Friday, June 30, 2006

Mandatory Arbitration Agreement Enforced Against Maryland Employee At Will

In Holloman v. Circuit City Stores (March 13, 2006), the Maryland Court of Appeals enforced a mandatory arbitration agreement against an employee who attempted to pursue her discrimination claim in court. The agreement:
  • was a condition of applying for a job with Circuit City;
  • could be amended only by Circuit City once per year provided the company gave 30 days notice of its intention to alter the agreement's terms;
  • applied to "any and all claims;"
  • did not confer any rights to the applicant or employee -- if hired, he or she remained an "at will" employee.

The five judge majority opinion held that the arbitration agreement was enforceable and thus prohibited the employee from pursuing her claims in court. (She was required to pursue them through arbitration). Writing for the majority, Judge Battaglia found "Circuit City's promise to arbitrate . . . constitutes consideration. . . " Chief Judge Bell (joined by Judge Greene) stated that the agreement was a contract of adhesion and was unconscionable because of the extraordinary difference in bargaining power between the parties.

The lesson in Holloman is that Maryland employers can require that their employees consent to arbitration as a condition of employment. Such agreements require carefully drafting and should be reviewed by counsel.

Thursday, June 29, 2006

Plaintiffs Alleging Discrimination May Sue Employer's Insurance Carriers to Resolve Coverage Issue

A class of plaintiffs sued their employer, Friedman's, alleging it had discriminated against them because of their race. Friedman's has employment practices liability insurance (EPLI) through Federal Insurance Company and St. Paul Mercury Insurance Company. In the early stages of the litigation the parties reach a settlement conditioned on Friedman's obtaining funding from its insurers. The insurance companies, however, deny that Friedman's EPLI policies cover the plaintiffs' claims.

Before Friedman's could resolve the coverage dispute, it filed for bankruptcy. Court rulings in the bankruptcy preclude monetary relief against Friedman's but permit monetary relief against its insurers.

The discrimination plaintiffs respond by asking for leave to amend their original complaint to add claims against Federal Insurance Company and St. Paul Mercury Insurance Company. Friedman's argues that the plaintiffs do not have standing to sue the insurance companies.

Seeing the original settlement slipping away, the District Court of Maryland permits the plaintiffs to sue the insurance companies. According to the Court:

"The fact that Federal and St. Paul remain the only means by which Plaintiffs may recover under their claim, coupled with the fact that the coverage dispute remains a significant obstacle to a settlement agreement, presents the Court with a genuine controversy regarding the legal rights and responsibilities of Plaintiffs and Friedman's EPLI insurers."

Wednesday, June 28, 2006

No Right to Review Personnel File in Maryland.

Many states require that employers grant employees access to personnel files. Maryland has no such law. Nevertheless, it is generally a good idea to allow employees to see what it is in their personnel files. Employers should have nothing to hide. This link provides a chart of the state laws on the issue. (Other than Maryland I cannot vouch for chart's accuracy.)

Tuesday, June 27, 2006

Opinion Letter Further Defines the Outside Sales Exemption

Employees who seek charitable contributions by door-to-door solicitation are not exempt outside salespersons, according a recent U.S. Department of Labor opinion letter. That is because the employees are not making "sales," as defined by the Fair Labor Standards Act. The letter relies on a 1940 DOL Report for the definition of a sale. According to the report:

In extending the scope of the term "outside salesman" to include such employees as radio time, advertising, and freight solicitors, it is not intended to include persons who in a very loose sense are sometimes described as selling "service."
* * *
[R]equests to include as outside salesmen such employees as service men, installation men, delivery men, and collectors must be denied as lying outside the scope of the Administrator's authority.

Monday, June 26, 2006

Fourth Circuit Affirms Summary Judgment for Employer in Gender Discrimination Claim Against Fire Station

Jonnie Sue Hux was the first woman in the City of Newport New Fire Department to obtain a fire officer's position. (She was a Fire Lieutenant). But the City denied her four attempts to be promoted to Fire Captain, hiring 19 male candidates instead. Ms. Hux sued the City, claiming she was better qualified than the male selectees and was the victim of gender discrimination.

Affirming the District Court in a published opinion, the Fourth Circuit recently stated that Ms. Hux was not better qualified than any of the male selectees. In attempting to pick apart the City's hiring decisions, Ms. Hux failed to acknowledge the selectees' "qualifications were superior to hers overall." According the Court, Ms. Hux's "suggestion that summary judgment is precluded by pinprick objections to an employer's non-discriminatory justification would place routine personnel decision in judicial hands."

Wednesday, June 14, 2006

US DOL Opinion Letter Addresses Mortgage Loan Officers' Right to Overtime

There has been significant litigation in Maryland over the rights of mortgage loan officers. Most of the litigation has focused on an individual's right to commissions that close after his or her employment terminates. I wrote about this issue here.

In addition, there has been litigation over whether Maryland loan officers are exempt from receiving either the minimum wage or overtime. One exemption that may apply is the outside sales exemption. A recent opinion letter issued by the United States Department of Labor applies the outside sales exemption to mortgage loan officers. Not surprisingly, the issue in these case is to the extent to which the loan officer "is engaged away from the employer's place of business." The opinion letter assumes that the loan officers work "primarily outside the employer's offices." Given that assumption, it did not take much for the Department of Labor to conclude the loan officers at issue are exempt outside salespeople.

If a loan officer performed most of his or her work in the employer's office, the result may likely be that he or she is entitled to the minimum wage and/or overtime.

Monday, June 12, 2006

Maryland Unemployment: Narrow definition of independent contractor

Maryland's unemployment law "presumes" a person performing services is an employee. That presumption can be difficult to overcome when an employer is attempting to classify an individual as an independent contractor. The unemployment law generally considers:

  • The extent to which the individual who performs the work is free from control and direction over its performance both in fact and under the contract;

  • The extent to which the individual customarily is engaged in an independent business or occupation of the same nature as that involved in the work; and

  • The extent to which the work is: (a) outside the usual course of business of the person for whom the work is performed, or (b) performed outside any place of business of the person for whom the work is performed.

A full set of circumstances evidencing independent contractor status can be found here.

Friday, June 09, 2006

Thursday, June 08, 2006

Employer Ordered To Turn Over Audio Tapes of Plaintiff's Prior Testimony

An employer being sued for sexual harassment refused to turn over audio tapes of the plaintiff's testimony in prior workers' compensation and domestic proceedings. The employer contended that because it intended to use the tapes for impeachment purposes only, the tapes were not discoverable. Magistrate Judge Day (acting as the trial judge)ruled to the contrary. Because the tapes had a substantive purposes, i.e., to prove that the employer was not the cause the employee's emotional distress, the Court ordered the employer to produce the tapes to the plaintiff.

Tuesday, June 06, 2006

Falling to File Opposition to Summary Judgment Motion Not Fatal, If The Motion Itself Creates Issue of Fact

A claimant files a worker's compensation claim. Employer moves for summary judgment, arguing that the claim is untimely because the claimant filed it more than two years after discovering his injury was work-related. The Employer's own motion (which included the claimant's hearing testimony ) showed the claimant may have filed a timely claim. Claimant files no response to the motion. What happens?

The Circuit Court dismissed the case because, it held, filing a written response to a motion for summary judgment is mandatory.

The Court of Special Appeals reverses finding the even if a claimant fails to respond to a summary judgment motion, a Court still must analyze whether the moving party met its burden of proving the absence of a disputed material fact.

Despite this decision, it is obviously prudent to file a written opposition to a motion for summary judgment.

Monday, June 05, 2006

Insurance Company's Reliance on Flimsy Evidence May be Reason to Overturn Disability Benefits Denial

Although the case is a year and a half old, Stup v. Unum Life Insurance (4th Cir. 2004), shows disabled individuals can prevail in challenging disability benefit denials. The plaintiff suffered from lupus and fibromyalgia. The issue was whether her condition prevented her from performing any gainful occupation.

Unum sent the plaintiff to a functional capacity evaluation ("FCE"). Although the physical therapist ("PT") conducting the FCE concluded that Ms. Stup could perform sedentary work, the PT equivocated because Ms. Stup's condition rendered her unable to complete the evaluation. As such, the PT stated "it would not be prudent to make recommendations regarding specific job duties that this client can or cannot perform due to a lack of consistent and true information." Based on the PT's report, A UNUM doctor concluded Ms. Stup could perform sedentary work.

For her part, Ms. Stup present a lenghty and well-documented medical history demonstrating she could not work.

UNUM denied Ms. Stup's claim. Citing the supposedly conflicting medical evidence above, UNUM claimed that under the deferential standard of review applied to these cases, the Court should affirm the benefits denial.

Not so, the Fourth Circuit held. To defer to an insurance company's decision, it must produce "substantial evidence" supporting its decision. The FCE was not substantial. According to the Court:

[An insurance company] does not act reasonably in denying benefits if faced, on the one hand, with substantial evidence of disability and, on the other, with only tentative and ambiguous evidence that might, or might not, favor denial of benefits. This is precisely the situation at hand.

Friday, June 02, 2006

Statute of Limitations Bars Workers Compensation Claim, says Court of Special Appeals

On January 2, 2002, Randolph Griggs was injured while working construction. On February 20, 2004, Mr. Griggs filed a workers compensation claim. Maryland Law requires employees to file such claims within two years of the accident. Because Mr. Griggs's claim was untimely, the Court of Special Appeals affirmed the dismissal of his case. The Court did not buy the argument that Griggs's employer -- by promising to file a claim for him -- actually induced Mr. Griggs to wait more than two years to file with the Workers Compensation Commission.

Thursday, June 01, 2006

Liquidated Damages Clause in Non Compete is Invalid

Suing to enforce a non competition agreement is similar to suing to enforce other contracts. The person bringing the suit must prove the defendant breached the agreement and the plaintiff suffered actual damages as a result. Some parties try to do away with the necessity of proving actual damages by stipulating to an amount of liquidated damages.

The employer in Willard Packaging Company, Inc. v. Javier inserted a liquidated damages provision in a non-compete agreement. The provision states in the event a breach, the departing employee will pay "$50,000 as . . . liquidated damages." Willard Packing entered into non-compete agreements with all of its sales staff. The salespeople marketed the company's line of packaging materials to businesses in the Mid-Atlantic. Willard sued one of its former salesmen, Javier, after the Company discovered he was working for a competitor.

During a bench trial, the Court held that Willard proved Javier breached the non-compete agreement. But, the Court held, Willard did not prove it suffered actual damages. Finally, the Court invalidated the liquidated damages provision because it unfairly penalized Javier.

On appeal, the Court of Special Appeals affirmed the trial court. Because the parties posses unequal bargaining power and because the liquidated damages provision bore no relation to Willard's actual damages, the Court held the provision constituted an unenforceable penalty.