Allyn & Fortuna LLP
Nicholas Fortuna, February 29, 2016
Chipotle was sued by seven former female managers for discrimination. They alleged that Chipotle favored male mangers and that was the reason they were fired. Chipotle countered that the managers were fired for inadequate performance. The claims of two plaintiffs were dismissed on summary judgment but the court ordered trial on the remaining five plaintiffs’ claims. The court’s ruling in Chipotle case is instructive in that changes to human resource practices would have allowed the employer to avoid liability for the alleged discrimination claims.
Like many employment discrimination cases, the claims filed against Chipotle were based on circumstantial evidence. There was no direct evidence of discrimination. The policies in place were not themselves discriminatory. The nature of the claims filed against Chipotle were built on an accumulation of circumstances that alone, have nondiscriminatory explanations. On motions for summary judgment, the court ruled that two of the plaintiffs did not have a claim and ordered the claims of the remaining five plaintiffs to trial. The court denied Chipotle summary judgment as to the five plaintiffs because it found that the inconsistent manner by which Chipotle handled the review process and termination of five of them was enough to require a trial on the claims of discrimination.
Evidence of unexplained contradictory employee reviews was one of the main reasons Chipotle lost on summary judgment. An example of such a contradictory employee review is when an employee was promoted to a new position and got an early review that she is doing well, but subsequently got a poor performance review without any documentation or explanation about the change in performance. The earlier positive review showed that employee was handling the initial parts of the new position well. However, expectations were that the employee would be able to take on more responsibility as she grew into the job with more time and experience. The employee fell short of those expectations, resulting in a subsequent poor review. The poor reviews should have taken into account the prior good reviews and addressed the change in performance and rating. The absence of such information gives rise to the appearance that nothing has changed other than the employer’s attitude toward the employee. Variations on this example is what Chipotle faced with the five plaintiffs whose claims were ordered to trial.
So far, three of the plaintiffs’ claims went to trial and the jury found for them. The outcome in Chipotle illustrates that in cases based on circumstantial evidence a jury could infer that policies were applied differently to men than women even though there was no motivation to discriminate. Sloppy and inconsistent documentation of performance can be held against the employer. Proper procedures and policies, if followed, will minimize the risk of such outcomes.
When terminating an employee, employers should not spare employees’ feelings by being vague. Account for what has changed since receiving good reviews and why the employee’s performance is inadequate. Also, the reasons given to the employee should be the same ones used internally to justify the termination. Inconsistent statements about why an employee was terminated creates opportunities for claims of discrimination to be made.
The employer should be vigilant and consistent in how it handles employee deviations from acceptable performance. If the employer has a three strikes policy, stick to it. If there is a performance improvement plan utilized by the company, use it. Treating variances in performance from one employee to another differently may be used as circumstantial evidence of discriminatory treatment.
Equally important, is documenting employee performance and evaluations. Employers should implement mechanisms for regularly evaluating employee performance using objective criteria. Employers should be careful to only evaluate what is in the employee’s control to fairly document performance. Unfair performance reviews will appear as excuses for unequal treatment.
Before taking any action to terminate an employee, the employer should review that employee’s file for inconsistencies and address them, otherwise the employer may be creating evidence in support of a possible claim. For instance, if an employee received mixed signals about his or her performance, termination should be delayed until a clear record is created.
Diana Uhimov, February 23, 2016
The Compassionate Care Act (CCA) was signed into law in New York in 2014, making New York the 23rd state in the U.S. to legalize medical marijuana. The CCA regulates the manufacture, sale and use of medical marijuana in New York. Under the Act, certified patients are allowed to use marijuana for treatment of a “serious condition” so long as the treatment is prescribed by a certified physician. Additionally, the CCA establishes employment regulations for medical marijuana use, including the creation of new anti-discrimination protections and accommodation obligations for such users. In January 2016, the first dispensaries offering medical marijuana opened. The advent of medical marijuana raises novel issues for employers, making it important to understand their obligations with respect to medical marijuana and any employees using it.
The law provides that certified patients may not be subjected to “disciplinary action by a business” for exercising their right to use medical marijuana. It also states that being a patient who was prescribed medical marijuana in New York is considered to have a disability under the New York State Human Rights Law (HRL). Accordingly, New York businesses with four or more employees are prohibited from firing or refusing to hire and discriminating in compensation or in the terms and conditions of employment, based on an individual’s status as a certified medical marijuana patient. If an employer fires or otherwise disciplines an employee for the lawful use of marijuana, it may face a discrimination claim.
Notwithstanding the legal protections granted under the law, employers may still enforce policies that prohibit an employee from performing his or her employment obligations while under the influence of a controlled substance. Accordingly, New York employers are permitted to implement reasonable policies—including drug testing—to ensure that an individual is not working while under the influence of a controlled substance (including marijuana) or engaging in the illegal use of drugs. However, it is difficult to determine whether any employee is under the influence of marijuana as most drug tests do not determine present use, but only whether they have used marijuana in the recent past.
Additionally, marijuana remains illegal under federal law, resulting in potential conflicts for certain employers between the CCA and federal law. Under the CCA, employers are not required to take actions that would put the employer in violation of such laws or cause it to lose a federal contract or funding. Businesses subject to federal regulations that require certain testing or safety precautions related to marijuana use must still abide by these regulations, and such compliance will not be deemed a violation of New York law. Accordingly, employers would not, for example, be subject to claims for refusing to hire a medical marijuana user in a position where marijuana use is prohibited under federal law. Federal agencies that have policies pertaining to marijuana use include the Department of Transportation, Department of Defense, Department of Energy, among others.
Employers may also need to provide reasonable accommodations to employees or potential employees who are certified patients under New York’s HRL. Whether an employer will need to accommodate an employee’s use of medical marijuana, and how to provide those accommodations, will depend upon the type of business, the circumstances surrounding the employee’s need for medical marijuana and underlying medical conditions, and the employee’s essential job duties. In the event that a certified patient requires an accommodation, it may be prudent to engage in a dialogue with that employee. Despite the duty to accommodate, New York law does not require an employer to permit the user to bring marijuana into the workplace or to use it on the premises. Employers should use caution when implementing accommodations to ensure that they are not illegal under federal law.
New York employers should be proactive about compliance with the CCA. The first step is to become familiar with the law and how it may impact your workplace. Employers should evaluate their policies and procedures regarding a drug-free workplace and discipline for violations of the policy. It may be necessary to update or revise any workplace drug policies already in place. A clear policy can minimize the risk of liability. If an employer wishes to enforce policies that prevent their employees from using controlled substances (including medical marijuana) during work hours, it should give notice of these restrictions to employees.
Paula Lopez, February 9, 2016.
The Women’s Equality Act (“WEA”) went into effect on January 19, 2016. The WEA is a combination of five bills signed into law by Governor Cuomo on October 21, 2015. The various provisions are intended to serve as a comprehensive means for protecting women’s rights in the workplace and affording enhanced remedies for plaintiffs who prevail in litigation brought for violations of the law. The key employment-related provisions of the WEA amend New York’s Labor Law (NYLL) and Human Rights Law (NYSHRL) and expand coverage of the state’s anti-sexual harassment laws to employers of all sizes, large and small.
Changes to New York’s Labor Law
WEA amends New York’s Labor Law by making it harder for employers to defend against pay discrepancies between men and women performing equal work. Prior to enactment of the WEA, New York’s Labor Law required equal pay to men and women for equal work unless an employer could show that that the pay discrepancy was based on: (a) a seniority system, (b) merit system; (c) a system that measures earnings by quantity or quality of production; or (d) any factor other than sex. The WEA amends NYLL § 194 to replace the exemption that an employer can claim under subsection (d) (“any factor other than sex”) with an exemption that requires a showing of a “bona fide factor other than sex, such as education, training, or experience.” This change imposed a greater burden on the employer to demonstrate that the wage differential is job-related and required by business necessity. “Business necessity” is defined as “a factor that bears a manifest relationship to the employment in question.”
Under the amendment, an employee can overcome an employer’s claim to an exemption by demonstrating that: (A) an employer uses a particular employment practice that causes a disparate impact on the basis of sex, (B) that an alternative employment practice exists that would serve the same business purpose and not produce such differential, and (C) that the employer has refused to adopt such alternative practice. Therefore, an employer bears a much higher burden in justifying pay discrepancies and should review its compensation policies and records to ensure that it is in compliance with the law. If an employer maintains a compensation structure that results in a pay discrepancy, it must be based on a “bona fide factor other than sex.”
The WEA also prohibits an employer from restricting any employee from “inquiring about, discussing, or disclosing the wages of such employee or another employee.” However, an employer can establish and circulate a written policy that imposes reasonable restrictions on the time, place and manner by which employees can make wage related inquiries. The WEA further amends NYLL § 198 by tripling the amount of liquidated damages that can be awarded for willful violations of NYLL § 194 from 100% of total wages due to up to 300% of the total amount of due.
By limiting the circumstances under which an employer can defend differences in compensation and making it easier for employees to obtain wage information, the WEA, while affording important protections to women, could result in businesses facing an increase in litigation. Therefore, it is important for New York businesses to assess their compensation practices and comply with the law, especially, in light of the new liquidated damages provision.
Changes to New York’s Human Rights Law
The WEA also results in significant changes to New York’s Human Rights Law. The WEA amends NYSHRL § 292 (5) by expanding the scope of employers subject to sexual harassment claims from any employer with four or more employees to an employer of any size. Therefore, small business that were previously not covered by New York’s Human Rights law are now exposed to potential sexual harassment claims and should implement sexual harassment policies and internal procedures for handling such complaints, as well as train management on the new law.
Additionally, the WEA amends NYSHRL § 296 to include “familial status” as a protected classification and prohibit discrimination in employment based on such status. “Familial status” is defined in NYSHRL § 292 (26) as “(a) any person who is pregnant or has a child or in in the process of securing legal custody of any individual who has not attained the age of eighteen years, or (b) one or more individuals (who have not attained the age of eighteen years) being domiciled with: (1) a parent or another person having legal custody of such individual or individuals, or (2) the designee of such parent.”
A further change brought on by the WEA is the amendment of NYSHRL § 296, which expressly requires employers to perform a reasonable accommodation analysis for employees with pregnancy-related conditions and to provide a reasonable accommodation unless it would create an undue hardship. The amendment to the NYSHRL will bring state law in line with existing New York City law, requiring employers to provide reasonable accommodated for pregnancy-related conditions. Additionally, the amendment creates an express requirement that an employee cooperate in providing medical or other information requested by the employer to verify the existence of a disability or pregnancy-related condition.
The WEA also amends NYSHRL § 297 so as to permit a prevailing party to recovery attorneys’ fees in sex discrimination cases. However, if the employer is the prevailing party, attorneys’ fees will only be awarded upon motion and a showing that the claim brought was frivolous.
It is important for New York businesses to ensure that their existing policies are in compliance with the changes to NYLL and NYSHRL brought about by the WEA. In eliminating the four employee threshold and exposing employers of all sizes to sexual harassment claims, there will likely be a spike in sexual harassment claims filed against small business—not previously covered by the NYSHRL. Therefore, it is especially important for businesses, of all sizes, to implement a sexual harassment policy and train its employees on its implementation.
Diana Uhimov, January 7, 2016
On December 19, 2015, the New York City Commission on Human Rights announced that the city’s Human Rights Law would establish among the strongest protections in the country for transgender people. New York City landlords, employers and businesses will be subject to the new regulations. Gender identity and expression bias has been illegal in New York City since 2002. But the announcement provided guidance for the first time on what conduct constitutes discrimination under the city’s Human Rights Law, setting forth penalties of up to $250,000 for the most hostile forms of transgender bias.
New York City is home to more than 25,000 transgender and gender-nonconforming people. Despite the New York City Council passing the Transgender Civil Rights Bill in 2002, protecting trans people from discrimination in areas such as employment, housing and public accommodation, many have reported being subjected to discrimination and harassment. According to a survey by the Commission on Human Rights, three quarters of transgender New Yorkers reported harassment or mistreatment in the workplace, one in five were denied housing, one in six were refused medical care and more than half were verbally harassed in public places like restaurants, buses, airports and government buildings because of their gender identity. The bold new guidelines aim to remedy this ongoing discrimination to ensure that transgender New Yorkers receive the full protection of the city’s human rights law.
Businesses cannot refuse to allow people to use single-sex facilities—such as bathrooms or locker rooms—consistent with their gender identity, regardless of that person’s sex at birth. And, intentionally referring to a worker as a “he” when the person prefers “she,” could expose business owners to a discrimination lawsuit. Under the rules, employers are required to use the employee’s chosen name, pronoun and title “regardless of the individual’s sex assigned at birth, anatomy, gender, medical history, appearance, or the sex indicated on the individual’s identification.” If an employer is unsure what someone’s preferred name and pronoun is, it is not a violation of the New York City Human Rights Law (NYCHRL) to ask.
Even though federal courts have upheld dress codes in the work place, the guidance bars gender-specific dress codes as discriminatory. Accordingly, it would be a violation of the NYCHRL for employers to require, e.g., men to wear ties or women to wear skirts. The guidance further prohibits employers from refusing to hire, promote, or terminate an individual because of a person’s actual or perceived gender, including actual or perceived status as a transgender person. Under the guidance, it is also illegal to set different terms and conditions of employment, such as work assignments, because of an employee’s gender. In addition, employers must provide health benefits for gender transition care and reasonable accommodations to transitioning people such as medical appointments or recovery time.
Violators of the new law can face civil penalties of up to $125,000, but violations of the NYCHRL “that are the result of willful, wanton, or malicious conduct” can be fined up to $250,000. And there is no limit to the amount of compensatory damages the human rights commission may award to a victim of discrimination. It is recommended that employers review their policies to ensure that they are gender neutral. These rules should be followed in all aspects of employment including hiring, firing, and conduct at the work place.
Paula Lopez, December 4, 2015.
Recently, New Jersey’s appellate court ruled that an arbitration provision contained in a company’s employee handbook, the receipt of which was electronically acknowledged by its employees, is unenforceable because the handbook also contained a broad disclaimer disavowing the creation of a contractual relationship. Because of the disclaimer language and the absence of a signed arbitration agreement, the court found that plaintiff never agreed to arbitrate the claims against her employer. New Jersey employers seeking to have claims brought by employees arbitrated should review their arbitration provisions to ensure that they meet the standard for enforceability set out by the court in C.M. v. Maiden Re Insurance Services, LLC, et. al.
Maiden Re Insurance involved claims brought by a former employee for discrimination based on her disability in violation of the New Jersey Law Against Discrimination. The plaintiff, C.M., was suffering from alcoholism and informed her employer that she was receiving counseling and was going to need time off to receive treatment at a residential rehabilitation facility. Five days after discussing her condition with her employer, the plaintiff was terminated. After C.M. filed an action against her employers for discrimination, Maiden filed a motion to have the action dismissed and sent to arbitration, which was granted by the Law Division judge based on the arbitration provision contained in the employee handbook.
C.M. appealed the decision directing arbitration on the basis that she did not agree to be bound by the terms of the employee handbook and that the electronic acknowledgment she submitted did not create an enforceable agreement to arbitrate because it in no way referenced the arbitration provision. Maiden, on the other hand, argued an agreement to arbitrate was created because the arbitration provision was contained in the handbook, and plaintiff “took deliberate steps [to indicate] she received, reviewed and understood the handbook and the arbitration provision contained therein.” In determining whether an enforceable agreement to arbitrate was created by the arbitration provision included in the employee handbook, the Appellate Division agreed with C.M. that no agreement to arbitrate was made.
The court emphasized that “an agreement to arbitrate must be a product of mutual assent,” meaning that the party relinquishing or waiving a right must have full knowledge of the rights being waived and intended to do so. C.M.’s acknowledgment that she had received the employee handbook was found by the Appellate Division to be insufficient evidence of the existence of a binding agreement to arbitrate. Decisive to the court’s ruling was the plain language in the handbook drafted by Maiden, which states “with unmistakable clarity, that Maiden did not intend the handbook to create a binding agreement.” Specifically, the court pointed to the handbook’s disclaimer provision which included the following statements:
- “The policies outlined in this handbook should be regarded as management guidelines only…”
- “The provisions of the handbook are not intended to create contractual obligations with respect to any matters it covers. Nor is the handbook intended to create a contract guaranteeing that employees will be employed for any specific time period.”
The Appellate Division found that “[t]he employee handbook cannot be a binding agreement with respect to the arbitration provision, and an unenforceable document merely containing ‘management guidelines’ for the rest of the provisions.” The court’s decision makes it clear that employers cannot have it both ways. They cannot insulate themselves from creating an employment contract with their employees by including broad disclaimer language to ensure “at-will employment,” and, at the same time, argue that a binding contract was created with respect to the employee’s obligation to arbitrate.
This decision is in stark contrast to the trend of cases favoring arbitration of employment claims and enforcing arbitration agreements entered into as a condition of employment, and which include a waiver of class and collective action claims against employers. Maiden Re Insurance reminds employers that despite the public policy in favor of arbitration, courts will not hesitate to refuse enforcement of an arbitration provision that is not expressly agreed to by the party against whom enforcement is sought.
Therefore, employers who intend to rely on arbitration provisions that are part of a handbook should ensure that the agreement/provision being relied on clearly identifies the employee’s rights that are being relinquished and that the employee expressly agrees to be bound to the arbitration provision. A good practice would be to carve out the arbitration provision from any general disclaimer language that is included in the handbook and to have the employee sign a separate agreement to arbitrate that clearly identifies the rights that the employee is agreeing to surrender.