It’s been a busy last couple of weeks. One issue I have been dealing with is an opposing counsel’s attempt to have me agree to language in a proposed settlement agreement between my client (employee) and his client (employer) that I will refrain from representing other individuals in legal matters against his client. By way of background, during the course of depositions taken in the case, it became apparent to myself, as well as opposing counsel, that other current employees at the company may also have legal claims against the company.

I have only had this come up once before in my practice. Strangely, this was also a recent topic on an attorney list serve that I am a member of.

Fortunately, there is an ethical rule on point, which forbids such attempts at restricting an attorney’s right to represent whoever the attorney chooses to represent. Click here.

As you can see, TRPC 5.6(b) provides, quite clearly I might add, that “[a] lawyer shall not participate in offering or making . . . an agreement in which a restriction on the lawyer’s right to practice is part of the settlement of a controversy between private parties.” Comment [2] to TRPC 5.6 further states that “[p]aragraph (b) prohibits a lawyer from agreeing not to represent other persons in connection with settling a claim on behalf of a client.”

When advised of this rule, opposing counsel deleted the proposed language and we moved on to argue about other matters! In any event, it is worth noting that attempting to refrain an attorney from representing other persons is forbidden in Tennessee.

I am presently representing a client claiming national origin discrimination. My client, who is originally from Asia and for whom English is his second language, alleges he was demoted from a position in part because his superiors believed his accent would make it difficult for him to deal with customers.

In researching this matter, I have learned that the 6th Circuit has recognized that linguistic discrimination constitutes national origin discrimination. In re Rodriguez, 487 F.3d 1001, 1008 (6th Cir. 2007). In this case, the 6th Circuit held that an employer’s comments concerning the plaintiff’s accent constituted direct evidence of national-origin discrimination. Id. at 1009.

The Rodriguez case also tracks the EEOC’s position, which “defines national origin discrimination broadly as including, but not limited to, the denial of equal employment opportunity because of an individual’s, or his or her ancestor’s, place of origin; or because an individual has the physical, cultural or linguistic characteristics of a national origin group.” See 29 C.F.R. § 1606.1. 29cfr1606.1

Click here for additional guidance on national origin discrimination from the EEOC.

April 15, 2010 is not far away and as most folks know that is the deadline for filing your federal income tax return. I have been busy lately dealing with a number of tax issues affecting my employment clients. One issue in particular is worth mentioning.

First, as an initial matter, monies received in the settlement of an employment case are almost always taxable. The exception is monies that can be said to have been paid on account of personal injuries. These monies are not taxable. See 26 U.S.C. 104(a)(2). Click here. Accordingly, unless monies are paid to the client on account of personal injuries, the monies received will be subject to income tax.

When one of my employment clients settles a case and receives money in exchange for dismissing the case, a portion of the money is generally allocated as payment of back wages and a portion of the money is generally allocated as compensatory damages or liquidated damages. When money paid to the client represents back wages, a Form W-2 is issued by the company to my client. When money paid to the client represents compensatory or liquidated damages, a Form 1099 is issued by the company to my client.

Often, the Form 1099 issued to my clients is incorrectly completed by the company. Form 1099-misc. By this I mean that Box 7 “nonemployee compensation” on the Form 1099 is checked, rather than Box 3 “other income”, which is the correct box that should be checked on Form 1099 for payments of compensatory damages or liquidated damages. Box 7 is for payments made to independent contractors.

The impact of Box 7 being checked is that the client is erroneously subjected to the self-employment tax. Click here. Accordingly, to avoid this negative consequence I try to include language in all settlements agreements that Box 3 “other income” should be checked when monies are being paid as compensatory damages or liquidated damages.

Under the FMLA, any eligible employee who takes FMLA leave shall be entitled – on return from such leave -to be restored by the employer to the position of employment held by the employee when the leave commenced, or to be restored to an equivalent position. 29 U.S.C. § 2614(a)(1). This right is qualified however by 29 U.S.C. § 2614(a)(3)(B), which essentially provides than an employee returning from FMLA leave is not entitled to restoration unless he would have continued to be employed if he had not taken FMLA leave. A recently decided case from the 6th Circuit Court of Appeals addresses the interplay between these statutory provisions.

In Cutcher v. Kmart Corp., 2010 WL 346131 (6th Cir. Feb. 1, 2010), the plaintiff returned from FMLA to learn that her employment had been terminated allegedly because of a reduction in force. Cutcher v. Kmart Corp. Invoking 29 U.S.C. § 2614(a)(3)(B), the defendant argued that the plaintiff would have been terminated even had she not taken FMLA leave. The plaintiff, however, challenged her termination arguing that the defendant negatively considered her use of FMLA when it made the decision to terminate her employment and that the defendant retaliated against her by she used FMLA leave.

The 6th Circuit reviewed the evidence presented by the plaintiff, which included the defendant’s consideration of the plaintiff’s use of leave on her appraisal score, and determined that a reasonable jury could conclude that the plaintiff’s termination was based in part on the plaintiff’s use of FMLA protected leave. Notably, the 6th Circuit held that the proof amassed by the plaintiff established a jury issue on plaintiff’s FMLA interference claim under 29 U.S.C. § 2615(a)(1) and plaintiff’s FMLA retaliation claim under 29 U.S.C. § 2615(a)(2).

On November 14, 2006, the 6th Circuit issued an under the radar per curiam decision dismissing Vicky Crawford’s Title VII retaliation case against Metropolitan Government of Nashville and Davidson County. See 211 Fed. Appx. 373 (6th Cir. 2006). That had to be an incredibly difficult day for Ms. Crawford.

Fortunately, Ms. Crawford’s petition for cert was accepted by the U.S. Supreme Court, which unanimously reversed the 6th Circuit’s decision on January 26, 2009. See Crawford v. Metropolitan Government of Nashville and Davidson County, 129 S.Ct. 846 (2009). The case was remanded for a jury trial on Ms. Crawford’s retaliation claim.

And yesterday, after a week long trial in Nashville federal court, the jury returned a verdict in favor of Ms. Crawford on her retaliation claim. Ms. Crawford was awarded over 1.5M in damages (420k in compensatory damages; 408k back pay; and 727k front pay). Crawford Verdict Form

If punitive damages were permitted against governmental entities under Title VII, which they are not according to 42 U.S.C. 1981a(b)(1) (click here), I can only imagine that the verdict would have been even bigger.

Congrats to Ms. Crawford and her trial attorney, Ann Buntin Steiner of Nashville, as well as Professor Eric Schnapper of Seattle, who handled Ms. Crawford’s appeal at the U.S. Supreme Court.

A recent Tennessee Court of Appeals decision involving a claim for unemployment benefits reiterated the general principle that ordinarily, an employee’s conduct off the working premises and outside the course and scope of his employment is not considered misconduct connected with work. Dura Auto Sys. v. Neeley

In Dura Automotive Systems v. Neeley, the claimant was terminated by his employer after it learned that the claimant admitted to smoking marijuana outside of work. The employer had a policy prohibiting its employees from using illegal drugs.

After termination, the claimant filed for unemployment benefits. His claim was denied by the Agency, which found that the claimant engaged in work related misconduct under Tenn. Code Ann. 50-7-303(a)(2)(A). The Appeals Tribunal reversed the Agency’s decision finding that the claimant had passed the company’s drug test (even though the claimant had admitted to smoking marijuana in the past) and that the claimant’s work performance had not been affected by his use of marijuana. Therefore, the claimant had not committed “misconduct connected with the claimant’s work” as required by Tennessee law to disqualify a claimant from receiving unemployment benefits.

The Board of Review affirmed the decision of the Appeals Tribunal awarding unemployment benefits, but the Chancery Court reversed the decision finding that the claimant had committed misconduct.

On appeal to the Tennessee Court of Appeals, the court agreed with the Appeals Tribunal finding that the employer had failed to demonstrate that the claimant’s drug use actually had any adverse effect on the claimant’s work and that the claimant had also passed the drug test required by the employer. Thus, the court of appeals concluded that the claimant’s conduct may have provided the employer an adequate basis to discharge him, but it did not warrant denying the claimant unemployment compensation.

In sum, despite an employee’s off site illegal conduct serving as a legitimate basis for termination, unless the conduct is connected to the employee’s work, it will not disqualify the employee from recovering unemployment benefits.

As reported by SCOTUSBLOG, the U.S. Supreme Court granted cert yesterday in a case arising out of the 4th Circuit: Hardt v. Reliance Standard Life Insurance Company.

This is a very important case to attorneys handling denial of benefit claims governed by ERISA. At issue is whether a party must “prevail” in court in order to be awarded attorney’s fees under ERISA’s attorney’s fee provision, which is found at 29 U.S.C. 1132(g)(1).

Frequently, courts “remand” cases for further review by the claim’s administrator rather than reversing the denial decision outright. In such a case, the claimant has certainly acheived a significant measure of success although not a victory in the sense of a final judgment in the claimant’s favor. Should the claimant’s attorney be awarded fees in this instance of a remand? Many courts interpreting ERISA’s attorney’s fee provision have said yes, see, e.g., Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995), but others such as the 4th Circuit Court of Appeals in the Hardt case have said no.

Since typical “prevailing party” language found in most federal law attorney’s fee provisions, such as Title VII’s attorney’s fee provision at 42 U.S.C. 2000e-5(k) (click here), is not found in ERISA’s attorney’s fee provision, I believe that the 4th Circuit’s holding, that claimants are not entitled to an award of attorney’s fees where a court remands the claim for further review, will be reversed.

ERISA’s attorney’s fee provision does not contain a “prevailing party requirement”; it simply provides that “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” Click here.

Thus, I believe that the plain language of ERISA’s attorney’s fee provision will persuade a majority of justices to find that a court does not abuse discretion by awarding attorney’s fees to a claimant who merely achieves a remand rather than a final judgment. Hopefully, this will be the result. Because if the 4th Circuit result is allowed to stand, claims administrators will be perversely incentivized to deny claims and if the claimant acheives a remand, then claims administrator can simply reverse its decision and foreclose any an award of attorney’s fees to the claimant.

An argument that I see from time to time is the contention by employers that position statements submitted to the EEOC are not admissible at trial. Often, inartfully drafted position statements contain evidence supporting a plaintiff’s claim of discrimination or retaliation.

The two primary bases for this argument is that position statement is inadmissible because it constitutes a settlement communication under Rule 408 of the Federal Rules of Evidence or it is hearsay. In an order issued today, Judge Donald, of the W.D. of Tenn., rejected these arguments. Order Denying Mot in Limine

In a short, to-the-point order, Judge Donald addressed the specifc position statement at issue and held that the position statement did not constitute a settlement communication under Fed. R. Evid. 408.

In addition, addressing the hearsay challenge, Judge Donald held that “position statements cannot be excluded as hearsay as an ‘employer’s position statement in an EEOC proceeding may be admissible to the extent it constitutes an admission, or to show the employer has given inconsistent statements in justifying its challenged decision, which may tend to prove that its stated reasons are pretexts.” (Order at 1-2).

Notably, a position statement submitted by an employer is generally not considered hearsay, but instead is considered an admission by a party opponent, which is admissble at trial under Fed. R. Evid. 801(d)(2)(A) because it is the party’s own statement or Fed. R. Evid. 801(d)(2)(D) because it is a statement by the party’s agent, e.g., attorney. See, e.g., Mugavero v. Arms Acres, Inc., 2009 WL 1904548, *4 (S.D. N.Y. July 1, 2009).

When, if ever, does providing poor service to a restaurant’s customers amount to “misconduct” under Tennessee’s unemployment compensation law? That’s the subject of a recent case (Doji, Inc. v. Neeley et al.) decided by the Tennessee Court of Appeals. Doji dba Demos v JG Neeley TDLWD and Ruffin OPN

As an initial matter, termination for “misconduct” will disqualify a claimant from receiving unemployment benefits under Tennessee law. See T.C.A. 50-7-303(a)(2)(A).

The court of appeals first noted that until recently, the term “misconduct” has not been defined by statute. [Note: Effective 1/1/2010, a definition of "misconduct" has been added to the Tennessee Code].

Instead, the court of appeals noted that the term “misconduct” had been defined by Tennessee case law to mean “conduct evincing such wilful and wanton disregard of an employer’s interests as is found in deliberate violations or disregard of standards of behavior which the employer has the right to expect of his employee, or in carelessness or negligence of such degree or recurrence as to manifest equal culpability, wrongful intent or evil design, or to show an intentional and substantial disregard of the employer’s interests or of the employee’s duties and obligations to the employer.”

In contrast, the court of appeals noted that “mere inefficiency, unsatisfactory conduct, failure in good performance as the result of inability or incapacity, inadvertences or ordinary negligence in isolated instances, or good faith errors in judgment or discretion are not to be deemed “misconduct” within the meaning of the statute.”

Applying the facts of the case to the definition of “misconduct” established by case law, the court of appeals held that “we are convinced that the sporadically poor quality of service provided by [the claimant] to [the employer's] customers is not the sort of deliberate violation of an employer’s policies that constitutes misconduct within the meaning of the unemployment statutes.”

As noted above, the Tennessee Code now contains a definition of “misconduct”. The new definition of “misconduct” tracks the case law definition for the most part and provides as follows:

Per T.C.A. 50-7-303(b)(3)(A):

“Misconduct” includes, but is not limited to, the following conduct by a claimant:

(1) Willful or wanton disregard of the rights or interests of the employer;

(2) Deliberate violations or disregard of standards of behavior that the employer has the right to expect of an employee;

(3) Carelessness or negligence of such a degree or recurrence to show an intentional or substantial disregard of the employer’s interest or to manifest equal culpability, wrongful intent or evil design;

Per T.C.A. 50-7-303(b)(3)(B):

“Misconduct” also includes any conduct by a claimant involving dishonesty arising out of the claimant’s employment that constitutes an essential element of a crime for which the claimant was convicted;

And, finally, per T.C.A. 50-7-303(b)(3)(C):

“Misconduct” does not include:

(1) Inefficiency, or failure to perform well as the result of inability or incapacity;

(2) Inadvertence or ordinary negligence in isolated instances; or

(3) Good faith errors in judgment or discretion.

On December 21, 2009, Senior Judge John Nixon (from the Middle District of Tennessee) issued the attached opinion in EEOC and Freeman v. Whirlpool, Case No. 3:06-cv-0593, which involved racial and sexual harassment claims brought under Title VII and 42 U.S.C. 1981. EEOC – Freeman v Whirlpool Mem Order 12-21-09

After determining that the defendant was liable for the racial/sexual hostile work environment experienced by the intervening plaintiff, Judge Nixon awarded the intervening plaintiff total damages in the amount of $1,073,261. Judge Nixon awarded $773,261 in back pay and front pay. He also awarded $300,000 for compensatory damages. Judge Nixon declined to award punitive damages.

Interestingly, with respect to the award of front pay, Judge Nixon found the intervening plaintiff, as a result of the harassment she experienced, suffered from chronic post-traumatic stress disorder rendering the intervening plaintiff unable able to work. Thus, Judge Nixon awarded the intervening plaintiff front pay to her normal retirement age.