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Retail Employment Law Blog

Court holds hostile work environment claim based upon disability harassment can proceed due to retail employer’s failure to stop the harassment

By Nancy J. Arencibia and Allison J. Vogel

A federal court recently held that a retail employee could proceed to trial on his hostile work environment claim based upon disability harassment due to his employer’s failure to take prompt remedial action to stop the harassment.  Pikowski v. Gamestop, Inc., et al., No. 11-2732, 2013 U.S. Dist. LEXIS 175193 (D.N.J. Dec. 11, 2013).

In this case, the plaintiff, Michael Pikowski, alleged that his former employer, GameStop, Inc., a major video game retailer, harassed, discriminated, and retaliated against him based upon his disabilities in violation of the New Jersey Law Against Discrimination (“LAD”).  Pikowski, a Lead Game Advisor (“LGA”) at GameStop’s Phillipsburg, New Jersey store, had Asperger’s Syndrome, obsessive-compulsive disorder (“OCD”) with contamination phobia, anxiety, and depression.  Prior to and throughout his employment, management was aware of his disabilities.  Following his manager’s termination, Pikowski was promoted to interim Senior Game Advisor (“SGA”).  Around this time, Pikowski visited another GameStop store as a customer and was allegedly subjected to inappropriate comments by the store’s manager when he requested to look at sealed, untouched games because of his phobia.  

After a newly hired store manager filled the SGA vacancy in the Phillipsburg store, Pikowski resumed working as an LGA.  Pikowski claimed his manager rubbed a cable he claimed was contaminated by dog feces over a game that Pikowski intended to purchase, and kicked a video console across the floor before Pikowski purchased it.  Upon receiving a complaint from Pikowski’s mother that her son had been discriminated against because of his disabilities and passed over for the SGA position, the district manager met with Pikowski to discuss his complaints, and informed him of an open SGA position at another GameStop store in Easton, Pennsylvania.  Pikowski accepted a transfer to the Easton store.

At the Easton store, Pikowski claimed his manager referred to him as “sped” and “retard” and kicked him in the buttocks.  Following an investigation, the store manager was disciplined and the entire store was required to complete a two-hour respectful-workplace training course.  After these incidents, Pikowski requested to be transferred back to the Phillipsburg store, even though he understood his hours would be reduced due to the store’s lower sales volume.  After returning to work at the Phillipsburg store, Pikowski was not given a key, which he previously had.  A month later, Pikowski resigned, claiming that he had been overlooked for SGA positions in Easton and Hackettstown, and subjected to constructive termination. 

Pikowski sued, asserting claims for hostile work environment based upon disability harassment, disability discrimination, retaliation, and constructive discharge.  The company moved for summary judgment, which was granted in part and denied in part.  The court held that the reduction of Pikowski’s hours following his transfer from the Easton store to the Phillipsburg store did not constitute an adverse employment action because Pikowski was aware of, and agreed to, the reduction in hours.  The court also held that the loss of Pikowski’s key holder responsibility was not an adverse employment action because the responsibility was discretionary and did not materially change the terms of his employment. Further, the court held that Pikowski could not maintain he was passed over for an SGA position because of his disabilities.  The court found that there was no evidence that an open position was available in the Hackettstown store; Pikowski removed himself from consideration for the position in the Easton store by transferring to the Phillipsburg store; and Pikowski failed to show that the company acted with any discriminatory intent when it promoted another employee over Pikowski in the Phillipsburg store.  As a result, the court dismissed Pikowski’s disability discrimination claim.  The court dismissed Pikowski’s retaliation and constructive discharge claims for similar reasons.

The court held, however, that Pikowski sufficiently raised a genuine issue of material fact as to whether the conduct, cumulatively, constituted workplace harassment.  The court found that the comments made, and the conduct committed, by the managers in the Phillipsburg and Easton stores, if true, could create an issue of fact as to whether Pikowski was harassed.  The court was not persuaded by the company’s argument that it took prompt remedial action after receiving Pikowski’s complaints because the alleged incidents of harassment continued until Pikowski’s resignation.

Accordingly, this decision highlights that an employer must not only take prompt remedial action after receiving an employee’s complaint of harassment, but must take steps to ensure that the harassment is stopped.  If the employer’s response does not stop the harassment, the employer will not be relieved of liability.

Federal Appeals Court Upholds NLRB’s “Micro-Unit” Rule

By: Keahn Morris

 

A U.S. appeals court in Cincinnati has upheld the National Labor Relations Board’s decision in Specialty Healthcare and Rehabilitation Center, 357 NLRB No. 83 (2011), allowing unions to organize in small units of employees, where their likelihood of success is heightened. Kindred Nursing Centers East f/k/a Specialty Healthcare and Rehabilitation Center of Mobile v. NLRB, Nos. 12-1027/12-1174 (6th Cir. Aug. 15, 2013). The Board’s win is seen as giving encouragement to unions attempting to gain footholds in industries and businesses where inroads for organized labor have been difficult in the past. 

 

In Specialty Healthcare, the Board agreed with a petitioning union to conduct an election in a unit comprised solely of that nursing home’s Certified Nursing Assistants (CNAs). Prior to this case, the Labor Board had almost always determined the composition of a bargaining unit using a “community-of-interest” standard that resulted in the inclusion of other positions, such as dietary aides and housekeepers, that reflected the working interrelationship of these employees in the facilities’ operations. Such “service and maintenance units” had become the norm. In a 2011 decision, however, the Board adopted a new standard that would apply across all industries – including Retail. From then on, the NLRB would approve whatever unit the union requested (assuming it had some rational basis) unless the employer could show that the jobs excluded had an “extraordinary community of interest” with those covered in the request. It was (and still is) unclear exactly how this test can be met, but it is clear that it is a very high threshold. For example, in the retail setting, it is possible the NLRB would permit a union to organize sales associates in a small department (such as women’s shoes, men’s clothing, etc) in a large department store despite having hundreds of other employees in other departments.

 

Why is this important? Because unions can more readily win elections if they can “cherry pick” the job classifications allowed to vote. Employers objected strenuously. The Board’s new standard, they said, could easily result in a company having many unions and collective bargaining agreements at a single location or in a single department, making peaceful labor relations uncertain and smooth operations much more difficult. The term “micro-units” gained currency. 

The employer in Specialty Healthcare sought judicial review in the U.S. Court of Appeals for the Sixth Circuit. Numerous employers and business organizations appeared as friends of the court (including Jackson Lewis LLP) and filed briefs. In its opinion, however, the Court rejected every argument pressed by the employer and its supporters, finding: 

  • The NLRB’s “clarification” of the community-of-interest standard was not arbitrary, unreasonable, or an abuse of discretion.
  • The Board did not abuse its discretion by adopting a general rule through adjudication instead of rulemaking — the Board is not precluded from announcing new principles in an adjudicative proceeding.
  • The new standard is not a “material change in the law” — it has been used by the Board before, but in an exceedingly small number of cases. The Court also said the Board may overrule its precedents, provided that it explains why, which it did in this case.
  • The National Labor Relations Act specifically prohibits the NLRB from determining unit composition based on the extent to which the union is successful in organizing. Although this new standard may sound perilously close to just that, the Court assures us it is not, because the Board does not simply rely on the union’s requested unit, but on its application of this new separate standard (albeit one that appears insurmountable to many employers).

The employer may seek review before the U.S. Supreme Court. However, review is discretionary and most requests are rejected. An appeal is more likely to be heard by the Supreme Court if there are differing results among the circuit courts. At present, there is no such conflict. 

Court castigates EEOC for baseless allegation that company’s use of criminal background checks has adverse impact on African-American and male applicants

By: Dylan B. Carp

The EEOC has recently initiated a number of publicized actions against retailers, claiming their use of criminal background checks in the hiring process has an unlawful adverse impact upon certain populations. In a recent decision, a federal district court granted summary judgment in favor of a company whom the EEOC alleged used criminal background checks in a manner that adversely impacted African-Americans and men. EEOC v. Freeman, Case No. RWT 09cv2573 (D. Md. Aug. 9, 2013). Although the holding turned on the EEOC’s failure to submit admissible evidence from its expert witness regarding the alleged disparate impact, the court’s opinion contains many of the following instructive and common sense observations that retailers may find worthy of attention.

For many employers, conducting a criminal history or credit record background check ona potential employee is a rational and legitimate component of a reasonable hiring process. Thereasons for conducting such checks are obvious. Employers have a clear incentive to avoidhiring employees who have a proven tendency to defraud or steal from their employers, engagein workplace violence, or who otherwise appear to be untrustworthy and unreliable. However,under Title VII of the Civil Rights Act of 1964, a specific hiring policy may constitute anunlawful employment practice if it has a disparate impact on the basis of race, color, religion, sexor national origin and the employer fails to demonstrate that the challenged practice is job-relatedfor the position in question and consistent with business necessity. 42 U.S.C. § 2000e–2(k)(1)(A)(i).

 

As the agency responsible for investigating possible violations of the Act and enforcinganti-discrimination laws in the employment realm, the EEOC has brought this action against theDefendant, Freeman, alleging that it has implemented a hiring policy that, though faciallyneutral, has a discriminatory effect on African-American and male applicants…Because of the higher rate of incarceration of African-Americans than Caucasians,indiscriminate use of criminal history information might have the predictable result of excludingAfrican-Americans at a higher rate than Caucasians. Indeed, the higher incarceration rate mightcause one to fear that any use of criminal history information would be in violation of Title VII.

However, this is simply not the case. Careful and appropriate use of criminal history informationis an important, and in many cases essential, part of the employment process of employersthroughout the United States. As Freeman points out, even the EEOC conducts criminalbackground investigations as a condition of employment for all employees, and conducts creditbackground checks on approximately 90 percent of its positions. Thus, it is not the mere use of any criminal history or credit information generally that isa matter of concern under Title VII, but rather what specific information is used and how it isused. Because of this, it is simply not enough to demonstrate that criminal history or creditinformation has been used. Rather, a disparate impact case must be carefully focused on aspecific practice with an evidentiary foundation showing that it has a disparate impact because ofa prohibited factor…

 

[A]ny rational employer in the United States should pause to consider the implications of actions of this nature brought based upon such inadequate data. By bringingactions of this nature, the EEOC has placed many employers in the “Hobson’s choice” ofignoring criminal history and credit background, thus exposing themselves to potential liabilityfor criminal and fraudulent acts committed by employees, on the one hand, or incurring thewrath of the EEOC for having utilized information deemed fundamental by most employers.Something more, far more, than what is relied upon by the EEOC in this case must be utilized tojustify a disparate impact claim based upon criminal history and credit checks. To require less,would be to condemn the use of common sense, and this is simply not what the discriminationlaws of this country require.

 

Jackson Lewis attorneys are available to discuss the legal implications of using background checks during the hiring process.

Male successor’s alleged greater ability to negotiate over salary not a defense to Equal Pay Act claim

By Douglas G.A. Johnston

A federal court held recently that a pay disparity between a female employee and her male successor was not justified as a matter of law by the company’s claim that he was better able to negotiate over salary. Dreves v. Hudson Group (HG) Retail, LLC, No. 2:11-cv-4 (D. Vt. June 12, 2013).

Plaintiff, a general manager of Hudson stores at Burlington International Airport, alleged Hudson violated the Federal Pay Act when it terminated her and paid a hire salary to her male successor. According to Hudson, the higher salary was justified because: (1) after Hudson’s initial offer, the male successor negotiated a higher salary; (2) the male successor had over six years of management experience at Hudson; (3) the cost of living in Burlington, Vermont was greater than his previous location; and (4) the male successor needed to be induced to move his family to the area. Plaintiff moved for summary judgment on her claims, which the court granted.

 

The Court held that, when a plaintiff has established a prima facie case of an equal pay act violation, a Defendant’s factor-other-than-sex defense cannot be grounded on the male successor’s alleged ability to negotiate a higher salary.  Nor may it be based on a company’s alleged need to induce the successor to agree to employment, unless the employer can show the inducement is based on a valid business purpose. For example, the employer can offer an inducement to a potential employee who has better qualifications or greater experience than the claimant. Here, the court concluded that Hudson lacked a valid defense as it did not meet its burden of showing that the inducement to the male successor based on his family circumstances was related to any unique characteristic of his position, his qualifications, experience or abilities, or any exigent circumstances associated with Hudson’s operations.

 

The decision highlights the difficulties retailers can face in attracting talent or making a decision regarding compensation of salaried employees. Companies must connect compensation decisions, including initial offers, starting salaries and raises to valid business purposes to avoid potential liability under federal equal pay requirements.

Second Circuit Finds Gristede’s Owner to Be Individually Liable “Employer” Under FLSA

Our colleagues at the Jackson Lewis Wage and Hour Law Update recently submitted this post. 

Summary:

Reviewing a district court decision issued two years ago, the United States Court of Appeals for the Second Circuit has affirmed a ruling finding John Catsimatidis, the CEO and owner of New York-area grocery chain Gristede’s (and a New York Mayoral Candidate), individually liable for wages under the FLSA based on the “economic realities” of his relationship to the business and the workers in question.

 

View the entire entry:

http://www.wageandhourlawupdate.com/2013/07/articles/wage-and-hour/coverage/second-circuit-finds-gristedes-owner-to-be-individually-liable-employer-under-flsa/index.html

 

Federal court holds offensive conduct by a retailer’s repeat customer may support a claim for sexual harassment by employees

By Heidi Guettler

In a recent opinion, a federal court held that a retail customer’s offensive acts directed toward a number of female employees may support a claim of sexual harassment by the employees against the retailer. EEOC v. Fred Meyer Stores, Inc., No. 3:11-cv-00832 (D. Or. June 17, 2013).

The EEOC alleged that a Fred Meyer store located in Oak Grove, Oregon subjected female employees to a sexually hostile work environment because of their sex because the store allegedly tolerated offensive conduct by a repeat customer. The employees claimed that they were sexually harassed by the customer on multiple occasions and the store failed to adequately address the problem, despite its knowledge of the alleged conduct. The store moved for summary judgment, contending the alleged conduct was not sufficiently severe or pervasive to be actionable harassment. The court denied the motion, however.

The court held that the alleged conduct was sufficient to support a finding of harassment for three reasons. First, many of the employees complained to management about the alleged conduct, indicating they found the conduct subjectively offensive. Second, much of the alleged conduct was very offensive, including alleged touching of employees’ breasts. Third, the employees testified they were aware of offensive conduct directed to each other, which contributed to an atmosphere of fear.

The decision highlights how important it is for managers and employers to take employee complaints regarding inappropriate customer behavior seriously, particularly where the customer’s problematic behavior constitutes a pattern of conduct. Companies must take action to protect employees from these customers, including taking steps such as banning the customer from the store. Without taking such proactive steps, inappropriate customer behavior may support a claim of sexual harassment by the employees against the retailer. 

Court denies certification of FLSA action brought by retail store managers alleging nation-wide misclassification

 

 

By Yvonne Norris Maddalena

 

 

The United States District Court for the Middle District of Alabama recently held that store managers of a large retail chain cannot pursue a nationwide FLSA overtime collective action claiming they were wrongfully classified as exempt and, thus, improperly denied overtime compensation.  In Creel v. Tuesday Morning, Inc., M.D. Ala., No. 2:09cv728-MHT, 5/06/13, the plaintiff claimed store managers routinely worked 50-60 hours a week at an Alabama store location and were improperly classified under the executive exemption of the FLSA as most of her job duties were non-managerial.   The plaintiff presented testimony that managers have limited discretion to change store hours, contract with service vendors, purchase supplies, choose merchandise sold, or hire, promote or terminate staff.  She also offered testimony that job duties are dictated by a uniform-company policy and submitted four affidavits from current or former store managers in three states reflecting they worked more than 40 hours per week without overtime compensation.  Plaintiff moved to conditionally certify a national collective action and facilitate class notice.   District Judge Myron Thompson denied the motion, holding Tuesday Morning store managers were not similarly situated.

 

Applying the two-tiered procedure that district courts should use in certifying collective actions under the FLSA, the court noted that the plaintiffs bore the burden of demonstrating a “reasonable basis” for their claim of class–wide discrimination.  While the standards for determining similarity were recognized as “fairly lenient” at the notice stage, the court reasoned that it should utilize “whatever information it has available at the time” as it would be “illogical and wasteful to all concerned to certify a collective action if the evidence is already sufficient to indicate that a decertification is likely to follow.”  The court held the plaintiff had carried her “low burden” of demonstrating there were other individuals who existed in the proposed class and had a desire to opt-in through her own testimony and the four affidavits submitted.

 

Turning next to whether the proposed class consisted of similarly situated individuals, however, the court found plaintiff did not carry her burden.  After analyzing prior decisions focusing on the proof required from a plaintiff, Judge Thompson held that the similarly situated requirement could be met “either by showing similarity between job responsibilities and pay provisions of plaintiffs and proposed class members or by providing evidence of a nexus between plaintiff’s claims and the claims of the proposed class.”  He also stated that the “broader and more numerous and complex the collective action the plaintiff wants, the more careful the court must be” and that the court “must be reasonably certain that the proposed litigation is not biting off more than can be chewed.”

 

The plaintiff sought certification of a national collective action that would include over 1,250 members.  The court held her testimony and affidavits from only four other store managers from only two other states did not “provide an adequate platform from which to make the grand leap to a national collective action.”   Although only one training manual was utilized and store managers were trained all in the same location, the court reasoned it could not “turn a blind eye” to a California appellate court that had decertified a class of store managers for the same defendant after holding the managers performed a variety of duties in significantly different ways depending on the size of the stores, the number of employees at stores, the location of the stores, the configuration of the stores and the amount of store sales.  While noting the decision could have been different if the plaintiff “had restricted herself to stores of only a certain location and size and other limiting characteristics,” the court refused to certify the collective action the plaintiff actually sought.

Court holds retail manager’s allegedly harassing comments directed to employee returning from leave supports infliction of emotional distress claim

By: Jody Wilner Moran

In a recent opinion, a federal court held that an employee discharged from a retailer soon after returning from medical leave stated a claim for intentional infliction of emotional distress, a difficult claim to prove.  Brown v. Casey’s Retail Co., 35 IER Cases (BNA) 1129 (S.D. Ill. May 13, 2013).

The plaintiff, Regenia Brown, alleged that after she returned from leave under the Family and Medical Leave Act (FMLA) for a serious medical condition requiring a hysterectomy, she was harassed and fired in retaliation for exercising her leave rights. Brown alleged in her complaint that even though the store manager knew she suffered from a serious medical condition, the manager had complained to her before she left about the burdens her leave would create on other staff. Brown alleged that, when she returned from leave, her manager brought her to tears with her negativity and harassing language, knowing she was in a weakened state.  She claimed that she was then fired in retaliation for having taken leave, and suffered profound emotional distress, requiring medical attention and medication with damages exceeding $100,000.

The court denied the retailer’s motion to dismiss, holding that Brown alleged facts that, if believed, would establish that her employer engaged in truly extreme an outrageous conduct. The court noted that, although the tort does not reach mere insults, indignities, threats, annoyances, petty oppressions or other trivialities in the workplace, one factor that influences the extreme and outrageous nature of the conduct is the degree of power or authority that the actor has over the plaintiff. The court focused on Brown’s allegations that the store manager knew Brown was in a weakened mental and physical condition yet used her power as manager to abuse Brown.  Because the manager allegedly knew that Brown was particularly susceptible, the manager’s alleged behavior was more extreme and outrageous than might otherwise be considered merely rude, abrasive or inconsiderate. 

The decision highlights how important it is for managers to be very careful how they communicate with employees who are taking FMLA leave.  Companies that have a Human Resources manager or department should instruct managers to direct all inquiries to Human Resources.  Further, managers need to be careful to treat employees no differently when they return from FMLA leave to avoid a claim of retaliation.  Certainly, the decision to terminate an employee’s employment shortly after a return from FMLA leave should be reviewed carefully to ensure it is justifiable and the justifications are well documented.