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Labor and Employment Update - Summer 2007

05.29.07

U.S. SUPREME COURT PROVIDES NARROW INTERPRETATION OF STATUTE OF LIMITATIONS TO TITLE VII WAGE DISCRIMINATION CLAIMS

On May 29, 2007, the United States Supreme Court upheld an Eleventh Circuit opinion that reversed a jury’s award of back wages to a former female employee of Goodyear Tire & Rubber Company.

In the case, Ledbetter v. Goodyear, Lilly Ledbetter brought a claim under Title VII for gender-based discrimination arising from the fact that her pay rate was lower than each of the other area managers at the Company, all of whom were male. Ledbetter had worked at a Goodyear plant in Alabama for almost 20 years, and although she had started working at the Company at roughly the same pay level as her male colleagues, over time she gradually made less and less than male employees working in the same position, including male employees who had been in the job for far less time than Ledbetter. By the time of her retirement in the late 1980’s, Ledbetter was earning between $500 and $1500 per month less than each of her male counterparts.

Ledbetter claimed that she did not become aware of this pay disparity until she received an "anonymous letter." She eventually filed a discrimination charge with the EEOC in November 1998, shortly after taking early retirement, claiming that the pay disparity during her tenure at the Company was the result of gender discrimination. At trial, the Company established that employees’ salary/wage increases were determined on an annual basis, based on the employees’ annual performance evaluation ratings, and that Ledbetter had consistently scored in the bottom of the performance rankings for her position throughout her time with the Company. Ledbetter, however, argued that the low performance ratings that she had received from her supervisors were themselves the result of gender bias.

After the jury found in her favor, awarding her back wages and punitive damages totaling almost $4 million, the Eleventh Circuit reversed, holding that Ledbetter’s claims based were time-barred under the 180-day statute of limitations applicable to Title VII claims. (Ledbetter was employed in Alabama, which is not a work sharing state, and thus a 180-day, rather than a 300-day, limitations period applied to her Title VII claims.)

On appeal, the Supreme Court affirmed the Eleventh Circuit’s reversal of the jury verdict, in a 5-4 opinion written by Justice Alito. Ledbetter’s attorneys had argued that "each paycheck" should be viewed as a new "discriminatory act" (and thus sufficient to satisfy the requirement of showing a discriminatory act during the limitations period). Ledbetter’s attorneys also argued that a "continuing violations" theory could and should be applied to the case in order to encompass prior paychecks and prior salary review decisions during Ledbetter’s 19-year history with the Company.

The majority, however, rejected this reasoning, holding, inter alia, that each paycheck was not a new or separate discriminatory act, but rather, at most, an adverse effect of a prior discriminatory act. Holding that present effects of past discrimination are not enough to render a claim timely, Justice Alito further noted that Congress had intentionally created a very short limitations period for Title VII claims, in order to protect employers from having to defend employment decisions that were "long past." In reaching this result, Justice Alito distinguished the Court’s prior opinion in Bazemore v. Friday, where the Court had found that a particular pay structure/system itself was facially discriminatory; in Ledbetter, where the pay structure was based on a facially neutral performance ranking system, each payment under that system could not be viewed as a separate discriminatory act.

This opinion may offer some relief to employers who understandably fear being hauled into court to defend or explain salary decisions made years, or even decades, ago. Employers’ pay decisions made more than 180 (or 300) days ago are not entirely insulated from liability, however, as the federal Equal Pay Act and several state anti-discrimination acts have longer limitations periods and/or are subject to different rules regarding whether or how past wage payments may be aggregated. Moreover, there are already signs that some in Congress may be working to reverse the effect of the Ledbetter, although the likelihood of success of such proposed litigation is far from clear.

Author:  Lynn A. Collins
             lcollins@klehr.com

ASSESSING THE IMPACT OF E-DISCOVERY

During the past year, much has been written about the amendments to the Federal Rules of Civil Procedure relating to the discovery of electronically stored information, often referred to as e-discovery. The e-discovery amendments, which became effective December 1, 2006, span a range of topics, including pre-trial conferences, initial disclosure, discovery via accessible and inaccessible sources, inadvertent disclosure, sanctions and subpoenas. A comprehensive list of the amendments can be viewed here: http:/www.uscourts.gov/rules/ EDiscovery_w_Notes.pdf. The e-discovery amendments recognize the fact that electronic documents have embedded data that is simply not captured though the production of paper copies and create new standards for collecting information that is preserved in its electronic form.

Most important, however, the e-discovery amendments require that trial counsel know well in advance what information their clients are storing, where that information is stored, and how that information can be accessed. As a result of this requirement, employers are wise to revisit their document retention policies and to provide additional training to their employees regarding best practices in complying with the stated retention policy. In light of the new rules, a comprehensive document retention policy should address the following subjects: creation, use, storage, access, purging, and production.

While most employers have little difficulty establishing a system to preserve necessary information, many have struggled to achieve cost-effective compliance with the new rules. This reality stems, in large part, from the failure to follow a systematic purging process and the inability to effectuate a "litigation hold" on the retention mechanism without creating utter chaos.

Generally speaking, employers create and preserve too many documents. Documents archives should be purged in the ordinary course of normal business operations and pursuant to a written policy. An effective document purge policy should be simple and:

  • apply to all electronic devices, hardware, or other sources of documents;

  • apply to all company locations;

  • offer a monitoring system to ensure compliance;

  • comply with all industry specific record-keeping obligations; and

  • provide for the immediate suspension of destruction of information.

Once an employer has notice of a possible claim, the document purging process must be stopped immediately so that all potentially relevant documents are preserved. Remember - the duty to preserve information is much broader than the duty to produce information. Failure to preserve documents can result in sanctions including attorneys’ fees, striking of pleadings, adverse inferences, and / or having certain facts deemed to be admitted.

Depending on the size of your company and the nature of your business, it may be beneficial to obtain an experienced outside IT consultant, who can provide a tremendous amount of value in creating and implementing document retention policies. It may also be beneficial to create a records management division to ensure company wide awareness of and compliance with your policies. In addition to monitoring and auditing compliance, this division can perform small scale or limited "litigation holds" in preparation for future litigation. Developing protocols for preserving, searching, collecting and storing potentially relevant documents on a pro-active basis can prevent massive headaches in the future.

Author:  Joseph P. Bradica

POTENTIAL EXPANSION OF EMPLOYER OBLIGATIONS TO EMPLOYEES IN PLANT CLOSINGS AND MASS LAYOFFS

The Worker Adjustment and Retraining Notification Act (the WARN Act) is a federal law that defines employer obligations in mass layoffs or plan closings. Generally, employers are required to provide notice to employees so that they are able to find an alternative employment.

Currently, employers are covered by the WARN Act if they have 100 or more employees, not counting employees who have worked less than six months in the last twelve months and not counting employees who work on average less than 20 hours a week. Generally, the WARN Act requires employers to give employers sixty (60) days notice of covered plant closings and mass layoffs. A plant closing is defined as the shut down of an employment site resulting in employment loss for 50 or more employees during any thirty-day period. A mass layoff is defined as an employment loss (1) at any site during any thirty-day period for 500 or more employees, (2) for between 500 and 499 employees, if they make up at least 33% of the employer’s active workforce. Employers who fail to provide the requisite notice under the WARN Act may be liable to each employee entitled to notice for back pay and benefits for the period of violation up to sixty-days. Workers, representatives of employees and units of local government may bring individual or class action suits to enforce worker rights under the WARN Act.

Recently introduced, the Federal Oversite Reform and Enforcement Act (FOREWARN) would expand employer obligations to employees in plant closings and mass layoffs. If passed, the FOREWARN Act would increase penalties to double back pay plus benefits for failure to provide the notice to employees. In addition, the proposed legislation would reduce the threshold for coverage from 100 to 50, would reduce the mass layoff figure from 50 to 25, and would lower the mass layoff trigger. The FOREWARN Act would also increase the amount of notice employers must provide 60 to 90 days and require employers to provide written notification to the Department of Labor.

Several states are also looking at providing expanded remedies to employees affected by plant closings and mass layoffs. Currently, nine states have passed their own version of legislation to supplement the WARN Act. The legislation in California and Illinois, for example outline more stringent requirements for employers. Recently, legislation was proposed in New Jersey that would increase the notification requirement from 60 days to 90 days. It would also require that employers pay severance pay.

There is currently a lot of activity and attention being paid to the WARN Act. Employers should make sure that they thoroughly understand all of their obligations under the Federal and State legislation and that they remain informed about any amendments and or new legal requirements in the event that they are downsizing or closing facilities.

Author: Mary B. Halfpenny

ELECTRONIC WAGE STATEMENTS

If you pay your employees electronically, through direct deposit or employee debit cards, you may wish to consider ditching the paper pay stub that you provide to your employees. Most likely, you provide direct deposit to employees because you have decided to reduce business related expenses. Ditching the paper pay stub will allow you to fully realize all the savings from this cost cutting initiative.

Most states require that employers provide pay statements to their employees each pay period that detail earnings, hours, deductions, and pay rate. Historically, employers provided this to employees as a detachable portion of their paycheck. Since the advent of direct deposit, the paper pay statement has replaced the detachable portion of the paycheck. A growing number of employers now provide this information to their employees electronically, through an Electronic Statement.

However, before you convert to electronic statements, you must review each state’s wage/pay regulation and administrative decisions regarding this topic with your attorney to ensure that this conversion is permissible and ensure that your plan for conversion complies with all other applicable wage/labor regulations. An employer considering electronic wage statements should take the following steps:

  • Review local administrative decisions, regulations and statutes with your attorney;

  • Obtain written consent from employees indicating that they wish to receive an Electronic Statement instead of a written statement;

  • Keep the information confidential and provide employees with a secure mechanism so that they may access their Electronic Statements from home or at work;

  • Ensure the employee has access to the wage statement. An employer may wish to do this by providing computer kiosks to employees where they can print their Electronic Statements; and

  • Maintain the Electronic Statements for the period of time applicable for each state.

Many states do not explicitly allow or prohibit electronic wage statements. The Pennsylvania statutes concerning wage pay are silent with respect to Electronic Statements. In Pennsylvania, employers must "furnish to each employee a statement with every payment of wages, listing hours worked, rates paid, gross wages, allowances, if any, claimed as part of the minimum wage, deductions and net wages." The term "furnish," which describes the method of delivery, is not defined. Nor are there any recent regulations in Pennsylvania that define the term "furnish." An aggressive interpretation of the Pennsylvania Wage Payment Law, therefore, would permit an employer to furnish a wage statement electronically.

The law with respect to Electronic Statements is evolving rapidly. Above all, it is important that you consult with your employees and your attorneys before you convert to Electronic Statements.

Author:  Randolph C. Reliford
             rreliford@klehr.com


The Labor and Employment Group represents and counsels employers in all aspects of the employment relationship, including EEO litigation, union avoidance, negotiations, arbitrations, executive compensation, corporate transactions, and non-competition/non-solicitation agreements, as well as compliance with federal and state laws such as the Family and Medical Leave Act, the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act, the Fair Labor Standards Act and the Occupational Safety and Health Act. This document is published for the purpose of informing clients and friends of Klehr Harrison about developments in the areas of labor, employment and benefits, and should not be construed as providing legal advice on any specific matter. For more information about this publication or Klehr Harrison, contact Charles A. Ercole, Chair of the Labor and Employment Group, at (215) 569-4282 or visit the firm's Web site at www.klehr.com

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©Klehr, Harrison, Harvey, Branzburg & Ellers LLP 2007. All rights reserved.