Should Employers Include “No Rehire” Clauses In Separation Agreements?

By Robert G. Chadwick, Jr., Managing Member, Seltzer, Chadwick, Soefje & Ladik, PLLC.

When terminating an employment relationship, a separation agreement can be a prudent strategy for managing the risk of a subsequent lawsuit. Such an agreement typically offers monetary or other consideration in exchange for a waiver or release of all claims, including claims of harassment and discrimination.

A waiver or release, however, generally cannot lawfully discharge future claims, including claims based upon denials of applications for re-employment. To manage this risk, it is common for separation agreements to include “no rehire” clauses. Such a clause can include an agreement by a former employee to (1) refrain from applying for or seeking employment, reemployment or reinstatement, (2) waive any  right to such employment, reemployment or reinstatement, or (3) termination of employment if rehired.

Recent developments have nevertheless raised two important questions for employers as to “no rehire” clauses: (1) Are such clauses legal? (2) Should employers include such clauses in separation agreements?

Are “No Rehire” Clauses Legal?

For at least a decade, the Equal Employment Opportunity Commission (“EEOC”) has warned that “no rehire” clauses can be viewed as retaliation against employees who come forward with claims of harassment or discrimination. Despite this warning, federal case law has routinely upheld such clauses. See Jencks v. Modern Woodmen of America, 479 F.23d 1261 (10th Cir. 2007)(employee’s waiver of any right to reemployment or reinstatement was legitimate nondiscriminatory reason for employer’s refusal to subsequently consider former employee for sales position).

Not all states, however, view “no rehire” clauses favorably.

Effective July 1, 2018, a new Vermont law provides: “An agreement to settle a claim of sexual harassment shall not prohibit, prevent, or otherwise restrict the employee from working for the employer or any parent company, subsidiary, division, or affiliate of the employer.” Such a clause is rendered “void and unenforceable” by the new Vermont law.

Section 16600 of California’s Business & Professions Code states, subject to certain exceptions: “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” On July 24, 2018, the Ninth Circuit in Golden v. California Emergency Physicians Medical Group addressed the legality under Section 16600 of a provision of a settlement agreement whereby a physician waived “any and all rights to employment with CEP or at any facility that CEP may own or with which it may contract in the future.” The Court held the clause survived to the extent it prevented the physician from working at facilities owned or operated by CEP, but failed to the extent it (1) prevented the physician from working for employers that have contracts with CEP, or (2) permitted CEP to terminate the physician from existing employment in facilities not owned by CEP.

Section 16600 of California’s Business & Professions Code is not dissimilar to the laws of other states.  It is safe to assume, therefore, that other states have taken notice of the broad interpretation by the Ninth Circuit of Section 16600.

Should Employers Include “No Rehire” Clauses in Separation Agreements?

The risk of omitting a “no rehire” clause from a separation agreement is not limited to a single failure to hire claim from a former employee. A disgruntled former employee can conceivably file a new claim as to each open position for which an application is denied.

Certainly, the new Vermont law provides few options for Vermont employers. Otherwise, the risks currently presented under state law, and to a lesser extent federal law, do not yet dictate the abandonment of “no rehire” clauses.  What these risks do mandate is that broad and overreaching clauses be avoided in favor of skillfully and carefully drafted clauses.

So, to answer the question presented by this article’s headline, most employers should include “no rehire” clauses in their separation agreements. What form these clauses should take depends upon the advice of experienced legal counsel.

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Combating Sexual Harassment In An Open Office Environment

By Robert G. Chadwick, Jr, Managing Member, Seltzer, Chadwick, Soefje & Ladik, PLLC.

For the past several years, studies have debated the benefits and detriments of open offices as viable working spaces. One of the benefits touted by open plan proponents is the deterrence of employee misconduct, such as sexual harassment, that privacy often enables.

Even in an open office, however, the risk of sexual harassment persists, albeit in forms unique to the work environment. The absence of walls and barriers may even provide more, not less opportunities for subtle forms of harassment. After all, open floor plans are specifically designed to facilitate close interaction among employees.  

A new study entitled “Doing gender in the ‘new office’” published in the journal Gender, Work and Organization, for instance, shows that open areas may subject female employees to increased leering or staring by male employees, and more comments regarding their personal appearance.

Other risks of an open layout include looming, crowding, brushing and stalking. Seemingly innocuous gestures, words and phrases by employees may actually have sexual connotations.

The formation of employee cliques is also a danger of an open office. Employees huddled together and whispering and giggling may seem innocent to some, but may actually be perceived by others as a form of harassment.

The more open an office environment, moreover, the greater the threat of ostracization of an employee or group of employees. Ostracization can be a powerful form of harassment or retaliation for a complaint of harassment. Fear of ostracization can also deter complaints of harassment.

In some respects, an open office environment may even be more hostile to an employee than a traditional office environment. Without walls or barriers, the employee is constantly sensitive to the surroundings. With no office or cubicle to which the employee can retreat, the affect of harassment can be constant throughout the work day.      

In implementing strategies for combating sexual harassment, employers must thus be mindful of the unique risks presented by an open office. Harassment and retaliation policies and training should address not only overt forms of harassment, but also subtle forms of harassment. Supervisors should be trained to detect and redress subtle forms of harassment. Employees should have private avenues for reporting harassment without fear of retaliation. Without a strategy tailored to an open office environment, the employer risks poor work performance, attrition and legal liability.

Predictive Scheduling: Yet Another Type of Law For Employers To Worry About

By Robert G. Chadwick, Jr., Seltzer, Chadwick, Soefje & Ladik, PLLC.

In recent years, the rights of applicants and employees have been expanded significantly through new state and local initiatives. These initiatives have included ban-the-box laws, which protect the rights of applicants with criminal conviction records, paid sick time laws, harassment training laws, and laws which ban inquiries about the salary history of job candidates.

In 2014, San Francisco became the first jurisdiction to adopt another new type of employment law. The Formula Retail Employee Rights Ordinances addressed predictive scheduling for employees in the retail industry. As with most new initiatives, other jurisdictions, including Seattle and New York City, quickly followed suit. On July 1, 2018, Oregon became the first state with a predictive scheduling law.

So, what are predictive scheduling laws?

Predictive scheduling laws vary from jurisdiction to jurisdiction. Common components, however, include:

* Advance written notice to an employee before the employee’s work shift.

* Rest periods between work shifts.

* The right of an employee to decline any work shift not included on the employee’s written schedule or which encroaches on a rest period.

San Francisco, Seattle and Oregon allow for variances, but subject to compensation schedules favorable to employees. New York City has completely banned the practice of on-call scheduling.

Which employers are subject to predictive scheduling laws?

For now, predictive scheduling laws apply only to employees of retail, hospitality and food services establishments. Some legal scholars, however, are predicting the laws could expand to other industries.

Where else are predictive scheduling laws under consideration?

In New York, a proposed new State Labor Department predictive scheduling regulation was published for comment on November 22, 2017. A predictive scheduling ordinance is currently under consideration in Chicago. Proposed legislation has also been introduced in Connecticut, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, North Carolina and Rhode Island.

What should employers take away from these developments?

As noted in a previous article on this blog, states and municipalities are increasingly the new frontier in employment law. For multi-state employers, this reality presents multiple challenges, including (1) understanding new types of laws for which guidance is sparse or nonexistent, (2) keeping up with fast-changing laws in multiple jurisdictions, and (3) compliance with laws which vary from state-to-state and municipality-to-municipality and which frequently have location-specific mandates. Although these challenges are more daunting with the passage of each new law, the price for not facing the challenges can be fines, damages, or worse.

 

Why Your Workforce Should Not Be Debating Roseanne’s Demise!

By Robert G. Chadwick, Jr, Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC.

The cancellation of the ABC comedy series Roseanne in the wake of allegedly racist tweets by the show’s star, Roseanne Barr, is undoubtedly a hot topic of debate across America. On one side of the debate are those who subscribe to the view ABC did the right thing. On the other side of the debate are those who believe ABC acted precipitously.

So, why should such debates be avoided in the workplace?  The simple answer is the debates may be cited as part of a charge or lawsuit alleging race discrimination or harassment under Title VII of the Civil Rights of 1964 (“Title VII”), the Civil Rights Act of 1866 or state or local law.

To illustrate this point, consider the debate which continues today regarding the 1995 murder trial of O.J. Simpson. Workplace remarks stemming from such debate are still cited as evidence in cases alleging race discrimination or harassment in employment. In Chattman v. Toho Tanex America, Inc., 686 F.3d 339 (6th Cir. 2012), for example, the claim that a human resources manager was racially biased included a joke as to O.J. Simpson’s innocence. A racially-charged disagreement as to the O.J. Simpson verdict was also at the heart of a race discrimination claim in Campbell v. Hamilton County, 2001 WL 1322785 (6th Cir. Oct. 17, 2001).  

Other racially-charged debates have been referenced in race discrimination cases. In David v. Trugreen Partnership, Ltd., 1999 WL 288686 (N.D. Tex. May 5, 1999), it was a debate regarding the trial of police officers who had allegedly beaten Rodney King. In Neal v. Whole Foods Market Company, Inc.,  2018 WL 2219362 (E.D.La. May 15, 2018), it was a discussion regarding Bill Cosby’s alleged sexual misconduct.

To be sure, not all remarks made during a racially-charged debate will support a claim of race bias. As many employers already know, however, even frivolous lawsuits cost money to defend.

Especially as to a newsworthy racially-charged debate, such as the cancellation of Roseanne, the urge to take a side can be overwhelming.  Where the debate spills into the workplace, however, the risk to an employer is a costly claim or litigation.  Employer inaction or acquiescence only increases this risk.

Prudent risk management thus dictates that an employer include debates rooted in race amongst prohibited activities in the workplace. Better yet, such a prohibition should be part of the employer’s discrimination and harassment training program.

Photo credit:  Stand-Up Sucks, LLC

State-Specific Harassment Prevention Mandates: The Emerging Reality For Multi-State Employers

By Robert G. Chadwick, Jr, Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC.

For more than thirty years, sexual harassment has been a recognized form of discrimination prohibited by federal and state employment discrimination laws. Prudent employers have thus long recognized written policies and training to be essential risk management tools for combating sexual harassment in the workplace.

Recently, the effectiveness of employer policies and training has come into question. A June 2016 Report of the EEOC Select Task Force on the Study of Harassment in the Workplace noted: “Much of the training done over the last 30 years has not worked as a prevention tool—it’s been too focused on simply avoiding legal liability.”

Although the June 2016 EEOC Report set forth only recommendations for effective sexual harassment training, some state legislatures have gone further.  On April 12, 2018, New York joined California, Connecticut, and Maine in prescribing sexual harassment prevention measures which must be undertaken by private employers.

These state prescriptions include not only the content and form of harassment policies, but also the content, form, timing, frequency, length, trainer qualifications, and proof of attendance requirements of harassment training. Although much of the prescribed content can be used in any state, some of the prescribed content is state-specific.

New York

The New York legislation, for instance, requires the adoption by the New York State Division of Human Rights (“DHR”) of a model prevention policy. The model policy must meet certain minimum standards, which include references to “state statutory provisions concerning sexual harassment” and state “forums for adjudicating sexual harassment complaints administratively and judicially.” Employers must either adopt the model policy or establish a policy that equals or exceeds the minimum standards of the model policy.

The legislation also mandates the production by the DHR of a model prevention training program. The model program must be interactive and include references to “state statutory provisions concerning sexual harassment”, and available state forums for adjudicating complaints. Employers must either adopt the model program or establish a program that equal or exceeds the minimum standards of the model program. Under either option, training must be provided annually.

New York’s new law is effective October 9, 2018.

California

Since 2004, California has required that employers with 50 or more employees provide detailed sexual harassment training for supervisors. Such training must be provided within six months of hire and on a biennial basis. The training must be provided in a classroom setting, through interactive learning, or through a live webinar, and must be at least two hours in length. Only attorneys, human resources professionals, harassment prevention consultants and professors or instructors with specific credentials can provide training.

Amongst the prescribed content of training are the definition of “sexual harassment” under the California Fair Employment & Housing Act (“FEHA”), and “FEHA … statutory provisions and case law principles concerning the prohibition against and the prevention of unlawful sexual harassment, discrimination and retaliation in employment.”

Since 2016, California regulations state that a covered employer in California must have a harassment, discrimination and retaliation policy meeting several minimum requirements. Among these requirements are the protections afforded to employees by FEHA.  Under California regulations, employers also have a continuing obligation to distribute to employees the brochure regarding sexual harassment published by the California Department of Fair Employment and Housing.

Pending Legislation

In the wake of the #MeToo movement, state-specific measures are likely only to gain steam.  In California, bills have been introduced to extend mandated training to smaller employers and non-supervisory employees. Existing bills in Connecticut seek to update that state’s existing mandates.  A bill to require harassment training has also been introduced in Delaware.  

The Emerging Reality for Multi-State Employers

Most multi-state employers already have a national strategy for preventing and redressing sexual harassment. Multi-state employers with workers in California have  long recognized the importance of also having a California strategy for managing the risks associated with sexual harassment in that state.

The New York legislation, and the pending legislation in other states, highlight an emerging reality for multi-state employers. The number of states requiring state-specific risk management strategies as to sexual harassment is growing.  For multi-state employers with workers in New York this emerging reality already has a due date – October 9, 2018.

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Why Employers Need To Provide Training as to “Unconscious Bias”

By Robert G. Chadwick, Jr., Seltzer Chadwick Soefje & Ladik, PLLC.

Last week, two black men were arrested at a Philadelphia Starbucks allegedly for trespassing. In the aftermath of the arrests, accusations of racial profiling have brought unwanted protests and media attention to the coffee chain. In response, Starbucks CEO Kevin Johnson said he will order store managers to undergo training as to “unconscious bias.”

Although the training ordered by Mr. Johnson likely relates to customer service, prudence dictates that the training also encompass employment relations. Courts have long recognized that an employment practice or decision influenced by “unconscious bias” toward one or more protected groups is a form of unlawful employment discrimination.  An employer who does not provide employee training to combat “unconscious bias” thus risks potential liability and defense costs under applicable employment discrimination statutes.

What Is “Unconscious Bias?”

Even if a person does not display overt bigotry or hatred toward a minority group, the person may still harbor assumptions about the group based on cultural generalizations or stereotypes. Often, these stereotypes are inaccurate and unfair, and therefore biased. The person may or may not be aware of the bias, but the bias exists nonetheless.  A bias harbored by a person of which he or she is unaware is “unconscious bias.”

Significantly, “unconscious bias” is common even in persons who profess to be unbiased.  As observed in the Harvard Business Review by Harvard University researcher Mahzarin Banaji:

Most of us believe that we are ethical and unbiased. We imagine we’re good decision makers, able to objectively size up a job candidate or a venture deal and reach a fair and rational conclusion that’s in our, and our organisation’s, best interests, but more than two decades of research confirms that, in reality, most of us fall woefully short of our inflated self-perception.

When Does “Unconscious Bias” Become Unlawful Discrimination?

“Unconscious bias” becomes unlawful discrimination when it (a) is tied to a protected characteristic, such as race, color, national origin, age, sex, disability or religion, and (b) influences an employment decision.  Predictably, an employment decision is more susceptible to being tainted by “unconscious bias” when subjective criteria are involved.  Under such circumstances, a stereotype may unwittingly bias how the decision-maker processes and interprets information and how other people are judged.

In The Id, The Ego, and Equal Protection Reckoning with Unconscious Racism, 39 Stan. L. Rev. 317, 324-25 (1987), Charles R. Lawrence provided an example of unconscious racial bias at work in a hiring decision:

Thus, an individual may select a white job applicant over an equally qualified black and honestly believe that this decision was based on observed intangibles unrelated to race. The employer perceives the white candidate as ‘more articulate,’ ‘more collegial,’ ‘more thoughtful,’ or ‘more charismatic.’ He is unaware of the learned stereotype that influenced his decision. Moreover, he has probably also learned an explicit lesson of which he is very much aware: Good, law-abiding people do not judge others on the basis of race. Even the most thorough investigation of conscious motive will not uncover the race-based stereotype that has influenced his decision.

In The Content of Our Categories: A Cognitive Bias Approach to Discrimination & Equal Employment Opportunity, 47 Stan. L. Rev. 1161, 1188-90 (1995), Linda Hamilton Krieger provided another example:

Krieger cites the example of a Salvadoran who was the only nonwhite employee at his workplace. Although he made mistakes, so did the other employees. However, his supervisor uniformly reprimanded him for his mistakes and later declined to promote him and ultimately terminated him while overlooking the white employees’ mistakes. His supervisor also ignored his achievements or attributed them to others, while commending white employees for similar achievements. While the supervisor may have intentionally discriminated against the Salvadoran, he might also have treated him poorly because he viewed him through the lens of an uncomplimentary stereotype, making him less likely to notice the Salvadoran’s achievements relative to those of the white employees and more likely to treat his mistakes harshly.

How Do Employers Combat “Unconscious Bias?”

The use of objective criteria in employment decisions is a partial answer to “unconscious bias”, but subjectivity cannot always be avoided. The ultimate answer is training.  In this regard, the goal of the training should be two-fold.

First, employees should not merely be told about “unconscious bias.”  Remember, many employees will believe their decision-making is unbiased.  Telling them otherwise may fall on deaf ears.

Instead, employees should be shown “unconscious bias.” Such a demonstration can be accomplished through employee testing. The results of testing can unsettling, but the first step toward combatting bias is to turn a hidden bias into a visible one. Once  preconceived beliefs have been dispelled, the employees will be more receptive to training.

Second, employees should be provided the necessary information for combatting “unconscious bias” in decision-making.  This information includes the fallacies behind certain stereotypes and the review of specific situations likely to arise in decision-making.  Once employees know how to fight back these biases, they will be better informed in mitigating the legal risks present in any employment decision.

Supreme Court Rejects Narrow Interpretation of FLSA Exemption

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC.

Federal jurisprudence under the Fair Labor Standards Act (“FLSA”), which requires employers to pay overtime compensation to covered employers, has historically mandated that exemptions to this requirement be narrowly construed against the employer.  A 5-4 opinion this week from the U.S. Supreme Court, however, may indicate a shift to a more employer-friendly treatment of FLSA exemptions.

The FLSA exempts from its overtime-pay requirement “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles, trucks, or farm implements, if he is employed by a non-manufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers.”  The issue in Encino Motorcars, LLC v. Navarro was whether service advisors at a Mercedes-Benz dealership in Los Angeles qualified for this exemption.

The service advisors argued they did not fit within the exemption because they did not sell or service automobiles; instead, they sold repair services. In rejecting this argument, the majority stated: “A service advisor is obviously a ‘salesman.'”

Perhaps more significantly, the majority opinion cited and then rejected the historic axiom that “exemptions to the FLSA should be construed narrowly.”  The opinion elaborated: “Because the FLSA gives no ‘textual indication’ that its exemptions should be construed narrowly, ‘there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.”

To be sure, Encino Motorcars analyzed one of the lesser-used FLSA exemptions.  Considerably more employers rely upon the exemptions applicable to executive, administrative, professional, outside sales and computer employees. Still, if the mandate going forward is that these exemptions be give a fair (rather than a narrow) interpretation, close cases which may have been decided in favor of employees may now be decided in favor of employers.

The New Wave Of Title VII Suits Alleging Sexual Orientation Discrimination

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC.

On July 26, 2017, the U.S. Department of Justice (“DOJ”) filed an amicus brief in an employment discrimination case pending before the U.S. Court of Appeals for the Second Circuit. In Zarda v. Altitude Express, Inc., the plaintiff alleged he had been discriminated against based upon sexual orientation in violation of Title VII of the Civil Rights Act of 1964 (“Title VII”).

The DOJ amicus brief argued that, although Title VII prohibits sex discrimination in employment, it does not proscribe sexual orientation discrimination. The brief emphasized that, until recently, federal Courts of Appeal uniformly held that sexual orientation bias is not unlawful under Title VII.  The brief added: “Any efforts to amend Title VII’s scope should be directed to Congress rather than the courts.”

Nevertheless, on February 26, 2018, the Second Circuit ruled en banc that Title VII bars discrimination based on sexual orientation. Prior to the ruling, other Circuits had been evenly split on the issue. On April 4, 2017 an en banc decision by the Seventh Circuit in Hively v. Ivy Tech Community College of Indiana concluded “discrimination on the basis of sexual orientation is a form of sex discrimination” outlawed by Title VII. On March 10, 2017, the Eleventh Circuit in in Evans v. Georgia Regional Hosp. found (by a 2-1 vote) it could not recognize sexual orientation claims under Title VII.

For its part, the U.S. Supreme Court declined on December 11, 2017 to take up the issue of whether Title VII addresses sexual orientation discrimination.

So, why have two federal appellate courts embraced the opposite view of that asserted by the DOJ? Simply stated, the courts found sexual orientation discrimination to be a form of sex discrimination. Four arguments were cited in support of this conclusion.

First, the Seventh Circuit in Hively noted a lesbian or gay man “represents the ultimate case of failure to conform to a gender stereotype (at least as understood in a place such as modern America, which views heterosexuality as the norm and other forms of sexuality as exceptional); she [or he] is not heterosexual.” The court continued: “Any discomfort, disapproval, or job decision based on the fact that the complainant—woman or man— dresses differently, speaks differently, or dates or marries a same-sex partner, is a reaction purely and simply based on sex.”

Second, the Seventh Circuit in Hively observed “a person who is discriminated against because of the protected characteristic of one with whom she [or he] associates is actually being disadvantaged because of her [or his] own traits.” The Court found this to be just as true for sex discrimination as race discrimination.

Third, the Second Circuit in Zarda opined: “… the most natural reading of the statutes prohibition of on discrimination ‘because of sex’ is that it extends to sexual orientation discrimination because sex is necessarily a factor in sexual orientation.”

Finally, as to the previously uniform rejection of sexual orientation claims under Title VII, the Seventh Circuit in Hively cited the need “to take a fresh look” at the issue “in light of developments at the Supreme Court extending over two decades.” The Second Circuit in Zarda cited a change of position by the Equal Employment Opportunity Commission and the Hively opinion.

At the district court level, the impact of the en banc decisions at the Seventh and Second Circuits has already been felt. Steadily since Spring 2017, new Title VII suits have been filed alleging sexual orientation discrimination. With Hively and Zarda providing non-frivolous arguments for the reversal of existing law in other circuits, sanctions are not a deterrent to such suits. Indeed, such suits carry the hope that other circuits or the U.S. Supreme Court will eventually follow the lead of the Seventh and Second Circuits.

To be sure, the Supreme Court may eventually decide that Congressional, not judicial, action is needed to expand the scope of Title VII to sexual orientation discrimination. In the meantime, however, employers must manage the risk of sexual orientation discrimination suits  even in states which do not have state laws barring such discrimination.

Employers Beware: The Customer Is Not Always Right!

By Robert G. Chadwick, Jr., Managing Member, Seltzer Chadwick Soefje & Ladik, PLLC

In today’s divisive political and cultural climate, it is not surprising that confrontations between workers and customers are commonplace.

On February 12, 2018, a state trooper who had pulled up to the drive-thru of a Normal, Illinois McDonald’s restaurant was allegedly greeted by an employee with the expletive “F*** the police.” Upon hearing of the incident, the franchise owner made the immediate decision to terminate the offending employee.

In this circumstance, the employer was likely acting within its legal rights in firing the offending employee. After all, the customer did nothing to provoke the employee. The customer was right.

But, what if the circumstances are different? What if a female employee berates or slaps a male customer who gropes her? What if an African American employee curses a Caucasian customer who calls him “boy?” What, if anything, does the employer risk by doing nothing? What, if anything, does the employer risk by disciplining or discharging the employee?

The Risk of Acceding To Customer Preferences

A good starting point for addressing these questions is the clash often faced by employers between customer preferences and employment discrimination laws. The desire to please a paying customer can be a compelling incentive to accede to his or her preferences or demands. However, if the preference or demand is that the employer engage in unlawful employment discrimination, the price of acquiescence can be civil liability.

In Chaney v. Plainfield Healthcare Center, for instance, an African-American healthcare worker challenged, under Title VII of the Civil Rights Act of 1964, a nursing home’s policy of honoring the racial preferences of its residents in assigning health care providers. The nursing home acknowledged it routinely acceded to patient demands for white-only health care providers.

In denying the nursing home’s motion for summary judgment, the 7th Circuit said in a July 20, 2010 opinion: “It is now widely accepted that a company’s desire to cater to the perceived racial preferences of its customers is not a defense under Title VII for treating employees differently based on race.”

In Wilson v. Southwest Airlines, male applicants said they had been rejected for positions as Southwest flight attendants based upon gender, in violation of Title VII. Southwest  admitted its policy of hiring only female flight attendants, but argued their sex appeal was a bona fide occupational qualification.

In rejecting Southwest’s defense, a Texas federal court opined in a June 12, 1981 decision:
“Southwest is not a business where vicarious sex entertainment is the primary service provided. Accordingly, the ability of the airline to perform its primary business function, the transportation of passengers, would not be jeopardized by hiring males. Southwest does not face the situation … where an established customer preference for one sex is so strong that the business would be undermined if employees of the opposite sex were hired.”

To be sure, there may be circumstances where customer preference can be a bona fide occupational qualification. The aforementioned cases, however, show that customer preference cannot always justify otherwise unlawful discrimination against an employee.

The Risk Of Doing Nothing

The issue of customer preference also arises when an employee complains of discriminatory harassment by a customer. The employer may prefer not to upset or lose a customer by taking prompt remedial action. However, if the employer does nothing it risks potential liability to the complaining employee.

In Lockard v. Pizza Hut, another Title VII suit, a female waitress employed by a Pizza Hut franchisee claimed her employer did not respond properly to the inappropriate conduct of “two crude and rowdy made customers” who frequented the restaurant. She specifically testified her employer did nothing when the men made sexually offensive comments to her, such as “I would like to get into your pants”, and one man pulled her to him by the hair, grabbed her breast and put his mouth on her breast.

In denying the employers motion to set aside a jury verdict in favor the female waitress, the 10th Circuit noted in a December 14, 1998 opinion: “An employer who condones or tolerates the creation of such an environment should be held liable regardless of whether the environment was created by a co-employee or a nonemployee, since the employer ultimately controls the conditions of the work environment.”

The Risk Of Firing The Employee

Finally, the behavior of an employee in response to inappropriate conduct of a customer may, viewed in isolation, be considered grounds for discipline or termination. Viewed in context, however, the behavior may arguably be protected opposition under employment discrimination laws. Disciplining or terminating the employee, therefore, may prompt a retaliation claim.

In Folkerson v. Circus Circus Enterprises, Inc., for example. a mime artist punched a casino patron who attempted to embrace her during a performance. For this behavior, the mime was terminated. The mime sued under Title VII arguing her behavior was protected opposition to discrimination.

In an October 16, 1995 opinion, the 9th Circuit agreed that “reasonable defense against physical violence may be protected oppositional activity.” Finding the mime’s reaction reasonable under the circumstances, the court reversed a grant of summary judgment for the employer.

In Van Horn v. Specialized Support Services, Inc., the Title VII plaintiff was a female employee of a company which provides services to developmentally disabled clients.  In her complaint, she detailed the conduct of a client who, over the course of time, said he loved her, and attempted to hug her. Although the female employee complained of the client’s behavior, the employer allegedly did nothing. One day, the client pinched the female employee’s breast. In response, the female employee instinctively slapped the client. For this behavior, the female employee was terminated.

Although the Iowa federal court found insufficient evidence of a hostile work environment, a January 29, 2003 ruling found that slapping the client was protected opposition under Title VII. The Court opined: “when an employer’s failure to act forces an employee to act in self- defense at the workplace, the employee’s defensive conduct is reasonable and the employee cannot be terminated for doing so.”

To be clear, most federal discrimination cases have sided with the employer where an employee responds to perceived discrimination by cursing, shouting or resorting to physical violence. The aforementioned cases, however, show that courts may be more willing to find questionable behavior to be reasonable if it follows inaction by the employer in responding to prior incidents of harassment.

The Risk Of Siding With The Employee

No discussion of the risks arising from confrontations between employees and customers is complete without mention of an employer’s potential liability to customers for discrimination. Federal, state and local laws prohibit discrimination in public accommodations and contracts.  A comprehensive discussion of these laws is beyond the scope of this article. An employer must nevertheless be mindful of such laws before terminating a customer contract or refusing service to a customer based upon a confrontation with an employee.

Takeaway For Employers

When presented with evidence of a confrontation between an employee and a customer, an employer’s first instinct may be to side with the customer. Following that instinct, however, may risk liability under employment discrimination laws. Siding with the employee can also have legal consequences.

As with any unfortunate incident involving an employee, therefore, an employer must  undertake a reasonably diligent and unbiased effort to determine the truth. Sometimes, appearances can be deceiving, and the truth may lie beyond the single incident. Admittedly, a more comprehensive investigation will require more work than a rush to judgment. Still, it is more prudent to work to prevent an unwanted claim, than to work to defend an unwanted claim.