This blog was prepared with the assistance of Bond, Schoeneck & King PLLC attorney Kerry Langan.

On July 9, 2009, the White House announced that it had sent three nominees for membership to the National Labor Relations Board (“NLRB” or “Board”) to the Senate for confirmation.  The latest nominee, Republican Brian Hayes, joins previously announced nominees, Democrats Craig Becker and Mark Gaston Pearce, as the three President Obama nominees to the five member Board. 

Currently, the Board has been operating with just two members, Chairperson Wilma Liebman (a Democrat) and Member Peter Schaumber (a Republican).  The United States Court of Appeals for the D.C. Circuit has recently held that the two-member Board lacks authority to issue decisions.  See Laurel Baye Healthcare of Lake Lanier, Inc. v. NLRB, No. 08-1162 (D.C. Cir. May 1, 2009).  Three other federal Circuits have held to the contrary.  See Northeastern Land Services Ltd. d/b/a The NLS Group v. NLRB, No. 08-1878 (1st Cir. Mar. 13, 2009);  Snell I sland SNF LLC, d/b/a Shore Acres Rehab. & Nursing Ctr. v. NLRB , No. 08-3822 (2d Cir. June 17, 2009); New Process Steel, L.P. v. NLRB, Nos. 08-3517, 08-3518, 08-3709, 08-3859 (7th Cir. May 1, 2009).

 

The new nominees, assuming they are confirmed by the Senate, which now has 60 Democratic members, will address the quorum issue and allow the Board to operate with a 3-2 Democratic majority.  And, the three Democratic members are all on record as being staunchly pro-union in their views.  Chair Liebman has been a vigorous dissenter in a number of Bush-era Board decisions.  Nominee Becker is currently Associate General Counsel to both the Service Employees International Union and the AFL-CIO.  See NLRB Press Release.  Nominee Pearce is a former NLRB attorney at the Regional level and has been a union-side labor lawyer in recent years.  See NLRB Press Release.

 

Although the proposed Employee Free Choice Act (“EFCA”) and other potential labor law reforms have received the lion’s share of attention from commentators and labor and management advocates, the composition of the NLRB may well have a greater impact on labor-management relations than any compromise EFCA or labor law reform ultimately enacted.

 

Board decisions in many areas have historically been heavily influenced by presidential appointments.  With a newly minted 3-2 majority, here are some cases that might be ripe for reversal by the new Board:

•  Weingarten Rights in a Non-Union Setting.  IBM Corp., 341 NLRB No. 148 (2004).  In IBM, the Board held 3-2 that employees in a non-union workplace are not entitled to a co-worker representative in investigatory interviews that may result in discipline.  The Board has flip-flopped on this issue over the years and will likely return to the prior rule of Epilepsy Foundation of Northeast Ohio, 331 NLRB No. 92 (2000), holding that non-union employees are entitled to employee representatives in those cases.

• Graduate Students Rights to Organize as Employees Under the Act.  Brown University, 342 NLRB No. 42 (2004).  Chair Liebman vigorously dissented in the Brown case, which held that graduate students, whose duties were primarily related to their status as students, were not statutory employees and therefore could not organize under the Act.  This decision overruled New York University, 332 NLRB 1205 (2000).  A change in this rule, reverting to the New York University rule, could have significant implications for institutions of higher education.

• Organization of Employees of Joint Employers in a Single Bargaining Unit.  H.S. Care LLC, 343 NLRB No. 76 (2004).  The Board returned to the long standing rule that employees of a temporary agency cannot be included in a bargaining unit of regular employees of the employer unless both the employer and temporary agency consent.  The new Board may return to the M.B. Sturgis, 331 NLRB 1298 (2000), rule to the contrary, with significant implications for employers who use temporary employees.

• Salting Cases.  Exterior Systems, Inc., 338 NLRB No. 82 (2002).  A Board majority found that union salts – employees who work for a union and apply for employment with an employer with an intent to organize the employer or an intent to not be hired so a charge may be filed – must have a genuine interest in gaining employment to be protected by the Act.  It is likely that this standard will be repudiated, returning to FES, 331 NLRB 9 (2000), making it easier for unions to maintain unfair labor charges against employers which they target for organization.

• Email Solicitation.  The Guard Publishing Co., 351 NLRB 1110 (2007).  In Guard Publishing, the Board decided, in a 3-2 decision, that employers may lawfully maintain a policy prohibiting use of its email system for “non-job related solicitations.”  The new Board may reverse this decision and require employers to allow union adherents to use email systems to solicit employees to support and join unions during union organizing drives.

The following examples are just a few of the changes that may be in store with a new Board.  The changes could be many and their impact will likely be great.  As is often the case in the analogous situation of Supreme Court composition, the changes effected by the new Obama NLRB may well have greater impact than any legislative changes we see in the next four years.

 

Somehow our legislature and Governor found time to amend the New York State Human Rights Law to expand the application of civil fines and penalties to include cases of employment discrimination occurring on or after July 6, 2009. N.Y. Exec. Law Sec. 297(4). Previously, the imposition of civil fines had been limited to cases of housing discrimination. With the enactment of the new law they may now be assessed in all cases of employment discrimination, which account for 80% of Division of Human Rights’ cases.  A fine of up to $50,000 may be imposed, or in the case where the conduct is found to be “willful, wanton or malicious,” a fine of up to $100,000. Where the employer has fewer than 50 employees, civil fines and penalties may be paid in installments by the employer.

The purpose of the amendment, according to the Division, is to:

…greatly advance the Division’s mission to exercise the police power of the State for the protection of the public welfare, health and peace of the people of this State, and in fulfillment of the provision of the constitution of this State concerning civil rights. N.Y. Exec. Law § 290.1. The fines imposed will further the goal of equal opportunity in New York State by acting to deter and reduce discrimination on the basis of race, color, creed, national origin, sex, age, disability, sexual orientation, marital status, military status, and other protected categories.

Furthermore, the imposition of such fines will be in addition to and will not reduce or offset any compensatory damages awarded to a prevailing complainant. The fines are payable to the State.

The law does not change the types of relief that may be awarded to the complainant. Complainants who prevail in an action under state law may be awarded affirmative relief from the employer (e.g., be hired, promoted or reinstated) and awarded compensatory damages (economic damages and emotional distress damages. However, there is pending legislation in New York which would allow individuals to also recover punitive damages and reasonable attorneys fees for human rights law violations.

There is presently little guidance on how the penalties will be applied. The Division promises future guidelines. It may be that the standards applied in housing discrimination cases will be considered relevant.  In housing discrimination cases, the factors that determine if civil fines and penalties are appropriate are: 1) whether the respondent previously committed unlawful housing discrimination; 2) the respondent’s financial resources; 3) the degree of respondent’s culpability; and 4) the goal of deterrence. The Division may also consider whether: 1) the employer has an established anti-discrimination policy; 2) the policy was distributed to employees; 3) there is an effective complaint procedure; and 4) employees have been trained in the law and the employer’s policies.

In many workplaces, it is not uncommon for employees to speak with each other about politics. As managers and employees learn each others’ political views, some employees may get the impression—rightly or wrongly—that their employers are discriminating against them because of political disagreements. 

Sometimes, political discrimination can be overt. In the 2004 presidential campaign, there was a well-publicized incident in which an employer in Alabama told an employee that she was being discharged because she had a John Kerry bumper sticker on her car.   But even when the employer does not expressly state why it has taken an adverse action against an employee, the circumstances may support an inference that the reason was political.

Employers and employees often assume that employment discrimination on the basis of political beliefs is unlawful. After all, discrimination on the basis of such obscure categories as marital status and genetic predisposition is unlawful, and human resources professionals constantly stress that all personnel decisions should be based on merit.  However, surprising as it may seem, federal and New York law do not generally prohibit political discrimination in the private sector. The First Amendment restricts action against political dissentersby the government, but it does not restrict action by private actors. An employer that fires an employee because of a political bumper sticker may well be acting within its legal rights, reprehensible as such an action may seem. This blogpost examines the types of political discrimination that are plainly unlawful, as well as legal theories that can be argued when none of the well-established prohibitions applies.

 

Political Discrimination in the Public Sector

It is well-established that public employers (e.g., federal, state, and local governments, school districts, public authorities, etc.) may not discriminate against their employees on the basis of their political beliefs or affiliations. The United States Supreme Court, in Elrod v. Burns and Branti v. Finkel, has held that such discrimination violates the First Amendment rights of the employees, and may be challenged in federal court.  A major exception to this rule provides that policymaking employees may be lawfully subjected to political discrimination, so that the will of the people as expressed at the ballot box can be carried out by officials who are loyal to the political agenda of elected officials. 

The Elrod/Branti rule has generated a complex body of caselaw. A discussion of the intricacies of First Amendment law under 42 U.S.C. § 1983 as applied to public employees would take volumes. It is sufficient for our purposes here to state that public sector employees have a great deal of protection against political discrimination.   

New York “Political Activities” Law

In 1992, the New York Legislature added Section 201-d to the New York Labor Law. This statute is best known for its prohibition against employment discrimination on the basis of off-duty “recreational activities” such as smoking and skiing.  Less well known is the statute’s prohibition of discrimination on the basis of an employee’s “political activities outside of working hours, off of the employer’s premises and without use of the employer’s equipment or other property.”

The statute’s definition of “political activities” is relatively narrow. It covers “running for public office,” “campaigning for a candidate for public office,” or participating in political fundraising activities.  It does not include mere political belief, or an expression of political views. Thus, an employer would violate the statute if it were to discharge an employee because she handed out leaflets for a candidate at a train station in her spare time, but would be in compliance with the statute if it were to discharge an employee because she expressed dislike for a particular candidate, or simply because it suspects that the employee favors a particular political philosophy.

The statute does not define “campaigning,” and there are no reported court decisions interpreting that word in this context. For this reason, it is uncertain whether a court would say that the statute would protect an employee who has a political bumper sticker on her car. The employee’s rights would depend in part on whether the display of a bumper sticker is considered “campaigning,” as opposed to simple expression. If the bumper sticker favors a party or a cause instead of a particular candidate, the statute would almost definitely not apply, since the only kind of campaigning that is protected is “campaigning for a candidate for public office.” For the same reason, a bumper sticker that opposes a candidate would also not appear to constitute “campaigning” within the meaning of the statute. Only a bumper sticker that favors a particular candidate would clearly invoke the statute’s protection.

The question would also arise whether driving a car with a political bumper sticker is conduct “off of the employer’s premises.”  If the employer owns the parking lot where the bumper sticker is displayed, the statute arguably would not apply. Only conduct that takes place off of the employer’s premises, outside of work time, is protected by the statute.

The “political activities” clause is not the only provision of Section 201-d that can be used by someone who claims to be a victim of political discrimination. The statute also prohibits discrimination on the basis of what an employee chooses to read or watch in her leisure time.  Thus, an employer may not treat an employee adversely because she reads the Daily Worker instead of the Wall Street Journal, or because she watches Norma Rae instead of Sleeping Beauty. 

An exception to the statute permits employers to take action against employees when their political activities create “a material conflict of interest related to the employer’s . . . business interest.”  Thus, a newspaper should be able to prohibit a journalist that it employs from campaigning for or against a candidate she covers, in order to protect the newspaper’s business interest in appearing impartial. Using the same exception, an employer that sells goods or services to government agencies may be able to argue that it is permitted to discharge an employee who is running as a candidate against the head of that agency, or who is campaigning for such a candidate. 

Even when the law would otherwise apply, Section 201-d of the New York Labor Law permits employers to restrict the outside paid political activities of employees who are contractually bound to devote their “entire compensated working hours” to the employer, as long as the employee is paid at least $50,000 in 1992 dollars (approximately $76,000 in 2009 dollars).  Similarly, an employer may enforce a contractual restriction on the outside activities of an employee who has a professional services contract because of the “unique nature of the services provided.”  For example, a celebrity who is engaged by a movie studio may be restricted from running for office or campaigning for a candidate, if the contract contemplates that such activities may diminish the celebrity’s marketability. 

New York Human Rights Law

The New York Human Rights Law, the state statute that prohibits most forms of unlawful employment discrimination, could perhaps be interpreted to cover political discrimination, but the courts have so far rejected such an argument. 

Like most states, and like the federal government in Title VII of the Civil Rights Act of 1964, New York does not include “political views” or “political activities” in its list of categories protected by discrimination laws.  However, the New York statute does prohibit discrimination on the basis of “creed.”  Although the “creed” clause is most commonly invoked to prohibit discrimination on the basis of religion, the word has a sufficiently broad dictionary definition to include political beliefs as well.

To date, the courts have insisted on restricting the word “creed” to religious beliefs, not political ones. The only reported court case to squarely face the issue is Keady v. Nike, Inc.  Keady was an employee of St. John’s University who claimed he was forced to resign from his employment because he protested the University’s decision to accept endorsement money from Nike in light of its labor practices in Third World countries. The court held that the employee could not sue under the Human Rights Law, because that law does not protect employees on the basis of their “ethical or sociopolitical views.” The court, however, failed to give convincing support for its holding. The only authority it cited other than the statute itself is  a federal appeals court decision called Avins v. Mangum.  But Avins merely noted that the State Commission for Human Rights declined jurisdiction over a claim of political discrimination. The Avins court did not rule on whether the State Commission was correct to decline jurisdiction, and it made no holding on the scope of the “creed” clause. Thus, there is still no reasoned decision that convincingly limits the “creed” clause to religious, as opposed to political, discrimination.

Perhaps the best argument against extending the Human Rights Law’s “creed” clause is the Legislature’s passage of Labor Law §201-d, discussed above. If the Legislature had believed that political discrimination was already prohibited by the Human Rights Law, it would have had no need to prohibit “political activities” discrimination in the new statute.

Religious Discrimination

Another possible strategy for challenging political discrimination would be to take advantage of the broad definition of religious discrimination under Title VII, the federal anti-discrimination statute. The Equal Employment Opportunity Commission (“EEOC”) has stated that “[r]eligion is very broadly defined under Title VII. Religious beliefs . . . include . . . non-theistic ‘moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views.”  This would seem to include at least some political beliefs, e.g., the belief that government should seek to maximize freedom, or the belief that government should seek to help the poor. 

However, the EEOC goes on to state that “[s]ocial, political, or economic philosophies . . . are not ‘religious’ beliefs protected by Title VII.”  This is a distinction that is difficult to define, and the EEOC makes no serious attempt to do so. If the facts presented in a particular case are favorable, it may be possible to convince a court that the distinction between protected non-theistic ethical beliefs on the one hand and unprotected political philosophies on the other is so untenable as to be arbitrary and capricious. This would open the door to at least some types of claims of political discrimination in federal court.

National Labor Relations Act

The National Labor Relations Act (“NLRA”) primarily involves union relations, but it also grants rights to employees in a nonunion setting. Specifically, it grants employees the right to “engage in . . . concerted activities . . . for the purpose of . . . mutual aid or protection.”  The Supreme Court has held that this right extends to at least some political activities, as long as they have a connection to the workplace.

 In July of 2008, the NLRB’s General Counsel released an official memorandum exploring the distinction between protected and unprotected political activity.  The memorandum concluded that in order for political activity to be protected under the NLRA, there must be a “direct nexus between the specific issue that is the subject of the advocacy and a specifically identified employment concern of the participating employees.”  The General Counsel found that such a nexus existed when employees participated in demonstrations against proposed immigration laws that would have made it more difficult for aliens to obtain work in the United States.

By analogy, it could be argued that the NLRA protects employees who seek to persuade other employees to vote for a political candidate who will work for improved family leave laws, or to support a political party that promises to raise the minimum wage. Like the immigration concerns discussed by the General Counsel, these causes are directly linked to employees’ interests as employees.

Conclusion

Contrary to the assumptions of many employers and employees, there is no law clearly prohibiting most forms of political discrimination in the private sector in New York. The New York Labor Law prohibits discrimination on the basis of active political “campaigning” or engaging in fundraising, but discrimination on the basis of mere political belief or expression is not prohibited. Creative plaintiffs may attempt to base claims on other legal theories, but so far such attempts have been successful only in narrow circumstances. Employees should beware of a gap in their legal rights, and employers should beware of the restrictions that do exist.

On June 29, 2009, the Supreme Court issued its decision in the case of Ricci v. DeStefano (see June 15, 2009 blog post for an explanation of the case and the positions of the parties).  In a 5-4 decision, the Supreme Court reversed the Second Circuit Court of Appeals, holding that the City of New Haven violated Title VII of the Civil Rights Act by refusing to certify the results of firefighter promotional examinations because too few minority candidates passed.

The Supreme Court agreed with the plaintiffs that an employer must have a "strong basis in evidence" to believe it will be subject to disparate impact liability in order to make a race-conscious decision such as the one made by the City of New Haven.  The Supreme Court rejected the position of the City of New Haven (and the position taken by the U.S. Government in its amicus brief) that an employer need only have a "reasonable basis" for believing it might be liable under a disparate impact theory.  In prior decisions (such as Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)), the Supreme Court has applied this same "strong basis in evidence" standard in determining whether certain types of race-conscious government actions to remedy past racial discrimination are justified under the Equal Protection Clause of the U.S. Constitution.  Therefore, it appears that the Supreme Court's decision is consistent with, rather than a deviation from, the current legal standards.

Upon examining the record, the Supreme Court held that the City of New Haven did not have a strong basis in evidence to believe it would have been subject to disparate impact liability.  The Supreme Court found that the City of New Haven's decision to throw out the results of the promotional examinations was based only on the statistical disparity in the number of white and minority candidates who passed.  The Supreme Court held that the statistical disparity alone was insufficient to justify the City of New Haven's race-based decision to reject the results of the examinations.  The City of New Haven would only have been liable under a disparate impact theory if the examinations were not job-related and consistent with business necessity, or if there existed a less discriminatory alternative that the City refused to adopt.  The Supreme Court found that there was no evidence that the examinations were not job-related and consistent with business necessity, or that there were less discriminatory alternatives available.  The Supreme Court held that "fear of litigation alone cannot justify an employer's reliance on race to the detriment of individuals who passed the examinations and qualified for promotions."

The lesson of the Ricci v. DeStefano case is that employers must be extremely cautious about making race-based employment decisions (or employment decisions based on any protected category) simply to avoid a disparate impact lawsuit.  Employers that find themselves in the difficult position faced by the City of New Haven should do a thorough analysis in order to determine whether there is a strong basis in evidence to support a disparate impact theory of liability, and should not make race-based employment decisions in the absence of such evidence.

 

It is that time of year when employers are approached with requests from college students for unpaid internships. The benefits of the symbiotic relationship are obvious. The internship provides the student with an opportunity for real life experience, resume enhancement and perhaps a step towards a paying position with the employer after graduation. The employer receives the chance to evaluate a new applicant, at no cost. What is not so obvious are the legal risks.

One area of risk is the Fair Labor Standards Act (“FLSA”) which requires non-exempt employees to be paid the minimum wage for all hours worked. Non-exempt employees must also receive 1.5 times their regular rate of pay for all hours in excess of 40 in a workweek.

The $64,000 question, however, is whether the unpaid intern is an “employee” within the meaning of this and other federal and state statutes. The Department of Labor (“DOL”) has adopted six criteria for evaluating this issue. They are as follows: 

1. he internship should be similar to the training given in a vocational school;
2. The training must be primarily for the benefit of the intern, not the employer;
3. The intern must not displace any regular employees, but must work under close supervision;
4. There should be no immediate advantage to the employer and, in fact, operations may be impeded by the training;
5. The intern must not be entitled to a job at the completion of the internship; and
6. The intern and the employer must understand that the intern shall receive no pay for the training. 

In one case, a company requested an opinion from the DOL as to whether unpaid interns who received college credit to work 7 to 10 hours per week as field marketers were employees. There was a coordinator who advised the students and communicated regularly on their progress. There was no obligation to hire them. The DOL found that four of the six criteria were established: (i) training similar to vocational school; (ii) no expectation of compensation; (iii) training primarily for the benefit of the intern; and (iv) no obligation of hiring.

On the two remaining questions, displacing regular employees and whether the company derived an immediate benefit, the DOL indicated the record was not clear. This opinion letter indicates employers should not assume the DOL will not carefully scrutinize these relationships. DOL has affirm its view in a subsequent formal opinion letter.

If a company is using unpaid interns, it should make sure:

1. It has an agreement or letter making it clear there is no pay and no guaranteed job;
2. Adopt a policy that sets up strict supervision and assigns a mentor;
3. Ensure the primary benefit of the internship is for the student, not the employer -- minimize assigning the same duties given to regular employees, do not use interns to displace any employees, and, if possible, require college credit; and
4. Arrange for a structured program of internal and, if possible, external instruction of the type of work done by the employer.

Remember, a determination that an unpaid intern is, in fact, an employee can have impact beyond minimum wage and overtime. The discrimination laws, worker’s compensation coverage, state and federal tax laws, employee benefits and unemployment insurance coverage all pose potential consequences in the event of a misguided classification.

 

It’s a case that has been to the Second Circuit twice, resulting first in a win and then a “bonus” for the prevailing Defendants. After an approximately one-month trial in November 2005 before the United States District Court for the Eastern District of New York, the jury returned a verdict in favor of the Town of Huntington and an individual board member and dismissed Plaintiff’s claims of sexual harassment, discrimination, hostile work environment, and retaliation. The United States Court of Appeals for the Second Circuit affirmed the verdict. 

After winning the case, Defendants requested reimbursement for their “costs” incurred during the lawsuit, including copying costs, deposition transcripts, and daily trial transcripts, pursuant to Federal Rule of Civil Procedure 54(d) and a federal statute, 28 U.S.C. §1920. The request involved a significant amount of money. During the trial, the Defendants had ordered daily transcripts of the trial testimony from the court reporter. Those transcripts cost approximately $50,000 for over 3,000 pages of testimony generated during the course of the lengthy trial.

District Court Clerks have the power to award costs initially. The Clerk’s decision, however, is reviewable de novo by the District Court which tried the case. The Clerk denied Defendants’ request for the high cost of the daily transcripts, but the District Court reviewed the Clerk’s decision and granted the request – including fees for daily trial transcripts.

Such costs are not customarily awarded. Daily trial transcripts are taxable to the losing party as costs only if they are “necessarily obtained for use in the case.” 28 U.S.C. §1920. In this case, the District Court agreed with the Defendants that all relevant factors favored awarding the cost of daily transcripts. The District Court cited the length of the case, Plaintiff’s “confusing and muddled” presentation, the fact that Plaintiff’s credibility was a crucial issue in the case, and the fact that the Court and the Defendants’ counsel had to resolve confusion by pointing to the record, as factors requiring the use of daily transcripts. The Court also noted that the Plaintiff failed to make any affirmative showing that he was financially unable to bear the cost of the daily transcripts. In some cases, indigency may convince a District Court that a significant award of costs is not appropriate. Perks v. Town of Huntington, Slip Op. 99-cv-4811 (March 31, 2008).

Plaintiff appealed the award of costs to the Second Circuit, challenging the District Court’s award of costs as an abuse of discretion. On May 27, 2009, the Second Circuit issued a summary order affirming the District Court's decision. Perks v. Town of Huntington, Slip Op. 08-cv-2123 (May 27, 2009). As a result, the Defendants not only won their case but the Plaintiff was also required to pay them over $58,000 in costs.

The Defendant Town of Huntington was represented by Ernest R. Stolzer of Bond, Schoeneck & King, PLLC in Garden City, New York.

On April 22, 2009, the Supreme Court heard oral arguments from both parties in the case of Ricci v. DeStefano. In the Ricci case, 17 white firefighters and one Hispanic firefighter who passed promotional examinations filed claims under Title VII of the Civil Rights Act and the Equal Protection Clause of the U.S. Constitution that the City of New Haven discriminated against them based on their race by refusing to certify the results of the exam because too few minority candidates passed. The Supreme Court granted certiorari after the U.S. District Court granted summary judgment to the City of New Haven, and the Second Circuit Court of Appeals affirmed.  Circuit Judge Sonia Sotomayor, who was recently nominated by President Obama to serve on the Supreme Court, was on the three-member Second Circuit panel that affirmed the District Court's decision.

The facts of the case are fairly simple. In late 2003, 118 applicants took a written and oral exam administered by the New Haven Fire Department for promotion to the positions of Captain and Lieutenant. Of the 118 applicants, 68 were white, 27 were African-American, and 23 were Hispanic. Based on the results of the exam, no African-American or Hispanic candidates were eligible for promotion to the Lieutenant position. Only two Hispanic candidates and no African-American candidates were eligible for promotion to the Captain position. The City of New Haven refused to certify the results of the exam, and did not grant any promotions based on the results of the exam, due to its stated fear that it would face a disparate impact lawsuit from non-white applicants.

The fundamental legal issue is whether a municipal employer’s fear of a disparate impact race discrimination lawsuit is a valid basis to disregard the results of a promotional exam that would make disproportionately more white applicants eligible for promotion than minority applicants. In other words, can a municipal employer engage in disparate treatment based on race, due to a fear of a disparate impact lawsuit? The plaintiffs contend that the City of New Haven’s fear of a disparate impact lawsuit was not sufficient to justify making the decision to disregard the results of the exam. The plaintiffs urged the Supreme Court to hold that an employer must have a “strong basis in evidence” for believing that an exam violates the law, and argued that the City of New Haven did not make such a showing.

The City of New Haven contends that an employer need only have a reasonable basis for believing that it could lose a disparate impact lawsuit if it makes promotions based on the results of an exam. The City of New Haven argued that the District Court correctly held that its belief that it could lose a disparate impact lawsuit was reasonable, based on the disproportionate percentage of white applicants who passed the exam, concerns about the validity of the exam, and the possibility of alternate exams.

The U.S. Government filed an amicus brief in this case, and also presented its argument to the Supreme Court. The Government essentially supports the City of New Haven’s argument that an employer need only have a reasonable belief that it could be liable under a disparate impact theory, but asked the Supreme Court to remand the case back to the District Court for further consideration of whether the City of New Haven’s belief in this case was reasonable. The Government noted during oral argument that the District Court found that there were several motivations for the City’s decision to disregard the results of the exam, which included not only the disparate impact concern, but also a desire to promote diversity within the Fire Department and to develop managerial role models for aspiring firefighters. The Government’s counsel stated during oral argument that promoting diversity and developing managerial role models “do not fit into complying with the Title VII disparate impact test,” and that the District Court therefore needed to re-examine whether the disparate impact concern alone was reasonable.

The Supreme Court's decision in the case is expected to be issued before the end of its term in June.

In what appears to be the first reported decision of its kind, the United States District Court for the Northern District of New York recently interpreted an Equal Employment Opportunity Commission (EEOC) regulation to permit an employer’s efforts to control retiree health insurance costs by coordinating its retiree health insurance plan with Medicare. Lefevre v. Niagara Mohawk Power Corp., slip op. no. 1:06-CV-768 (N.D.N.Y. April 21, 2009). The employer provided health insurance benefits to retirees under a plan that required a Medicare eligible employee to apply for Medicare Parts A and B. Medicare then became the primary health insurance coverage, and the plan paid benefits to supplement the benefits paid by Medicare. Due to the terms of the plan, a Medicare eligible retiree’s share of the plan premium was somewhat greater than that of a non-Medicare eligible employee. 

Several Medicare eligible employees sued alleging that the higher premium share constituted age discrimination in violation of the Age Discrimination in Employment Act (ADEA). The ADEA prohibits discrimination based on age in terms and conditions of employment, including the terms of benefit plans. 29 U.S.C. §§ 623(a) & 630(l) However, the ADEA also authorizes the EEOC to create reasonable exemptions from the statute’s prohibitions when necessary and proper in the public interest. 29 U.S.C. § 628 EEOC created a coordination with Medicare exemption for employee benefit plans that provide health insurance benefits that are altered, reduced, or eliminated when the plan participant becomes Medicare eligible. 29 C.F.R. § 625.32(b) 

In the Lefevre case, the Court found that the regulation applied and required dismissal of the plaintiffs’ age discrimination claim. Because the premium differences were the result of the coordination with Medicare, they fell squarely within the regulatory exemption, even though they only impacted individuals who were age 65 (the age of Medicare eligibility) and older.

The Court also examined and applied a safe harbor provision within the ADEA which permits employers to implement a bona fide employee benefit plan which treats older and younger workers differently when either the costs are the same for both sets of workers, or the benefits are the same, the equal cost/equal benefit provision. 29 U.S.C. § 623(f)(2)(B)(1).  In Lefevre, the Court found that the equal cost provision did not apply – the employer was in fact trying to lower its retiree health insurance costs by coordinating benefits with Medicare – but that the equal benefit rule did apply because the Medicare eligible retirees received the same benefit as non-Medicare eligible retirees. The plan supplemented any benefit provided by Medicare to provide full coverage.

Because the plan fell within the EEOC’s regulatory exemption, as well as qualifying under the equal benefit rule, the Court granted summary judgment to the employer and dismissed the complaint. The employer was represented by Robert A. LaBerge and Louis Orbach of Bond, Schoeneck & King, PLLC, in Syracuse, New York.