Minnesota Labor & Employment Law Blog : Minnesota Employment Lawyers & Attorneys : Abrams & Schmidt Law Firm : Unfair Labor Practices, Workplace Investigations : Minneapolis, St. Paul, Twin Cities

Last week, the United States Supreme Court ruled in favor of an employee who had alleged he was terminated from his job as a technician at a hospital, due to his military service.  Staub v. Proctor Hospital. The employee claimed he had been discriminated against in violation of the Uniformed Services Employment and Re-employment Rights Act (USERRA).

Mr. Staub argued that the anti-military hostility of two supervisors had wrongly influenced the final decision-maker, who made the decision to terminate his employment.  The case is troubling because there was no proof the decision-maker was aware of the supervisors' hostility towards Mr. Staub’s military service, or even that she shared in the supervisors’ hostility towards military obligations.   The Court stated, “We therefore hold that if a supervisor performs an act motivated by anti-military animus that is intended by the supervisor to cause an adverse employment action, and if the act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”   The Court aggregated the supervisors’ military hostility and attributed it to the decision maker and her decision to terminate Mr. Staub.  The Court remanded the case to the Seventh Circuit to determine if a new trial was warranted.

Mr. Staub’s legal argument of the case is known as a "cat's paw" theory.  The theory stems from a 1600’s fable by Jean de la Fontaine, where a monkey induces a cat through flattery, to extract roasting chestnuts from a fire.  After the cat has removed the chestnuts, burning his paws in the process, the monkey runs off with the chestnuts and leaves the cat with nothing but his burned hands.  Translated to employment law, an employer can be held liable for discrimination when it can be established the final decision-maker was influenced to take an adverse employment action against an employee (such as termination in the Staub case) through the actions of a lower-level employee who has discriminatory motives.

The difficulty in the case, lies in determining what was the motivating factor of the employer in deciding to terminate Mr. Staub’s employment. The lower court noted, the internal investigation conducted by the employer could have been “more robust.”  This means there were skimpy facts on the record to support that the termination was for any other reason, but for the actions taken by the supervisors who had exhibited military hostility.  This affords a small nugget for employers to take away from the case, when assessing termination decisions in the future. 

Employers should:

• Make sure their workplace investigations are independent and thorough.  This is especially true if an investigation concerns allegations of discrimination against a supervisor.
• Accurately document work performance issues and conduct annual performance evaluations of both employees and supervisors.
• Review and update workplace complaint procedures and make sure everyone is aware of them.
• Document all employee complaints and be sure to include documentation regarding the outcome of the complaint.
• Train supervisors on USERRA.

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This week the EEOC filed discrimination charges against Kaplan Higher Education Corporation, alleging the use of credit checks to screen job applicants was discriminatory. Kaplan had rejected job applicants based on their credit history since at least 2008. According to EEOC, the practice had a disparate impact on black job applicants, and was not job-related or justified by business necessity.

This is actually the second recent claim against an employer who used credit checks to reject job applicants. Last month, similar charges were filed in federal court in a class action lawsuit against the University of Miami. There the job applicant had been offered a job, and quit her previous position. She was then informed she would not be hired due to her credit score.

Plaintiff’s attorneys are actively seeking class action clients who may have been rejected for a job, based on their credit score. According to the EEOC, the problem with using credit checks to screen applicants is that they are not recognized as predictors of job performance. Given the present economy many consumers have struggled with debt and their credit scores have suffered. Coupled with potential errors in credit reports, their use in making job decisions should be carefully scrutinized.

Unless an employer is hiring a CFO, or an accountant, credit scores simply do not meet the job-relatedness and business necessity tests necessary to avoid discrimination charges. Employers should rely on more reliable predictors of job performance to make their 2011 hiring decisions.  This may mean different screening and hiring processes based on individual job descriptions.

The EEOC reports, “Workplace discrimination filings with the federal agency nationwide rose to an unprecedented level of 99,922 during fiscal year 2010.” I predict this number will increase in 2011, and we will see more discrimination claims concerning the use of credit reports as well as an expansion to include other automatic job screening exclusions such as the use of criminal arrest records that don’t result in a conviction.
 

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Just like Dorothy following the yellow brick road to Oz battling lions, tigers, and bears, the path to determining the right classification for summer employees, interns, independent contractors, and volunteers can be hazardous. Mischaracterizing a worker can lead to sanctions and fines for Employers. Due to current economic challenges, concerns are being raised that Employers are misclassifying workers as interns, volunteers and independent contractors to save from paying wages, benefits, and taxes. The Department of Labor is paying close attention and auditing workplaces.

There is a presumption anyone performing work for a “for-profit” enterprise is an employee.  In Minnesota, the nature of the employment relationship is determined by using the same tests, and in the same manner as employee status is determined under both workers’ compensation and unemployment insurance law. Compensation of Minnesota employees is determined under Minn. Stat. § 181.722, Subd. 3, and the federal Fair Labor Standard Act.  Dorthy Gale had to stay on the yellow brick road to try to avoid the wicked witch and her flying monkeys.  As an Employer the path to proper classification of workers will avoid the ire of the Department of Labor.   Correctly assessing a  worker as an employee, student/intern, independent contractor, or volunteer is critical.   

Employee: An employee is someone who works for hire in the services of another. The existence or non-existence of an employment relationship between two parties is a question of fact.   To the extent the facts lead to a conclusion the parties have an employment relationship, the Employer is responsible for state and federal taxes, workers’ compensation, and unemployment insurance. 

Student/Intern: The use of student/interns in the workplace has increased over the years. This group of workers is currently the subject of close scrutiny by the Department of Labor.  Student/interns are not considered employees under both state and federal law, if their use in the workplace generally passes six tests offered by the Department of Labor. The tests are:

1. The training experience is similar to what is provided at school;
2. The training experience is for the benefit of the student/interns;
3. The student/interns do not displace regular employees;
4. The employer providing the training receives no immediate advantage from the activities of the trainees;
5. Student/interns are not necessarily entitled to a job at the conclusion of the training; and
6. The employer and the student/interns understand the work is unpaid training. (Note: a reasonable stipend may be permitted)

 Independent Contractor: Independent contractors are hired to perform special services of a limited scope and duration, and they typically perform the same services for a variety of businesses. The standards in Minnesota to be considered in determining whether or not an individual is an employee or an independent contractor include: 

1. The right to control the means and the manner of performance;
2. The mode of payment;
3. The furnishing of materials or tools;
4. The control of the premises where the work is done; and
5. The right of the employer to discharge the individual. 

Generally, the more control an Employer has over the individual performing the work, the work site, and the nature, quality, and manner in which work is performed, the more likely the relationship is an employer-employee relationship vs. an independent contractor arrangement.

Volunteer: Volunteers freely offer services to non-profits, charitable organizations, and churches at no charge without expectation of compensation. “…Any individual who renders service gratuitously for a nonprofit organization,” is not considered an employee. Minn. Stat. § 177.23 Subd. 7 (7).   Volunteers at a non-profit organization are not subject to workers’ compensation or unemployment benefits. Someone performing work on behalf of a for-profit enterprise, is presumed to be an employee.

Properly classifying workers, including summer workers, is important to your business. Minn. Stat. § 181.722 prohibits the misrepresentation by an Employer of the nature of an employment relationship with its workers, including not requesting a worker enter into an agreement, or sign a document which results in misclassification of a worker’s status. An Employer may be subject to penalties for improperly classifying workers. Be sure to intentionally follow the yellow brick road to avoid the lions, tigers and bears along the way. OH MY!

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Words are very important to attorneys. It is how we make our living, reading words, writing words, and speaking words. We are hired because we know how to put words together to make arguments, draft contracts, and obtain settlements. We aren’t doctors or engineers, we don’t use scalpels or major mathematical equations. We use words.

How important are words? The Minnesota Court of Appeals will tell you every word counts. In the unpublished decision, Carley Foundry, Inc. et al. v. CBIZ BVKT, LLC, et al, No. 62-CV-08-9791 (Minn. Ct. App. April 6, 2010) (pdf) the Court addressed the issue of multiple settlement releases. In previous litigation over erroneous tax advice, two releases were executed as part of the settlement process between the parties. The first release was a Pierringer release executed between Carley and Mr. Barton and CBIZ BVKT LLC. It included broad release terms regarding potential future claims. A second settlement release with language narrower in scope with respect to future claims was subsequently executed between Carley and the remaining parties to the litigation. Mr. Barton and CBIZ BVKT LLC, were also mentioned in the second release, but only Mr. Barton signed it.

The present case arose out of tax advice Carley sought from Mr. Barton and CBIZ BVKT LLC, concerning settlement proceeds from the previous litigation. The advice given was ultimately erroneous and Carley bought forth the current action where Mr. Barton and CBIZ BVKT LLC, requested dismissal based on the Pierringer release executed during the previous litigation.

The Court reviews extensively the language of the two releases and the intent of the parties. Additionally, one of the arguments raised by the Appellants was that the district court erroneously “adopted an interpretation of the phrase ‘and/or’ to mean ‘the one or the other or both.’” The Court did not need to address this argument because it had already decided the Pierringer release was not superseded by the second settlement release, but the Court determined the language still warranted comment on the art of drafting.

The Court stated,

"The phrase “and/or” is semantically and logically contradictory. A thing or situation cannot be simultaneously conjunctive and disjunctive. Laypersons often use the phrase and, surprisingly, lawyers resort to it from time to time. It is an indolent way to express a series of items that might exist in the conjunctive, but might also exist in the disjunctive. It is a totally avoidable problem if the drafter would simply define the “and” and the “or” in the context of the subject matter. Or the drafter could express a series of items as, “A, B, C, and D together, or any combination together, or any one of them alone.” If used to refer to a material topic, as here, the expression “and/or” creates an instant ambiguity. Furthermore, as one legal-writing authority noted, a bad-faith reader of a document can pick whichever one suits him-the “and” or the “or.” Bryan A. Garner, Looking for Words to Kill? Start with These, Student Law., Sept. 2006, at 12-14. At the very least, this sloppy expression can lead to disputes; at the worst to expensive litigation."

What can we learn from this case? We have to be careful with the words we choose to use. The crux of this case involved slightly varying language in two settlement releases. Every word has meaning and when used in a business contract, employee handbook or litigation, the meaning will be scrutinized. The Court went out of its of way to discuss a phrase, which ultimately had no bearing on its decision, just because it wanted to stress the importance of using clear and concise words to convey the parties intentions. Don’t let the Court make an example out of the words you use.

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