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Reprinted with permission from the April 19th edition of The Legal Intelligencer. (c) 2019 ALM Media Properties. Further duplication without permission is prohibited.

On April 12, 2019, in the United States District Court for the Western District of Pennsylvania, a jury returned a verdict that serves as a reminder to employment law practitioners of the importance of treating mental health issues with sensitivity and consistent with the Americans with Disabilities Act (“ADA”) and taking a practical approach to reasonable accommodations.  The jury in Schirnhofer v. Premier Comp Solutions LLC, Western District of Pennsylvania docket number 2:16-CV-00462, found that the employer, Premier Comp Solutions LLC (“Premier”), had discriminated against the Plaintiff, Ms. Schirnhofer, on the basis of her mental health disability, and in violation of the ADA.  The jury awarded Ms. Schirnhofer $285,000 in damages:  $35,000 in backpay, and $250,000 in non-economic damages.

This summary of the facts of the case is drawn from the Court’s opinion on Premier’s summary judgment motion, issued on March 28, 2018.  Ms. Schirnhofer began her employment at Premier in 2009, and was terminated on February 5, 2014.  She was employed as a billing assistant in the billing department.  During the course of her employment, she had good performance reviews.  Ms. Schirnhofer was diagnosed with anxiety and other mental health issues prior to her employment with Premier.  Her condition was exacerbated in 2012 when her newborn grandchild died, and a co-worker with whom she was close left Premier.  What followed was a series of interpersonal problems, and conflicts with and complaints about co-workers.  Premier’s president and Ms. Schirnhofer’s co-workers had referred to her as “Sybil” (referencing a character in the movie Sybil who suffered from mental health issues).  The human resources representative noted that she should seek “medical attention.”  Ms. Schirnhofer eventually asked for a reasonable accommodation in the form of two additional ten-minute breaks.  She provided a letter from her physician regarding the need for such breaks to accommodate her Post Traumatic Stress Disorder and her Generalized Anxiety Disorder.  On January 28, 2019 Premier denied the request, despite the advice of its human resources professional to provide the accommodation.  Instead, Premier offered to move her work area.  On a particularly bad day in February, 2014, Ms. Schirnhofer took to Facebook to vent her anxiety.  She was terminated on February 5, 2014 for her Facebook posts in violation of Premier’s Social Media policy.   Ms. Schirnhofer sued, alleging that Premier had terminated her in retaliation for her request for an accommodation, that Premier had discriminated against her in violation of the ADA, and that Premier had failed to provide a reasonable accommodation.   The jury returned a verdict in her favor on the issue of discrimination, but found that Premier had not retaliated against Ms. Schirnhofer.

The lessons for employment law practitioners in this verdict are many, among them:  mental health issues and accommodations are subtle, and require sensitivity; requests for reasonable accommodations provide an excellent opportunity for risk management; and, it is quite expensive to be wrong.

 

The increased attention to sexual harassment in the work place is reflected in the increasing number of sexual harassment suits filed by the United States Equal Employment Opportunity Commission-a federal agency whose responsibilities include enforcing federal nondiscrimination laws.

This trend magnifies the need for employers to be aware of an opinion by a judge of the United States District Court of the Eastern District of Pennsylvania, holding that an employer may be liable for the sexual harassment of one of its employees by a nonemployee.    

In this case, Hewett v. BS Transportation of Illinois, LLC, et al., the Court considered various claims by an employee, Hewitt, including a claim of sexual harassment, against his employer, BS Transportation.

Specifically, Hewitt alleged that he was a freight driver for BS Transportation whose job responsibilities included weekly loading of oil at a Sunoco refinery.

According to the allegations in Hewitt’s complaint:


During the course of Hewitt’s employment, a Sunoco employee sexually harassed Hewitt, first with sexual
comments and hand gestures and then after Hewitt asked the employee to stop, with more aggressive behavior including
physical contact. Hewitt made complaints to the Sunoco employee’s supervisor, as well as Hewitt’s supervisor at BS
Transportation who was also the owner of BS Transportation. Although Hewitt’s supervisor indicated he would
“handle the matter” with the Sunoco employee, the supervisor did not investigate the complaint nor did the Sunoco
employee’s supervisor.  After a pause in his harassment of Hewitt, Sunoco’s employee again engaged in sexual
harassment of Hewitt, who again complained to Hewitt’s supervisor. Hewitt’s supervisor did not notify Sunoco of
these latest actions by the Sunoco employee. Shortly after the resumption of the harassment, Hewitt’s employment
with BS Transportation ended.


As a result of the alleged harassment described above, Hewitt filed suit in federal court alleging, among other claims, sexual discrimination by BS Transportation in violation of Title VII of the Civil Rights Act of 1964. (The Court dismissed claims against Sunoco and its employee). While dismissing certain claims against BS Transportation and its supervisor, the Court did permit the sex discrimination claim to proceed-deeming it a claim of hostile work environment. (The Court in allowing the case to proceed did not make any factual findings regarding Hewitt’s allegation. Rather the Court needed to decide at this stage whether Hewitt stated a plausible claim against his employer).

The Court noted that the claim in this case was not like most claims of employment discrimination, where the offending conduct is alleged to have been committed by an employee of the employer. This case instead involved a nonemployee.  The Court, however, allowed  the case to proceed  based on the allegations that a management -level  employee  (Hewitt’s supervisor)of BS Transportation was aware of the harassment complaints and failed to investigate or take appropriate action and that BS Transportation failed to notify Sunoco when Sunoco’s employee allegedly resumed harassment of Hewitt.

Pointing to decisions of other courts, the Court in this case held that an employer may be liable for employment discrimination  “where the employer (or its agents or supervisory employees) knows or should have known of the conduct and fails to take immediate and appropriate action”(quoting Johnson-Harris v. AmQuip Cranes Rental ,LLC).  The Court ruled that Hewitt had alleged sufficient facts to let the matter go forward. The Court also found that Hewitt stated a claim (yet to be proven) that BS Transportation’s supervisory employee had aided or abetted an unlawful discriminatory practice under the Pennsylvania Human Relations Act.

The obvious takeaway from this decision is that an employer must have procedures in place to immediately and thoroughly investigate claims of workplace discrimination of any type.  These procedures, of course, go along with anti-discrimination policies and procedures that may be used by an employee to file a complaint with the employer.

The less obvious lesson from this case is that an employer could be found liable for the unlawful conduct of a nonemployee if it fails to take appropriate action, including a thorough investigation. The reasoning of this case can easily be applied to other nonemployees who come into contact with an employer’s employees- vendors, outside maintenance personnel, salespeople, customers and so on. An employer must be alert as to any such claim that could give rise to a lawsuit.

The divorce is final. No more deadlines to meet, papers to file or waiting time for all of it to be over. Now that the hard part is behind you, it is time for a fresh start. However, there might be a few things remaining for you to do before you can officially move on to the next chapter.

The following is a checklist of things that you might still need to do after your divorce is finalized:

  • Review your divorce decree and create a list of things that you and your former spouse still need to satisfy. It could help if you create a calendar to visualize when certain things are due such as alimony/child support payments or when certain things are scheduled to terminate.

  • Divide investment assets and retirement plans according to the terms of the divorce settlement agreement. Dividing a 401(k) or pension will require a Qualified Domestic Relations Order (QDRO). A QDRO is a court order telling the administrators of the retirement plan or the 401(k) how to divide the account. Most QDROs need to be drafted by an attorney or a CPA, signed by you and the former spouse, filed with the court and signed by a judge. If you are the recipient of a portion of your former spouse’s retirement account and you need the QDRO, it is imperative that you follow-up with your attorney to ensure the implementation of the QDRO is done in a timely fashion.

  • Update all beneficiary designations with your workplace retirement plans, investment accounts, retirement accounts, trusts, annuities, life insurance, bank accounts, credit cards and any other place you might have listed your former spouse as a beneficiary.

  • Obtain your own insurance coverage for your health, automobile, home and life insurance.

  • Review your credit report to cancel any joint credit cards and close any joint accounts. Also, look through your credit report for any joint debts that you were not aware of.

  • Update your estate planning documents including your will, any trusts, durable and health care power of attorneys.  If you never had a will, this is a good time to consider making one.

  • Change your emergency contacts with your workplace, doctors, health club, etc.

  • If you changed your name back to your maiden name, you will need to notify different agencies. Most importantly, you will need to change your name on your social security card, passport and your driver’s license. You should also consider changing your name on your social media accounts. 

  • Consider changing your passwords to any emails or online accounts (i.e. Paypal, Facebook, etc.) that you might have shared the access information with your former spouse.  Confirm that your spouse isn’t either a signer or authorized user on any of your online accounts.

  • After the divorce, your financial circumstances have likely changed. You should consider developing, by yourself or with the help of a professional, a new financial plan for your new life.

Getting these things done might seem a burden now, after all you have been through, but it is necessary to avoid trouble later on.  It is better that you go through this checklist and handle these issues as soon as your divorce is finalized to prevent possible future complications.

Once these things are done, you get to close that chapter and enjoy your new life with no worries about unhandled matters left over from the divorce.

One of the trickiest issues we deal with in business control disputes relates to the impact and management of personal guaranties on the part of the individual shareholders/members.  A personal guaranty can be an impediment to a transaction among the shareholders consolidating ownership, an impediment to the withdrawal of a shareholder/member, or even a trigger of default under the terms of financing agreements in place between a business and its bank.  Managing the impact and expectations of business owners as to a personal guaranty should be considered in the early stages of any potential transaction.

In nearly every small business banking relationship, the bank requires personal guaranties on the part of business owners.  Personal guaranties, often even the more overbearing “spousal” personal guaranties, are the norm.  Of course, the purpose from the bank’s perspective is to increase the level of security against repayment.  The individual terms of the personal guaranty are governed by the language of the agreements. 

The net effect of a personal guaranty is to, in effect, pierce the corporate veil and render the guarantor liable for the debt to the bank (or other creditor party to the guaranty agreement).  In this way, not only does the bank obtain another source from which it can recover, but also dramatically impacts its practical bargaining power.     Often we see shareholder agreements including and incorporating indemnification provisions which reference those situations in which a shareholder/member has guarantied an obligation to a lender.  The value of such indemnification provisions is suspect given that the bank is always going to look to the path of least resistance to recover the extent of its obligation.  In a guaranty the company is the primary obligor to the creditor.  It is the primary obligor’s default which leads to exposure under a personal guaranty.  In that instance, the company is not likely in a position to indemnify as its assets are likely devoted to the repayment of the primary guarantied obligation.

The best and most frequent approach to a personal guaranty in a business control dispute is to secure the release of the guaranty by the bank or other creditor as part of the transaction.  Certainly, if the debt is retired in a third party sale, accounts are closed and the issue is moot.   Not necessarily so in an ownership consolidation transaction involving a transfer among existing owners or members, or where one or more shareholders/members leaves the business.  In that case, the business may continue and banking relationships may remain unmodified.  The bank is not required to release the guaranty.  Even further, under certain circumstances and agreements, a transaction may constitute an event of default of the credit arrangement.  Management of the personal guaranty becomes an important part of the deal.

It is obviously always better to secure a release of a guaranty contemporaneous with a transaction.  If that course of action is unavailable, indemnity is the only other option.  In such cases, indemnification should flow from both the company and individuals as, if the guaranty is ever an issue, it is likely the Company’s ability to pay in the first place, which gives rise to creditor’s pursuit of the guarantor.    

A recent case from the United States Court of Appeals for the Sixth Circuit demonstrates the ongoing struggle to apply the Fair Labor Standards Act (“FLSA”) to the “side gigs” that have come to signify the modern employment market.  In Acosta v. Off Duty Police Services, Inc., United States Court of Appeals for the Sixth Circuit, Nos. 17-5995/6071 (February 12, 2019), the Sixth Circuit held that security offers working for Off Duty Police Services (“ODPS”) as a side job were employees entitled to overtime pay under the FLSA.  

ODPS workers were either sworn law enforcement officers who worked for law enforcement entities during the day, or unsworn workers with no background in law enforcement.  All workers had the same duties, but sworn officers earned a higher hourly rate.  Duties included “sitting in a car with the lights flashing or directing traffic around a construction zone.”  They were free to accept or reject assignments, but would be punished by withholding future assignments if they did so.  When they accepted an assignment, ODPS instructed the workers where to report, when to show up, and who to report to upon arrival.  ODPS provided some equipment, but workers did have to use some of their own equipment.  Workers followed customer instructions while on assignment, and only occasionally received supervision from ODPS.  ODPS paid workers for their hours upon submission of an invoice.  Workers did not have specialized skills, as sworn officers and unsworn workers had the same duties.   

ODPS treated the workers as “independent contractors.” As the facts set forth in the Sixth Circuit opinion demonstrate, the factors relevant to determining whether a worker is an independent contractor or employee do not provide a clear answer.  The United States District Court for the Western District of Kentucky broke the tie this way:  the court held that “nonsworn workers” were employees, but that the sworn officers were independent contractors because they “were not economically dependent on ODPS and instead used ODPS to supplement their incomes.”   

The Sixth Circuit disagreed, noting that the FLSA is a broadly remedial and humanitarian statute, designed to improve labor conditions.  The Sixth Circuit applied the “economic reality” test to determine that the sworn offers were also employees and not independent contractors, and to uphold the finding that unsworn workers were employees.  Specifically, the Court noted that the officers provided services that represented an integral part of the business, and that the work required no specialized skills, that the officers made only limited investment in equipment, and that the workers had little opportunity for profit or loss.  The Court noted that the facts did not “break cleanly in favor of employee or independent contractor status” regarding the right to control the work for the sworn officers. 

In the last segment of this series, we focused on concerns for employers in drafting and enforcing restrictive covenants.  The choices for employees are fewer, and none of them are good.   Employees are generally asked to sign restrictive covenants at two points:  either at the beginning of their career or upon a promotion or other significant improvement in employment status.  Such agreements diminish employees’ choices should they want to move on from their current employment, whether or not the restrictions are actually enforceable.

Some employers require employees to sign a restrictive covenant at the outset of their employment.  If the employee was recruited and has other employment choices, the employee has some bargaining power to reduce the duration or scope of the restrictions.  But this is seldom the case, and the law recognizes that employees generally have limited (or no) bargaining power in these situations.  The law disfavors restrictive covenants for precisely this reason:  the agreement imposes a post-employment restriction that may hinder the employee’s ability to earn a living at a time when the employee has little or no bargaining power to negotiate the restriction.

This calculus changes a little when the employee is required to sign a restrictive covenant in conjunction with a promotion or other benefit, such as participation in a stock option or bonus program.  Then the employee has to decide whether the value of the promotion or other benefit is enough to justify agreeing to the post-employment restriction.  Where it is not, the employee can refuse to sign, forcing the employer to decide how valuable this employee is to the employer.  However, the employee should factor into this decision that the employer is free to terminate the employee for refusing to sign.  And, this might be a good thing, as the employee will be leaving the employer without a noncompete. 

Frequently, employees breach the restriction without consulting an attorney first based on the widely held, mistaken, belief that courts do not enforce noncompetes.  Let’s be clear:  courts will enforce noncompetes where the law permits them to do so.  More importantly, the old employer will sue the employee and the employee’s new employer for breach of the agreement.  The new employer may terminate the new employment to avoid the costs of litigation.  Litigation regarding these matters is expensive, time-consuming and stressful.  Practically speaking, most employers will refuse to hire an employee with a restrictive covenant even if it is unenforceable for any number of technical reasons we have discussed in this series. 

At the very least, employees should consult an attorney prior to signing, even if they have limited bargaining power, to understand the restrictions in place.  We can help employees with that review, and we can help employees navigate the minefield of finding new employment when they have a noncompete in place. 

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