Posted on December 29, 2009 by James A. Burns, Jr.

New Law Restricts Employment Arbitration for Defense Contractors and Subcontractors

President Obama has signed the Department of Defense Appropriations Act for Fiscal Year 2010 (H.R. 3326). Section 8116 of that Act significantly restricts the ability of defense contractors and subcontractors to enter into or enforce agreements that require employees or independent contractors to arbitrate certain claims.

In particular, section 8116 provides that no funds appropriated under the Act may be spent on any federal contract in excess of $1 million that is awarded 60 or more days after the effective date of the Act, unless the contractor agrees not to:

(1) enter into any agreement with any of its employees or independent contractors that requires, as a condition of employment, that the employee or independent contractor agree to resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention; or

(2) take any action to enforce any provision of an existing agreement with an employee or independent contractor that mandates that the employee or independent contractor resolve through arbitration any claim under title VII of the Civil Rights Act of 1964 or any tort related to or arising out of sexual assault or harassment, including assault and battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring, supervision, or retention.

Section 8116 also provides that no funds appropriated by the Act may be spent on any federal contract in excess of $1 million that is awarded 180 or more days after the effective date of the Act, unless the contractor certifies that each of its subcontractors that has a subcontract worth more than $1 million has agreed not to enter into or seek to enforce any provision of any agreement described above with respect to any employee or independent contractor who is or will be performing work related to the subcontract.

The Secretary of Defense may waive the application of these provisions to a particular contractor or subcontractor for the purposes of a particular contract or subcontract if the Secretary or the Deputy Secretary personally determines, with a specific explanation, that the waiver is necessary to avoid harm to national security interests of the United States, and that the term of the contract or subcontract is not longer than necessary to avoid such harm.

Congress is considering more sweeping restrictions on arbitration that would apply to every employer. The Arbitration Fairness Act (H.R. 1020, S. 931), which now has 106 cosponsors in the House and 11 cosponsors in the Senate, would prohibit the enforcement of all pre-dispute agreements to arbitrate employment disputes (other than in collective bargaining agreements), civil rights disputes, consumer disputes, or franchise disputes, and would require courts, rather than arbitrators, to decide the validity or enforceability of any such agreement.

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Posted on July 1, 2009 by James A. Burns, Jr.

Supreme Court Creates New Risk For Employers Who Use Tests or Other Screening Devices

In one of its most significant employment discrimination decisions in years, the U.S. Supreme Court held this week that if an employer discovers that a test it has given to employees would screen out a statistically significant number of women or minorities, the employer cannot scrap the test based on a fear that it will be sued for discrimination by those who did not pass the test, unless it can show a “strong basis in evidence” that it would actually lose such a suit. Throwing out the test results without such a showing, the Court held, would unlawfully discriminate against those who did well on the test based on their race or sex. Ricci v. DeStefano, Nos. 07-1428 and 08-328 (June 29, 2009).

Facts

The City of New Haven, Connecticut (the “City”), used a written test to help decide which firefighters would be eligible for certain promotions. The results showed that the test had a statistically significant adverse effect on African-Americans. Not only was the passing rate for black firefighters only about half of what it was for whites, but also none of the employees with top scores – the only ones eligible for promotion under City rules – was black. Concerned that using the test would lead black employees to file, and probably win, a suit alleging that the test had a discriminatory “disparate impact” based on race, the City decided not to use the test. In what likely appeared to the City as a case of “damned if you do, damned if you don’t,” it was then sued by 18 firefighters (17 whites and one Hispanic) who had passed the test, alleging that the City had discriminated against them, based on race, by refusing to use the test and thus denying them a chance at promotions.

The Court’s Decision

Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits two types of discrimination based on race, color, national origin, sex, and religion. First, the law prohibits intentionally treating one employee better than another because of such factors – so-called “disparate treatment” discrimination. Second, the law prohibits unintentional discrimination that results when an employer uses a test, selection device, or practice that is neutral on its face, but that has a disproportionate adverse impact on members of a protected group, or “disparate impact” discrimination.

Ricci dealt with a clash between those two types of discrimination. Although the City refused to use its test because it was afraid that it would lose a “disparate impact” case brought by black employees who had not passed the test, the Court held that fear did not justify the City in deciding not to use the test, because that amounted to intentional “disparate treatment” discrimination against the non-black firefighters who had done well on the test. In particular, the Court said that once a test has been given, even a significant statistical difference between how well two groups did on the test is not enough to justify scuttling it, because doing so amounts to “race-conscious” discrimination against those who did well on the test. To justify discarding such a test, the employer must instead show that there is a “strong basis in evidence” that if those who did poorly on the test challenge its use as “disparate impact” discrimination, the employer will lose that case, either because its test was not “job related and consistent with business necessity,” or because it refused to adopt less discriminatory ways to choose among employees who would have met its needs. In effect, the Court said that the only way an employer can walk away from a test it has already given, based on concern about possible liability for disparate impact discrimination, is to show that the test was unrelated to the job for which it was used or that the employer had ignored ways of selecting employees that would have met the employer’s needs with a less discriminatory effect.

What This Case Means for Employers

The Court’s decision puts employers between a rock and a hard place in deciding what to do if, after they give a test or use a selection device, they discover that the test or device has a disproportionate adverse effect on members of a protected group. If the employer uses the test, it may be sued by members of that group for “disparate impact” discrimination, but if it decides not to use the test, it may be sued by those who did well on the test for “disparate treatment” discrimination.

After Ricci, employers making that choice must now be much more concerned about a discrimination suit from those who will lose out if the test is discarded. An employer can defend such a claim only by showing that its own test was largely irrelevant to the job for which it was being used or not closely aligned with the employer’s business needs, or that the employer rejected less discriminatory ways of meeting those needs. But having chosen and used a test, presumably based on a belief that it would accurately predict success in a job, very few employers will be able to meet that burden.

For that reason, it is now risky to change a selection process after the fact, and employers who give a test must be prepared to follow through with it. Before giving any test or implementing any other method of selection among applicants or employees, therefore, employers should carefully evaluate the likelihood that the test or method may have a disproportionate adverse effect on certain groups; whether other alternative tests or methods are available that may have a less discriminatory impact; and – most importantly – how accurate the test or method will be in correctly selecting those employees who are best able to perform the required duties and responsibilities of the relevant job or jobs. By taking those steps before using any test or other selection device, employers will be best prepared to defend any resulting discrimination claim.
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Posted on May 8, 2009 by Joel S. Barras

Police Department Not Required to Accommodate Officer's Request to Wear Religious Dress with Uniform

This post was written by Joel S. Barras, Scott E. Blissman, and Daniel J. Moore.

The Third Circuit Court of Appeals has ruled that the Philadelphia Police Department did not violate Title VII of the 1964 Civil Rights Act when it denied an officer’s request to wear a headscarf, a head covering traditionally worn by Muslim women, while in uniform and on duty. According to the court’s ruling, the Department successfully demonstrated that allowing the officer to wear a headscarf on duty would impose an undue hardship on the Department.

Background

The dispute began in 2003 when the officer requested permission from her commanding officer to wear a headscarf while on duty. The officer’s request was denied pursuant to the Department’s strictly-enforced internal uniform policy. The officer subsequently filed a complaint of religious discrimination with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission (“PHRC”). While these administrative agencies investigated her complaints, the officer continued to report to work wearing a headscarf, eventually resulting in a temporary 13-day suspension, without pay, for insubordination.

In 2005, the officer brought suit against the city of Philadelphia in federal district court, alleging religious discrimination. The district court granted summary judgment in favor of the city, holding that the officer could not be reasonably accommodated without imposing an undue burden on the city.

The Third Circuit’s Decision

The Third Circuit affirmed the district court’s ruling. The court explained that an employer is not required to accommodate a religious belief if it can show that the requested accommodation would cause an undue burden on the employer and its business. In this context, an accommodation constitutes an “undue hardship” if it would impose more than a de minimis cost on the employer. Here, the city presented testimony that strict enforcement of the Department’s uniform policy was
“critically important to promote the image of a disciplined, identifiable and impartial police force by maintaining the Philadelphia Police Department uniform as a symbol of neutral government authority, free from expressions of personal religion, bent or bias.” Such uniformity encouraged officers to subordinate their personal preferences in favor of the overall policing mission, and conveyed a sense of authority and competency both inside the Department and to the general public. Accordingly, the court found that the city had shown that wearing a religious headscarf would impose an undue burden on the Department, and that the district court’s grant of summary judgment was proper.

Practical Effects for Pennsylvania Public Employers

The Third Circuit’s decision is consistent with a number of federal courts holding that police departments are not required to accommodate an officer’s request to wear religious garb while on duty. For example, a court in another jurisdiction has held that a police department was not required to accommodate an officer’s request to wear a gold cross pin on his uniform in contravention with the department’s no-pins policy. It is important that police departments have a detailed, written uniform and appearance policy. Such policies can and should address tattoos and piercings that would be visible on an officer while in his or her uniform. Additionally, it is important that police departments apply any such policy consistently, without exceptions. A court would likely rule differently had the department provided medical exemptions for a particular aspect of the uniform policy or grooming standards (e.g., a “no-beard” policy), while refusing religious exemptions. As a practical matter, this uniform and appearance policy should be included with your job application materials to avoid situations where a newly appointed officer claims that he or she was unaware of work rules on appearance. If your police department does not have such a policy, contact one of the attorneys at Reed Smith to obtain a model policy.

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Posted on January 29, 2009 by James A. Burns, Jr.

President Obama Signs Ledbetter Fair Pay Act, Placing New Burdens on Employers

Acting swiftly on one of his campaign promises, President Obama today signed the Lilly Ledbetter Fair Pay Act (S. 181). The new law will increase the number of pay discrimination claims, make them much more difficult to defend, and force employers to retain records relating to compensation decisions far longer than they have in the past. In addition, the Act creates a strong incentive for management to review any current disparities in pay or benefits between two employees who hold similar jobs, to be confident that such differences were and are based on legitimate factors rather than a discriminatory decision that may have occurred years ago.

Federal discrimination laws generally require employees to file charges of discrimination with the Equal Employment Opportunity Commission (“EEOC”) within 180 or 300 days after the alleged discrimination occurs. That deadline allows such claims to be resolved relatively quickly, while the evidence is fresh and witnesses are available. In Ledbetter v. Goodyear Tire & Rubber Co. (2007), the U.S. Supreme Court, emphasizing the importance of the deadline, held that the period for challenging pay discrimination starts to run when an employer first makes the allegedly discriminatory decision, not each and every time that the employee later feels the effect of such a decision by receiving a paycheck.

The Ledbetter Act overturns that approach. The period for filing a charge now starts to run not only when an allegedly discriminatory compensation decision or practice is first adopted, but also each time that an individual becomes subject to or affected by application of such a decision or practice, “including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or practice.” The new law, which takes effect today and retroactively applies to any claim filed since the Ledbetter case was decided, amends Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and the Rehabilitation Act of 1973, and thus applies to compensation discrimination based on sex, race, national origin, color, religion, age, and disability.

The new law creates substantial challenges for employers, in that they will now be forced to reconstruct and defend compensation decisions made years ago by persons likely to have forgotten what happened – even assuming that such witnesses are still alive and can be found. For that reason, employers now have a strong incentive to document any and all decisions that may affect compensation – such as why they paid a new employee more than an existing one, or why a supervisor gave one employee a better review than another – and to retain all such records much longer than is legally required. Finally, employers may want to evaluate any current disparities in pay and compensation between employees who hold the same job in order to be able to defend such differences as legitimate.

Congress is soon expected to place even greater emphasis on pay discrimination by passing the Paycheck Fairness Act, which was approved by the House of Representatives earlier this month but has not yet been voted on in the Senate. That law would allow plaintiffs bringing Equal Pay Act claims to recover unlimited compensatory and punitive damages, make it far easier for them to bring class actions, and prohibit employers from taking action against most employees because they have asked about, discussed, or disclosed any employee’s wages.

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