Wake Forest Law Review

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.

By Sarah Saint

On March 4, 2016, the Fourth Circuit issued a publish opinion in Gentry v. East West Partners Club Management Company, Inc., a civil case in which Plaintiff Judith Gentry (“Gentry”) sued her former employer East West Partners Club Management Company, Inc. (“East West”) and manager Jay Manner (“Manner”) for wrongful termination in violation of the Americans with Disability Act (“ADA”) in addition to other state and federal law claims. On appeal, Gentry challenges the district court’s jury instructions and the damages award. The Fourth Circuit found no reversible error, and thus affirmed the district court’s judgment.

Gentry’s Injury and Termination

Prior to termination, Gentry was an executive housekeeper at the Maggie Valley Club and Resort (“the Club”). East West managed the Club through Manner. In July 2007, Gentry fell at work and injured her left foot and ankle. She received treatment and surgery, and eventually returned to work in January 2009, though still experiencing pain. In January 2010, her doctor determined that, under North Carolina workers’ compensation guidelines, Gentry had a 30 percent permanent physical impairment and may need further surgery.

When the Club’s insurance carrier offered to settle Gentry’s workers’ compensation claim, Gentry declined and expressed concerns that she would be terminated if she accepted. According to the insurance adjuster, Manner was surprised to learn of these fears, describing Gentry as a “great worker” who did “a great job,” and that he intended to make layoffs due to financial difficulties. Manner denied making these statements. Manner, on the other hand, stated that the insurance adjuster felt extorted by Gentry and that she expected Gentry to make another claim against the Club. The insurance adjuster also denied these statements. Nevertheless, Manner relayed his version of the conversation to the officers of the Club and East West. Gentry’s workers’ compensation claim was settled at mediation in November 2010.

In December 2010, Gentry was terminated. The Defendants claim that the termination was part of a restructuring plan to consolidate management positions due to financial difficulties. Gentry was fired along with two other department heads. All but three housekeeping employees had been terminated. Gentry, on the other hand, alleged that one of the executives told her Manner terminated Gentry because of the “issues with [her] ankle.” The Equal Employment Opportunity Commission (“EEOC”) investigator also confirmed that the executive thought Manner terminated Gentry due to her disability. The executive denied ever making such statements.

Procedural History

Gentry sued the Club and East West for (1) disability discrimination under the ADA and North Carolina common law; (2) sex discrimination under Title VII and North Carolina common law; and (3) retaliation against Gentry for pursuing a workers’ compensation claim, in violation of North Carolina common law. Gentry also sued East West and Manner for tortiously interfering with her employment contract with the Club. The jury found for Gentry on the workers’ compensation retaliation claim and the tortious interference claim. The jury found for the Defendants on all other claims.

On appeal, first, Gentry argued that the district court incorrectly instructed the jury on the causation standard and the definition of disability under the ADA. Second, she argued that the district court erred in refusing to admit certain evidence. Third, Gentry argued that she is entitled to a new trial on damages for claims on which she prevailed.

Standard of Review for Jury Instructions

Challenges to jury instructions are reviewed for abuse of discretion. Jury instructions are viewed in their totality to determine if they adequately informed the jury without misleading or confusing the jury or prejudicing one of the parties. Whether jury instructions were correct statements of law are reviewed de novo. Jury instructions will not be set aside unless they seriously prejudice the objecting party.

ADA Causation Standard

Title I of the ADA prohibits employers from “discriminat[ing] against a qualified individual on the basis of disability in regard to . . . the hiring, advancement, or discharge of employees.” 42 U.S.C. § 12112(a). The district court instructed that Gentry had to prove that her disability was the but-for cause of her termination. Gentry argued that this was in error and that the district court should have instructed that Gentry had to prove that her disability was a motivating factor for her termination. The Fourth Circuit determined that the ADA’s text requires a “but-for” causation standard, and thus the district court did not err in applying a “but-for” causation standard to Gentry’s ADA claim.

Title VII allows for employees to establish actionable disability discrimination under the motivating factor causation standard. The Fourth Circuit pointed to the 1991 amendment to the Civil Rights Act of 1964 providing for this, codifying the Price Waterhouse v. Hopkins decision that first established the motivating factor standard for Title VII cases. However, in Gross v. FBL Financial Services, Inc., the Supreme Court determined that the motivating factor causation standard does not apply to the Age Discrimination in Employment Act (“ADEA”) because Congress did not amend the ADEA when it amended Title VII. The Fourth Circuit determined that the ADA, too, does not allow employees to establish actionable disability discrimination under the motivating factor causation standard, following the reasoning in Gross and joining the Sixth and Seventh Circuits. The few cross-references in the ADA to Title VII do not incorporate the motivating factor standard, contrary to Gentry’s contentions. Using the legislative history and the plain language of the ADA, the Fourth Circuit determined that the language of the ADA requires that “on the basis of” unequivocally means but-for causation.

ADA Definition of Disability

The ADA defines disability as “(A) a physical or mental impairment that substantially limits one or more major life activities of [an] individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” 42 U.S.C. § 12102(1).

The district court instructed the jury that an impairment substantially limits a major life activity “if it prevents or significantly restricts a person from performing the activity.” However, EEOC regulations now provide that an impairment does not need to prevent or significantly restrict a major life activity in order to be substantially limiting.

Because Gentry did not initially object to the district court’s instruction, the standard of review is plain error, which requires Gentry to establish that the district court erred, that the error was plain, and that the error probably affected the outcome of the trial. The Fourth Circuit determined that Gentry failed to establish that the error probably affected the outcome of the trial, and thus affirmed the district court’s definition of disability jury instructions. Gentry could not prove that the jury believed her injury was less severe than the jury instruction required. Instead, there was substantial evidence Gentry was terminated for other reasons. In so concluding, the Fourth Circuit considered that Gentry was terminated more than three years after her injury, that no one complained of her ability to do her job, and that her only evidence that she was terminated due to her disability was the disputed statements of Manner.

The district court also instructed the jury that a “regarded as” disability is actionable if “a perception that [Gentry] was disabled, was the ‘but for’ reason that [Defendants] . . . terminate[d] her employment.” The Fourth Circuit  could not see how Gentry was prejudiced by the jury instruction because the jury would have been instructed to find for Gentry if they believed Manner’s alleged statements. Accordingly, the Fourth Circuit found no abuse of discretion and no serious prejudice to Gentry that would warrant vacating the verdict.

Finally, the district court instructed the jury regarding the “record of” disability, to which Gentry also objected. However, because Gentry did not object to the instructions at trial and did not explain how the language affected her case, the Fourth Circuit could not find that the district court erred or otherwise abused its discretion.

State Law Claims and Damages Awards

For the state law claims, the district court instructed the jury that it could award damages for back pay, front pay, emotional pain and suffering, and nominal damages; and that Gentry had to mitigate her damages by seeking and accepting similar employment and that it could reduce the damages award based on what she could have earned. The jury awarded Gentry $10,000 against East West for workers compensation retaliation and $5,000 against East West and Manner each for tortious interference. Gentry argued on appeal that the trial court erred in denying her motion to introduce evidence of East West’s insurance coverage and indemnification and in denying her motion for a new trial on damages.

Gentry argued that the damages award was minimized by the Defendants’ belaboring of their poor financial conditions and the impression that a large award would be overly burdensome. Further, she argued that she should have been allowed to dispel this impression by presenting evidence of East West’s liability insurance and its indemnification agreement with the Club.

Evidentiary rulings are reviewed for abuse of discretion. Rulings will only be overturned if they are arbitrary and irrational. The Fourth Circuit found no such basis for overturning the district court’s decision.

The Defendants’ evidence of their financial status was relevant in their defense that they did not terminate Gentry because of her disability but rather because of their financial situation. Further, Gentry did not sufficiently show how the evidence of the financial troubles would show that the Defendants could not pay a damages award. Finally, the district court instructed the jury to award Gentry “fair compensation” and did not reference the Defendants’ ability to pay.

Gentry also argued that she is entitled to a new trial on damages because the damage award was inadequate and that the jury found that Gentry failed to mitigate her damages against the clear weight of the evidence.

Motions for new trial are reviewed for abuse of discretion, which is a high standard because the district court is in the position to hear from the witnesses and has a perspective an appellate court can not match. The crucial inquiry is whether an error occurred in the conduct of the trial that was so grievous as to have rendered the trial unfair. Gentry did not meet this substantial burden because she could not assert with certainty the reasons for the jury’s decision on damages. Further, she could not assert that the clear weight of the evidence showed that she properly mitigated her damages. Accordingly, the Fourth Circuit affirmed the district court’s denial of Gentry’s motion for a new trial.

Conclusion

The Fourth Circuit affirmed the judgment of the district court on all the issues Gentry raised on appeal.

DSC03525-B

By Paige Topper

On December 23, 2015, in the civil case of Calderon v. GEICO General Insurance Co., a published opinion, the Fourth Circuit affirmed a district court’s decision classifying the employee position of Investigator in an insurance company as non-exempt from the Fair Labor Standards Act’s (“FLSA”) provision regarding overtime pay.

Administrative Exemption Under FLSA

Under the FLSA, employers are generally required to pay overtime to employees for each hour worked in excess of a 40-hour week. However, there are exemptions to this general rule. The exemption at issue in this case is § 213(a)(1), which exempts “any employee employed in a bona fide executive, administrative, or professional capacity.” Here, the plaintiffs argued that they did not fall within this exemption and thus were entitled to overtime pay while the defendant, GEICO, claimed that the employees were in fact exempt from receiving overtime pay because their title of “Investigators” falls under this provision.

GEICO’s Special Investigation Unit

The heart of this case lies in the distinction between GEICO’s Claims Adjusters and its Investigators working in GEICO’s Special Investigations Unit (“SIU”). Claims Adjusters had the primary job of adjusting insurance claims by investigating, assessing, and resolving the claims. This position required the employees to determine how much GEICO will pay on a claim and then negotiate a settlement if necessary.

On the other hand, Investigators within the SIU, while still a part of GEICO’s Claims Department, principally focused on identifying claims that are potentially fraudulent. Investigators had a set list of procedures for determining whether a claim is fraudulent. Among these procedures, Investigators had to submit interim reports and a final report to their Supervisor for review.

GEICO Classified Investigators as Exempt Under the FLSA

GEICO has continuously classified its Investigators as exempt under the FLSA provision requiring the employer to pay overtime. Specifically, the company examined the Investigators’ classification in 2004 in light of a court decision that GEICO had misclassified a different position as exempt. At that time, the Senior Vice President and the Senior Vice President of Human Resources concluded that despite the court’s decision as applied to Auto Damage Adjusters (which was later reversed) the Investigators were still properly exempt. In 2007, GEICO reviewed the applicability of exemptions for its various employee classifications. GEICO again concluded that the Investigators were properly exempt under the administrative exemption of the FLSA.

In 2010 the named plaintiff, Samuel Calderon, filed suit against GEICO alleging that GEICO improperly classified the Investigator position as exempt from overtime pay under the FLSA. The current case is a class action including all individuals who were or had been employed by GEICO as Investigators within three years of the filing of this action. An additional class action claim was added for unpaid overtime pay under New York’s Labor Law.

This was the second time the Fourth Circuit heard this case. Initially, the district court granted plaintiffs’ motion for partial summary judgment and denied GEICO’s motion for summary judgment, finding that as a matter of law GEICO’s classification of Investigators did not fall within the FLSA’s administrative function exemption. Then the parties filed cross-motions for summary judgment on several remedy issues. The district court determined that because GEICO acted in good faith and not willfully the statute of limitations for plaintiffs’ claims was only two years. Furthermore, the district court held that the plaintiffs were not entitled to liquidated damages or prejudgment interest.

Upon appeal, the Fourth Circuit concluded that it lacked jurisdiction because there was no final judgment, as the district court had not found all the facts necessary to compute the amount of damages awarded to the plaintiffs. Therefore, on remand the district court determined the amount of damages entitled to each plaintiff and entered judgment in favor of the plaintiffs. Both parties appealed again raising the same issues as their original appeals.

GEICO’s Classification of Investigators was Incorrect

GEICO argued that the district court erred in finding that Investigators were not exempt from the FLSA. However, the Fourth Circuit indicated that FLSA exemptions are to be narrowly construed against employers. The Fourth Circuit turned to the regulations to identify whether the plaintiffs were covered under the administrative exemption. The regulations indicate that the exemption covers employees (1) who are paid $455 a week or more, (2) whose primary duty is the performance of office work that is directly related to the management of general business operations of the employer, and (3) whose primary duty includes the exercise of discretion and independent judgment with respect to significant matters.

The Court determined that plaintiffs were entitled to summary judgment because their positions as Investigators were not directly related to the management of GEICO’s general business. Specifically, the Fourth Circuit explained that the directly related element is met when an employee performs work directly related to assisting with the running or servicing of the business. Here, the Investigators’ primary responsibility was too far removed from GEICO’s management or general business operations to satisfy the second element. The Investigators had no supervisory responsibility and they did not recommend or develop GEICO’s business policies with regards to the claims under investigation. The Fourth Circuit concluded that although the Investigators work was important to GEICO, the directly related element hinges on the nature of the work and not the outcome of that work.

The Fourth Circuit looked to both FLSA regulations and Department of Labor opinion letters to support its conclusion. Furthermore, the Court found unpersuasive GEICO’s argument that Investigators nevertheless performed some of the same duties that Claims Adjusters perform and were thus exempt. The Court countered this argument by pointing out that the title of Claims Adjuster alone does not warrant an exemption—the directly related element must be determined on a case-by-case basis. Second, while the Court acknowledged that the Investigator position may have duties that support GEICO’s claims-adjusting process, this has to do with the ultimate consequence of the position rather than the nature of the work, which is the true focus for the directly related element.

Plaintiffs’ Arguments over Remedies

Next, the Fourth Circuit addressed the plaintiffs’ various complaints regarding the remedies awarded to them. First, the plaintiffs argued that the district court erred in determining that GEICO did not act willfully under the FLSA. Whether a party acted willfully in violation of the FLSA impacts the statute of limitations. If the violations were not willful then the limitations period is two years, but if the violations were willful then the period is extended to three years. The Fourth Circuit concluded that due to the close and complex nature of the elements at issue in this case, GEICO did not act willfully in deciding to exempt Investigators from overtime pay.

Second, the plaintiffs alleged that the district court erred in its calculation of compensation to be awarded to the plaintiffs. Specifically, the plaintiffs claimed that there was no agreement between them and GEICO to receive straight-time pay for all hours worked in a given workweek. The Fourth Circuit determined that although the plaintiffs did not always work the same number of hours in a day, they received fixed salaries for the many years that the plaintiffs worked for GEICO. Therefore, an agreement for straight-time pay had been established.

Third, the plaintiffs contended that the district court erred in its denial of plaintiffs’ request for liquidated damages. Although the FLSA provides for an award of liquidated damages, a district court may refuse the award if the employer showed that it acted in good faith. The Fourth Circuit found that, again because the issue was very close and GEICO reviewed the classification on multiple occasions, the district court was allowed to refuse to award liquidated damages.

Finally, the plaintiffs argued that the district court abused its discretion in declining to award prejudgment interest. On this final issue, the Fourth Circuit agreed with the plaintiffs, noting that under the FLSA prejudgment interest is typically necessary, in the absence of liquidated damages, in order to make the plaintiff(s) whole.

Fourth Circuit Affirmed in Part and Denied in Part

As a result of statutory interpretation and supporting authorities, such as the opinion letters, the Fourth Circuit concluded that GEICO misclassified Investigators as exempt under the FLSA for overtime pay and thus affirmed the district court’s grant of plaintiffs’ motion for partial summary judgment. The Fourth Circuit further affirmed the district court’s decisions on the statute of limitations, the calculation of compensation, and the denial of liquidated damages. The Court reversed and remanded on the last issue of awarding prejudgment interest to the plaintiffs.

By Amanda Whorton

On December 18, 2015, the Fourth Circuit issued a published opinion in the civil case Williams v. Genex Services. The court affirmed the district court’s award of summary judgment to the defendant, Genex Services, LLC (“Genex”), in holding that Nancy Williams (“Williams”) was exempt from the mandatory overtime provisions of the Fair Labor Standards Act (“FLSA”).

Williams’ Job Duties

Genex provides services to clients that focus on controlling health care and disability costs, as well as ensuring that workers have access to quality health care. Genex makes sure that injured workers return to work as quickly and as cost-effectively as possible.

Williams works as a Field Medical Case Manager for Genex and began working there in 2011. She is paid a salary by Genex and for 2012 and 2013, that salary was over $80,000. As part of Williams’ job, she must be a licensed Registered Nurse (“RN”).

Williams develops individual care plans for injured workers, reviews their medical records, and interviews them about their conditions. She coordinates injured workers’ medical care and communicates with various groups to assess whether these workers are receiving appropriate care. Williams makes recommendations concerning alternate forms of treatment and provides commentary and suggestions on the injured workers’ conditions. She has two supervisors, but rarely has contact with them.

The FLSA Requires That Employers Pay Overtime Compensation

The FLSA requires that employers pay overtime compensation to employees who work more than 40 hours during a seven-day period, unless the employer falls under one of the FLSA’s exemptions. One of these exemptions is the “learned professional” exemption. The relevant Department of Labor regulation states that for an employee to fall under this exemption, the employee’s primary duty must be the performance of work “requiring advanced knowledge . . . in a field of science or learning,” that is “customarily acquired by a prolonged course of specialized intellectual instruction.”

The District Court Granted Defendant’s Motion for Summary Judgment

Genex filed a motion for summary judgment, which the district court granted because it agreed that Williams was a learned professional and therefore fell under the FLSA exemption. Williams argued that her duties consisted only of clerical, nondiscretionary, and routine work, but the district court rejected that argument. The district court concluded that Williams performed work requiring advanced knowledge, as she advised injured workers on their medical conditions and made her own commentary and suggestions. She was not closely supervised and had a great degree of discretion in performing her duties. The district court further reasoned that because Williams was a licensed RN, she performed work in a field of science that is customarily acquired by a prolonged course of specialized intellectual instruction.

The Fourth Circuit Affirmed

The Fourth Circuit affirmed the district court’s grant of summary judgment to Genex in holding that Williams’ position was properly classified under the “learned professional” exemption in the FLSA. The Fourth Circuit reasoned that Williams regularly had to use her skills, training, and knowledge as a RN to perform her duties, she exercised her own discretion on a daily basis, and was not closely supervised. Therefore, Williams fell under the “learned professional” exemption and was not subject to overtime compensation.

IMG_1391a

By Eric Benedict

On August 10, 2015, the Fourth Circuit Court of Appeals issued its published opinion in the civil case DeMasters v. Carilion Clinic. In DeMasters, the Fourth Circuit had to decide how to properly frame an employee’s conduct to determine whether it constituted ‘protected activity’ under Title VII of the Civil Rights Act of 1964 (“Title VII”). Additionally the Court had to decide if the “manager rule” from the Fair Labor Standards Act (“FLSA”) barred relief in the context of Title VII. The Fourth Circuit reversed the District Courts rulings that DeMasters did not engage in protected activity and that the “manager rule” precluded the suit.

DeMasters Conduct in the  Employee Assistance Program

Carilion, a large healthcare organization, employed Neil DeMasters (“DeMasters”) through its “Employee Assistance Program” (“EAP”). In his role as an EAP, DeMasters met with an employee (“Doe”) who believed he was the subject of workplace sexual harassment by his manager. While the manager was promptly terminated for the harassment, Doe began to face harassment from other employees sympathetic to the Manager. DeMasters approached the Human Resources department at Carilion and criticized its handling of the subsequent harassment. Ultimately, Carilion settled a Title VII suit filed by Doe.   

In the wake of the Title VII settlement, DeMasters was contacted by his employer to inquire into the role DeMasters had played in Doe’s path to litigation. DeMasters admitted that he thought Carilion handled the harassment poorly. Carilion ultimately terminated DeMasters, citing among other things, DeMasters’ failure to take a “pro-employer” position and “fail[ure] to perform or act in a manner that is consistent with the best interests of Carilion Clinic.”

DeMasters’ Title VII Opposition Clause Retaliation Claim

After his termination, DeMasters filed a Title VII Retaliation suit in federal court alleging that he was terminated in violation of Title VII’s opposition clause. To establish a prima facie case under Title VII’s opposition clause, the employee must show, “(1) that [he] engaged in a protected activity…(2) that [his] employer took an adverse employment action…(3) that there was a causal link between the two events.” While the defendant conceded that DeMasters was terminated, satisfying the second element, it argued that DeMasters did not engage in protected activity and that therefore there was no causal link. The District Court agreed with Carilion and dismissed DeMasters’ complaint. The District Court reasoned that, “no individual activity in which DeMasters engaged by itself constituted protected oppositional conduct and that the so-called ‘manager rule,’” precluded relief.

The Fourth Circuit Evaluates Demasters’ Conduct as a Whole

The Fourth Circuit concluded that the court must, “examine the course of a plaintiff’s conduct through a panoramic lens, viewing the individual scene in their broader context and judging the pictures as a whole.” After reviewing the record, the court found that the course of DeMasters’ conduct, from reaching out to the HR department to sharing his opinion with Carilion’s HR manager, was sufficient to satisfy the first prong of the prima facie case.  The court reasoned that, “Neither the text nor the purpose of Title VII is served by this method of parsing a continuous course of oppositional conduct into individual acts and assessing those acts in isolation.”

The “Manager Rule” does not Apply to Title VII Retaliation Claims

Carilion also argued that the “manager rule” would prevent DeMasters from seeking protection. The “manager rule” is derived from  Fair Labor Standards Act litigation. The rule requires an employee to “step outside his or her role of representing the company” before their activity can be protected. Here, DeMasters would have to step outside his role as an EAP before his conduct could be considered protected. The District Court decided that DeMasters’ conduct “could not qualify for protection under Title VII because, as an EAP consultant, he had a duty to counsel Doe and to relay his complaints to Carilion’s HR Department.” Citing the differences between the two statutes and the importance of encouraging employees to voice their concerns, the Fourth Circuit rejected this approach, holding that “[n]othing in the language of Title VII indicates that the statutory protection accorded an employee’s oppositional conduct turns on the employee’s job description….” The court also explained that a contrary rule would leave those most equipped to help employees with their concerns, in this case EAPs, without protection.  The court concluded that the manager rule does not apply to Title VII, and therefore did not preclude DeMasters’ suit.

The Fourth Circuit Reverses the District Court

Ultimately, the Fourth Circuit found that DeMasters could establish a prima facie case based on the entirety of his activity and that the manager rule does not apply to Title VII. The court, therefore, reversed the United States District Court for the Western District of Virginia and remanded the case to allow the suit to move forward.