Washington Labor, Employment & Employee Benefits Law Blog

Video Interviews: Are They Legal?

Internet technology now makes it possible to interview an employee "in-person" anywhere in the world.  The benefit to employers is obvious.  No longer do employers need to pay expensive travel expenses to facilitate an in-person interview.  At the same time, by viewing a candidate on video, the employer can readily discern things about candidates that could make for illegal employment decisions, such as age, disability, and race.  A recent webinar addressed whether video interviews are problematic from an EEO perspective:  To Video or Not to Video: Social and Legal Considerations of Video Interviews and Video Resumes for Employers and Recruiters.  One of the presenters was Carol Miaskoff, Assistant Legal Counsel for Coordination at the EEOC.  Her guidance was less than equivocal but predictable:  "As with any recruiting technology . . . it all depends how you use it as to whether or not it would violate the federal EEO laws."  Generally speaking, however, Miaskoff and other speakers opine that video interview techniques are perfectly acceptable as long as they are not being used in a discriminatory manner.  Attorney John Chun also presents some "best practices" to stay out of trouble in conducting video interviews.

Washington Company Rejects Ban on Sexual Orientation Discrimination

An employment law issue generated controversy yesterday at a company's annual shareholder meeting in Seattle.  The company is Expeditors International, a Fortune 500 global logistics company based in Seattle.   It trades in the NASDAQ 100 and generates $5 billion in annual revenue.

A shareholder proposal requested adoption of a written policy banning sexual orientation discrimination. The resolution failed after it was unanimously opposed by the board of directors, but it came close with 49% of the vote.  In an article about the resolution published here, a former Expeditors employee is identified as saying that “he experienced an intolerant corporate culture and heard managers use derogatory terms for gays during his three years at the global logistics company.”

A copy of the shareholder proposal can be found here.  Here is the written position statement supporting the resolution:

Employment discrimination on the basis of sexual orientation diminishes employee morale and productivity. Because state and local laws are inconsistent with respect to employment discrimination, our company would benefit from a consistent, corporate wide policy to enhance efforts to prevent discrimination, resolve complaints internally, and ensure a respectful and supportive atmosphere for all employees. Expeditors International will enhance its competitive edge by joining the growing ranks of companies guaranteeing equal opportunity for all employees.

The board of directors published this statement opposing the resolution:

The Board of Directors unanimously recommends voting against this proposal and believes that our current policy and practice more than achieve the objectives of this shareholder proposal.

Our long standing policy is as follows:

Expeditors has a policy of equal opportunity with respect to race, sex, marital status, age, color, religion, creed, national origin, handicapped, veteran or other protected status. The Company is morally and legally committed to give all persons an equal opportunity for employment and promotion based solely on their individual qualifications and the valid requirements of the position. While supervisors and managers are charged with the responsibility of preventing discrimination, the success of the Company's equal opportunity policy really depends on the unbiased attitudes and actions of all employees.

The factors specifically listed in the first sentence of the existing policy are those prohibited by existing federal law. The second sentence of this policy goes beyond these basic legal requirements and obligates the Company to extend equal opportunity in employment and promotion to all persons subject only to classification based upon individual qualifications and valid requirements of the particular position. This shareholder resolution itself implies that some additional action would be necessary to implement the resolution. This is simply not the case. The Company has received no indication from its employees that discrimination on the basis of sexual orientation is practiced within the Company, nor has the Company received notice from its employees, customers or suppliers that the Company's employment policies or practices jeopardize its relationship with any of them.

The debate reflected in these two position statements is reminiscent of the debate that occurred in the Washington Legislature two years ago before sexual orientation discrimination was declared illegal in the State of Washington. Expeditors' employees in Washington are already protected from sexual orientation discrimination by the Washington Law Against Discrimination, Ch. 49.60 RCW.

In the Washington Law Against Discrimination, "sexual orientation" is defined in very broad terms, as follows:

"Sexual orientation" means heterosexuality, homosexuality, bisexuality, and gender expression or identity. As used in this definition, "gender expression or identity" means having or being perceived as having a gender identity, self-image, appearance, behavior, or expression, whether or not that gender identity, self-image, appearance, behavior, or expression is different from that traditionally associated with the sex assigned to that person at birth.”

RCW 49.60.040(15).  No doubt we have not seen the last of this shareholder proposal, at Expeditors or at other companies.  In addition, if a sexual orientation lawsuit is ever filed against Expeditors under Washington law, one also wonders whether a plaintiff's attorney at some point may try to argue that the company's position on this issue provides some evidence of discriminatory intent or company-wide policy condoning sexual orientation discrimination. 

Age Discrimination Case: $560,000 in Attorneys’ Fees

How do you turn a run-of-the-mill termination for poor performance into an $800,000 liability?  We find the answer in the Sears Roebuck catalog. 

Former Sears employee Gunnar Steward sued for age discrimination after his termination for performance reasons.  The facts of the case are relatively unremarkable.  In fact, the evidence supporting Steward’s discrimination claim was weak enough that a judge dismissed the case once, before it was reinstated by the Court of Appeals. 

Instead of settling the case, Sears decided to take the case to trial and lost.  The jury awarded Steward $240,985 ($92,985 in back pay and $148,000 in front pay).  Sears then successfully obtained a trial court ruling setting aside the verdict and ordering a new trial.  However, on appeal, the Third Circuit Court of Appeals reinstated the verdict.  Now, after the dust has settled, Sears must pay not only the $240,000 jury award but also $560,000 in attorney’s fees.  Steward’s attorneys were awarded nearly $425,000 for their work in the trial court and an additional $136,000 for the appeal. 

This case demonstrates that employment discrimination cases are risky, not only because of the damages a jury might award (consider the recent sexual orientation case in Washington that resulted in a verdict of $4.4 million), but also because a successful employee will almost always collect attorney’s fees, which can be substantial.  Employers beware! 

An additional article about this case can be found here.  The Third Circuit Court of Appeals opinion discusses the evidence in the case and can be read here.  The trial court’s recent opinion awarding fees can be read here. 

Congress Passes Genetic Information Nondiscrimination Act

Congress has passed a new employment discrimination law, the Genetic Information Nondiscrimination Act (GINA).  The bill passed the House today by a vote of 414-1. The Senate approved it last week 95-0. It now goes on to President Bush to sign into law.  Under GINA, it will be illegal for employers to make decisions to hire, fire, or promote based on genetic information.  GINA also prohibits using genetic information in decisions on health care coverage or in setting insurance premiums.  A New York Times article about the Act appears here and the full text of the legislation is here. 

Turmoil Surrounds Election of Union Officers

We do not often hear about the internal turmoil that can surround the election of union officers.  But, to borrow a phrase from Donald Rumsfeld, democracy is messy.  Here is an article about two campaigns that are competing for the leadership of the International Association of Machinists District 751, a powerful union that represents more that 25,000 Boeing workers in Seattle, Western Washington, Portland, and Wichita, Kansas.  In this case, democracy involves allegations of “moles” and surreptitious surveillance photos.  The fight sounds more like Clinton vs. Obama than solidarity forever.  Interestingly, the election of union officers precedes impending contract talks with Boeing, which appear headed for a rocky start judging from the reaction to Boeing's pension proposal. 

Supreme Court Considers Age Discrimination Burdens of Proof

The Supreme Court was busy with two employment cases yesterday.  We reported below on the employee benefits case.  The Court also heard arguments in Meacham v. Knolls Atomic Power Laboratory, which addresses the burdens of proof to be applied in age discrimination cases.  Here is a New York Times article about the case.  Briefs and documents about the case can be found here.

Supreme Court Hears Important ERISA Case

The U.S. Supreme Court yesterday heard oral argument in the MetLife v. Glenn case.  This is an important case that could affect all future lawsuits to collect benefits under an employee benefit plan. 

Where an employee benefits lawsuit is governed by ERISA, the lawyers in nearly every case argue over the standard of review.  Those seeking benefits (usually employees or beneficiaries) argue that the court should determine whether the best decision has been reached (so-called de novo review) while employers and plan sponsors argue that the court should defer to the judgement of the decision-maker, i.e., that the decision should be overturned only if it was arbitrary and capricious.  In the Glenn case, the Supreme Court will decide what standard of review should be applied if there is a potential conflict of interest and the same entity that decides whether to pay benefits is also the entity that will pay benefits (e.g., insurance companies or self-insured employers).  The circuit courts have reached different views on this.  

We previously reported on this case here.  A copy of yesterday's oral argument transcript can be read here.  Paul Secunda of the Workplace Prof Blog has some good analysis of the oral argument transcript here, and Roy Harmon on the Health Plan Law blog has analysis here and here.  Copies of briefs, the lower court decision, and related documents can be found here.

Another Court Allows “Benefits Interference” Claim for Terminated Employee

We reported last month on the decision by the 7^th Circuit Court of Appeals in Dewitt v. Proctor Hospital in which the court allowed a claim by a plaintiff who contended that she was fired because of her husband’s high medical bills.  In a similar case decided this week, the 8^th Circuit Court of Appeals has allowed a claim for “interference with employee benefits.”

In Fitzgerald v. Action, Inc., Danny Fitzgerald told his employer that he was scheduled to have surgery.  A short time later, he was terminated due to “lack of work.”  Fitzgerald contended that he was terminated "to prevent him from receiving his healthcare insurance benefits" in violation of § 510 of ERISA.  After Fitzgerald challenged the termination, the employer asserted that Fitzgerald abused restroom privileges and breaks.  Fitzgerald argued that this was a change from the stated “lack of work” reason at the time of the termination. 

Section 510 of ERISA makes it unlawful for an employer to discharge a participant in an employee benefit plan "for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan."  29 U.S.C. § 1140.   To establish a claim for a violation of § 510, a plaintiff must show that the employer had a specific intent to interfere with the employee’s benefits, which may be shown by circumstantial evidence.

The court analyzed Fitzgerald’s case under the McDonnell Douglas framework and concluded that he produced sufficient evidence to show that misconduct may not have been the true impetus behind his termination, but rather a pretext for interfering with his insurance benefits.  The evidence supporting pretext included: (1) the employer's inconsistent explanations for the termination; (2) the employer's failure to follow company policy; (3) more lenient treatment of another employee; and (4) the temporal proximity between when Fitzgerald notified his employer of his surgery and his termination.   A copy of the decision can be read here.

"Public Policy" Wrongful Discharge Claim Based on Court Testimony

Here is an article about an interesting case filed recently in the United States District Court for the Western District of Washington.  A counselor for a mental health agency alleges he was fired because of testimony he gave on the witness stand in a domestic violence case.  A copy of the lawsuit complaint can be read here. 

Boeing Joins List of Companies Seeking Pension Changes

Boeing this week added itself to the list of companies that are phasing out defined benefit pension plans.  In negotiations with its unions, Boeing is proposing that all new employees be enrolled in a 401(k) type plan supplemented with contributions by Boeing.  The proposal is not surprising.  Many companies are working to replace their pension plans with defined contribution plans as the only form of retirement security for many workers.   The Supreme Court addressed that issue in the recent LaRue case.  But will the trend create a retirement crisis in the years to come? 

Consider this interview with Brooks Hamilton from 2006.  Hamilton reports a yield disparity in 401(k) plans in which many individual workers receive very poor investment performance.  According to Hamilton, this “destroy[s] the opportunity for ordinary workers to retire in dignity. They couldn't get there from here. There is no way. Number one, they are contributing too little, too late for the most part. They are contributing the least, and then they are getting lousy investment performance.” 

Much has been written lately on the need for older workers to work longer because of shortfalls in retirement benefits.  Pre-retirees expect to work on average a full decade longer than those already in retirement, with nearly half expecting to work early in retirement and one in three working throughout retirement to bolster their savings.  This is not likely to change anytime soon.  A majority of employers believe that employees prefer higher salaries instead of better retirement benefits.  In addition, for those that do have 401(k) plans, they are tapping their 401(k) account for cash and borrowing and withdrawing funds at a record rate. 

Court Permits “Public Policy” Constructive Discharge Claim Based on Sexual Harassment

Candace Wahl worked for a few months as a dental assistant in a small dental clinic.  A dentist who co-owned the clinic commented about her breasts and the bodies of other employees and female patients, made sexual explicit comments about his sex life, and at one point allegedly masturbated while the two of them were in a darkroom.  After the darkroom incident, Wahl worked the rest of the week and quit the following Monday.  The dentist denied the incidents and contended that Wahl was a bad employee.

Wahl sued on a claim for “wrongful discharge in violation of public policy.”  She had minimal wage loss because she was able to find another job right away, but after a trial she was awarded $20,000 in emotional distress damages.  The trial court’s ruling included the following findings:

It is a violation of the common law of the State of Washington to sexually harass an employee.  There was sufficient evidence to prove a common law claim of sexual harassment against Dr. Moore.

Furthermore, there was a hostile working environment created by Dr. Moore.  When the person you are to report a sexual harassment claim to is the harasser and there is no higher person, there is no requirement to complain.  Were Candace Wahl to have complained to either Dr. Moore or Mrs. Moore, it would not have any benefit and thus would have been an exercise in futility.

Candace Wahl was constructively discharged as the working conditions and environment were so intolerable that a reasonable person would have quit.  Further Candace Wahl quit in response to Dr. Moore's sexually harassing conduct.

There was sufficient evidence to prove emotional distress damages.

The court concludes that a reasonable award to Plaintiff, Candace Wahl is $20,000.

These findings were challenged in the Washington Court of Appeals.  One issue was whether Wahl could pursue a sexual harassment or constructive discharge claim against a small employer.  The clinic had less than 8 employees so Wahl could not state a claim under the Washington Law Against Discrimination, RCW 49.60.  She alleged a common law claim for wrongful discharge based on the “public policy against gender discrimination.” 

The court of appeals permitted Wahl to state a common law claim based on public policy.  According to the court,

[W]hile Wahl cannot bring a statutory claim under chapter 49.60 RCW because the clinic has fewer than eight employees, the clear mandate of public policy against sex discrimination set out in that statute remains and supports the policy element of the common law tort of wrongful discharge in violation of public policy.

The court then noted that a “hostile work environment” claim is “a subset of gender discrimination” and that a “public policy” claim could be based on sexual harassment: 

Public policy favors rebuffing unwanted sexual advances in the workplace where engaging in sexual activity negatively impacts productivity, employment stability, and client care.  Public policy supports Wahl's desire to conduct her work duties without engaging in unwanted sexual activity.

The court also addressed the fact that Wahl was not terminated.  Her claim was allowed based on a theory of “constructive discharge.”  Constructive discharge can apply when an employer engages in a deliberate act that makes working conditions so intolerable that a reasonable person would have felt compelled to resign.  Working conditions can be “intolerable” because of a pattern of conduct or where there are aggravated circumstances.  The employee must show that he or she resigned because of the conditions and not for some other reason, like finding a better job.

Wahl’s case was tried before a judge instead of a jury, but in either situation whether working conditions are intolerable is a factual question to be decided after trial.  Here, the court of appeals found that Wahl satisfied this element of her claim, stating as follows:

Here, the trial court found that a reasonable person would find Dr. Moore's continuous pattern of making sexually graphic comments was an intolerable working condition.  These comments were made a few times a week for at least three months and escalated until, over Wahl's objections, Dr. Moore masturbated in the darkroom while he was supposed to be training her on how to duplicate x-ray film.  The trial court found that Wahl's testimony about the sexual episodes was credible.  We defer to the trial court evidence regarding witness credibility and conflicting testimony.  Under the facts presented here, a rational trier of fact could conclude that Dr. Moore's deliberate sexual harassment behavior created working conditions so intolerable that Wahl reasonably felt compelled to resign.  Thus, Wahl was constructively discharged.

Finally, the trial court upheld the award of emotional distress damages, stating as follows:

At trial, Wahl offered proof of emotional distress when she testified that, following the darkroom incident, she felt disgusted, used, and violated; that she could no longer work for another dentist again; that she has become claustrophobic; that she can only work in warehouse-type open spaces; and that, when she sees a car similar to Dr. Moore's, her stomach "clenches." Wahl also testified that she sought counseling but did not feel the process was helpful.  In addition, Wahl's mother testified that Wahl's mood changed halfway through her employment with Dr. Moore and that Wahl became withdrawn and began to spend more time in her bedroom.  As discussed above, there was sufficient evidence to find that Dr. Moore had wrongfully discharged Wahl in violation of public policy and, thus, damages for the resulting emotional distress proved were recoverable.

The case is Wahl v. Dash Point Family Dental Clinic, Inc. (4/15/2008).  A copy of the decision can be read here.

Are Public Employee Conversations Considered “Private”?

A recent published decision by the Washington Court of Appeals, Kitsap County v. Smith, raises interesting questions under the Washington Privacy Act:  Can conversations with or among public employees be considered "private"? 

Under RCW 9.73.030, it is unlawful to record "private" conversations without obtaining consent of all persons engaged in the conversation.  Anyone who violates this statute is subject to criminal prosecution for a gross misdemeanor and a civil action for damages and attorneys' fees.

In this particular case, Smith, a traffic engineer and senior program manager in a county public works department, recorded numerous conversations with employees and citizens without the knowledge and consent of all parties to the conversations.  It appears that Smith made the recordings to support a civil rights action filed by another employee and possibly to assist in his own retaliation case.  According to the opinion, Smith “recorded these conversations to protect himself because he had been threatened with ‘bodily harm’ and had found that some county employees were ‘illegally undermining and discriminating against other county employees.’”  It also states that Smith “made some of the recordings, particularly those related to some citizen contacts, for other purposes, such as keeping a record of what he told others so he could later report this information accurately.”

Upon learning of Smith’s recordings, the county filed a declaratory judgment action "declaring that David Smith recorded private conversations of County employees in violation of RCW 9.73.030."  Smith opposed the declaratory judgment arguing that the recorded conversations were not “private conversations” subject to the privacy act because they took place during meetings or when he contacted individuals regarding complaints in his capacity as a public employee.  Smith also argued that a declaratory judgment was improper because, by the time the case arrived in court, he had been terminated and thus there was no “justiciable” controversy.

The court of appeals punted on the issue of whether Smith’s actions violated the Privacy Act and whether Smith’s conversations with citizens, coworkers, and managers were “private” conversations under the Act.  However, the court of appeals sent the case back to the trial court to rule on those issues, so these questions could end up squarely in front of the appellate court in the future.   The court of appeals stated as follows:

Here, the County filed declarations from four county employees as well as declarations from three citizens whose conversations Smith recorded, along with transcripts of those recorded conversations.  Each individual stated that they were not aware that Smith recorded their conversations and asserted that, even though others were present during some of these conversations, they believed that these conversations were private.  The conversations with the citizens generally involved disputes with neighbors or attempts to limit trespassing.  The conversations with the co-workers generally related to private and/or personnel matters.

We conclude that the issue of whether conversations with public employees are subject to the Privacy Act and the broader issue of whether certain types of conversations are always considered private conversations for purposes of the Act are issues of great public importance.  Not only should the County be able to advise its employees of the legal limits on their ability to record work-related conversations, but all persons have the right to know whether their conversations with public employees can be surreptitiously recorded.  Clarification of these issues will enhance the County's ability to properly advise its employees and establish policies ensuring protection of all persons' privacy rights.

The court went on to state, “Although the County invites us to reach the issue of whether

Smith's actions violated the Privacy Act, we decline to do so because the trial court did not reach these issues and the record related to these issues is not adequately developed."  The court of appeals remanded to the trial court for full consideration of the county’s declaratory judgment action.  A copy of the case can be found here.

New Leave Law for Victims of Domestic Violence or Sexual Assault

Substitute House Bill 2602 became effective April 1, 2008.  The new leave law in Washington State permits victims of domestic violence, sexual assault, or stalking to take reasonable leave, including intermittent leave, for counseling, medical care, and for legal and law enforcement matters.  The employee is permitted to choose vacation, sick leave, personal time off, or leave without pay, at the option of the employee.  In addition, a victim's family member (defined as child, spouse, parent, parent in law, grandparent, and person the victim is dating )of a victim of domestic violence or assault is entitled to take time off of work to assist a victim in obtaining help or treatment.  An employer is permitted to request verification, such as a police report, court order, or other documentation.  More information about the new law can be found here and here.

New Military Family Leave Act in Washington

Effective June 12, 2008, military families in Washington will have new leave rights under legislation passed by the legislature and signed by Governor Gregoire.  During periods of military conflict, employees can take up to up to 15 days of unpaid leave before their spouse is deployed or while their spouse is on leave from deployment. Senate Bill 6447 also raises the the number of days each year a state or local officer or employee who is a member of the Washington National Guard or Reserves is entitled to a military leave of absence from employment.  More information about the legislation can be found here and here.

Male Police Officer Wins $400,000 in Sex Harassment Case

Out of Springfield, Massachusetts comes this article about a sexual harassment case that resulted in a $400,000 verdict for a male police officer.  According to the published reports, John Brock’s image was superimposed over a woman in a bikini and posted at police headquarters. 

Here are some other recent verdicts in employment cases:

$2.1 million verdict in a so-called “reverse discrimination” case. The plaintiff alleged that she was passed over for a municipal judgeship because the Kansas City Council wanted to hire a minority applicant. 

$6.5 million verdict against Kelly Services for a California woman alleging religious discrimination.  The plaintiff alleged that she was not hired because she was not a member of a church group that received hiring preferences. 

$2.2 million verdict against Chase Manhattan for violations of the Family and Medical Leave Act (FMLA).

$1.2 million verdict in an age discrimination case filed by teachers in Pittsburgh.

EEOC Finds Against University of Washington in Age Discrimination Case

Here is an article about an interesting age discrimination case against the University of Washington.  The case was filed by Warren Guntheroth, an 80 year old doctor at the UW Medical Center.  In 2004, the UW paid $35 million for overbilling Medicare and Medicaid.  At the time, Guntheroth blamed the dean of the medical school.  He now claims that the school retaliated against him by questioning his competence, hiring people to review Guntheroth’s treatment of patience, and ordering an assessment of his work.  In the EEOC action, Guntheroth also alleged age discrimination.  The EEOC found “reasonable cause” to support the charge.  According to the article, only 4 percent to 10 percent of EEOC cases result in a “reasonable cause” finding.  Apparently, the UW disputes the finding and has refused to participate in a proposed settlement, and Guntheroth has no plans to pursue litigation concerning the matter. 

Subrogation and Reimbursement of Overpaid Benefits Under ERISA Plans

Recent court cases have highlighted the thorny issues that arise when a benefit plan enforces its subrogation rights or seeks reimbursement of overpaid employee benefits. 

Plan administrators have faced uncertainty about subrogation and reimbursement claims in the wake of the Supreme Court rulings in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356 (2006) and Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002).  In Sereboff and Great-West, the Court addressed what should be considered “equitable relief” in order to state an ERISA claim to recoup benefits that have been paid out to a plan participant.  The lines drawn by the Court have created differing decisions among the circuit courts and uncertainty for plan administrators.   Roy Harmon’s Heath Plan Law blog has been tracking the recent developments.  The results demonstrate how the courts have reached different conclusions in such cases.  See ERISA Group Health Plan Subrogation Update; Plan Fiduciary Claims For Overpayments, Post-Sereboff; Complaint Need Not Identify Specific Funds For Imposition Of Constructive Trust (noting conflicting court decisions on whether identifiable funds are required to state a claim for equitable relief).

The cases create a risk for plan administrators that efforts to collect overpaid benefits or subrogation interests could fall into a black hole between federal and state law.  On one hand, there is a risk that a federal court could hold that a claim for overpaid benefits is a claim for money damages and not “equitable relief” (particularly where the funds are have been disbursed and cannot be “traced”) and therefore that a federal cause of action—and federal court jurisdiction--under ERISA is not permitted.  On the other hand, there is a risk that a state court could hold that ERISA preempts such claims, or that various state law equitable defenses would make such claims uncertain and more expensive to litigate.

One recent case demonstrates that some federal courts have found a way to address this problem.  The United States District Court in the Northern District of Illinois permitted a plan adminstrator’s lawsuit for overpaid disability benefits on the basis of an “equitable lien by agreement.”  In the case, Mr. Van Slyck, the plan participant, collected disability benefits even after he collected retirement benefits from his former employer.  Under the plan, the benefits should have stopped with the retirement payout but they continued until Van Slyck had been overpaid $261,559.  A plan provision required retirement benefits to offset disability benefits.  The court held that a claim for “unjust enrichment” was permitted under the federal common law of ERISA, and the claim for an “equitable lien by agreement” was permitted as a claim for “equitable relief” under ERISA Section 502(a)(3).  According to the court, “there is no tracing requirement where there is an equitable lien by agreement.”    The plan requirement for offsetting retirement benefits from disability benefits was sufficient to create an "equitable lien by agreement" and a claim under Section 502(a)(3).  The case is United Air Lines Inc. Retirement and Welfare Administration Committee v. Van Slyck.  A copy of the decision can be read here. 

But even when an ERISA claim can proceed, plan administrators still face various obstacles in the form of common law limitations on subrogation and reimbursement rights, such as the "made-whole" doctrine.  The “made-whole” doctrine is an insurance principle applied by many state courts (including Washington) and some federal courts.  It provides that subrogation rights cannot be enforced until the party insured has been fully compensated for his or her injuries.  In other words, subrogation is permitted only after a claimant has been “made whole.”  Recently, the 5^th Circuit Court of Appeals held that a state court rule applying the made-whole doctrine was not preempted by ERISA and thus it could be applied in federal cases, at least insofar as fully insured plans are concerned.  The case is Benefit Recovery, Inc. v. Donelon.

If a plan administrator can successfully navigate all of these issues and collect overpaid benefits or a subrogation claim, there also are potential public relations issues that can arise.  Consider the recent example of Wal-Mart, which found itself in a public relations firestorm after attempting to collect a subrogation interest from a plan participant.  In the Wal-Mart case, it sued to recoup health benefits paid to Debbie Shank after Shank and her family settled a tort lawsuit.   For photos and video about the case, see Fight with Wal-Mart Ends for Jackson Woman with Brain Damage from Crash.

Wal-Mart was labeled "Worst Person in the World" by MSNBC's Countdown with Keith Olbermann.  The Executive Director of "Wal-Mart Watch" said, "Wal-Mart claims it must recover the money from the Shank family in 'fairness' and to 'protect' the plan, but those claims are absurd because Wal-Mart self-funds its health care plan. Wal-Mart can and should do the right thing and let the family keep this money to take care of Debbie Shank."  Some writers even attempted to bring the Shank case into the presidential campaign.  See Hillary Clinton and Wal-Mart: What About Debbie Shank?

Ultimately, Wal-Mart decided to drop the claim for reimbursement from Shank's family.

$317,000 Race Discrimination Verdict for Farm Workers

A jury in Yakima, Washington has awarded a verdict of $317,000 for farm workers who claimed they were discriminated against based on race.  The farm workers contended that they were not hired, or they were fired and replaced, in favor of workers brought from Thailand under the federal H-2A guest-worker program in 2004.  An article about the case appears here. 

Washington Court Allows Wrongful Discharge Claim by Women’s Basketball Coach

Trev Kiser was the women’s basketball coach at Clark College in Vancouver, Washington.  Kisar complained to school officials about a pattern of inequality between the men's and women's basketball programs, such as in the quality of the officiating assigned to women’s games, the team budgets, and travel accommodations, and that the college’s athletic director was hostile toward the women’s team.  Kisar testified that, after he complained about the inequity in the programs, he was warned by the athletic director to “quit with the Title 9 complaints" or he would be fired and never coach again.  After he was terminated, Kisar contended that his complaints about the women’s program caused the termination of his employment.  He alleged claims for retaliatory discharge and wrongful discharge in violation of public policy.  The college, on the other hand, contended that Kiser was fired because he misappropriated player per diem funds and misused his school gas card.  The Washington Court of Appeals concluded that the case could go forward because the record supports a reasonable inference that the College had a retaliatory motive when terminating Kiser.  According to the court,

Kiser met his burden of production with regard to pretext, given (1) the direct evidence of [the athletic director's] threat and his continued employment at the College after his dismissal from his coaching duties and (2) the questions Kiser raised surrounding the timing, motivation, and thoroughness of the College's investigation. 

A copy of the “unpublished” opinion can be found here. 

Employee Who Took Company Documents Charged With Computer Trespass

A criminal case filed in King County Superior Court demonstrates the consequences faced by an employee who takes company documents without permission.  Gerald Eastman, an 18-year employee and former quality assurance inspector for Boeing, is on trial facing 16 felony counts of “computer trespass.”  According to published reports, in 2002, Eastman filed a 400-page complaint with the Federal Aviation Administration alleging quality assurance problems with Boeing aircraft.  Starting in 2003, Boeing began investigating how company documents ended up in the hands of a reporter, including documents addressing company production rate numbers, where Boeing would build its 787, how much labor was required to build the 787, and assembly times and sales figures.  Eastman was pinpointed as the source three years later, in 2006.  A report from the trial indicates that Eastman’s defense is that he was an authorized user of Boeing’s computer system, which he used to gather evidence to support his “ethical concerns.”  Seattle police found thousands of Boeing documents on Eastman’s home computer.  Articles and other blog discussions about the case can be found here and here. In an interesting twist to this case, Eastman is keeping a blog about his own experience being on trial.

UPDATE:  The case ended in a mistrial.

Court: Subjective Hiring Process Permitted Racial Bias

A recent case in the 6^th Circuit Court of Appeals demonstrates how discretionary decision-making can lead to employment discrimination claims.  David Dunlap sued his employer for race discrimination under Title VII of the Civil Rights Act of 1964.  Dunlap had 20 years of experience as a boilermaker and boilermaker foreman.  He was one of 21 people who interviewed for 10 boilermaker positions.  Interviews were conducted by a panel comprised of 5 white managers and one African-American manager.  Participants were asked a series of technical and non-technical questions. The interview committee gave individual scores and then reviewed their score sheets together to even out the scores.  Dunlap demonstrated that he was rated lower than other applicants that gave the same interview answers or that had the same background.  In addition, another African-American employee testified that he was chosen for a position, but he had a history being denied jobs and obtained the promotion only after filing an EEOC charge. 

The court found that the assigned weight given to the interview was changed by the questioners to favor a more subjective process, interview questions were not objectively evaluated, and scores were altered to produce a racially biased result.  In short, the evidence demonstrated that the process was manipulated to exclude black applicants who were better qualified than the white applicants selected for full-time jobs at the plant, and that Dunlap himself was subjected to disparate treatment.  The court thus upheld the judgment for Dunlap for backpay, compensatory damages, and attorneys’ fees.  A copy of the case can be read here. 

The case demonstrates how discretionary decision can allow for discrimination to occur or give the appearance that discrimination is occurring.  Another recent case reported here discusses how a lack of diversity in a company can also give the appearance of discrimination.  A lack of diversity at a company led to a $1.4 million verdict in an employment discrimination case, including $455,000 in compensatory damages and $900,000 in punitive damages. 

FLSA Misclassification and Overtime in Retail Jobs

C.R. Wright of Fisher & Phillips LLP recently posted this useful article on Fair Labor Standards Act litigation in retail jobs.  The article notes a huge increase in overtime cases under the Fair Labor Standards Act and state wage and hour laws.  (Indeed, many such cases have been filed here in Washington, including one that was the subject of a recent Washington Supreme Court opinion.)  Mr. Wright discusses class action cases against Starbucks, Home Depot, Family Dollar, Radio Shack, and convenience stores challenging whether retail managers are properly treated as exempt from overtime.  He argues that companies have paid in past cases to avoid legal fees and uncertain results but that some courts are beginning to side with retailers in such cases.  Nevertheless, it is recommended that companies closely monitor whether employees are properly considered exempt from the FLSA as well as the duties and number of employees supervised by exempt employees.

Wage Class Action Settled for $5.25 Million

The City of Colorado Springs agreed to pay police officers $5.25 Million in a wage and hour class action lawsuit.  The suit concerned the classification of Sergeants as exempt employees under overtime laws and the time spent by police officers before and after their scheduled shifts -- off-the-clock “donning and doffing” activities.  Articles about the case appear here and here.

4,000 Nurses On Strike in San Francisco

Nurses at eight Sutter Health Hospitals in the Bay Area started a 10-day strike on Friday, their third walk-out in six months.  The nurses and the hospitals are at loggerheads in negotiations over healthcare, pensions, meal and break periods, and safe lifting policies.  The hospitals have brought in replacement nurses from other states.  Some articles about the dispute appear here, here, here and here. 

Starbucks Baristas Awarded $106 Million for Wage Claims

Last week, we wrote about the wage claim class action concerning the tip jar at Starbucks stores in California.  A class of an estimated 120,000 Starbucks baristas requested pay for their fair share of money from the tip jar.  The court has awarded $106 million.

The suit alleged that store managers and supervisors shared in the tip jar in violation of California law.  The class plaintiffs argued that Starbucks should have paid shift supervisors higher wages instead of taking money from the tip pool, and that the money diverted to managers should be paid to the baristas.  Starbucks unsuccessfully argued that the shift supervisors were allowed to participate in sharing the tips.

It is reported here, that the plaintiffs’ experts sampled 250 stores and calculated the amount due to the class as equal to $1.87 (plus or minus 16 cents) per hour worked by shift supervisors. It is reported here that the restitution order reached back 8 years.  The $106 million award includes $87 million in back tips plus interest of $19 million.  In May, the court will decide how to divide the money among class members and the amount of attorneys’ fees.

Aging Workforce Likely To Increase Age Discrimination Claims and Change Retirement Plans

Within 20 years, nearly 20% of Americans, 71 million people, will be age 65 or older.  Thanks to the baby boomers, America is getting older and doing so at a rapid rate.  Recently, a federal task force published a report addressing the aging of the American workforce.  The task force was comprised of representatives from the Departments of Commerce, Education, Health and Human Services, Labor, Transportation, and Treasury; the Equal Employment Opportunity Commission; Small Business Administration; and Social Security Administration. 

The task force reports that many older Americans want to continue working or need to do so for financial reasons.  Indeed, muc