Age Discrimination, Volunteering for RIFS, Quirky Question # 23
It is not uncommon for our employees with greater seniority (often 20 years or more) to volunteer for layoffs. As they point out, this relieves their managers from the difficult ranking decisions and laying off younger employees who wish to continue their employment. Of course, they benefit because they receive the substantial severance compensation – compensation for which they would not be eligible if they simply retired.
This seems like a win-win. Are we overlooking anything?
Second, as a corollary to the point above, keep in mind that if one or more of your employees challenged their terminations on the ground that they were discriminatory, you would need to demonstrate that in fact, the RIFs were justified by the financial savings and were not simply a “pretext” for getting rid of certain protected class employees. If your firm cannot demonstrate that there were true economic benefits flowing from the RIFs, you may have difficulty justifying the “economically-driven” layoffs.
Third, in your question, you stated that the employees who volunteered for the RIFs became eligible for benefits that they would not otherwise receive if they simply retired. I wonder whether your company’s approach will affect normal retirement patterns. If your employees know that your company is likely to engage in RIFs “periodically” and that they can “volunteer” to participate, with the potential for receiving substantial additional financial benefits, they may postpone retirements that otherwise would benefit your company.
Fourth, deferred retirements can have several negative effects. Employees who otherwise are psychologically ready for retirement may continue to work longer than they otherwise would have, perhaps coasting along until the next RIF announcement. Such an approach can result in diminished quantity and quality of the work performed. Further, opportunities for less senior employees to move up in your organization and assume the positions these individuals normally would be vacating may be diminished. These employees may wait until opportunities become available, or they may simply elect to pursue alternative opportunities elsewhere.
Fifth, allowing employees to “volunteer” for layoff may undermine your carefully constructed RIF selection process. As you point out, your company utilizes a 10-criteria system designed to ensure your firm retains its most talented and capable employees. By allowing certain employees to volunteer for layoffs (in exchange for substantial financial benefits), you may be saying “Goodbye” to employees you would most want to retain. Some of your senior, long-term, employees may be your most knowledgeable, most dependable workers. Do you really want to create an incentive for them to leave? Similarly, some of your most talented, severance-eligible, employees may feel that they can easily obtain suitable alternative employment with your competition. Do you want to create a financial incentive for those individuals to depart and work for your competitors?
Sixth, just as you are creating a financial incentive that may result in talented individuals volunteering for lay off, you also are creating a system that may result in the retention of less talented employees who would otherwise have been selected through your RIF evaluation process. Assume, for example, you were eliminating twenty percent of your workforce in the RIF. Assume further that the two top performers in a group of ten were individuals who were eligible for the severance package. In other circumstances, they may continue working for another five to ten years and the two employees who would laid off were be the employees who ranked ninth and tenth on your RIF criteria. Because the top two “volunteered” for layoff, however, the two poorest performers would retain their positions. Although this might spare the managers of this group some short-term discomfort, in the long run they likely will regret the fact that the two weakest performers are still employed, and continue to generate an average (or poor) work product. At some point, your company will have to address these performance deficiencies. Even worse, the fact that these two employees were not selected in the RIF process may be used as evidence by their counsel that they were performing satisfactorily in any discharge claims they later asserted.
Finally, unless you document very carefully who “volunteered” to be included in the RIF, you may be skewing significantly the statistics of those “selected” for layoff as well as the application of your RIF selection criteria. Particularly with respect to age discrimination claims, this can create standard deviations dramatically higher than would exist in the absence of the “voluntary” layoffs. You need to ensure that your company’s well-intentioned and generous approach does not create potential liability in connection with the claims of those who did not want to be included in the RIFs.
Age Discrimination and the OWBPA, Quirky Question # 22
Our company decided to close one of its two manufacturing facilities in Minnesota. In deciding which facility to close, we considered factors such as the relative productivity of the facilities and the age and condition of the buildings and equipment.
The employees of our closed facility will receive separation benefits in exchange for signing a release of claims. We are aware that to obtain a valid release under the Age Discrimination in Employment Act (ADEA), the Older Workers Benefit Protection Act (OWBPA) requires us to provide disclosures to the terminated employees. We understand that our disclosures must describe (among other things) the affected decisional unit – that is, the “group or class” of employees from which the termination decisions were made.
Since we terminated everyone at the closed facility, in our disclosures we defined the “decisional unit” as the manufacturing facility that we closed. We provided the terminated employees the job titles and ages of everyone who worked at that facility. I keep hearing about problems with ADEA releases. Given the facts described above, do we have anything to worry about or have we complied with OWBPA?
The EEOC’s interpretive regulations define the decisional unit as “that portion of the employer’s organization from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver.” 29 C.F.R. § 1625.22(f)(3) (B). The EEOC uses the term “decisional unit” to “reflect the process by which an employer chose certain employees for a [termination or exit incentive] program and ruled out others from that program.” Id.
Determining the appropriate “decisional unit” is highly fact intensive and there is no “safe harbor” under the regulations. If an employer defines the decisional unit too narrowly or too broadly, it might be accused of trying to hide its discriminatory motives. In Kruchowski v. Weyerhaeuser Co., 446 F.3d 1090 (10th Cir. 2006), for example, the federal appellate court invalidated a release because the employer misidentified the affected decisional unit. In its OWBPA disclosures, the employer defined the decisional unit as “all salaried employees” employed at a specific mill. In discovery, the employer clarified that the decisional unit actually consisted of “those salaried employees reporting to the Mill manager.” The court found that 15 employees were included in the disclosures but were never considered for termination. Although the employer tried to characterize its discovery response as a “slight clarification” of its OWBPA disclosures, the court invalidated the release.
Where an employer closes an entire plant or facility, as your company has done, it is possible that the proper decisional unit is broader than just the affected plant or facility. Unfortunately, there is no “one size fits all” answer in these situations; rather, determining the appropriate decisional unit depends on how you arrived at the decision to close the affected facility.
In Griffin v. Kraft General Foods, Inc., 62 F.3d 368 (11th Cir. 1995), a class of plaintiffs challenged the release used in connection with a plant closing, arguing that the employer should have provided information – i.e., ages and job titles – of individuals employed at other plants if the company “considered for closure several plants producing similar products” and if “employees at other plants may assume some of the functions of the closed plant.” The court remanded the case to the trial court for additional fact finding regarding the company’s plant closure decision. Under Griffin, it appears that employers may have to provide information beyond a closed facility if, for example, a certain production line or function will be transferred to another facility, or if the employer evaluated several facilities before deciding which one to close. If, however, a plant was closed because, for example, it produced a product line which the company decided to discontinue, and no serious consideration was given to closing another plant, the proper decisional unit would be the affected facility only.
Despite the reasoning of Griffin, a recent case from the District of Minnesota, Pagliolo v. Guidant Corp., 483 F. Supp. 2d 847 (D. Minn. 2007), suggests that Minnesota employers should proceed cautiously before identifying a decisional unit that is broader than a single facility. In Pagliolo, the company implemented a reduction in force affecting employees at six separate Guidant-owned corporations, who worked in nine of the company’s 84 facilities in the United States. The company identified the decisional unit as all United States-based employees, arguing that every department in each one of its United States-based businesses was required to examine whether staff reductions could be made. In this case, the District of Minnesota found the decisional unit of all United States-based employees to be too broad. The court particularly took issue with the fact that terminations were made in six separate corporations and multiple facilities, and found that a terminated employee would not be able to draw meaningful information from disclosures that lumped together employees from different facilities and corporations. The decision goes on to express doubt that a decisional unit could ever be larger than a single facility.
When drafting OWBPA disclosures, be sure to examine your termination decisions carefully. Ensure that you do not define the “decisional unit” either too broadly or too narrowly. Given the high stakes involved (the invalidation of releases of ADEA claims, often for significant numbers of potential plaintiffs), plaintiffs’ counsel may scrutinize OWBPA disclosures in the hopes of finding some deficiency in how the company defined the decisional unit. They will have an incentive to do so as long as courts continue to invalidate releases on (sometimes) very technical grounds.
Medical Marijuana Use In the Workplace, Quirky Question # 21 (California Issue)
Quirky Question # 21:
We recently made a job offer to a gentleman as a lead systems administrator in the California division of our telecommunications company. As part of our routine pre-employment drug testing, he tested positive for marijuana. However, the applicant presented us with a doctor’s note allowing him to use “medical marijuana” for chronic back pain cause by injuries he suffered while on active duty in the Air Force. He explained that he’s been using it for years, he only uses it at home, and it has never had a negative impact on his job performance.
It’s our company’s policy not to hire anyone who tests positive for illegal drug use. But this is the first time we have been presented with a doctor’s note authorizing the marijuana use for medical reasons. Are we going to be in trouble if we refuse to hire him?
[As promised, today marks the introduction of our West Coast Quirky Question analyses. On the first Wednesday of each month, we will post a question pertaining to issues arising in California, Washington or Alaska. Our firm's attorneys in our two California offices, located in Irvine and Palo Alto, or our Seattle or Anchorage offices will share their insights in response to the questions.
Today's analysis is provided by Karen Wentzel. Karen, who practices in our Palo Alto office, is a Stanford Law School grad, who has been practicing employment law for more than 20 years. Karen's biography can be found at www.dorsey.com. Her email address is: wentzel.karen@dorsey.com. If you have any particularly unusual questions pertaining to California law, you can send them either to me or to Karen.
We hope you enjoy this new, monthly feature of our Blog. Regards, Roy]
Karen’s Analysis:
I suspect that those of you whose companies are located in, or do business in, California, recognize that these facts are drawn not from a client inquiry but instead from a very recent case from the California Supreme Court. In that case, Ross v. Ragingwire Telecommunications, Inc. (Cal. No. S138130, January 24, 2008), the state’s high court affirmed a bright line test that employers need not accommodate the use of illegal drugs.
The employee in the Ross case argued that his employer had to accommodate a person using marijuana under a doctor’s care based on a 1996 initiative passed by California voters called the Compassionate Use Act. Federal law prohibits the possession of marijuana, even by medical users. But the Compassionate Use Act gives a person in California who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges involving the drug. Mr. Ross argued that this meant his potential employer could not refuse to hire him based on the results of his pre-employment drug test.
The California Supreme Court disagreed. The Compassionate Use Act, the court said, does not address the rights and duties of employers and employees. And, the California Fair Employment and Housing Act (which prohibits discrimination on the basis of a disability as well as other protected categories) permits an employer to condition an offer of employment on the results of a medical examination, and to deny employment to applicants who test positive for illegal drugs. Therefore, there was no basis for Mr. Ross’ claim of disability discrimination.
The ruling is important to employers for several reasons. The opinion affirms that an employer may condition an offer of employment on the results of a medical exam. Medical exams may be required by an employer after an offer of employment is made but before the employee begins work to ensure that the applicant can perform the essential functions of the job. This means that the medical exam must be job related. But the court said that the employer had a legitimate interest in avoiding well-documented problems associated with the abuse of drugs and alcohol by employees – increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover. This was true even though Mr. Ross would not have had responsibilities for driving a company vehicle or operating potentially dangerous machinery.
Notwithstanding this decision, as is always the case, if an employer is going to require conditional medical exams and reject applicants who test positive for illegal drug use, it is important to apply the rule fairly and across the board. Treating applicants differently without a legitimate and well-articulated business reason for doing so can lead to claims of differential treatment and discrimination. In addition, the tests should be administered to preserve the applicant’s right to privacy under the California Constitution. Finally, remember that the Ross case involved the current use of an illegal drug. A past addiction or alcoholism may be a covered disability that cannot be the basis for an adverse employment action and may require a reasonable accommodation (e.g., a modified schedule to allow the employee to attend Alcoholic Anonymous meetings).
Unfortunately, even though Ross was an opinion of the California Supreme Court, the issue of accommodating medical marijuana use in the workplace is not necessarily settled. The dissent argued that the result was anything but compassionate and will unfairly force employees to choose between medical treatment for serious illnesses and unemployment, or continuing employment and chronic pain. At least one state legislator has said he plans to introduce legislation to protect medical marijuana users’ right to employment. Stay tuned.
Reasonable Suspicion of Drug Use, Quirky Question # 20
Quirky Question # 20:
We recently saw in the newspaper that one of our employees had been arrested for DUI and marijuana possession. Based on the newspaper article, we insisted on drug testing the employee under the “reasonable suspicion” section of our drug testing policy. The employee adulterated his urine sample by adding soap to it. The testing facility advised us that they consider an adulterated sample to be the same as a positive test.
We have asked the employee to go through a treatment program, as required by a “first positive” result of a drug test under our policy. The employee is balking. Are we being unreasonable? Can’t a newspaper article provide us reasonable suspicion to warrant a drug test?
Roy’s Analysis:
I am not aware of specific judicial decisions that clearly would support your company’s decision. In my view, however, with just one caveat, I believe your company has acted reasonably and should be able to persuade a court of that fact in the event your employee challenges your company’s actions.
As you described in your question, based on the newspaper article, you learned that your employee was “arrested for DUI and marijuana possession.” Ideally, when your company was made aware of this situation, it should have conducted an independent investigation. Your investigation could have consisted of obtaining the police arrest record or other public information regarding this incident through the City or County Attorney’s Office.
Alternatively, your investigation could have simply involved interviewing the employee to ascertain the relevant factual information directly from him. You could have confirmed the accuracy of the newspaper report, ensuring that your employee actually was arrested for DUI and that drugs were found in the vehicle. If the employee admitted the accuracy of the report and offered no explanation for the situation, you would have received independent confirmation in support of your suspicion.
It is possible, though unlikely, that your employee could have presented additional information to you that both cast doubt on the information in the article and assuaged your concerns. For example, he might have informed you that he is a diabetic and the erratic driving leading to his “DUI” arrest was caused by low blood sugar. (These facts would have been easily verifiable.) Similarly, he might have informed you that although there were drugs in the vehicle, they belonged to his passenger, who admitted they were his. (Again, these facts would have been verifiable.) If these facts had been uncovered and confirmed, you may not have elected to require the employee to engage in the random drug test. In short, it usually is advisable to conduct a prompt investigation of your own into the issues that caused your firm concerns, or aroused your suspicions, whatever the underlying issues might have been.
Let’s assume for this discussion, however, that no investigation was conducted. Even without an investigation, your employee’s destruction of the urine sample is corroborative of the fact that there was prior wrongful conduct. Indeed, your employee’s behavior following the company’s request that he take the drug test (which the testing company advised you is equivalent to a positive test) provides ample justification for treating his conduct as a “first positive” under your policy.
You also have asked whether your firm is justified in relying on a newspaper article. Although as noted above, I would recommend that your firm conduct its own investigation regardless of the source of your concerns (e.g., a newspaper, an employee’s report, an anonymous tip on your company’s hotline, your own observations, etc.), a newspaper report may provide you a legitimate basis for having “reasonable suspicion” of wrongful conduct, with resulting disciplinary action. This issue is particularly timely here in the Twin Cities, where a group of students at a local high school recently included pictures of their underage drinking escapades on their Facebook pages. The school disciplined the students based on the pictures they had displayed on Facebook. While the school’s actions have precipitated some protests from the students themselves, their parents, and a few of their fellow students, the school’s disciplinary decision seems to have been well grounded.
Another way of evaluating the appropriateness of your company’s conduct is to consider how an alternative hypothetical scenario might have played out. For example, if your company took no action in response to the newspaper report and did not require a drug test, presumably the employee would have continued working without interruption. Imagine that the employee caused an accident at your facility due to impairment relating to alcohol or drug use. If another employee or a member of the public were injured in this accident and sued the company for negligence, it would be difficult to explain the company’s complete inaction after seeing the newspaper story.
In short, as with many aspects of employment law, once the company is on notice of problematic behavior (e.g., drug use, sexual harassment, potential workplace violence, etc.), it needs to act. The fact that the source of this knowledge might be a newspaper – here, the report of an arrest – does not alter this equation. (Keep in mind, however, that regardless of the source, all allegations are not true. That observation is easily illustrated by reference to just two words, even in the context of an “arrest” – “Duke Lacrosse.” Hence the need for your own, objective investigation.)
Starting the Work Day, Quirky Question # 19
Our company provides automobiles and vans to some of our employees who have to conduct product installations or repairs at customers’ work sites. Some times these work sites are closer to the employees’ homes than is our central office; some times they are farther away.
Figuring that the distances roughly balance out between the shorter and longer trips, we start paying our employees when they arrive at the customers’ locations. This approach also enables our employees to stop for coffee or food on the way to the job site without feeling that they are ripping us off. A friend at another company recently told me that this approach may cause us problems down the road.
We have been doing this a long time without any employee complaints. In fact, our installation and service employees like the fact that they can go directly to the customers’ locations rather than having to check in at the home office first. Are we missing something important?
Your question raises the issue of what constitutes compensable time prior to the commencement of the work day. Similarly, by extension, the facts you describe also raise a question about whether your employees are compensated for the time they spend driving home from their final customer’s location.
An employer’s approach to this issue (whether it involves the vehicle question you posed or other types of pre- or post-work activities) can have ramifications under the Fair Labor Standards Act (FLSA) and/or parallel state wage and hour laws. Historically, there was relatively little interest in these types of issues by the plaintiffs’ employment bar. That was then, this is now. FLSA and state wage and hour claims now are receiving incredible amounts of attention and are yielding some of the largest settlements and verdicts (many involving eight- and nine-figure sums).
I can certainly understand why your firm has approached this issue as you describe. It seems wasteful to have an employee commute 30 miles to a central office before starting his/her day, only to send that person 25 miles back in the same direction after he/she has “clocked in” at the home office. I don’t doubt that the employee would prefer to drive the 5 miles directly to the customers’ location, rather than spending an hour-plus in the car. Similarly, I am sympathetic to the concerns you articulate regarding the employee’s desire to stop for food or a beverage on the way to the job site, without feeling that he/she is exploiting your company.
Nevertheless, in a recent decision by the Washington Supreme Court, that state’s high court rejected the approach your company has been following. In the case of Stevens vs. Brink’s Home Security Inc., No. 79815-0 (Wash. October 18, 2007), the court ruled that the alarm installation employees who drove directly from their homes in company-provided vehicles were entitled to compensation for their commuting time (both before and after the time spent with customers) pursuant to Washington’s Minimum Wage Act (MWA).
Interestingly, the defendant in the Stevens case offered its employees two options: a) they could drive to the central office and pick up a company vehicle at the start of the day, returning it at the end of the day; or b) they could retain the company vehicle and go directly to the job site from their homes. With respect to the second option, the employees were compensated for drive time in excess of 45 minutes. A class of employees, all of whom had selected the second option, brought the lawsuit, seeking overtime compensation for the time spent driving to the worksite and driving home from the worksite, regardless of the length of the commute.
For Washington employers, barring distinguishing factors, drive time in a company vehicle (whether going to the first job of the day, or returning home at the end of the day), is compensable and should be included in employers’ calculations when determining employees’ overtime eligibility. For your company, and employers in other states, the Stevens analysis provides some useful insights and guidance. To what extent are your firm and other employers “controlling” the use of the company vehicles? Do the employers prohibit all passengers, or would it be permissible for an employee driving the vehicle to drop a child off at school or a spouse off at work, on the way to a jobsite? Are employees permitted to run errands with the company vehicles, either at the beginning or the end of the day? How do employees learn where they will be assigned to work on a particular day and do they have to engage in any preparatory activities before arriving at the job site? Do employees have contact with the home office on the way to the job site and, are they sometimes told to report elsewhere for work? Depending on how these and similar questions are answered and depending on the similarities between other states’ statutes and the language of Washington’s MWA, your company and other firms may be confronting unanticipated overtime liability.
I recommend that you evaluate your policies and practices carefully in this area and consider whether it would be prudent to alter your approach. Note, too, as referenced above, that there are a number of other contexts where the commencement and end of the official work day has been litigated. Often, these situations implicate the donning and doffing of protective or other types of specialty clothing or equipment. As I’ve stated in other blog analyses, however, these are questions that I’ll reserve for another day.
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