Employment Law

EEOC Sues Over Transgender Discrimination

Why it matters: In its first cases alleging bias against transgender employees, the Equal Employment Opportunity Commission has filed suit against a Florida eye clinic and a Michigan funeral home. In both actions an employee began the process of transitioning from male to female and both employers reacted by terminating the employees at issue, according to the EEOC. Although the Florida employer claimed the position was being eliminated, it hired a new employee soon after, while the agency said the funeral home director told the employee what she was proposing to do was “unacceptable.” The EEOC alleged that the employers engaged in discriminatory sex-based considerations because the employees were transgender, transitioning in gender, and/or because the employees did not conform to the employer’s sex- or gender-based stereotypes, preferences, or expectations. The two lawsuits reiterate the EEOC’s intent to focus on “coverage of lesbian, gay, bisexual and transgender individuals” as part of its Strategic Enforcement Plan. Employers should be prepared to avoid allegations of discrimination if an employee identifies as transgender or, like the plaintiffs in the EEOC suits, states an intent to transition.

Detailed Discussion

Michael Branson was hired as Director of Hearing Services at the Lakeland Eye Clinic in Florida in July 2010. Branson – who presented as male at the time – provided hearing services to patients referred to him by the clinic’s physicians.

During February 2011, Branson began wearing feminine attire to work, including women’s makeup and clothing, and noticed that coworkers “snickered, rolled their eyes, and withdrew from social interactions with her in response to her changing appearance,” according to the complaint.

In April, the owner of the clinic requested a meeting with Branson and confronted her about her changing appearance. Branson informed him that she was undergoing a gender transition from male to female and would be legally changing her name from Michael to Brandi.

Branson alleged that after the meeting, the ostracism and derogatory comments by coworkers increased and all but one of the physicians stopped referring patients to her, depriving her of a client base. Branson was terminated in June and told that her position was being eliminated and the hearing services division closed. But the division continued to operate and a male employee – who conformed to traditional male gender norms – was hired in August, the EEOC said.

The Eye Clinic’s “decision to terminate Branson was motivated by sex-based considerations,” the agency claimed in the complaint. “Specifically, defendant terminated Branson because Branson is transgender, because of Branson’s transition from male to female, and/or because Branson did not conform to the defendant’s sex- or gender-based preferences, expectations, or stereotypes.”

In the Michigan case, embalmer and funeral director Aimee Stephens informed her employer and coworkers of her plans to undergo a gender transition from male to female in a July 2013 letter. Stephens said she planned to dress in appropriate business attire at work as a woman from then on and asked for her colleagues’ support and understanding.

Instead, the EEOC said Stephens was terminated two weeks later, with the funeral home owner stating that what she was “proposing to do” was unacceptable.

Seeking to hold both defendants liable for violating Title VII, the EEOC referenced a 2012 agency ruling in Macy v. Department of Justice, where the Commission recognized for the first time that employment discrimination against transgender employees constitutes discrimination because of sex. “The lawsuits filed today are consistent with the Commission’s position in Macy and binding court precedent,” the agency said in press releases about the cases.

Both suits seek a permanent injunction banning the defendants from engaging in unlawful discrimination and ordering them to institute and carry out policies and programs that provide equal employment opportunities regardless of sex, including gender identity. In addition, the agency requests reinstatement or front pay for Branson and Stephens as well as back pay and punitive damages.

To read the complaint in EEOC v. Lakeland Eye Clinic, click here.

To read the complaint in EEOC v. R.G. & G.R. Harris Funeral Homes, click here.

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Supreme Court to Consider Title VII Religious Accommodations

Why it matters: Can an employer be liable under Title VII for discrimination where an applicant or employee did not explicitly request an accommodation for a religious practice? The U.S. Supreme Court has agreed to answer this question in a high-profile dispute involving an applicant who wore a hijab to a job interview at Abercrombie & Fitch. The plaintiff sued the national retailer alleging the failure to accommodate her religious beliefs violated her Title VII rights. A federal district court granted summary judgment for the plaintiff, but the Tenth U.S. Circuit Court of Appeals reversed. Citing similar decisions from the Third, Fourth, Seventh, and Eighth Circuits, the majority opinion made clear that the burden rests on an applicant or an employee to initially inform an employer of the religious nature of his or her conflicting practice and the need for an accommodation. A dissenting member of the panel noted contrary rulings from the Ninth and Eleventh Circuits. With a Circuit split in place – and religious accommodation a major issue in the workplace – the justices accepted the case. Oral argument and a decision are expected later this term.

Detailed Discussion

In 2008, Samantha Elauf applied for a job at Abercrombie Kids in Tulsa, Oklahoma. During her two interviews, Elauf wore a hijab, or headscarf. But at no point during the process did she inform the employer that she was a practicing Muslim or ask whether the headwear would be an issue.

Abercrombie declined to hire Elauf because of the hijab, which conflicted with the company’s “Look Policy,” the retailer’s dress code for employees. The Policy seeks to promote and showcase the retailer’s “classic East Coast collegiate style” and brand. On behalf of Elauf, the Equal Employment Opportunity Commission (EEOC) brought suit against the retailer, alleging religious discrimination in violation of Title VII.

A federal district court granted summary judgment in Elauf’s favor, and after a damages-only jury trial she was awarded $20,000.

But in a 95-page decision, the Tenth Circuit reversed, holding that the plaintiff failed to set forth a prima facie case of discrimination because Elauf had not requested a religious accommodation.

“Ms. Elauf never informed Abercrombie prior to its hiring decision that her practice of wearing a hijab was based on her religious beliefs and (because she felt religiously obligated to wear it) that she would need an accommodation for the practice, because of a conflict between it and Abercrombie’s clothing policy,” the divided panel wrote.

The majority recognized that employers face a Catch-22 under Title VII. The EEOC “discourages employers from making inquiries in the first instance regarding the religious beliefs or practices of applicants,” while on the other hand, without knowledge of an employee’s need for a religious accommodation, it is hard for employers to provide one. “[H]ow is an employer to know that applicants or employees are engaged in a practice for religious reasons, unless they inform the employer?” the court asked.

Religion is a uniquely personal and individual matter, the panel said, and even generalized knowledge may not be sufficient to guide employers where not all Muslim women wear a hijab and not all women wear a headscarf because of religious beliefs.

“Thus, it is only after an employer is put on notice of the need for a religious accommodation that the EEOC’s policy materials encourage it to actively engage in a dialogue with applicants or employees concerning their conflicting religious practice and possible accommodations that the employer might provide for it,” the court wrote.

Calling its interpretation “the most natural reading” of the language of Title VII, the panel also found support in the EEOC’s own regulations and policy documents, such as its compliance manual and best practices guidance, as well as analogous requirements under the Americans with Disabilities Act.

The EEOC petitioned the high court for review, arguing that the Tenth Circuit created an “additional requirement that an employer’s understanding that a practice reflects religious beliefs must come from explicit statements of the applicant herself.” Such a narrow interpretation of Title VII “threatens broad adverse consequences, particularly in situations involving applications for employment, where applicants may never learn that their religious practices conflict with job requirements and therefore require accommodation,” the agency wrote in its petition.

In its brief in opposition to high court review, Abercrombie told the justices that job applicants should not be allowed “to remain silent and to assume that the employer recognizes the religious motivations behind their fashion decisions.”

To read the Tenth Circuit’s opinion in EEOC v. Abercrombie & Fitch, click here.

To read the EEOC’s cert petition, click here.

To read Abercrombie’s brief in opposition, click here.

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California Protects Unpaid Interns

Why it matters: Joining a growing number of states, California has enacted a new law that provides employment protections to unpaid interns. In late September, Governor Jerry Brown made California the fourth state in the country (and fifth jurisdiction, including Washington, D.C.) by banning sexual harassment and discrimination against unpaid interns in the workplace. The statute extends California’s Fair Employment and Housing Act not only to unpaid interns but to volunteers and individuals in apprenticeship training programs as well. Oregon was the first state to enact such protections in 2013, followed by Illinois and New York this summer. With the passage of California’s law – and similar legislation being considered in states such as Michigan – employers need to be cognizant of the growing trend to extend the protections of employment laws to unpaid interns.

Detailed Discussion

The legal status of unpaid interns is a hot topic in the workplace, with class action lawsuits filed against employers across the country seeking unpaid wages or arguing that interns are protected by employment laws such as Title VII.

Some states have decided to address the matter by passing legislation bringing unpaid interns within the scope of existing employment laws. Oregon became the first state to pass a bill in 2013, followed by Washington, D.C. and over the summer Illinois and New York (see here).

In September, California followed suit.

Previously the state’s Fair Employment and Housing Act (FEHA) protected the following classifications: race, religious creed, religious observance, color, age, sex, sexual orientation, gender identity, gender expression, national origin, ancestry, marital status, medical condition as defined by applicable state law, disability, generic information, military service, military and veteran status, pregnancy, and childbirth and related medical conditions.

AB 1443 added unpaid interns, volunteers, and individuals in apprenticeship training programs to the list.

As of January 1, 2015, it will be considered an unlawful employment practice to discriminate against or to harass an unpaid intern or volunteer on the basis of any legally protected classification unless an exception applies, such as a bona fide occupational qualification.

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Employer’s Requirement to Post a Social Media Disclaimer Passes NLRB Muster

Why it matters: According to a newly released Advice Memorandum from the National Labor Relations Board’s Office of the General Counsel, employers may require their employees to post disclaimers on social media to state their views are their own and not those of their employer. The issue arose in a case involving a challenge to several provisions of an employer’s social media policy, including the requirement that an employee post, “The views expressed on this website/blog are mine alone and do not necessarily reflect the views of my employer.” In a memo prepared in 2012 but just released in September, a member of the Division of Advice recognized that the employer had a legitimate interest in protecting itself from unauthorized postings and found that the disclosure requirement was not unlawful.

Detailed Discussion

U.S. Security Associates provides security services nationwide, employing more than 46,000 workers in 45 states. In October 2010, the company issued a revised employee handbook known as the Security Officer’s Guide, which a New England chapter of the Service Employees Union challenged in the fall of 2011.

The Union argued that several provisions of the Guide violated Section 8(a)(1) of the National Labor Relations Act (NLRA), including a prohibition on “insignia, emblems, buttons, or items other than those issued or authorized” by U.S. Security Associates, a requirement to act “respectfully” to other employees and clients, a confidentiality policy, a chain-of-command rule outlining the process for problem resolution, and the company’s policy on personal blogging and social networking.

Rule 4.21 stated that while U.S. Security Associates “respects the right of employees to use personal websites, social networking websites, multi-media sites, wikis, texting sites, and blogs” during nonworking times, the company wanted to make clear that such activity is an employee’s personal expression.

The policy “has been developed for employees who maintain personal blogs, access social networking web sites or wikis, or engage in texting that contain[s] any references or postings about [U.S. Security’s] business, products, services, or employees,” according to the Guide. “Any [U.S. Security] employee engaged in communication on or through the above-mentioned means is personally responsible for his or her posts and should understand that what is posted is track-able, traceable and permanent.”

Employees who identify themselves as U.S. Security workers or discuss matters related to the business “may create an impression of speaking on behalf of [U.S. Security],” the company wrote, and must follow the company policy. “Failure to adhere to this policy may result in legal action or discipline up to and including termination of employment,” the Guide warned.

“Employees must make clear that the views expressed by them are their own and do not necessarily represent the views of [U.S. Security]. If you identify yourself anywhere on a web site, blog, or text as an employee of [U.S. Security], make it clear to your readers that the views you express are yours alone and that they do not necessarily reflect the views of the company. To reduce such possible confusion, we require that you put the following notice in a reasonably prominent place on your site: ‘The views expressed on this web site/blog are mine alone and do not necessarily reflect the views of my employer, U.S. Security Associates, Inc.’”

The policy also prohibited the disclosure of “sensitive, proprietary, confidential, or financial information” about the company, its customers, clients, parents, subsidiaries, or affiliates, and required that employees obtain advance written permission from the company before linking to the company website. Employees were also instructed by the Guide to obey the law, express themselves in a “respectful manner,” and refrain from posting anything “obscene, defamatory, profane, discriminatory, libelous, threatening, harassing, abusive, hateful, [or] embarrassing to another person or entity.”

Despite the Union’s challenge, Associate General Counsel Barry J. Kearney found the disclaimer requirement was lawful.

“[T]he employer has a legitimate interest in protecting itself against unauthorized postings purportedly on its behalf and the requirement would not unduly burden employees in the exercise of their Section 7 right to discuss working conditions,” he wrote in the memorandum. “Although one could argue that the disclaimer requirement would be unduly burdensome if it was applicable to text messages, in light of their brevity, the employer’s rule requires the disclaimer only on a ‘site,’ where posting the disclaimer would not be a burden.”

Kearney said the prohibition on disclosing “confidential” and “sensitive” information was unlawfully overbroad, however, because employees could reasonably construe the language to include personnel records, which could interfere with employee discussions about their terms and conditions of employment. The requirement to obtain written approval before linking or referring to U.S. Security’s website also violated the NLRA.

“First, employees will be hindered in exercising their Section 7 rights if, when discussing their work-related concerns and complaints on social media, they cannot refer third parties to the employer’s website to support, and garner support for, their position,” Kearney wrote. “Furthermore, any work rule that requires employees to secure permission from their employer prior to engaging in Section 7 activities is unlawful.”

The section on obeying the law received mixed results. While mandating that employees express themselves in a “respectful manner” did not arouse the NLRB’s concern, the prohibition on posting “embarrassing” material on social media was unlawful. “Employees would reasonably construe this rule to bar them from discussing work-related complaints, particularly those involving their managers,” according to the memo.

To read the Advice Memorandum, click here.

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IRS Reminds Employers About the Tax Implications of Parking Perks

Why it matters: The Internal Revenue Service (IRS) has provided a reminder to employers about the tax implications of employer-provided parking in Information Letter 2014-0017. If an employer provides a free parking benefit for employees that exceeds the maximum amount that may be excluded from an employee’s income per month, then the value of the benefit exceeding that limit must be included in the employee’s wages for income and employment tax purposes, the agency explained. Up to $250 per month can be excluded from income for “qualified parking,” but in major cities the value may tip over the monthly allowance, triggering tax withholding requirements. Employers that provide qualified parking to employees would be well advised to review the value of their perks to ensure they are not facing potential tax liability.

Detailed Discussion

In response to a request from an employer providing on-site parking to its employees, the IRS published a letter setting out information on the taxation of employer-provided parking.

The definition of gross income excludes benefits that meet the definition of a “qualified transportation fringe” benefit under Section 132(a)(5) of the Internal Revenue Code. Included on the list of qualified fringes is qualified parking, which is located on or near the business premises of the employer but does not include any parking at or near the employee’s home.

Under the Code, the following circumstances must be satisfied: parking is provided on property that the employer owns or leases, the employer pays for the parking, or the employer reimburses the employee for parking expenses.

The amount excludable for qualified parking may not exceed $175 per month, but the amount is indexed for inflation on an annual basis and was increased to $250 per month for 2014. The $250 allowance is not affected by the use of other qualified fringe transportation benefits such as transit passes or fare cards.

How to value the cost of parking? Transportation benefits are generally valued at fair market value (FMV). In the case of parking, the FMV would be based on the cost to pay for parking at the same location over the same time period or at a comparable lot under similar circumstances. If an employer owns the lot, the FMV would be the amount the general public must pay to park. If the lot does not offer public parking, the employer should consider the amount charged by nearby parking facilities, per Regulation 1.61-21(b)(2).

Employers providing parking to employees with a fair market value of $250 or less per month can breathe easier. But in those locations where parking is a premium, employers need to be aware of Regulation 1.132-9(b) Q/A 8, which states that “an employee must include in gross income the amount by which the fair market value of the benefit exceeds the amount paid by the employee, if any, and any amount excluded from gross income under Section 132(a)(5).”

The Regulation also states that “if an employer provides an employee with a qualified transportation fringe that exceeds the monthly limit and the employee does not make any payment, the value of the benefits provided that exceed the monthly limit must be included in the employee’s wages for income and employment tax purposes.”

If the amount over and above the $250 limit is included in the employee’s wages, employers must withhold for federal income tax as well as Federal Insurance Contributions Act and Federal Unemployment Tax Act taxes.

To read IRS Information Letter 2014-0017, click here.

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