visa, approved, journey, template, service, tour, paperwork, visit, ticket, tourism, trip, international, immigration, sign, national, contract, permission, foreign, certificate, passport, business, hand, office, banner, paper, form, apply, application, document, authorization, embassy, agreement, text, product, logo, font, design, brand, graphic design, graphics, communication, illustration

Makenzie Taylor

Each year, 66,000 H-2B visa guest workers enter the United States to perform nonagricultural temporary and seasonal jobs[1] in industries such as forestry, landscaping, hospitality, seafood processing, and construction.[2] The workers typically perform “relatively low-skilled” jobs and often work in “geographic areas where the number of available U.S. workers is limited.”[3] They comprise less than 0.001% of total U.S. employment.[4]

Far from reducing job availability for U.S. workers, the H-2B program is essential to many smaller and seasonal businesses.[5] It “supplies a source of supplementary labor for [physically demanding] jobs that U.S. workers are unwilling to take.”[6] H-2B workers provide a “legal, stable and motivated work force,” allowing businesses to grow and create more jobs for Americans as well.[7] U.S. workers, though cheaper to hire, are not always available, interested, or dependable.[8]

By contrast, employers have reported that H-2B employees are consistently reliable and hard-working, and their productivity helps offset the cost of recruiting and hiring them.[9] H-2B employment also correlates with higher U.S. employment rates.[10] Without the program, many employers would go unstaffed, close their doors, and cause “lost income for American businesses, and lost tax revenues” for the States.[11]

The Problem

Despite these benefits, the program’s cumbersome nature discourages employer participation: “[T]he system [is] complicated, time-consuming, costly and inefficient.”[12] Petitioning employers must prove “[t]here are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work.”[13] They must make “extensive efforts to recruit U.S. workers,” file documentation with four different government agencies, and foot the bill for guest workers’ visas and transportation costs.[14]

Once the 66,000 annual cap is reached, the U.S. Citizenship and Immigration Services (USCIS) stops accepting petitions and will not issue additional visas until the next year.[15] This means that even after expending significant time and money into the petition process, many employers fail to secure their necessary workforce and are in a worse position than before they applied. Even one small mistake in the “complicated application process can mean delayed approval or visas denied—both extremely costly for employers.”[16] The uncertainty involved in the petition process incentivizes employers to petition for more H-2B workers than they actually need, “just in case their business takes off or some of their workers quit after the quota is hit.”[17] Employers who do so, and whose petitions are approved, further decrease the likelihood of other employers receiving their necessary visas.

Employers may use the premium processing track to “expedite the adjudication of certain forms,” but doing so costs an additional fee of $1,500 per petition.[18] Employers are also financially responsible for guest workers’ roundtrip transportation to and from their home countries, daily meals and lodging, and for each “visa, visa processing, and other related fees.”[19] Finally, businesses often require consultants and lawyers to navigate the process, adding to their costs.[20]

Each employer individually shoulders the full financial burden of this process, because H-2B workers may not “switch employers during their visa terms.”[21] In order for a guest worker to continue working for a second employer after her original visa term ends, the putative secondary employer must file and receive approval for a petition “requesting classification and an extension of the alien’s stay in the United States.”[22] H-2B workers are required to leave the States at the end of their authorized period of stay,[23] so if the secondary petition has not yet been granted, the worker must travel home before turning around and returning to the States for the second job. This unnecessarily duplicative process only adds to employer cost and restricts the employees’ access to stable employment.

The Solution

Visa portability, whereby an H-2B worker may transfer her employment from one authorized employer to another without an intermediate petition process, is the best solution to this problem.[24] Portability would encourage cost-spreading, allowing employers to share in recruitment, visa, and transportation expenses for shared workforces. For example, Colorado’s Steamboat ski resort hires H-2B employees as dishwashers for its winter season, from late November to April.[25] Lindy’s Seafood in Maryland hires H-2B workers as crab pickers from April through December.[26] Visa portability would allow Steamboat to send its H-2B workers to Lindy’s at the end of the ski season for the start of Lindy’s crab-processing season, as long as both companies proved a seasonal need for temporary workers and were approved by USCIS. Steamboat and Lindy’s could share the costs of the visa petition and travel expenses and provide workers with a longer term of employment. This would increase efficiency and make H-2B employment more affordable—benefitting both the workers and U.S. businesses.

The Department of Labor has already set the stage for this change by allowing for broader dissemination of job offer information.[27] It has instructed that job orders may be stored as electronic records in an electronic job registry, resulting in a “complete, real-time record of job opportunities for which H-2B workers are sought.”[28] H-2B employers could use a similar system to match approved employers with available employees who are already in the States.[29] Additionally, requiring H-2B workers to fulfill their contract with the petitioning employer before accepting a new job would assuage any employer fears of H-2B workers jumping to new employers upon arrival.[30]

Conclusion

The H-2B visa program is an essential supplement to the U.S. workforce and economy, enabling small- and mid-size businesses to successfully perform seasonal and temporary operations in essential industries. Far from taking jobs away from U.S. workers, H-2B employees comprise a small segment of the workforce and their employment correlates with higher U.S. worker employment. In order to increase the program’s feasibility for businesses and ease its burden on both employers and foreign workers, the best solution is a policy of visa portability. This solution would increase efficiency, reduce costs, and provide more stable employment for a crucial segment of the workforce.

[1] H-2B Temporary Non-Agricultural Workers, USCIS (May 29, 2020), https://www.uscis.gov/working-in-the-united-states/temporary-workers/h-2b-temporary-non-agricultural-workers.

[2] Kati L. Griffith, United States: U.S. Migrant Worker Law: The Interstices of Immigration Law and Labor and Employment Law, 31 Comp. Lab. L. & Pol’y J. 125, 135 (2009).

[3] Madeline Zavodny & Tamar Jacoby, The Economic Impact of H-2B Workers 4 (2010), https://www.uschamber.com/sites/default/files/documents/files/16102_LABR%2520H2BReport_LR.pdf.

[4] Id. at 23.

[5] Charles C. Mathes, Note, The Department of Labor’s Changing Policies Toward the H-2B Temporary Worker Program: Primarily for the Benefit of Nobody, 80 Fordham L. Rev. 1801, 1814 (2012).

[6] Id.

[7] Zavodny & Jacoby, supra note 3, at 10.

[8] See id. (explanation by a forestry contractor that he has “hired dozens and dozens of American workers. Only a handful have ever shown up for work. Of those, we have never had one last more than two days.”).

[9] Zavodny & Jacoby, supra note 3, at 10.

[10] Id. at 2.

[11] Mathes, supra note 5, at 1813. See also Suzanne Monyak, Trump to Suspend New Work Visas Through 2020, Law360 (June 22, 2020, 3:37 PM), https://www.law360.com/articles/1285526/trump-to-suspend-new-work-visas-through-2020 (reporting that in June 2020, President Trump restricted visas to “free up 525,000 jobs for Americans,” but he exempted food supply and seafood industry H-2B workers, evidencing the U.S. economy’s need for these workers and demonstrating that they do not compete with U.S. workers for jobs).

[12] Zavodny & Jacoby, supra note 3, at 20.

[13] Forms: H-2A, H-2B, and H-3 Visa, USCIS (Dec. 1, 2020), https://www.uscis.gov/forms/explore-my-options/h-2a-h-2b-and-h-3-visa.

[14] Zavodny & Jacoby, supra note 3, at 2.

[15] Zavodny & Jacoby, supra note 3, at 6.

[16] Id. at 20.

[17] Id. at 21.

[18] Premium Processing Fee Increase Effective Oct. 19, 2020, USCIS (Oct. 16, 2020), https://www.uscis.gov/news/premium-processing-fee-increase-effective-oct-19-2020.

[19] Fact Sheet #78F: Inbound and Outbound Transportation Expenses, and Visa and Other Related Fees under the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2015), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs78f.pdf.

[20] Zavodny & Jacoby, supra note 3, at 21. See also Griffith, supra note 2, at 136 (revealing the admission of some employers that “they opt out of the H-2 program entirely and hire undocumented workers because the ‘process is too expensive, taxing, and time-consuming’”).

[21] Griffith, supra note 2, at 135.

[22] 8 C.F.R. § 214.2 (h)(2)(i)(D) (2020).

[23] Fact Sheet #69: Requirements to Participate in the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2009), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs69.pdf.

[24] See Mathes, supra note 5, at 1812–13 (explaining that legislation was introduced in 2005 that allowed “temporary guestworkers to change employers without penalty,” but the bill was never voted on).

[25] Employment FAQ, Steamboat Ski & Resort Corp, https://www.steamboat.com/employment/faq (last visited Jan. 6, 2021).

[26] Job Opportunities, Lindy’s Seafood, Inc., https://www.lindysseafood.com/job-opportunities (last visited Jan. 6, 2021).

[27] Temporary Non-Agricultural Employment of H-2B Aliens in the United States, 77 Fed. Reg. 10038, 10128 (Feb. 21, 2012).

[28] Id.

[29] Mathes, supra note 5, at 1850.

[30] Id.

By Alex Lewis

            Working remotely has become the new normal, and it may stay that way after COVID-19.[1] Although many professionals enjoy the safety, freedom, and flexibility that comes with remote work, a potential tax nightmare may be around the corner for some in 2021. If employees did not switch over their withholding once they started working remotely in a different state, those individuals could incur a higher tax bill in their resident state and possibly incur penalties.[2] Additionally, companies that now have employees working in states other than the business’s home office may unintentionally trigger income or sales tax nexus in their employees’ home states.[3] These employers may also be required to pay unemployment insurance tax in those states that employees now call home.[4] Although some state legislatures have released guidance for determining nexus and apportionment of income due to remote workers, many states have yet to address the issue.[5] Out of all the uncertainty caused by COVID-19, one thing is clear—preparing and paying income, payroll, and unemployment tax for both individuals and corporations could be complicated and expensive.

Individual Income Tax Implications 

            Typically, the state in which a taxpayer resides taxes all of their income, regardless of where it is earned.[6] Additionally, when a taxpayer works in more than one state during a year, the individual must, in most states, allocate their income to the respective state in which it was earned.[7] When this happens, the taxpayer’s resident state will give a tax credit to the taxpayer for the state income taxes paid to another state.[8]

            When employees began working remotely due to COVID-19, the taxpayer may now have less income to allocate to the state in which they normally worked (if it is located in another state).[9] Since less income will be allocated to the state in which they normally work, the amount of taxes due and the amount of credit that the taxpayer will be able to claim on their resident state income tax return will be lower.[10] The smaller credit could cause the taxpayer to have a much higher income tax liability in their resident state, which could result in tax penalties for failing to make estimated payments in their resident state.[11]

            Although some states have exempted income earned in the state because of COVID-19,[12] others have not.[13] Thus, employees should check with their employer and change their withholding requirements to their resident state to ensure that they do not incur tax penalties as a result of working remotely.[14]

Business Income/Payroll/Unemployment Tax Implications 

            Businesses that allowed their employees to work remotely due to the COVID-19 pandemic may face far more challenges. There are a variety of ways that states require businesses to apportion income.[15] Most states require businesses only to apportion income based on the sales made within the state.[16] Those states will likely be unaffected by the COVID-19 remote workforce. However, other states apportion income with a multi-factor model, which allocates income based on sales, property, and payroll.[17]

            The remote workforce will change these calculations because remote employees will change the amount of payroll allocated to each state. Some states have released guidance exempting income earned by employees in the state that were relocated due to COVID-19.[18] Under these exemptions, income earned by remote workers due to COVID-19 will not be included in the apportionment calculation.[19] Other states only allow an employer to exempt payroll from the apportionment calculation during periods when a government shelter-in-place mandate was in effect.[20] Thus, a business may need to determine the specific dates employees worked remotely and cross-check those dates with shelter-in-place mandate dates to calculate the payroll factor appropriately. In rare situations, a company may trigger nexus in a state, and an additional filing requirement, simply because they had a remote worker in the state, even though the business did not have any sales or property in the state.            

            States that do not have traditional corporate income tax regimes could cause further issues for companies. In extreme circumstances, companies may be required to register and pay certain income and other taxes.[21] For example, in Texas, a non-Texas entity does not have to pay their corporate franchise tax unless it (1) has over $500,000 of gross receipts from doing business in Texas; (2) obtains a use tax permit; or (3) has physical presence in the state.[22] Establishing physical presence includes having employees or representatives doing business in the state.[23] So, if a company normally does not have over $500,000 in gross receipts in Texas, but now has an employee working remotely in the state due to COVID-19, the entity must now pay Texas franchise tax. Washington’s business and occupation tax (“B&O”) has similar tax characteristics.[24] In Washington, a business must pay B&O tax if it (1) has physical presence nexus in Washington; (2) has more than $100,000 in combined gross receipts sourced to Washington; or (3) is organized or commercially domiciled in Washington. Thus, a remote worker could trigger nexus for a company even if they do not normally meet the $100,000 threshold.[25]

            Finally, companies that now have employees working remotely could cause the employer to pay unemployment insurance tax in the state in which the employee relocated.[26] Some states require an employer to file with the state and begin paying unemployment insurance tax once an employer has one employee working in the state.[27] In some circumstances, an employee may be exempt from triggering unemployment insurance taxes.[28]

Conclusion

            With so many changes happening for employers and workers, many taxpayers may not yet be worried about their next tax bill in 2021—but maybe they should be. Making sure that employers are withholding income to the correct state could alleviate future tax issues. Also, for businesses that are merely trying to stay afloat during the pandemic, the potential additional filing requirements will be an unwelcome surprise next year. Although some states have offered guidance on how to allocate payroll to the state, the nonuniformity in tax laws across states creates a hassle and could lead to a higher tax bill (or, at least, a higher tax preparation bill). States still have time to issue helpful guidance to employers regarding their payroll allocation. If corporations are lucky, some states may entirely waive the physical presence threshold that would otherwise trigger a filing requirement. Conversely, since most states are facing severe budget deficits, they may be less forgiving and will not waive any remote work performed by employees.[29] If more states follow Georgia’s guidance, employers will undoubtedly incur additional headaches trying to cross-check governmental shelter-in-place mandates with specific dates that employees worked remotely.[30] Nevertheless, with some employers now embracing remote work as a permanent solution, Americans may feel the pandemic’s tax effects for years come.[31]

[1] Why Remote Working Will Be the New Normal, Even After COVID-19, EY (Sept. 7, 2020), https://www.ey.com/en_be/covid-19/why-remote-working-will-be-the-new-normal-even-after-covid-19.

[2] Katherine Loughead, In Some States, 2020 Estimated Tax Payments Are Due Before 2019 Tax Returns, Tax Found. (May 22, 2020), https://taxfoundation.org/2020-quarterly-estimated-tax-payments-2019-tax-returns/.

[3] Daniel N. Kidney, State and Local Tax Implications of Remote Employees During the COVID-19 Pandemic, Wipfli (June 19, 2020), https://www.wipfli.com/insights/articles/tax-covid-19-remote-employee-nexus (stating that nexus is typically created by having “physical presence” in the state).

[4] Larry Brant, Having Employees Working Remotely May Become the New Norm—There May Be Tax and Other Traps Lurking Out There for Unwary Employers, Foster Garvey (May 26, 2020), https://www.foster.com/larry-s-tax-law/tax-traps-remote-employees-covid19.

[5] Coronavirus Tax Relief FAQs, Ga. Dep’t of Revenue, https://dor.georgia.gov/coronavirus-tax-relief-faqs (last visited Sept. 16, 2020).

[6] See Idaho Code § 63-3011; see also Credit for Taxes Paid to Another State, Va. Tax, https://www.tax.virginia.gov/credit-for-taxes-paid-to-another-state (last visited Sept. 16, 2020).

[7] See Mont. Admin. R. 42.15.110(3) (requiring an employee to only allocate income that is “sourced” to the respective state); see also Or. Dep’t of Revenue, Publication OR-17 Individual Income Tax Guide 47 (2019), https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2019.pdf (requiring an employee to apportion income by taking the number of days worked in the respective state divided it by the total number of days worked everywhere in a year).

[8] Idaho Code § 63-3029(1).

[9] See Or. Dep’t of Revenue, supra note 7, at 47.

[10] Idaho Code § 63-3029(3)(a)(i).

[11] See Loughead, supra note 2 (stating that Delaware, Indiana, Montana, Nebraska, New Jersey, New York, Oklahoma, and Rhode Island require estimated state income tax payments).

[12] FAQ Articles, N.D. Tax, https://www.nd.gov/tax/faqs/articles/412-/ (last visited Sept. 16, 2020).

[13] Guidance for Individuals Temporarily Living and Working Remotely in Vermont, Vt. Dep’t of Taxes, https://tax.vermont.gov/coronavirus#temporarily (last visited Sept. 16, 2020).

[14] For example, assume an individual taxpayer normally lives in New York, but works in Massachusetts and has a taxable income of $100,000. In a normal year, the taxpayer will pay $5,050 (calculated using the 5.05 percent Massachusetts individual income tax rate) in tax to Massachusetts. Thus, the taxpayer will be able to claim a $5,050 credit for taxes paid to another state on their New York return, reducing the amount of taxes owed to New York. Now, assume that because of a stay-at-home order, the taxpayer works at home for 75 percent of the year, and only 25 percent of its income will be allocated to Massachusetts. Then, the taxpayer will only receive a $1,262.5 credit on their New York tax return, causing the taxpayer to underpay their taxes substantially unless a withholding change is made. If no change is made, the taxpayer may incur penalties. See 2019 Personal Income Tax Rates, Mass. Dep’t of Revenue, https://www.mass.gov/info-details/major-2019-tax-changes#2019-personal-income-tax-rates- (last visited Sept. 16, 2020) (providing Massachusetts state income tax rates); Who Must Make Estimated Tax Payments?, N.Y. State Dep’t of Tax’n & Fin. (Aug. 5, 2020), https://www.tax.ny.gov/pit/estimated_tax/who_must_make.htm.

[15] State Apportionment of Corporate Income, Fed’n of Tax Adm’rs (Feb. 2020), https://www.taxadmin.org/assets/docs/Research/Rates/apport.pdf.

[16] Id.

[17] Id.

[18] See Frequently Asked Questions About the Income Tax Changes Due to the COVID-19 National Emergency, Neb. Dep’t of Revenue, https://revenue.nebraska.gov/businesses/frequently-asked-questions-about-income-tax-changes-due-covid-19-national-emergency (last visited Sept. 16, 2020).

[19] See id.

[20] See Coronavirus, supra note 5.

[21] Texas: Franchise Tax, Economic Nexus Rule is Finalized, KPMG (Dec. 20, 2019), https://assets.kpmg/content/dam/kpmg/us/pdf/2019/12/19611.pdf

[22] 34 Tex. Admin. Code § 3.586(f).

[23] Id. § 3.586(d)(5).

[24] Out of State Business Reporting Thresholds and Nexus, Wash. State Dep’t of Revenue (Apr. 2020), https://dor.wa.gov/education/industry-guides/out-state-businesses#:~:text=1%2C%202020%2C%20a%20business%20must,sourced%20or%20attributed%20to%20Washington (last visited Sept. 16, 2020).

[25] Wash. Admin. Code § 458-20-193(102)(a)(ii) (stating that even the “slightest presence” of a single employee may trigger the physical presence nexus).

[26] Stephen Miller, Out-of-State Remote Work Creates Tax Headaches for Employers, SHRM (June 16, 2020), https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/out-of-state-remote-work-creates-tax-headaches.aspx.

[27] Out-of-State Employers with Employees Living in Idaho, Idaho State & Fed. Res. for Bus. (July 30, 2020), https://business.idaho.gov/out-of-state-employers-with-employees-living-in-idaho/.

[28] Occupations Exempted from Unemployment Insurance Coverage, Wash. State Emp. Sec. Dep’t https://esdorchardstorage.blob.core.windows.net/esdwa/Default/ESDWAGOV/employer-Taxes/ESD-exempt-professions-chart.pdf (last visited Sept. 16, 2020).

[29] States Grappling with Hit to Tax Collections, Ctr. on Budget and Pol’y Priorities (Aug. 24, 2020), https://www.cbpp.org/sites/default/files/atoms/files/4-2-20sfp.pdf.

[30] See Coronavirus, supra note 5.

[31] Why Remote, supra note 1.

By Katy Thompson and Lanie Summerlin

          In Equal Employment Opportunity Commission v. McLeod Health Inc., Cecilia Whitten (“Whitten”) was employed by McLeod Health, Inc. (“McLeod”) for twenty-eight years as the editor of McLeod’s internal employee newsletter[1].  Whitten was born with postaxial hypoplasia of the lower extremity, so she lacks certain bones in her feet, legs, and right hand. Therefore, Whitten has limited mobility and has always struggled with falling.[2]  In 2012, Whitten fell three times: twice outside of work and once at work.  As a result, McLeod required Whitten to undergo several fitness-for-duty exams.[3]  McLeod concluded that Whitten was a high-fall risk.  Whitten proposed several reasonable accommodations, but McLeod determined that these accommodations would prevent Whitten from fulfilling her job’s essential function of travelling to the company’s different campuses to collect stories.[4]  Whitten was placed on medical leave and ultimately terminated.[5]

            Whitten filed a complaint with the Equal Employment Opportunity Commission (“EEOC”), prompting EEOC to bring a suit against McLeod on Whitten’s behalf. The district court granted summary judgment to McLeod on both claims and the EEOC appealed.[6]  The issue before the Court was whether McLeod violated the Americans with Disabilities Act (“ADA”) by (1) requiring Whitten to undergo medical exams despite a lack of evidence that the exams were necessary (“illegal-exams” claim); and/or (2) terminating Whitten on the basis of her disability (“wrongful-discharge” claim).[7]

EEOC’s Arguments

            On appeal, the EEOC argued that summary judgment was not appropriate on either claim because there was sufficient evidence for a reasonable jury to rule in favor of the EEOC.[8]

            Under the ADA, an employer may not require an employee to undergo a medical exam unless the exam is job-related and consistent with business necessity.  Specifically, the employer must reasonably believe the employee’s ability to perform an essential job function is limited by a medical condition or that, due to a medical condition, the employee’s performance of an essential job function would pose a direct threat to the safety of the employee or others.[9]  The EEOC appealed summary judgment on the illegal exams claim by arguing that it had provided enough evidence for a reasonable jury to conclude that travelling to the company’s different campuses was not an essential function of Whitten’s job.[10]  McLeod’s description of Whitten’s position did not include travelling to McLeod’s campuses, and Whitten could gather information for the employee newsletter over the phone.  Also, the EEOC argued that McLeod’s belief that Whitten’s falls made her a direct threat was unreasonable because her falls did not cause injury.[11]

            Furthermore, to establish a wrongful-discharge claim a plaintiff must prove (1) she has a disability; (2) she is a qualified individual; and (3) her employer took adverse employment action against her because of her disability.[12]  The EEOC claimed that the first and third elements were clearly met and that it had presented enough evidence on the second element to preclude summary judgment.[13]  A qualified individual must be able to perform the essential functions of the job with or without a reasonable accommodation.[14]  The EEOC argued that a reasonable jury could determine, based on the evidence presented for the illegal-exams claim, that Whitten was a qualified individual because travelling was not an essential function of her job.[15]

McLeod’s Arguments

            On appeal, McLeod argued that summary judgment on both the illegal-exams claim and the wrongful-discharge claim was appropriate.[16]

            Specifically, in regards to the illegal-exams claim, McLeod argued that it did not violate the ADA by requiring Whitten to undergo work-related medical exams because it reasonably believed, based on objective evidence, that Whitten could not perform an essential function of her job without posing a direct threat to herself.[17]  McLeod claimed, and the district court agreed, that one of the essential functions of Whitten’s job was to navigate to and within the medical campuses.[18]  Thus, McLeod argued, the medical exams did not violate the ADA because McLeod believed Whitten’s disability rendered her unable to travel to and within the company’s different campuses without posing a direct threat to herself.[19]

            With respect to the wrongful-discharge claim, McLeod argued that summary judgment was appropriate because Whitten was not a “qualified individual” within the meaning of the ADA.  Specifically, McLeod asked the Court to affirm on the basis that the EEOC had not proven Whitten was a “qualified individual;” the medical exams indicated she could not perform an essential function of her job, regardless of whether she was provided with a reasonable accommodation.[20]

Holding: Summary Judgment Inappropriate as to Both Claims

            The Fourth Circuit reversed summary judgment on both claims and remanded the case to the lower court.[21]  Reviewing the grant of summary judgment on both claims de novo, the Court disagreed with the district court’s determination that McLeod had showed there was no genuine dispute as to a material fact; therefore, summary judgment was inappropriate.[22]

            The Court examined the evidence presented by both parties but disagreed with the district court’s finding that the EEOC failed to produce enough evidence for a jury to rule in its favor.[23] The Court acknowledged that the record contained evidence supporting McLeod’s position that it reasonably believed, based on objective evidence, that Whitten could not navigate to or within its campuses without posing a direct threat to herself.[24]  Based on the testimony of one of Whitten’s superiors, as well as her own testimony agreeing that her job required her to “safely navigate marketing department functions,” the Court found that a reasonable jury court rule in favor of McLeod.[25]

            However, the Court also found that a reasonable jury, based on the evidence presented in the lower court, could rule in favor of the EEOC.[26]  The Court looked at McLeod’s own written description of Whitten’s job, which contained no mention of navigating to and from company events or conducting in-person interviews.[27]  Although Whitten testified that she believed she collected better content by travelling to McLeod’s campus locations, she did not believe it was an “essential” function of her job because she could collect information and conduct interviews over the phone.[28]  Because the Court determined that the EEOC had produced “more than a scintilla of evidence” in support of its position that navigating to and from McLeod’s campus locations was not an essential function of Whitten’s job, the Court reversed summary judgment as to the illegal-exams claim.[29]

            The Court noted that even if the EEOC had failed to produce enough evidence that navigating to and from campus locations was an essential function of her job, McLeod would still not be entitled to summary judgment.[30]  The Court analyzed what McLeod knew before it required Whitten to take the medical exams; specifically, that (1) McLeod knew Whitten had performed the essential function of her job for twenty-eight years, despite her disability; (2) Whitten had recently fallen several times (once at work), none of which resulted in any severe injuries; (3) Whitten missed deadlines, came in late, and struggled with her workload; and (4) Whitten’s supervisor noted she recently appeared winded and groggy.[31]  The Court determined that a reasonable jury, based on the evidence, could have found that McLeod lacked a reasonable, objective basis for requiring Whitten to undergo work-related medical exams.[32]

            As to the wrongful-discharge claim, the question at issue was whether the EEOC had produced enough evidence to convince a jury that Whitten was a “qualified individual” within the meaning of the ADA.[33]  The Court noted that the district court, in analyzing the “wrongful-discharge” claim, relied on its finding that navigating to and from McLeod’s campus locations was an essential function of Whitten’s job.[34]  Because the medical exams had revealed that no reasonable accommodation would permit Whitten to perform that function, the district court concluded that the EEOC had not proven Whitten was qualified to continue her work with the company’s employee newsletter.[35]  However, because the Court had already determined that it was uncertain whether navigating to and from McLeod’s campus locations was an essential function of Whitten’s job, and because the medical exams may have been unlawful, the Court held that McLeod was not entitled to summary judgment.[36]

Conclusion

            Ultimately, the Fourth Circuit held that McLeod was not entitled to summary judgment on either of the EEOC’s ADA claims and remanded for further proceedings.[37]  The Court held that a reasonable jury could conclude that travelling was not an essential function of Whitten’s job.[38]  If a jury made this determination, then there could be sufficient evidence (1) that McLeod’s required medical exams were illegal; and (2) that Whitten was illegally terminated on the basis of her disability.[39]  This case is important because it provides an example of the level of evidence a plaintiff must offer to survive a summary judgment motion on ADA claims.  Also, this ruling sends a message to employers that the Fourth Circuit takes ADA claims very seriously, and it could encourage the EEOC to bring more ADA claims in this circuit.

[1] No. 17-2335, 2019 WL 385654, at *1 (4th Cir. Jan. 31, 2019).

[2] Id.

[3] Id. at *2.

[4] Id. at *3.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id. at *4.

[11] Id.

[12] Id. at *5.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *3.

[17] Id. at *4.

[18] Id.

[19] Id.

[20] Id. at *5.

[21] Id.

[22] Id. at *3.

[23] Id. at *4–5.

[24] Id. at *4.

[25] Id. at *4.

[26] Id.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id. at *5.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id. at *4.

[39] Id. at *5.

By Jim Twiddy and Kayla West

United States v. Miguel Zelaya

In this criminal case, the Fourth Circuit affirmed the trial court’s convictions of Miguel Zelaya, Luis Ordonez-Vega, Jorge Sosa, and William Gavidia. Each were convicted of participating in a racketeering conspiracy under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Some of the defendants were also convicted of committing violent crimes in related and unrelated events. Appellants were members in the gang, MS-13. Each of the defendants were charged with violent action associated with their racketeering activity. Sosa and Gavidia moved for severance because they had not been charged with murder, unlike the other defendants. Ordonez-Vega moved to exclude testimony from New York police officers who had knowledge about his previous gang affiliation in New York. Sosa moved for mistrial based on a witness’ reference to an uncharged MS-13 murder during her testimony to establish Sosa as a gang member. Gavidia moved for a new trial following the verdict. All four Appellants moved for a judgment of acquittal based on insufficient evidence. All of these motions were denied. Appellants raised multiple issues on appeal including the denial of their motion for acquittal. Sosa and Gavidia challenged the denial of their motions for severance and new trials, Ordonez-Vega challenged the admission of certain evidence, Sosa challenged the jury instructions, and Gavidia challenged his sentence. The Fourth Circuit addressed each of these challenges in turn, articulating the relevant standard for each conviction and applying that standard for the facts relevant to each challenge. Essentially, all of these claims turned on whether there was sufficient evidence for a reasonable jury to come to the conclusions from the trial court. In each of these challenges, the Fourth Circuit found that there was sufficient evidence to support all of the jury’s findings. All of challenged trial court holdings were affirmed. Judge Floyd, dissenting in part, argued that, with respect to some of these convictions, the government lacked sufficient evidence to show that the violence was connected to membership in a gang.

 

Catherine D. Netter v. Sheriff BJ Barnes

In this civil case, Appellant argued that her unauthorized review and disclosure of confidential personnel files to support her racial and religious discrimination claims constituted protected activity under Title VII. Appellant filed a complaint with her employer and the EEOC. Appellant reviewed, copied, and supplied the confidential personnel files to support her claims. After she was discharged by her employer, she filed a new charge with the EEOC. The EEOC dismissed the charged but allowed her to supplement her existing Title VII discrimination complaint with a new retaliation claim. After discovery, the district court granted summary judgment to Appellant’s employer on all claims. Appellant filed an appeal, challenging only the portion of the district court’s order that concerns her retaliation claim. The Fourth Circuit held that Appellants actions were in violation of N.C. Gen. Stat. § 153A–98(f) which establishes a Class 3 misdemeanor for “knowingly and willfully examin[ing] . . . , remov[ing] or copy[ing] any portion of a confidential personnel file” without authorized access. Further, illegal actions do not constitute a protected activity for participation clause claims under Title VII. Thus, the Fourth Circuit affirmed the decision of the district court.

By Mackenzie Bluedorn and Jacqueline Canzoneri

Relevant Facts

This case began as an age discrimination claim.  The Equal Employment Opportunity Commission (“EEOC”) initially challenged that Baltimore County’s (“County”) retirement plan violated the Age Discrimination in Employment Act (“ADEA”) because its age-based contributions required older employees to pay higher percentages of their salaries.[1]  When adopting its retirement benefit plan in 1945, the County stated that employees were eligible to retire and receive pension benefits at the age of 65, no matter how long the individual had actually been employed and contributing the plan.[2] Because the payments of an employee who joined the plan at an older age would accrue less interest than payments made by younger employees before the employees actually started to draw from the fund, the County determined that older employees should be charged higher rates.[3] Although the retirement benefit plan was amended several times over the years, the different contribution percentages based on age were never fully eliminated.[4] In response to this policy, the EEOC first brought civil suit in the District Court of Maryland in 2007, requesting injunctive relief to bar the discriminatory contribution percentages and reimburse employees subject to the age discrimination through back pay.[5]

 

Procedural Posture

This opinion was the third issued in a series of appeals for this case.  In 2010, the court of appeals initially reversed and remanded the district court’s holding in favor of Baltimore County, prompting the district court to reconsider whether the retirement benefit rates violated the ADEA.[6]  The issue once again reached the court of appeals for opinion in 2014. The second time, the district court had determined that the rates were impermissible and granted partial summary judgment on liability in favor of the EEOC, but the court of appeals then remanded again for consideration of damages.[7]  Although the parties had entered into a consent order for injunctive relief, the order did not discuss monetary relief and stated that the issue would be considered on a later date.[8]

The case then reached the court of appeals for a third time in 2018 after the EEOC appealed the district court’s determination on damages that it had discretion to deny an award of back pay otherwise afforded under the ADEA.  In reaching its decision, the district court held that it had discretion over whether or not to award that remedy or, in the alternative, that even if back pay were mandatory under enforcement of the ADEA, the court’s equitable powers still granted it the authority to deny back pay because the EEOC delayed so long in originally bringing this case.[9] The underlying issue for the court of appeals to consider on this third appeal was under the ADEA, is the monetary award of retroactive back pay discretionary, after liability has been established.

 

Plaintiff-Appellant Argument: Equal Employment Opportunity Commission (“EEOC”)

While Baltimore County grounded its argument in statutory language of the ADEA, the EEOC highlighted specific Fair Labor Standards Act (“FLSA”) provisions that have been incorporated into the ADEA.[10]  Most notably, the ADEA adopted the FLSA provision that violators “shall be liable” for back pay.[11] The EEOC argued that because back pay is a mandatory legal remedy under the FLSA, and because the ADEA adopted this language, it is not a discretionary issue. The choice of language reflected Congress’ intent that remedies under both of these statutes should be construed in the same manner. Thus, the District Court lacked discretion to determine whether back pay was owed.

 

Defendant-Appellee Argument: Baltimore County (“County”)

Baltimore County argued that back pay was properly denied because the district court is granted wide authority under the ADEA.  Specifically, the County claimed that the court has broad authority under 29 U.S.C. § 626(b) “to grant such legal or equitable relief as may be appropriate,” which could include the denial of back pay.[12]  Under broad authority, the court should be allowed to determine appropriate remedies, similar to the discretionary nature of back pay under Title VII. The County tried to expand precedent, by relying on various United States Supreme Court cases regarding Title VII pension issues.[13]  In those cases, the Court held that retroactive monetary awards are discretionary under Title VII and did not award any retroactive monetary relief.[14]

As the district court itself determined following the second remand of this case, it would be equitable to deny back pay in this instance, even if it were mandatory under the ADEA, because the EEOC had delayed initiating this suit for years.[15]  The County emphasized the long delay in the EEOC’s action, which led to the County incurring substantially more liability in back pay.[16]

 

Holding & Rationale

The Court of Appeals for the Fourth Circuit agreed with the EEOC’s interpretation of the ADEA’s language and concluded that retroactive monetary award of back pay is mandatory, not discretionary, upon the finding of liability.  The initial matter of liability was already decided through issuance of partial summary judgment in favor of the EEOC following the first remand of the case. To assess the statutory language of the ADEA, the court considered the plain language of the statute, congressional intent, United States Supreme Court precedent, and legislative history.

The court addressed the plain language of enforcement under 29 U.S.C. § 626(b).  As a threshold matter, the court stated that the ADEA was a remedial statute and therefore warrants liberal interpretation. Furthermore, because specific FLSA language regarding back pay was incorporated into the ADEA enforcement provision, interpretation of the provision should mirror prior interpretations of the relevant back pay provisions in the FLSA.[17]  As such, under the FLSA, retroactive monetary damages are considered mandatory. Thus, by extension, there was an apparent congressional intent that such damages should also be mandatory under the ADEA.[18]

In regard to relevant precedent, the court’s touchstone of inquiry was a United States Supreme Court case, Lorillard v. Pons,[19] where the Court applied a similar analytical framework while interpreting another portion of the ADEA.[20]  There, the Court stated that since the ADEA adopted specific FLSA language, it should be interpreted as its original counterpart was interpreted.[21] The Fourth Circuit also rejected the County’s reliance on the Title VII pension cases because there, back pay was an equitable remedy, whereas here under the ADEA, back pay would be a legal remedy.[22]

Next, the court considered legislative history.  While drafting the enforcement clause of the ADEA, Congress was faced with various potential enforcement mechanisms.[23]  Ultimately, Congress specifically chose to incorporate FLSA remedial measures into the ADEA.[24] This conscious decision of incorporation, and rejection of other options, is relevant legislative history that assists with judicial interpretation of statutory language.[25]

Finally, the court next addressed the district court’s alternative holding that, even if the statutory language indicated back pay was mandatory, the court still had discretion through its equitable powers.  The court of appeals fully rejected the district court’s comparison of the ADEA to Title VII, under which the Supreme Court had held that retroactive monetary awards were, in fact, discretionary.[26] The court of appeals explained that an award of back pay under Title VII was up to a court’s discretion because it was an equitable remedy; under the ADEA, however, back pay was a legal remedy, and only the amount of back pay was open-ended, to be determined at the discretion of the factfinder.[27]

 

Conclusion

The district court’s opinion was vacated and remanded for the consideration of the amount of back pay owed to the affected employees under the ADEA.

 

 

[1] EEOC. v. Baltimore Cty., 747 F.3d 267, 1–2 (4th Cir. 2014).

[2] Id. at 3.

[3] Id. at 4–5.

[4] Id. at 6.

[5] Id. at 7.

[6] EEOC. v. Baltimore Cty., No. 16-2216, 2018 U.S. App. LEXIS 26644, at *2 (4th Cir. Sept. 19, 2018).

[7] Id.

[8] Id.

[9] Id. at *2–*3.

[10] Id. at *4–*5.

[11] Id. at *5.

[12] Id. at *3.

[13] Id. at *9.

[14] Id.

[15] Id. at *3.

[16] Id. at *11.

[17] Id. at *5–*6.

[18] Id. at *7.

[19] 434 U.S. 575 (1978).

[20] Baltimore Cty., 2018 U.S. App. LEXIS 26644, at *8.

[21] Id.

[22] Id. at *10.

[23] Id. at *8.

[24] Id. at *9.

[25] Id.

[26] Id. at *10.

[27] Id.

 

 

 

 

 

By: Thomas Cain & Noah Hock

Equal Employment Opportunity Commission v. Baltimore County

In this case, the Equal Employment Opportunity Commission (“EEOC”) sought back pay for employees based on Baltimore County’s discriminatory practice involving improper contribution rates to the county’s age-based employee benefit plan. The district court found the county liable under the Age Discrimination in Employment Act (“ADEA”) and granted the EEOC partial summary judgment, but it denied a motion for back pay because the EEOC’s undue delay in investigating substantially increased the county’s back pay liability. The Fourth Circuit vacated the district court decision, ruling that an award of back pay is mandatory under the ADEA after a finding of liability. Thus, the case was remanded for a determination of back pay amounts to which affected employees are entitled.

By: Lanie Summerlin

Henderson v. Bluefield Hosp. Co.

In this civil appeal, the National Labor Relations Board (“NLRB”) appealed the District Court’s refusal to grant preliminary injunctive relief under section 10(j) of the National Labor Relations Act. The NLRB sought preliminary injunctions against two hospitals until NLRB agency adjudication of a complaint filed against the hospitals by the National Nurses Organization Committee (“Union”) was complete. The injunctions would have required the hospitals to bargain with the Union in good faith, and NLRB argued the injunctions were necessary to protect the nurses’ fundamental right to be represented through collective bargaining. The District Court denied these injunctions because it ruled the NLRB failed to prove this type of relief was necessary to preserve the remedial power of the NLRB. The Fourth Circuit affirmed the District Court’s decision and emphasized that the NLRB has the burden of proving irreparable harm absent the injunction. Ultimately, the Fourth Circuit held the NLRB failed to meet this burden because its theories of harm were speculative; the NLRB failed to explain why its own forms of relief available after completion of the agency process would be insufficient.

U.S. v. Bell

In this criminal appeal, Quintin Bell (“Bell”) challenged his convictions of four counts of drug trafficking and one count of illegal possession of a firearm. Bell argued the District Court erred in (1) denying his motion to suppress statements he made to police officers who were executing a search warrant on his residence; (2) admitting evidence of another arrest of Bell under Federal Rules of Evidence Rule 404(b); (3) denying Bell’s motion to disclose the identity of a confidential informant; and (4) enhancing Bell’s sentence to 480 months’ imprisonment due to his prior convictions. The Fourth Circuit held the District Court did not err in denying Bell’s motion to suppress his statements because Bell was not being interrogated at the time the statements were made; the officer’s question was directed to Bell’s wife and Bell voluntarily answered. The Fourth Circuit also held the District Court did not abuse its discretion by admitting evidence of Bell’s other arrest because this evidence’s relevance to Bell’s motive and intent was not substantially outweighed by the risk of unfair prejudice to Bell. In regards to the confidential informant, the Fourth Circuit held the District Court did not err in refusing to disclose the informant’s identity because Bell failed to prove the informant’s identity was necessary to establish his own guilt or innocence. The Fourth Circuit also reviewed Bell’s criminal record and held that his 480 month sentence was appropriate due to the nature of the crimes on his record. Overall, the Fourth Circuit affirmed Bell’s convictions. Judge Wynn dissented; he argued the Fourth Circuit should have remanded the issue of Bell’s statements to police officers to the District Court for a determination of whether Bell perceived himself as being interrogated. Judge Wynn also argued that Bell’s prior convictions do not qualify as predicate convictions to enhance his sentence.

VanDevender v. Blue Ridge of Raleigh

This civil appeal focuses on the District Court’s decisions as to two judgment as a matter of law (“JMOL”) motions filed by Blue Ridge of Raleigh (“Blue Ridge”). Blue Ridge operated a long-term skilled nursing facility in Raleigh, North Carolina, but consistently failed to meet state-mandated staffing levels and supplies requirements. The estates of three deceased ventilator-dependent patients at Blue Ridge brought claims of wrongful death nursing home malpractice against Blue Ridge. The jury awarded compensative and punitive damages to each Plaintiff. However, the District Court granted Blue Ridge’s motion for JMOL as to all three Plaintiffs’ punitive damages awards because it ruled the Plaintiffs had not produced sufficient evidence. The District Court denied Blue Ridge’s motion for JMOL as to Plaintiff Jones’s compensatory damages. Plaintiffs appealed the JMOL as to their punitive damages, and Blue Ridge cross-appealed the denial of JMOL as to Plaintiff Jones’s compensatory damages. The Fourth Circuit held the District Court erred in granting JMOL as to the Plaintiffs’ punitive damages. Based on the record, the Fourth Circuit held that a jury could determine Blue Ridge’s staffing policies and managerial decisions constituted willful or wanton conduct. It held that the District Court erred by requiring the Plaintiffs to prove malice, which is not required for willful or wanton conduct. The Fourth Circuit emphasized that Blue Ridge failed to follow state and federal laws on staffing and intentionally failed to follow its own patient safety policies. Additionally, the Fourth Circuit affirmed the District Court’s denial of Blue Ridge’s JMOL motion as to Plaintiff Jones’s compensatory damages. There was sufficient evidence that Blue Ridge breached the standard of care it owed to Plaintiff Jones by being understaffed without proper supplies. The Fourth Circuit remanded with instructions for the District Court to enter punitive damages for all three Plaintiffs consistent with North Carolina’s statutory limits.

By: Katherine Wenner & Holly Ingram

A. Overview

On November 17th, the Fourth Circuit published an opinion for Schilling v. Schmidt Baking Co., Inc.. The Court considered whether the District Court erred in its dismissal of Plaintiffs’ claims under the FLSA. The Fourth Circuit reversed the District Court’s dismissal and held that Plaintiffs fell within a group of “covered employees” under the Technical Corrections Act of 2008’s exception to the FLSA and thus were entitled to overtime wages for hours they worked in excess of forty hours per week.

B. Facts and Procedural History

The Plaintiffs, Ronald Schilling, Russel Dolan, and Jonathan Hecker (collectively, “Plaintiffs”), worked as district sales managers for Schmidt Baking Company, Inc. (“Schmidt”). There, they were considered nonexempt salaried employees. Plaintiffs frequently worked more than forty hours per week; however, for all hours worked Plaintiffs were paid their regular wage rate and did not receive overtime wages for hours worked beyond forty hours per week.

Schmidt provides baked goods to restaurants, grocery stores, and small business across the Mid-Atlantic. Schmidt contracted with independent operators to execute some of their deliveries. Additionally, Schmidt maintained a mixed fleet of company vehicles at each of their depots, including some vehicles which weighed under 10,000 pounds and others weighing over 10,000 pounds.

In the event that various delivery operators were unable to perform their delivery duties, Plaintiffs delivered the necessary baked goods. Plaintiffs spent between 65%-85% of their time each week performing deliveries, the majority of which were made in their personal vehicles weighing less than 10,000 pounds.

Plaintiffs filed this federal action alleging that they were entitled to payment of overtime wages under the Fair Labor Standards Act and various Maryland labor laws. Schmidt moved to dismiss the complaint for failure to state a claim for which relief can be granted and in the alternative, moved for summary judgment. The District Court treated Schmidt’s motion as a motion to dismiss, and granted it without a hearing. Plaintiffs appealed. At oral arguments, Plaintiffs conceded that were it not for the Technical Corrections Act of 2008 exception, they would be excluded from overtime compensation under the FLSA.

C. Employees driving vehicles in a mixed fleet are entitled to overtime wages under the Technical Corrections Act of 2008.

To determine whether Plaintiffs were entitled to overtime, the opinion began with an overview of the Fair Labor Standards Act (“FLSA”) and the statutory scheme at issue. The FLSA establishes a federal minimum wage to combat the dangers of long working hours, which may pose negative health implications for employees. There are, however, certain classes of employees exempt from overtime protections and one such class is employees falling under the Motor Carrier Act (“MCA”) Exemption. In 2005 and 2008 Congress amended the MCA Exemption to clarify that certain employees were subject to the FLSA’s overtime requirements. Now, FLSA overtime requirements apply to certain “covered employees,” which includes “an individual”:

(1) who is employed by a motor carrier or motor private carrier . . .;

(2) whose work, in whole or in part, is defined—

(A) as that of a driver, driver’s helper, loader, or mechanic; and

(B) as affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce . . . ; and

(3) who performs duties on motor vehicles weighing 10,000 pounds or less.

SAFETEA–LU Technical Corrections Act of 2008 Pub. L. No. 110–244 § 306(c)(1)–(3) (2008) (emphasis added). Thus, employers may be obligated to pay overtime to employees under the FLSA, if the employee is “covered.” Consequently, the central issue in this case was whether Plaintiffs were “covered employees.”

In addition to considering persuasive authority from the Third Circuit, the Court held that Plaintiffs were “covered employees” after examining the text, structure, and intent of the statute at issue. First, the Court explained that in McMasters v. Easter Armored Services, Inc., the Third Circuit concluded that when an employee spends some time driving vehicles over 10,000 pounds and some time driving vehicles under 10,000 pounds, such employees may still fall within the “covered” definition. 780 F.3d 167, 168–70 (3d Cir. 2015). The Court then proceeded to analyze the text, structure, and intent of Congress’s 2008 amendment to the MCA Exemption. It concluded that Congress mandated certain drivers be entitled to overtime compensation and that the statute allows a driver to only partially work with a vehicle under 10,000 pounds. Additionally, the Court noted that there was no evidence Congress intended for employees working in a mixed fleet to be exempt from overtime compensation. The Court did not create a strict definition of how much time is enough to constitute “in part,” but its decision indicates that employees operating in a mixed fleet may be entitled to overtime pay, despite the MCA Exemption.

Here, the Court concluded that the Plaintiffs satisfied the statute’s requirements for “covered employees.” Though at times Plaintiffs drive vehicles weighing over 10,000 pounds, because they spend a majority of their working hours driving vehicles weighing less than 10,000 pounds, they easily satisfy the “in part” requirement. Thus, the Court held Plaintiffs were entitled to FLSA overtime wages.

D. Conclusion

The Fourth Circuit reversed the District Court’s dismissal of Plaintiffs’ FLSA claims. The Plaintiffs were “covered employees” under the Technical Corrections Act of 2008, thus were entitled to overtime wages under the FLSA.

Weekly Roundup: 11/6-11/10
By: Tim Day & Jonathan Hilliard

Plotnick v. Computer Sciences Corp.
             In this civil case, the plaintiffs, former executives of Computer Sciences Corporation (“CSC”), filed suit against CSC, alleging they were denied benefits under their Deferred Compensation Plan for Key Executives after an amendment to the plan changed the applicable crediting rate.  The Fourth Circuit affirmed the district court’s grant of summary judgment for CSC, holding that the denial of benefits was proper under any standard of review.

By M. Allie Clayton

Today, in the civil case of Barton v. Constellium Rolled Products-Ravenswood, LLC., a published opinion, the Fourth Circuit affirmed the District Court in granting summary judgment for the company. The court stated that the governing collective bargaining agreement did not provide for vested retiree health benefits, and thus the former employer was within their power to unilaterally alter its retiree health benefits program.

Facts

A class of retirees and their union, The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industry & Service Workers International Union AFL-CIO/CLC (“The Union”), filed this action. The union had represented the retirees since 1988 and had negotiated collective bargain agreements with their previous employer—Constellium Rolled Products-Ravenswood, LLC (“Constellium”).

The Parties’ Agreement

There was a specific provision of their collective bargaining agreement (“CBA”) that governed group health insurance benefits: Article 15. The 2010 provision of Article 15 stated:

  1. The group insurance benefits shall be set forth in booklets entitled Employees’ Group Insurance Program and Retired Employees’ Group Insurance Program, and such booklets are incorporated herein and made a part of the 2005 Labor Agreement by such reference.
  2. It is understood that this agreement with respect to insurance benefits is an agreement on the basis of benefits and that the benefits shall become effective on July 15, 2010, except as otherwise provided in the applicable booklet, and further that such benefits shall remain in effect for the term of this 2010 Labor Agreement.

In addition to Article 15 and the various booklets incorporated by reference therein (which operated as summary plan description (“SPD”)), Constellium (or its predecessors) and retirees agreed to further parameters governing retiree health benefits that were contained in “Cap Letters.” The cap letters throughout the years governed how Constellium (or its predecessors) would allocate health care spending of employees based on pre- and post-January 2003 retirees. The third cap letter, which took effect on January 1, 2011, was unique in that it took effect after the concurrently-negotiated collective bargaining agreement did.

The Unilateral Change Leading to Litigation

While the parties were negotiating a new CBA in July 2012, Constellium proposed a change to Article 15 that would extend the cap on its contributions to retiree health benefits to those who retired before January 1, 2003, and freeze its Medicare Part B premium reimbursement amount for all hourly retirees at $99.90. The Union refused to bargain about this issue because it asserted that the retiree health benefits had already vested. Constellium notified the Union that it planned to make those changes on January 1, 2013, and made those changes on that day.

Procedural History

After discovery, the parties filed cross-motions for summary judgment. The district court granted the company’s motion and dismissed the case.

The Issue

Did Constellium’s unilateral alteration of those benefits breach its obligations under the CBA?

Reasoning

The Supreme Court in M&G Polymers USA, LLC v. Tackett stated that courts must “interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy.” Therefore, as this court was interpreting the collective bargaining agreement with the parties, it was bound by ordinary contract principles. Those ordinary contract principles included the rule that states that in order to find that the retiree health benefits vested, there must be unambiguous evidence that indicates that the parties intended that outcome.

The Fourth Circuit found that the plain language of the CBA and the SPD indicated that the benefits did not vest. They found that there was explicit durational language in the retiree health benefits SPDs. Bolstering that conclusion was the contrast of the retiree health benefits section with a different section of the SPD that stated unambiguously that the pension plans cannot be reduced and they are paid monthly for the participants. Because the language was unambiguous in another section, it clearly demonstrated that the parties knew how to express their intent that certain benefits should vest.

Disposition

Because there were clear temporal limitations on the employee health benefits, the retirees’ and the Union’s arguments that the benefits had already vested cannot be upheld. Therefore, the grant of summary judgment in favor of Constellium by the district court is affirmed.

By Ali Fenno

On November 22, 2016, the Fourth Circuit issued a published opinion in the civil case of UBS Financial Services, Inc. v. Padussis. In UBS Financial, the Fourth Circuit addressed whether an arbitration award of over $900,000 to Gary Padussis (“Padussis”) could be vacated or modified in light of Padussis’s insolvency and UBS Financial Services’ (“UBSFS”) lack of participation in the selection of the arbitrators. In affirming the district court, the Fourth Circuit held that there was no basis for overturning the arbitrators’ award and that UBSFS’s motion should be dismissed in its entirety.

Facts of the Case and Procedural History

Padussis began working for UBSFS in 2009, bringing with him a team of financial advisors and an established list of clients. As part of his initial compensation, UBSFS granted Padussis a $2.7 million loan, for which he signed a promissory note that provided the balance of the loan would become fully due in the event he ended his employment with UBSFS. Also executed by Padussis was a Letter of Understanding describing his compensation and a Financial Advisor Team Agreement that governed the operations of his team. Each agreement entered into by the parties provided that any dispute would be subject to arbitration before the Financial Industry Regulatory Authority (“FINRA”).

Two years later, Padussis resigned from UBSFS on the grounds that it had ruined his team of financial advisors and cost him valuable clients. When he did not pay the $1.6 million remaining balance on the promissory note, USBS initiated arbitration proceedings.  Padussis responded with counterclaims alleging that UBSFS’s interference with his team of financial advisors and clients amounted to tortious conduct and a breach of contractual duties.

Pursuant to the FINRA Code of Arbitration Procedure for Industry Disputes (the “FINRA Code”), the Director of FINRA Dispute Resolution (the “Director”) mailed a list of potential arbitrators to Padussis and USBFS on August 21, 2013. Each party was then supposed to indicate their preferences by striking four arbitrators from the list and ranking the remaining ones. The lists were to be returned to the Director within 20 days of their being sent so he could then select a three-person arbitration panel based on those rankings. Padussis returned his list of preferences within the proscribed time, but USBFS did not, allegedly because it never received the list from the Director.

On September 11, UBSFS received a letter, dated September 3, reminding the parties to return their list of preferences by the September 10 deadline. It then filed a motion to extend the deadline. Padussis opposed the motion, claiming that UBSFS had notified him in mid-August that it was transferring to new counsel and that the list of preferences had not yet been sent. Padussis argued that this transfer of counsel caused confusion over who was sending the list and was the reason the list was never sent.

Although FINRA Rule 13207(c) allows a Director to extend the Code’s deadlines for good cause, FINRA’s Regional Director, acting for the Director as consistent with FINRA Rule 13100(k), denied UBSFS’s motion. The Director affirmed the denial, finding that UBSFS did not have good cause to extend the deadline because the list of arbitrators and a courtesy reminder of the deadline were both timely mailed, and FINRA did not receive any mail returned as undeliverable. Accordingly, FINRA proceeded with the arbitration process and selected a three-person panel of arbitrators based off of Padussis’s list of preferences.

UBSFS challenged the composition of the panel based on his lack of participation in the selection of the arbitrators, but his challenge was denied. Then, on October 27, 2014, the panel issued its final decision, awarding UBSFS $1,683,262 for the balance on the promissory note and Padussis $932,887 for damages UBSFS caused to his business.

However, faced with a statutory lien and the prospect of bankruptcy, Padussis admitted that he could not pay the full $932,887, leaving UBSFS in a position of owing Padussis over $900,000. UBSFS subsequently filed the present action to vacate the award on the grounds that UBSFS did not participate in the arbitrator selection process. It argued in the alternative that the award should be offset because of Padussis’s admission of being unable to pay the award owed to UBSFS.

The district court declined to vacate the arbitration award and to impose an offset, and UBSFS appealed.

Narrow Standard of Review

The Fourth Circuit first established the extremely narrow scope of judicial review of an arbitration award. It noted that an arbitration award should only be modified if it is one of the limited circumstances listed in the Federal Arbitration Act, or if under common law, it “fails to draw its essence from the contract” or “evidence a manifest disregard of the law.” The court emphasized that in reviewing an arbitration award, whether an arbitrator did their job “well, or correctly, or reasonably,” is not the concern. Instead, courts should ask whether the arbitrators exceeded their powers because they did not meet certain thresholds of arbitrability such as not being appointed according to the parties’ agreement. Deference should be given to arbitrators on questions outside those thresholds that regard the merits of the case or procedural questions.

The court found support for this narrow scope in public policies that focus on using arbitration as a tool to avoid the costs and delays of litigation. It noted that parties entering into agreements to arbitration do so in the hope of avoiding “a protracted set of legal proceedings.” Narrowing the judicial review of arbitration awards furthers this intent.

Rightful Appointment of Arbitrators

The Fourth Circuit next addressed UBSFS’s claim that the arbitrators were not selected according to the parties’ agreement. It first confirmed that, pursuant to Section 5 of the Federal Arbitration Act, arbitration awards will be vacated where the arbitrators’ appointment violates the parties’ contract. It then noted that here, UBSFS and Padussis agreed that all disputes would be subject to arbitration before FINRA and thus subject to the FINRA Code.

However, the Fourth Circuit rejected UBSFS’s claim that the rules for selecting arbitrators were not followed. The court listed every step FINRA and the Director took in selecting the panel and noted that not a single requirement was skipped. And even though UBSFS did not get to participate in the selection of the arbitrators, the court found that this outcome was explicitly allowed in FINRA Rule 13404(d), which requires a Director to appoint arbitrators without a party’s input when the list of arbitrators is not returned.

Because FINRA clearly followed the FINRA Code’s rules for selecting arbitrators, the Court decided that the issue raised by UBSFS was instead whether FINRA properly applied the rules when it found that UBSFS did not have good cause to extend the deadline for submitting its list of preferences. But the Fourth Circuit concluded that this constituted a procedural question, and relying on the Supreme Court’s decision in Howsam v. Dean Witter Reynolds, Inc., affirmed that such a “procedural question[] which grow[s] out of the dispute and bear[s] on its final disposition [is] presumptively not for the judge, but for the arbitrator, to decide.” The court also noted that the power to determine whether good cause existed was explicitly given to FINRA in FINRA Rule 13412. Furthermore, the court reasoned that arbitrators would be more expert about the issue because it concerned, as stated in Dockser v. Schwartzberg, “the written rules governing the parties’ proceeding.” Accordingly, the Court refused to question FINRA’s decision that there was not good cause for extending the deadline for returning the list of preferences.

Refusal to Reduce the Award

The court next addressed UBSFS’s request for the arbitral award to be offset based on Padussis’s admission of being unable to pay his portion of the award. The court first noted that complying with UBSFS’s request would result in a net profit for UBSFS and thus eliminate any damages he might owe to Padussis. It also found that the offset would constitute a modification of the arbitration award because the agreement explicitly denied “any and all relief not specifically addressed” in the arbitrators’ final decision, which never mentioned the possibility of an offset.

Pursuant to the Federal Arbitration Act, a court may modify an award if it will effectuate the intent of the arbitrators. Here, the court concluded that this modification would not effectuate the intent of the arbitrators because the award never mentioned an offset and there is no other evidence in the record suggesting such an intention. UBSFS contended that the offset of the award would reflect the intent of the arbitrators because it would provide a “simple, fair result” without changing the arbitrators’ valuation decision. But the court rejected this claim, reasoning that UBSFS should have determined the arbitrators’ intent by asking for an offset during the arbitration proceedings. Accordingly, because evidence in the record and the arbitration award did not indicate that the intent of the arbitrators would be effectuated by an offset, the Fourth Circuit chose to not impose an offset on these grounds.

UBSFS last claimed that the offset should be imposed regardless of the arbitrators’ actual intent and that the court should recognize a presumption favoring an offset. The court disagreed, reasoning that such an action would put a “judicial gloss” on the arbitration award. A judicial gloss on this award would be impermissible because the award explicitly limited itself to the relief specifically rendered in the arbitrators’ final decision.

Accordingly, because the intent of the arbitrators would not be effectuated by the offset, and because a presumption of an offset would directly conflict with the arbitrator’s final decision, the court held that granting an offset in this case would be inappropriate.

Conclusion

The Fourth Circuit concluded that UBSFS simply did not want to abide by a result it did not like. Because UBSFS had agreed to arbitration, the dispute was within the scope of that agreement, and the rules for arbitration were selected in the agreement and then followed, the court could find no reason to vacate or modify the award. Accordingly, it affirmed the district court’s decision to deny UBSFS’s motion in its entirety.

By Kelsey Hyde

On October 31, 2016, in the civil case of Masoud Sharif v. United Airlines, Inc., the Fourth Circuit affirmed the decision of the District Court for the Eastern District of Virginia dismissing plaintiff’s claims of unlawful retaliation by his employer. Because plaintiff failed to sufficiently rebut the defendant employer’s reasoning and factual support for their actions against him, the Fourth Circuit found the District Court had correctly granted defendant’s motion for summary judgment and dismissed plaintiff’s claims.

Sharif’s Claims and Subsequent Proceedings

On March 14, 2014, Masoud Sharif and his wife, both employees of United Airlines, Inc. at Dulles Airport in Washington, D.C., embarked on a planned vacation to South Africa. Their trip was scheduled to last until April 4, as a result of their successful bidding and receipt of approximately 20 days off, but, in the midst of those 20 days, Sharif was still assigned to work March 30 to 31 at customer service back in Washington, D.C.  Through the United Airlines “shift-swap” website, he was able to cover one day, but was still scheduled to work March 30.

However, back in 2009, Sharif had been diagnosed with an anxiety disorder, resulting in his qualifying for intermittent leave under the Family and Medical Leave Act (“FMLA”), 29 U.S.C. § 2601, et. seq. (2012), in order to handle his panic attacks. On the morning of March 30, the day of the shift he had unsuccessfully tried to cover, Sharif called from South Africa to take medical leave under the FMLA. Sharif had not made any prior reservations for a return flight to the U.S., but did fly to Italy with his wife the next day, and did eventually depart for Washington on April 3, arriving back just in time for his wife’s shift.

The circumstances of Sharif’s FMLA leave, coincidentally falling on the only day he was scheduled to work in the midst of planned time-off, did not go unnoticed. Instead, this incident, along with another prior instance in September 2013 where Sharif took FMLA leave under similar circumstances, inspired an investigation. Sharif was interviewed by a member of Human Resources and gave a series of inconsistent answers regarding his “unsuccessful efforts” to return home in time for his shift. As a result, senior management was notified that Sharif was untruthful in his answers, and changed his story many times, which, ultimately, led to the conclusion that he never intended to make it back in time to work his shift. Other evidence in employment and travel records also corroborated this conclusion. After being suspended without pay, Sharif was notified that United Airlines planned to terminate him for fraudulently taking FMLA leave and for making dishonest representations during the subsequent investigation. Sharif retired under threat of termination in June 2014.

Challenging Employer Action as Retaliation in Violation of FMLA

            The FMLA includes both a prescriptive element, guaranteeing substantive rights to employees who qualify, and a proscriptive limitation on employers, which makes it unlawful for employers to discharge employees for opposing employment practices that are unlawful under the FMLA. 29 U.S.C. §§ 2615(a)(1), 2615(a)(2). The proscriptive limitation effectively provides plaintiff employees with an avenue to legally dispute retaliation by their employers.

The Fourth Circuit reviewed relevant Supreme Court and Circuit Court decisions to navigate the standards of law and burdens of proof applicable in this case. To succeed on retaliation claims, a plaintiff must show that (1) they engaged in protected activity, (2) the employer took adverse action against them, and (3) this adverse action was casually connected to the protected activity. Yashenko v. Harrah’s NC Casino Co., LLC, 446 F.3d 541, 551 (4th Cir. 2006) (citing Cline v. Wal-Mart, 144 F.3d 294, 301 (4th Cir. 1998)). Thus, employer intent is especially relevant to such claims, and plaintiff can establish such intent by either direct evidence, or under the “burden-shifting framework” introduced by the Supreme Court in McDonnell Douglas Corp. v. Green. 411 U.S. 792, 800-06 (1973).

This burden-shifting framework entails: (a) plaintiff establishing a prima facie case of retaliation; (b) if successful, the burden shifts to the employer to provide some legitimate, non-discriminatory reason for the adverse action to rebut plaintiff’s prima facie case; (c) if successful, the burden shifts back to plaintiff to persuade fact-finders that employer’s explanation in (b) was a “pretext” for discrimination. Id. at 802-04. This third element requires plaintiff to produce sufficient evidence such that a reasonable fact-finder could conclude the employer’s reasons were impermissible.

In addition to these standards specific to the FMLA and retaliation claims, the summary judgment standard further requires that a reasonable jury could find for the non-moving party, in this case Sharif. See Fed. R. Civ. P. 56(a) (2016).

Legal Contentions on Appeal

Sharif filed suit against United Airlines for retaliation in violation of the proscriptive provision of FMLA, arguing they threatened to terminate him for taking FMLA leave and that their proffered reasons were a mere pretext for this discriminatory act. The District Court found that Sharif failed to create an issue of triable fact regarding United Airline’s explanation for his threatened discharge as allegedly pretextual, and awarded summary judgment to the defendant employer, dismissing Sharif’s claims. On appeal, Sharif contends that he has produced sufficient evidence of pretext to survive summary judgment.

Plaintiff’s Failed to Create a Triable Issue of Fact 

            Ultimately, the Fourth Circuit was unpersuaded by plaintiff’s argument that United Airlines’ actions were a pretext for impermissible discriminatory conduct under the FMLA. The Court considered the evidence as a whole, in a light most favorable to the plaintiff, yet could not find any cause for dispute over the logic and reasoning of United Airline’s conclusion. On the contrary, they found all evidence supported the nondiscriminatory motivations for their action against Sharif, based on the facts available from Sharif’s employment records, his noted FMLA leave, and the results of the subsequent investigation. Additionally, the Court found that Sharif’s inconsistent narrative throughout the investigation, as well as his failure to provide any documentation or verification of his own version of the events, did not effectively dispute the evidence proffered by United Airlines, or offer any alternative, such that a fact-finder could reasonably rule in favor of him. Thus, he failed to meet his burden to provide sufficient evidence and create a genuine dispute of material fact regarding his employer’s motives as pretext.

Affirming Dismissal and Defending the Purpose of the FMLA

            Based on their analysis of the case under applicable Supreme Court and Fourth Circuit precedent, the Fourth Circuit affirmed the dismissal of plaintiff’s claims. In doing so, the court also highlighted the fundamental importance of the FMLA, allowing employees to take leave for legitimate family needs and medical reasons without threatening job security, and emphasized that fraudulent invocations and dishonest representations for claims under the FMLA greatly compromise this Congressional goal. As such, their decision reflected the importance in providing employers the ability to sanction employees who threaten to abuse this statute and undermine its purpose.