2006-13

U.S. Supreme Court Allows Plaintiff To Recover Under Title VII's Retaliation Provision For Action Which Is "Materially Adverse" To A Reasonable Employee.

In Burlington Northern & Santa Fe Railway Co. v. White, 2006 DJDAR 7866 (U.S. June 22, 2006)(1), the United States Supreme Court unanimously upheld a jury verdict in favor of an employee and held that the anti-retaliation provision of Title VII of the Civil Rights Act of 1964 is not limited to actions affecting employment terms and conditions. Instead, the Court held that the provision applies to employer actions that a "reasonable employee" would find "materially adverse," including transfers or suspensions that do not result in a loss of pay or benefits, actions not directly related to employment, and harm outside the workplace.

Plaintiff Sheila White began working for Burlington Northern & Santa Fe Railway Company ("Burlington") in 1997 and, at that time, was the only woman working in Burlington's Maintenance of Way department. During her June 1997 job interview, Burlington's roadmaster, Marvin Brown, expressed interest in White's prior experience operating forklifts. Burlington hired White as a "track laborer," a physically demanding job that involves removing and replacing track components, transporting track material, cutting brush, and clearing litter and cargo spillage from the right of way. Soon after White was hired, the forklift operator assumed other responsibilities and Brown immediately assigned White to operate the forklift. While operating the forklift was White's primary responsibility, she also performed some track laborer tasks.

In September 1997, White complained to Burlington officials that her immediate supervisor, Bill Joiner, had repeatedly told her that women should not be working in the Maintenance of Way Department and that he made insulting and inappropriate remarks to her in front of her male co-workers. Burlington investigated the charges, suspended Joiner for 10 days, and ordered him to attend a sexual-harassment training class. On September 26, Brown told White about Joiner's discipline and, at the same time, informed her he was removing her from forklift duty and assigning her to perform standard track laborer tasks exclusively. Brown's explanation for the reassignment was that co-workers had complained that, in fairness, a "more senior man" should have the forklift operator position because it was a less strenuous and cleaner job than that of track laborer.

On October 10, 1997, White filed a complaint with the Equal Employment Opportunity Commission ("EEOC"), claiming that her job reassignment was gender-based discrimination and retaliation for her having earlier complained about Joiner. White filed a second retaliation charge with the EEOC in early December, claiming that Brown had placed her under surveillance and was monitoring her daily activities. A few days later, she had a disagreement with her immediate supervisor who reported to Brown that White had been insubordinate. Brown immediately suspended White without pay. White filed an internal grievance and Burlington concluded that White had not been insubordinate. Burlington reinstated White to her position and awarded her backpay for the 37 days she was suspended. She filed another retaliation charge with the EEOC based on the suspension.

White sued Burlington and claimed the employer's actions of changing her job responsibilities and suspending her without pay for 37 days was unlawful retaliation in violation of Title VII. The jury returned a verdict for White, awarding her $43,500 in compensatory damages. A divided Sixth Circuit Court of Appeals panel reversed the judgment and found in favor of Burlington. Sitting en banc, the Sixth Circuit vacated the panel's decision and affirmed the District Court's judgment on both of White's retaliation claims. The Supreme Court agreed to review the decision, and affirmed the en banc decision upholding the jury's verdict.

Title VII's retaliation provision forbids employer actions that "discriminate against" an employee because he or she has "opposed" a practice made unlawful by Title VII or has "made a charge, testified, assisted, or participated in" a Title VII proceeding or investigation. The Court noted that while the term "discriminate against" refers to differential treatment that injures protected individuals, the various Circuit Courts of Appeals have reached different conclusions about whether the challenged action has to be employment or workplace related and about how harmful the action must be to constitute retaliation. To resolve this disagreement, the Court addressed two questions: (1) whether Title VII's retaliation provision forbids only those employer actions and resulting harms that are employment or workplace related; and (2) how harmful a retaliatory action must be to constitute retaliation under Title VII.

Burlington argued that to establish retaliation, a plaintiff must show that he or she experienced an "adverse employment action," defined as a "materially adverse change in the terms and conditions" of employment. The Court disagreed. Title VII's discrimination provision makes it an unlawful employment practice (1) to discriminate against a person "with respect to [] compensation, terms, conditions, or privileges of employment, because of . . . race, color, religion, sex, or national origin" or (2) to limit, segregate, or classify employees in a way that would "deprive or tend to deprive any individual or employment opportunities or otherwise adversely affect his status as an employee based on the individual's race, color, religion, sex, or national origin." The Court observed that the words "hire," "discharge," "compensation, terms, conditions, or privileges of employment," "employment opportunities" and "status as an employee" limit the scope of this provision to conduct that affects employment or alters the conditions of the workplace. However, no such limiting words appear in the retaliation provision.

The Court concluded that this difference in language between the two provisions evinced Congress's intent that the two provisions also differed in purpose. The discrimination provision helps create a workplace where individuals are not subjected to discrimination based on their race, ethnicity, religious belief, or gender-based status. By contrast, the retaliation provision tries to secure that primary objective by preventing employer retaliation with an employee's efforts to enforce the Act.

The Court stated that an individual cannot protect herself from retaliation by focusing solely upon the employer actions and harm that concern employment and the workplace. An employer can effectively retaliate against an employee by taking actions not directly related to her employment or by causing her harm outside the workplace. The Court thus concluded that Title VII's discrimination provision and its retaliation provision are not coterminous and that the scope of the retaliation provision extends beyond workplace-related or employment-related retaliatory acts and harm. In so doing, the Court rejected the line of cases limiting actionable retaliation to "ultimate employment decisions."

The Court next addressed the type of retaliatory conduct necessary to establish retaliation under Title VII. Title VII does not protect against all retaliation, but from retaliation that produces injury or harm. The provision seeks to prevent employer interference with Title VII's remedial mechanisms by prohibiting employer conduct likely to deter discrimination victims from complaining. "[N]ormally petty slights, minor annoyances, and simple lack of good manners will not create such deterrence." Because "it is important to separate significant from trivial harms," there has to be "material adversity" for employer conduct to become actionable retaliation. Thus, an employee's decision to report discriminatory behavior "cannot immunize that employee from those petty slights or minor annoyances that often take place at work and that all employees experience." Adopting a standard that it characterized as an "objective" standard for judging harm under the retaliation provision, the Court held that the plaintiff must prove a reasonable employee would have found the challenged action materially adverse, "which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination."

The Court acknowledged that the significance of any retaliatory act will often depend upon the particular circumstances. For example, a change in an employee's work schedule may not matter to many employees, but may matter enormously to a young mother with school age children. Further, while a supervisor's refusal to invite an employee to lunch would normally be "a nonactionable petty slight," to retaliate by excluding an employee from a weekly training lunch that significantly contributes to an employee's advancement "might well deter a reasonable employee from complaining about discrimination."

Applying these standards to White's case, the Court found there was sufficient evidence to support the verdict on her retaliation claim. The jury found two actions retaliatory: White's reassignment from forklift duty to standard track laborer tasks and her 37-day suspension without pay. Burlington asserted that a reassignment of duties cannot constitute retaliatory discrimination where, as here, both the former and present duties fall within the same job description. The Court acknowledged that reassignment of job duties is not automatically actionable, but whether a particular reassignment is materially adverse depends upon the circumstances of a particular case and should be evaluated "from the perspective of a reasonable person in the plaintiff's position" in light of all of the circumstances. The evidence showed that the track laborer duties were arduous and dirty, while the forklift operator position required more qualifications and was viewed as more prestigious. Further, the forklift position was objectively considered a better job and the male employees resented White for holding the position. The Court found that based on this evidence, a jury could reasonably conclude that White's reassignment would have been materially adverse to a reasonable employee.

Burlington also argued that White's suspension without pay lacked statutory significance because Burlington ultimately reinstated her. The Court again disagreed, finding that Title VII permits victims of intentional discrimination to receive compensatory and punitive damages to help make victims whole.

The Court also rejected Burlington's claim of insufficient evidence and found that the jury's conclusion that the 37-day suspension without pay was materially adverse was a reasonable one. Although she did receive backpay, White and her family had to live for 37 days without income. The Court noted that many reasonable employees would find a month without a paycheck a serious hardship. Here, the suspension occurred around Christmas. White testified that it was the worst Christmas in her life, she became very depressed, and obtained medical treatment for her depression. The Court stated that a reasonable employee facing the choice between keeping her job and paycheck and filing a discrimination complaint might well choose the former. An indefinite suspension without pay could act as a deterrent, even if the employee is subsequently reinstated with backpay.

Justice Alito filed an opinion concurring only in the Court's judgment. He disagreed with the majority's interpretation of Title VII's retaliation provision, favoring a narrower interpretation limited to retaliation with respect to the "compensation, terms, conditions, or privileges of employment" to harmonize the provision with the discrimination provision. Alito also took issue with the majority's "reasonable worker" standard, stating that it was "unclear." Lastly, Alito was critical of the majority's causation standard that utilizes as its test whether an employer's retaliatory act "well might have dissuaded a reasonable worker from making or supporting a charge of discrimination." Characterizing this test as "a loose and unfamiliar causation standard," he commented that in an area of law that already contains complex standards of causation, the introduction of this new and unclear one was unwelcome. However, Alito agreed with the majority that the retaliation found by the jury in this case was actionable under Title VII.

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Court Of Appeal Refuses To Enforce Arbitration Agreement Involving "Reality" Television Participants On Grounds Of Procedural And Substantive Unconscionability.

In Higgins v. Superior Court, 2006 DJDAR 8328 (Cal.App. June 27, 2006)(2), the California Court of Appeal, Second District, Division Eight, found that an arbitration provision in a contract was unconscionable and, thus, unenforceable.

The plaintiffs in this case were Charles Higgins and his four siblings, ages 14-21, who sued several defendants in a dispute arising from a contract they signed to appear in a reality television show. Plaintiffs were orphaned when their parents died in 2004. The five moved in with church acquaintances, Mr. and Mrs. Leomiti, a couple with three children of their own. Plaintiffs and the Leomitis were selected by the reality television show, "Extreme Makeover, Home Edition," to have the Leomitis' home completely renovated. Before participating in the show, the show's producers required plaintiffs and the Leomitis to sign an "Agreement and Release." The Agreement contained 24 single-spaced pages and 72 numbered paragraphs. There were several pages of exhibits attached to the Agreement, including a one-page release. At the top of the first page of the Agreement the following text was printed: "Note: DO NOT SIGN THIS UNTIL YOU HAVE READ IT COMPLETELY." Near the end of the Agreement was a paragraph stating: "I have been given ample opportunity to read, and I have carefully read, this entire agreement .... I certify that I have made such an investigation of the facts pertinent to this Agreement and of all the matters pertaining thereto as I have deemed necessary .... I represent and warrant that I have reviewed this document with my own legal counsel prior to signing (or, IN THE ALTERNATIVE, although I have been given a reasonable opportunity to discuss this Agreement with counsel of my choice, I have voluntarily declined such opportunity)."

The last section of the Agreement was entitled "Miscellaneous" and contained twelve numbered paragraphs. None of the paragraphs contained a heading or title, but a paragraph near the end of the document stated in pertinent part:

I agree that any and all disputes or controversies arising under this Agreement or any of its terms, any effort by any party to enforce, interpret, construe, rescind, terminate or annul this Agreement, or any provision thereof, and any and all disputes or controversies relating to my appearance or participation in the Program, shall be resolved by binding arbitration ... under the auspices of the American Arbitration Association .... I agree that the arbitrator's ruling, or arbitrators' ruling, as applicable, shall be final and binding and not subject to appeal or challenge ....

Nothing in the Agreement brought the reader's attention to the arbitration provision. Although six paragraphs in the Agreement contained a box for the plaintiffs to initial, initialing was not required for the arbitration provision.

The separate one-page Release was typed in a smaller font than the Agreement and contained four, single-spaced paragraphs, one of which contained an arbitration clause. The clause read in pertinent part:

I agree that any and all disputes or controversies arising under this Release or any of its terms, any effort by any party to enforce, interpret, construe, rescind, terminate or annul this Release, or any provision thereof, shall be resolved exclusively by binding arbitration before a single, neutral arbitrator, who shall be a retired judge of a state or federal court.

There was no evidence that any discussions took place between plaintiffs and any representative of defendants regarding either the Agreement or the Release. When the show's producers visited the Leomitis' home to meet with the couple, the plaintiffs did not participate in the meeting. After the meeting, however, the Leomitis gave plaintiffs several documents and instructed them to "flip through the pages and sign and initial the documents where it contained a signature line or box." According to one of the plaintiffs, no more than five or ten minutes passed between the time Mrs. Leomiti handed the documents to the plaintiffs and the time they signed them. At the time of signing the documents, the plaintiffs ranged in ages from 14 through 21. Charles Higgins, the eldest of the plaintiffs, did not know what an arbitration agreement was and did not understand its significance or the legal consequences resulting from signing it. Each plaintiff signed the Agreement and all of the exhibits, including the Release.

After the "Extreme Makeover" was completed, the new home had nine bedrooms, including one for each of the five plaintiffs, and the home mortgage was paid off. The program featuring plaintiffs and the Leomitis was broadcast on Easter Sunday 2005. According to plaintiffs, after the show was first broadcast, the Leomitis told them that the home was theirs (the Leomitis'), and they forced plaintiffs to leave the home. The show's producers told plaintiffs that they could not assist them with this problem. The episode was rebroadcast sometime thereafter.

Plaintiffs sued the Leomitis as well as the entertainment companies that produced and broadcast the episode and the company that built the new home ("the television defendants"). The causes of action included: intentional and negligent misrepresentation, breach of contract, unfair competition, and false advertising. The theory against the television defendants was that they breached promises to provide plaintiffs with a home, exploited plaintiffs, and portrayed them in a false light by rebroadcasting the episode when they knew plaintiffs no longer resided in the home. The television defendants sought to compel arbitration under the Federal Arbitration Act ("FAA"). Plaintiffs opposed the petition, claiming that the arbitration provision was unconscionable. They asserted the provision was procedurally unconscionable because the parties had unequal bargaining power, the arbitration provision was "buried" in the Agreement, they were given no more than ten minutes to look at the Agreement before signing it, and the television defendants did not explain to them what the Agreement was. Plaintiffs further asserted that the Agreement was substantively unconscionable "because its terms were so one-sided as to shock the conscience." Plaintiffs asserted that (1) the Agreement and Release required only them, not the television defendants, to arbitrate, (2) they were precluded from appealing, and (3) they were required to arbitrate under the AAA rules which require arbitration costs be borne equally by the parties.

The trial court granted the television defendants' petition to compel arbitration except as to the unfair competition and false advertising claims. The trial court found that although plaintiffs argued that the arbitration agreements were not enforceable, their actual argument was directed not to the arbitration provisions, but to the Agreement and Release. The trial court also stated that because the defendants had shown that plaintiffs signed the releases having had an opportunity to read them, the arbitration provisions were enforceable. The trial court did not address plaintiffs' claims of unconscionability.

The plaintiffs filed a petition in the Court of Appeal for a writ of mandate to overturn the trial court's order. The appellate court granted the plaintiffs' petition and refused to enforce the arbitration agreement.

As a prefatory matter, the appellate court found that the trial court incorrectly concluded that plaintiffs were challenging the enforceability of the entire Agreement and Release, rather than just the arbitration provision. The trial court also granted the petition to compel arbitration on the fact that plaintiffs had the opportunity to read the Agreement and Release before signing them. The appellate court noted that while this was factually correct and legally bears on whether the agreement is procedurally unconscionable, "no authority is cited for a supposed rule that if a party reads an agreement, he or she is barred from claiming it is unconscionable." The appellate court observed that such a rule would seriously undermine the unconscionability defense.

The appellate court also agreed with plaintiffs' argument that the arbitration provision was unconscionable. The court first addressed the issue of procedural unconscionability, which focuses on factors of surprise and oppression due to unequal bargaining power. The court found the Agreement procedurally unconscionable for several reasons. First, the arbitration provision appeared in only one paragraph near the end of a lengthy, single-spaced document. The Agreement was drafted by the television defendants who knew that plaintiffs were young and unsophisticated and had recently lost both parents. The television defendants made no effort to highlight the presence of the arbitration provision in the Agreement. Rather, it was one of twelve numbered paragraphs in the "Miscellaneous" section. Unlike other paragraphs, no text in the arbitration provision was highlighted. No words were printed in bold letters or larger font, nor were they capitalized. Although some paragraphs required plaintiffs to initial them, there was no such requirement for the arbitration provision. The only reference to the term "parties" is the provision giving the defendants the right to seek injunctive and/or equitable relief.

The court also found the Agreement was substantively unconscionable. Substantively unconscionable terms are those that are unfairly one-sided or overly harsh. The court interpreted the arbitration provision as requiring only the plaintiffs to submit their claims to arbitration. The court focused on language repeatedly used in the agreement such as "I agree," with "I" referring to plaintiffs. Although the top of the first page advised plaintiffs to read the Agreement before signing and the second to the last paragraph acknowledged that the person signing has done so, the court found this unavailing to defeat "the otherwise strong showing of procedural unconscionability."

The television defendants asserted that the arbitration provision was bilateral because the language states "all disputes or controversies arising out of this Agreement or any of its terms, any effort by any party to enforce ... this Agreement ... and any and all disputes or controversies relating to my appearance or participation in the Program, shall be resolved by binding arbitration." The court rejected this argument, stating that only one side, plaintiffs, agreed to the clause. Substantive unconscionability was also found in the provision barring only plaintiffs from seeking appellate review of the arbitrator's decision and the provision requiring arbitration under the AAA rules that require arbitration costs be borne equally by the parties. The harsh, one-sided nature of the arbitration provision, in conjunction with the elements of procedural unconscionability, rendered the arbitration provision unconscionable and, therefore, unenforceable.

The appellate court directed the trial court to vacate its order compelling arbitration and enter a new order denying the petition to compel arbitration.

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Successor Company May Be Liable Under Family & Medical Leave Act Even Without Merger Or Transfer Of Assets.

In Cobb v. Contract Transport, Inc., 125 DLR E-1 (6th Cir. June 28, 2006)(3), a case of first impression in the federal appellate courts, the Sixth Circuit held that a merger or transfer of assets is not a precondition to imposing successor liability under the Family and Medical Leave Act ("FMLA") and, thus, the plaintiff was FMLA eligible after only six months of employment with defendant.

Plaintiff Ronald Cobb worked as a truck driver for Byrd Trucking for three years delivering mail between Denver and Philadelphia pursuant to Byrd's contract with the U.S. Postal Service ("USPS"). Byrd lost the contract on the Denver-Philadelphia route to Contract Transport, Inc. ("Contract") in June 2003. To staff the route, Contract hired the drivers formerly used by Byrd, including Cobb, who received his assignments from a Contract dispatcher located in Des Moines, Iowa. Within six months of his hire by Contract, Cobb became ill and was unable to work for a period of time. When Contract terminated Cobb, he sued, claiming the termination violated the FMLA. The district court granted Contract's summary judgment motion, holding that Cobb was not an FMLA-eligible employee because he had worked for Contract for less than the statutorily-required 12 months. The district court declined to apply the doctrine of successor liability and credit Cobb for the three years he worked for Byrd, finding that there could be no continuity of ownership or control without a merger or transfer of assets.

The Sixth Circuit reversed. Under the FMLA, work for a covered employer includes work performed for both a covered employer from whom leave is requested and any previous employer to whom the current covered employer is a "successor in interest." The appellate court held that a transfer of assets or a merger is not always a precondition to determining a "successor in interest" under the FMLA. Here, the court found that the policy embodied in the FMLA weighed in favor of holding that Contract was a successor in interest to Byrd for the purpose of providing Cobb with FMLA leave. Cobb's employment had been continuous and he had worked the same route for three years for the USPS performing the same job, just for different employers. The court further noted that, under these facts, if a new company bidding on a USPS contract was not required to grant drivers FMLA leave regardless of how long the driver had been on the route, new companies would have lower FMLA costs and, thus, be at an advantage in the bidding process.

Contract also argued that plaintiff was not FMLA eligible because he was employed at a worksite (a truck stop in Kentucky where he picked up a mail truck) with less than 50 employees. The court disagreed. For employees with no fixed worksite, the FMLA defines the "worksite" as the site to which the employee is assigned, from which their work is assigned, or to which they report. The court found that Cobb's worksite was Des Moines, Iowa because plaintiff received his work assignments from there and reported to Des Moines as well.

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1. Opinion by Breyer, J., joined by Roberts, C.J., and Stevens, Scalia, Kennedy, Souter, Thomas and Ginsburg, JJ. Separate opinion by Alito, J., concurring in the judgment.

2. Opinion by Rubin, J., joined by Cooper, P.J. and Boland, J.

3. Opinion by Clay, J., joined by Moore and Cole, JJ.