It’s an all too common situation: an employee’s medical condition results in permanent restrictions that prevent the employee from performing essential job functions that she used to be able to do.   It is not reasonable to modify the job so the employee can keep the position.   There is a vacancy in another department for which the employee is qualified, and she wants the job.  But, the employer has another candidate who is more qualified for the vacant position, but does not have a disability.    Does the ADA require the employer to reassign the employee with a disability in favor of hiring someone else more qualified?

What Does the Law Require?

In its published Enforcement Guidance, EEOC takes the position that the ADA requires the employer to do just that.    But, in a recent opinion, the U.S. Court of Appeals for the Eleventh Circuit rejected the EEOC’s position.  (EEOC v. St. Joseph’s Hospital, Inc., 11th Cir. 12/7/2016).     The Court ruled the ADA indexdoes not require non-competitive reassignment as a reasonable accommodation for a disability.  In other words, it is legal to choose a more qualified, non-disabled employee over a less qualified employee with a disability.   The Eleventh Circuit (which covers Alabama, Florida, and Georgia) cited previous opinions from courts in the Fifth and Eighth Circuits (which includes Iowa) that already followed this rule.

In theory the rule is simple, but like many decisions involving the employment discrimination laws, it is more complicated in practice.    The EEOC v. St. Joseph’s Hospital case shows why.  The plaintiff was a nurse who had worked various jobs in the psychiatric unit for more than 20 years.    She developed back pain from spinal stenosis, which ultimately made it difficult for her to walk more than short distances without stopping.  The Plaintiff obtained a doctor’s note recommending she use a cane, which would provide support and allow her to walk longer distances.  But, the hospital was concerned the cane presented a safety risk in the psychiatric unit because patients could use it as a weapon.

Despite the doctor’s recommendation, the hospital told the Plaintiff she could no longer use the cane because of the safety risk.     Rather than immediately terminate her employment, the hospital offered Plaintiff 30 days to apply for other, open positions.    Technically, Plaintiff was not eligible for a transfer because she had been in her existing position for less than six months and was working under a final written warning.   But, the hospital waived those requirements as an accommodation.

The Plaintiff applied for three other jobs.   The hospital hired other, non-disabled candidates for two of them.  The third job was not actually available and was posted in error.    In the end, because plaintiff was not able to find another position, she was terminated.

Here is where it got complicated.  Even though the court ruled the hospital was not required by law to favor Plaintiff over other more qualified candidates, the question of who was the more qualified candidate was left for the jury to resolve.   The jury found the hospital failed to provide a reasonable accommodation for the Plaintiff by not reassigning her to one of the jobs for which she applied.     The hospital still won the case because the jury also concluded the hospital made good faith efforts to find a reasonable accommodation.  But, it is important to note the good faith defense eliminated the liability in this case because of some technical issues relating to the form of the jury instructions.     An employer’s good faith defense in most cases will protect only from damages, but not equitable relief or attorney’s fees.

What Should Employers Do?

The good news is, the the St. Joseph’s case reaffirms principle that an employer may hire the best candidate for the position, with or without a disability.  On the other hand, it remains a significant litigation risk to fill a vacant position with someone other than an employee with a disability, when the disabled employee will be terminated if not selected.   This is especially true for long term employees.   There is a very good chance a jury will be second guess the employer’s decision about which candidate is really the most qualified.

There are a number of policies or practices employers should consider that will make these types of  claims more defensible:  1)  employers should have a stated policy or demonstrated practice of hiring the best candidate for the job;  2) the stated qualifications for a position should match as much as possible the actual job duties; 3) the stated qualifications should emphasize criteria that are more objective (e.g., education, years of experience); 4)  subjective factors, such as the “right fit,” positive attitude, etc. are relevant but should be subordinate to objective criteria  4) identify and document the specific reasons the chosen candidate is more qualified than other candidates, especially if it is not obvious based upon the objective criteria.

Image Credit: from Google, Creative Commons license, Handicapped sign.

Management side lawyers are constantly giving  advice about “how to” or “how not to” handle various employment situations.   But, sometimes the best insight about what is or is not a good practice comes from the plaintiff’s side.   After all, they are the ones who sue our clients, and we should pay attention whenever a plaintiff’s lawyer tells us candidly what makes for a good employment lawsuit.

The following are a few quotes from a presentation attorney Randy Freking gave at a Labor and Employment Advanced Practices Symposium, followed by my own observations in bold:Lawyer

Freking: “Performance reviews are dangerous things. I always tell employers to not do employee reviews unless you’re going to do them honestly. They’re wonderful documents for plaintiff lawyers.”

I agree with Mr. Freking on this one.    When my client tells me they fired an employee for poor performance, only occasionally do the performance reviews back them up.   The fact is, most managers and supervisors are not candid with employees who need to do better.  Although it is difficult to give bad reviews, not putting an employee on notice of bad performance will cost you later.

Freking; “With every new potential client, I ask if they received a warning before being terminated. As soon as I hear ‘yes,’ it does slow us down in the march toward litigation.”

Many employers think that because Iowa is an at-will state, there is no legal requirement to give warnings.   While that is technically true, at will employment has for all practical purposes become a myth.    The reality is, almost all employee handbooks have progressive discipline, and most juries think it should be followed.  The only exception might be if the employee does something really egregious, and you can prove the employee actually knew it was egregious and might result in a discharge.  Serious safety related violations may qualify, especially if someone else is injured.   So does theft or some serious dishonesty.  But not too much else.

Freking: “Juries expect some level of progressive discipline—they think it should be required.”

See above.

Freking: “For a plaintiff’s lawyer, email stands for ‘evidence mail.'”

As we all know,  e-mail has become the most common way people communicate with each other in the workplace.    No matter how much managers are cautioned about how they use it,  the reality is most continue to treat e-mail like it is a conversation instead of a written communication.    People forget that e-mail does not go awayand those internal censors that are typically used in written communication are sometimes turned off when it comes to e-mail.  

Freking: “People don’t run to attorneys because they think they’ve got a great legal case. They come to see me because they’re angry about the way they were treated, especially on their way out.”

Few things are more difficult that terminating employees, even those who deserve termination.    To try and make the conversation easier, sometimes we say too much, try to be funny, or simply don’t think enough ahead of time about what to say.    For example common statements like the following really have no place in a termination:   “I understand how you feel”;  “this is as hard for me as it is for you”; or “this decision is for the best interests of you and the company”.

Freking: “Respond to the lawyer’s letter. You’ve got to tell your side of the story. It’s your opportunity to talk the plaintiff’s lawyer out of the lawsuit. If I get blown off, I’ll proceed with the case.”

This is a good idea, but please get counsel involved at this point.   Don’t assume the lawyer will be dissuaded from filing a if you simply tell them what the real facts are.  Don’t assume this employee will never sue, that the court will dismiss it right away, or it will be obvious to anyone that you are on the right side.

How to best accommodate pregnant employees is a frequent challenge Iowa employers face.    Pregnant employees may be entitled to protection under the laws prohibiting discrimination on the basis of pregnancy, as well as those requiring equal treatment based upon gender and disability.  Many employers have tried to walk this fine line with policies that allow for accommodation of a temporary disability only if it is the result of an on-the-job injury.   For non-worked related temporary disabilities (which pregnancy presumably is almost all the time), no accommodation is offered.

The theory behind such policies is that it treats similarly situated employees equally, regardless of gender or the nature of the temporary disability.   The distinction is drawn between work and non-work causes of the temporary disability.   The rationale for treating on-the-job injuries differently is that the workers’ compensation law provides an incentive to return injured workers to work as soon as possible, indexso as to avoid paying benefits for temporary total disability.

Until about the last year or so, this was a workable policy for an employer to have.   But, two cases decided last year, one by the U.S. Supreme Court (Young v. UPS)  and one by the Iowa Supreme Court (McQuistion v. City of Clinton) should cause employers to re-visit and possibly change their policies governing temporary disabilities and pregnancy accommodations.

Both cases dealt with employer policies of the type described here.  That is, accommodation was provided for some temporary disabilities, but not others, pregnancy being within those that were not subject to accommodation.   Although the U.S. Supreme Court addressed federal law and the Iowa Supreme Court Iowa law, the practical result from both opinions is the same:  this type of policy is presumed to violate the law against pregnancy discrimination.   The employer can overcome this presumption if it can show the legitimate reason underlying the policy is sufficiently strong to justify the burden it places on pregnant employees.   But, if the practical effect of the employer’s policy is to accommodate a large percentage of non-pregnant while a large percentage on pregnant employees are not accommodated, it will be difficult for the employer to carry its burden.    In the end, a jury will get to decide whether your policy is justified or creates an unreasonable burden.

The best way to avoid litigation is to change the policy that automatically results in pregnancy not being accommodated.   Each and every condition that results in a disability should be evaluated on its own merits to determine whether it can be accommodated.   While this may create more burdens for the employer each time you have to address a pregnancy related request for accommodation, it is more likely to keep you from being sued.


Employment discrimination lawsuits are filed because something bad happened to an employee that the employee did not want. Usually it’s a termination, a demotion, or discipline. Sometimes it’s harassment. Other times a refusal or failure to hire or promote. It’s always something adverse. That’s why they are called “adverse employment actions”.

So, what happens in an employee applies for a transfer to a new position within the organization   He thinks it will be better for his career. Someone else gets the job, but that person doesn’t work out. Employee gets another opportunity and is moved into the new position.   Unfortunately, the employee is not well suited for job, and ultimately gets terminated.   Now he claims the employer discriminated against him by transferring him to the new position.    He can’t sue can he? He asked for the transfer.   

A recent ruling from the Sixth Circuit seems to stand the whole idea of “adverse employment action” on its head. In Deleon v. Kalamazoo County Road Commission (6th Circuit, January 14, 2014) the Court held a lateral transfer from one department to another qualifies as an adverse employment action, even though the Plaintiff had applied for the job nine months previously.

The Plaintiff, a 53 year old Hispanic male of Mexican descent, was employed by the Kalamazoo County Road Commission. For 13 years he served as an area superintendent, which involved supervising road maintenance activities, road crews, and overseeing repairs.

In 2008, a vacancy arose for the position of Equipment and Facilities Superintendent. Plaintiff applied for the position because he anticipated it would result in a pay increase and would be better for his career and advancement.    He was not offered the job, primarily because of his deficient computer skills. But, the person who took the job left shortly thereafter, and an external candidate offered the position declined it. Thus, nine months after Plaintiff had applied, the job was again open, and he was transferred there. 

Unfortunately for Plaintiff, the deficient computer skills that kept him from getting the job in the first place proved to be his undoing. Plaintiff’s first evaluation in the new position rated him acceptable in most critical areas but he was deficient in technology. He complained that he was unhappy with his new position.   He did not like the fact that the working condition exposed him to loud noises and diesel fumes.   Plaintiff inquired why he had been involuntarily moved from a position where he was performing well to one that was more hazardous. Plaintiff was later hospitalized for what he attributed to work induced stress and eventual mental breakdown. He took eight months of leave under FMLA because of his mental breakdown. By the time he was released to return to work, his employment had been terminated. Plaintiff alleged the transfer was a deliberate attempt to set him up to fail because of his race, national origin, and age.

The trial Court granted Defendant’s Motion for Summary Judgment on the basis that Plaintiff did not suffer an adverse employment action. The Court of Appeals reversed, but with one judge dissenting.    In evaluating whether the transfer was an adverse employment action, the majority discounted the fact that Plaintiff had previously sought the job, concluding that the conditions at the time the transfer actually occurred made it involuntary.   The majority pointed to the fact that Plaintiff did not receive the raise he expected, and was not satisfied with the more hazardous working conditions.   The test, according to the majority, was not whether the employee requested or did not request the transfer, but whether the conditions of the transfer would have been objectively intolerable to a reasonable person.

The dissenting judge disagreed that Plaintiff’s transfer could be considered an involuntary one.   According to the dissent, giving an employee what he wanted, and in what he persisted in seeking when at first he did not succeed, cannot an adverse employment action.  

Unfortunately, rulings like this one contribute to employer cynicism about the employment discrimination laws and tend to undermine what the law seeks to accomplish.   The dissent pointed out this perverse result, noting that an interpretation of the law “that subjects employers to liability coming and going—whether after granting employee requests or denying them-will do more to breed confusion about the law than to advance the goals of a fair and respectful workplace.”     

Employers who want to bypass jury trials of employment disputes in favor of arbitration got another boost in a recent case from the Eastern District of Missouri. In Karzon v. AT&T, Inc. (E.D. Mo. 1/7/14), the court ruled that E-mail notification of an arbitration proposal combined with an “opt-put” option was sufficient to bind employees to the company’s arbitration agreement.   The plaintiff sued AT&T, alleging he was subject to a hostile work environment, unequal discipline, and was unlawfully terminated based upon his national origin. AT&T asked the court to dismiss the lawsuit and order the parties to submit the case to arbitration. In late 2011, AT&T offered its employees the opportunity to arbitrate any employment disputes with the company.   The plaintiff argued he was not required to arbitrate because he never agreed to the arbitration offer. AT&T notified employees by e-mail it had implemented an arbitration program to resolve disputes between the AT&T Companies and their employees. The e-mail included a link to a web page containing the text of the arbitration agreement. AT&T’s records showed the plaintiff received the e-mail and accessed the associated web page through the link on the same day. The e-mail to employees stated in bold print “REVIEW REQUIRED” and “Notice Regarding Arbitration Agreement”. The notification told employees they had the option whether to participate in the arbitration program. The program also gave the employees the option whether or not to participate. However, in order not to participate in mandatory arbitration, the employee had to “opt out” using the instructions and website. If the employee did not opt out, the company presumed the employee agreed to arbitration. The Federal Arbitration Act (FAA) makes arbitration agreements enforceable just as any other contract. Although it has been extensively litigated, courts have held in recent years that even employment agreements containing arbitration provisions are enforceable. The only way an employee can get out of an arbitration provision is by showing the agreement is not enforceable for some other reason.  In Karzon, plaintiff claimed the arbitration agreement AT&T presented to its employees was not enforceable because it was not in writing. The court rejected that argument, finding the e-mail communication was sufficient to qualify as a writing. The plaintiff also argued no contract was formed because he never accepted the agreement. The court ruled, however, that under Missouri law an offer may be accepted by conduct, which includes failing to opt out of the agreement as was the case here. While agreements to arbitrate employment disputes are not common in Iowa, this case nonetheless is a reminder that such an option is available for employers who want to avoid jury trials. To make an arbitration agreement enforceable, however, employers should ensure employees have fair notice and a real opportunity to agree or not agree. . That was accomplished in the Karzon case by making participation in arbitration optional and not mandatory. The second important consideration is making sure the employee consents to be bound by the arbitration agreement. In the Karzon case it was enough for the court that the plaintiff failed to opt out of participation. While some states will require stricter evidence of consent to participate, this case shows that an opt out provision may be a viable alternative. Of course, whether arbitration is a better option for employers than litigating in court is another question altogether.     That is a subject for another day.

A federal district court in Michigan recently granted summary judgment for the plaintiff, (you read that correctly), ruling that the employer was liable for disability discrimination as a matter of law. (Lafata v. Dearborn Heights Sch. Dist. No.7 (E.D. Mich. 12/11/2013)).   A plaintiff hardly ever files for summary judgment in an employment case, let alone wins the motion. So what happened here?

The Plaintiff applied for a position as a Plant Engineer with the Defendant School District.   For ten years prior to applying for the job, Plaintiff worked as a building supervisor at a community center. In that job, he was responsible for complete maintenance, inside and outside the building, minor plumbing and electrical work, roof repairs, and all tasks associated with set up and care of the community pool and ice skating rink.   He regularly used ladders and carried objected weighing more than forty pounds.

The School District offered the Plant Engineer position to Plaintiff, conditioned upon a physical exam showing he could perform the essential functions of the job.   The job description for the position was very general, and did not identify specific tasks or physical demands. The physician who did the pre-employment physical diagnosed the Plaintiff with Charcot Marie Tooth syndrome, a genetic disorder that causes muscle deterioration and gradual loss of strength. But, the doctor did not ask any questions about the Plaintiff’s physical symptoms or his work history. The doctor expressed concerns about Plaintiff using a ladder because he could not “purposely dorsi-flex his foot up or down as he might to have to maneuver while climbing on a ladder."   He also said a forty pound lifting restrictions was a “fair number” based upon his estimation of Plaintiff’s strength, which he assessed by watching Plaintiff climb onto the examination table.

The doctor had a telephone conversation with the Assistant to the Assistant Superintendent, during which he verbally told her about his findings and restrictions.    The Assistant shared her notes of the telephone conversation with her boss (the Assistant Superintendent) and the Director of Operations. They decided, without any further information or documentation, to revoke Plaintiff’s conditional job offer. The reason: Plaintiff could not perform the essential functions of the job. They testified decision was “somewhat automatic”, based upon the restriction against ladders and lifting more than forty pounds.   They likened the Plaintiff’s physical restrictions to a an applicant who has a felony history—it disqualified him in and of itself.

The School District lost this case at the summary judgment stage for two reasons.   First, the information it relied upon about the Plaintiff’s restrictions was woefully inadequate.   District personnel took everything the doctor told them at face value, without having any information about the nature and extent of the doctor’s exam or other information the doctor relied upon.   Second, after learning about the restrictions, the District made no effort to dialogue with the Plaintiff about potential reasonable accommodations. If they had simply talked to the Plaintiff, they may have learned more about the limitations of the doctor’s opinion and perhaps could have developed a solution that would have allowed Plaintiff to do the job while also dealing with any of the medical concerns.

Takeaway: employers cannot farm out to medical professionals their obligation to make an individual assessment of an applicant’s ability to perform the essential functions of a job.   While a physician’s opinion is often essential, in and of itself it does not answer the questions about qualifications or reasonable accommodation.  Nor does it relieve the employer of its obligation to engage in the interactive process. 

The CFO of Bishop Heelan Catholic Schools in Sioux City claims he was terminated because he is not Catholic.   He recently sued the Diocese, the school, and the Bishop alleging his termination violated the law against discrimination on the basis of religion. Does he have a case?

Courts in the United States have uniformly recognized a “ministerial” exception to the employment discrimination laws. Basically, that means a church can’t be sued for discrimination because of hiring, firing, and other employment decisions involving its ministers.   The First Amendment trumps the employment laws. 

Like many legal doctrines, however, the ministerial exception is simple in theory but more difficult in practice. The case raises two questions: whether the Sioux City Catholic Schools are covered by the ministerial exception; and whether the CFO qualifies as a “minister”.  

The answer to the first question is almost certainly “yes”.   Courts have ruled that Catholic Colleges are ministers of the Church and are entitled to the Church’s protection against government mandates that burden its religious practice.  The same reasoning applies to elementary and high schools.  The Bishop Heelan School System operates under the authority of the Bishop of the Sioux City Diocese.   That a Catholic School is part of the ministry of the Church cannot reasonably be questioned. 

The answer to the second question is more difficult. In 2012, The U.S. Supreme Court ruled that a teacher at a Lutheran School could not sue for disability discrimination because she qualified as a “minister”. (Hosanna Tabor Lutheran Church v. EEOC).   Unfortunately, the Court did not set forth clear criteria by which the lower courts in future cases could judge who and who is not a minister.   The Court adopted a vague, “we’ll know it when we see it” approach.   Some have interpreted Hosanna-Tabor as giving religious institutions wide discretion in identifying who is a minister.  Others claim courts should engage in a fact intensive inquiry in each case to determine whether an employee is a minister.

Certainly one could make the case an accountant is not a minister. But, because the plaintiff is alleging discrimination on the basis of religion, the inquiry should not end there. There is one more constitutional right at stake that should trump any analysis under the ministerial exception. Namely, the right of freedom of association.   Even the EEOC in the Hosanna-Tabor case agreed that church organizations can defend themselves from claims of discrimination by invoking this right.  It seems absurd to claim the Catholic Church cannot favor Catholics over non-Catholics in hiring and firing decisions, whether that employee is clergy, a teacher, or an accountant.   No religious organization should have to defend itself in court because it favors members of its own faith in employment.  The court should quickly dispose of the plaintiff’s religious discrimination claim. 

The best outcome to a discrimination lawsuit from the employer’s perspective is to win outright—for the judge or jury to find that the employer did not unlawfully discriminate. But, even if you lose, there is a “Plan B” defense—the failure to mitigate damages.   An employee who is terminated (or not hired in the first place) can have his back-pay award reduced or eliminated altogether if he did not make reasonable efforts to get another job. 

But, asserting a failure to mitigate defense and actually proving it are two very different things, as shown in the recent Colorado case, EEOC v. Beverage Distributors, LLC (12/9/13 D. Colo.). The jury awarded the plaintiff over $132,000 in back pay after finding the employer discriminated on the basis of the plaintiff’s disability.   But, the jury then reduced the award by $102,000 because it found the plaintiff failed to mitigate his damages.   Plan B was a success, or so it seemed.

After the judgment entry, EEOC filed a motion asking the court to award the back pay the jury gave without the reduction for failure to mitigation.   EEOC argued the employer did not present evidence as a matter of law to prove failure to mitigate. In an unusual move, the trial judge agreed, vacated the jury’s award, and entered a judgment for the full $132,000 in back pay.

The evidence showed Beverage Distributors rescinded a job offer for a night warehouse loader when it learned the plaintiff was legally blind. The plaintiff found another job within a week at a landscaping company, but the pay was less than he would have earned at Beverage Distributors.   The employer argued the plaintiff should have made more effort to secure a job with pay comparable to the one he would have had.   As evidence, the employer presented expert testimony about various employment statistics in the geographic area. For example, the evidence showed there were 10,000 drivers’ helper or storage-labor jobs; that the unemployment rate in the area was lower than the national average; and that unskilled laborers with plaintiff’s experience typically find a job paying the median wage within a certain number of weeks. 

The court held this evidence was not enough to allow the jury to find the plaintiff failed to mitigate.   That a certain number of positions existed in the labor market does not allow one to conclude the positions were available to the plaintiff. The court was looking for evidence there were actual openings for jobs paying comparable wages, for which the plaintiff was qualified, within a reasonable commuting distance.   General statistical evidence about the labor market was simply too vague to allow an inference that this particular person could have found a higher paying job.

The lesson for employers: if a plaintiff actually gets another job, it will be difficult to prove failure to mitigate.   General assertions that the plaintiff could or should have tried harder probably won’t cut it. You need evidence of specific job openings, for which the plaintiff is qualified, at particular employers that the plaintiff should have known about, but failed to pursue.   Obtaining this type of evidence that is not speculative is likely to be a challenge.    

Fixed or no-fault leave policies were once considered easy way to manage attendance and long term leave of absence issues.   Once the employee reaches the maximum number of absences, or is gone the maximum number of weeks on medical leave, the employee is terminated; no questions asked, no exceptions.   The benefit of these kinds of policies is that they remove discretion from the decision makers and therefore result in the same treatment for all employees. In more recent years, these types of policies have fallen out of favor.   Employers have found that  applying a no-fault policy blindly may conflict with its obligation to engage with an employee to find a reasonable accommodation for a disability.   The EEOC is strongly opposed to no fault policies. Its Enforcement Guidance takes the position that application of a no fault leave policy to an employee with a disability is a per se violation of the law.  However, as the recent case of Cash v. Siegel-Robert, Inc.(6th Cir. 12/3/2013) shows, there is no reason employers cannot maintain a no fault policy so long as it has some flexibility built in to account for employees with disabilities. Siegel-Robert, Inc. (SRI) had a policy that resulted in automatic termination if an employee was unable to work for six months within any 12 month period.   SRI’s policy also allowed employees who used up the six months to request an extension.   The policy said an extension would be considered so long as the request was received before the termination would take effect, and if it was supported by medical documentation showing a return to work on a date certain or within a reasonable period of time.  Cash was scheduled for back surgery on March 18. Because Cash’s job was physically demanding, his doctor told him he may not be able to work for a full year following surgery. SRI granted Cash job protected leave from March 18 until September 17, pursuant to its policy.  At the beginning of his leave period, Cash received a copy of SRI’s policy.   Even though Cash knew he may be off work for one year, he did not ask the HR Manager how to obtain an extension of medical leave beyond six months; nor did the HR Manager tell him.   By August 17 Cash thought he could return to work and asked the doctor to release him.   The doctor wrote in the chart that he thought Cash would be able to return to work in a month. A follow-up visit was scheduled on September 14.   For some reason Cash could not keep the September 14 appointment. He rescheduled the appointment for September 21, at which time the doctor gave him a work release with restrictions. Cash presented the work release to the HR Manager on September 21. “Thanks”, responded the HR Manager, “but unfortunately you were terminated three days ago because your medical leave expired.” SRI did not offer Cash another position or part time employment, nor did he ask whether those were available. He simply left the plant.   Cash ultimately sued SRI claiming that it violated the ADA in failing to accommodate his restrictions and in terminating his employment.   Notably, after Cash filed his lawsuit, the company adopted the practice of notifying employees on long term leave before their leave expired.   The Court granted SRI summary judgment. The crucial fact was that Cash took no action before the expiration of the no-fault leave period to ask for an extension of his leave. Even though SRI later changed its practice, the Court did not impose on the company an obligation to notify the employee about the expiring leave as the date approached. The Court also ruled that SRI had no obligation to engage with Cash about potential accommodations for his work restrictions because the termination was effective before Cash presented the restrictions to HR.   An important take-away from the Cash case is that a no-fault system can be used without legal liability, so long as there is a safety valve that permits employees to obtain additional leave time if necessary.   While it was a good idea for SRI to change its practice and notify employees about expiring leave, this case also reinforces the fact that employees themselves have obligations to keep track of and follow the company’s policies with respect to leave.   At least in this court, ignorance was not an excuse.

Good news for employers—you have due process rights too. So ruled the court in Business Communications, Inc. v. U.S. Dept. of Education  (8th Cir. 12/2/13). 

The Federal Government awarded Business Communications, Inc. (BCI) contracts to install cables in two school districts. The money for the project was provided by the American Recovery and Reinvestment Act (“ARRA” a/k/a the “Stimulus”), which requires contractors to pay employees a “prevailing wage.”   ARRA also has a “whistleblower” provision that protects employees from retaliation because the employee discloses a violation of law, rule or regulation relating to an agency contract funded with stimulus money. After a BCI employee complained to the company that he was being paid less than the prevailing wage, the employee was fired. BCI denied the termination was related to the employee’s wage complaint.

ARRA has its own procedure for the investigation and adjudication of “whistleblower” claims.   The agency’s Office of Inspector General (OIG) has 180 days to investigate the complaint. If the OIG finds the complaint is actionable, a report is forwarded to the head of the agency overseeing the contract (Department of Education in this case), the complainant, and the employer. The agency head then has a non-extendable period of 30 days to determine whether there is sufficient basis to conclude reprisal has occurred.   If the head of the agency finds in favor of the employee, the potential remedies include reinstatement, back pay, compensatory damages, and attorney’s fees. 

The statute imposes a fairly low burden of proof on the employee. The complainant must prove the disclosure of information was “a contributing factor” in the reprisal. This burden may be satisfied with evidence showing the employer knew of the disclosure and took adverse action within a reasonably short time period thereafter.   The employer is entitled to rebut the complainant’s evidence, but the standard of proof is much higher than the employee’s. The employer must demonstrate by clear and convincing evidence it would have taken the same action even in the absence of the employee’s disclosure.   In the event of an adverse finding, a party has the right to judicial review, but the review process does not allow for the admission of any new evidence not part of the proceedings below.

In the BCI case, the OIG interviewed many witnesses who provided conflicting evidence about the employer’s motive. The investigator determined the witnesses favoring the employee’s side were more credible and issued a report recommending a finding in favor of the employee. The OIG provided a report to the employer, but with witness names redacted. Almost two weeks later, the OIG provided a new copy of the report with summaries of some of the witness interviews (those who signed releases).   The OIG then gave the employer seven days to respond to this new report.    The employer asked for an extension of time to respond, which the agency refused.

Not surprisingly, the Secretary of Education supported the OIG’s findings, and concluded the employer had failed to present clear and convincing evidence that the termination was not retaliatory. The employer was ordered to reinstate the employee with back pay.   All of which occurred without providing the employer an opportunity to be heard or to cross-examine adverse witnesses.

On judicial review, the Court ruled that the Department of Education’s procedures violated BCI’s right to due process by failing to provide any kind of hearing at which it could confront and cross-examine witnesses.  Notably, the DOE acknowledged that ARRA provided no mechanism for a hearing, either before or after the secretary made a decision on the merits of the case.   Nonetheless, the agency claimed BCI was provided adequate due process. First, DOE claimed BCI would have the opportunity to present defenses in the DOE’s court action to enforce its order.   The Court easily rejected that argument, because “[d]ue process cannot be conditioned on requiring BCI to violate an order, exposing itself to statutory sanctions”. Second, DOE claimed BCI had adequate opportunity to be heard by seeking review in the Court of Appeals.   Judicial review is not itself sufficient for due process, the Court concluded, because the employer does not have the right on review to present new evidence or cross-examine witnesses. 

That a federal law would grant rights to employees without commensurate protections for employers to defend themselves should be surprising,   But, even though most federal and state employment laws are not so one-sided as ARRA’s whistle-blower protections, employers too often are subject to unfair and arbitrary administrative enforcement of employment laws.  Most employers don’t have the resources or the inclination to resist administrative overreach like occurred in this case.  That is why a ruling like BCI is not only refreshing, but is an important check on unbridled administrative discretion.