United States: US Employment Litigation Round-Up For December 2014 - A Review Of Key Cases And New Laws Affecting Employers

Keywords: EEOC v. Royal Caribbean Cruises, whistleblower, Disability Act

California Court Extends Whistleblower Protections to "Perceived Whistleblowers"

Decision: In Diego v. Pilgrim United Church of Christ, a preschool employee alleged she was wrongfully terminated from her employment in violation of public policy as a result of the school director's mistaken belief that she had lodged a complaint with the Department of Social Services, which resulted in an unannounced inspection of the preschool. The school claimed that the plaintiff had been discharged for insubordination and moved for summary judgment on the ground that no constitutional or statutory authority extended whistleblower protections to employees who were merely believed to have engaged in protected activity. The trial court granted summary judgment in favor of the school, finding that the plaintiff's termination of employment did not violate public policy as a matter of law because she had not, in fact, made any complaint.

The court of appeal reversed, holding that California's public policy "applies to preclude any retaliation by an employer not only against employees who actually notify the agency of suspected violations but also against employees whom the employer suspects of such notifications." The court reasoned that the policy embodied by the whistleblower protection statutes—to "encourage workplace whistle-blowers to report unlawful acts without fearing retaliation"—would be "frustrated" if the policy permitted the termination of employment to be "based on the employer's mistaken belief that the employee might disclose or has disclosed a violation of state regulations to a governmental agency."

Impact: The court's decision demonstrates the continuing encouragement of workplace whistle-blowers to report unlawful acts without fear of retaliation from the employer.

Eleventh Circuit Clarifies EEOC's Subpoena Power

Decision: In EEOC v. Royal Caribbean Cruises, Ltd., the US Court of Appeals for the Eleventh Circuit denied enforcement of an Equal Employment Opportunity Commission (EEOC) administrative subpoena because the scope of information sought by the subpoena went beyond what was necessary to investigate the claim of discrimination at issue. The case concerned the EEOC's investigation of a discrimination charge against Royal Caribbean by a crew member who claimed he was terminated in violation of the Americans with Disability Act after he was diagnosed with human immunodeficiency virus. The EEOC's subpoena sought information related to all employees who were terminated due to a medical reason. The district court denied enforcement of that subpoena, and the Eleventh Circuit affirmed, emphasizing that an EEOC administrative subpoena must seek information relevant "to the contested issues that must be decided to resolve that charge, not relevant to issues that may be contested when and if future charges are brought by others." The court further noted that, although an EEOC subpoena seeking statistical information to determine the validity of an employer's facially neutral explanation for the adverse employment decision could be enforceable, it was clear that the subpoena in Royal Caribbean was "aimed at discovering members of a potential class of employees or applicants who suffered from a pattern or practice of discrimination rather than fleshing out [the charging party's] charge" and therefore unenforceable.

Impact: Employers faced with an administrative subpoena from the EEOC should keep in mind the standard of relevance articulated by the Eleventh Circuit in Royal Caribbean when determining whether and how to comply with the request. The EEOC may be able to subpoena information regarding potential discrimination against employees who have not filed charges of discrimination in order to gather statistical evidence, but courts may limit the EEOC's ability to obtain discovery for the purpose of identifying potential class members or victims of discrimination.

California Court of Appeal Reverses Trial Court's Denial of Class Certification in Misclassification Case

Decision: In Martinez v. Joe's Crab Shack, the plaintiff sought to represent a class of managerial employees who he alleged were misclassified as exempt and were thus owed unpaid overtime. The trial court denied the plaintiff's motion for class certification on the ground that the plaintiff had failed to establish typicality, predominance of common questions and superiority of the class action mechanism. The court of appeal reversed that decision and remanded the case in December 2013. On remand, the trial court again denied class certification. After a new appeal, the court reversed the trial court's denial, holding that individual inquiries do not necessarily overwhelm common issues when a case involves exemptions premised on how employees spent the work day. "Where standardized job duties or other policies result in employees uniformly spending most of their time on nonexempt work, class treatment may be appropriate even if the case involves an exemption that typically entails fact-specific inquiries." The court further explained that the plaintiff's theory of liability—that exempt managerial employees were subject to common policies that dictated that they perform hourly functions—is "by nature a common question eminently suited for class treatment." Finally, the court noted that statistical sampling may be used as evidence to assist in identifying the realistic demands of the job and to determine the typical employee's ability to meet those expectations.

Impact: This case continues the trend of recent California court of appeal decisions that reverse trial court denials of class certification based on varying individual class member experiences. Those cases, like this one, focus instead on the existence of a generally applicable policy and practice.

Ninth Circuit Holds That FLSA Pleadings Must Comply With Twombly

Decision: In Landers v. Quality Communications, Inc., the US Court of Appeals for the Ninth Circuit held that FLSA claims must contain sufficient factual content to state a claim for relief that is plausible on its face, as required by the US Supreme Court's rulings in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal. Landers claimed that her employer subjected employees to a "piecework no overtime" wage system under which employees worked more than 40 hours per week without receiving overtime compensation. The trial court dismissed the complaint because it did not contain any factual allegations about the approximate overtime hours the plaintiff worked or the amount of unpaid overtime wages and thus failed to meet the Twombly and Iqbal standard. The Ninth Circuit affirmed, finding that the complaint did not allege facts showing there was a "specific week in which the plaintiff was entitled to but denied minimum wages or overtime wages."

Impact: The Ninth Circuit joins the First, Second and Third Circuit Courts of Appeals in specifically requiring that FLSA claims comply with the pleading standards established in Twombly and Iqbal. A growing number of federal circuits have found that FLSA plaintiffs must plead sufficient facts to establish at least one workweek in which the plaintiff worked in excess of 40 hours and was not paid overtime or minimum wages.

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