Employment Law Update

AFFIRMATIVE ACTION: YOU CAN TAKE IT TO THE BANK
Frank H. Henry

As a social policy, affirmative action is intended to correct systemic discrimination in the workplace. However, many employers and employees believe that the effect of affirmative action has been to create and/or widen a rift between race and gender classifications and foster resentment in the workplace.

Did you know that most banks are required to have written affirmative action plans? Did you know that, if such a bank does not have a written affirmative action plan, the federal government can revoke the bankâs deposit insurance, and debar the bank from participating in federal contracts?

Federal law requires that some employers have affirmative action plans based on the fact that they do business with the federal government and are "government contractors." It is sometimes difficult to tell, however, whether your company is a federal contractor.

If the company is manufacturing widgets for sale to the federal government, and the widgets are collectively worth more than $50,000,00, the company is probably a federal contractor. In fact the procurement contract with the federal government will probably contain a clause that says that the company is a government contractor and, as a result, required to have a written affirmative action plan.

What if your company is a bank and some of your account holders are federal employees or federal retirees who deposit their paychecks or retirement checks directly into your bank? What if your company is a bank and your customers deposit Social Security checks in your bank? What if your bank is insured by the Federal Deposit Insurance Corporation (FDIC)? What if your bank issues savings bonds? What if your bank offers student loans guaranteed by the federal government?

The federal government has relied upon all of these factors in determining whether banks are required to have affirmative action plans. The federal agency responsible for enforcing the affirmative action obligations of federal contractors has taken the position that most, if not all, banks that employ more that fifty (50) employees are federal contractors and must maintain written affirmative action plans. The rationale for the agency'â position on that issues is certainly not obvious from federal law or applicable regulations.

Under Executive Order 11246, agencies of the federal government are required to include in certain government contracts an equal opportunity clause providing that the contractor will not discriminate on the basis of race, religion, color, sex, national origin, disability or Vietnam-era veteran status. Certain employers covered under Executive Order 11246 are required to have written affirmative action plans. Reviewing your contracts for references to affirmative action requirements can be misleading. Under the applicable regulations, the equal opportunity clause is deemed to be incorporated in every government contract covered under Executive Order 11246, even if the clause is not expressly set forth in the contract.

Federal regulations attempt to create a bright-line test for determining which employers are subject to the affirmative action obligations. The regulations require that a written affirmative action plan must be in place by a non-construction contractor which has fifty (50) or more employees and: (1) has a contact valued in excess of $50,000.00; (2) serves as a depository of federal government funds; or (3) is a financial institution that is an issuing and paying agent for United States savings bonds and savings notes.

The term "contract" includes [a]ny agreement or modification thereof between any contracting agency and any person for the furnishing of supplies or services, or for the use or real or personal property, including lease arrangements. The term "services" as used in this section, includes, but is not limited to, the following services: utility, construction, transportation, research, insurance, and fund depository." 41 C.F.R. 60-1.3 (1998).

There is little policy guidance as to which employers are subject to the affirmative action requirements. The Secretary of Labor, through the Office of Federal Contract Compliance Programs (OFCCP), is responsible for enforcing the affirmative action obligations of federal contractors. The OFCCP has historically relied upon the existence of deposit insurance with either the FSLIC or the FDIC to assert jurisdiction over federally insured financial institutions. See, e.g., USAA Federal Savings Bank vs. McLaughlin, 849 F. 2d 1505, 1507 (DC Cir. 1988).

The OFCCP recently reinforced that position and, in no uncertain terms, articulated the potential consequences of a bankâs failure to abide by the affirmative action and no-discrimination requirements of federal law. 61 Fed. Reg. 50080, 50082 (1996) ("OFCCP wishes to reemphasize that it will continue to maintain its long-standing policy of imposing sanctions other than debarment of financial institutions from future deposit or share insurance, or cancellation, termination or suspension of a financial institutionâs deposit or share insurance for violation of Section 4212").

What does it all mean? If your company is a bank, and you have more than fifty (50) employees, the bank is are probably required to have an affirmative action plan. In order to be certain, it will be necessary for you to closely scrutinize the bankâs business practices to determine if any of your products, services or programs fall within the scope of the federal affirmative action regulations.

Enforcement begins with a "desk audit" in which the OFCCP requests that the contractor produce a copy of its affirmative action plan and supporting documentation. An affirmative action plan must be produced within (30) days. If no affirmative action plan is produced, or fi the plan is insufficient in some way, the OFCCP issues a "show cause" order, which begins official enforcement proceedings.

AGE DISCRIMINATION: THE OLDER WORKER IN AMERICA'S YOUTH CULTURE William P. Burns

The Age Discrimination in Employment Act (ADEA) prohibits discrimination in the workplace on the basis of age. To establish a prima facie case of age discrimination, a claimant must demonstrate that he/she 1) is in the protected class of age 40 or older; 2) was performing to the employerâs legitimate expectations; 3) was subject to an adverse employment action; and 4) that similarly situated and substantially younger employees were treated more favorably. Also, the ADEA proscribes discrimination against job applicants on the basis of age.

The ADEA is a separate law apart from Title VII of the Civil Rights Act of 1964, which is the basic federal law which covers most forms of discrimination in employment. Discrimination based upon age was not a part of the 1964 law, but was enacted as a separate statute by Congress in 1967. This legislation is unique among this countryâs anti-discrimination laws in that it establishes a "protected classification", i.e., those age 40 and older, which all of us, if we are lucky, will one day attain.

In many respects, age discrimination is among the more subtle of the types of discriminatory activity that occurs in the workplace. Certainly there is nothing subtle about discriminating against somebody because of the color of their skin, or their birthplace, or their sex. But age discrimination is a little different.

An example of how the ADEA may be violated by an employer in a manner that, on its face, may not appear to be illegal, is illustrated by a very recent decision of the United States District Court for the Southern District of New York. In Hamm v. New York City Office of the Comptroller, the Court denied an employerâs motion for summary judgment, and allowed a claim of discrimination to go forward, where a 49 year-old man was rejected for an entry-level job as an auditor because he was "overqualified". This job applicant had worked for three years as a consultant in the financial industry. In 1994, as he was completing a second undergraduate degree, he applied for an entry-level job in New York Cityâs Comptrollerâs Office. He survived the first job interview, but, during the second interview, the audit manager who interviewed him told the applicant the was "overqualified and would be bored" with the job.

The Court stated that not hiring an applicant because he is "overqualified" may well be a code word for "too old", and thus potentially a violation of the ADEA.

Employers should note carefully the ruling in this case.

Think about it. How can someone be "overqualified" for a job? Would a Major League Baseball team refuse to employ a pitcher who could accurately throw a baseball 120 miles an hour because he was "overqualified"? Should not an employer want the most qualified individual for the job? In the real world, "overqualified" is probably a code word for "we better not hire him because as soon as something better comes along, the will leave." But in todayâs fluid job market, is an older worker any more likely to leave a position than someone younger? Perhaps employers should put themselves in the shoes of this job applicant. John Lennon once challenged us to "Imagine". Imagine how an older job applicant feels to be denied employment because he is "overqualified". Imagine the frustration and humiliation. How do you imagine it feels? How would you feel?

Routinely, law firms advertise available attorney positions with statements such as they are seeking an applicant with "2 to 5 years experience. But why have an upper limit on the number of years or experience? If you can get somebody with 10 years of relevant experience, why not hire him or her? Or at least consider them for the position. By restricting applicants to those with "2 to 5 years experience", the law firm is automatically taking out of the universe of available applicants for the position all those lawyers with more than 5 years of experience.

Certainly, most of us would acknowledge a correlation between years of experience in a profession and the job applicantâs age. However, the United States District Court for the District of Columbia recently found to the contrary. In Koslow v. Epstein, Becker & Green, the Court rejected the ADEA claim of a 53-year old attorney with substantial antitrust law experience who was denied an interview for a health law antitrust position advertised by the defendant law firm which sought applicants "2 to 6 years out of law school". While there are certainly people in their 40âs, 50âs or even older, who enter law school, the great majority are in their early-to-mid 20âs and recently graduated from college. The court apparently refused to take judicial notice of this fact. When the law disassociates itself from reality, unfortunate decisions result.

The blatant "screening out" of older workers by arbitrary upper limits on experience is particularly inappropriate in a era of downsizing, mergers and technological innovation, when experienced and very highly qualified people often suddenly, through no fault of their own, find themselves unemployed.

As stated above, the protected classification of age 40 plus is the one classification into which we will all one day fall, barring catastrophe. Employers should be especially sensitive not to indirectly or inadvertently discriminate against older workers. Age discrimination is illegal and can be extremely costly if it results in litigation. But more importantly, it is the wrong thing to do. What executive or human resources manager can be certain in Americaâs rapidly changing economy that they may not one day be the victim of the same discrimination they may now practice, perhaps unintentionally but nonetheless illegally and insensitively, against others?

SUPREME COURT RULES ON "SAME SEX" HARASSMENT Alan M. Gerlach

In Oncale v. Sundowner Offshore Services, Inc., 118 S. Ct. 998 (1998), the Supreme Court handed down a unanimous decision holding that "same sex" sexual harassment is actionable under Title VII of the Civil Rights Act of 1964. In that case, which arose in Louisiana, a male employee brought a sexual harassment suit against his employer and other male employees alleging that÷while working on an oil platform in the Gulf of Mexico÷he had been physically assaulted in a sexual manner and threatened with rape by male co-workers. The federal district court and intermediate appellate courts ruled in favor of the defendants, believing that a male employee has no cause of action under Title VII for sexual harassment by male co-workers.

Writing for the Court, Justice Scalia held that the standard for recovery in a same-sex case is the same as in other sexual harassment cases. However, Justice Scalia cautioned that the behavior at issue must be assessed in light of its context. "Common sense, and an appropriate sensitivity to the social context, will enable courts and juries to distinguish between simple teasing or roughhousing among members of the same sex, and conduct which a reasonable person in the plaintiffâs position would find severely hostile or abusive."

The Courtâs decision emphasized that Title VII reaches "discrimination in employment·because of ·sex." It viewed the Oncale case as the latest of many in which courts have held that the fact the alleged victim and the alleged discriminator are the same sex or race does not insulate the employer from liability. The Court sensibly limited liability to cases involving "conduct which a reasonable person in the plaintiffâs position would find severely hostile or abusive." It is heartening that the Court re-emphasized that Title VII is an employment discrimination statute, not a remedy for every unfortunate act occurring in the workplace. To be actionable, the harassment must not only be "severely hostile or abusive" conduct must also be "because of" the victimâs sex, meaning gender. The Court left for another day the difficult issue of the bisexual supervisor who sexually harasses both men and women. Oncale merely held that Title VII recognizes claims of same-sex harassment.

Interestingly, the Oncale decision was foreshadowed by an Eleventh Circuit decision arising from a case in which a Broad and Cassel attorney successfully represented the alleged individual harasser. The alleged harasser was ultimately dismissed from the suit because, the federal district judge held, neither Title VII nor the Florida Civil Rights Act allows cases to be brought against individual supervisors or managers. (The plaintiff later dropped the individual defendant from the appeal.) The judge also determined that allowing a Title VII suit where a heterosexual male allegedly harassed by a homosexual male supervisor amounted to an action based on the employeeâs sexual preference, a characteristic that is not protected by Title VII, and so entered judgment for the employer. On appeal, the Eleventh Circuit disagreed with this aspect of the lower courtâs analysis and held that the plaintiff could proceed against the employer because same-sex harassment cases are actionable under Title VII. Fredette v. BVP Management Associates, 112 F. 3d 1503 (11^th Cir. 1997).

If the Oncale and Fredette cases are not enough to persuade employers to take same-sex harassment claims as seriously as male-female harassment cases, consider this: in May, a federal court jury in Ocala, not a part of the state known for large verdicts, awarded a female plaintiff more than a million dollars in total damages (not including attorneyâs fees and costs) against the defendant employer for claims arising from her sexual harassment by another female, a supervisor for Belk-Lindsay Department Stores.

SEXUAL HARASSMENT: DEDUCTIBILITY OF SEXUAL HARASSMENT EXPENSES Steve L. Waserstein

Sexual harassment lawsuits against employers are increasing with no end in sight, especially considering the recent United States Supreme Court ruling which makes it easier for an employee to sue an employer. Employers are spending a great deal of money defending these sexual harassment lawsuits. One of the issues each entity faces is whether the legal fees and payments to settle such lawsuits are a deduction for federal income tax purposes. Sexual harassment claims usually involve verbal or physical conduct at the workplace. Outside the workplace, harassment claims may arise from conduct on business trips, at business meetings or at a clientâs or customerâs work location. Generally, the deductibility of legal fees and settlement payments of a corporate defendant or other entity will depend upon whether its employee charged with harassment committed the action within the scope of his/her employment. If, for instance, an employee rejects the president of corporation XYZ sexual advances at the workplace and later the president takes employment actions against such employee, i.e., denying a promotion or a decrease in salary, the legal fees and costs to defend and settle a sexual harassment claim by such employee should be deductible. There is no clear answer, however. Each case is based upon the facts and circumstances of that case. Before settling any sexual harassment lawsuit and taking a deduction a qualified tax attorney should be consulted.

SEXUAL HARASSMENT AN OUNCE OF PREVENTION Frank H. Henry

Most employers are aware that reports of sexual harassment must promptly and thoroughly be investigated. Where appropriate, prompt remedial action must be taken to end the harassment. Are there any proactive steps that an employer can take to limit its liability in the event of a claim of sexual harassment?

One of the most important pieces of evidence in any sexual harassment case is the employerâs policy on sexual harassment. However, even the least tolerant, most heavy-handed policy means nothing unless the Companyâs employees are aware of the policy and understand it. Employers are frequently embarrassed to learn ÷ at a deposition ÷ that the Companyâs employees have never read the Companyâs sexual harassment policy (or any other policy, for that matter, other than the most important on vacation and holidays).

One of the best preventive remedies, used by only a small minority of employers, is sexual harassment training. The benefits of training are twofold. First, employee sexual harassment training teaches employees the types of conduct which constitutes sexual harassment and teaches them what to do in the event they, or their co-workers, believe they are being harassed. Second, sexual harassment training may become a persuasive piece of evidence which can be used by an employer in court to show that the employer did everything it could to prevent and/or eliminate sexual harassment in the workplace.

There is no explicit requirement in federal law that an employer conduct any such program. However, the EEOCâs Guidelines on Discrimination Because of Sex suggest that employers "affirmatively [raise] the subject" of sexual harassment and develop "methods to sensitize all concerned." That spells training.

SEXUAL HARASSMENT RECENT DEVELOPMENTS Frank H. Henry

In two companion cases, the United States Supreme Court recently announced a new framework for employer liability in sexual harassment cases. In Burlington Industries, Inc. v. Kimberly Ellorth, Case No. 97-569 (June 26, 1998) and Faragher v. City of Boca Raton, Case No. 97-282 (June 26, 1998) the Court decided the circumstances under which an employer may be held liable for sexual harassment by one of the employerâs supervisors.

The Court held that an employer is subject to vicarious liability for hostile environment sexual harassment by a "supervisor with immediate (or successively higher) authority over the employee." When an employee has not been subject to any tangible adverse employment action, the employer is entitled to raise an affirmative defense to liability or damages. The defense is based on "two necessary elements: (a) that the employer excised reasonable care to prevent and correct promptly any sexually harassing behavior, and (b) that the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise."

The Court also endorsed the promulgation of Company policies against harassment and grievance procedures for employees who have been victimized by sexual harassment. However, the Court announced a strict liability standard where adverse action is taken against the complaining employee. The Court held that "[n]o affirmative defense is available, however, when the supervisorâs harassment culminates in a tangible employment action, such as discharge, demotion, or undesirable reassignment."

The Courtâs rationale was based on public policy favoring remediation of sexual harassment in the workplace by "encouraging forethought by employers and saving action by objecting employees·" The practical effect of these cases is a rebuttable presumption in favor of liability in sexual harassment cases involving supervisors where the employee has suffered no tangible economic injury. Where the employee has been subjected to some form of tangible injury to his or her employment status, the employer is strictly liable.

PRACTICAL IMPLICATIONS FOR EMPLOYERS

In defense of a sexual harassment case involving a supervisor-subordinate relationship, it will be important for an employer to be able to show that it took reasonable steps to prevent the harassment, including adopting a strong policy against harassment, training managers and supervisors, and otherwise sensitizing the workplace to sexual harassment issues. It will also be important to show that the complaining employee had a complaint procedure available to him or her, and the employee failed to utilize it.

If you wish to receive additional information regarding any of the subjects contained herein, please contact one of our attorneys. Readers are free to reproduce articles in this newsletter, however, we ask that credit be given to Broad and Cassel and a copy sent to the Editor.

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