February 2002

Washington's 10 Most Significant Labor and Employment Cases in 2000-2001 

by Juliet Wehr Jones

Labor and employment law involves complicated burden-shifting schemes, nasty personal issues, and almost as many booby traps as the famously tricky arena of trusts and estates. It's enough to make the nonemployment practitioner shy away from further familiarity with this rapidly changing field. And there have been some significant changes in 2000 and 2001.

Especially in the current recession-driven economy, everyone needs to know a little more about how these significant changes apply to their clients, employers or employees. This "top 10" list is a quick and painless overview of the last two years' most significant state and federal cases for nonemployment practitioners and those employment practitioners who need a brief review.1 Admittedly, I cite a few more than 10 cases, and not all are strictly from Washington, but these cases apply in our jurisdiction and deserve our attention.

This article is not intended to substitute for legal advice, but may help practitioners "issue-spot" to know when they need more specialized assistance.

Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S. Ct. 1302, 149 L.Ed.2d 234 (2001)

Summary: Nontransportation employment contracts are covered by the Federal Arbitration Act.

Facts: Mr. Adams applied and was accepted for a job as a salesperson at Circuit City in Santa Rosa, California. His employment application contained an arbitration clause requiring him to arbitrate any dispute over his application, employment or termination, including Title VII (sex, race, national origin discrimination) and the ADEA (age discrimination). Two years later, Mr. Adams filed an employment discrimination lawsuit against Circuit City. Circuit City, 121 S.Ct. at 1306.

Procedure: Circuit City tried to enjoin Mr. Adams from pursuing action and sought to compel arbitration under the terms of the employment application. The lower court granted Circuit City's injunction request and compelled Mr. Adams to arbitrate; he then appealed. The 9th Circuit reversed, and Circuit City appealed. Id.

Issue presented:

Does Mr. Adams's agreement fall under the Federal Arbitration Act's (FAA) exemption, 9 U.S.C. § 1, of "contracts of employment for…any other class of workers engaged in…commerce," therefore excusing him from mandatory arbitration? Id., at 1307-08.

Holdings: No.

The Federal Arbitration Act (FAA), 9 U.S.C.§ 2, applies to individual employment contracts. Id., at 1311;

Only employment contracts of transportation workers are exempt from the FAA under 9 U.S.C. § 1. Id.

Related federal cases: Circuit City updates another well-known 9th Circuit case, Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L.Ed.2d 26 (9th Cir. 1991) (requiring arbitration of an age-discrimination claim based on an agreement in a securities registration application; court declined to interpret 9 U.S.C.§1, the exemption provision).

In addition to finishing work left undone in Gilmer, but in keeping with the same tradition of selective avoidance, the U.S. Supreme Court left untouched the 9th Circuit's decision-making arbitration agreements inapplicable to Title VII (federal discrimination) cases when the agreement is imposed as a condition of employment prior to the dispute. Duffield v. Robertson Stephens & Co., 144 F.3d 1182 (9th Cir. 1998).

Washington courts of appeal are dividing over the impact of Circuit City on state law. See Young v. Ferrellgas L.P., 106 Wn. App. 524, 21 P.3d 334 (Div. 2 2001), and Tjart v. Smith Barney, Inc., 107 Wn. App. 885, 28 P.3d 823 (Div. 1 2001). Depending on the employee's particular claims and the appellate division, an arbitration clause may be enforced. So far, Division III has yet to weigh in on this topic.

In Young, the Division II Court of Appeals found Circuit City inapplicable to its analysis because (a) FAA issues were not raised on appeal, (b) Mr. Young would likely have been excluded as a "worker involved in transporting goods in interstate commerce," and (c) state wrongful-discharge claims in violation of public policy cannot be bargained away by agreement. Young, 106 Wn. App. at 528-29, citing Smith v. Bates Technical Coll., 139 Wn.2d 793, 809, 991 P.2d 1135 (2000) (public policy wrongful-discharge claim cannot be waived by agreement).

Unlike Young, Tjart incorporates Circuit City and followed this analysis:

1. FAA applies to arbitration agreements in employment contracts (with a few exceptions). Tjart, 107 Wn. App. at 827-28.

2. FAA applies to state anti-discrimination laws, as well as Title VII, requiring these claims to be arbitrated. Id., at 828.

3. Ordinary state contract law determines whether the agreement subject to FAA exists. Id.

4. If found to exist, an agreement to arbitrate is enforceable absent unconscionability, fraud, overwhelming economic power, and other contractual defenses. Id., at 830.

5. An agreement to arbitrate statutory claims such as Ms. Tjart's does not violate federal or state public policy because under the Circuit City analysis, arbitration agreements do not take away substantive statutory rights, but change the forum for them. Id., at 831-32.

6. The court distinguished Young as a non-FAA case and because the employee was a whistleblower complaining of workplace health-and-safety issues.

 If you are looking for guidance on the enforceability prong of Division I's analysis, take a look at the following cases: Mitsubishi v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 627, 105 S.Ct. 3346, 87 L. Ed. 2d 444 (1985) (the Supreme Court gives examples of types of unenforceable agreements); Perez v. Globe Airport Sec. Svcs, Inc., 253 F.3d 1280 (11th Cir. 2001) (fee-splitting makes the whole arbitration agreement unenforceable); Ball v. SFX Broadcasting, Inc.,_F. Supp. 2d_, No. 00-CV-1090, 2001 WL 1048556 (N.D.N.Y. 2001) (requiring employee to pay half of arbitrator's fee in an agreement signed as a condition of employment is unenforceable); Cole v. Burns Intern. Security Svs, 105 F. 3d 1465 (D.C. Cir. 1997) (requiring employee to pay half arbitration fees is unenforceable); and Shankle v. B-G Maint. Mgmt. of Colo., 163 F.3d 1230 (10th Cir. 1999).

Summary: Disappointing plaintiff and defense lawyers alike, the Washington Supreme Court adopted the "hybrid pretext" burden of proof, which allows a plaintiff to prove an employer's given reason for an adverse employment action is pretext or "fake" by only showing sufficient evidence to disbelieve the employer. However, sometimes proof of a "fake" reason is insufficient. In this case, the plaintiff's evidence of pretext for age discrimination was insufficient, and a jury verdict was overturned. Id., at 183.

Facts: An African-American woman who was 53 years old when hired sued her employer for race, disability and age discrimination after her termination. Ms. Hill, who has an asthmatic condition, claimed she asked for a transfer as a reasonable accommodation of a disability. During this discussion, Ms. Hill talked about her level of compensation. The employer stated it fired Ms. Hill for discussing her salary and benefits with other employees, in violation of a company policy. Id., at 177-78.

Procedure: The trial court directed a verdict for the employer on a disability-discrimination claim and entered a judgment upon jury verdict in favor of the employee on her age-discrimination claim. The employer appealed, and the employee cross-appealed. The court of appeals, 97 Wn. App. 657, 986 P.2d 137, affirmed denial of the employer's motion for directed verdict, but reversed jury verdict for insufficient evidence under the "pretext-plus" standard. The employee appealed. Id., at 178-79.

Issue presented:

What is a plaintiff required to prove in order to show the employer's reason for taking an adverse employment action is "pretext" for unlawful discrimination under WLAD (RCW 49.60, et seq.)?

Holdings:

"Hybrid-pretext" rather than "pretext-plus" standard applies in determining whether employer's stated reason for the adverse action was in fact pretext; Id., at 185;

"…while a McDonnell Douglas prima facie case, plus evidence sufficient to disbelieve the employer's explanation, will ordinarily suffice to require determination of the true reason for the adverse employment action by a fact-finder in the context of a full trial, that will not always be the case." Id.

Central to the court's pretext analysis was the U.S. Supreme Court's adoption of the "hybrid-pretext" evidentiary standard covering federal discrimination statutes, resolving conflicting federal circuits in Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000). Justice Bridge gives a comprehensive historical analysis of the burden-shifting paradigm in discrimination law.

Brown v. Scott Paper Worldwide Co., 143 Wn.2d 349, 20 P.3d 921 (2001)

Summary: This case consolidated two conflicting court of appeals' cases on the issue of supervisors' personal liability under WLAD: Brown v. Scott Paper Worldwide Co., 98 Wn. App. 349, 989 P.2d 1187 (1999); and Raymond v. Pac. Chem., 98 Wn. App. 739, 992 P.2d 517 (1999). The Supreme Court resolved the common issue and reversed a summary judgment for plaintiff Raymond's employer on a breach-of-contract (handbook) claim.

Facts: Beverly Brown worked in an Everett paper mill from 1979 until her termination in 1995. Shortly after her termination, she sued her employer, as well as six individual supervisors, under WLAD, alleging sexual harassment and discrimination on the basis of sex and disability. Brown, 143 Wn.2d at 355.

Terry Raymond was a 51-year-old sales representative for Pacific Chemical when he was terminated and replaced by a younger, less experienced employee. Id, at 356. Mr. Raymond sued his employer and several supervisors for age discrimination under WLAD. Id.

Procedure: In Brown, the trial court granted the supervisors' motion for summary judgment, agreeing with their interpretation of RCW 49.60 that they were not covered "employer[s]." Brown appealed. The procedure in Raymond was the same.

Issues presented:

Can supervisors be held individually liable for employment discrimination under WLAD? Id., at 357;

Did the Raymond appeals court err in placing too much emphasis in its contract analysis on the sales agreement, disregarding other documents and circumstances under which his employment contract was formed and modified? Id., at 364.

Holdings:

Yes, supervisors may be individually liable if they engage in employment discrimination under WLAD. Id., at 361-62. Employer liability is not based upon independent fault, but upon the theory of respondent superior. Id., at 350, n 3. The court based its ruling on statutory construction, legislative intent and public policy. Id., at 360-62;

Yes, the court of appeals should have looked at the context in which the contract was formed. In evaluating and interpreting employment contracts, Washington follows the "context rule" as set forth in Berg v. Hudesman, 115 Wn.2d 657, 801 P.2d 222 (1990), instead of the plain-language rule. Id., at 364. In other words, extrinsic evidence regarding contract formation, like subsequent conduct and interpretive reasonableness, may be admissible to determine the contracting parties' intent. Id., citing Id., at 667.

Pulcino v. Federal Express Corp, 141 Wn.2d 629, 9 P.3d 629 (2000)

Summary: Justice Ireland clarified what constitutes a "handicap" for purposes of analyzing employee claims that their employer failed to accommodate their disability, choosing not to strictly follow WAC 162-22-020's definition of "handicap" promulgated by the state Human Rights Commission (HRC). The HRC's definition of disability is generally viewed to be broader than the federal Americans with Disabilities Act (ADA) definition.

Facts: FedEx terminated Leanne Pulcino, a five-foot, five-inch, 120-pound flight attendant who was also a union member, after a series of transfers and orthopedic injuries following the elimination of her flight-attendant position. FedEx claimed they were unable to find a less physical courier position for Ms. Pulcino, and transferred her to a handler position that involved stacking items on pallets and pushing pallets that could weigh up to 2,000 pounds into trucks. Id., at 636-37.

Ms. Pulcino accepted the handler position and sustained injuries over time, including a rib strain and a broken foot. Ms. Pulcino submitted evidence of bias against her because of her union activity (a "smoking gun" Post-It® note), and that other physically easier positions were available. FedEx produced conflicting evidence. After breaking her foot, Ms. Pulcino was cleared to return to work, but was told the only position available was for a handler, which Ms. Pulcino did not take. She was placed on a leave of absence and assigned a manager to help her look for another internal job. The only two openings required relocation or a long commute, and the company terminated her at the end of the 90-day leave of absence for not having found another position. Id.

Procedure: Ms. Pulcino lost the disability discharge claim on summary judgment, and the trial judge limited her to the claim of wrongful discharge for union activity. After Ms. Pulcino presented her discharge claim at trial, the court granted a directed verdict in favor of FedEx, which Ms. Pulcino appealed, as well as the summary judgment order dismissing her disability discrimination claim. The court of appeals affirmed the summary judgment dismissal of the disability claim and reversed the limitation of Ms. Pulcino's union discrimination claim to discharge, ordering a new trial. FedEx appealed. Id., at 636-38.

Issues presented:

Whether Ms. Pulcino properly stated a claim for disability discrimination based upon FedEx's alleged failure to reasonably accommodate her during periods of temporary disability;

Whether union membership alone is a "concerted activity" protected by RCW 49.32.020. Pulcino, at 638, 648-49.

Holdings:

WAC 162-22-020 definition of "handicap" does not apply in refusal-to-accommodate cases. Instead, plaintiff must show he has/had a sensory, mental or physical abnormality, and such abnormality has/had a substantially limiting effect upon the individual's ability to perform his job. An employee can show that he has a sensory, mental or physical abnormality by showing that he has a condition that is medically cognizable or diagnosable, or exists as a record or history. Id., at 641;

Union membership alone is "concerted activity" covered under RCW 49.52, affirming Bravo v. Dolsen Cos., 125 Wn. 2d 745, 888 P.2d 147 (1995). Pulcino, supra at 650-51.

Ellerman v. Center Point Prepress, Inc., et al., 143 Wn.2d 514, 22 P.3d 795 (2001)

Summary: Ellerman sets the standard for determining when personal liability applies for wage withholding, following up on Schilling v. Radio Holdings, Inc., 136 Wn.2d 152, 961 P.2d 371 (1998) (financial inability to pay wages is no defense to willful wage withholding). There is personal liability for willful wage withholding under RCW 49.52.050 for officers, financial directors or principals who directly supervise or control the payment of wages.

Facts: Mr. Ellerman worked for Center Point Prepress, which went bankrupt, leaving some of his wages unpaid. Id., at 517.

Procedure: Mr. Ellerman sued Center Point, the sole stockholder and president (Widener), and the business manager (Handly). Ellerman obtained a default judgment against Center Point and settled with Widener, leaving Ms. Handly as a defendant. The trial court ruled Ms. Handly was not a covered "employer" liable for wages under RCW 49.52. Id., at 518. Ellerman appealed, the court of appeals affirmed, and Ellerman appealed to the Supreme Court. Id. After it decided Schilling, the Supreme Court remanded Ellerman for reconsideration and the court of appeals reaffirmed, finding Handly had no personal liability because she was not "an officer, vice principal, or agent" of his employer responsible for paying wages. Id. Ellerman appealed.

Issues presented:

When does personal liability attach under RCW 49.52 for unpaid wages?;

Who is a liable "officer, vice-principal or agent of any employer"?

Holdings:

A vice-principal, someone who has the authority to direct and supervise the work of the employee, is personally liable for unpaid wages if he exercised control over the direct payment of the funds and acted pursuant to that authority. Id., at 521-22;

Personal liability attaches to an employer's agent who has some power and/or authority to make decisions regarding wages. Id., at 522-23.

Sinyard v. Commissioner of Internal Revenue, 268 F.3d 756, No. 99-71369, 2001 WL 1117553 (9th Cir. 2001)

Summary: Attorneys' fees from a plaintiff's Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. (ADEA) settlement paid directly to the attorneys is taxable gross income to the plaintiff.

Facts: Sinyard, 49 years old at the time, joined in as a plaintiff in two class-action suits against his employer (IDS) for federal age-discrimination and other claims. Id., at 757. With his lawyer he entered into a standard contingent-fee agreement allocating one-third of any award or settlement as attorneys' fees. Id. When the suits were settled, the parties agreed that one-third of the settlement would be paid directly to the attorneys, one-third as compensation for tort injuries, and the remaining third to wages, from which IDS did IRS withholding. Id. The supervising district court approved the settlement order with the attorneys designated payable directly to the plaintiffs' law firm, without tax withholding. Id., at 757-58.

Issue presented:

Are attorneys' fees taxable income to the plaintiff?

Holding: Yes.

IDS's payment of Sinyard's attorneys' fees, even as a third-party discharge of Sinyard's debt to his lawyer, is taxable income. Id., at 758; Congress must deal with any remedy for unfairness. Id.

Summary: The National Labor Relation Board (NLRB) found seven employee committees not to be employer-dominated "labor organizations" prohibited by Section 8(a)(2) of the National Labor Relations Act (NLRA) because the committees had actual decision-making authority and were therefore "management."

Facts: A 150-employee nonunion company uses an employee management system that consists of four production teams, each made up of 33 members. Id., at 1. There is a "team leader" (from management) with 32 lower-level production employees. Each team makes decisions by consensus, and no employee has greater authority than another; any employee unable to join a consensus can abstain from a vote. Id.

An Organizational Review Board (ORB) oversees the four production teams, and consists of about a dozen members, including two members from each of the four teams and some members of management. The ORB monitors plant policies and suggests modifications to plant norms including hours, layoff procedures, smoking policies, vacations, and all terms and conditions of employment. Many of the decisions made by these three committees are reviewed by the management team composed of 15 members of management. The plant manager is above the management team and has the ultimate authority to review all decisions made by the three committees. The plant manager testified he had never overruled any ORB recommendation. Id., at 2-3.

Issue presented:

Are these committees illegal employer-dominated "labor organizations" that exist for the purpose, in whole or in part, of "dealing with" employees through a bilateral mechanism concerning grievances, labor disputes, wages, rates of pay, hours of employment or conditions of work? Id., at 3.

Holding:

The seven committees are not labor organizations because their purpose is to perform essentially managerial functions, and thus they do not "deal with" the employer within the meaning of Section 2(5) of the Act. Id., at 5. The board was convinced that these committees consisted of managerial functions delegated to the employees.

This case also stands as a reminder to nonunionized employers that they are covered by the National Labor Relations Act (NLRA). The Epilepsy case below is another example. In general, the NLRA provides employees protections to form, join or assist labor organizations, bargain collectively through chosen representatives, and "to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection." State law (RCW 49.32.020) also protects employees engaging in "concerted activities."

Summary: The U.S. Court of Appeals for the District of Columbia Circuit ruled on November 2, 2001 to uphold an NLRB decision overturning a 12-year precedent to extend to nonunion workers the rights enunciated in the U.S. Supreme Court's decision in NLRB v. J. Weingarten, Inc., 420 U.S. 251, 95 S.Ct. 959, 43 L.Ed.2d 171 (1975). An older 9th Circuit case directly conflicts with the Epilepsy case. E.I. Du Pont De Nemours & Co. v. NLRB, 707 F.2d 1065, 1078 (9th Cir. 1983). So now there is a conflict among the circuits and it is unclear whether or not Epilepsy will be appealed to the U.S. Supreme Court. It is a controversy worth watching.

In Weingarten, the U.S. Supreme Court held that employees in a unionized workplace may request the presence of a union representative at an investigatory interview that the employee reasonably believes might result in disciplinary action. Weingarten, 95 S.Ct. at 959. This does not mean the employer has to offer a representative, but has to allow one if requested, or choose an alternative to the meeting. Weingarten interprets the National Labor Relations Act (NLRA), § 1 et seq., as amended, 29 U.S.C.A. § 151, et seq.

Abbreviated facts: Two employees, Arnis Borgs and Ashraful Hasan, had disagreements with a supervisor (Berger) about how she was managing them, and sent a memo to Berger's supervisor (Loehrke). Soon thereafter, "Borgs asked for Hasan to attend a meeting at which he, Berger and Loehrke were scheduled to attend. Loehrke denied Borgs's request to have Hasan attend the meeting. When Borgs refused to meet without Hasan, Loehrke told him to go home for the day and return the next morning. Borgs returned to work the next day and was fired by Loehrke for refusing to meet with his supervisors." Epilepsy, 268 F.3d at 1098.

Procedure: The employer appealed to the D.C. Circuit U.S. Court of Appeals an NLRB decision that the terminations of Borgs and Hasan were unfair labor practices under the NLRA. Id., at 1098.

Issue presented:

Was the NLRB permissible in its interpretation of the NLRA to cover employees in nonunion workplaces and uphold Weingarten rights for nonunion employees? Id., at 1098-99.

Holdings:

Yes, the NLRB's interpretation is reasonable. Requesting a co-worker's presence at a disciplinary meeting is "concerted activity" protected by Section 7 of the National Labor Relations Act (NLRA), which protects employees' rights to engage in "concerted activities for the purpose of mutual aid and protection." Id., at 1099-1100;

The NLRB's July 2000 ruling does not apply retroactively to events prior to the decision. Id., at 1102-03.

Summary: The Nichols court based its decision on the U.S. Supreme Court's primary case on illegal gender stereotyping, Price Waterhouse v. Hopkins, 490 U.S. 228, 109 S.Ct. 1775, 104 L.Ed.2d 268 (1989). Price Waterhouse involved a female employee who was denied partnership and was told she could improve her chances if she would "walk more femininely, talk more femininely, dress more femininely, wear make-up, have her hair styled, and wear jewelry." Id., at 235.

Facts: The plaintiff, a restaurant server, claimed he was verbally abused because he was effeminate and did not meet male stereotypes of behavior. His co-workers insulted him and called him names because he carried a serving tray "like a woman"; referred to him in the female gender in Spanish; and called him a female prostitute, using vulgar language. Nichols, supra at 874.

Procedure: Employee filed an EEOC charge alleging hostile working environment, sexual harassment and retaliation under Title VII (federal law prohibiting sex discrimination) and Washington's Law Against Discrimination (WLAD) appealed from a district court decision in the employer's favor.

Issue presented:

Were co-workers' comments about the plaintiff's effeminate behavior unlawful Title VII hostile working-environment discrimination and impermissible gender stereotyping?

Holdings:

Plaintiff met the elements of his hostile working environment claim, one of which was proving that the verbal abuse was "because of sex." Id., at 875;

Men are equally protected by Title VII and the U.S. Supreme Court precedent prohibiting sex discrimination in the form of gender stereotyping. Id., at 874;

The 9th Circuit's prior conflicting case law in DeSantis v. Pacific Telephone and Telegraph Co. Inc., 608 F.2d 327 (9th Cir. 1979) was overturned. Id.

Supreme Court clarifies second prong (justifiable reliance) of the Thompson v. St. Regis Paper exception to the at-will employment rule. An employee must be aware of a policy before there is justifiable reliance.

Facts: Safeway, Inc. fired Jim Bulman for initiating wage increases for his two sons while they were working for stores in the district under his management. Bulman sued Safeway for wrongful termination, arguing that the manner of his termination violated Safeway's written personnel policies. Id., at 338.

Procedure: Mr. Bulman prevailed in a jury trial. On appeal, Safeway argued that Bulman was a terminable-at-will employee who had not provided substantial evidence of reliance upon the personnel policies he claimed prevented his termination. Division I affirmed the jury verdict. Safeway appealed and the Supreme Court reversed. Id.

Issues presented:

Did the Court of Appeals correctly state the standard for justifiable reliance upon an employer's promises of specific treatment in specific situations? Id., at 339;

Did Bulman prove justifiable reliance upon promises of specific treatment in specific situations that induced him to remain at Safeway and not seek other employment? Id;

Did either the employment of relatives policy or the personnel-improvement plan form the basis of an implied contract? Id.

Holdings: No.

The proper standard for the 2nd prong is based on the knowledge of the policies and reliance upon them, not an "atmosphere" of job security without actual knowledge and demonstrated reliance on a particular policy. Id., at 344-45;

Mr. Bulman did not present substantial evidence for a reasonable trier of fact to conclude he had justifiably relied on any promises of specific treatment; therefore, the court overturned the jury verdict. Id., at 350.

1. This survey adds to Katrin E. Frank's very thorough Title VII article in the November 2001 issue of Bar News, dealing with recent changes in Washington's approach to sexual-harassment laws. Also, this survey does not list all facts, issues and holdings in the cited cases, but singles out those the author believes are the most significant and new.