for a raffle ticket, there's no contract for the prize

If you've already started thinking about gathering examples for your courses this fall, here's a consideration case for you out of Ohio, Forbes v. Showmann, Inc., Appeal No. C-180325. Forbes was an employee of Showmann, and at a holiday party Showmann gave its employees, including Forbes, raffle tickets. One of the prizes was what sounds like a pretty sweet cruise package, and Forbes won the cruise. Showmann terminated Forbes's employment a few weeks later and informed Forbes that the cruise package was conditioned on Forbes still being a Showmann employee when she took the cruise. 

Forbes sued for breach of contract but the problem was that it was undisputed that Forbes did not pay for the raffle ticket. Showmann simply distributed the raffle tickets for free to its employees. Therefore, there was no consideration with which to form a contract. Forbes tried to argue her employment by Showmann was the consideration for the ticket but Forbes's employment was not used to bargain for the raffle ticket in exchange, so therefore there was no contract. 

If you feel bad for Forbes, which I admit I kind of did based on these given facts, her conversion claim does survive, so there is some hope for her. 

June 17, 2019 in Commentary, Games, Labor Contracts, Law Schools, Recent Cases, Teaching, Travel, True Contracts | Permalink | Comments (0)

Tuesday, May 21, 2019

Information Asymmetries Lead to Women Being Underpaid

Democratic presidential candidate Kamala Harris has revealed a plan that would overhaul American discrimination laws to ensure that women and men are paid the same for the same work. Unknown-1

Under the plan, companies with 100 or more employees would, among other things, be required to obtain a federal certification showing they are not underpaying women.  If they fail to do so, they may be fined.  The burden would be on the employers to show that any pay gap is based on merit, performance, or seniority.  If companies discriminate, they would be fined 1% of their average daily profits for every 1% of their average daily profits for every 1% gap that exists between the gender-based pay differential.  The plan would also bar employers from asking job applicants about their salary history and ban forced arbitration in pay discrimination disputes.

But is this really necessary?  Can’t employees themselves contract around this problem in a free marketplace? Unknown

Sadly, the answer is no. Women who work full time are paid an average of 80 cents for every dollar paid to men.  For black women, the figure is 61 cents.  For Latinas: only 53 cents.  And we are talking about pay for the same jobs; not educational or other relevant differences.

Of course, this is just a proposal from a political candidate who at this point in time appears unlikely to win the race.  But it raises an important, yet sadly not new, contractual problem, namely that of disparity in bargaining positions.  As the situation is now, much of the burden of avoiding this problem is on the potential or actual employee.  If a woman needs a job, how is she going to ensure that she is, in effect, paid the same as her fellow male workers?  In other words, how would she even find out what males earn in a particular job?  She can’t. And the pressure of adding one’s salary history is also known to create a bargaining inequality.  This is an example of information asymmetry; a situation in which government action might help ensure a better situation for individuals who have proved unable to obtain that situation contractually.  This is a political issue that will, of course, have to be decided by legislators.  The free market is not producing an acceptable situation here as it is unacceptable that employers pay their employees differently simply because of gender. The fact that race makes the pay disparity even greater makes matters worse.

May 21, 2019 in Contract Profs, Current Affairs, In the News, Labor Contracts, Legislation | Permalink | Comments (0)

Monday, April 29, 2019

Would we really say that Weinstein's company's directors didn't approve of his pattern of sexual misconduct?

This, strictly speaking, isn't really a contract case, although there is an employment contract at issue so I guess that's how it got caught in my filter. But I read it and thought that this case is raising important enough issues that we should be discussing them. 

The case is David v. The Weinstein Company LLC, 18-cv-5414 (RA), out of the Southern District of New York, and it's a case centering around the alleged sexual assault perpetrated by Harvey Weinstein on the plaintiff. The story the plaintiff tells is a familiar one to those who have read the Weinstein reporting, that "Weinstein asked her to meet him in his hotel room to discuss potential acting roles, and then, on one occasion, forcibly raped her." This decision isn't so much about Weinstein's conduct, though, as it is about the former directors of Weinstein's companies, who the plaintiff contends "enabled Weinstein's sexual misconduct, making them liable for general negligence and negligent retention or supervision." 

The court dismisses the claims against the directors, and the reasons why were what caught my eye about this case. Plaintiff's allegations were that the directors were aware of Weinstein's harassing behavior toward women, based on a number of things: a written communication within the company calling his behavior a "serial problem" the company had to deal with; the characterization by a company executive of Weinstein's female assistants as "honeypot[s]" to lure actresses into meetings with Weinstein; a formal complaint by an employee about Weinstein's behavior; an employee memo summarizing two years' worth of allegations of sexual harassment and misconduct by Weinstein and characterizing the company as a "toxic environment for women"; the settlement of many sexual misconduct claims against Weinstein; and at least one police investigation into Weinstein's behavior. 

None of the allegations established negligence on the part of the directors, according to the court. First of all, the directors did not owe the plaintiff a duty of care, and there is no case law that directors of a company can be held liable for an employee's tortious act. The plaintiff pointed to the fact that the directors renewed Weinstein's contract in 2015 with a provision that prevented Weinstein from being fired for sexual misconduct as evidence that they were enabling Weinstein's conduct, but the court found that this was "a far cry from them approving of Weinstein's sexual assault." While the court admitted that the directors "were not without moral culpability," their actions were not negligence as a legal matter. 

Nor did the plaintiff assert a claim for negligent retention or supervision. The plaintiff did not show that Weinstein's sexual assault took place on the company's premises, since she asserted it happened at a hotel not affiliated with the directors. While the plaintiff argued that Weinstein used company credit cards to pay to the hotel room and lured her to the hotel room under the guise of a business meeting regarding employment by the company, that was regarding the company, not the directors sued here. 

As a matter of law, the court's reasoning makes sense.

As a matter of recognition of how oppressive power structures work, this decision is terrible.

When I learned negligence way back in law school, I remember so many discussions about the policy behind it, about not wanting to hold people to a generalized duty to protect everyone on the planet, about how we decide proximate causation, about how it's really at heart about what we want to hold people liable for and what we don't. 

So this decision makes sense in terms of worrying about generalized duties, of not dismissing the culpability of those committing the intentional tortious act. But it doesn't make sense in terms of thinking about the type of society we want to live in. The Weinstein reporting tells a story of serial abuse that was systemically protected for years by the power structure around Weinstein. To say that nobody else in the power structure was sexually assaulting women is a true statement of legal fact, but also seems disingenuous at this point. Weinstein's abuse was so widespread and lasted so long not only because of Weinstein but also because of the entire operation around him deflecting culpability for it. 

The negligence analysis in this case feels like it's operating in a vacuum, which is kind of how we teach our students to think, presenting them with discrete hypotheticals, but might not be the best or most effective way to set up a fair legal system that protects the most vulnerable and least powerful in society. The societal discussion about the oppressive system that permitted Weinstein (and others) to perpetrate so much abuse has just begun, and maybe we should include how the legal system interacts with those power structures in the discussion. If negligence is all about policy decisions about who you need to protect and how much, then maybe we should have a policy discussion about how to make those decisions, especially if we're making them in the context of an abusive pattern that might be obscured by looking at things in isolation.  

The plaintiff's allegations in this case contain many damning examples that many people around Weinstein knew about the disturbing pattern of sexual misconduct, and made affirmative choices to find ways to use the power structure to protect Weinstein. I appreciate the court's statement that the directors might be morally culpable but not legally culpable, and I recognize that law and morals are two different things. But I don't know that I agree that the director's actions are "a far cry from them approving of Weinstein's sexual assault . . . ." Given the allegations about what the directors knew and how they reacted to that knowledge, I think we could read their actions as indicating that they were a far cry from disapproving of Weinstein's sexual assault.

April 29, 2019 in Celebrity Contracts, Commentary, Current Affairs, Famous Cases, In the News, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, April 17, 2019

Reminder: unconscionability requires both procedural and substantive

A recent case out of the Northern District of California, Sanchez v. Gruma Corporation, Case No. 19-cv-00794-WHO, is a good case to point to to remind students that unconscionability has both procedural and substantive sides, and you need to have both. In the case, the court admits that the plaintiff's account of the signing of the contract raised procedural unconscionability issues: the plaintiff alleged that he was given no choice, was told if he did not sign the contract he could not work at the company, was not told what the contract really meant, and was given no opportunity to review the contract. However, this procedural unconscionability ultimately didn't matter, because the court ruled the contract was not substantively unconscionable. There was one provision the court found unenforceable but the court severed that provision and enforced the rest of the agreement. 

 

 

April 17, 2019 in Labor Contracts, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)