Employment Law Update - June 2021
by Bob Gregg
Boardman & Clark Law Firm
Wisconsin SHRM Legislative Sponsor
LEGISLATIVE AND ADMININISTRATIVE ACTIONS
States Lifting of COVID Restrictions Do Not Lift Federal Safety Responsibility. Most states are lifting mask, distancing and other COVID restrictions. Some, such as Texas, have forbidden any counties or cities from requiring masks and distancing in public places, schools and government facilities, and from having any rules which apply to private sector businesses or employers. Employers, though, may still impose their own rules in their operations. States’ decisions do not void federal rules or standards. Employers continue to have a duty of maintaining a Safe Place under OSHA or other federal laws. So many employers are continuing all, or a number of, COVID restrictions and practices in order to assure a safe place for their employees and customers.
Juneteenth Should be Recognized As A Significant Employment Date. On June 19, 1865, two and a half years after the Emancipation Proclamation, enslaved people in Texas learned that they were finally free. Union forces landed at Galveston and the cavalry was sent on a mission to issue a proclamation: “All slaves are free. This involves an absolute equality of rights and rights of property between former masters and slaves, and the connection heretofore existing between them becomes that between employer and hired laborer.” This was a powerful employment message. Juneteenth has been celebrated ever since. Equality of rights was certainly not achieved then, in either employment, social equity, or justice. Many anti-discrimination laws have had to follow. Yet the Juneteenth proclamation of the status of employer-employees instead of master-servant commemorates the start. Boardman & Clark seeks to continue the effort to bring that message of equal rights to fruition and urges all employers and HR professionals to continue to do so and to recognize Juneteenth’s employment significance.
Theme of The Month – Sports
We don’t often think of professional athletes as employees. They seem to operate in a special, higher status environment, above the fray of the regular work world. However, they receive compensation, have employment contracts, and are subject to the rules and environment of their organizations as are other employees. Many of the same employment laws apply. This month there are a number of cases involving athletes.
Employee Threats - Coach Prosecuted for Extortion. A former University of Louisville assistant basketball coach was charged with the crime of extortion. When his coaching contract was not renewed, he met with university administration and demanded to be paid a 17-month severance (approximately $480,000) or else he would go public with information and videos allegedly showing violations of NCAA recruiting rules. Instead of paying up, the university reported the extortion to the police and criminal charges were brought. The prosecution is for a federal crime since the coach sent one of the videos to a colleague across state lines. U.S. v Gaudio (W.D. KY, 2021). Extortion, sometimes termed blackmail, involves a threat of something harmful used to obtain money or something else of value if the other party does not pay up. The threat is something outside the standard legal remedies, such as in this case, public disclosure unless paid to be quiet. This is not uncommon in employment. People believe they “have something” on the company or its managers and, instead of using the appropriate, legally provided remedies, they threaten to use other methods unless they get what they want. Upset employees should be careful not to overreact and make rush threats. The consequences can be serious, as in this case. Be Aware that threats to use legal remedies are NOT extortion. So, employees may validly state that they will file cases under employment laws if their complaints, concerns or grievances are not satisfactorily addressed. A statement that one wants severance or will file an EEO or FMLA case is a valid and legal negotiation. Pointing out that complaints or disclosures may be made under ethics or whistleblower laws, unless a situation is remedied, is not extortion. (However, demanding money to “keep quiet” could be.) There can be a fine line between a protected activity and extortion. So, one should check with legal counsel if there is a situation of concern. Also be aware that an employer which does pay-up in order to buy silence may also the be guilty of a crime, and suffer prosecution as well.
Major League Soccer Demands Return of Player from Saudi Arabia. Some employment contracts require “specific performance,” meaning the individual must perform the services. A star athlete cannot fulfill their contract by substituting in someone else to play the games. Major League Soccer, LLC v Major League Soccer Players Association, et al. (S.D. NY, 2021) is about a male player, Alejandro Gamarra (“Kaku”), who signed to play with the New York Red Bulls until 2022. In February, 2021 he signed with the Saudi Arabian Football Federation and left the U.S. The matter quickly went to arbitration under the CBA with the players’ union. The arbitrator ruled in favor of the Red Bulls and ordered that Kaku must honor his contract and “is ordered to not play, attempt to play or threaten to play soccer for any team other than his Major League Soccer team.” Kaku has so far ignored the order and is playing in Saudi Arabia. MLS is now seeking to enforce the order by getting a federal court to order that Kaku must be forced to return to the U.S. for the 2021-2022 soccer season.
Child Labor – 15-Year-Old Can Seek Order to Play Professional Soccer. A federal judge has found that a 15-year-old soccer phenom can seek an order which would allow her to play the 2021-2022 season in the National Women’s Soccer League (NWSL). The NWSL does not allow players under age 18. The young star signed a nine-year endorsement deal with Nike at age 13, and has been practicing with the Portland Thorus professional team the past two years, but cannot play in actual games. The NWSL fought against the suit by claiming that it is preempted by the current collective bargaining between the NWSL and the Women’s Players Assoc. and any challenges to league rules or practices should be subject to arbitration under a collective bargaining agreement; so the courts should not get involved. The judge, however, pointed out that there is no CBA. The parties are still negotiating as to whether to reach a CBA, so there is no arbitration rule in effect and the court is not precluded by a non-existent, future CBA. The judge did not indicate whether she would grant an order allowing the 15 year old to play. She just allowed the case to proceed to a hearing on the matter. Moultove v National Women’s Soccer League (D. OR, 2021).
University of Iowa Charged with Hostile Work Environment for Black Football Players. Are student athletes “employees?” They receive scholarships and other room, board, etc. “compensation” for their efforts. There are state and congressional efforts to require payment of wages to athletes. Now, in Wadley, et al. v U. of Iowa (S.D. IA, 2021), a court has found that alleged racial harassment created a valid case for “hostile work environment” for Black football players. The allegations include assistant coaches and other athletic staff making racial slurs, ridiculing the clothing and hairstyles of Black athletes and enforcing rules, especially on political expression such as Black Lives Matter, more strictly than upon White players who voiced controversial and opposite public social/political opinions. Several players quit the team or left the university due to the hostile environment. Racial discrimination cases under 42 US Code Sec. 1983 and 1981 cover discrimination in contracts and employment relations. A scholarship is a contract for services (work), so is employment. So, the same legal standards may apply to college student athletes as to employees regarding harassment. The case has been brought by current and former UI players, including several who are now playing in the NFL.
Wages and Hours
Employers and Employees Should Take Notice of the Increasing Focus on Criminal Actions for Wage Violations. The Dept. of Labor, IRS and state agencies have been increasing audits and suits for violation of FLSA and other wage and hour laws. Now the Dept. of Justice and state prosecutors are devoting more attention to finding these same matters can also constitute criminal acts. Both employers and employees are facing prosecution, in addition to civil liability. The big difference is that the company pays most of the civil liability. In criminal cases, the individual gets convicted.
Boston Police Officers’ OT Embezzlement. A retired Boston Police Officer plead guilty to collecting $20,000 in overtime pay for hours he did not work. This was a federal criminal charge since the Police Department received U.S. Dept. of Justice and U.S. Dept. of Transportation funding and grants which went toward payment of the OT. This officer was the first of nine indicted officers to plead guilty. He had collected the least amount of false OT and reached an agreement to testify against six other officers, a sergeant and a lieutenant, in exchange for only a two-year prison sentence. U.S. v Torgian, et al. (D. Mass, 2021). This officer and the others may face an even more-lasting consequence if the city pursues the voiding of their pensions due to the misconduct.
Two-Year Sentences for Contractors Failure to Pay Prevailing Wage Rate. A number of states have bolstered their standard wage claim laws with criminal statutes which categorize failure to properly pay employees as “wage theft.” These charges are filed against the individual business owners or executive who authorized or condoned the improper pay practices and profited from the non-payment to the workers. In the following case, the company paid skilled workers less than the prevailing wage required under contracts with the state of Pennsylvania and instructed the employees to falsely report that they had not been doing the skilled contract work at the time of the accrued hours. The company collected the full state contract money and pocketed the difference it should have paid as wages. State v Goode (PA Ct. of Common Pleas, 2021). This is one of five more similar cases of wage theft currently pending in just Pennsylvania. Attorney Generals and local prosecutors in other states are also bringing such actions.
Don’t Talk and Drive and Be Sure to Turn Off the Phone. In Town of Brookline v Alston, et al. (Mass. S. Ct., 2021), the court ruled that a city failed to adequately address complaints of racial abuse in the workplace and improperly fired a Black firefighter after he complained of the discrimination. The main harasser was a White lieutenant. Instead of investigating complaints, the department sat on them for weeks. Then it ignored concrete evidence of harassment, fired the person who complained, and proceeded to promote the harasser. A key piece of evidence was the recording of a cell phone call in which the lieutenant was driving and leaving a voicemail for the Black firefighter. Then, when he thought he hung up, the lieutenant proceeded to voice racial slurs and profanities which were now on the voicemail. The court found that once he complained, the Black firefighter was then subject “to an avalanche of retaliatory behavior.” This case is also a good illustration of how cell phones and inattentive driving can have more serious consequences than a traffic ticket.
The Law Has Developed – Standards Are Changing. The standards for establishing illegal harassment, developed through many older cases, may no longer be an effective defense for employers. Courts are ruling that a hostile environment can be found with fewer instances and less egregious behavior. Older cases and some current ones do not recognize instances of offensive behavior to meet the “severe or pervasive” harassment standard even for highly offensive racial or ethic or sexual slurs unless there have been several repetitions. In Rios v Meda Pharmaceuticals (N.J. S. Ct. 2021), the court joined a growing number of others in finding just one or two instances of highly offensive slurs are sufficient. In this case, a supervisor twice used slurs about Hispanics in addressing an employee. The court opined that “much case law has developed” and there is now “a greater emphasis put on supervisors as being key to eradicating harassment in the workplace.” So, the two statements met the severe or pervasive standard. This is yet another reminder that employers should give greater emphasis to training on supervisors Duty of Care, especially in this current period of increasing incivility and incidents of racial animosity.
Corporate Responsibility and Accountability
CBS CEO Gives Up $120 Million Severance. The May, 2021 Update described the lawsuits challenging, and trying to recover, the $53 million severance paid to the ex-McDonald’s CEO after being fired for violating the company’s sexual/romantic relationship policies. Now Viacom CBS has achieved a quicker result when challenging the severance packages of its former Chairman–CEO, Les Moonves. The company claimed he was released “for cause” due to sexual harassment of several female employees and allowing a culture in which other senior male managers were allowed to also engage in “endemic” sexual misconduct. This issue was then taken to private arbitration. Mr. Moonves has agreed to forego a $120 million severance package. The company reported this to the U.S. Securities and Exchange Commission on May 14, 2021.
Yet Another Company Is Sued By Its Stockholders Due to Lack of Effective Anti-Discrimination and Diversity Efforts. Company claims lawsuits are “The Wrong Means” for Addressing These Issues. A new phenomenon has emerged of stockholders – often large pension funds – suing corporations due to the company’s unsatisfactory employment practices regarding discrimination and diversity. (See May Update McDonald’s case.) The suits alleged that poor practices negatively impact profits and stock values. The latest in this series is City of Pontiac Retirement System v Buch, et al. (Cisco Systems, Inc.) (N.D. Cal, 2021). The suit alleges that Cisco has made many public pronouncements about its commitment to diversity as a fundamental part of its operation and culture yet has done little to actually accomplish these things. The company has “paltry” single digits for diversity in its employees, managers, and leadership. The Retirement Fund had made a pre-suit demand for Cisco to take action, but the Board did not respond. So, the suit was then filed. Cisco, as with a number of other companies which have been sued, claims that a lawsuit is “the wrong way” to address these issues. Instead, it believes the matter should be handled internally between the shareholders and the Board of Directors. The same Board which seemingly allowed the situation to exist and did not respond to the shareholders’ earlier internal demands.
Court Reverses Pay Damages But Leaves Punitive Damages Intact on Whistleblower Case. An engineer was demoted after reporting problems in the development of U.S. Military satellite navigation systems. He reported that he had been ordered to change data to give false reports which made it seem the company was meeting the contract standards. When management refused to correct them, he reported the matter to the Dept. of Defense. He was then demoted and put in a dead-end, isolated job with 90% of his responsibilities taken away, and had his reputation smeared. He filed a case under the Defense Contractor Whistleblower Protection Act. A jury awarded $42,000 in pay damages and $1 million in punitive damages. When the company appealed, the judge eliminated the pay award but kept the $1 million punitive and emotional distress damages fully intact. Casias v Raytheon Co. (D. CO, 2021).
For additional information, see www.boardmanclark.com. The Reading Room has past issues of the Employment Law Update. Other publications on the website are the Employment Benefits Newsletter, the Municipal Law Newsletter and the School Law Newsletter.