Retail Labor and Employment Law

Retail Labor and Employment Law

News, Updates, and Insights for Retail Employers

Rumor and Drama at Retailer Creates Jury Question

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In January, a New York federal district court denied a retailer’s bid to dismiss a former regional manager’s lawsuit alleging that workplace rumors spread by three female co-workers that she showed her breasts to the company’s CEO by wearing a revealing blouse without a bra and that her subsequent termination shortly after she complained about the gossip constituted hostile work environment sex discrimination and retaliatory discharge. Baez v. Anne Fontaine USA, Inc., No. 14-cv-56621 (KBF), 2017 U.S. LEXIS 1630 (S.D.N.Y. Jan . 5, 2017).

Background

Baez, who normally dressed without a bra, was employed as the East Coast Regional Manager for Anne Fontaine USA, Inc. (“AFUSA”), a clothing retailer that operates 25 stores nationwide.

In September 2013, AFUSA began looking for candidates to replace Baez because of alleged unsatisfactory job performance.  On September 27, 2013, AFUSA extended an offer for Baez’s position to a candidate who declined the job.

In late December 2013, Baez heard that two female managers who reported to Baez and the company’s retail operations manager (also female) were spreading a rumor that Baez had worn a revealing blouse and no bra at a meeting with the CEO, thereby showing him her breasts. On December 27, 2013 Baez reported the rumor to the company’s Controller who, after conferring with the retail operations manager, advised Baez not to write-up one the managers because Baez had already given her a verbal warning and not to terminate the other manager because she was a top performer.

On the 27th, Baez also sent an email to the CEO complaining that one of the managers was telling her team that Baez would soon be terminated. Baez did not, however, mention the rumor about her revealing blouse.

On January 14, 2014 the Controller responded in writing to Baez’s complaint about the rumor advising her “[R]garding the content of the rumor/gossip, you either need to be strong and say ‘so be it, I make my own fashion and life choices…’ Or, if the content bothers you, you need to adjust what you are doing to prevent such rumors/gossip, but you can’t prevent people from having their opinions.” The Controller reiterated that she did not recommend escalating the matter to a written warning.

On January 30, 2014, however, at the direction of the CEO the Controller and Baez met with one of the managers to issue her a written warning. Baez disagreed with the wording of the warning and the manager refused to sign it.

In the meanwhile on January 6, 2014 a week after Baez’s emailed complaints, AFUSA went back to the candidate who had turned them down in September and arranged for her to meet with the CEO. On January 27, 2014 AFUSA offered and the candidate accepted the position of “North America Director,” to start on February 10, 2014.

Thereafter, on February 7, 2014, the CEO and the Controller terminated Baez’s employment. In the termination meeting, which Baez unilaterally taped, the CEO gave Baez three reasons for her discharge: (1) unsatisfactory management of an employee at one of the stores under her supervision; (2) problems associated with the opening of a store; and (3) that she was connected with “too much drama.”  Baez sued AFUSA, the CEO and the Controller alleging violation of Title VII of the Civil Rights Act of 1964 (“Title VII”), the New York State Human Rights Law (“NYSHRL”) and New York City Human Rights Law (“NYCHRL”).

The Court Rulings

The district court found that Baez’s complaint about the gossip regarding her going bra-less and allegedly showing her breasts to the CEO constituted protected conduct and a “very weak claim of discrimination.” The court noted that “if comments on bra-less attendance at a meeting were made by a man, plaintiff’s case would be much stronger[,]” but found “no legal reason why the gender” alters the analysis. The court opined that “even ‘a single comment that objectifies women . . . made in circumstances where that comment would, for example, signal views about the role of women in the workplace [may] be actionable.”

The district court also held that the short time frame between Baez’s December 27, 2013 Complaint and her February 7, 2014 discharge, in part, for being associated with “too much drama” created a sufficient factual dispute to preclude summary judgment on the retaliation claim. The district court acknowledged that AFUSA had articulated two legitimate business reasons for Baez’s discharge, i.e., alleged poor management of an employee and alleged problems with a store opening. Citing Second Circuit precedent, however, the court stated that retaliation need not be the only reason for the adverse job action, but “only that the adverse action would not have occurred in the absence of the retaliatory motive.”

The district court also concluded that there was an issue of material fact over whether the controller adequately investigated the rumor and whether AFUSA responded with the appropriate discipline.  The court granted summary judgement as to the CEO finding no evidence that he directly participated in or abetted any violation of law.

In sum, the content of the gossip, which concerned Baez’s sex; the remedial nature of discrimination statutes and in particular the expansive nature of the NYCHRL; and the use of the word “drama”- a term more likely to be applied to a woman’s behavior – as a reason for Baez’s discharge following her complaints, combined to create enough of a factual dispute to preclude summary judgment.

Lessons For Employers

Retail employers, especially those operating in New York City, should ensure that employees are counseled about the employer’s anti-discrimination and anti-harassment policies, fully investigate all complaints that potentially implicate anti-discrimination laws, and, when appropriate, discipline offending employees.

Retail employers should also ensure that adverse employment actions are based solely upon legitimate non-discriminatory factors which, preferably, are documented. Employers should be careful to avoid ambiguous or potentially charged language, which might undermine the employer’s legitimate reasons for discharge or discipline, when speaking with the employee.

Employers: How to Handle F17, Mass Strikes, and Political Activity in the Workplace

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Our colleagues Jeremy M. Brown, Steven M. Swirsky and Laura C. Monaco, at Epstein Becker Green, have a post on the Management Memo blog that will be of interest to many of our readers in the retail industry: “F17 and the General Strike Movement – Best Practices for Addressing Political Activity in the Workplace.”

Following is an excerpt:

This week, an activist group calling itself “Strike4Democracy” has called for a day of “coordinated national actions” – purportedly including more than 100 “strike actions” across the country – on February 17, 2017. The group envisions the February 17th strike as the first in “a series of mass strikes,” including planned mass strikes on March 8 (organized by International Women’s Day and The Women’s March) and May Day, and a general “heightening resistance throughout the summer.” The organizers are encouraging people not to work or shop that day. …

Read the full post here.

Prince v. Sears: A Reminder About the Benefits of Complete Preemption

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In Prince v. Sears Holding Corp., the United States Court of Appeals for the Fourth Circuit (the “Fourth Circuit” or the “court”) sets forth a test that should assist sponsors of employee benefit plans covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) in identifying when participants’ state law claims may be removed to the federal courts.  The Fourth Circuit offers a clear explanation of complete preemption under Section 502(a) of ERISA and the test to determine if Section 502(a) completely preempts a state law claim.

Summary of the Facts

This case involves a claim for benefits under an employer-sponsored life insurance plan covered by ERISA. In November 2010, Billy E. Prince (“Prince”) submitted an application to enroll his spouse in the life insurance program sponsored by Sears, his employer.  In May 2011, Sears sent an acknowledgement letter to Prince and began withholding premiums from his pay.  However, in 2012, Sears advised Prince that his spouse’s coverage never became effective because a completed evidence of insurability questionnaire had not been submitted for her.

Prince’s spouse died in May 2014. When Sears denied his claim for benefits, Prince filed a complaint in the Circuit Court of Marion County, West Virginia.  The complaint asserted “constructive fraud/negligent misrepresentation” and “intentional/reckless infliction of emotional distress”.

Sears removed the suit to a United States district court in West Virginia and asked the court to dismiss the complaint, arguing that ERISA completely preempted the state law claims. Prince opposed the motion and moved to remand the case.  The district court held that ERISA completely preempted Prince’s claims and then denied Prince’s motion to remand and dismissed the complaint without prejudice.  Prince filed an appeal with the Fourth Circuit.

The Court’s Analysis

In its opinion, the Fourth Circuit first examined the removal statute and explained that any civil action brought in a State court of which the U.S. district courts have original jurisdiction may be removed to federal court.  The court further explained that when a federal statute completely preempts state law causes of action (referred to as complete preemption), a state law complaint is converted into one stating a federal claim and defendants may remove preempted state law claims to a federal court, regardless of any state-law label that the plaintiff may have used..

The court stated that Section 502(a) of ERISA completely preempts a state law claim when the following three-prong test is met:

  • The plaintiff has standing under Section 502(a) to pursue its claim;
  • The plaintiff’s claim falls within the scope of an ERISA provision that the plaintiff can enforce via Section 502(a); and
  • The claim is not capable of resolution without an interpretation of the contract governed by federal law, i.e., an employee benefit plan covered by ERISA.

The Fourth Circuit found that all prongs of the test for complete preemption were satisfied. With respect to the first prong, Prince conceded that he had standing under Section 502(a), which states that a civil action may be brought by a participant to recover benefits due under a plan, to enforce his rights under the plan or to clarify his rights to future benefits under the plan.  The court determined that Prince satisfied the second prong and  rejected Prince’s argument that ERISA 502(a) did not apply because his claims relied on actions by Sears prior to the denial of benefits.  The court easily concluded that the third prong of the test was satisfied because resolution of Prince’s claim required interpretation of the ERISA life insurance plan maintained by Sears.

Take-Away for Plan Sponsors

The Prince case serves as reminder to plan sponsors that, under the complete preemption doctrine, Section 502(a) of ERISA may allow them to convert claims filed in state court relating to ERISA benefit plans to federal claims and then remove such claims to a federal court.  Since a plaintiff cannot avoid removal by seeking money damages, use of the complete preemption doctrine should provide a valuable tool for plan sponsors in responding to claims under their ERISA plans.

Court Refuses To Dismiss Challenge To OSHA Practice Allowing Unions To Accompany OSHA Workplace Investigations

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United States District Court in Texas has refused to dismiss a law suit challenging OSHA’s practice of allowing union representatives and organizers to serve as “employee representatives” in inspections of non-union worksites. If the Court ultimately sustains the plaintiff’s claims, unions will lose another often valuable organizing tool that has provided them with visibility and access to employees in connection with organizing campaigns.

The National Federation of Independent Business (‘NFIB”) filed suit to challenge an OSHA Standard Interpretation Letter (the “Letter”), which sets forth the agency’s position that an employee of a union that does not represent the workers at the site may accompany the OSHA representative conducting an inspection. The Federation argued on behalf of itself and one of its members because OSHA had permitted a representative of the Service Employees International Union (“SEIU”) to accompany him despite the fact the SEIU did not represent the workers at the facility. The lawsuit asserts that in allowing this, OSHA had violated its own rules and gave the union rights that it did not have under the law. In the Letter, issued in February 2013, OSHA gave a new definition of “reasonably necessary,” which supported its holding, for the first time, that a third party’s presence would be deemed “reasonably necessary,” if OSHA concluded that the presence of the third party “will make a positive contribution” to an effective inspection. The NFIB’s lawsuit contradicted both the OSHA statute itself and OSHA regulations issued in 1971 following formal rulemaking.

While OSHA asked the Court to dismiss the lawsuit, claiming that the NFIB lacked standing to bring the lawsuit because it could not demonstrate that it had been harmed, and that the lawsuit was procedurally flawed for a number of other reasons as well, Judge Sidney A. Fitzwater denied the U.S. Department of Labor’s Motion to Dismiss, finding that “NFIB as stated a claim upon which relief can be granted,” and that “the Letter flatly contradicts a prior legislative rule as to whether the employee representative” in such a walk-around inspection “ must himself be an employee.”

The rule Judge Fitzwater referred to, 29 U.S.C Section 1903.8(c) contained OSHA’s policies for what are referred to as “safety walk-arounds,” which are on site workplace inspections. The Letter gives employees in the workplace the right to have a representative present during such an inspection. OSHA’s own rules make clear that such “authorized representative(s) shall be an employee(s) of the employer,” but that when “good cause is shown why accompaniment by a third party who is not an employee of the employer (such as an industrial hygienist or a safety engineer) is reasonably necessary to the conduct of an effective and thorough physical inspection of the workplace, such third party may accompany the Compliance Safety and Health Officer during the inspection.” (emphasis added)

If the ultimate outcome of the case, which seems likely, is a finding that OSHA does not have the authority to permit union representatives to participate in OSHA inspections of workplaces where they do not represent the workers, the effect would be to deny unions a potentially potent tool for organizing. As Judge Fitzwater described in his Memorandum and Order, unions such as the UAW in its ongoing organizing campaign at Nissan in Tennessee have come to rely upon participation in OSHA inspections as a valuable tool.

While it is too soon to say whether the Department of Labor will continue to defend the 2013 Letter and the position that OSHA has the right to permit union representatives to participate in safety and health inspections, Judge Fitzwater’s denial of the motion to dismiss raises serious doubt as to the long term viability of OSHA’s position.

Plan Sponsors Can Draw Guidance (and Comfort) from New DOL FAQs

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Our colleague Sharon L. Lippett, a Member of the Firm at Epstein Becker Green, has a post on the Financial Services Employment Law blog that will be of interest to many of our readers in the retail industry: “New DOL FAQs Provide Additional Guidance (and Comfort) for Plan Sponsors.”

Following is an excerpt:

Based on recent guidance from the Department of Labor (the “DOL”), many sponsors of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA Plans”) should have additional comfort regarding the impact of the conflict of interest rule released by the DOL in April 2016 (the “Rule”) on their plans. Even though it is widely expected that the Trump administration will delay implementation of the Rule, in mid-January 2017, the DOL released its “Conflict of Interest FAQs (Part II – Rule)”, which addresses topics relevant to ERISA Plan sponsors. As explained below, these FAQs indicate that the Rule, as currently designed, should not require a large number of significant changes in the administration of most ERISA Plans. …

Read the full post here.

Five Issues Retail Employers Should Monitor Under the Trump Administration

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A New Year and a New Administration: Five Employment, Labor & Workforce Management Issues That Employers Should MonitorIn the new issue of Take 5, our colleagues examine five employment, labor, and workforce management issues that will continue to be reviewed and remain top of mind for employers under the Trump administration:

Read the full Take 5 online or download the PDF. Also, keep track of developments with Epstein Becker Green’s new microsite, The New Administration: Insights and Strategies.

50 Really Is the New 40

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The Age Discrimination in Employment Act (“ADEA”) protects individuals who are at least 40 years of age from discrimination in the workplace. As such, the outcome of disparate-impact claims under the ADEA hinges, ordinarily, on whether or not an employer’s facially neutral-policy has a disparate impact on employees who are 40 years of age or older.  On January 10, 2017, the Third Circuit, in Karlo v. Pittsburgh Glass Works, LLC, 2017 BL 6064 (3d Cir. 2017), issued a precedential ruling, holding that disparate impact claims under the ADEA are not limited to comparisons of the impact an employer’s policy has on employees over 40 with the impact to employees under 40. Rather, the Third Circuit found that claims premised on an allegation that an employer’s policy impacted workers over the age of 50 are cognizable under the ADEA even when the policy had no disparate impact when employees in their forties were considered.

The defendant employer in Karlo terminated approximately 100 employees through a series of reductions in force (“RIFs”). While the impact of the RIFs did not have a disparate impact when comparing employees under the age of 40 with those over the age of 40, the plaintiffs in Karlo, all 50 years of age or older, asserted an ADEA claim premised on the allegation that the RIFs had a disparate impact on employees who were 50 or older.  Rejecting the defendant employer’s argument that the disparate impact claim failed because no evidence of disparity existed when the younger members of the protected category (employees between the age of 40 and 50) were considered with the employees over the age of 50, the Third Circuit opined that: “The ADEA prohibits disparate impact based on age, not forty-and-older identity,” and that “requiring the comparison group to include employees in their forties has no logical connection to that prohibition.”

The Third Circuit’s decision creates a split among the federal appeals courts on whether the ADEA permits disparate impact claims by subgroups of workers in the “40-and-over” protected category when the alleged bias disproportionately impacts older workers within that protected class. The ruling rejects the view of the Second Circuit (Lowe v. Commack Union Free Sch. Dist., 886 F.2d 1364 (2d Cir. 1989)), Sixth Circuit (Smith v. Tenn. Valley Auth., 924 F.2d 1059 (6th Cir. 1991)), and Eighth Circuit (E.E.O.C. v. McDonnell Douglas Corp., 191 F.3d 948 (8th Cir. 1999), that such claims are not allowed.

The Third Circuit correctly recognized that its decision “may very well require employers to be more vigilant about the effects of their employment practices.” The ruling that disparate impact claims may be asserted by subgroups within the protected category of employees over the age of 40 most definitely complicates employers’ ability to effectuate workforce reductions. Before approving a proposed RIF, retail employers concerned with avoiding potential disparate impact claims cannot simply satisfy themselves that employees over and under the age of 40 are treated fairly.  Retail employers now need to check for age-based impacts across different strata of their employees over the age of 40.

Governor Andrew D. Cuomo Introduces Employee Protective Mandates in New York State

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Our colleagues Judah L. Rosenblatt, Jeffrey H. Ruzal, and Susan Gross Sholinsky, at Epstein Becker Green, have a post on the Hospitality Labor and Employment Law Blog that will be of interest to many of our readers in the retail industry: “Where Federal Expectations Are Low Governor Cuomo Introduces Employee Protective Mandates in New York.”

Following is an excerpt:

Earlier this week New York Governor Andrew D. Cuomo (D) signed two executive orders and announced a series of legislative proposals specifically aimed at eliminating the wage gap in gender, among other workers and strengthening equal pay protection in New York State. The Governor’s actions are seen by many as an alternative to employer-focused federal policies anticipated once President-elect Donald J. Trump (R) takes office. …

According to the Governor’s Press Release, the Governor will seek to amend State law to hold the top 10 members of out-of-state limited liability companies (“LLC”) personally financially liable for unsatisfied judgments for unpaid wages. This law already exists with respect to in-state and out-of-state corporations, as well as in-state LLCs. The Governor is also seeking to empower the Labor Commissioner to pursue judgments against the top 10 owners of any corporations or domestic or foreign LLCs for wage liabilities on behalf of workers with unpaid wage claims. …

Read the full post here.

Are You Prepared to Ban the Box? New Ordinances Prohibit Los Angeles Employers from Asking About Criminal Convictions Before Making Conditional Job Offers

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On December 9, 2016, Los Angeles Mayor Eric Garcetti signed ordinances no. 184652 and 184653, collectively referred to as the “Fair Chance Initiative.” These ordinances prohibit employers and City contractors (collectively “Employers”), respectively, from inquiring about job seekers’ criminal convictions until after a conditional offer of employment has been made. Both ordinances will go into effect on January 22, 2017 and will impact all employers in the City of Los Angeles and for every position which requires an employee to work at least an average of two hours per week within the City of Los Angeles and all City contractors and subcontractors, regardless of their location.

No Criminal Inquiry Until After Offer

Specifically, these ordinances prohibit Employers from inquiring about a job applicant’s criminal history, at any time or in any manner, unless and until a Conditional Offer of Employment has been made to the applicant. Following the Conditional Offer of Employment, Employers are permitted to request information regarding the applicant’s criminal history. However, Employers can only withdraw or cancel the conditional offer as a result of the applicant’s criminal history after engaging in the “Fair Chance Process.”

New “Fair Chance Process” Required

The “Fair Chance Process” requires Employers to prepare a written assessment highlighting the specific aspects of the applicant’s criminal history that pose an inherent conflict with the duties of the position sought by the applicant. Employers must provide the applicant with written notification of the proposed withdrawal of the conditional offer, a copy of the written assessment regarding the risks posed by the applicant’s criminal history, and any other relevant documentation. The applicant is then given an opportunity to provide the Employer a response to the written assessment, including any supporting documentation. Employers must wait at least 5 business days after the applicant is informed of the proposed withdrawal before taking any action, including filling the position for which the applicant applied.

New Posting and Recordkeeping Requirements

Additionally, Employers’ job postings must now include a notice stating that they will consider all qualified applicants regardless of their criminal histories, in compliance with these ordinances. Employers must also conspicuously post a notice regarding the “Fair Chance Initiative” in a location in the workplace visible to all job applicants; this notice must also be sent to each union or workers’ group with which the employers have any agreement that governs over employees. Further, Employers must retain all job application documents for three years. Penalties for violations of these ordinances may be assessed at up to $500 for the first violation, up to $1,000 for the second violation, and up to $2,000 for subsequent violations. The City may then, at its discretion, distribute a maximum of $500 from that penalty directly to the applicant. The penalty provision of the ordinances will not go into effect for employers in Los Angeles City until July 1, 2017. However, the penalty provision for City contractors is effective immediately.

Exceptions from these ordinances include: (1) employers who are required by law to seek a job applicant’s criminal history; (2) positions for which an applicant would be required to possess or use a firearm; (3) positions which, by law, cannot be held by an individual with a criminal history; and (4) employers who are prohibited, by law, from hiring persons with criminal convictions.

Employers with operations in the City of Los Angeles should:

  1. Remove questions regarding criminal history from job applications;
  2. Ensure future job postings include required equal employment notices;
  3. Defer inquiries regarding criminal history until making conditional job offers; and
  4. Ensure the Fair Chance Process is followed before denying employment based on criminal history.

Top Issues of 2016 – Featured in Employment Law This Week

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The new episode of Employment Law This Week offers a year-end roundup of the biggest employment, workforce, and management issues in 2016:

  • Impact of the Defend Trade Secrets Act
  • States Called to Ban Non-Compete Agreements
  • Paid Sick Leave Laws Expand
  • Transgender Employment Law
  • Uncertainty Over the DOL’s Overtime Rule and Salary Thresholds
  • NLRB Addresses Joint Employment
  • NLRB Rules on Union Organizing

Watch the episode below and read EBG’s Take 5 newsletter, “Top Five Employment, Labor & Workforce Management Issues of 2016.”

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