Third Circuit Sends Wake Up Call to Employers About Discriminatory Hiring Practices

In the spirit of National Equal Pay Day on Tuesday, I wanted to share the important gender discrimination case of Donlin v. Phillips Lighting North America Corp. decided by the Third Circuit last week.

Here's what happened in the case.

Colleen Donlin was hired by Phillips as a temporary warehouse employee at its Mountaintop, Pennsylvania distributions center. Her job was to help prepare orders for shipment.

Like other temporary workers, Donlin applied for a permanent position. She was not hired and her eight month temporary assignment ended.

Donlin got two other jobs after she left Philips. At the first job, Donlin earned  $14.70 an hour, but it was a 32-mile commute.

She left that job and found a job closer to home at which she made $13.00 an an hour. Had she been hired by Philips, she would have earned $14.67 an hour as a base salary

Donlin learned that Phillips hired several men for the position she had applied for after it refused to hire her.  She filed a Title VII lawsuit for gender discrimination,  won the trial and was awarded damages.

In discrimination cases, the compensation which can be awarded by a judge or jury  is designed to make victims whole and put them in the position they would have been in had they not been discriminated against.

A winning employee can recover "back pay" and "front pay."

  • Back pay represents losses from the the time of the discrimination up to the time of trial. 
  • Front pay represents the losses that the victim will experience in the future if he or she does not find a comparable position.

Based on the premise that Donlin would have worked for another 25 years, an advisory jury awarded Donlin:

  • $63,050 in back pay
  • 395,795 in front pay
  • for a total of $458,845

The award was based on the difference in pay and benefits between the $13.00 hour job she was holding at the time of trial and the $14.67 hour job she would have had at Phillips had she not been discriminated against when Phillips refused to hire her.

The judge modified the front-pay award by reducing it to account for 10 years of damages instead of 25, finding that a 25 year period was too speculative -- so the total award was $164,850.

Phillips appealed and the decision came out last week. The issues decided are very important for both victims of discrimination and their lawyers. 

Here are the highlights:

1. Front Pay:

Donlin was in her 30's at the time of her employment with Phillips and 40 at the time of trial. The question presented was: was how far into the future can a younger employee like Donlin claim economic loss?

For those of us who represent individuals in employment cases, the issue  has always been a hard one to deal with when it comes to a younger worker.  The reason is because past damages can be calculated with certainty, but future losses can not:

  • Is the person going to get another job?
  • If so when and for how much?
  • How do we know what someone will be doing 20 or 30 years from now?

When we  represent someone in an age discrimination case, and the terminated employee is 55 for example,  it's easy for us to project damages until age 65 or 70  ( whatever the age is that the person was likely to retire).

It's not speculative to assume that the person would have worked for another 10 or 15 years, and it's not hard to calculate what he or she would have earned and what the total losses are.

It's much more complicated when we represent a younger person.  Since the law does not allow "speculative" damages, it's simply very difficult to predict how far into the future the court will allow us to project.

In this case, the  district court judge ruled that Donlin was entitled to receive damages for economic loss for 10 years into the future. The Court of Appeals affirmed the ruling :

We note that there will often be uncertainty concerning how long the front-pay period should be, and the evidence adduced at trial will rarely point to a singe, certain number of weeks, months , or years.  More likely, the evidence will support a range of reasonable front-pay periods.  Within this range, the district court should decide which award is most appropriate to make the claimant whole ...

We find that the District Court did not abuse it's discretion when it awarded Donlin front- pay for 10 years.

This means that we now we have a decision with a sound analysis for front -pay involving a relatively young employee from a high level court.  It's a decision that other victims and their lawyers can rely on and it's a decision that carries considerable weight. It's very good news.

2. Mitigation

In an employment case, the employee  who has lost a job has a duty to mitigate -- which means that she  (or he) must make reasonable efforts to minimize her loss of income. The precise language of the statute says

Interim earnings or amounts earnable with reasonable diligence by the person or persons discriminated against shall operate to reduce the back pay otherwise allowable.

In other words:

  • a person who is claiming damages in an employment case has a duty to look for work
  • damages into the future end if an employee gets an equivalent job or better job

In this case, Donlin first got a job in which she earned $14.70 and hour.  The problem was that it was a 32 -mile commute. She worked at the job for two years, and then found a job closer to home at which she made $13.00 an an hour.

She would have  received $14.67 an hour as a base salary had she been hired at Philips.

Phillips argued:

  • Donlin's "voluntary transfer" to a lower-paying job was inconsistent with her "duty to mitigate"
  •  Phillips should not have to make up the difference.

Donlin argued:

  • once you factor the cost of the commute
  • the the two jobs were substantially the same.

The Court of Appeals agreed with Donlin:

An employee need not seek employment which involves conditions that are substantially more onerous than [her] previous position...

It is well settled that a claimant has not failed to make a reasonable effort to mitigate damages when she refuses to accept employment that is an unreasonable distance from her residence.

[T]he job at Mission constituted a substantially equivalent opportunity as that available at Romark.  Donlin should not be penalized for accepting that opportunity.

Accordingly, the District Court's finding that Donlin sufficiently mitigated her damages was not clearly erroneous ...

Certainly our clients still have a duty  to mitigate and make a "reasonable effort" to find comparable work if they intend to claim damages in a lawsuit.  This decision does not change that fact.

But this decision certainly delivers great news since it clearly states that a person is not required take a job which places an onerous burden on him (or her)  in order the meet that obligation.

On many fronts,  this is a hugely helpful case on questions of damages in employment cases. While we deal with these problems every day, it's certainly not every day that we get federal circuit court case law on these particular issues.

It's also a wake up  to employers to be careful about their hiring practices.

The bottom line is that Donlin worked as a temp at  a company  for eight months. Because she was discriminated against when the company hired a man instead of her into a permanent position, she is now entitled to all of her past losses plus 10 years of damages into the future. That's a big win.

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It's Not All Bad News in Battle Against Mandatory Arbitration

The recent US Supreme Court decision in the14 Penn Plaza v. Pyett case was a huge blow to employee rights. The case held that a worker can't go to court on a discrimination case when the union bargaining contract  requires that  civil rights claims must go to arbitration instead of a judge or jury.  There's are lots of summaries of the case including those in  Ross Runkel's Law Memo  the SCOTUS BLOG and The Wall Street Journal.

The 14 Penn Plaza case is another chapter in the ongoing battle regarding mandatory arbitration of civil rights and employment claims and the decision couldn't be worse.

The only bright spot on the topic is that there was a very good decision from the Third Circuit  Court of Appeals just days before 14 Penn Plaza in the case of Kirleis V. Dickie, McCamey & Chlcote, P.C.

In Kirleis, the Court  held that the plaintiff was not required to arbitrate her civil rights claims. Here's what happened in the case.

The plaintiff, Alyson Kirleis, practiced law with the firm of Dickie, McCamey & Chilcote. She worked there since 1987. She became a shareholder in 1998.

Kirleis filed complaints against the firm alleging sex discrimination, retaliation, and hostile work environment in violation of state and federal law. The firm filed a motion to compel arbitration  based on a provision of its bylaws which mandated arbitration of any disputes.

Kirleis submitted undisputed evidence stating that:

  •  she never got a copy of the by-laws
  •  she never saw the document which contained the mandatory arbitration language
  • she was never given a copy of the document which contained the mandatory arbitration language
  • she never signed any agreement to arbitrate
  • she never agreed to arbitrate her claims against the firm 

Therefore, she argued, that since she never agreed to the arbitration provision she could not be bound by it.

The firm argued that Kirleis;

  • got the benefits of the firms by-laws, including generous pay and benefits
  • should not be able to accept the benefits of the by-laws without honoring her responsibilities
  • under corporate law principles, members of corporations are presumed to know and understand the by-laws of the corporation

In rejecting the firm's arguments, the Court relied on basic contract principles in determining whether there was an agreement to arbitrate. While the Court noted that there is a presumption in favor of arbitration, it said:

this presumption does not apply to the determination of whether there is a valid agreement to arbitrate between the parties. ... Before a party to a lawsuit can be ordered to arbitrate ... there should be an express, unequivocal agreement to that effect. 

The Court looked at cases in which arbitration provisions were placed in employee handbooks. In many of those cases, employees never read or understood provisions in those documents which required them to arbitrate claims rather than go to court.  As the Court stated:

Contrary to the Firms' arguments, Quiles is analogous to the present case in at least one critical respect:  like Quiles, Kirleis never received a copy of the only document containing the firm's arbitration provision.  Without this document, Kirleis cold not have explicitly agreed to arbitrate her claims. . . .

As we have explained, Kirleis cold not have explicitly agreed to arbitrate her claims because she never received a a copy of the bylaws and was unaware of the existence of the arbitration provision contained therein.

In other words, the Court held:

  • under contract law, an explicit agreement to arbitrate is required
  • Kirleis never received, read, or agreed to the arbitration provisions in the by laws
  • therefore, there was no agreement and no contract to arbitrate 
  • Kirleis could go to court on her civil rights claims

It  may seem simple, fair, and pretty straightforward but that's not usually the way it turns out. The 14 Penn Central case is the opposite example. Overturning what many believe to be thirty years of precedent, the Supreme Court held in effect that a union official can waive the right to go to court on behalf of one of it's members -- no "explicit agreement" by the individual is required.

Equally bad is that employees are given handbooks to sign every day which have mandatory arbitration provisions.  Employees are asked to, and are usually required to,  sign a document which states that they have received the company handbook.  The handbook contains a mandatory arbitration provision.  By signing the document, the employee in many cases gives up the right to take a discrimination or sexual harassment case to court.  If they don't sign,  they don't have a job --is that a fair choice?

Those of us who represent employees have been fighting this battle for years.  We believe that employees should have the right to take their cases to court and get the full benefit of laws intended to protect them -- including the right to have a judge or jury decide the case.

That's why legislation has been introduced called the Arbitration Fairness Act of 2009 (on February 12, 2009) which amends the Federal Arbitration Act and states in part:

No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of --

(1) an employment, consumer, or franchise dispute; or

(2) a dispute arising under any statute intended to protect civil rights.

There are many reasons why this is a good and important bill. For those interested,  I suggest taking a look at  the California Employment Labor and Employment Law blog piece on it, which does a great job of dispelling the  mythology on the subject.

It's also worth mentioning that not all management lawyers are keen on arbitration.  In addition to the many things wrong with mandatory arbitration, it turns out that it's simply not cost effective from a business perspective.

So while there was very bad news last week on the subject of mandatory arbitration, at least there was one very good case which states the obvious -- you can't (at least you shouldn't) be bound to something you didn't agree to.

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