HRMN 408 Assignment 2: Discrimination and Harassment Case Study

Discrimination in General

• Title VII of the Civil Rights Act

• Covered Employers and Employees

• Religious Discrimination under Title VII

• Genetics

• Retaliation

• Anatomy of a Title VII Case

• Other Nondiscrimination Laws

• State and Local Prohibitions

• Professional Codes of Ethics

• Record-Keeping

• Employment Practices Liability Insurance

CHAPTER 14

C o p y r i g h t 2 0 1 7 . S o c i e t y F o r H u m a n R e s o u r c e M a n a g e m e n t .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

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The SHRM Essential Guide to Employment Law262

The Civil War made clear that slavery would no longer be toler- ated in the United States, but it did little to remedy rampant dis- crimination. It was not until 1964, through the efforts of Presidents Kennedy and Johnson and after bitter congressional debate, that the first significant nondiscrimination laws were passed. Since then, numerous protections have been added, not only at the federal level, but also at state and local levels.

This chapter addresses employment discrimination in general, including religious and genetic discrimination. Subsequent chapters deal with discrimination on account of gender, age, and disability.

TITLE VII OF THE CIVIL RIGHTS ACT The Civil Rights Act of 1964 is the first modern piece of federal leg- islation to address discrimination generally. The act deals not only with discrimination in employment but also with discrimination in public accommodations. The act was amended in 1991 to clarify and strengthen certain provisions and to expand the range of available remedies to include compensatory and punitive damages in cases of intentional discrimination.

Title VII of the act addresses employment discrimination. It applies to all employers that have 15 or more employees and to employment agencies and labor unions. The Equal Employment Opportunity Commission (EEOC), created by Title VII, together with cooperating state and local agencies, enforces Title VII at the administrative level by investigating charges, recommending reme- dies, and conciliating disputes between employers and employees. The EEOC can also bring suit in its own name against employers in federal court. EEOC guidelines interpreting Title VII are a useful resource.

At the heart of Title VII is the following provision: It shall be an unlawful employment practice for an employer:

(1) to fail or refuse to hire or to discharge any individ- ual, or otherwise to discriminate against any individual

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with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or appli- cants for employment in any way which would deprive or tend to deprive any individual of employment opportuni- ties or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

Those two paragraphs have generated whole libraries of commen- tary and many thousands of court decisions. Many of the Supreme Court’s landmark cases during the last 50 years have involved Title VII. It would be impossible to digest that body of material here. What follows is a brief overview of Title VII principles and a discus- sion of some of the more important issues employers are likely to face.

Title VII is not limited to traditional minorities. Everyone— whites as well as blacks, males as well as females, Christians as well as Jews—is protected. In other words, Title VII does not pro- tect special groups from adverse employment decisions. Rather, it prohibits an employer from using certain criteria when making decisions. So, for example, a more qualified white male who is passed over for promotion in favor of a less qualified black female has a good Title VII claim if the employer was motivated by race or gender.

Reverse Discrimination The discrimination that a nonminority member suffers when an employer discriminates in favor of a minority member is some- times called reverse discrimination. Although the Supreme Court has made clear that such favoritism is plain and simple discrimina- tion, the court’s current views on this topic are not entirely clear. In a pair of widely publicized decisions involving the University

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of Michigan, the court ruled that the university’s law school may consider race as a plus factor in evaluating individual applicants to the law school. According to the court, the law school had a legit- imate educational interest in assembling a diverse student body.

In 2016, the Supreme Court considered a case involving the admissions policy of the University of Texas at Austin. Under the policy, the school admitted all applicants who graduated from a Texas high school in the top 10 percent of his or her class (a requirement of state law), and it filled the remainder of its incom- ing freshman class by combining an applicant’s “academic index” (SAT scores and high school academic performance) with the appli- cant’s “personal achievement index,” which the court described as a holistic review containing numerous factors, including race. The court upheld UT’s admissions policy despite the inclusion of race as a consideration.

Since employers, too, have a legitimate interest in a diverse workforce, the court’s reasoning would seem to apply to employ- ment as well as higher education. It remains to be seen, however, just how these decisions might transfer to the workplace.

Disparate Treatment and Disparate Impact Discrimination under Title VII is sometimes classified as either disparate treatment discrimination or disparate impact discrim- ination. The first category includes what immediately comes to mind—intentionally making a personnel decision, such as refusing to hire or promote a particular individual because of race, color, gender, or other characteristic. That type of discrimination is pro- hibited by Title VII. So too is an employer practice of grouping employees by race, color, gender, or other prohibited factors and treating the groups differently. Employment ads that indicate a preference for or against a particular race, color, or sex are also illegal, whether or not any actual discrimination is shown.

Disparate impact discrimination is more subtle. Suppose an employer adopts a policy that on its face seems neutral but that

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turns out to have an adverse impact on a particular ethnic group or gender. Take, for example, a private security company that has a minimum height and weight requirement for its patrol officers, the net effect of which is to exclude most females, but almost no males.

Other practices that could give rise to disparate impact claims include minimum education or experience requirements that do not serve a legitimate business purpose, use of tests scores in hiring or promoting if the test is culturally biased or is not related to job performance, or blanket exclusion of applicants with criminal records or whose wages have been garnished.

Terms, Conditions, and Privileges of Employment Title VII prohibits discrimination in hiring, firing, compensation, and other terms, conditions, and privileges of employment. Ready examples of what is meant by terms, conditions, and privileges of employment include shift assignments; fringe benefits such as vacation, sick leave, or insurance programs; and access to facilities such as the cafeteria and fitness center. Courts have ruled that the intangible work environment is covered by Title VII as well. Under those rulings, an employer that promotes or tolerates a workplace environment filled with demeaning racial or sexual slurs can be sued by the target of those slurs and by others who find the envi- ronment offensive if the slurs are severe and pervasive and a reason- able person would find the environment offensive.

Trivial or inconsequential workplace actions by the employer will not support a Title VII discrimination action. The Supreme Court has said that a job action must amount to a significant change in employment status. The action must also be objectively detrimental, not just something a particular employee dislikes. As one court put it, not everything that makes an employee unhappy is an actionable adverse action, nor are changes that make a job less appealing but that do not affect a term, condition, or benefit of employment.

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QUICK TIP A less-than-favorable evaluation, minor change in duties, or a change in title, with no

effect on pay or status, even for allegedly discriminatory reasons, is not illegal. But if the

evaluation leads to a loss of bonus or a demotion and the employee can show discrimi-

natory motive, a good Title VII claim will result.

Bona Fide Occupational Qualification An employer charged with discrimination on the grounds of sex, religion, or national origin (but not discrimination on the grounds of race) may, in theory, raise a defense of bona fide occupational qualification (BFOQ). However, the defense is narrowly interpret- ed and as a practical matter is rarely available. In the airline indus- try, for example, a carrier that fails to hire male applicants as flight attendants under the belief that passengers expect females in that role does not have a good BFOQ defense. On the other hand, an employer may rely on the BFOQ exception in hiring actors for male roles and actresses for female roles.

Testers Private organizations and even the EEOC sometimes use testers to obtain evidence of discrimination in the workplace.

EXAMPLE: Suppose an employer that is suspected of having racially discriminatory hiring practices advertises a job opening. Two testers—one white, one black—apply for the job and give fake credentials that are substantially the same. The employer interviews the black candidate first but says he needs to check references before making any offer. He then interviews the white candidate and makes an offer on the spot. If this pattern is repeat- ed several times, the employer will have a difficult time explain- ing its actions in the discrimination suit that is sure to follow.

Claims of discrimination by testers, and by the organizations that employ them, do not always fare well in court, since the testers

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are not really candidates and they cannot really claim to have been denied a job.

QUICK TIP The term employee as used in Title VII includes former employees. Therefore, it is illegal,

for example, for a company to give a bad reference to a former employee in retaliation

for the former employee’s filing a charge of race discrimination after he or she was fired.

Training It is not enough for a company to include nondiscrimination provi- sions in its employee handbook. To have an effective nondiscrimina- tion policy, companies must periodically train their employees as to what constitutes discrimination and how to complain about discrim- ination. As part of the training, employees must be assured that their complaints will not result in retaliation.

Training, as part of an effective nondiscrimination policy, is par- ticularly important with regard to sexual and other types of harass- ment. Absent an effective policy, the employer will be unable to defend a claim that a supervisor harassed a subordinate employee. (See Chapter 15 for more on harassment.)

COVERED EMPLOYERS AND EMPLOYEES Title VII defines employer as a person or organization engaged in an industry affecting commerce that has 15 or more employees for each working day in each of 20 or more calendar weeks in the cur- rent or preceding calendar year.

The term industry affecting commerce means any activity, busi- ness, or industry in commerce in which a labor dispute would hinder or obstruct commerce or the free flow of commerce—in other words, just about any activity in which an employer might engage. (Title VII is tied to the Commerce Clause of the U.S. Constitution because all federal legislation must be based on one or another of the powers granted the federal government by the Constitution.)

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Although failure to meet the 15-employee threshold does not affect a court’s power to hear a Title VII case (that is, it does not deprive the court of jurisdiction), an employee bringing a Title VII case must prove that the 15-employee threshold is satisfied as part of his or her case. Failure to do so could result in the case being dismissed. Determining who are employees is therefore crit- ical to a Title VII claim. And, of course, the person making the claim must be an employee (or an applicant for employment or a former employee) to invoke federal nondiscrimination laws in the first place.

The discrimination laws themselves are not at all helpful in answering the question of who are employees. They typically define employee as an individual employed by an employer. In the Supreme Court’s words, that is a mere nominal definition that is completely circular and explains nothing.

One issue is how to deal with individuals who are carried on the employer’s books as employees, but who are not physically at work for a full 20 weeks. In a 1997 Supreme Court case, the employ- er had between 15 and 17 employees on its payroll for at least 20 weeks, but during 11 of those weeks, it was not actually compen- sating 15 or more employees. The difference resulted from the fact that two of its employees were part time who worked fewer than five days per week.

The court ruled that the employer was subject to Title VII, adopting what has become known as the payroll method for count- ing employees. Under that method, if an employee appears on the employer’s payroll records, he or she is counted whether or not he or she is actually being compensated on a particular day. In short, part-time employees, full-time employees, and presumably persons on leave all count.

QUICK TIP The employee-counting question is broadly applicable to a wide range of federal employ-

ment-related laws, even though they may have different numerical thresholds.

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Professional Corporations Yet another issue involves shareholder-directors of profession- al corporations, such as doctors and lawyers. While they may be classified as employees for federal tax and pension plan purpos- es, they also manage the professional corporation. (Professional corporations and other types of business entities are discussed in Chapter 1.)

CASE STUDY: SHAREHOLDER-DIRECTORS AS EMPLOYEES In a Supreme Court case called Clackamas Gastroenterology Associates, P.C. v. Wells, an Oregon medical clinic was sued for discrimination by the clinic’s bookkeeper. The bookkeeper argued that the clinic met the 15-employee threshold so long as four of its physician- shareholders were counted. The bookkeeper pointed out, for example, that the physician-shareholders had employment contracts, they were salaried, and they were treated as employees for tax purposes. The clinic claimed otherwise—that the physician-shareholders were really more like partners in a partnership and should therefore not be counted. Citing EEOC regulations, the Court in Clackamas listed the following six factors to be considered in determining whether a shareholder- director of a professional corporation is an employee for discrimination purposes:

• whether the organization can hire or fire the individual or set the rules and regulations of the individual’s work

• whether, and if so, to what extent, the organization supervises the individual’s work

• whether the individual reports to someone higher in the organization • whether, and if so, to what extent, the individual is able to influence the organization

• whether the parties intended that the individual be an employee, as expressed in written contracts

• whether the individual shares in the profits, losses, and liabilities of the organization.

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Whatever the merits of the Clackamas decision, the six factors the Supreme Court listed are highly fact-specific. Having to deal with these additional factors adds further uncertainty to discrimination claims and increases associated costs and delays.

Contingent Workers In general, independent contractors are not covered by the employment provisions of the nondiscrimination laws because they are not employees. However, the misclassification of a true employee as an independent contractor is as disastrous for non- discrimination law purposes as it is for tax and benefits entitle- ment purposes. (Independent contractors are discussed in more detail in Chapters 1 and 7.)

All other categories of contingent workers—such as part-tim- ers, job-sharers, teleworkers, and day laborers—are fully pro- tected by the nondiscrimination laws. For example, a company whose staff includes temporary workers (temps) furnished by an agency cannot direct the agency to furnish (or not furnish) temps of a particular race or gender. Nor can the company accept temps from an agency when the company knows that the agency itself discriminates in selecting persons to be temps.

For certain categories of contingent workers, such as leased or joint employees, it is not always clear who the actual employ- er is—the staffing firm, the company that controls the actual worksite, or both. The EEOC has developed elaborate guide- lines to determine the identity of the employer for purposes of applying the federal nondiscrimination laws. The guidelines turn on such factors as who does the hiring and firing, who handles payroll, and who controls the employee’s day-to-day work envi- ronment. While it may be possible in any particular circumstance for either the staffing firm or the worksite owner to avoid being tagged as the employer, any company that tolerates or commits discrimination against a member of its workforce is exposed to substantial risk.

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Extraterritorial Application Activities by employers outside the U.S. could certainly affect com- merce within the U.S. But the Supreme Court has held that Title VII does not have extraterritorial application, so that U.S. citizens employed abroad, even U.S. citizens employed by U.S. employ- ers, have no Title VII protection. Title VII itself exempts aliens employed outside the U.S., and it permits employers operating in a foreign country to comply with that country’s law even if compli- ance amounts to a violation of Title VII.

RELIGIOUS DISCRIMINATION UNDER TITLE VII Title VII makes it illegal for an employer to discriminate against an employee on the basis of his or her religion. Religion includes all aspects of religious observance, practice, and belief. This means, for example, that an employer cannot refuse to hire an applicant because the applicant is a member of a particular religious sect any more than the employer can refuse to hire an applicant on the basis of the applicant’s race or gender. Harassment based on religious beliefs or practices also violates Title VII.

But special rules apply to religious discrimination. The First Amendment to the U.S. Constitution says that “Congress shall make no law respecting the establishment of religion, or prohibit- ing the free exercise thereof.” Based on the First Amendment, the courts have developed the so-called ministerial exception to Title VII, under which religious organizations may discriminate in con- nection with the selection and employment of their own clergy.

The term clergy has been broadly defined by the courts to include lay employees whose primary duties consist of teaching, spreading the faith, church governance, supervision of religious orders, or par- ticipating in religious ritual and worship. So, for example, a nun who was an assistant professor of canon law at Catholic University could not sue for sex discrimination when she was denied tenure. And a lay music teacher at a Catholic elementary school who directed a church choir also could not complain of sex discrimination because,

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as the court recognized, music is important in the spiritual and pas- toral mission of the church and plays in integral role in religious tra- dition. Even for nonclergy, religious organizations may discriminate against employees on religious grounds. (See Chapter 23 for more on religious organizations.)

Title VII also requires employers to reasonably accommodate their employees’ religious observances and practices. In this respect it is similar to the Americans with Disabilities Act (ADA) (discussed in Chapter 17), which requires reasonable accommodation of employ- ees with disabilities. As with the ADA, the burden is on the employ- ee to ask for a reasonable religious accommodation.

One difference between disability accommodation under the ADA and religious accommodation under Title VII is that under the ADA the employer must, in effect, conduct an interactive dialogue with a disabled employee to arrive at what is reasonable. Under Title VII, the employer can offer any reasonable accommodation in satis- faction of its obligation.

The employer is excused from accommodating a religious prac- tice if the accommodation would impose an undue hardship. While anything more than a minimal cost to the employer will qualify as an undue hardship, the hardship must be real and not merely specula- tive or hypothetical.

Following are cases in which employees or applicants claimed that the employer failed to accommodate their religious observances or practices.

Sabbath Day A number of cases have involved work on a Sunday or other Sab- bath day. The courts have ruled that an employer must attempt to accommodate a good-faith belief prohibiting work on Sabbath, such as by allowing the employee to switch with another employee or by having a flexible leave policy that allows the employee to choose the Sabbath as a leave day. However, the employer does not have an absolute duty to accommodate such religious beliefs. If, due to the

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employer’s workload, weekend work is necessary, and if excusing some employees completely from all weekend work would create disruption within the workplace, or would violate established senior- ity rules or a union contract, the employer may insist that employees participate in weekend work schedules despite their religious scru- ples to the contrary.

Religious Garb If there is a good business reason, such as interference with job performance or safety concerns, an employer may prohibit employ- ees from wearing religious garb, such as crucifixes, yarmulkes, or chadors. Otherwise, the employer is likely obligated to accommo- date the practice. One way to accommodate might be to transfer the employee to a position that does not involve safety issues. (Dress codes are discussed in Chapters 2 and 15.)

In a case involving Abercrombie & Fitch, a practicing Muslim applicant wore a head scarf at her initial job interview. The scarf would have violated the store’s dress code, and she was not hired. The Supreme Court ruled that the applicant stated a good claim of failure to accommodate her religious practice, even though the applicant’s religion was never discussed during the interview and the applicant never requested an accommodation.

Abortion and Birth Control Cases in this area provide a good illustration of what is, and what is not, required of an employer. In one case an anti-abortion activist took a religious vow always to wear a particular button depicting a fetus and containing anti-abortion slogans. The button was dis- turbing to many of her co-workers for reasons unrelated to religious beliefs. Her employer offered her the option of covering the button while at work, wearing a different button that contained the slogans but not the fetus, or removing the button when she left her imme- diate work area. She refused all of these options and was fired. In her Title VII suit for religious discrimination, the court held that the

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employer had offered a reasonable accommodation and was justified in firing her when she rejected the accommodation.

In another case, an orthodox Jewish pharmacist, who was unwill- ing to sell condoms on religious grounds, applied for a job at a drugstore. The drugstore refused to consider his application and was sued for discrimination. The court agreed with the pharmacist, noting that the drugstore made no effort whatever at accommoda- tion and that the drugstore’s claim of undue hardship, had it tried to accommodate, was merely speculative.

The Patient Protection and Affordable Care Act (PPACA), dis- cussed in Chapter 10, requires employer group health plans to provide preventive care and screenings to women without any additional cost to the female patients. Regulations adopted under the PPACA identify some 20 contraceptive methods (including four that prevent a fertilized egg from attaching to the uterus) that are included within the PPACA’s preventive care requirement. However, consistent with another federal law—the Religious Free- dom Restoration Act—the regulations exempt churches and reli- gious nonprofit organizations from the contraceptive mandate. The question before the Supreme Court in Burwell v. Hobby Lobby Stores, Inc. was whether for-profit companies, whose owners held the religious belief that life begins at conception, had to comply with the contraceptive mandate. The court ruled that the compa- nies did not have to comply.

Praying and Preaching To what extent may an employee actively promote his or her reli- gious beliefs to fellow employees? In one case a management-lev- el employee, who had become an evangelical Christian, wrote a letter to her supervisor stating that because of certain unidentified actions the supervisor had taken, he needed to “get right with God.” The supervisor’s wife saw the letter and took it to mean that her husband was having an affair. The same employee wrote a second letter to a subordinate of hers, suggesting that the subor-

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dinate’s illness was punishment for premarital sex. The employee’s firing over the letter-writing was justified, said the court, because the employer had no obligation to accommodate such inappro- priate behavior by an employee with management responsibilities, even if the behavior was religiously motivated.

In another case, a born-again Christian occasionally prayed in his office with other employees, and he made isolated references to his Christian beliefs. The court ruled that tolerating these trifling inci- dents imposed no hardship on the employer and could not justify termination.

Refusal to Comply with Tax Laws When an applicant for employment refused, on religious grounds, to provide his Social Security number, the prospective employer was justified in rejecting his application. The court held that the employer was not required to accommodate the applicant by vio- lating Internal Revenue Service (IRS) regulations or by seeking a waiver from the IRS.

Mandatory Flu Vaccinations May a hospital or other health care provider require its employees to be vaccinated against seasonal flu? Although the EEOC has no formal rule on the subject, in a 2009 technical assistance document and in a 2012 informal discussion of the matter, the EEOC basi- cally said yes, provided the employer allow exemptions for persons who have sincerely held religious beliefs against the practice, or who cannot be vaccinated for medical reasons.

GENETICS By use of genetic testing, it is possible to calculate the probability that a person who is now symptom-free will develop a disabling or fatal disorder. Biomedical research continues to increase the number of conditions known to be genetically linked. While some genetic markers increase only slightly the statistical risk that an associated

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disease will become manifest, other genetic markers are virtual guar- anties of eventual sickness or death.

Title II of the Genetic Information Nondiscrimination Act (GINA) generally prohibits the use of genetic information in employment, including discrimination on the basis of genetics and the requiring, requesting, or purchasing of genetic information about employees and applicants. The law defines genetic information as the following:

• genetic tests of an individual or his or her family member • the manifestation of a disease or disorder in family members of such individual

• genetic services provided to an individual or any family member, or the individual’s or family member’s participation in clinical research that includes genetic services

A genetic test means analysis of human DNA, RNA, chromosomes, proteins, or metabolites that detects genotypes, mutations, or chro- mosomal changes. A family member is an individual’s dependent or anyone within the fourth degree of relationship.

The problem is, employers routinely acquire medical information about employees that might just include genetic information. For example, an employee applies for leave under the Family and Medi- cal Leave Act (FMLA), and the supporting report from his physician discloses that the employee suffers from a genetic disorder. Does receipt of that report amount to a violation of GINA?

Under regulations adopted by the EEOC, the general prohibi- tion against acquiring genetic information does not apply when an employee is asking for leave under the FMLA (or other leave pol- icies established by the employer) to care for an ill family member and is required to provide medical certification in support of the leave request. There is also no GINA violation when an employ- er inadvertently acquires the information. Inadvertent acquisition may occur, for example, when an employee just happens to mention his or her own genetic condition or that of a fellow employee—the so-called water-cooler problem.

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Acquisition of genetic information will also be considered inad- vertent if the employer uses language such as shown in Figure 14.1 in any request for medical information.

FIGURE 14.1: GINA DISCLAIMER

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits employers and other entities covered by GINA Title II from requesting or requiring genetic information of an individual or family member of the individual, except as specifically allowed by this law. To comply with this law, we are asking that you not provide any genetic information when responding to this request for medical information. “Genetic information,” as defined by GINA, includes an individual’s family medical history, the results of an individual’s or family member’s genetic tests, the fact that an individual or an individual’s family member sought or received genetic services, and genetic information of a fetus carried by an individual or an individual’s family member or an embryo lawfully held by an individual or family member receiving assistive reproductive services.

RETALIATION Title VII also prohibits retaliation against an employee who has complained about discrimination or who has assisted another com- plainant, such as by testifying on his or her behalf.

Whenever a discrimination charge is pending—even an informal one that is still at the internal investigation stage—employers should exercise extraordinary caution in making personnel decisions that affect the complaining employee or others involved in the matter. Any adverse action taken after the initial charge has been made is likely to generate a further charge of retaliation. A weak discrimina- tion claim that would likely fail if pursued before the EEOC or in the courts is all too frequently converted into a successful retaliation claim after the complaining employee suffers an adverse action at the employer’s hands. (According to the EEOC’s Performance and Accountability Report: Fiscal Year 2016, retaliation led the list of charges filed with the EEOC that year.)

The Supreme Court has made clear that to constitute retaliation, the retaliatory acts must be material and adverse. However, unlike discrimination itself, the retaliation need not affect the terms or con-

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ditions of employment. Under this ruling, an act can qualify as retal- iatory even if it is unrelated to the job, so long as it would dissuade a reasonable employee from filing a discrimination charge.

In a 2017 federal court case from New York, the trial court dis- missed a claim of disability discrimination, but it allowed a retal- iation claim to go forward to trial. The employee’s evidence in support of retaliation was that, after the employee made a claim of disability discrimination, his supervisors stopped saying good morning to him, they spoke to him without a warm welcome and as if he were a criminal, they closely monitored his work, and they asked about two instances of unapproved overtime. While this evi- dence would seem to fall short of the material-and-adverse stan- dard, it illustrates the care an employer must take in the face of a discrimination claim.

ANATOMY OF A TITLE VII CASE Employers are well-advised to develop in advance procedures for handling a claim of discrimination, whether the claim is simply an internal complaint or a formal charge filed with the EEOC. Missteps at this critical juncture can convert an otherwise straightforward, easily handled matter into costly and disruptive litigation. Compe- tent legal guidance in developing the plan and responding to the claim is essential.

Investigation Internal complaints must be investigated promptly, thoroughly, and objectively, and appropriate discipline must be imposed when war- ranted. If the complaint involves, say, only a single inappropriate comment of a sexual nature, perhaps it would be sufficient to have a trained manager or an HR representative conduct the investiga- tion. In most cases, however, an outside, independent investigator is needed. Hiring an independent investigator excludes the lawyers who regularly represent the company, both because they will not be perceived as independent and objective and because the company

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risks losing the protection of the attorney-client privilege as to other matters on which the lawyers advised the company.

While investigations should be conducted as confidentially as reasonably possible (since unnecessary dissemination of informa- tion about the matter could be seen as retaliatory), investigators should not promise confidentiality to the parties or witnesses involved. Further, employers should not impose a blanket prohibi- tion on participants’ discussing the matter, because (according to the National Labor Relations Board), doing so could amount to interference with employees’ right to engage in concerted activ- ity. Figure 14.2 is a suggested handbook provision addressing investigations.

FIGURE 14.2: COMPANY INVESTIGATIONS

Following receipt of a complaint of discrimination or receipt of other evidence of suspected misconduct, the company will normally conduct an investigation, either by company personnel or by outside professionals. When requested to do so, employees must cooperate with the company and its agents in any such investigation by providing accurate and complete information.

The company has a compelling interest in protecting the integrity of its investigations. In every investigation, the company has a strong desire to protect witnesses from harassment, intimidation, and retaliation; to keep evidence from being destroyed; to ensure that testimony is not fabricated; and to prevent a cover-up. The company may decide in some circumstances that in order to achieve these objectives, the investigation must be conducted in strict confidence. If the company reasonably imposes such a confidentiality requirement and an employee does not maintain confidentiality, the employee may be subject to disciplinary action up to and including termination.

Notice of Charge Often the first time an employer learns of a discrimination complaint is when it receives notice from the EEOC (or a state or local fair employment practice agency, or FEPA) that a formal charge has been filed. Sometimes the EEOC notice advises the employer that no action is currently needed. More likely, the notice includes a lengthy request for company information and records and gives the com- pany a deadline for filing a position statement in response to the

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charge. The notice will also be accompanied by information regard- ing the EEOC’s voluntary mediation process that, if agreed to by the employee and the company, eliminates the need to provide informa- tion, records, and a position statement.

If the parties do not agree to mediation, or if mediation is unsuc- cessful, then the company must comply with the EEOC’s informa- tion requests and provide a position statement. The EEOC may also ask to interview company personnel who have knowledge pertinent to the discrimination charge.

QUICK TIP Under EEOC rules announced in 2017, an employer’s position statement will be shared

with the complaining party, but the complaining party’s response to the position state-

ment will not be shared with the employer. It is not clear why the EEOC has unleveled the

playing field this way.

Probable Cause When the EEOC completes its investigation, it usually issues a writ- ten finding either that there is probable cause to believe discrimi- nation occurred or that there is no probable cause. Or it may just dismiss the charge without any finding. In the event of a probable cause finding, the EEOC then invites the parties to conciliate—a step the EEOC is legally required to take. Conciliation is different from mediation, because at the mediation stage the parties can gen- erally resolve the charge on any terms they deem appropriate. At the conciliation stage, however, the EEOC is effectively a party to the negotiations and will insist that remedial measures be included in any final agreement, such as that the company agree to monitor its employment practices and that it post a notice in the workplace concerning the discrimination.

If conciliation is unsuccessful, or if the EEOC finds no probable cause or dismisses the case without any finding, then the EEOC issues a right-to-sue letter authorizing the complaining party to file suit in court within 90 days. Receipt of such a letter is a prerequisite

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for going to court on any discrimination or retaliation claim over which the EEOC has jurisdiction.

If the parties reach agreement, either during mediation or after conciliation, the agreement will be binding on them just like any other contract. But absent agreement, the EEOC has no author- ity to decide discrimination charges or impose enforceable rem- edies on employers in the private sector. So an employer may be tempted simply to ignore the EEOC charge. This is usually a mistake.

Ignoring the EEOC means missing the opportunity to convince the EEOC that the charge is groundless. If the EEOC finds no probable cause, the complaining employee may well be discouraged from pursuing the matter in court or may have difficulty finding a lawyer to take his or her case. Even if the charge is not groundless, ignoring the EEOC means missing the opportunity to mediate or conciliate the charge and avoid costly litigation. Finally, the EEOC itself can file suit and may decide to do so when faced with a recal- citrant employer.

Remedies A successful plaintiff in a Title VII discrimination case can be award- ed a variety of remedies by the court. In a failure-to-hire or wrong- ful termination case, for example, the remedies might include the following:

• back pay—pay and benefits the plaintiff would have received from the time of the discrimination to the time of the court judgment

• reinstatement—an order that the employer hire or reinstate the plaintiff

• front pay—if hiring or reinstatement is not feasible, pay and ben- efits the plaintiff would have received from the date of the court judgment until he or she can reasonably be expected to obtain comparable employment

• compensatory damages—money damages for humiliation and embarrassment the plaintiff suffered in connection with the dis-

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crimination, capped as follows: for employers with between 15 and 100 employees, $50,000; for employers with between 101 and 200 employees, $100,000; for employers with between 201 and 500 employees, $200,000; and for employers with more than 500 employees, $300,000

• punitive damages—damages to punish the employer acting with malice or reckless indifference to the employee’s federally protect- ed rights

• attorney’s fees and costs—fees of the plaintiff’s attorney and court costs incurred in the litigation (in addition, of course, to the fees and costs the company has to pay its own attorney to defend the case)

After-Acquired Evidence When faced with a formal, EEOC charge of discrimination, the employer, usually through its attorneys, undertakes its own inves- tigation to determine whether the charge has merit and whether any defenses are available. Sometimes an investigation turns up evidence about the complaining employee, such as false resume statements, that would have justified firing the employee or not hiring him or her in the first place. Such after-acquired evidence is not a complete defense to a discrimination claim, but it does limit the remedies available to the aggrieved employee. As the Supreme Court said in such a case, it makes no sense to compel an employer that fired an employee for discriminatory reasons to rehire the employee, and then turn around and fire the employee again based on resume fraud. But it does make sense to allow a back-pay award for the period before the resume fraud was discovered.

OTHER NONDISCRIMINATION LAWS Although Title VII is by far the broadest and most significant fed- eral nondiscrimination law, it is not the only one. Other federal laws apply in more limited circumstances.

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Section 1981 A Reconstruction-era statute guarantees to all persons within the United States “the same right … to make and enforce contracts … as is enjoyed by white citizens.” (Lawsuits brought under this statute are known as §1981 actions because the statute is codified at Title 42 §1981 of the United States Code.) Congress has amended the statute to cover not only the formation and enforcement of con- tracts but also the making, performance, modification, and termina- tion of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship. And the courts have interpreted the statute to cover ethnicity as well as race.

Section 1981 is an important statute. Even though Title VII also prohibits racial and ethnic discrimination, Title VII is limited to employers with 15 or more employers. Section 1981 has no such limitation, and it protects independent contractors as well as employees. In addition, claims under §1981 are not subject to the abbreviated time limits set by Title VII, they can be filed in court without first going through the administrative procedures applica- ble to Title VII claims, and they are not subject to the compensa- tory damage caps applicable to Title VII.

Immigration When Congress passed the Immigration Reform and Control Act in 1986 making it illegal for employers knowingly to hire persons who are not eligible to work in the U.S., Congress included a provi- sion prohibiting discrimination on the basis of citizenship or nation- al origin. The prohibition applies to employers with four or more employees. Title VII, in contrast, prohibits national origin discrim- ination by employers with 15 or more employees, and it does not address citizenship status at all.

Military Service Federal law prohibits any employer from discriminating against employees and applicants for employment on account of their mil-

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itary service. Persons who are members of the uniformed services, who have applied to become members, or who have obligations to one of the uniformed services are protected against discrimination in hiring, retention, re-employment, promotion, or the granting of any employment benefit.

QUICK TIP Nondiscrimination clauses are frequently contained in construction and other contracts

with government agencies. (See Chapter 22 for specifics.)

Financial Discrimination Federal law prohibits an employer from discharging an employee whose earnings have been subject to garnishment for any one debt, regardless of the number of levies made or proceedings brought to collect it. Discrimination against a person who has filed for bankruptcy is also prohibited.

STATE AND LOCAL PROHIBITIONS Most states and many local governments have their own laws prohibiting discrimination on grounds of race, color, and so on. These laws are not just duplications of federal law, since they often prohibit additional forms of discrimination not specifically covered by federal law, such as ancestry, marital status, sexual orientation, and transgender individuals. These laws also reach smaller employers not covered by Title VII, and they typically do not cap compensatory damage awards. (Gender discrimination, including sexual orientation and gender identity, is covered in Chapter 15.)

When a FEPA provides procedures similar to those available under federal law, the EEOC may enter into a work-sharing agreement with the agency. When such a work-sharing agree- ment is in place, a charge of discrimination filed with either the EEOC or the FEPA is considered dual-filed with both agen- cies. Work-sharing agreements normally provide that the FEPA

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will initially handle the charge, subject to final review by the EEOC.

PROFESSIONAL CODES OF ETHICS The codes of ethics of some professional groups contain nondiscrimi- nation clauses. A professional who discriminates in employment may become subjected to disciplinary proceedings before his or her state licensing board and may suffer suspension or revocation of his or her license to practice.

RECORD-KEEPING Under EEOC regulations, private employers with 100 or more employees and U.S. government contractors with 50 or more employees are required to file an Employer Information Report EEO-1 (also called Standard Form 100) each year. The EEO-1 report calls for data about employees’ ethnicity, race and sex by job category. A proposal to add a summary of pay and hours worked was scrapped by the Office of Management and Budget under Pres- ident Trump.

EEO-1 reports are due by March 31 of each year based on data from any pay period during the last quarter of the previous year. The EEOC does not prescribe any particular records that must be kept to support the information contained in an EEO-1 report, but whatever records are prepared must be kept for a least a year. Records relating to a pending charge of discrimination must be kept until the charge is finally resolved.

EEOC regulations permit employers to collect information on race and national origin for affirmative action compliance and EEO-1 reporting purposes (unless prohibited by state law), but the EEOC recommends that any such records be kept separate from other personnel data, such as evaluations.

The statutes of limitations—the time period within which an employee or enforcement agency can bring a claim—should also be considered in establishing record retention policies. Those statutes

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differ from state to state, and they may even vary for different types of claims. Although charges of Title VII discrimination must be ini- tiated within a relatively brief time period (180 days or 300 days, depending on the particular federal, state, or local agency that has jurisdiction), other types of claims may be filed as late as three or more years after the events take place. A five-year retention policy— that is, a policy of retaining all employment-related documents and information for five years after an employee terminates or an appli- cant is rejected—may seem a bit excessive, but can prove helpful.

The retention policy should apply not only to documents and information that relate to individual applicants and employees but also to items such as employee handbooks and policy directives that have become out-of-date or superseded. That way, the employer can show what the rules were at a particular time, even if the rules have since changed.

EMPLOYMENT PRACTICES LIABILITY INSURANCE Most standard premises liability insurance policies and comprehen- sive general liability (CGL) insurance policies exclude claims arising out of employment matters. This means that if you are sued for abu- sive discharge, for race or sex discrimination, or for employment-re- lated defamation, your insurance carrier will not provide a defense attorney, and it will not pay any judgment against you. Unless, that is, you have employment practices liability insurance (EPLI).

A number of companies offer coverage that picks up where the usual exclusion leaves off. While the coverage may be expensive, it is probably a good idea at least to discuss EPLI with your insurance broker and find out whether it is available and at what cost. Some carriers offer loss control services as part of their coverage, such as reviewing employment application forms and handbooks and coun- seling on compliance issues.

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