Employment Law

New EEOC Suits: Discrimination Based on Sexual Orientation Violates Title VII

Why it matters

The Equal Employment Opportunity Commission (EEOC) filed a pair of landmark lawsuits alleging sex discrimination based on sexual orientation, charging Scott Medical Health Center in Pennsylvania and Pallett Companies in Maryland with violations of Title VII. A supervisor at Scott subjected a gay male employee to harassment because of his sexual orientation, the agency alleged, repeatedly using antigay epithets and making other offensive comments about his sex life and sexuality. After complaining to his employer to no avail, the employee quit, the EEOC said. In the second suit, a lesbian employee was harassed by her male supervisors with comments about her orientation and appearance ("I want to turn you back into a woman," for example), according to the agency's complaint, and then fired when she reported the behavior. Sexual orientation discrimination, by its very nature, is discrimination because of sex, the EEOC emphasized. "With the filing of these two suits, EEOC is continuing to solidify its commitment to ensuring that individuals are not discriminated against in workplaces because of their sexual orientation," agency General Counsel David Lopez said in a statement. "While some federal courts have begun to recognize this right under Title VII, it is critical that all courts do so."

Detailed discussion

One of the priorities identified by the Equal Employment Opportunity Commission (EEOC) in the agency's Strategic Enforcement Plan was addressing emerging and developing issues in the coverage of lesbian, gay, bisexual and transgender individuals under Title VII's sex discrimination provisions.

Last year, the Commission released a federal sector decision that determined sexual orientation discrimination, by its very nature, is discrimination because of sex in violation of Title VII. Sexual orientation discrimination necessarily involves treating workers less favorably because of their sex because sexual orientation as a concept cannot be understood without reference to sex, the Commission wrote in Baldwin v. Department of Transportation, and the discrimination is rooted in noncompliance with sex stereotypes and gender norms, which have long been found to be prohibited sex discrimination under Title VII. In addition, sexual orientation discrimination punishes workers because of their close personal association with members of a particular sex, such as marital and other personal relationships.

Furthering the goals of its Strategic Plan—and relying upon the Baldwin case—the agency filed its first lawsuits alleging sex discrimination based on sexual orientation against employers in Maryland and Pennsylvania.

A gay male, Dale Baxley, worked in a telemarketing position at Scott Medical Health Center in Pennsylvania. Over the course of several weeks in the summer of 2013, Baxley's supervisor "routinely made unwelcome and offensive comments" at least three to four times each week, according to the EEOC's complaint. In addition to antigay epithets, the supervisor often made "highly offensive" remarks about Baxley's relationship with his male partner and also "frequently screamed and yelled" at the employee.

Baxley reported the behavior to the company's president, who expressly refused to take any action to stop the harassment, the EEOC said, causing Baxley to resign in order to avoid the sexually hostile work environment.

The supervisor's conduct "directed at Baxley was motivated by Baxley's sex (male), in that sexual orientation discrimination necessarily entails treating an employee less favorably because of his sex; in that Baxley, by virtue of his sexual orientation, did not conform to sex stereotypes and norms about males to which [the supervisor] subscribed; and in that [the supervisor] objected generally to males having romantic and sexual association with other males, and objected specifically to Baxley's close, loving association with his male partner," the agency alleged.

In a second complaint, the EEOC asserted similar claims against Pallet Companies. Yolanda Boone was hired as a forklift operator in 2013. Most, if not all, of her coworkers were aware of her sexual orientation as a lesbian. About three months after she began working for the Maryland company, the night shift manager requested that she begin working night hours. Boone agreed in order to earn extra income.

But almost as soon as she began working the night shift, the supervisor began harassing her on a weekly basis, making comments such as "I want to turn you back into a woman," "I want you to like men again," and "Are you a girl or a man?" The EEOC said the supervisor also quoted biblical passages to Boone that a man should be with a woman, and on several occasions he grabbed his crotch while staring at her.

Boone complained to her supervisor and the general manager on multiple occasions but no action was taken. After contacting human resources to file a complaint, only to return to the warehouse where the supervisor continued to intimidate and harass her, Boone left work early. The next day, an HR representative and her supervisor called her into a meeting and asked her to resign. Boone refused and was terminated, according to the agency's complaint.

The employer unlawfully discriminated against Boone on the basis of her sex by subjecting her to harassment, which culminated in her discharge—a termination that also violated Title VII as it occurred in retaliation for complaining about the harassment, the EEOC said.

Both lawsuits request a permanent injunction enjoining the employer from engaging in discrimination on the basis of sex and retaliation against those who engage in protected activity as well as an order that the defendants institute and carry out policies, practices, and programs that provide equal employment opportunities based on sex. In addition, the complaints seek back pay, damages for past and future pecuniary losses and nonpecuniary losses, as well as punitive damages for Baxley and Boone.

To read the complaint in EEOC v. Scott Medical Health Center, click here.

To read the complaint in EEOC v. Pallet Companies, click here.

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Employer Dodges Liability for Employee's Disparaging Social Media Posts

Why it matters

Taking a commonsense approach to a lawsuit seeking to hold an employer responsible for an employee's social media posts about a customer, a federal court judge in Hawaii noted that "the law does not impose strict liability on an employer every time an employee steps out of line," dismissing the suit. A Hertz employee posted disparaging and discriminatory remarks about a client on his Facebook page that coworkers liked and commented on. When the customer saw the post, he sued, claiming he suffered reputational harm and post-traumatic stress disorder. Considering claims for negligent supervision, retention, and training, the court said Hertz owed no duty to the plaintiff with regard to the employee's social media posts. Although the employee had posted disparaging comments before, the comments about the plaintiff were not foreseeable, the court determined, as his supervisor was not friends with him on Facebook and would not have seen the prior comments. Antidiscrimination language in the employer's handbook did not create a specific duty with regard to social media, the court added, as such a duty "would require employers to monitor every statement by every employee, as discriminatory statements might be made in person, over the phone, over the Internet, and in letters or other written materials. This is an impossible burden."

Detailed discussion

On February 27, 2012, Maurice Howard visited a Hertz location at the Maui Airport. Later that day, Hertz lot manager Shawn Akina saw Howard walking near the location and posted, "I seen Maurice's bougie ass walking kahului beach road … n**** please!" Three coworkers commented on his post, with Akina posting additional comments in response including that Howard was "a broke ass faka who act like he get planny money," and "it's too bad his CC declines all the time." A fourth coworker liked the comments.

A Facebook friend of Akina's showed the post to Howard, who visited the Hertz location to complain. Akina's supervisor reviewed the post and found it offensive and inappropriate, as well as a violation of Hertz's corporate policy. Akina and three others were either terminated or resigned as a result.

Howard followed up with a lawsuit against Hertz, Akina, and the other employees. He alleged that he suffered post-traumatic stress disorder and was financially damaged because he lost customers as a result of the post. Hertz moved to dismiss the suit and U.S. District Court Judge Susan Oki Mollway granted the motion with respect to some of the claims.

She let Howard's claims for negligent supervision, negligent retention, and negligent training move forward, however. Hertz then moved for summary judgment on these remaining claims.

The relevant question for each claim was whether Hertz owed Howard a duty, with foreseeability as the pivotal issue, the court said.

With respect to negligent supervision and negligent retention, Howard argued that Hertz owed him and other customers a duty of care to prevent Akina from posting harmful social media content at work. He pointed to evidence that in 2009 or 2010 Akina posted a Facebook comment that "made light" of his supervisor after she nearly walked into a coconut tree and made previous negative comments about a customer online.

But the parties agreed the question of foreseeability should be viewed from the perspective of Akina's supervisor, and she testified that she had no knowledge about the prior post about a customer, Hertz countered. She wasn't friends with Akina on Facebook and just because other employees were aware of the post, that knowledge could not be imputed to the supervisor.

The court agreed. "That some of Akina's peers knew of his alleged posts about customers does not create a genuine issue of material fact as to whether … his supervisor also knew of such posts," the judge wrote. The post about the supervisor and the coconut tree also failed to support Howard's foreseeability argument, the court added, because she viewed it as "fairly innocuous" and unthreatening.

"However imprudent the prior post may have been, its content gives no indication that Akina would later make a racist, homophobic, or threatening post about a customer, or that he would post financial nonpublic information about a customer," Judge Mollway said. "Two or three years elapsed between the post about the tree and the post about Howard, making the likelihood of Akina's offensive post about Howard difficult to foresee. The post about the tree did not give rise to a duty on Hertz's part to prevent the harm that eventually occurred."

The court was clear that Akina's post and many of the follow-up comments were "indisputably despicable." But this fact wasn't lost on Hertz, which disciplined all of the employees involved, the court noted. "Howard has not demonstrated the existence of a genuine issue of material fact that [the supervisor] or Hertz foresaw or should have foreseen the danger posed by Akina and should have been more closely supervising his Facebook use earlier or should have fired him earlier," the court said.

Howard alternatively urged the court to base a duty on Hertz's employee handbook, which contained provisions addressing safeguarding customer information, nondiscrimination, and a lack of tolerance for violence. "While Hertz therefore could be said to have recognized these dangers, the law does not impose strict liability on an employer every time an employee steps out of line," Judge Mollway wrote.

Claims of negligent supervision and negligent retention require an inquiry into whether the employer knew or should have known of the danger posed by the particular employee who caused the injury, and the handbook alone was insufficient for Howard to establish a duty.

"Hertz's acknowledgement of possible dangers in its handbook does not suffice by itself to establish a duty of care running from Hertz to Howard," the court said. "It is reasonable and proper for employers to warn against possibilities, but nothing in Hawaii law equates the recognition of possibilities, without more, with the establishment of a duty. Here, the only 'more' is Akina's Facebook posting some years earlier about seeing [the supervisor] nearly walk into a tree. Howard's argument would require employers to monitor every statement by every employee, as discriminatory statements might be made in person, over the phone, over the Internet, and in letters or other written materials. This is an impossible burden."

Turning to the question of negligent training, the court again found Howard's failure to establish the duty element fatal to his claim. The duty to train must be tied to a particular job task that poses a foreseeable risk of harm if performed without adequate training, the judge explained, such as a security guard taught how to apprehend a suspected shoplifter or a social worker trained to handle psychiatric patients.

Howard was unable to identify any specific aspect of Akina's, his supervisor's, or any other Hertz employee's job that posed a risk of danger to Hertz customers as a result of the company's failure to train. Although he suggested the employer had "a duty to properly train its employees to conduct themselves in a lawful manner in their interactions with their customers and the public," this "limitless duty" would require Hertz to train its employees to avoid all unfavorable interactions with or relating to customers, the court said, and could not serve as the basis for a negligent training claim.

Attempts to establish a contractual duty (based on a letter from Hertz's CEO to the company's employees) and argue the plaintiff was in a "special relationship" with Hertz as a business visitor similarly failed to sway the court. And even if Hertz was under a duty to train Akina and others to prevent the harm allegedly suffered by Howard, the plaintiff provided no evidence that such a duty was breached, making no attempt to describe what additional training Hertz should have provided, the court said.

Judge Mollway granted Hertz's motion for summary judgment on all of the remaining claims and directed the clerk to close the case.

To read the order in Howard v. The Hertz Corporation, click here.

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California Appellate Panel Finds Arbitration Agreement Procedurally, Substantively Unconscionable

Why it matters

Continuing California's long, complicated history with arbitration agreements in the employment context, an appellate panel ruled that an employer's arbitration agreement was both procedurally and substantively unconscionable, striking the arbitration provision from the agreement. Martha Carbajal filed suit asserting violations of state wage and hour law. CW Painting countered with a motion to compel arbitration based upon a provision found in her employment agreement. Affirming the trial court, the appellate panel found the provision unconscionable. Procedurally, the provision was part of an adhesion contract that CW Painting imposed on Carbajal as a term of her employment, and although it required the parties to arbitrate their disputes under the American Arbitration Association's rules, it did not identify which rules would apply and the employer failed to provide Carbajal with a copy of the applicable rules. The court also found several substantive deficiencies with the agreement, including a waiver by employees of their statutory rights to recover fees and the ability of the employer to obtain injunctive relief while workers were required to seek relief through arbitration. In another blow to the employer, the panel said it was not required to sever the unconscionable terms and enforce the remainder of the arbitration provision and instead struck the agreement in its entirety. The decision offers a valuable road map for employers about what not to include in arbitration agreements to avoid a similar fate.

Detailed discussion

CW Painting provides residential painting services for homeowners. The company hired Martha Carbajal during her university's on-campus solicitation program. During her interview, Carbajal was provided with an employment agreement that included an arbitration provision.

Under the heading, "LET'S TALK IT OUT," the arbitration provision required Carbajal and CW Painting "to submit any and all disputes to final and binding arbitration in accordance with the rules of the [American Arbitration Association]." The provision had a class action waiver requiring Carbajal to arbitrate any claims she asserted on an individual basis and provided that arbitration costs would be shared equally between the parties unless the law expressly required the employer to bear the entire cost. Each party was responsible for its own attorneys' fees.

The agreement also required Carbajal to keep CW Painting's trade secrets and other information confidential; if she broke this promise, she was required to pay the employer liquidated damages, and CW Painting reserved the right to obtain an injunction restraining her breach. Carbajal signed the documents.

After just a few months of work, Carbajal quit and filed a putative class action against CW Painting. She alleged multiple violations of state law, including the failure to provide meal periods and paid rest periods, minimum wage, and compensation for business expenses, as well as illegal deductions from wages and unfair business practices.

CW Painting moved to compel individual arbitration. A trial court denied the motion and the employer appealed.

As a threshold matter, the appellate panel rejected CW Painting's argument that the Federal Arbitration Act (FAA) governed the agreement and the motion to compel arbitration. As the party asserting FAA preemption, the employer shouldered the burden to establish that the arbitration agreement affected one of three categories of activity: the channels of interstate commerce, the instrumentalities of interstate commerce, or those activities having a substantial relation to interstate commerce.

CW Painting failed to meet its burden, the court said, presenting no evidence to establish any connection to interstate commerce. Carbajal worked in California while serving customers in the state. The employer's argument that she made "frequent" phone calls to customers and used a fax machine was "at most a trivial connection" to interstate commerce, particularly where no other relationship existed between the agreement and interstate commerce, the panel said.

"The evidence here does not show painting a house involves a channel or instrumentality of interstate commerce, and simply using phone lines intrastate to follow up with customers is not a substantial relationship to interstate commerce," the court said, concluding that the argument that the FAA preempted California statutes or case law lacked merit.

Next, the court evaluated the arbitration agreement for unconscionability.

The panel found several factors contributed to the agreement's procedural unconscionability, foremost because it was a contract of adhesion in the employment context. "CW Painting was an employer with superior bargaining power and the arbitration provision is part of a standardized, preprinted form CW Painting requires of all of its interns to sign," the court said. "Carbajal had to sign the Agreement if she wanted to work for CW Painting."

Pushing the level of procedural unconscionability from a modest degree to a moderate level, the employer left the applicable rules open to question. The agreement did not state which of the AAA's almost 100 different sets of active rules were applicable, the employer never provided Carbajal with a copy of the governing rules, and did not offer to explain the arbitration position, the court said. "Moreover, when Carbajal deposed CW Painting's person most knowledgeable about the Agreement and its arbitration provision, the designated person could not identify which set of AAA rules applied even when he was provided with a list of AAA's active and archived rules," the panel wrote.

Turning to substantive unconscionability, the court found three characteristics of the agreement problematic: the agreement allowed CW Painting to seek injunctive relief in court while limiting Carbajal to arbitration, permitted the employer to seek injunctive relief without posting a bond or other security, and waived her statutory right to recover attorneys' fees if she prevailed on her Labor Code claims.

Although the panel recognized that a contractual provision is not substantively unconscionable simply because it provides one side a greater benefit, CW Painting's agreement was unconscionable "on its face" and offered no justification for the "blatantly one-sided provision" permitting the employer to seek injunctive relief while forbidding it for Carbajal. The injunctive relief carve-out created further unconscionability by waiving CW Painting's need to post a bond to obtain an injunction, the court added.

Many of Carbajal's statutory wage claims would entitle her to recover attorneys' fees if she prevailed, the court said, and language in the provision that permitted an arbitrator to award "all types of relief that would otherwise be available to the parties in a court proceeding under State or Federal law" did not save this feature of the agreement. "The arbitration provision's plain language requires the parties to be responsible for their own attorney fees without any exceptions," the panel wrote. "Nothing in the provision's language suggests the parties intended to limit or qualify this provision by also granting the arbitrators broad authority to award all types of relief authorized by law."

"Based on the injunctive relief carve-out provision, the waiver of the injunction bond requirement, and the waiver of Carbajal's statutory right to recover attorney fees on her Labor Code claims, we conclude the Agreement's arbitration provision presents a moderate level of substantive unconscionability," the court said. "When that substantive unconscionability is combined with the moderate level of procedural unconscionability … the Agreement's arbitration provision is unenforceable."

The court's final blow to the employer was affirming the trial court's refusal to sever the unconscionable provisions of the arbitration agreement and instead tossing it in its entirety. Trial courts have the discretion to refuse to enforce a contract as a whole if it is "permeated" by the unconscionability, the panel wrote, if it contains more than one unlawful provision.

"Here, the Agreement contains three substantively unconscionable terms," the court said. "These provisions support the finding the Agreement's arbitration provision was permeated with unconscionability, and therefore we conclude the trial court did not abuse its discretion by refusing to sever these terms and enforce the remainder of the arbitration provision."

To read the opinion in Carbajal v. CWPSC, Inc., click here.

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