Pennsylvania Labor and Employment Blog : Pennsylvania Labor and Employment Lawyer & Attorney : McNees Wallace & Nurick Law Firm : Human Resources, Workplace and Business Law : Harrisburg, Lancaster, Allentown, Lehigh

On March 24, 2011, the Equal Employment Opportunity Commission (EEOC) issued the final version of the regulations (pdf) implementing the Americans with Disabilities Act Amendments Act (ADAAA).  The final regulations were modified as compared to the EEOC's initial proposed regulations, and the changes to the regulations made will likely be welcomed by employers.  For more information from the EEOC on the ADAAA please click here.

Even with the changes, the regulations make clear that the ADAAA broadened the definition of disability under the Americans with Disabilities Act (ADA).  Under the ADAAA that far more impairments will now meet the definition of disability.  Importantly however, the regulations state that whether or not an individual has a disability will still be determined on a case-by-case basis. 

The ADAAA and the regulations attempt to shift the focus in ADA claims from whether or not an individual has a disability to whether or not prohibited discrimination has occurred.  As a practical matter for employers, this approach will shift the focus to the interactive process and the information exchanged during that process. 

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This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Law Practice Group.

Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Uniformed Services Employment and Reemployment Rights Act, and the Age Discrimination in Employment Act are widely known as the primary federal laws governing employment discrimination. Many employers are surprised to learn that the U.S. Bankruptcy Code also contains employment discrimination provisions. Section of 525 of the Code prohibits certain types of employment discrimination against individuals who have claimed bankruptcy. However, this obscure provision is rarely the subject of lawsuits and, consequently, there is little guidance from federal courts as to its meaning. In Rea v. Federated Investors, the U.S. Court of Appeals for the Third Circuit considered the fundamental question of whether Section 525 prohibits a private sector employer from discriminating against a job applicant in the hiring process on the basis of his prior bankruptcy.

Mr. Rea applied for employment with Federated Investors in 2009 through a placement firm and, after a successful interview, was informed that he would not be hired due to a 2002 bankruptcy. Rea filed suit in federal court claiming that Federated discriminated against him in violation of Section 525 of the Bankruptcy Code.

Section 525(a) of the Code states that it is unlawful for any "governmental unit…[to]…deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under [the Code]" solely because the individual has been a debtor under the Code, has been insolvent or has not paid a debt that is dischargeable under the Code. Clearly, a government employer could not have refused Mr. Rea employment solely on the basis of his prior bankruptcy without violating Section 525(a). However, as a private sector employer, Federated was governed by Section 525(b) of the Code.

Section 525(b) of the Code, unlike subsection (a), makes no mention of "denying employment to" an individual who has declared bankruptcy. Section 525(b) reads: "No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under [the Code]" solely because the individual has been a debtor under the Code, has been insolvent or has not paid a debt that is dischargeable under the Code. The issue presented in the Rea case was whether 525(b) could be interpreted to prohibit private employers from discriminating against job applicants on the basis of prior bankruptcies.

Mr. Rea argued that Section 525(b)'s prohibition against "discriminat[ion] with respect to employment against" individuals who have filed for bankruptcy should be interpreted to protect job applicants. However, the Third Circuit noted that "where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely…" Since Section 525(a) specifically includes "denying employment to" individuals as unlawful discrimination – and 525(b) does not - the Court concluded that private sector employers are not prohibited from discriminating against applicants on the basis of prior bankruptcies.

This recent decision may come as particularly welcome news for employers in the financial services industries who may be reluctant to employ individuals with multiple prior bankruptcies. Although the Rea decision certainly gives private sector employers greater flexibility in the hiring process, it is important to remember that terminating or discriminating against a current employee solely on the basis of a prior bankruptcy remains unlawful.
 

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This post was contributed by Schaun D. Henry, Esq., a Member in McNees Wallace & Nurick LLC's Labor and Employment Practice Group.

In this difficult economy, funding sources can be scarce. The financial climate makes government contracts appear quite lucrative. Every industry should seriously consider the ramifications of their actions on other areas of the business when entering into government contracts. We frequently see situations where the sales force of an organization enters into a contract without coordination with the sections of the business responsible for compliance with the multiple reporting procedures, that often go along with government contracts. In fact, there have been a number of occasions where a company's contracting agents had no idea that the work being secured for the company would result in significant reporting requirements. Two relatively new developments should give companies pause when considering government contracting.

Executive Order 11246 requires that all government contractors undertake affirmative action in the hiring of traditionally disenfranchised groups where the contractor or subcontractor has a government contract of $10,000 or more. Contractors who have contracts of $50,000 or more must prepare, maintain and comply with a written affirmative action program. Compliance with affirmative action plans is onerous enough, but the bigger issue is that these plans may be classified as admissible evidence to prove reverse discrimination. See Stimeling v. Board of Education Peoria Public School Dist.  To be sure this issue has been visited in the past by appellate courts, with recent case law successes in the reverse discrimination field. See Christianson v. Equitable Life Assurance Society, 767 F.2d 340, (7th Cir. 1985).  At least one court has recently found that a former employee of the Peoria School District in Illinois could use the existence of the District's affirmative action plan as evidence of discriminatory intent, so long as other evidence of intent was also present. This case is evidence of the fact that Office of Federal Contract Compliance Programs' ("OFCCP") mandates for affirmative action plans can create hidden dangers to a company. These factors should be considered prior to entering into any government contract.

The second fairly new issue of concern is the fact that government contractors are now required to disclose the compensation earned by certain company executives. This information will be made publicly available once it has been reported to the government. An amendment to the federal acquisition regulation which became effective March 1, 2011, requires all contractors and first-tier subcontractors to report the executive compensation (in all forms) of their top five most highly compensated executives for the contractor's previous fiscal year (the amendment has been in place since July 2010, and has been implement in phases).  The reports will be applicable to all contracts where the prime contract is for $25,000 or more. Contractors and first-tier subcontractors must report the information by the end of the month following the month of the award of the contract and annually thereafter. Many companies will be less than thrilled about such information becoming public.

The wise move is to think long and hard about entering into any government contract. Once the decision is made, companies would do well to recognize the risks of such contracts and take steps to limit those risks. Here are some dos and don'ts when considering entering into government contracts:

• Advise your sales force of the potential attendant requirements of any government contract.

• Require sales executives to get approval of a management official before proceeding with any government contract.

• Carefully examine all requirements of the contract before signing.

• Assign reporting requirements to a specific entity within the company.

• Know the end date for the contract. You are not required to continue any contract-related reporting or other record keeping after the completion of the contract. Doing so may subject the company to discrimination claims and unnecessary scrutiny.

Should you require additional information about any of the information discussed above, please feel free to contact Schaun Henry at (717) 237-5346.
 

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On March 1, 2011, the United States Supreme Court again increased employers' exposure to employment discrimination claims. In Staub v. Proctor Hospital, 562 U.S. ___ (2011) (pdf), the unanimous Court concluded that employers may be held liable for unlawful discrimination if a lower level supervisor influences an adverse employment decision, even if the decision is ultimately made by an independent manager. The theory that an employer may be liable when it relies on facts supplied by a biased supervisor when making an adverse employment decision is known as the "cat's paw" theory.

Staub claimed that Proctor Hospital's Human Resources (HR) Manager relied on facts supplied by Staub's supervisors, who were acting with anti-military animus in violation of the Uniform Services Employment and Reemployment Rights Act (USERRA), when the HR Manager terminated him. Staub admitted that the HR Manager did not have anti-military animus, but claimed that the facts provided by his supervisors were false, and that his supervisors provided the false facts because the supervisors wanted him fired because of his military Reserve obligations.

The focus of the Court's decision was whether the supervisors' anti-military animus was "a motivating factor in the employer's action," in violation of the USERRA. Importantly, and unfortunately for employers, the Court pointed out that the "motivating factor" language from the USERRA is also found in Title VII of the Civil Rights Act. Therefore, it is clear that the "cat's paw" theory is viable under Title VII.

The Court found that the actions of the supervisors, and the independent actions of the HR Manager, could be aggregated to produce a discriminatory employment action. Because the supervisors were agents of the Hospital, their actions could be imputed to the Hospital. If supervisors are motivated by unlawful discrimination, intend to cause the adverse action, and the intended action actually occurs, then the employer will be liable because the supervisors were acting on behalf of the employer. The decision leaves open the question of whether or not an employer may be held liable if an employment decision is influenced by non-supervisory coworkers.

The Court's "cat's paw" theory requires a showing that: (1) a supervisor; (2) acting within the scope of his or her employment; (3) performed an act that was motivated by discrimination; (4) which was intended by the supervisor to cause an adverse employment action; and (5) the act was a proximate cause of the adverse employment action. If such a showing is made, then the employer may be liable for discrimination.

The cat's paw theory seems strikingly expansive, because the proximate cause element of the theory could expose employers to liability in extremely attenuated circumstances. Therefore, employers must take action now to brace for claims involving the cat's paw theory. First, employers should ensure that their discrimination and harassment policies and procedures are up-to-date, and that they contain adequate reporting mechanisms. All employees must be made aware of the available discrimination reporting procedures.  In addition, these procedures should not require that employees first make reports of discrimination to their immediate supervisors. Please click here to view our prior post on this issue.

Also, if and when an employee reports discrimination, the employer must conduct a thorough investigation and take appropriate action. Employers considering terminating an employee should also conduct a thorough investigation and should attempt to establish the relevant facts independently if possible.  This is true particularly if there have been allegations of discrimination raised against the employee's supervisor before or during the termination process.
 

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