Court Report

Apr 1, 2008
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HR Magazine, April 2008 Refusal To Sign Arbitration Agreement Protected; Whistle-Blower Claims Rejected; HR’s Interruptions Were Not Unlawful Surveillance

Refusal To Sign Arbitration Agreement Protected

Goldsmith v. Bagby Elevator Co., 11th Cir., No. 06-14440 (Jan. 17, 2008).

Referring to Martin Luther King Jr.’s prediction that if the civil rights movement could prevail in Birmingham, Ala., it could prevail in the South, the 11th U.S. Circuit Court of Appeals affirmed a jury award in favor of a black employee who claimed that his firing was in retaliation for his refusal to sign an agreement to arbitrate. The agreement would have impeded his pursuit of a previously filed Equal Employment Opportunity Commission (EEOC) charge of a hostile work environment.

Greg Goldsmith was hired by Bagby Elevator Co. to work in its Birmingham shop as an elevator fabricator. During his employment, Goldsmith reported racial slurs made by his supervisor, Ron Farley, but no action was taken to end those remarks. Goldsmith was told “that’s just the way Ron [Farley] is. You are just going to have to accept it.”

Goldsmith also experienced threats of violence at work, including an instance when Farley’s nephew—a co-worker of Goldsmith’s—said that he planned to make Goldsmith’s son an orphan. Although Goldsmith reported the remark, no action was taken to reprimand or move the offending co-worker.

Goldsmith filed an EEOC charge, claiming that his work environment was racially hostile and that the company had failed to promote him on the basis of race in violation of Section 1981 and Title VII.

Goldsmith subsequently was given a document titled “Dispute Resolution Agreement,” including an agreement to arbitrate all “past, present and future” claims against Bagby Elevator; he was instructed to sign and return the document by the following day. When Goldsmith and a white co-worker both refused to sign the agreement, they were told they would be fired unless they signed.

As the two men packed their be longings to leave the building, a supervisor approached the white co-worker and asked him to reconsider his stance. That co-worker subsequently signed the agreement and continued his employment. Goldsmith was not asked to reconsider his decision, even though he suggested that he would sign the document if it was limited to future complaints. The company rejected the suggestion and fired Goldsmith.

Goldsmith filed a second EEOC charge, claiming both wrongful termination and retaliation. The EEOC issued a “for cause” determination, finding retaliation, discrimination with respect to promotion and a hostile work environment. Goldsmith filed a federal court lawsuit.

A jury returned a verdict in Goldsmith’s favor on the wrongful termination and retaliation claims, awarding him more than $50,000 in back pay and damages and $500,000 in punitive damages, in addition to more than $150,000 in attorneys’ fees. Unlike Title VII, Section 1981 does not cap compensatory and punitive damages.

Bagby Elevator appealed the verdict and argued that Goldsmith had failed to prove his claims. On appeal, the 11th Circuit found that Goldsmith established retaliation. It determined that Goldsmith was able to establish a causal relationship between his first EEOC charge and firing, and that Bagby Elevator did not have a legitimate nondiscriminatory reason for termination.

By Maria Greco Danaher, an attorney with Ogletree Deakins in Pittsburgh.


Whistle-Blower Claims Rejected

Allen v. Administrative Review Board, U.S. Dept. of Labor, 5th Cir., No. 06-60849 (Jan. 22, 2008).

Employees could not state a retaliation claim under the Sarbanes- Oxley Act (SOX) when their alleged activities did not implicate one of its six enumerated categories of prohibited conduct, according to the 5th U.S. Circuit Court of Appeals.

Patricia Allen, Dana Breaux and Laura Waldon were employed by Stewart Enterprises Inc., a publicly traded company in the funeral home and cemetery business.

In late 2000, during an internal audit, Stewart discovered a malfunction in its AS400 computer system for calculating interest on customer balances, resulting in erroneous calculation of customer “payoff” amounts. Stewart immediately began working on a program to correct the errors in the interest calculations and also performed manual amortizations on its customer accounts.

Beginning in April 2003, Allen, Breaux and Waldon expressed concerns to their supervisors about the problems with the AS400. They testified that they never thought Stewart intentionally programmed the AS400 to overcharge customers and that they knew Stewart was actively working on a solution, but they believed that Stewart was taking too long to fix the problem because of Stewart’s alleged desire to keep the problem a secret.

Allen and Breaux also were concerned about Stewart’s billing system for “Pending Other Source (POS) Accounts,” which are accounts that a third party, such as an insurance company, pays in part or in full. Allen and Breaux suspected that this POS billing system made it difficult for the company to collect the unpaid balances from customers and would affect revenue in situations where the other source did not pay the balance.

After reviewing internal accounting reports and speaking with Stewart’s head of internal audit, Waldon became concerned that Stewart was not in compliance with the U.S. Securities and Exchange Commission (SEC) Staff Accounting Bulletin 101 (SAB-101). Waldon was aware that Stewart did not submit these internal accounting reports to the SEC, but she was concerned that the company was overstating its gross profit.

The employees filed a SOX whistle-blower complaint with the U.S. Department of Labor, claiming that Stewart retaliated against them and included them in a companywide reduction in force as a result of engaging in protected activity. An administrative law judge dismissed the complaint, and the administrative review board affirmed.

In upholding the decision, the 5th Circuit determined that Waldon’s suspicion that Stewart’s conduct violated SOX was not reasonable, as she knew that the internal consolidated financial statements were not financial statements submitted to the SEC.

As for the employees’ complaints to managers regarding the AS400 interest calculation, untimely refunds and POS billing issues, the court held that the employees did not have a reasonable belief that Stewart acted with intent to deceive, manipulate or defraud its shareholders.

By Phillip K. Cha, an attorney with Swerdlow Florence Sanchez Swerdlow & Wimmer, a Worklaw® Network member firm in Beverly Hills, Calif.


HR’s Interruptions Were Not Unlawful Surveillance

Local Joint Executive Board of Las Vegas v. NLRB, 9th Cir., No. 05-75515 (Jan. 28, 2008).

The 9th U.S. Circuit Court of Appeals deferred to a determination by the National Labor Relations Board (NLRB) that an employer’s brief interruption of union organizing activities in a lunchroom was not unlawful surveillance.

In May 2003, two local unions began a campaign to organize workers in the housekeeping, food and beverage departments of a casino in Las Vegas. On two different occasions in June 2003, managers of the casino’s human resource department interrupted union-related discussions by employees in a dining room open to employees and managers.

After briefly observing two pro-union employees soliciting union-card signatures, the vice president of human resources, Tracy Sapien, approached the group and interrupted. Sapien told the workers that she wanted to make sure they had all the facts before they signed the cards, and that signing a union card was like signing a “legal and binding” document that could result in union dues of $32.50 each month if the union won the election. She also opined that the workers could not count on different health benefits even if the union’s campaign was successful. The entire conversation with Sapien lasted about eight minutes.

The second incident occurred a few days later. A union committee leader, Azucena Felix, was speaking to a table full of housekeepers in the employee dining room about signing union cards. The casino’s HR director, Stacey Briand, approached the workers and told an employee, who was in the process of signing a union card, that she “shouldn’t be signing things that she wasn’t sure about, because what she was signing was something like a contract,” and that Felix was probably promising something that she wasn’t going to be able to give her.

Because the employee signing the card was not fluent in English, Felix translated Briand’s comments into Spanish. When Briand asked what she was saying, Felix explained that she was just translating. Briand then left the table.

The unions filed unfair labor practice charges against the employer. An administrative law judge concluded that the casino had engaged in illegal surveillance in violation of National Labor Relations Act, but the NLRB reversed.

On appeal, the 9th Circuit deferred to the board’s interpretation, rejecting the union’s argument that merely interrupting protected union activity, even to express opinions, is unlawful. The court also agreed with the board’s finding that Sapien’s and Briand’s statements were protected by the National Labor Relations Act because there was no evidence that they expressed any “threat of reprisal or promise of benefit” that would strip the employer’s free speech rights under the law.

By Chris Arbery and Roger Gustafson, attorneys at Hunton & Williams LLP in Atlanta.

Editor’s Note: These articles should not be construed as legal advice.

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