ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Monday, September 20, 2021

Some Colorful Facts Relating to Duress in an Employment Discrimination Case

It is difficult to assert an affirmative defense of economic duress under New York law.  The party alleging economic duress has to show a wrongful threat and not merely point to his own financial hardship.  The wrongful threat must be some threatening conduct that is not within the other party's legal rights. But in Herrnson v. HoffmanJudge Oetkin of the District Court for the Southern District of New York found that plaintiff had alleged sufficient facts to survive a motion that the court treated as one for summary judgment.

Sparkling-heart_1f496Pro se plaintiff Samuel Herrnson alleges that defendant Mark Hoffman gave Herrnson a check for $16,000.  Hoffman boasted of his wealth and allegedly gave Herrnson the money to assist the latter in a rent dispute he was having with his landlord.  Hoffman allegedly told Herrnson  that he wanted him to "view Hoffman Management as the place to be for the remainder of his career."  Herrnson alleges that Hoffman wrote "loved" on the memo line of the check (he may have written "loan").  Herrnson deposited the money in an escrow account, anticipating litigation with his landlord.

Two months later, Hofmann and his co-defendants terminated Herrnson.  Kinda gives Hoffman's statement "the place to be for the remainder of [your] career" a different cast.  It's reminiscent of the Delphic Oracle's reply to Croesus: "If Croesus goes to war, he will destroy a great empire."  In any case, Hoffman called Herrnson's escrow manager and had the funds frozen, telling the escrow manager that the $16,000 check was a loan, conditional on Herrnson's continued employment.  As that employment had terminated, the loan was being called in.  

SDNYHerrnson's narrative, accepted as true at this stage in the proceedings, was that Hofmann knew that Herrnson was contemplating an ADEA claim against Hofmann and his co-defendants, or similar claims arising under state law.  Hofmann mischaracterized a gift as a loan in an attempt to strong-arm Herrnson into dropping his claim.  Hofmann made Herrnson sign a general release in order to have the funds released.  

Judge Oetkin was having none of it at the summary judgement stage.  If Herrnson's narrative is accurate, he received nothing from the release, other than funds that had already been given to him.  Defendants' motion to dismiss, converted into a motion for summary judgment was denied.

H/T @NY_Contracts.

September 20, 2021 in Labor Contracts, Recent Cases | Permalink | Comments (0)

Tuesday, June 29, 2021

Rich Paul and the Role of Sports Agents in the NBA

As reported in Isaac Chotiner's New Yorker article, Lebron James’s Agent Is Transforming the Business of Basketball, Rich Paul has been changing the way athletes and agents negotiate with teams. Paul, the agent for LeBron James and other N.B.A all-stars, started his agency, Klutch, nine years ago.

Paul and James became friends in 2002 when James -- only seventeen—was expected to be N.B.A.’s No.1 draft pick. When the two first met, Paul was twenty-one and selling vintage jerseys out of his trunk. James took an interest in one of the jerseys, the two struck up a friendship and stayed in touch. They bonded over being Black kids who grew up in the inner city and the difficulties that come with that.  That background has given Paul a unique advantage when advising young players with similar experiences growing up.  Paul's mother struggled with drug addiction.  His father died of cancer while he was in college. He would have finished, he said, because it was important to his father.  But after his father died, Paul's business ambitions took over.

LeBronCav
Photo by Keith Allison

Their contractual relationship began the summer of 2003, when James signed with the Cleveland Cavaliers. James began paying Paul a salary of $48,000. According to Chotiner, James regarded the payments as “an investment in what the relationship could become.” A few years later, Paul began working for James then-agent Leon Rose, at Creative Artists Agency (CAA).

Paul left CAA and formed Klutch Sports Group in 2010 after the controversial announcement made by James on “The Decision” —an  ESPN live broadcast—in which he declared he was leaving the Cavaliers. James declared “I’m going to take my talents to South Beach and join the Miami Heat.”  The press took a very dim view of "The Decision," but James has no regrets (or will admit to none), and his move from Cleveland to Miami became the model for later moves by star players who want to dictate where they play and with whom they play.  

Paul began to develop powerful influence in the N.B.A with James as his star client. They have become associated with “player empowerment.” Player empowerment is the influence that athletes wield as they change teams and build new fan bases. The argument in favor of player empowerment is that too much control has been in the hands of teams who can trade a player on a whim. Players should have some say in where they work and live. This philosophy allows the league’s best athletes to have the most leverage because they bring in the fans, jersey sales, and general revenue. Paul believes players should have more power over who and where they sign with.

The dynamic between the league, athletes, and player empowerment, is intertwined with race. Historically, basketball—a majority Black sport—has always been run by white owners. As players have become increasingly more outspoken about politics, the league has had to follow suit, like embracing the Black Lives Matter movement.

The dynamic in NBA player contracts has certainly changed, at least at the top of the NBA food chain.  The game used to be that owners would lock in young players to multi-year contracts.  If the players underperformed or became injury-prone, the owners retained the ability to trade them.  If the players exceeded expectations, they were systematically underpaid until their contract came up for re-negotiation.  Sorry Scottie Pippen.  Now, the star players can reverse the option.  With Paul's help, they star prospects can now negotiate generous contracts but retain some contractual flexibility to move to different teams, and the league and the owners seem relatively powerless to prevent them from doing so.

Critics of player empowerment say it has put too much power in the hands of players. Bomani Jones, a sports journalist for ESPN state that player empowerment is a catchall for the fact that the league has done a terrible job empowering team, and that the N.B.A. has a problem with real estate; they have teams in places where young Black men do not want to live.

Although Paul is proud and willing to fight for his clients, he struggles with the impression that he is constantly battling with teams. He said that perception is all wrong. “What I am focused on was how to educate the athletes. It’s one thing to be a black man in America it’s a totally different thing to be a black athlete.”

For Black athletes, Paul explained, the sudden wealth of an NBA contract comes with a ‘black tax.’ Black tax is the difference in experience black athletes face compared to that of white athletes. For some Black athletes, their number of dependents is higher, their education may be lower, their financial literacy lower, and their family infrastructure is lesser. Paul and others at Klutch say they see their job not only as making money for players, but also teaching them how to spend it. Furthermore, family members of young athletes historically have only seen White men in a position of agent or head coach, so that is who they tend to seek out and listen to. It is difficult for Paul to represent White athletes because they do not seek him out and they do not expect or trust Black agents.

LeBron_James_Lakers
Photo by All-Pro Reels

Klutch became known for driving hard bargains, especially for James. Paul's reputation was cemented when James joined the Lakers in 2018. The following year, Paul pressured New Orleans Pelicans to trade Anthony Davis to the Lakers—which cemented the roster that enabled the Lakers to win the NBA championship in 2020.  Paul's strategy has aggressive:  he let it be known David was demanding a trade and that the he really wanted to be traded to the Lakers.  Davis's value to the Pelicans dipped precipitously.  He didn't want to play for the team and he didn't want to risk injury.  Paul effectively called the bluff of the owners.  They disapproved of the tactics, but Paul forced them to recognize the market power their star players wield.   The N.B.A. fined Davis fifty thousand dollars for the trade demand.   Why even bother?

Paul’s success has led to debate about what it takes to be a good agent. Paul cannot match his rivals in formal education.  Most other agents are lawyers or have lawyers. But Paul understands the business, and he understands the psychology of the players, the agents, and the "Euro men in their fifties" who still make the decisions for teams. Now for Paul’s star clients, the job is about finding new ways to wield power, including using the media. In 2018 Paul negotiated an unconventional deal for NBA prospect Darius Bazley. Bazley reneged on a commitment to play for Syracuse University but was later paid $1 million for an internship at new balance. The next year the NCAA announced a new rule: agents could not represent college athletes unless they themselves had a college degree. Then James took to Twitter and dubbed the new regulation #TheRichPaulRule. Within a week the NCAA rescinded the rule.

Chotiner's article provides a behind-the-scenes look at how Paul recruits clients.  He recounts a Zoom call between Paul and an NBA-prospect's mother.  Paul encourages the young athlete to talk about his teammates and his team mentality, about his enthusiasm for playing defense and being a play-maker rather than just a scorer or showboater.  The mother quickly grasps that the strategy is to spout cliches to counteract the prejudices about young Black athletes her son is likely to encounter.  But to her, it sounds like forcing her son to repress his personality and bow before these new White masters.  Paul is playing the long game.  For him, it is not about bowing down to anyone.  it's about achieving a balance that enables young stars to rise.   

Once players rise to stardom, they have more freedom to speak for themselves.  Klutch has athletes speak out on political or social issues. Michael Jordan would not even say whether he preferred classic Coca-Cola or new Coke.  James has spoken out on the killing of George Floyd, police brutality, and Georgia’s restrictive voting laws. Paul said that however the players decide to involve themselves is up to them, and that they should not be tone-deaf to things happening around them. 

Durant
Photo by Keith Allison 

The new model works well for the star players, but does it improve the sport?  From my perspective in Oklahoma City, I still hear complaints about Kevin Durant's abandonment of the Thunder.  I hear this from White fans, and I suspect that, while the NBA's popularity bridges racial gaps in the U.S., the people buying (unbelievably expensive) seats in stadiums and (unbelievably expensive NBA gear) are mostly White. 

I've only been here a year, and with COVID, people aren't thinking much about attending sporting events (other than college football, which never stopped here), but nobody has ever brought up the Thunder in conversation with me since I arrived.  I follow basketball a little, but I can't name a single Thunder player.  I follow the Bulls, but I know at the start of every season that the Bulls do not have three all-stars, so they will not be in serious competition for the championship.  Seems like a doomed model for small-market cities like New Orleans, Oklahoma City, and the New York Knicks.

Bobby_Bonilla_PiratesStill, it seems preferable to baseball contracts where, for some reason, owners lock themselves in to multi-year contracts valued in the hundreds of millions of dollars with players who are nearing their peaks and will be paid tens of millions late in their careers.  Such older players often are of limited value to the club, often relegated to the roll of designated hitter.   I wonder whether, for that reason, the average age on American League teams is a bit higher than on National League teams.  On the one hand, perhaps it is nice that these players get to enjoy the riches denied them in their primes.  On the other hand, it must frustrate elite athletes to compete and under-perform.  It also hurts their teams, because salary caps prevent baseball teams with older, expensive players from trading for top players still in their prime.

Thanks to ContractsProf Blog Intern, Alyssa Cross, for her research assistance!

June 29, 2021 in Celebrity Contracts, In the News, Labor Contracts, Sports, True Contracts | Permalink | Comments (0)

Friday, May 28, 2021

An AAUP Special Report: Never Waste a Good Pandemic

AAUPThe American Association of University Professors (AAUP) issues a Special Report, Covid 19 and Academic Governance.  The news is not good.  We law professors had a rough ride after 2008's Great Recession, but most law schools were able to ride out the storm and most law schools are now steering towards calmer waters.  Meanwhile, smaller colleges and universities are taking on a lot a water as a result of the pandemic, and the report sadly evidences that contracts and tenure do little to protect faculty when educational institutions founder.

The title of this post is a quotation from a university administrator, allegedly in the service of "disaster capitalism."  That is, some university administrations may have used the pandemic as an excuse to eliminate programs and faculty that were not carrying their weight in terms of revenue generation.   Saying the quiet part loud, academic administrators welcomed the opportunity created by the pandemic.  They invoked "act of God" provisions to close departments and terminate tenured faculty members, and they tossed aside existing faculty handbooks, replacing them with new ones written by administrators with limited faculty input.   The result may be a permanent adjustment of university governance that will make it -- wholly unsurprisingly -- more resemble corporate governance, with power concentrated in the hands of university administrators, while faculty governance is constrained, especially with respect to financial matters.

The AAUP document is illustrative rather than exhaustive.  It reports on an investigation into eight institutions.  While the investigation was ongoing, the AAUP was inundated with reports of similar developments at other institutions, but the report remains focused on eight: Canisius College (NY), Illinois Wesleyan, Keuka College (NY), Marian University (WI), Medaille College (NY), National University (CA), University of Akron, and Wittenberg University (OH).

The report makes for sobering reading.  There seems to be something of a playbook that administrations follow.  Faculty as a whole respond rather timidly, voicing their objections but ultimately acquiescing as their colleagues agree to severance or early retirement.  They have little choice, as courts tend to back administrations, who can rely on "financial exigency" or "act of God"  provisions in faculty handbooks, and tenured faculty members have few options if they lose their jobs.  The AAUP acknowledges that educational institutions face significant financial challenges, and the report does not suggest that there is an alternative to cutting programs and terminating tenure lines.  Rather, it admonishes these institutions for failing to follow AAUP procedures and guidelines for doing so with the involvement of and input from faculty.

The AAUP tacitly acknowledges that it has a problem.  According to the report Kenneth Macur of Medaille College wrote to his faculty on April 15th, “I believe that this is an opportunity to do more than just tinker around the edges. We need to be bold and decisive . . . . A new model is the future of higher education.”  That new model does not include the tenure system as we currently know it.

The report indicates that AAUP reached out to Dr. Macur seeking an interview. 

In his May 12 response, the president declined a request for an interview by the investigating committee, submitting instead a three-page statement, which claimed that Medaille “has no affiliation or relationship with the AAUP, does not have a faculty chapter of the AAUP, and does not have any faculty listed as members on the AAUP’s website.  The AAUP does not govern, accredit, or have any authority over Medaille College.” It is symptomatic of the current state of affairs in American higher education, we believe, that a college president would declare his intention to dismantle tenure at his institution to the Wall Street Journal but refuse to participate in an investigation conducted by the AAUP.

In such circumstances, all AAUP can do is name and shame, but it is not clear if that approach will be effective.  One would hope that being the focus of an AAUP report would serve a disciplinary function on such institutions, but they seem willing to take the risk, and most likely consequence of negative publicity would be declining enrollments and more cuts to faculty and staff.

May 28, 2021 in Current Affairs, In the News, Labor Contracts | Permalink | Comments (0)

Wednesday, March 10, 2021

John Carroll University Rebranding as Humpty Dumpty University

Humpty_Dumpty_TennielAs Colleen Flaherty writes here in Inside Higher Education, John Carroll University, like many small colleges and universities, is having a hard time financially.  It has already terminated two tenured professors and eliminated its Art Department.  Further cuts would ordinarily require a finding of financial exigency. 

But John Carroll gets words to mean whatever it chooses them to mean.  Financial exigency now means a projected budget shortfall of six percent or more and a cloudy future.  This is termed a "budgetary hardship."  You might think that the question is how can words mean so many different things, to which John Carroll (now Humpty Dumpty) responds, "The question is which is to be master -- that's all."  

Humpty Dumpty University's administration has proclaimed a new policy permitting termination of tenured faculty upon a determination of a budgetary hardship, and it has issued a new faculty handbook that eliminates a right of appeal from such terminations.  The old handbook, Humpty Dumpty says, was outdated.  The new policies, on the other hand, "prioritize the retention of tenured positions and the preservation of academic freedom, to which the board is fully committed.”

Faculty members are impressed.  They had no idea that words like "tenure" and "academic freedom" were consistent with policies that permit the non-appealable termination of full-time faculty members based on unilateral declarations of economic hardship.  

"That's a great deal to make words mean so many different things," the faculty ventured in a thoughtful tone.

"When I make a word do a lot of work like that," said Humpty Dumpty, "I always pay it extra.  Ah, you should see 'em come round me of a Saturday night," Humpty Dumpty went on, wagging his head gravely from side to side, "for to get their wages, you know."

Well, at least somebody is getting paid.

March 10, 2021 in Commentary, Current Affairs, Labor Contracts | Permalink | Comments (1)

Friday, January 15, 2021

John Eastman and Chapman University Part Ways

According to this article in the L.A. Times, John Eastman, who has recently represented the President in connection with numerous lawsuits challenging election results, has agreed to resign his position as a professor of law at Chapman University.  Professor Eastman joined Rudy Giuliani at the "Save America" Rally on January 6th.  The L.A. Times reports that, at that rally, he made unsubstantiated claims of voter fraud in connection with the 2020 Presidential election.  

More than 160 faculty members called for the University to take action, but Chapman's President Daniele Struppa refused, citing the limitations of his powers as university president and the important principles of academic freedom and contractual rights.  President Struppa's statement is worth quoting at length.

I am not the Emperor of Chapman University, nor I am the Supreme Leader of Chapman University. I am the President of the university, and as such, I am bound by laws and processes that are clearly spelled out in our Faculty Manual. The Faculty Manual, despite its common name, is actually a contractually binding document that faculty, administration, and Trustees have agreed upon. This document contains the rules that determine how faculty are hired, and how they are disciplined, up to and including termination. The documents spell out cases under which such actions can be taken, and what process must be followed. The process includes a prominent role for the Faculty Personnel Committee and affords the faculty under discipline a process, and the right to grieve the decision in multiple settings. 

Daniele-Struppa_headshotI do not know anything about President Struppa (pictured), but if this statement is representative of his qualities, he is a very fine university president.  I do have some concerns about wearing such a busy tie with a plaid sports jacket, but I would not question his leadership on that basis.

Happily, Chapman University and Professor Eastman were able to come to an agreement.  He voluntarily resigned, and neither party will pursue legal action against the other.  Some may think that Professor Eastman was strong-armed into forfeiting his position and some part of his academic freedom and freedom of expression.  I choose to see this episode as one in which contract law and contractual negotiation play a starring role and put in a strong showing.

January 15, 2021 in Commentary, Current Affairs, In the News, Labor Contracts, Law Schools | Permalink | Comments (0)

Monday, December 7, 2020

Cherry on Harris on Unconscionability in Contracts for Worker Training

HarrisOver at Jotwell, Miriam Cherry has a post up about Jonathan Harris's very timely piece, Unconscionability in Contracting for Worker Training, 72 Ala. L. Rev. __ (forthcoming, 2021), available at SSRN).  

In the article, Harris (pictured) looks at various training schemes that purport to assist new workers or job applicants as they enter the work force or transition to new work.  Specifically, Harris discusses two new developments.  First, training repayment agreements (TRA), require  employees to reimburse the employer for outside trainings if the employee quits or is fired before a fixed period of time elapses.  Secondm Income Sharing Agreements (ISAs), which require a trainee to pay a percentage of future income in exchange for the ability to participate in a computer coding course or program.   The possibilities for exploitation are palpable.  Read more over at Jotwell, or download the article.  It's what all the cool kids are reading.

December 7, 2020 in Contract Profs, Labor Contracts, Recent Scholarship, Weblogs | Permalink | Comments (0)

Friday, December 4, 2020

Pushing Back Against Boilerplate: Comic Contracts

Contracts profs around the world are trying to de-mystify contracts and clarify their terms by creating graphic contracts analogous to graphic novels.  This video explains the strategy (but you will have to click on it and go to YouTube to get it view it).

 

Thanks to J. Kim Wright for the link.

December 4, 2020 in Contract Profs, Labor Contracts, True Contracts | Permalink | Comments (0)

Tuesday, December 1, 2020

Contracts Law in the News This Week

Both of these stories come from Bloomberg Law. 

The first is a new podcast series from Bloomberg called Uncommon Law.  Bloomberg does not seem quite sure of how it wants to characterize this occasional format, alternating between calling it a "podcast" and a "audio documentary."  In any case, the episode from earlier this month on "virus exclusions" in insurance policies is a new twist on a theme we have explored in other posts  here, here, and here.

Here is Bloomberg's summary of its podcast/audio documentary:

Businesses all across the country have been shutdown for days, weeks, or even months at a time due to the coronavirus pandemic. Many assumed their insurance policies would help them defray some of their lost revenue. But those assumptions were, by and large, wrong.

In this special audio documentary, “Business, Interrupted” we look at why insurers denied the claims of their shuttered policyholders. A team of reporters from Bloomberg Law and Bloomberg Tax look into the so-called “virus exclusion” clauses, that insurers quietly inserted into many of their business policies, and how those clauses are now creating strife between insurers and businesses.

We hear from several small business owners across the country about the shock they felt when their pandemic claims were denied, in some cases within hours after filing. We also hear from regulators and lawmakers about whether they will force insurers to retroactively honor these claims, a possibility that insurers view as an existential threat to their entire industry.

UberA second Bloomberg report summarizes developments in the gig economy, ranging from a review of court cases in which gig workers try to get courts to force employers recognize their status as employees to a discussion of California's Proposition 22 and a possible intervention by the U.S. Department of Labor.

In need of further explanation?  Try this book by the delightful Sarah Dooley (daughter of the incomparable Laura Dooley of Touro Law), available on Amazon.

December 1, 2020 in Current Affairs, In the News, Labor Contracts, Web/Tech | Permalink | Comments (0)

Thursday, November 19, 2020

A Follow-Up on Yesterday's Post

Yesterday, we linked to and summarized some of the findings of a New Yorker article by Eyal Press, highlighting Eugene Scalia's Labor Department's laissez faire approach to regulation of health and safety violations during the COVID pandemic.

TysonToday, we noticed this related article from the Huffington Post  by Sanjana Karanth(h/t Ben Davis).  The article reports on a wrongful-death lawsuit filed by the family of a worker at a Tyson plant in Iowa who died from COVID, allegedly after exposure at work.  The plaintiff was one of five workers from the same factory who died from COVID; about 1000 employees -- over a third of the workforce -- were infected.  The complaint alleges that managers at the plant set up a betting pool in which managers would try to guess how many workers would become infected.  The complaint also alleges that the plant manager called COVID "a glorified flu" and instructed workers to show up, even if they had symptoms.  

And now the link to yesterday's post:  here is the closing paragraph of the article:

The Occupational Safety and Health Administration and the Centers for Disease Control and Prevention issued guidance at the beginning of the pandemic recommending that meatpacking companies put up physical barriers, enforce social distancing and install more hand-sanitizing stations, among other steps. But the guidance is not mandatory and is mostly unenforceable.

November 19, 2020 in Current Affairs, Food and Drink, In the News, Labor Contracts, Recent Cases | Permalink | Comments (0)

Wednesday, November 18, 2020

COVID and OSHA

We have posted in the past (as part of our virtual symposium) about the extent to which workers in essential positions have been left without legal recourse as their employers fail to take adequate precautions to protect them from COVID infection.  Rachel Arnow-Richman covered the topic here and hereJeff Sovern and Ben Davis posted about the possibility that third parties who patronize businesses can be without legal recourse if they contract COVID due to the business's lack of precaution.  

Eugene ScaliaOne response to businesses failing to take reasonable precautions might be that individual suits seeking to hold employers liable for workplace infection are inefficient and are unlikely to succeed because the odds are stacked against lone employees who sue large corporations.  The better response would be government regulation and sanction of negligent employers under the authority of the Occupational Safety and Health Administration (OSHA).

Unfortunately, according to this New Yorker article by Eyal Press, the Trump adminsitration's Labor Secretary, Eugene Scalia pictured), has no interest in investigating companies whose workers are exposed to COVID at work.  According to the article, like many other Trump appointees, Mr. Scalia previously made a career of opposing the policies of the agency he now heads.  Unlike some of the others, he is competent, experienced, and an expert in the legal issues that his agency addresses.  His take on those legal issues is highly anti-regulatory.  Some highlights:

  • In response to over 10,000 complaints regarding OSHA violations since the pandemic began, the Department of Labor (the Department) has issued a grand total of  two citations;
  • On April 10th, the  Department issued a memo relieving employers of the duty to keep records about "work-related" infections;
  • That memo drew protests and so withdrawn, but it was replaced this Fall with one saying that employers do not have to report COVID-19 hospitalizations unless they occur within twenty-four hours of a workplace exposure (which almost never happens); and
  • The Department now has the fewest inspectors it has had in 45 years, and 42% of its leadership positions are vacant.

The article is long but highly recommended.

November 18, 2020 in Current Affairs, In the News, Labor Contracts | Permalink | Comments (0)

Thursday, October 8, 2020

District Court Vacates Arbitral Award in Part, Finding Panel Exceeded Powers

WD NCHere's something you don't see every day: In Warfield v. Icon Advisors, the federal District Court for the Western District of North Carolina struck down an arbitral award finding that the arbitration panel had, in part, exceeded its authority.  

Plaintiff James Warfield was a mutual funds wholesaler employed at-will by the defendant.   After six months, ICON terminated Warfield.  Warfield was a broker regulated by the Financial Industry Regulatory Authority (FINRA), and when he was terminated, ICON provided grounds for his termination on a Form U5 filed with FINRA.  Warfield brought an arbitration, alleging that the U5 was false and defamatory, and also alleging that ICON engaged in deceptive trade practices.  He sought $5 million in relief.  

The arbitration panel awarded him about $1.2 million, finding that he had been unjustly terminated without just cause.   Citing to § 10(a)(4) of the Federal Arbitration Act, the District Court vacated the award in part, finding that the panel exceeded its powers.  It did so because it recognized a cause of action for wrongful termination without cause, and no such cause of action exists under North Carolina law for at-will employees.  The court upheld the portion of the arbitral award that directed ICON to expunge allegedly defamatory language from the U5 form. 

H/T Charles Calleros

October 8, 2020 in Labor Contracts, Recent Cases | Permalink | Comments (0)

Tuesday, September 15, 2020

Virtual Symposium Part V: Rachel Arnow-Richman on Employee Rights, Part II

Individual Employee Rights and COVID-19
Part II (What we really want to know):
Can faculty be terminated for refusing to teach in person?
Rachel Arnow-Richman

 Part I of this symposium contribution addressed the general public and private law rules bearing on whether an employer can lawfully terminate an employee who refuses to return to work because of COVID.  This Part focuses on a specific example of considerable interest to our community: tenured university faculty members seeking to teach remotely.  But first, one brief (and final) digression . . .

I. Unforeseen circumstances

Those who focus primarily on B2B contracts may think that I gave short shrift to the unprecedented nature of a global pandemic in Part I. Much of the commercial world is consumed with the question of whether contractual obligations can be set aside due to catastrophic circumstances.  But excuse doctrines are of less significance in the employment context where, under employment at will, the law imagines that parties have no long-term obligations to one another. 

In the case of employees with contract rights, however, concepts like impracticability could conceivably be brought to bear. If this were an actual exam question rather than a real-life dilemma, I would expect students to invoke doctrines of excuse. I would also expect them to begin their invocation with two mantras that I force then to incant in class:

Rachel A-RContract liability is strict liability.  It does not matter why a party fails to perform, only that the contract terms have not been satisfied. If we were to imagine that the contract clearly obligated the employee to work in person, then her failure to do so is a breach even if she is acting justifiably.  The same holds for the employer: if it is contractually obligated to provide a safe work environment, it is liable for its failure to do so despite its inability to fully contain the risks that make the workplace unsafe.

Changed circumstances do not excuse contract performance. Rather, they are the reason we contract in the first place. In entering a contract, parties obtain a degree of security in the face of an uncertain world: whatever happens, the other side is obligated to perform.  The tradeoff is that come “hell or highwater,” they must perform too. 

Of course, those are baseline principles.  There are exceptions, and COVID-19 would appear to be a textbook example. Doctrines like impracticability exist to absolve a party from breach when an event so outside the norm of what either party expected makes performance virtually impossible.  A global pandemic surely fits the bill for an unforeseen event – one so extraordinary that neither party can be blamed for failing to anticipate it at the time of drafting.

Whether the employee’s performance is indeed impracticable is a more nuanced question.  Coming to work is not physically impossible. Its practicability or impracticability depends on a number of fact-driven considerations ranging from the contact-intensiveness of the work, to the employer’s mitigation efforts, to the employee’s underlying health issues.  But such matters need not detain us. At this point I hope students recall the difference between recission and breach. Impracticability generally operates as a shield not a sword, meaning the employee could use the doctrine to relieve herself of any continued commitment to serve the employer.  But what the employee wants is either to continue the relationship on her terms (remotely rather than in person) or access the remedies associated with breach of contract.  Recission is not the outcome anyone is seeking.

COVIDOr maybe it is. If any party is going to make a successful COVID-based impracticability argument, it is likely to be the employer, and not with regard to the safety or feasibility of in-person work. Rather an employer might be inclined to argue that the dire economic fallout from the virus has made it all but impossible to retain the employee for the duration of her contract. This argument may sound eerily familiar to readers whose universities have begun or threatened to lay off faculty pursuant to exigent financial circumstances provisions in their appointment and tenure policies.  Such language is the faculty-employment-contract counterpart to a force majeure clause, and the prospect of its deployment is sobering. For present purposes, though, we will stick with the question of remote versus in-person work, rather than the dreaded scenario of no work at all. But word of warning to otherwise job-secure employees seeking to draw on excuse doctrines in the fight to obtain remote work: be careful what you wish for.

II. Are faculty a special case?

 And now to the much-awaited question:  what are the possible job consequences to faculty who decline to teach in person?

Tenured faculty members are similar to corporate executives.  True, they earn less.  But they have the equivalent of an individual written contract precluding termination absent specific grounds in the form of the university’s promotion and tenure policy. Unlike individual written contracts, it never ends.  An executive at the top of the corporate hierarchy generally has a fixed term of employment. If the employer does not have the grounds or the stomach to terminate her during the life of the contract, it can wait it out and refuse to renew.  The same goes for so-called “contract” faculty, whether or not they are on a tenure track. These employees can be terminated upon contract expiration absent any presumption of renewal.  Not so with tenured faculty. If the university wishes to terminate a tenured professor for refusing to teach in person, it must establish that her conduct satisfies the narrow and exclusive criteria under which tenure may be stripped for performance-related cause. 

In some cases, these causes may be even narrower than the already pro-employee definitions found in the high-level employment contracts of the corporate world. Consider the following publicly posted example from the tenure policy of a large public university in the southeast (that is not my employer):

Cause for termination must directly and substantially affect the fitness of the faculty member to function … in an academic community, or be related to a serious failure of a faculty member to discharge his or her obligations to [the University].  Examples include, but are not limited to, serious professional or personal misconduct, serious failure to perform academic duties in accordance with generally accepted norms, conviction of a serious crime and serious violations of [University] policy.

Just count the number of times the word “serious” appears to qualify the grounds for removal, and you see which way the deck is stacked.  It will be extremely difficult for this university to revoke the tenure of a faculty member for refusing to teach in person but still genuinely seeking to fulfill those obligations in a different modality. This is particularly so if the faculty member is still fully performing her other “academic duties” – scholarship and institutional service.

In addition to having exceedingly narrow justifications for removal, university personnel policies on tenure revocation guarantee affected faculty a robust form of internal review.  Depending on the type and culture of the institution (public or private, large or small, strong or weak traditions of faculty governance), this process will vary. It may be styled as a disciplinary proceeding or a grievance, it likely involves review by a particular faculty committee or governing body, and it probably concludes with an appeal to the university’s board of regents or trustees.  Universities not being known for their institutional efficiency, this process can take a very, very long time. In addition, any failure to comply with the required procedural steps can itself create a breach of contract, potentially giving the professor another bite at the apple. 

In sum, even if a university is confident that it has substantive grounds to remove a tenured faculty member, it may lack the ability to execute on it. By the time it dots and crosses every “i” and “t” of its procedures, the pandemic will surely be over. At that point one can imagine a simple resolution under which the university drops its charges and the professor quietly returns to the classroom.

Conclusion

Let us return to the not-so-hypothetical question that began Part I. I end all of my exams with the same instruction: Advise the client. If a colleague who fears both for her safety and her job asks me what to do about institutional pressure to teach in person, I need to provide a coherent response, not the meandering intellectual analysis we subject ourselves to grading (or which I have imposed on you here). This is where the true teaching moment lies: students learn that lawyers do not make decisions, but merely lay out the likely results of different scenarios. Ultimately the client must weigh the strength of her convictions against her tolerance for risk.  All things considered, tenured faculty are well positioned to take the risk of refusing to return to in-person work. Most employees -- including many elite workers who enjoy just cause protection -- are not.

September 15, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Teaching | Permalink | Comments (0)

Monday, September 14, 2020

Virtual Symposium Part V: Rachel Arnow-Richman on Employee Rights, Part I

Individual Employee Rights and COVID-19
Part I: The Basics
Rachel Arnow-Richman

Introduction 

For those fond of mining current events for exam questions, the present moment makes a fitting hypothetical. Consider:

An employee declines to come to work for fear of serious or deadly illness. The employer has attempted to mitigate the risk, but cannot ensure the employee’s safety.  The employee asks to perform her job from home, but the employer refuses. What are the parties’ rights and obligations?

Or, to make it acutely personal: If we refuse to teach in person out of a justifiable fear for our health, could we lose our jobs?

Like all COVID-related legal matters (and all law school exam questions), there are no definitive answers only arguments on each side. Unfortunately for most employees, those arguments largely favor the employer. Tenured professors, we will see, are a rare exception. 

I. Default rules and public law considerations

A. It all begins with employment at will

Rachel A-ROrdinary employees are hired at will. They can be terminated for a good reason, a bad reason, or no reason, as the saying goes. Firing someone for not coming to work would seem like a good reason if one were needed.  The employee has a good reason for not showing up too, but sadly that is worth little:  a contract requires the assent of both parties, and in the workplace, the employer is usually the party who dictates the terms. The employee’s bargaining power, such as it is, lies in her ability to walk away from the deal.  It is true that current working conditions are wildly different from how they were at the start of employment. This distinguishes the current situation from one in which an employee knowingly takes an inherently risky job (such as an infectious disease physician who will be exposed to biohazards). But no matter. In courts’ absurdly formalistic conception, each moment of an at-will employment relationship is treated as a “new” contract. The employer is free to terminate the employee and insist on her acceptance of the new normal in exchange for reemployment. In other words, whatever the agreement was before COVID as to safety, location, work format, and all other conditions of the job, the offer now on the table is for work amidst a global pandemic.

 B. The search for an exception

That is the contractual baseline. There are various public law “hooks” that can protect the employee in specific circumstances, even allowing an employee who wishes to stay at home some job-protected paid leave. These include Congress’s temporary expansion of the Family/Medical Leave Act (FMLA); the Occupational Health & Safety Act (OSHA), which protects workers who report dangerous working conditions; and state public policy and whistleblower laws that protect workers who refuse to engage in unlawful behavior at work or object to conduct that creates a public safety risk.

Yet none of these quite do the trick for the employee who wants to work from home. OSHA and other whistleblower-type protections make it illegal for an employer to terminate or otherwise retaliate against a worker for objecting to or reporting unsafe conditions or wrongful behavior. They do not protect a refusal to come to work even if for the same reasons. Congress’ pandemic-related legislation comes closer. Qualifying workers can take partially paid, job-protected leave for a maximum of 12 weeks (just a few weeks shy of a typical law school semester). But these apply only to small employers with fewer than 500 employees, which excludes most universities.  Plus, the employee must have a qualifying COVID-related reason for leave, such as the need to quarantine due to exposure, not a general fear of contracting the virus. 

COVIDIn any event, leave from work is not the same as working from home. Employees wishing to perform their job remotely are effectively requesting an accommodation, much like what the Americans with Disabilities Act (ADA) guarantees disabled workers. Indeed, some employees might qualify for ADA protection, such as those who have immune disorders or other conditions that would make contracting COVID especially grave.  But employees who are at risk due merely to age are not disabled, nor are accommodations available to employees living with or caring for a family-member who is disabled. Finally, ADA-qualifying employees are entitled to an accommodation, not necessarily the one they want.  A court could find that an employer’s implementation of social distancing and sanitization protocols are a reasonable, and consequently sufficient, accommodation for the employee’s disability.

II. Contract-Based Job Security Rights 

The questions, and in some cases the results, are different when the employee has some form of contractual job security. Teachers, for instance, regardless of tenure, usually are hired under a written contract for one academic year; top executives, multiple years from the date of hire.  Other employees have implied contract rights to job security, meaning that the court treats the relationship as one that can be terminated only for just cause based on the reasonable expectations of the parties despite the absence of a formal agreement.  Assuming the parties’ contract does not contain any express terms regarding the employee’s ability to work from home, their rights depend on whether a refusal to work in person constitutes cause for termination. If not, firing the employee is a breach of contract.

A. What is cause to terminate?

With a written contract, the “cause” question is often answered by express language. Some contracts simply state that the employee may be terminated upon just cause, but others contain a definition delineating the precise and exclusive grounds for termination. Failure to show up at work, or what the employer might describe as excessive absenteeism, would seem on its face to be “just cause,” at least in the usual course of things (more on COVID in a moment).  But where the contract contains what I refer to as an “enumerated just cause provision,” ordinary cause to terminate usually will not suffice. 

For instance, high-level executives often have contracts that define cause to include narrow performance-related grounds such as “incompetence,” “misconduct,” “failure to perform,” or “material breach,” none of which is quite on point for the remote work scenario. The employee is not incompetent (one might say that insistence on working from home demonstrates the opposite). If she is keeping up with work –  completing tasks at home, meeting deadlines, interacting with colleagues virtually – then she is not failing to perform, which consequently means she is not in material breach. There is an argument for misconduct: the employer might say it ordered the employee to return to the office and she refused, an act of insubordination.  But “misconduct” in this context is generally understood to mean intentionally wrongful behavior or violations of policy:  misusing corporate assets, stealing trade secrets, or, of recent note, engaging in sexual harassment. An employer that relies on such language to terminate a worker who is still performing, albeit from home, is on shaky legal ground.

In contrast, employees with implied just-cause contracts or written agreements that do not define the term have less job security.  The common law meaning of “cause” in such cases is any reasonable, good faith basis for terminating. Certainly, the employee can argue forcefully that cause is lacking:  She is willing and able to perform and her reasons for avoiding the workplace are sound.  But the suitability of working from home is a classic area of managerial discretion, and the legal standard, particularly in implied contract cases, is highly deferential to employers.  Unless the employee is able to establish that the parties intended “just cause” to have a specialized meaning, neither the soundness – nor, in some jurisdictions, the accuracy – of the employer’s judgment is subject to review. Should the question prove a close one, the burden of proof lies with the employee to demonstrate breach of contract.

B. Wait…which breach came first?

But why begin with cause?  As a practical matter it is always termination that triggers a lawsuit, but other aspects of the employer’s behavior bear scrutiny.  How can the employer demand that the employee work under conditions that compromise her health? Might not the employer’s failure to provide a safe work environment itself constitute a breach of contract? If so, that could mean that the employee is within her rights to withhold performance altogether, stay at home, and sue for damages. 

The answer turns on whether the employer has any contractual duties with regard to safety and whether it has materially breached. The parties’ contract is presumably silent as to COVID, as it is on so many terms of the relationship.  Employment agreements, even written ones, are notoriously incomplete.  In some unionized workplaces, however, the collective bargaining agreement requires that employers provide a safe work environment. It would not be hard to imply a similar obligation in an individual employment contract based on OSHA’s general duty clause or grounded in the implied duty of good faith.

The question then becomes what constitutes a breach of that obligation, one that is material in the context of the whole agreement. Clearly there is no way to fully eliminate the risk of contracting COVID for employees who physically interact with large groups of people, like teachers in the classroom.  The employer that fails to take basic steps (like instituting social distancing and requiring masks) or that flagrantly fails to enforce their rules might be in material breach. But an employer that adopts measures consistent with existing medical protocols, limited though they may be, probably is not. This is especially so if the employee is not being deprived of the “principal benefit” of the contract – namely, her salary.

*  *  *  *

Reader, you have waited patiently for an assessment of your personal employment rights. But the customary law of the blogosphere forbids posts in excess of 1500 words. Please see Part II of this symposium contribution.

September 14, 2020 in Commentary, Contract Profs, Current Affairs, In the News, Labor Contracts, Teaching | Permalink | Comments (0)

Wednesday, August 19, 2020

Uber and Lyft drivers in CA

In a previous post, I blogged about the legal (and particularly, legislative) constraints on private parties to recharacterize legally defined relationships such as calling an employee an independent contractor.  In CA, the issue has been heating up and reached a critical point when AB 5, a new law addressing the classification of employees v. independent contractors, went into effect.  As I mentioned in that prior post, the California Attorney General Xavier Becerra and the city attorneys of Los Angeles, San Diego, and San Francisco sued Uber and Lyft, arguing that they had misclassified their drivers as independent contractors when they should be employees under AB 5.  Last week, a California judge agreed and issued a preliminary injunction compelling the companies to classify their drivers as employees immediately (due to the pandemic, this issue has even greater urgency given have financially stressed many drivers are.  Uber and Lyft ridership is also way down). The Verge has the story and a copy of the complaint.

The takeaway is that parties to a contract may allocate their rights and responsibilities but only in areas where they have the authority to do so.  Private parties do not have the right to characterize their relationship in a way that doesn’t reflect reality (as defined by statute).  Facts matter, even in contracts.

August 19, 2020 in Commentary, Current Affairs, Labor Contracts, Legislation | Permalink | Comments (0)

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)