Court Report

Aug 1, 2007

HR Magazine, August 2007E-mail about a colleague evidenced harassment; ambiguous covenant not to compete enforced; more.

Sexist E-Mail Backfires

EEOC v. PVNF LLC d/b/a Chuck Daggett Motors, 10th Cir., No. 06-2011 (May 14, 2007).

A sexually charged e-mail exchange between two workers at an auto dealership about the plaintiff, but not directed at her, can support a claim of sexual harassment, the 10th U.S. Circuit Court of Appeals ruled.

Marla Segovia, a car sales manager at Chuck Daggett Motors in Portales, N.M., was regularly subjected to sex-based remarks from the owners of the dealership, her co-workers and her subordinates. One of the owners, Alva Carter, made numerous remarks to Segovia and other female employees, such as “[women] belong at home barefoot and pregnant” and “women did not belong in the workplace because of their child care issues.”

Segovia complained to the dealership’s other owner, Chuck Daggett, but the gender-based remarks continued. After a verbal confrontation with used car sales manager Roger Ennis, during which Ennis called Segovia a “bitch,” she accessed Daggett’s work e-mail account without his permission.

She noticed that Ennis had forwarded an e-mail conversation to Daggett that included a discussion between Ennis and one of Segovia’s male subordinates. In the e-mail, Ennis asked Segovia’s subordinate why he could not leave work to go buy beer, wondering, “[Segovia] got you by the balls?” Segovia’s subordinate responded with a sexually derogatory, vulgar e-mail about Segovia’s anatomy and dress.

Segovia subsequently notified Daggett and Carter that she had seen the e-mail and that she was offended. Daggett asked the subordinate to apologize, and Carter simply instructed Segovia to not let it interfere with her work.

A month later, Daggett sent Segovia an “Employee Warning Notice” and a “New Pay Plan,” advising her that she had been late to work too often and that her subordinates had registered complaints about her unavailability. No other sales managers who had been tardy or attended to personal business while at work had ever been written up for doing so.

Moreover, under the new pay plan, Segovia and Ennis were to share 60 percent of their combined commissions, despite the fact that Segovia earned much higher commissions. Segovia resigned, and the Equal Employment Opportunity Commission (EEOC) filed a lawsuit on her behalf alleging sexual harassment under Title VII. After the EEOC presented its evidence at trial, the district court entered judgment in favor of Daggett Motors. The EEOC appealed.

On appeal, the 10th Circuit reversed the judgment and ordered a new trial. Noting that the owners of Daggett Motors knew about all of the conduct and chose to either ignore it or respond “only in the most minimal of ways,” the 10th Circuit held that a reasonable jury could conclude that Segovia’s work environment was charged with gender bias and sexual animus such that it altered her working conditions.

By Scott R. Eldridge, an attorney with the firm of Miller, Canfield, Paddock and Stone PLC in Lansing, Mich.

Ambiguous Covenant Not To Compete Enforced

King v. PA Consulting Group Inc., 10th Cir., No. 05-1351 (May 8, 2007).

An ambiguous covenant not to compete executed in the context of a business sale should be enforced against an employee who later resigned, according to the 10th U.S. Circuit Court of Appeals.

Michael King worked for Hagler Bailley Inc. as a senior vice president until Oct. 28, 2000, at which time Hagler Bailley was acquired by PA Consulting Group Inc. for cash. This acquisition was conditioned on at least 75 percent of Hagler Bailley’s senior vice presidents signing employment agreements containing noncompete covenants with PA Consulting. King signed his employment agreement with PA Consulting on June 5, 2000.

King’s agreement with PA Consulting prohibited him from servicing PA Consulting clients for one year after his employment with PA Consulting for any reason. However, a “side letter” to the agreement gave King an escape hatch: If he were to resign during the 180-day period that commenced 18 months after the completion of PA Consulting’s acquisition of Hagler Bailley, King would be released from his noncompete obligation.

This 180-day period ran from April 28, 2002, until Oct. 24, 2002. The side letter also obligated King to provide at least three months’ advance notice of resignation, and the agreement subjected King to salary forfeiture if he failed to do so.

King gave PA Consulting notice of his resignation on July 29, 2002, and his last day of work was Oct. 24, 2002. PA Consulting informed King that he was not released from the noncompete agreement because he did not provide his notice of resignation at least three months before the expiration of the three-month period. Wanting to work for a competitor and service PA Consulting clients, King filed suit, claiming that PA Consulting had breached its contract by not releasing him from the noncompete agreement.

After determining that the agreement was reasonable and enforceable, the trial court decided that the agreement’s escape clause was ambiguous. It could be interpreted in two different ways—either:

King was released from the noncompete obligation if his last day of work occurred within the 180-day period, regardless of whether or when he gave notice of his resignation.

Reading the side letter and agreement together, King could not be released from the noncompete unless he complied with the three-month advance notice requirement and his last day of work fell during the 180-day period and at least three months after the resignation notice.

Because the escape clause was ambiguous, the trial court left it to the jury to figure out what the agreement meant and whether it had been breached. The jury agreed with PA Consulting’s interpretation of the agreement’s escape clause and found in its favor, and the 10th Circuit affirmed.

By R. Scot Harvey, an attorney in the firm of Millisor & Nobil Co. LPA, a Worklaw® Network firm in Cleveland.

Remark Triggered Unemployment Comp

Cipriani & Werner v. Unemployment Compensation Bd. Of Review, Pa. Cmwlth., PICS Case No. 07-0653 (April 30, 2007).

An office manager’s statement that an employee should “seek other employment” because the individual’s job performance was so poor equaled an employment termination, according to Pennsylvania’s Commonwealth Court, and the court held that the employee was eligible for unemployment benefits.

Regina McKnight began working as a legal secretary at the firm of Cipriani & Werner on May 31, 2005. On the morning of Feb. 24, 2006, the firm’s office manager met with the attorney for whom McKnight worked to discuss McKnight’s job performance issues.

At that time, the office manager agreed to set up a meeting with McKnight to discuss McKnight’s “inability to do her job.”

Before that occurred, however, McKnight came to the office manager to complain about her workload. In response, the office manager told Mc-Knight that neither she nor the attorney for whom McKnight was working felt that McKnight was performing adequately, and that it was in McKnight’s best interest to “look at other options, and start looking for another job.”

While the office manager later testified that it was “never my objective to fire Ginnie McKnight,” she did not offer McKnight any other employment positions or other work within the firm. McKnight left the office and never returned.

McKnight then sought unemployment compensation benefits. The local job center (Pennsylvania’s first level of review in a request for benefits) determined that McKnight was ineligible for benefits because she left her job without a necessitous and compelling reason.

McKnight’s appeal then was heard by a referee, who denied the benefits. The Pennsylvania Unemployment Compensation Board reversed the referee’s decision, finding McKnight eligible for benefits.

The Commonwealth Court upheld that decision. The court rejected the employer’s argument that McKnight resigned. While the office manager did not use the words “fired” or “terminated,” McKnight was told that it was in her best interest to “look at other options,” and that she should “start looking for another job.” According to the court, such statements carry with them the immediacy and finality of a firing.

By Maria Greco Danaher, an attorney with the firm of Dickie, McCamey & Chilcote in Pittsburgh.


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