Lou Michels and Rod Satterwhite are partners in the Labor & Employment group at McGuireWoods LLP. Both handle employment litigation on behalf of employers, and advise companies on employment issues regularly.

Thursday, September 21, 2006 - Posts

Ineffective Releases of Employment Claims

    Termination releases of claims are common tools used by employers to preclude litigation by ex-employees.  A federal court in Pennsylvania recently decided that an employee could not knowingly waive her rights under the Family and Medical Leave Act, or the Americans with Disabilities Act, despite signing a comprehensive waiver and release of all claims in exchange for a severance payment, even when she keeps the payment.  In Dougherty v. Teva Pharmaceuticals, the court determined that, notwithstanding her signature on a general waiver and release of all claims against her former employer, and her acceptance of several months of pay and health insurance, the plaintiff was not prevented from suing her employer on a claim of violating the FMLA and, her concurrent ADA claim as well.

      Circuits across the country are split on whether employees can waive an FMLA claim because of fairly straightforward Department of Labor regulations found in 29 C.F.R. ยง 825.220, which say that employees cannot waive nor be induced to waive their rights under the FMLA.  Some courts have interpreted this to mean that the clause only applies to current employees and that it only limits a prospective waiver of rights (rights that would attach in the future) under the statute. Other courts have held that the regulation bars outright any waiver under any circumstances.     

     The court here seems to lean towards decisions in the middle ground, which prohibit waivers of FMLA rights unless they are approved by the Department of Labor or a court. 

     The court then went on hold that even though the plaintiff retained her severance payment and health insurance benefits after she discovered the release was voidable, there could be no ratification of the agreement because the Third Circuit refuses to apply ratification to claims involving federal employment discrimination statutes.  Finally, having found there was no valid release of FMLA claims, the court determined that it could not sever the void FMLA waiver from the possibly valid ADA waiver under the language of the agreement.  It therefore invalidated the entire release, allowed the plaintiff to keep the compensation that her employer paid in consideration of the release, and let her ADA and FMLA claims go forward to trial.

    This is a particularly dangerous area for employers.  Because of the vague notice requirements under the FMLA, employers can easily find themselves having accepted what they believe to be complete and total releases of all claims from their employees, only to find themselves sued for latent FMLA claims not brought to their attention at the time.  In these situations, it is important for employers to draft agreements that specifically mention that the employee is giving up an FMLA entitlement, and put severability language in the agreement so that other claims can be protected from the void FMLA claim.  This issue seems ripe for Supreme Court resolution given the wide disparity between the cases.

 

 

Direct Discrimination Discussion

    Employment discrimination cases are typically resolved on something called the McDonnell-Douglas model of proof.  This test, used by federal courts (and some state courts) in analyzing summary dispositions of employment cases (i.e. before trial) dates back to the early 1970s and is used to focus the court's inquiry on whether the disputed employment action, typically a termination or demotion, was actually based on a protected factor such as race, versus a legitimate business reason. 

     But there is another way of proving these cases - using something called a direct method of evidence, or "direct" evidence of discrimination.  Direct evidence is so closely linked to the protected factor that a jury can properly conclude that the employer intentionally discriminated against the employee, either because the evidence references the protected factor itself or because the evidence creates so strong a circumstantial inference.

     Direct method evidence cases are rare because direct evidence of discrimination is so obviously improper.  For example, it would be direct evidence of discrimination to hear a hiring manager say, "We can't take Employee A because we have too many women already in this office."  Similarly, circumstantial evidence under the direct method would consist of things like managers claiming that women needed to stay at home with their children, that women were incapable of working long hours because of home commitments, that women weren't as competent in the job as men, and similar remarks.  The point here is that once an employer has this kind of conduct in its workplace, it becomes impossible to dispose of a discrimination case on summary judgment.  The evidence itself is sufficient, with nothing more, to raise the inference that the employer is illegally discriminating against the subject employee.

     Such a case was decided recently by the Seventh Circuit.  The plaintiff claimed race and pregnancy discrimination, as well as retaliation, by her employer.  She alleged that her immediate supervisor said, "Mexicans cause problems and come to the United States to take jobs away from American people," and also said that she would not hire any more Mexicans because they cause too many problems in the workplace.  In addition, the supervisor provided significantly poorer working conditions for Hispanic employees with regard to things like job duties, breaks and shift assignments.  The employer made similar comments about the employee's pregnancy, which the court found established direct method evidence of pregnancy bias.  Finally, to round out the trifecta, after the plaintiff filed a complaint against the supervisor, the supervisor issued a warning notice that referenced the employee's protected complaint as a basis for the warning!  Again, clear direct method evidence that precluded summary judgment.

     Perhaps because of the audacity of the discriminatory conduct alleged in this case, or perhaps because it was unused to seeing these kinds of cases, the district court had awarded summary judgment to the employer.  The Seventh Circuit reversed saying, "[W]e fail to see how the district court granted summary judgment for the defendant."  No kidding.