Employment Law

The Customer Isn't Always Right—Especially When He Harasses Employees

Why it matters

Providing an important reminder about the potential for liability from customers, a new lawsuit was filed against a supermarket chain for allegedly failing to take action after a worker repeatedly complained about a customer's sexual harassment. Daphne Lannan alleged that during her time as a deli counter worker at a Safeway in Lebanon, Oregon, a customer made inappropriate comments about her body and what he would like to do to her while she made him chicken sandwiches. When Lannan complained, her manager said the employer couldn't do anything about the harassment unless a supervisor personally witnessed the behavior, she alleged. When the harassment continued, Lannan quit and filed suit against Safeway, seeking compensatory damages of $67,000. Employers would be well served to remember that liability for discrimination in the workplace can be imposed based on the actions of clients and customers as well as other employees and take appropriate action when such circumstances are alleged.

Detailed discussion

Daphne Lannan began working as a deli clerk on November 15, 2013 at the Safeway in Lebanon, Oregon. Lannan worked diligently for the employer and earned "repeated" praise for her work ethic and customer service, she claims, until she was forced to quit her job due to "severe and pervasive instances of sexual harassment."

Importantly, the harassment did not come at the hands of a co-worker. Instead, "an older, male, Safeway customer" repeatedly stared at her breasts, made "vulgar and perverted" comments about her breasts, including their size and how he wanted to touch them, and made inappropriate comments about her rear-end, including telling her to "move that ass" while she made his sandwich, according to the complaint.

Stressed and anxious about the customer, Lannan said she made repeated complaints about the sexual harassment to her supervisors. The employer did not take any action to stop the harassment, she alleged. "In fact, one supervisor responded to Plaintiff's sexual harassment complaint by telling Plaintiff that Safeway could not do anything about the sexual harassment unless a manager personally witnessed the customer sexually harassing Plaintiff."

Lannan backed up her allegations with affidavits from co-workers filed with her complaint. One fellow deli clerk said the customer would ask for Lannan when he didn't see her and "seemed disappointed she wouldn't be serving him" when she wasn't working; another female employee stated that the customer made inappropriate comments to her as well, asking if she had a boyfriend and talking about sex.

The harassment caused the plaintiff to "dread coming to work," and left her "depressed, anxious, and sad," she claimed. After the customer's comments continued into September 2014, she left work, telling management she could no longer tolerate the harassment. She later resigned.

Safeway violated Oregon state law prohibiting a hostile work environment and gender discrimination as the company knew about the sexual harassment but failed to take corrective action, Lannan alleged.

Her Oregon state court complaint seeks $42,000 in compensatory damages for loss of earnings, loss of benefits, loss of job opportunities, and other employment benefits, with an additional $25,000 requested for emotional distress.

To read the complaint in Lannan v. Safeway, Inc., click here.

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NLRB: Confidentiality Requests for Internal Investigation Must Be Case-Specific

Why it matters

Reversing an administrative law judge (ALJ), the National Labor Relations Board (NLRB) invalidated an employer's confidentiality policy pertaining to workplace investigations. When the company conducted internal investigations, the human resources employee worked from an "Interview of Complainant" form that included a request for those interviewed not to discuss the matter with their coworkers while the investigation continued. Interviews are confidential, the form explained, and interviewees were notified that attempts to influence the outcome of the investigation or retaliation against those who participated could be the basis of corrective action, up to termination. Although an ALJ found the employer had a legitimate business reason for using the form, a majority of the NLRB disagreed. "Employees have a Section 7 right to discuss discipline or ongoing disciplinary investigations involving themselves or coworkers," the panel wrote. "Such discussions are vital to employees' ability to aid one another in addressing employment terms and conditions with their employer." A dissenting member noted that no evidence had been submitted that the request "targeted, prevented or penalized specific [National Labor Relations Act]-protected concerted activity that actually occurred" or that "discipline was imposed based on disclosures involving actual protected concerted activity."

The decision establishes that employers may not use a "one size fits all" confidentiality policy and are required to conduct a case-by-case analysis to determine if such confidentiality provisions are appropriate for a specific investigation. An employer may only restrict discussions "where the employer shows that it has a legitimate and substantial business justification that outweighs employees' Section 7 rights," the panel said. This entails a case-specific inquiry into whether, for example, witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is a need to prevent a cover up.

Detailed discussion

The National Labor Relations Board (NLRB) continued its streak of striking down employer policies when a majority of a three-member panel determined that a form used by Banner Health System ran afoul of Section 7 of the National Labor Relations Act (NLRA).

The case dates back several years, with an administrative law judge (ALJ) ruling in 2011 in favor of the employer. A previous decision from the NLRB was vacated by the U.S. Supreme Court's decision in NLRB v. Canning, so the panel considered the case de novo.

In addition to charges of NLRA violations relating to a technician at Banner Health, the decision focused on a charge that Banner's Human Resources Consultant JoAnn Odell unlawfully requested employees involved in workplace investigations not to discuss the matters with coworkers while the investigations were ongoing.

The requests were made pursuant to Banner's "Interview of Complainant" form, which featured a standard "Introduction for all Interviews" instructing HR employees to explain to employees that the interview was confidential. Employees were requested "not to discuss this with your coworkers while this investigation is going on," as "when people are talking it is difficult to do a fair investigation and separate facts from rumors."

The interviewer was also directed to inform the employee being interviewed that "[a]ny attempt to influence the outcome of the investigation … can be the basis for corrective action up to and including termination."

Odell testified that over the course of 13 months, she requested confidentiality in at least six investigations. She made the request based on the type of investigation, she explained, such as sexual harassment. Other "sensitive situations" including allegations of abuse or hostile work environment claims would also trigger her use of the form.

The requests did not violate Section 8(a)(1) of the NLRA, an ALJ determined, because the purpose of protecting the integrity of the investigation constituted a legitimate business justification for the confidentiality policy.

"That was error," a majority of the NLRB panel wrote. "Employees have a Section 7 right to discuss discipline or ongoing disciplinary investigations involving themselves or coworkers. Such discussions are vital to employees' ability to aid one another in addressing employment terms and conditions with their employer."

The court said this standard complies with earlier NLRB precedent in Hyundai America Shipping Agency, Caesar's Palace, and Phoenix Transit Systems. "[T]hose cases make clear that it is the employer's burden to justify a prohibition on employees discussing a particular ongoing investigation," the panel wrote, and demonstrated a two-fold process for employers.

"First, the employer must proceed on a case-by-case basis," the NLRB said. "The employer cannot reflexively impose confidentiality requirements in all cases or in all cases of a particular type," such as sexual harassment. "Second, a determination that confidentiality is necessary in a particular case must be based on objectively reasonable grounds for believing that the integrity of the investigation will be compromised without confidentiality."

These requirements are appropriate because "they fully and fairly accommodate the competing interests at stake: on one hand, employees' Section 7 right to discuss potential discipline (whether from the perspective of the employee facing possible discipline or from that of his coworkers) and, on the other hand, employers' legitimate need for confidentiality in certain circumstances to protect the integrity of their workplace investigations," the panel wrote. Placing the burden on the employer also made practical sense, the NLRB added, because it was in the best position to know whether confidentiality was necessary in a particular instance.

Applying the standard to Banner Health, the panel said the employer had not offered "any legitimate and substantial justification for Odell's requests to employees to keep investigations confidential." The employer's "generalized concern" was insufficient to outweigh employees' Section 7 rights, the NLRB said, as "Odell's own testimony establishes that she took a more categorical approach."

The fact that the form was used to make requests that lasted only as long as the investigation did not persuade the panel. "The investigative period—before [Banner Health] had reached any conclusions—would seem to be the period when employees likely would be most interested in, and most likely to benefit from, discussion with their coworkers and union representative," the panel said.

Banner Health must cease and desist from maintaining or enforcing its policy of requesting employees not to discuss ongoing investigations and rescind the policy, the majority ordered.

One member of the panel dissented, writing that the majority's decision "represents a disappointing extension of the Board's treatment of workplace investigations," adding that the standard would prove unworkable for employers. The dissent also noted that the Board "routinely imposes more onerous disclosure restrictions in its own investigations and hearings," adding that the decision was inappropriate because in the case at hand, no discipline was imposed and the request did not "target, prevent, or penalize specific NLRA-protected concerted activity that has actually occurred."

To read the decision in Banner Health System, click here.

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California Supreme Court Upholds Arbitration Agreement

Why it matters

In the latest California Supreme Court decision considering the unconscionability of an arbitration agreement, the state's highest court concluded that the provision was not unconscionable, reversing an appellate panel. Gil Sanchez filed a putative class action suit against Valencia Holding Co. after he purchased a used Mercedes-Benz and the dealer invoked an arbitration agreement in the sales contract that included a waiver of class proceedings. An appellate panel found the arbitration agreement unconscionable. But the California Supreme Court, invoking AT&T Mobility v. Concepcion, held that a plaintiff can't dodge the terms of an agreement by arguing after the fact that the deal was unfair. "The application of unconscionability doctrine to an arbitration clause must proceed from general principles that apply to any contract clause," the court explained. Although set in the context of a consumer contract, the principles of the court's analysis apply with equal weight to arbitration clauses in employment agreements and the decision signals the California Supreme Court's increasing respect for arbitration agreements.

Detailed discussion

When Gil Sanchez purchased a 2006 preowned Mercedes-Benz S500V for $53,498.60, the automobile sales contract he signed with the dealership included an arbitration agreement. The agreement provided that arbitrated awards of $0 or over $100,000 as well as grants (but not denials) of injunctive relief could be appealed to a panel of arbitrators. The agreement also required the party appealing the award to front the costs of the appeal, preserved the rights of the parties to go to small claims court and to pursue self-help remedies, and waived the right to class action litigation or arbitration. If the class waiver was deemed unenforceable, the entire arbitration agreement was unenforceable.

Sanchez filed a putative class action against Valencia Holding Company, alleging that the dealership violated consumer law by making false representations about the condition of the vehicle and illegally failed to itemize charges in the total payment for the car. Pursuant to the arbitration agreement, the defendant moved to compel arbitration. The trial court denied the motion, finding the class waiver—and in turn, the entire agreement—unenforceable.

The U.S. Supreme Court then issued its decision in AT&T Mobility v. Concepcion, ruling that the Federal Arbitration Act (FAA) preempted California's unconscionability rule prohibiting class waivers in consumer arbitration agreements. Valencia appealed to the state appellate court, but a panel affirmed the trial court based on a finding that the arbitration agreement as a whole was unconscionably one-sided.

Relying on Concepcion, the dealership appealed and the California Supreme Court reversed. "[W]e hold that Concepcion requires enforcement of the class waiver but does not limit the unconscionability rules applicable to other provisions of the arbitration agreement," the court wrote. "Applying those rules, we agree with Valencia that the Court of Appeal erred as a matter of state law in finding the agreement unconscionable."

Discussing the general principles of unconscionability, the court noted that the various formulations to express it—"shock the conscience," "unduly oppressive," and "overly harsh," for example—all mean the same thing. "Commerce depends on the enforceability, in most instances, of a duly executed written contract," the court said. "A party cannot avoid a contractual obligation merely by complaining that the deal, in retrospect, was unfair or a bad bargain."

An evaluation of unconscionability "is highly dependent on context," the court added, and the standard must be the same for both arbitration and nonarbitration agreements. "[T]he application of unconscionability doctrine to an arbitration clause must proceed from general principles that apply to any contract clause," the court wrote. "In particular, the standard for substantive unconscionability—the requisite degree of unfairness beyond merely a bad bargain—must be as rigorous and demanding for arbitration clauses as for any contract clause."

Turning to the contract at issue, the court said no dispute existed that it was adhesive, which was sufficient to establish some degree of procedural unconscionability. The court then addressed substantive unconscionability, working its way through the terms of the arbitration provision.

The appeal threshold did not obviously favor the drafting party, the court found, as most disputes would result in awards within the acceptable range of $0 to $100,000. The ability to appeal the grant of an injunction tended to favor the dealership, but the court said an injunction could have "far-reaching" remedies such as a change to business practices, justifying the extra level of protection. The retention of self-help remedies did not contribute to the agreement's unconscionability. While it retained the dealer's powers to repossess, it also preserved the ability of both parties to go to small claims court, the court wrote.

Concerns about the arbitration's appellate filing fees and costs needed to be considered on a case-by-case basis, the court said. Although such fees could have the power to deter consumers from using the appeals process, the court noted that Sanchez purchased a "high-end luxury item" and made no showing that costs would have a substantial deterrent effect in his case.

Here the court distinguished employment cases, quoting a 2003 appellate court decision in Gutierrez v. Autowest, Inc. "A family in search of a job confronts a very different set of burdens than one seeking a new vehicle," the court wrote. "Consumers, who face significantly less economic pressure[,] would seem to require measurably less protection."

The court disposed of arguments about the final element of the arbitration agreement, the class waiver, by simply pointing to Concepcion, despite Sanchez's argument that the Consumer Legal Remedies Act (CLRA) states that the right to a class action is an unwaivable right.

"To find the class waiver here unconscionable would run afoul of Concepcion," the California Supreme Court wrote. "Concepcion's rule that states may not require a procedure that interferes with fundamental attributes of arbitration, 'even if it is desirable for unrelated reasons,' applies equally to requirements imposed by statute or judicial rule. We conclude that the CLRA's anti-waiver provision is preempted insofar as it bars class waivers in arbitration agreements covered by the FAA."

In a lengthy concurring and dissenting opinion, one justice agreed with the majority's outcome but wrote that he would not have considered whether the agreement was unconscionable.

To read the opinion in Sanchez v. Valencia Holding Company, click here.

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Ninth Circuit Adopts a Rebuttable Presumption of Age Discrimination in Cases Based on a Difference of 10 or More Years

Why it matters

The Ninth Circuit Court of Appeals adopted a rebuttable presumption that an age difference of ten years or more is substantial in an Age Discrimination in Employment Act (ADEA) lawsuit, with a difference of less than ten years presumptively insubstantial. The case involved a 54-year-old border patrol agent who was interviewed for a new position but was not selected for the final round of consideration; the finalists ranged in age from 44 to 48 years old. The agent sued under the ADEA and a federal court judge granted summary judgment for the federal agency. On appeal, the Ninth Circuit followed case law from other federal appellate courts to adopt the ten-year age difference presumption. Applying it to the case, the panel said that although the age difference between the plaintiff and the finalists was presumptively insubstantial, he also produced evidence that a supervisor expressed a preference for promoting younger agents and that he was repeatedly questioned about his retirement plans, establishing a prima facie case of discrimination. The court reversed and remanded. Employers in the Ninth Circuit should take note of the new presumption regarding age difference in ADEA cases.

Detailed discussion

A border patrol agent for the Department of Homeland Security, John France was assigned to the Tucson Sector in Arizona. In March 2007, a pilot program was established in the sector that divided agents into two categories. Those in administration would keep their current pay grade of GS-14 while the agents assigned to operations would receive a promotion to GS-15.

Twenty-four eligible candidates applied for the four new GS-15 positions created by the program, including France. The ages of the applicants ranged from 38 to 54 years, with France the oldest at age 54. The candidates were ranked based on their scores on an assessment and the top 12 were invited for interviews with three chief patrol agents (CPA), including the Tucson Sector CPA who was in charge of the program.

After the interviews, six candidates were named for final consideration. France was not one of the finalists. The final four agents selected for the new positions were aged 44, 45, 47, and 48 years old. France sued the agency, alleging that the decision not to promote him constituted age discrimination in violation of the Age Discrimination in Employment Act (ADEA).

The border patrol moved for summary judgment, offering nondiscriminatory reasons for not promoting France including a lack of leadership and judgment necessary for the GS-15 position. France countered that in a staff meeting the Tucson Sector CPA expressed his preference for "young, dynamic agents" to fill the new positions and that the CPA had repeated discussions about retirement with him, even though France had made clear he had no plans to retire.

A district court judge granted the motion for summary judgment and France appealed.

The Ninth Circuit Court of Appeals first adopted a new rebuttable presumption for ADEA cases found in both the Sixth and Seventh U.S. Circuit Courts of Appeal.

"We hold that an average age difference of ten years or more between the plaintiff and the replacements will be presumptively substantial, whereas an age difference of less than ten years will be presumptively insubstantial," the court wrote.

Applying the standard, the average age difference between France and those selected for the GS-15 positions was eight years, presumptively insubstantial. "But our analysis does not end there," the panel noted. "A plaintiff who is not ten years or more older than his or her replacements can rebut the presumption by producing additional evidence to show that the employer considered his or her age to be significant. The plaintiff can produce either direct or circumstantial evidence to show that the employer considered age to be a significant factor."

Although the border patrol articulated legitimate, nondiscriminatory reasons for not selecting France, he provided both direct and circumstantial evidence that age was a significant factor in the hiring process that was sufficient to withstand a motion for summary judgment, the court said. In addition, the panel applied the "cat's paw" theory to the Tucson Sector CPA to find that he was involved in and influenced the hiring decisions. (This theory holds that an employer can be liable for discrimination or retaliation if the employer acts innocently but based on input from a biased employee.)

He created the GS-15 positions in the first place, the court said, the other interviewers deferred to him because he would be supervising the new positions, and he recommended the four finalists, with the other two interviewers deferring to his suggestion, recommending the same individuals. A genuine issue of material fact existed as to whether the Tucson Sector CPA—"a subordinate employee with a discriminatory animus"—influenced or was involved in the hiring decisions, despite the fact he was not the final decision maker, the panel said.

The Tucson Sector CPA reportedly expressed his preference for "young, dynamic agents" and repeatedly pressed France about his retirement plans, the court added. "The timing of the retirement discussions is significant," the court explained, because the conversations occurred just prior to the posting of the GS-15 positions. "The close proximity in time could allow a reasonable jury to find by a preponderance of the evidence that France's non-selection based on grounds other than age was pretextual," the panel wrote.

Calling it a "close question," the court reversed summary judgment in favor of the employer and remanded.

"In the total circumstances presented opposing summary judgment, we conclude that France, although less than ten years older than his replacements, has established a prima facie case of age discrimination by showing that the agency considered age in general to be significant in making its promotion decisions, and that [the Tucson Sector CPA] considered France's age specifically to be pertinent in considering France's promotion," the court said.

To read the opinion in France v. Johnson, click here.

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USCIS Issues Final Guidance Requiring Employers to File Amended H-1B Petition and Labor Condition Application for Changes in Worksite Location

Why it matters

In April, the U.S. Citizenship and Immigration Services' (USCIS) Administrative Appeal Office (AAO) issued a precedential opinion setting forth an employer's obligation to file an amended petition when a geographical change in an H-1B employee's worksite occurs, indicating that the requirement would have retroactive application. However, the AAO released final guidance on the decision in late July offering some relief for employers concerned about agency action. While the guidance upholds the requirement to file an amended H-1B petition and Labor Condition Application for a change in worksite location, the agency said it would not pursue employers for past failures to file the necessary paperwork—although the USCIS will not cancel any actions that were initiated in the interim. Employers that want to file an amended petition for workers who moved prior to the date the decision was issued on April 9 have the option to do so. If an employee moved after April 9 and before August 19, employers have until January 15, 2016 to file. And if a H-1B employee moves to a new location after August 19, employers are required to file an amended petition before the employee starts work at the new location, the USCIS reiterated.

Detailed discussion

Under what circumstances does an employer need to file an amended H-1B petition?

Simeio Solutions LLC—an information technology services provider—learned the hard way that a worksite change constitutes a material change to the terms and benefits of employment specified in the original petition in a decision handed down by the U.S. Citizenship and Immigration Services' (USCIS) Administrative Appeal Office (AAO) in April.

The company filed a Petition for a Nonimmigrant Worker (Form I-129) to classify a beneficiary as an H-1B temporary nonimmigrant worker pursuant to the Immigration and Nationality Act. Included in the petition: the necessary Department of Labor (DOL) Labor Condition Application for Nonimmigrant Workers (LCA).

The Form I-129, the LCA, and an accompanying letter of support all attested that the beneficiary would be employed at a Simeio facility in Long Beach, California, working on an in-house project for a specific client with an annual salary of $50,232. The company did not include an itinerary, nor did it list other worksites. The petition was approved.

When USCIS officers later conducted a site visit at the Long Beach facility where the beneficiary was supposed to be working, they discovered that the address had been abandoned two months after the start date of the beneficiary's H-1B employment. Further investigation revealed that the beneficiary was assigned to Simeio's Los Angeles office.

The California Service Center Director (Director) responded with a notice of intent to revoke the approval of the petition. In response, the company submitted a new LCA that provided two worksites for the beneficiary: Camarillo, California, and Hoboken, New Jersey.

These changes in the beneficiary's places of employment constituted a material change to the terms and conditions of employment as specified in the original petition, the Director concluded. Because Simeio failed to file an amended petition with the LCA, the Director revoked the petition.

The AAO affirmed on April 9.

A change in the geographical location of employment of a beneficiary constitutes a material change in the terms and conditions of employment necessitating an amended or new H-1B petition with the corresponding LCA, the agency said. Because Simeio neglected to file the necessary paperwork, the AAO affirmed the Director's decision to revoke the petition.

"Having materially changed the beneficiary's authorized place of employment to geographical areas not covered by the original LCA, the petitioner was required to immediately notify USCIS and file an amended or new H-1B petition, along with a corresponding LCA certified by DOL, with both documents indicating the relevant change," the AAO wrote.

In an attempt to clarify the situation for employers, the USCIS issued guidance on when to file an amended H-1B petition in the wake of the Simeio decision.

Employers must file an amended H-1B petition if the employee changed or is going to change his or her place of employment to a worksite location outside of the metropolitan statistical area (MSA) or an "area of intended employment" covered by the existing approved H-1B petition—even if a new LCA is already certified and posted at the new location, the agency said.

The USCIS noted that the H-1B employee can immediately begin to work at the new location once the amended petition has been filed, with no need to wait for a final decision on the amended petition.

Not all moves will trigger the need to file an amended petition, however. A short term placement (lasting up to 30 days) or visits to non-worksite locations for a management conference or staff seminar, for example, do not require an amended petition. A move within a MSA similarly does not require new paperwork, although the LCA must be posted in the new work location.

The agency also established three categories of filing requirements based on timing. For H-1B workers that changed worksite locations before the Simeio decision was issued on April 9, the "USCIS will generally not pursue new adverse actions … solely based upon a failure to file an amended or new petition regarding that move after July 21, 2015," the agency wrote. Adverse actions already commenced prior to that date will continue.

A safe harbor period was established for employers to file amended or new petitions if they wish to comply with the Simeio decision, but only until January 15, 2016. Employees that moved to a new place of employment between April 9 and August 19, 2015 have until the January 15 date to file an amended petition or "be out of compliance with [Department of Homeland Security] regulations and the USCIS interpretation of the law, and thus subject to adverse action," the agency cautioned, as will the H-1B employee.

Finally, if the change in the place of employment occurs after August 19, the employer must file an amended or new petition in line with the Simeio decision.

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Manatt to Host Events Focused on Employee Risks in Privacy and Data Security: What In-House Counsel Need to Know

Every company faces a data security and privacy risk—not just e-commerce or Internet-related industries—because of employee risks. The retention of employee data is just the first hurdle to overcome in protection and access. Theft of data, proper access and use, documentation of protocols and communication and enforcement of such processes are all a part of a successful campaign to manage the risks of misuse of data. Government investigations and civil litigation can force a company to its heels for the simple misapplication of personally identifiable data.

Join Manatt attorneys Esra Hudson, Carol Van Cleef, Mandana Massoumi and Cherise Latortue to learn the best compliance measures that in-house counsel need to manage a successful internal data protection and privacy policy.

This program will be offered as a webinar on August 25, 2015 and as an in-person breakfast and briefing in our Orange County, California office on September 2, 2015. Both events are complimentary and approved for CLE credit in California and New York.

For details on the August 25th webinar, or to register, click here.

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