It’s not very often an appellate court takes away a jury verdict because of the trial court’s discretionary ruling to extend a deadline. The case is Petrone v. Werner Enterprises (8th Cir. 10/10/2019).    Student drivers for Werner Enterprises brought a FLSA collective action for alleged unpaid wages earned during an eight weeks student-driver training program.   The plaintiffs alleged they were entitled to wages for time spent on short rest breaks and while resting in their sleeper berths.   A jury awarded the student drivers $779,127 for their short term rest breaks, but nothing for the sleeper berth claims.  The court then awarded liquidated damages and attorney’s fees.

The appeal was about the plaintiffs’ late disclosure of a supplemental expert witness report. Plaintiffs disclosed their original expert report in compliance with the deadline in the scheduling order. But, defense counsel’s deposition of the plaintiff’s expert “revealed considerable flaws in the methodology for computing allegedly uncompensated break and sleeper-berth time.”   The expert admitted in his deposition he had double counted some times, and others were artificially split into two separate breaks because they spanned 12:00 a.m., and thus occurred in two separate days.   As a result, the expert’s original calculations of the lost wages were inconsistent and inflated.

After the deposition, which occurred well after the expert disclosure deadline, plaintiffs’ counsel requested the court to amend the scheduling order to permit a “supplemental” expert report. The “supplemental” report corrected the flaws the defense counsel had exposed in the expert’s deposition, and was served one month before the deadline to file motions to exclude the expert testimony.

Naturally, Werner opposed extending the expert witness deadline.   The expert’s deposition revealed enough flaws in his proposed testimony that the court might exclude it altogether, which would make it difficult for the plaintiffs to prove damages.    If the deadline was extended, however, it would allow the expert to present a modified opinion free from the flaws contained in the expert’s original report.

The outcome turned on Federal Rule 16(b), which permits a court to modify a scheduling order for “good cause.” In this case, the trial court ruled good cause did not exist, because the expert’s so-called “supplemental” report did not really “supplement” his original opinions, as much as correct them. The court found that nothing prevented the expert from recognizing the flaws in his report before he was deposed.  While an expert is permitted to supplement expert opinions based upon information not available at the time the original report was prepared, he cannot use opposing counsel’s efforts identifying the flaws in the original report to hone his methodology and present more robust expert opinions.

What was the consequence of the “no good cause” finding?  It turns out, not much.     The court granted the requested extension of expert disclosure deadline anyway, reasoning that the lack of good cause was outweighed by the general preference in the Rules of Civil Procedure “for determination of cases on the merits.”   The trial court also relied on Rule 37(c)(1), which allows the trial court to impose as a sanction for failing to properly supplement discovery something less than complete exclusion of the evidence.    The sanction the trial court chose was to give Werner the opportunity, at plaintiffs’ expense, to depose the expert about the supplemental report, as well as awarding Werner costs incurred because of the late submission.   In the end, the expert was permitted to testify about the value of the lost wages, which he opined was $779,127.  That was precisely the amount the jury ultimately awarded.

In a 2-1 decision, the Court of Appeals vacated the judgment against Werner, holding the trial court abused its discretion in granting the plaintiffs’ request to modify the scheduling order despite finding no good cause existed for doing so.   The majority ruled the trial court should not have considered lesser sanctions under Rule 37 because Rule 37 did not apply in these circumstances.    The trial court also erred in finding the general preference for resolving disputes on the merits trumped the mandatory good cause standard in Rule 16(b).

What happens next? Vacating the judgment means the case is remanded back to the trial court, except this time the plaintiffs will not be allowed to present their modified expert opinion that was submitted after the original disclosure deadline.    The next battle will be whether the expert’s original, but admittedly flawed opinion, is still admissible to prove the plaintiff’s damages.

This opinion demonstrates that something as simple as a deadline in a scheduling order can have potentially an outcome determining effect on the case.   While a missed deadline will not necessarily gut every case like it did potentially to Petrone, when it comes to evidence you can’t live without, pay close attention to the disclosure deadlines.   This case is also a good reminder that expert witnesses should not expect to get a mulligan for sloppy work.     If it’s not done right the first time you may not get another chance.

It’s October, and the Iowa Supreme Court’s term is in full swing. Next week the Court will hear argument in Ferguson v. Exide Technologies (No. 18-1600). The case addresses whether an employee may bring a tort claim against her employer if she’s discharged in violation of Iowa’s statute regulating workplace drug testing.  This is an important case for not only employers, but also court watchers.

First some background.  In Iowa, as in most every other state, an employee generally may be fired for good reason, bad reason, or no reason at all.  Everyone knows this general rule as employment at will.  But the rule has its exceptions.  For example, the Iowa Civil Rights Act forbids an employer to fire someone because she belongs to a protected class.  And the Iowa Supreme Court has held that an employer may not fire someone in violation of public policy.  Attorneys know this as the tort of wrongful discharge in violation of public policy.

In Ferguson, the plaintiff was fired after she refused to submit to a drug test that her employer concedes was unlawful.  She sued, alleging first that this violated the Iowa drug-testing statute itself and, second, that she was wrongfully discharged in violation of public policy.  The trial court sided with the plaintiff on both claims, precipitating the employer’s challenge to the public-policy claim.

The claim’s survival turns largely on legislative intent.  A provision of the drug-testing statute says that violations “may be enforced through a civil action” and an employee may be awarded “reinstatement or hiring, with or without back pay,” and other relief, including “attorney fees and court costs.”  By prescribing a cause of action and remedies in the drug-testing statute, did the Iowa legislature intend those remedies to be exclusive?

Ferguson’s employer of course argues yes, likening the drug-testing statute to the ICRA.  The Supreme Court has held that the ICRA is exclusive for discrimination claims.  Ferguson for her part insists the wrongful-discharge claim safeguards the public policy embodied in the drug-testing statute’s employee protections.  In her view, the statutory remedy thus supplements rather than supplants her wrongful-discharge claim.

This question looks a lot like one the Supreme Court sidestepped last year.  Ackerman v. State of Iowa (No. 16-0287) held that an employee covered by a collective bargaining agreement could sue for wrongful discharge in violation of public policy. Yet the Court avoided the State’s argument that the remedy available to Ackerman under another Iowa statute prevented her wrongful-discharge claim, finding the argument was too late.

But that didn’t stop the Justices from wading into the issue.  The statute in Ackerman prescribed a “civil action” awarding “affirmative relief” to aggrieved public employees, “including reinstatement, with or without back pay,” and other relief, including “attorney fees and costs.”  Telegraphing how they might analyze a similar statute, the five-Justice majority observed that this provision doesn’t “expressly declare” its remedy is exclusive.  Justices Waterman and Mansfield dissented, writing that Ackerman could “proceed with her statutory right of action.”  She thus didn’t need “a third avenue of recovery”—“especially one that is at odds with” the statute.

The statute in Ferguson nearly mirrors that in Ackerman.  The Justices’ reasoning in that case thus offers a glimpse at how they may decide Ferguson.  But two Justices who joined the majority there—Zager and Hecht—have been replaced.  And Justices Waterman and Mansfield remain.  With this reconfigured majority, Justice Waterman’s Ackerman dissent may supply the foundation of a Ferguson majority.  If that happens, employees will be left with the exclusive avenue of recovery under the drug-testing statute.

We’ll follow up when the Court issues it opinion.

The U.S. Court of Appeals for the Fifth Circuit issued a potentially game-changing decision earlier this month on the EEOC’s Enforcement Guidance on criminal background checks.   The case is State of Texas v EEOC (5th Cir. 8/6/2019).   An applicant rejected for employment at the Texas Department of Public Safety  filed a complaint with EEOC, alleging the Department’s no-felon policy violated Title VII because it has a disparate impact on African American applicants.

EEOC’s investigation of such charges, and the decision whether to refer them for enforcement, is governed by a 2012 Enforcement Guidance, known as the “Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act of 1964.”   Rather than submit to an EEOC investigation and potential enforcement action, Texas sued EEOC, alleging its Guidance unlawfully limits the prerogative of employers to exclude convicted felons from employment. State and local laws in Texas prohibit hiring persons convicted of certain crimes.  The EEOC Guidance, on the other hand, disapproves of blanket bans of hiring of persons with criminal convictions.  Instead, the Guidance declares that employers should conduct an individualized assessment of the applicant to determine whether the applicant’s criminal history warrants exclusion from employment.

A judge in the U.S. District Court for the Northern District of Texas issued an injunction in February 2018 that prohibited EEOC from using its Enforcement Guidance in to investigate the Texas no-felon policy. But, that injunction was to last only until EEOC subjected the Guidance to legally required notice and opportunity for public comment required of all substantive rulemaking.  On appeal, the Fifth Circuit affirmed the injunction, but in the game-changing move, modified it to remove the language that lifted the injunction after EEOC put the rule through notice and comment.  The effect of the Court of Appeals’ modification was to make the injunction permanent.  There was no need to put the Guidance through the notice and comment procedure, the Court concluded, because Title VII provides EEOC no legal basis to issue the Guidance in the first place.   

What is the Enforcement Guidance on Criminal Background and Why Does it Matter?

EEOC has long taken the position that an employer’s consideration a person’s arrest and/or conviction record to make employment decisions has a disparate impact on certain minorities.   EEOC’s position is based upon national arrest and conviction data showing African American and Hispanic males have disproportionate rates of arrests and convictions relative to their population.   While critics of EEOC’s Guidance do not question the national arrest and conviction data, what is controversial is EEOC’s presumption that disparate impact liability exists whenever a particular employer excludes persons from employment because of their criminal background.   In EEOC’s view, an employer can legally justify reliance on criminal background checks only to the extent the employer can prove such reliance is “job related” and “consistent with business necessity.”

Historically, an employer could satisfy job relatedness and business necessity of criminal background checks if the employer took into account the following factors for excluded applicants: 1) the nature and gravity of the offense; 2) the time that has passed since the conviction and/or completion of the sentence; 3) the nature of the job held or sought.   These factors came to be known as the “Green” factors, named after the case Green v. Missouri Pacific Railroad Co. (8th Cir. 1977).

Although the 2012 Guidance reiterated that employers must satisfy the Green factors, it added “suggestions” for additional “best practices” employers should use to avoid disparate impact liability, including the following:

1) If the employer’s use of criminal background information is “validated” in accordance with the Uniform Guidelines on Employee Selection Procedures; or

2) If the employer conducts a “targeted screen” (i.e., the employer targets for criminal conviction inquiry only those positions where it may be relevant to the position), followed by an “individual assessment” of applicants who are excluded by the screen. The individual assessment is supposed to consider factors such as the age of the applicant when the conviction occurred; the number of offenses; the facts or circumstances of the conduct that led to the conviction; the length and consistency of employment before and after the conviction; employment or character references, and efforts and rehabilitation or training.

If indeed the Guidance offers merely “suggestions” or “best practices” for employers, why is it such a big deal? After all, it’s not the law, or even a legally enforceable regulation.    Nonetheless, the Guidance is intended to have, and does in fact have, real world impact on employer behavior.   The Guidance binds EEOC staff when conducting investigations, and directs their decisions about whether to refer employers for enforcement actions.   It limits the Agency’s discretion about how to view evidence; for example, the fact that an employer has a racially balanced workforce is not sufficient to overcome, in and of itself, the presumption that its use of criminal background checks results in disparate impact liability.   EEOC contends its best practices should be used even where state or local laws automatically disqualify applicants with certain criminal backgrounds.   According to EEOC, such laws are not a defense to disparate impact liability under Title VII.  Employment lawyers advise their clients the best way to avoid an EEOC investigation or enforcement action is to design your criminal background check around EEOC’s suggested best practices.    While following such advice may keep EEOC at bay, conducting an individual assessment of each applicant rejected because of a criminal background can be burdensome for employers that process a high number of applications.   Plus, the individual assessment criteria are inherently subjective, and excluding an applicant based upon subjective criteria does not necessarily insulate an employer from a claim.

The impact of the EEOC Enforcement Guidance goes beyond EEOC decision making.   Plaintiff’s lawyers frequently cite EEOC documents in legal briefs as persuasive authority on the interpretation of Title VII and other anti-discrimination laws. Even though the Guidance is not a regulation and is not entitled to deference by a court, some courts nonetheless defer to EEOC’s interpretation of the law contained in the Guidance.   Litigants in Iowa have even argued that Iowa state courts should defer to the EEOC Guidance in interpreting the Iowa Civil Rights Act, a law over which is has no jurisdiction whatsoever. In short, what starts as an EEOC “suggestion” for a “best practice” morphs over time into a legal requirement, the violation of which may involve significant economic damages and other relief to an aggrieved complainant.

No one is advocating the use of screening procedures that have a disparate impact on minority applicants when there are reasonable alternative procedures that would mitigate such an impact.   What concerns critics of the EEOC’s 2012 Guidance is that EEOC overreached with its suggested best practices.    In its zeal to limit employer use of criminal background screens, EEOC neglected the legitimate need of employers in some cases to err on the side of excluding applicants based simply on their criminal history, without the necessity of a subjective individual assessment.

What is the Effect of the Fifth Circuit’s Ruling?

There are several important takeaways from this Ruling:

  1. According to the Fifth Circuit, the problem was not that EEOC failed to go through the notice and comment procedure before implementing the Enforcement Guidance, but that it has no legal authority to issue such Guidance at all. The Court ruled Title VII allows EEOC to promulgate regulations only on procedural matters, not matters of substance.    EEOC has issued many other Guidance documents on various substantive aspects of the anti-discrimination laws, and this ruling puts them all into question (at least in the Fifth Circuit).
  2. Outside the Fifth Circuit, including in Iowa, it is possible EEOC will continue to rely on its Enforcement Guidance regarding criminal background checks. But, Fifth Circuit’s ruling gives employers in other jurisdictions ammunition to challenge EEOC’s authority to rely on the Guidance.  The ruling also can be used to try to dissuade courts, including state courts, from giving any deference to the EEOC’s view of the law as set forth in the Guidance.
  3. This ruling may embolden some employers to revisit burdensome and expensive criminal background screening practices adopted in the wake of the 2012 Guidance.
  4. This ruling does nothing to change the law in those states and localities that have enacted so-called “ban-the-box” laws or otherwise prohibit an inquiry into an applicant’s criminal background. It is important to be aware of the law in your local area when developing policies and procedures for evaluating an applicant’s criminal background.
  5. The Fifth Circuit’s ruling is likely not the last word.   As noted above, the Court’s reasoning is broad enough to call into question all documents EEOC has published over many years addressing the substantive application of the law.    This issue is likely to arise in other circuits, perhaps creating the opportunity for Supreme Court review down the road.

As employment cases go, the 2018–2019 adjudicative term (covered in Part I here) may go down as a year of missed chances. In Hawkins v. Grinnell Regional Medical Center, Patrick Smith wrote in June, the Justices failed to address an emotional-distress award’s excessiveness and the permissibility of a “golden rule” argument used in closing. So too in Hedlund v. State, where the Court sidestepped whether courts should stick to the McDonnell Douglas burden-shifting framework at summary judgment.

All the same, the term was never to populate the collective memory with signature precedents, its painful loss of a Justice, or the historic of appointments of two others.  It will be remembered instead as the point when the Court’s ideological balance tipped from left to right for years to come.

To be sure, Justice Christensen’s replacing Justice Zager will probably have little if any effect, at least in ideologically divisive cases, where their views appear generally similar.  But Justice McDonald replaced Justice Hecht, a swap, if history is any indicator, likely to produce different outcomes in many cases.  Not least labor and employment cases, where the Justices often sharply divide.

Hedlund and Slaughter v. Des Moines University College of Osteopathic Medicine are cases in point. Glossing over some nuance, both were decided 4–3.  Predicting judicial votes is risky, but had cancer not felled Justice Hecht, the decisions might have swung the other way, leaving Justices Waterman, Mansfield, and Christensen in dissent.  That lineup could have held until Iowa law compels Justice Appel to retire in 2022.  Between now and then, the Court will probably decide over 300 cases.  Instead of authoring binding precedents, Justices Appel and Wiggins, joined sometimes by the more centrist Chief Justice, could find themselves dissenting in dozens of employment cases.

And the votes don’t tell the whole story of Slaughter and Hedlund.  The majority and dissenting opinions in those cases expose a schism between the two blocs about summary-judgment standards in employment cases.  In fact, Justice Appel devoted about 15 total pages of his two dissents to what probably seems like procedural arcana, details important only to judges and lawyers (and not even all of them).

Yet the debate is actually very much about substance.  In our legal system juries, not judges, normally resolve fact disputes, and they, not judges, may generally award money.  But if a judge grants summary judgment, she dispatches the case before a jury hears witnesses or sees other evidence.  Existing legal rules and prior decisions will bless her ruling in many if not most employment cases.  So in a discrimination case (discrimination here includes the various forms of harassment), the summary-judgment standard may be the difference between a million-dollar verdict, as in Hawkins, and a take-nothing judgment, as in Hedlund.

Justice Appel’s Hedlund dissent stressed that some federal appeals courts urge “‘rigor,’ ‘caution,’ or ‘special caution’ in ruling on summary judgment in discrimination cases.”  He too would have had Iowa courts use “great caution,” an approach that if fully embraced by Iowa courts would shunt more cases to damages-awarding juries.  In fact, many Iowa trial courts in practice already take this approach (though, Justice Appel might insist, not those in Slaughter and Hedlund).

Now consigned solidly to the minority, Justice Appel’s dissents may signal that he believes the Supreme Court’s newly reconfigured majority is readying to apply (or is already silently applying) summary judgment more aggressively in discrimination cases.  Indeed, in the minds of employment litigators his insistence on special handling of employment cases may evoke a 2011 decision by the full Eighth Circuit, Torgerson v. City of Rochester (No. 09-1131), holding that no “discrimination case exception” applies at summary judgment.  To that end, the Eighth Circuit expressly disavowed phrases used in scores of prior opinions resembling those Justice Appel invoked in Hedlund.  And in no small part because Torgerson requires uniformity, Iowa employment plaintiffs prefer Iowa’s more hospitable courts to the Eighth Circuit’s.

We of course don’t know whether the Court will follow the Eighth Circuit’s lead and issue, as it were, a Torgerson for Iowa.  But if that—and nothing more—happens, Iowa employment litigation in the future will look very different than it did at last term’s end.  And if the Court someday also, say, capped emotional-distress awards—a question avoided in Hawkins—the 2018–2019 term will be assured a lasting spot in the memories of Iowa’s employers, employees, and employment lawyers.

Arbitration continues to be popular with many employers.   Two significant factors driving employers to arbitration, and away from state and federal courts, are the potential for lower defense costs and reduced risk of runaway jury awards that seem to be more common than ever before.    Many lawyers think the benefits of arbitration are overstated and the costs understated, but the trend nonetheless is for more arbitration.

Of course, before an employee can be compelled to arbitrate an employment dispute, the employee must first agree to arbitrate.   Many employers try to make an agreement to arbitrate a condition of continuing employment by putting an arbitration agreement in their employee handbook.  If the employee acknowledges in writing the arbitration provision in a handbook, and continues to work thereafter, most courts will find that the employee manifested sufficient assent to the arbitration agreement and will compel arbitration.

But, a recent ruling from the Eighth Circuit shows the practice of relying on the employee’s assent to a handbook provision may not be enough to prove the employee agreed to arbitrate employment disputes. The case is Shockley v. Primelending (8th Cir.,  July 15, 2019).   Shockley sued Primelending for alleged violations of the Fair Labor Standards Act (FLSA).    The employer moved the court to compel arbitration, relying upon the arbitration provision contained in its employee handbook.   The district court denied the motion, finding there was no enforceable agreement to arbitrate, which the court of appeals affirmed.

The handbook in question was maintained on an intranet accessible by Primelending’s employees.  In August 2016, two months after she was hired, Shockley accessed the company intranet, clicked on and opened several company documents, including the handbook.   When an employee enters the area of the intranet containing the handbook, the employee is advised that by entering she thereby acknowledges review of the materials therein.  But, the click that generates the acknowledgement did not actually open the full text of the handbook.  Rather, the click generated a pop-up window that contained a link, which itself had to be clicked to open the full handbook.   Shockley went through the same process again in February 2017 as part of an annual policy review.  Shockley testified that she did not remember reviewing the handbook either time. Nor was there evidence Shockley actually clicked on the link in the pop-up window that would have taken her to the full text handbook.

The court found that, at best, Shockley was aware of the existence of the arbitration provision in the handbook. But, knowing the agreement is there and actually agreeing to be bound by its terms are two different things.    The court held that the “employee’s general knowledge or awareness of the existence of a contract” is not sufficient to constitute “the positive and unambiguous acceptance required under Missouri law.”

Fortunately for those employers who like arbitration, Shockley does nothing to alter your rights to condition continued employment on the employee’s agreement to arbitrate.  But, the opinion should cause employers to rethink how they go about obtaining the employee’s consent.   Using a computer based system for employee review and acknowledgement is efficient, but it may be more difficult to prove the employee actually read and assented to the arbitration agreement.  An employer may not be able to impose consent on an employee simply by having a pop-up window appear that says, in effect, “by entering the site you acknowledge reviewing its contents.”   The best evidence of assent may be obtained the old-fashioned way; that is, having the employee review the arbitration agreement in document form and specifically acknowledge in writing that she received and read it.     Or, an electronic system could still be used if it included the ability to obtain an electronic signature.    No matter how you obtain the employee’s agreement, it should be done in a way that can be reliably proved in the event the employee challenges its enforcement.

The Iowa Supreme Court wrapped up its latest adjudicative term on June 28, 2019, having submitted 113 cases. More remarkable for the changes it witnessed than for its labor and employment decisions, the term began with the Court’s first new Justice since 2011.  By term’s end another had been appointed.  The Court that completed this term resembled little the one that completed its last—whether measured by gender, race and ethnicity, or, as Part II will discuss, philosophy.

In September, Judge Susan Christensen was appointed to a seated vacated by Justice Bruce Zager’s retirement.  She became the first woman to don a Justice’s robe since 2010.  In December, Justice Daryl Hecht, battling cancer, resigned.  Four months later, at age 66, he died.  To fill his seat, the governor appointed Judge Christopher McDonald, who became the first Justice of color since the Court’s creation in 1838.

But the Court’s business is of course opinions, and they kept coming all the while.  Of the 113 cases submitted, eight decisions have direct implications for labor and employment law.  Just two of these decisions arose from alleged employment discrimination, a typically fertile source of judicial opinions.  Five stemmed from public-employee labor law.  All eight are summarized chronologically below.

In Slaughter v. Des Moines University College of Osteopathic Medicine (No. 17-1732), issued in April, a psychologist, a university employee, treated the plaintiff, a student, for depression. When the plaintiff later sued the school for disability discrimination, she invoked Iowa’s general rule attributing an employee’s knowledge to her employer.  But Iowa and federal law generally forbid healthcare providers to disclose patient information.  And so the Court held as a first-impression matter that the psychologist’s knowledge of the plaintiff’s disability couldn’t be imputed to the university.  Although this wasn’t technically an employment case, the Court’s holding has obvious implications for employment-disability cases.

A single Friday in May saw the Court issue five opinions in labor-union cases, three stemming directly from 2017 amendments to the Iowa Public Employee Relations Act.  In Iowa State Education Association v. State (No. 17-1834), the Court held that an amendment eliminating payroll deductions for union dues—the dues checkoff—didn’t violate Iowa’s equal protection guarantee. Nor did another amendment to the statute violate equal protection as unlawfully over- and underinclusive, held AFSCME Iowa Council 61 v. State (No. 17-1841). This amendment restricted the mandatory subjects of collective bargaining under PERA for bargaining units consisting of less than thirty percent “public safety employees,” a category  covering first responders (in very rough terms; thus the asserted underinclusivity).  The last of the PERA-amendments trilogy, United Electrical, Radio & Machine Workers of America v. Iowa Public Employment Relations Board, interpreted “base wages” in the amendments to mean bottom, lowest, or minimum wage for employees in a job classification. The Court also interpreted “past collective bargaining agreements” to mean agreements predating the parties’ current, expiring agreement.

In UE Local 893/IUP v. State (No. 17-2093), the Court unanimously upheld a trial court ruling that union negotiators had accepted the State’s offer, resulting in an enforceable collective bargaining agreement. In SEIU, Local 199 v. Iowa Board of Regents (18-0018), the Court approved a regulation requiring the Board to meet and vote to accept an agreement before a collective bargaining agreement takes effect, dooming the collective bargaining agreement.

In June, Patrick Smith incisively covered the Court’s opinion in Hawkins v. Grinnell Regional Medical Center (No. 17-1892). The Court nixed a $4.5 million jury verdict and ordered a new trial.  But it sidestepped two important issues:  whether the $4.28 million emotional-distress award was excessive and whether plaintiff’s counsel had improperly used a so-called “golden rule” argument in closing, which may have provoked jurors to award damages based not on the evidence, but on their emotions.  As Patrick wrote, the Justices missed an opportunity to provide meaningful precedent on these important issues.

In Hedlund v. State (No. 18-0567), issued on the term’s last day, the plaintiff had urged the Supreme Court to scrap the familiar McDonnell Douglas framework at summary judgment, as it had for jury instructions just weeks before in Hawkins.  But in the end, the Court ducked the question, affirming summary judgment on Hedlund’s age-discrimination claim without deciding the question.  In this way, Hedlund and Hawkins mirror one another as missed opportunities for the Court to offer guidance to parties, lawyers, and lower courts.

In July 2017, a jury in Poweshiek County, Iowa returned a verdict against Grinnell Regional Medical Center (GRMC) for $4.5 million in an age and disability discrimination lawsuit.   The Grinnell Regional case was one of a trio of million dollar plus verdicts Iowa juries returned in the spring and summer of 2017 in employment discrimination cases.   In all three cases, the lion’s share of the damages awarded was attributable to the employee’s emotional distress.   In the GRMC case, 95% of the damage award ($4.28 million) was for emotional distress, with only 5% awarded for back pay.   Not included in these numbers were amounts the court awarded post-trial, including front pay ($241,746) and attorney’s fees ($615,208), which were added to the verdict in later court rulings.  In the end, the economic damages of the former employee constituted 10% of the total damages, with emotional distress constituting 90% of the award.

On June 7, 2019, the Iowa Supreme Court reversed the jury verdict and ordered a new trial (Hawkins. v. Grinnell Regional Medical Ctr. et al).   While the ruling was obviously a big win for GRMC, unfortunately, the reversal was based upon very narrow grounds relating to the admission of an exhibit that contained inadmissible hearsay.  The court chose not to address two issues GRMC raised that would have the most lasting impact on the employment litigation landscape. Those issues are:  1) whether the emotional distress award was excessive; and 2) whether plaintiff’s counsel’s use of the so-called “golden rule” argument during closing was improper because it provoked the jury to award damages based upon an emotional appeal rather than on the evidence.   These same issues will continue to arise in future cases; indeed, they are likely to arise in the re-trial of the GRMC case.   We can only speculate why the court ruled the way it did.  But, in our view, the court missed an opportunity to provide meaningful precedent on an important issue facing Iowa employers.

The prospect of a potentially ruinous jury verdict arising out of an employment discrimination claim is the result of an anomaly in Iowa Civil Rights Act jurisprudence.    It started in 1991 when Congress to amended Title VII and the ADA  to allow compensatory damages (i.e. emotional distress), punitive damages, and jury trials.   Before 1991, there was no right to a jury trial, and the only monetary relief available was back pay, front pay, and attorney’s fees.  One of the legislative compromises in the 1991 amendments was to include caps on compensatory and punitive damages, depending upon the size of the employer.   For small employers (less than 50 employees), the damages cap (which does not include back pay or front pay) is $50,000.   The maximum compensatory and punitive damage award for the largest employers (500 plus employees) is $300,000. Thus, in exchange for the probability of more and larger jury awards, employers received a certainty of avoiding runaway verdicts for non-economic damages and punitive damages.

In contrast, the ICRA has no damages caps.   But, for the first 14 years of the Title VII amendments it did not seem to matter very much because most discrimination cases alleged violations of federal law and were tried in federal court.   Plaintiffs typically avoided state court because the Iowa Supreme Court ruled twice (in 1990 and again in 1996) that no jury trial was available under the ICRA. Iowa employers received the benefit of the statutory caps and were protected for the most part from runaway verdicts consisting primarily of non-economic damages.

Everything changed in 2005.  In McElroy v. State the Iowa Supreme Court overruled its prior precedents, and held that a plaintiff alleging ICRA violations is entitled to a jury trial.  Ironically, one of the reasons the court so ruled was to make the ICRA more like Title VII and the ADA after the 1991 amendments.   But, in trying to level the playing field between the state and federal laws, the court actually made it uneven the other way, because the ICRA has no damages caps.   McElroy effectively gave discrimination plaintiffs in Iowa state court the benefit of the employee’s bargain contained in the Title VII Amendments, but neglected to provide employers with their side of the deal: caps on compensatory damages.  Iowa plaintiffs now had the best of both worlds:  a jury trial under the ICRA, with no damages caps.  Adding insult to injury, employers have a much lower probability of winning on summary judgment in state court.  The result, not surprisingly, is that the vast majority of employment discrimination cases since 2005 have been filed in state court alleging only ICRA violations.   It was only a matter of time before we ended up with runaway jury verdicts in which non-economic damages dwarfed any other relief

The most effective fix to this problem is a legislative one: amend the ICRA in a way that gives Iowa plaintiffs the same rights and remedies allowed under the federal anti-discrimination laws, including the caps on compensatory damages.   Unfortunately for employers, the legislature has apparently not had the appetite to make this change in the law.    The next best solution is for the Iowa Supreme Court to provide meaningful standards so as to prevent runaway emotional distress damages that dwarf a plaintiff’s economic harm. Since the court created this anomaly, it would have been fitting to use the GRMC case to impose some reasonable limits on emotional distress awards.   Who knows when, if ever, the Court will be presented another such opportunity.  Employers are trying fewer and fewer cases, perhaps paying more to settle because they don’t want to be the next victim of a runaway verdict.

Another excellent post from our colleague Brandon Underwood:

A good rule of thumb that trial and appellate lawyers learn early in their careers is that you generally forfeit arguments you don’t make. Suppose that a defendant takes a case to trial and loses, only to realize in briefing its appeal that the plaintiff’s lawsuit was untimely under the statute of limitations.  Too bad: the argument is too late, and so the appeals court will ignore it, even if the plaintiff’s lawsuit really was too late.  The defendant waived that argument.

But the rule has at least one exception: arguments about a court’s jurisdiction. Unlike most other arguments, a party may challenge a court’s jurisdiction to hear a case for the first time at any stage in the case—even in front of the Supreme Court.  In other words, challenges to a court’s subject-matter jurisdiction can’t be waived, unlike the ill-fated statute-of-limitations challenge.  (As a corollary, courts in our adversarial system don’t typically raise arguments on their own.  Except subject-matter jurisdiction, which courts must raise on their own.)

On June 3, 2019, the Supreme Court resolved a conflict in lower courts about whether a requirement in Title VII of the Civil Rights Act of 1964 is jurisdictional. Under Title VII, before a plaintiff may sue in court, she must first file a charge complaining of an unlawful act with an administrative agency—for instance, the Iowa Civil Rights Commission.  This is part of what’s known as exhausting administrative remedies, and federal courts have long held that a plaintiff who fails to exhaust administrative remedies can’t sue in court.  But courts disagreed about whether this charge requirement was jurisdictional, leading to conflict about whether the requirement may be waived or not.

Fort Bend County, Texas v. Davis (No. 18-525) unanimously holds that Title VII’s charge-filing requirement is not jurisdictional and thus may be waived if not raised.  Lois Davis filed a charge of sexual harassment and retaliation with the agency, and later tried to supplement her charge with a complaint of religious discrimination.  The district court granted summary judgment for Davis’s employer on all these claims.

On appeal, the appellate court remanded the religious-discrimination claim only for trial. Back in front of the district court, the employer argued for the first time that Davis hadn’t raised the religious-discrimination claim in her charge.  The district court agreed, ruling that it accordingly lacked jurisdiction.  The appeals court then reinstated Davis’s claim, holding that Title VII’s charge-filing requirement is not jurisdictional and had been forfeited when Davis’s employer failed to raise it earlier.  The Supreme Court agreed with the appellate court.

In a short opinion, the Supreme Court reasoned that Title VII’s charge-filing provisions read like a party’s non-jurisdictional procedural obligations, not like jurisdictional obligations. These procedural obligations compel a plaintiff to submit information to the agency and wait a specified amount of time before filing a lawsuit.  The provisions do not say they are jurisdictional.  And although courts must enforce the charge-filing requirement if it is properly raised, a party forfeits the challenge by waiting too long.

The day-to-day effects of Davis are, to be sure, pretty limited, as the Supreme Court noted.  Defendants have good reason to promptly raise the objection: to rid themselves of lawsuits.  On the other hand, plaintiffs, the Supreme Court observed, “would be foolhardy consciously to take the risk that the employer would forgo a potentially dispositive defense.”

In other words, plaintiffs in most cases will continue to file administrative charges as required by law. And in those cases where the plaintiff doesn’t, defendants in most cases will not waive the challenge by failing to bring it up. Davis will figure in only unusual cases, like Davis itself.

 

My Fredrikson & Byron colleague Brandon Underwood is the author of today’s guest-post:

On May 31, 2019, in Webb v. Farmers of North America, Inc. (No. 17-3456), the Eighth Circuit dismissed an employer’s appeal challenging how the lower court had read an arbitration agreement.  The employer, citing the agreement with its employee, had actually persuaded the lower court to require the employee to arbitrate his case.  So why the employer’s appeal?

After the district court ordered him to arbitrate his case, the employee challenged who would arbitrate it, and the court sided with him.  The Eighth Circuit then tossed the employer’s appeal, holding that it lacked jurisdiction, primarily because the case wasn’t yet final.  Federal appellate courts don’t ordinarily review non-final—or, “interlocutory”—orders.

But this is an employment law blog, and those are procedural points. Webb contains a lesson for employment lawyers (any lawyer who reads or writes contracts, really) because its underlying dispute was about an arbitration agreement’s wording.

Under the agreement, the parties agreed to arbitrate their claims under “the rules” of the American Arbitration Association, a well-known arbitral body.  Even so, the plaintiff contended this provision didn’t require the AAA to be the arbitrator; a non-AAA arbitrator could preside, as long as it applied the AAA’s rules.  The district court agreed, finding that if the employer had meant for all the parties’ disputes to be submitted to the AAA, it could have said so.  So the dispute would be arbitrated—just not necessarily before the AAA.

It’s worth emphasizing that the Eighth Circuit’s opinion in Webb doesn’t address the merits of the district court’s ruling.  Its correctness will have to be reviewed, if ever, in a later appeal.

But the case highlights the importance of specifically designating who will arbitrate employee disputes, rather than assuming that a reference to a particular body’s rules is enough.  If the arbitration agreement in Webb had specified that the arbitration would be administered by the AAA (or another body) under its rules, the district court would have lacked grounds to find the agreement ambiguous.  Indeed, construction-industry contracts between contractors often contain this term or one similar to it.  These contracts may supply useful models for designating an arbitral body.  By specifying a particular arbitrator, parties can avoid having to reach agreement on mutually acceptable arbitrator, as the district court in Webb directed.

Sometimes employers become conditioned to believing that an employee who has recently used FMLA leave is effectively immune from discipline or discharge.   It is no doubt true this employee presents a heightened litigation risk, but when the adverse action is handled properly the employer can mitigate that risk or at least make the potential claim more defensible.  A recent opinion from the Eighth Circuit shows the importance of creating a discipline record that will negate any inference the discipline was motivated by an employee’s FMLA usage.

The case is Beckley v. St. Luke’s Episcopal-Presbyterian Hospitals (8th Cir. 5/16/2019).  The plaintiff, Karen Beckley, worked as a surgical technician in the operating room of a hospital.   She was promoted to the position in 2012 while using intermittent FMLA leave.   Beckley continued to be approved and used intermittent FMLA for the next year, until August 2013.   She again qualified for FMLA intermittent leave starting in April 2014 and continued to use the leave until her termination on March 20, 2015.

Starting in March 2014, Beckley started having performance problems. She received a “Level 1” warning on March 10, 2014; a “Level 2” warning on August 12, 2014, and a “final” warning on August 25, 2014.  All of these warnings related to Beckley’s failure to respond appropriately to emergency requests while on call.

In addition to the formal warnings, Beckley also received counseling for performance issues.   On March 13, 2014 she was counseled for being inattentive to details.  During a March 30, 2014 performance review Beckley’s supervisor recommended she take specific steps to help her focus on her role as a technician and decrease the amount of time taking and repetitive questioning during a procedure.  On April 7, 2014 the Hospital against counseled Beckley about the need to focus on the task at hand.

The event precipitating the termination occurred March 9, 2015.   During a complicated surgical procedure, Beckley became contaminated in the operating room when she touched a non-sterile object.  She also left the operating room to use the bathroom without telling the surgeon, and was gone for 10-15 minutes.   Someone else entered the operating room during her absence to assist with the procedure.  Beckley denied she entered a sterile field while contaminated.  She admitted she left the operating room for 15 minutes, but seemed to think it was not a big deal, as she denied it was necessary for anyone to cover for her.   She was terminated about ten days later.

Beckley sued the Hospital for FMLA retaliation, alleging she routinely suffered adverse employment actions following the exercise of FMLA leave.   The key fact Beckley relied upon to support her FMLA retaliation claim was the temporal proximity between her FMLA use, discipline, and ultimately, her termination.  Beckley also claimed she was treated differently than employees not on FMLA leave for what she considered to be minor infractions.  Lastly, she pointed to other evidence of the Hospital’s animus toward FMLA, including a statement from another employee that she needed to “watch herself” with regard to FMLA usage, and a supervisor’s question whether she could schedule doctor appointments outside of work hours,

In affirming the grant of summary judgment to the Hospital, the court found that Beckley’s use of FMLA leave without adverse consequences for nearly 18 months between October 2012 and March 2014 negated any inference that FMLA usage motivated the three warnings she received starting in March 2014. The court found persuasive the consistent record of discipline arising out of failure to abide by the on-call policy as well as other performance issues.   There was little doubt Beckley was on notice of her performance problems before she was terminated. The court found Beckley’s claims of different treatment were only her subjective belief, and the adverse comments about FMLA use were mere “stray remarks” that did not result in tangible injury or harm.

The Beckley opinion is an important reminder that an employer’s hands are not tied because an employee has recently exercised rights under FMLA.    Consistent and documented discipline of bad performance or behavior, especially when combined with evidence that of FMLA usage without consequence before the performance or behavior issues, will provide a persuasive defense.