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US Supreme Court Rules That Defendant Need Not Win on Merits to Be Prevailing Party Under Title VII

Decision: In CRST Van Expedited, Inc. v. Equal Opportunity Employment Commission, a CRST driver filed a US Equal Opportunity Employment Commission (EEOC) charge alleging that she was sexually harassed by two male trainers. The EEOC investigated the claim and informed CRST that it found reasonable cause to believe that the plaintiff and a class of employees and prospective employees were subject to sexual harassment. The EEOC filed suit against CRST under Title VII of the Civil Rights Act of 1964. The US District Court for the Northern District of Iowa dismissed the lawsuit on the grounds that the EEOC had failed to satisfy its statutory obligation to engage in pre-suit investigation and conciliation efforts and awarded CRST $4 million in attorneys’ fees. The Eighth Circuit reversed the award, concluding that a judicial determination on the merits is necessary to establish that the claim was “frivolous, unreasonable, or groundless,” as required by Title VII’s fee-shifting provision.

In a unanimous opinion, the US Supreme Court upheld the district court’s prevailing party determination, holding that Title VII defendants may be eligible for attorneys' fees even if they win dismissal of the case on procedural grounds. The Court explained that the defendant’s objective is to rebuff the plaintiff’s challenge by any available means and that “[t]here is no indication that Congress intended that defendants should be eligible to recover attorneys' fees only when courts dispose of claims on the merits.” Instead, the Court found that “Congress must have intended that a defendant could recover fees expended in frivolous, unreasonable, or groundless litigation when the case is resolved in the defendant’s favor, whether on the merits or not.” The Court left two issues open for remand: (1) whether a defendant must obtain a preclusive judgment in order to be deemed the prevailing party entitled to attorneys' fees; and (2) whether the EEOC’s claim that it satisfied its pre-suit obligations was actually frivolous, unreasonable, or groundless.

Impact: The Court’s decision will give the EEOC greater incentive to diligently fulfill its obligation to pursue conciliation before filing suit.

US Supreme Court Rules on Statute of Limitations for Constructive Discharge Claims By Civil Servants Under Title VII Violations

Decision: In Green v. Brennan, Green was employed as a postmaster by the US Postal Service. He complained that he was denied a promotion in favor of a purportedly less-qualified candidate because he was black. Green alleged that, after he complained, his supervisors accused him of intentionally delaying the mail. In an agreement signed on December 16, 2009 between Green and the Postal Service, the Postal Service agreed not to pursue criminal charges in exchange for Green agreeing either to retire or to accept another position in a distant location for less money. Green chose to retire and submitted his resignation paperwork on February 9, 2010. Later—41 days after resigning, but 96 days after signing the agreement—Green made a constructive discharge/discrimination claim to the EEO counselor and eventually filed suit in federal court. The court dismissed his complaint as untimely because Green had not exhausted his administrative remedies by initiating contact with the counselor within 45 days of the date of “the matter alleged to be discriminatory,” i.e., the signing of the settlement agreement, as required by the EEOC’s regulation. The Tenth Circuit affirmed.

The US Supreme Court reversed, holding that the limitations period for a constructive discharge claim by a public servant “begins running only after the employee resigns” as a result of discriminatory behavior, rather than at the time of the employer’s last act of bias that led to the resignation. The Court explained that “the ‘matter alleged to be discriminatory’ in a constructive-discharge claim necessarily includes the employee’s resignation” and that the employee does not have a “complete and present cause of action” until he resigns because “such a claim accrues only after an employee resigns.” The Court further explained that for practical reasons, “[s]tarting the limitations clock ticking before a plaintiff can actually sue for constructive discharge serves little purpose in furthering the goals of a limitations period—and it actively negates Title VII’s remedial structure.”

Impact: The Court’s decision that the clock starts running upon resignation means that employees will be able to bring constructive discharge claims based on alleged discriminatory conduct that occurred months or even years prior to their resignation. Although this case arises in the context of a federal government employee, the Court’s bright-line rule for measuring timeliness may be applied to the limitations period governing private-sector constructive discharge claims.

President Obama Signs Landmark Federal Trade Secrets Bill

Law: On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA), the result of an extended bipartisan effort that passed the Senate with a unanimous vote and the House with only two nay votes. The DTSA amends the existing Economic Espionage Act to allow companies to file federal civil lawsuits for trade secret theft. Previously, companies harmed by trade secret theft could only sue civilly under state laws which, while similar to each other, can vary in meaningful ways. Remedies under the DTSA include injunctive relief for actual or threatened misappropriation, payment of a reasonable royalty and actual damages, recovery for unjust enrichment and exemplary damages for willful and malicious misappropriation. The DTSA also allows courts to issue ex parte civil seizure orders on a showing of extraordinary circumstances if necessary to protect a company’s trade secrets.

Impact: The DTSA provides greater predictability for businesses looking to protect their trade secrets and provides companies engaged in interstate commerce with easier access to the federal courts. Moreover, it elevates the protection of trade secrets to the level afforded other intellectual property such as trademarks, copyrights and patents by establishing a national standard of protection. However, the DTSA does not preempt state trade secret laws, and lawsuits that do not involve a product or service in interstate commerce will remain in state court.

Department of Labor Issues Final Rule Raising Salary Thresholds for Overtime Exemptions

Update: On May 18, 2016, the US Department of Labor (DOL) issued the final version of its new overtime rule, which raises the minimum salary thresholds for the Executive, Administrative and Professional exemptions to the overtime requirements of the Fair Labor Standards Act. The new rule, which takes effect on December 1, 2016, more than doubles the base salary requirement from $23,600 to $47,476 ($455 to $913 per week) and also establishes a mechanism for automatically updating the salary thresholds every three years beginning on January 1, 2020. In addition, the new rule increases the minimum annual compensation for the Highly Compensated Employee exemption (also known as the “White Collar” exemption) from $100,000 to $134,004 per year. Employers will, however, be able to count bonuses and commissions toward up to 10 percent of the new salary thresholds.

Impact: According to the DOL, the new rule will extend overtime protections to 4.2 million Americans and is expected to boost wages by $12 billion over the next 10 years. Since the rule takes effect on December 1, 2016, employers have six months to analyze the status of all employees who earn below the new salary thresholds but are currently classified as exempt. In such cases, employers will have to consider whether to reclassify the employees as nonexempt or adjust their salaries to meet the new minimum thresholds. Employers may also want to consider modifying their current labor structure to limit future overtime, especially for businesses that operate on nights and weekends.

Equal Employment Opportunity Commission Issues Fact Sheet on Bathroom Access Rights for Transgender Employees Under Title VII of the Civil Rights Act of 1964

Update: The US Equal Employment Opportunity Commission (EEOC) recently issued guidance on the application of Title VII of the Civil Right Act of 1964 (Title VII) to the issue of transgender employees’ bathroom access rights in the workplace. The guidance discusses recent EEOC cases holding that discrimination based on transgender status is sex discrimination in violation of Title VII and that denying an employee equal access to a common restroom corresponding to the employee’s gender identity is sex discrimination. The guidance also reminds employers that they cannot condition the right to use a common restroom corresponding to the employee’s gender identity on the employee undergoing or providing proof of surgery or any other medical procedure. Further, an employer cannot restrict a transgender employee to a single-user restroom, although the employer can make a single-user restroom available to all employees who might choose to use it. Finally, the guidance reminds employers that “[c]ontrary state law is not a defense under Title VII.”

Impact: Employers should review their current equal employment opportunity and anti-discrimination/anti-harassment policies to ensure that they comply with the EEOC’s most recent pronouncements about transgender employees’ workplace rights. Employers should also make sure that their managers, supervisors and human resources personnel are trained to administer these policies consistent with the EEOC’s directives.

Ninth Circuit Approves Employer’s Rounding Policy Despite Underpayment of Wages to Plaintiff

Decision: In Corbin v. Time Warner Entertainment-Advance/Newhouse Partnership, plaintiff Corbin filed a putative class action against his employer claiming that the company’s practice of rounding all employee time punches to the nearest quarter-hour increment deprived him of wages in violation of the Fair Labor Standards Act and California wage and hour laws. Under the employer’s rounding policy, if an employee punched out between 5:00 p.m. and 5:07 p.m., his time would be rounded to 5:00 p.m.; if the employee punched out between 5:08 p.m. and 5:14 p.m., his punch would be rounded to 5:15 p.m. At the end of the pay period, the employee was paid in accordance with the rounded times. Corbin’s time records revealed that he gained compensation or broke even in 58 percent of his shifts, but that over the course of his employment, Corbin lost a total of $15.02 due to the rounding of his punches.

The Ninth Circuit held that both federal and California law permit employers to round employees’ time punches to the nearest 15 minute or smaller increment, provided the rounding policy is neutral on its face and as applied. The court further held that, despite the fact that Corbin was slightly “underpaid” due to the rounding, the employer’s policy was facially neutral because it rounded all time punches to the nearest quarter-hour without an eye towards whether the employer or the employee benefitted from the rounding and that it was neutral as applied to Corbin because sometimes Corbin gained minutes and compensation and sometimes he lost them. The court explained that the neutrality analysis is not “meant to be applied individually to each employee to ensure that no employee ever lost a single cent over a pay period.” Rather, “in any given pay period, employees come out ahead and sometimes they come out behind, but the policy is meant to average out in the long-term.

Impact: The Ninth Circuit’s ruling reinforces the importance of employers analyzing their rounding policies to ensure that they are neutral and designed to even out over time. The ruling clarifies that to qualify as a neutral rounding policy, an employer’s rounding practice must permit both upward and downward rounding; rounding in only one direction will not average out over time. Importantly, the decision establishes that underpayment due to rounding does not in and of itself render a rounding policy invalid for purposes of complying with federal and California law.

New York City Commission on Human Rights Issues Guidance on Workplace Rights for Pregnant Employees

Update: New York City’s Commission on Human Rights recently issued guidance (Guidance) that explains workplace rights for pregnant employees as well as employers’ obligations to reasonably accommodate pregnant workers or new mothers under the city’s 2014 Pregnant Worker Fairness Act (Act). The Act makes it unlawful for employers with four or more employees in New York City to discriminate against pregnant employees and requires such employers to provide reasonable accommodations based on employees’ needs that arise from pregnancy, childbirth or a related medical condition. The Guidance creates five categories of violations under the Act: (1) disparate treatment, (2) failure to provide reasonable accommodations, (3) failure to post or provide notice regarding pregnancy protections, (4) maintaining policies or practices that have a disparate impact on pregnant workers and (5) retaliation. The Guidance also provides multiple examples of each violation type, along with detailed scenarios that demonstrate how employers can satisfy their obligation to engage in a cooperative dialogue process with employees about the need for reasonable accommodations.

Impact: The Guidance highlights that the Act’s protections for pregnant employees go beyond those provided by other federal and state anti-discrimination laws by, for example, providing protection to employees with any pregnancy or childbirth-related condition, not just those that rise to the level of a disability. Additionally, the Guidance reminds employers that employees with pregnancy or childbirth-related conditions must be offered reasonable accommodations, regardless of whether and to what degree other employees are accommodated. Employers covered by the Act should review the Guidance to better understand the commission’s position on the types of conduct that constitute violations under the Act and how employers can satisfy the cooperative dialogue process when working with employees to determine the availability of reasonable accommodations.