What Employers Need To Know About the Supreme Court’s Pregnancy Accommodation Decision

The U.S. Supreme Court recently released a decision holding that a plaintiff may prevail on a pregnancy discrimination claim using a failure-to-accommodate theory. Here’s what employers need to know about the case:

In Young v. United Parcel Service, Inc., the plaintiff was a delivery driver who was required to lift up to 70 pounds for her job. No. 12-1226 (Mar. 25, 2015). After she became pregnant, the employee’s doctor advised that she should not lift more than 20 pounds, and she requested an accommodation from UPS. Although UPS had policies that offered similar accommodations to employees who were injured on the job, had disabilities covered by the Americans with Disabilities Act, or who had lost their Department of Transportation certifications, UPS denied the request because the employee did not fall under any of those policies. When the employee sued, both the district court and the court of appeals rejected the plaintiff’s pregnancy discrimination claim on the grounds that the plaintiff was not similarly situated to the other employees to whom she compared herself.

The Supreme Court reversed the lower court rulings and endorsed the plaintiff’s failure-to-accommodate theory of liability. Although the Supreme Court recognized that the Pregnancy Discrimination Act does not give pregnant workers “most-favored nation” status, the Court explained that a pregnant employee can make a prima facie case of discrimination by showing that: (i) she belongs to the protected class; (ii) she sought accommodation; (iii) the employer did not accommodate her; and (iv) the employer did accommodate others “similar in their ability or inability to work.”

If the employee establishes a prima facie case, the employer may justify its refusal to accommodate with a legitimate, nondiscriminatory reason for its actions. But the Court cautioned that the employer’s justification “normally cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those (‘similar in their ability or inability to work’) whom the employer accommodates.”

If the employer presents a legitimate, nondiscriminatory reason for its denial of the requested accommodation, the employee must then present evidence that the asserted reason is a pretext for pregnancy discrimination. The Court explained that a plaintiff can satisfy this burden by “providing sufficient evidence that the employer’s policies impose a significant burden on pregnant workers, and that the employer’s ‘legitimate, nondiscriminatory’ reasons are not sufficiently strong to justify the burden, but rather—when considered along with the burden imposed—give rise to an inference of intentional discrimination.” Alternatively, a plaintiff can create an issue of material fact by “providing evidence that the employer accommodates a large percentage of nonpregnant workers while failing to accommodate a large percentage of pregnant workers.”

Takeaway: The failure-to-accommodate theory of liability endorsed by the U.S. Supreme Court in Young is a new theory of liability for pregnancy discrimination claims. Employers should review their policies and practices to ensure compliance. The decision will likely not have a significant impact for employers in Minnesota, however, because Minnesota state law already requires most employers to accommodate pregnant workers.

When Are Federal Contractors Required To Maintain Affirmative Action Plans?

Federal law requires certain employers who perform work on contracts and subcontracts with the United States government to maintain affirmative action plans. The rules for when affirmative action programs are required are different for construction and non-construction contractors. Here’s what employers need to know about when federal affirmative action requirements apply:

Construction Contractors: A construction contractor or subcontractor is required to maintain an affirmative action program if it holds any “Federal or federally assisted construction contract in excess of $10,000.” 41 C.F.R. § 60.4-1(a).

Non-construction Contractors: A non-construction contractor or subcontractor must an maintain affirmative action program if: (1) it has 50 or more employees; and (2) either (i) has a contract or subcontract with the government of $50,000 or more; (ii) has government bills of lading which in any 12-month period total or can reasonably be expected to total $50,000 or more; (iii) serves as a depository of government funds in any amount; or (iv) is a financial institution which is an issuing and paying agent for U.S. savings bonds and savings notes in any amount. 41 C.F.R. § 60-2.1(a).

Takeaway: Employers who do business with the federal government may be required to maintain affirmative action programs depending on the type of work they do and how much revenue is generated by the work performed. State laws may also impose similar requirements.

When Is Advice of Counsel A Valid Defense To A Claim For Tortious Interference?

The Minnesota Supreme Court recently published a decision that clarifies when advice of counsel can provide a defense to a claim for tortious interference with contract.

In Sysdyne Corp. v. Rousslang et al., Sysdyne sued a company named Xigent Solutions, LLC for hiring a former employee who was subject to a noncompete agreement. No. A13-0898 (Minn., Mar. 4, 2015). Although Sysdyne prevailed on its claim for breach of contract against the former employee, the trial court held that Xigent was not liable for tortious interference because its actions were justified based on its reliance on advice of legal counsel. Sysdyne appealed and argued that the justification defense cannot be satisfied by a defendant’s honest but erroneous belief, based on the advice of counsel, that a contract is unenforceable.

The Minnesota Supreme Court affirmed the lower court’s decision that Xigent was not liable for tortious interference. The Court emphasized that any reliance on advice of counsel with respect to a noncompete agreement must be reasonable under the circumstances to provide a defense. The Court affirmed the trial court’s decision that Xigent’s actions were reasonable because Xigent provided its attorney with the noncompete agreement and the employee’s original offer letter from Sysdyne, informed its attorney that the employee would be doing the same work for Xigent, and consulted with the attorney regarding the enforceability of the noncompete.

The Court explained that the focus of the analysis is on whether the defendant’s consultation with legal counsel is reasonable, not whether the attorney’s legal analysis was reasonable. The Court also held that the attorney’s advice may be verbal and does not necessarily need to be written.

Takeaway: Reasonable reliance on advice of counsel may provide a defense to claims of tortious interference with contract based on hiring a competitor’s employee who is subject to a noncompete. Although written advice is not absolutely necessary, it may be helpful from an evidentiary standpoint in proving the defense. It is also important to remember that relying on advice of counsel may waive attorney-client privilege with respect to the advice in question and will not necessarily protect the employee from liability for breach of contract.

What Employers Need To Know About Works Made For Hire

In many cases, employee work product – such as reports, drawings, designs, or other written content – is subject to United States copyright law, and the default rule is that the work product belongs to the employer. This is known as the “works made for hire” doctrine.

In most circumstances, the copyright over a creative work initially vests in the “author” of the work. In the case of works made for hire, however, the law provides that:

[T]he employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

17 U.S.C. § 201.

The works made for hire doctrine is somewhat different from the rules that apply to inventions, which are subject to U.S. patent laws. In many states, there are laws that impose certain requirements when an employer requires an employee to assign ownership of inventions to the employer.

Takeaway: When U.S. copyright laws apply, employee work product that qualifies as “works made for hire” presumptively belongs to an employer, unless there is an express written agreement to the contrary.

Legislation Introduced To Preempt Municipal Minimum Wage Increases

Legislators at the Minnesota House of Representatives recently introduced a bill that would prevent cities and counties from establishing new minimum wage rates or other employer benefit mandates that are inconsistent with state law. See H.F. 1241. The bill is designed to ensure the uniformity of minimum wage and other employment benefits across the state and to prevent local variations that will create added complexity for employers. The bill will not prevent cities and counties from establishing the wages and benefits for their own employees or for employees who perform work pursuant to municipal contracts.

Recently, there has been talk of the City of Minneapolis establishing its own municipal minimum wage. One group called 15 Now is seeking to establish a $15 per hour minimum wage in Minneapolis. Other cities have passed similar ordinances recently, including San Francisco, Chicago, and Seattle. If this new bill passes, however, the bill would prevent any minimum wage ordinance passed by Minneapolis or any other local government in Minnesota from taking effect.

One notable opponent of a municipal minimum wage in Minneapolis is the Mayor of Minneapolis, Betsy Hodges. Although Mayer Hodges supports a higher minimum wage, she believes that it should be addressed on a broader level than city-by-city. According to the Star Tribune, Mayor Hodges has expressed concern that Minneapolis could lose jobs to other cities if it establishes its own minimum wage, and she believes that there are other ways that cities can ensure that residents benefit from economic activity.

Takeaway: If passed, this new legislation would ensure that minimum wage and employment benefit requirements are uniform throughout the state of Minnesota. If you feel strongly about the legislation – one way or the other – contact your state representatives.

Executives Moving From The Private to the Public Sector: In Some Ways a Different World

When a senior executive level employee switches jobs between the private and public sectors, what are some of the changes to the norms of employment?

One key difference is the public nature of employment in the public sector – chiefly because public funds are involved.  Salaries and severance payments are public in the public sectors (for example, the controversy du jour about increases in Minnesota state department head salaries) as are contracts and summary performance evaluations.  The State Open Meeting Law governs performance evaluations and investigations.  The State auditor can have access to public employee accounts and expenditures.  Under many circumstances, the factual bases for a disciplinary action or resignation that occurs while a disciplinary matter is pending are public data.  The public nature of public employment can sometimes come as unwelcome news to an executive used to the private world of the private sector.

Other public sector differences are caps on severance payments for public employees.  Highly-compensated employees (earning more than approximately $72,000 a year) are limited to six month’s compensation in severance, all others are limited to one-year severance.  There are exceptions for sick leave and continued insurance payments.  It is safe to say that public sector higher level executives need to have lower severance pay expectations than in the private sector.

But there are also protections in the public sector not found in private employment chiefly due to the application of constitutional rights.  An example would be rights associated with a disciplinary investigation.  A public sector executive has Loudermill due process rights to know and respond to the reasons for a proposed disciplinary action.  He or she has the Tennessen right to know the potential use of all data that can come out of a disciplinary investigation.  There is the Garrity right to be assured that a compelled statement cannot be used in a criminal proceeding.  Paid administrative leaves are more common as the slower public employment investigation process works out.   There are also provisions in the Data Practices Act protecting non-public private personnel data from disclosure and allowing for rebuttal data.  In short, for any public sector executive in difficult straits there may well be better internal protection than given a private sector executive.

Takeaway:  If you are a senior executive employee in the private sector considering a move to the public sector, it would be a good idea to sit down with legal counsel and get a firm idea of what norms will change in the employment relationship.

An Important Change In Minnesota Public Employer Labor Law

In 2014, the Minnesota Legislature amended the Public Employment Labor Relations Act (PELRA) to establish the Public Employment Relations Board (“PERB”) to investigate, hear and resolve unfair labor practice (“ULP”) charges and complaints.  Previously PELRA ULPs were heard by the district courts, chiefly under injunctive relief motions.

In addition to creating PERB, PELRA was amended to include the following with respect to concerted activity:

Concerted Activity.  Public employees have the right to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection.  Minn. Stat. § 179A.06, subd. 7.

The establishment of PERB and the concerted activities provision helps to bring Minnesota public employer labor law in line with federal labor law procedures and protections for private sector employees.  For discussion of concerted activity in federal labor law and its impact in the private sector, click here.

Significantly, the amendments also include employees of charitable hospitals and charitable hospitals as public employees and public employers for the purposes of filing and processing unfair labor practice charges.  Minn. Stat. § 179A.03, subd. 14 (a)(8); Minn. Stat. § 179A.03, subd. 15(c); Minn. Stat. § 179A.135.

The basic functions of Minnesota PERB are:

  • Receiving and investigating unfair labor practice charges in the public sector;
  • Where appropriate, issuing complaint on unfair labor practice charges;
  • Appointing a hearing officer to hear complaints issued;
  • Holding hearings on complaints issued;
  • Where appropriate, ordering relief for violations found;
  • Where necessary, petitioning the district court for enforcement of the PERB’s orders;
  • Where appropriate, seeking temporary judicial relief upon issuance of a complaint alleging an unfair labor practice;
  • Hearing appeals of BMS decisions relating to unfair election practices.

Takeaway:  Minnesota PERB will change the process and pace for resolution of ULP charges for all employees of public employers covered by PELRA.  Currently, while a PERB Board is appointed, the rulemaking process is still in early days, so the activation of PERB may still not be for several months.  Ultimately, the amendment will likely help unify public employee and private sector employee labor law processes and protections.

Save the Date – Employment, Benefits, and Labor Law Seminar on May 5, 2015

On Tuesday May 5, 2015, attorneys from Briggs and Morgan, P.A. will present “Safeguarding Employers in 2015 – Changes in Employment, Benefits, and Labor Law.” The seminar will occur from 8:00 a.m. to 11:45 a.m. at Windows on Minnesota on the 50th floor of the IDS Center in downtown Minneapolis, and will be followed by a lunch.  The seminar will also feature a presentation from Tom Gillaspy, former Minnesota state demographer.  CLE and HRCI credits will be applied for.  There is no charge to attend.

If you are interested in attending, please RSVP online by clicking here.  Additional details about speakers and topics will be announced soon.

Is A Prescription For Medication Sufficient To Establish A Serious Health Condition Under the FMLA?

No – the Eighth Circuit Court of Appeals recently held that a single prescription for medication is not sufficient to establish a serious health condition under the Family and Medical Leave Act (FMLA), unless it is “under the supervision of a health care provider.” Johnson v. Wheeling Machine Products et al., No. 13-3786 (8th Cir., Feb. 20, 2015).

In Johnson, the employee left work early and went to the doctor on May 11, 2011, because he was not feeling well. A physician assistant gave the employee a prescription for high blood-pressure medication and told him to follow up with his regular physician, but the physician assistant did not tell the employee when he should schedule the follow-up appointment. The physician assistant also gave the employee a note excusing him from work and stating that he could return to work on May 16, 2011.

When the employee brought the note to work, the employer questioned its authenticity and stated that it was not sufficient under the employer’s policy because it did not state the reasons for the employee’s absences. The employee subsequently provided two more notes, but neither of them provided a more detailed explanation for the absences. The employer then suspended the employee on May 16, 2011, and terminated his employment on May 18, 2011. The employee later sued, alleging that the employer violated his FMLA rights. The district court dismissed the employee’s claims on summary judgment.

In analyzing the case on appeal, the Eighth Circuit explained that in order to demonstrate that the employer interfered with the employee’s entitlement to FMLA leave, the employee must first establish that he was entitled to FMLA leave due to a serious health condition. One way that an employee can establish a serious health condition is by proving a period of incapacity for three or more days plus “[t]reatment by a health care provider on at least one occasion which results in a regimen of continuing treatment under the supervision of a health care provider.” 29 C.F.R. § 825.115(a)(2). DOL regulations define “regimen of continuing treatment” to include “a course of prescription medication.” 29 C.F.R. § 825.113(c).

The Johnson court held that the employee failed to prove a serious health condition because, although he received prescription medication, it was not under the “supervision of a health care provider.” The court explained that:

We believe the supervision requirement must be given effect. To interpret the regulation as requiring only a single visit to a health care provider, followed by a course of prescription medication, would be to read the “supervision” language out of the provision . . .

If a person’s health condition is indeed “serious,” it follows that the patient’s regimen of continuing treatment would involve either supervision – for example a phone call with the health care provider to communicate updates on the patient’s condition and progress – or a follow-up appointment soon after the first visit (which, if fulfilled, could satisfy the two-treatment definition).

Because the physician assistant simply prescribed medication to the employee and sent him on his way, the court held that the plaintiff did not satisfy the “regimen of continuing treatment” definition of serious health condition.

The court also rejected the argument that the employee established a serious health condition by showing “[t]reatment two or more times, within 30 days of the first day of incapacity, unless extenuating circumstances exist, by a health care provider . . . .” 29 C.F.R. § 825.115(a)(1). The court held that the employee did not satisfy this definition of serious health condition because the physician assistant “did not indicate a time period within which he should follow up with his regular doctor.” The court explained that “[v]ague assertions about a follow-up appointment without specificity as to its timing are not sufficiently probative to permit a finding in [the employee’s] favor . . . .”

Because the employee did not establish that he had a serious health condition under the FMLA, the Eighth Circuit affirmed the district court’s order dismissing the case on summary judgment.

Takeaway: An employee’s receipt of prescription medication, without “supervision” by a health care provider, is not sufficient to establish a serious health condition under the FMLA.  However, whether the supervision requirement is met will vary depending on the individual circumstances, so employers should continue to exercise caution whenever denying a request for FMLA leave.

What Does the Anthem Breach Mean For You?

In early February 2015, Anthem, Inc. reported that on January 29, 2015, it had discovered that it was the target of “a very sophisticated external cyber attack.”  Anthem believes the attack happened over the course of several weeks, starting on December 10, 2014.  Accessed information may have included the names, dates of birth, social security numbers, home addresses, email addresses, and income data of current or former members of one of Anthem’s affiliated health plans, or one of the health plans that Anthem provides administrative services to.  Anthem is one of the largest health insurance companies in the United States, and one of the largest service provider to self-funded group health plans and Blue Cross and Blue Shield plans across the country.  Over 300,000 Minnesotans may have been affected by this breach.

What this means for you:

  • If you are one of the individuals that were directly affected by this breach, you should take advantage of the credit monitoring protection offered by Anthem and continue to watch your banking and other financial accounts for any potential suspicious activity. Anthem will contact affected individuals.  However, if you have not yet been contacted by Anthem, but believe you may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan insured or administered by Anthem, you may need to provide notice to the participants in your plan, and may need to provide notice of the breach to the Department of Health and Human Services (HHS), as required by the Privacy Rule under the Health Insurance Portability and Accountability Act (HIPAA). Some state laws also require notifications in these types of instances.  As a result, you should contact your company’s employee benefits counsel to determine specifically what notice requirements apply in this case.  Anthem may take the lead in fulfilling any notice requirements that apply to your plan, especially if Anthem fully insures the plan.  However, as the plan sponsor, your company is generally ultimately responsible for making sure all HIPAA requirements are met, especially if the plan is self-insured and Anthem only serves as the claims administrator. In addition, you should consult your plan’s HIPAA privacy and security policies to determine if further actions are required due to this breach.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.  Anthem will contact affected plan sponsors.  However, if you have not yet been contacted by Anthem, but believe your plan may have been affected by the breach, you can contact Anthem directly by calling (877) 263-7995.
  • If you represent an employer that sponsors a group health plan that is not insured or administered by Anthem, you should still familiarize yourself with this breach for two reasons. First, you still may get questions from employees wondering if they are affected.  Second, it can serve as a good test of your HIPAA privacy and security policies and procedures.  HIPAA generally requires all group health plans have privacy and security policies and procedures.  If you do not have such policies and procedures, this serves as a good reminder to implement such policies and procedures as soon as possible.  You can be thankful that your plan was not affected this time.  But you may not be so lucky next time.  In addition, even if your plan is never affected by a breach, HHS has the authority, and regularly exercises such authority, to audit group health plans for HIPAA compliance, and to assess significant fines for noncompliance.  Therefore, you should make sure you have HIPAA compliant policies and procedures in place for your plan, and that you are following them.
  • If your company provides services to another company, and in the course of providing such services, your company receives, transmits, stores, or otherwise has access to certain health information of individuals, your company may be considered a “business associate” under HIPAA. In that case, HIPAA imposes direct liability on your company for certain HIPAA requirements, and your clients will also expect your company to be HIPAA compliant.  As a result of the Anthem breach, your clients may be more interested in your HIPAA policies and procedures, since they do not want to risk being responsible for a HIPAA violation that was caused by your company.  Therefore, you should also make sure you have HIPAA compliant policies and procedures in place for your company, and that you are following them.

Takeaway:  Clearly if you were directly affected by the Anthem breach, either as an individual whose personal data may have been compromised, or as the representative of a company that sponsors a group health plan insured or administered by Anthem, you should take immediate action to obtain credit monitoring (in the case of an individual) or consult with your company’s employee benefits counsel regarding HIPAA notification requirements.  However, even if you were not directly affected by this data breach,  if you represent a company that sponsors a group health plan and/or your company is a “business associate,” this data breach serves as a good reminder to make sure you are in compliance with HIPAA.  At a minimum you should have, and be following, HIPAA compliant policies and procedures.  Two of the most important policies are to conduct a comprehensive security risk assessment and to conduct on-going employee training.  If you do not currently have HIPAA compliant policies and procedures, or you are not sure if they are HIPAA compliant, you should contact your company’s employee benefits counsel as soon as possible.

Adrian Peterson Prevails In Overturning NFL Suspension

On February 26, 2015, the U.S. District Court for the District of Minnesota vacated the arbitration decision upholding Minnesota Viking Adrian Peterson’s suspension from the NFL.  In challenging the arbitration decision, the NFL Players’ Association had a difficult legal standard to overcome, but the Association prevailed, and the court vacated the arbitration decision.

In the court’s decision, the court explained that although arbitrator’s decisions are entitled to substantial deference, the court must vacate an arbitration award if it fails to “draw its essence” from the parties’ collective bargaining agreement – including the “past practices of the industry and the shop.”  The court then explained that the arbitration decision upholding AP’s suspension was inconsistent with past practices because it was based on retroactive application of a new NFL policy.  The court noted that in another recent NFL disciplinary matter – the Ray Rice arbitration – the arbitrator “unequivocally recognized that the New Policy cannot be applied retroactively . . . .”  In contrast, the arbitrator who decided AP’s case “simply disregarded the law of the shop” by allowing the policy to be applied retroactively.  As a result, the court concluded that the arbitrator’s award did not “draw its essence” from the parties’ agreement.

The court also held that the arbitrator exceeded his authority under the parties’ agreement because he adjudicated the hypothetical issue of whether the suspension could be sustained under the NFL’s previous policy.  The only issue presented to the arbitrator was “whether the New Policy could be applied retroactively.”  There was no evidence in the record that the parties’ asked the arbitrator to decide whether the suspension could be upheld under the previous policy.  Accordingly, the court held that the arbitrator “strayed beyond the issues submitted by the NFLPA and in doing so exceeded his authority.”

Takeaway:  The NFL will likely appeal the district court’s decision.  For now, the AP case shows that it is possible to vacate arbitration awards, even though it is often difficult to do so.

Beyond At-Will: Fiduciary Rights of Shareholder-Employees

At-will employment is a bedrock concept – an employee can be discharged without proof of cause.  The principle exists at all employment levels, from rookie to veteran, from entry-level clerical to senior executive.  The common exception is when at-will employment is altered by a contract with just cause employment provisions, such as a collective bargaining agreement or an executive compensation agreement.  But employers also need to be aware of the limitations that result from the fiduciary obligations between partners or shareholder-employees.

Under the common law of many states, including Minnesota, partners or shareholders of a closely-held corporation owe each other a duty of good faith and fair dealing.  Minnesota courts have held that partners or shareholders of a closely-held corporation may not contract to change their relationship to each another in a manner that will “destroy its fiduciary character.”  Appletree Square I Limited Partnership v. Investmark, Inc., 494 N.W.2d 889, 893 (Minn. Ct. App. 1993).  In a closely-held corporation, shareholder-employees may have a reasonable expectation of continued employment and termination only for cause.  This legal concept is different from basic employment law wrongful termination – it is the more arcane concept of employment-based shareholder oppression.  It captures the idea of protecting a shareholder’s investment and reasonable expectation in ongoing employment in a closely-held corporation.  It is a complex doctrine with its own exceptions, but one clearly recognized by the courts.  See, e.g., Gunderson v. Alliance Computer Professionals, 628 N.W.2d 173, 192 (Minn. Ct. App. 2001).

Takeaway:  When dealing with a shareholder-employee, the concept of at-will employment and its basic contractual exceptions may not be sufficient to fully appreciate all legal rights involved in a termination.  Employment-based shareholder oppression is a living legal principle that, while found deep in the pages of the common law, can control the outcomes and resolutions of important employment termination matters.  Good legal counsel will be an important guide to this employment concept that goes beyond the at-will doctrine.