Employment Law

Sixth Circuit: Employer Violated ADA by Firing Diabetic Employee

Why it matters

An employer violated the Americans with Disabilities Act (ADA) for terminating a diabetic employee who drank orange juice at the cash register during hypoglycemic episodes, the U.S. Court of Appeals for the Sixth Circuit has affirmed. A diabetic, Linda Atkins requested to keep a bottle of orange juice at her register to avoid the risk of seizing or passing out during a hypoglycemic episode, but her manager refused, citing Dollar General policy that prohibited food and drink at the registers. On two occasions, she took a bottle of OJ from a store cooler, drank it and paid for the juice, telling her manager what she did. When the regional manager later conducted an audit of the store, Atkins was fired for violating the “grazing policy,” which forbids employees from consuming merchandise in the store prior to paying for it. A jury awarded her more than $600,000 in her ADA suit, and the employer appealed. But the federal appellate panel rejected Dollar General’s argument that Atkins could have treated her hypoglycemia in other ways, noting that after the company denied the plaintiff’s request, it failed to engage in the interactive accommodation process to find a solution that worked for both parties.

Detailed discussion

Linda Atkins began working at Dollar General as a sales associate in August 2009. She received annual raises and was promoted to lead sales associate in March 2012. The position required her to handle the cash register in the store. When Atkins experienced hypoglycemic episodes at work due to her diabetes, she would excuse herself to the break room, where she kept orange juice in a cooler.

However, her promotion meant she often worked alone and could not leave the floor to go to the break room. Atkins spoke to her store manager about keeping a bottle of orange juice at her register but was told store policy prohibited it. After her promotion, Atkins suffered two hypoglycemic episodes, one in 2011 and another in 2012. Both times she was working alone while at least eight customers were in the store, so she took a bottle of OJ from the store cooler, drank it and paid the $1.69 for each. Both times, she told the store manager what had happened.

In March 2012, the regional loss manager conducted an audit of the store to address employee theft. During an interview, Atkins told them about the orange juice she consumed and paid for. Citing Dollar General’s “grazing policy,” which forbids employees from consuming merchandise in the store before paying for it, Atkins was fired at the end of her meeting.

She filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC), and the agency filed suit in Tennessee federal court. Atkins intervened, and at trial, a jury found in her favor on both the reasonable accommodation and discriminatory discharge claims, awarding $27,565 in back pay and $250,000 in compensatory damages (along with almost $450,000 in attorneys’ fees and expenses).

Dollar General appealed the verdict. The employer argued that the jury erred in finding that it discriminated against the plaintiff by failing to provide her with a reasonable accommodation for her disability. Atkins could have treated her hypoglycemia in ways other than taking a bottle of orange juice, the employer told the court, such as by consuming glucose tablets, honey, candy or peanut butter crackers.

“But these options do not make the jury’s verdict unreasonable,” the Sixth Circuit wrote. “The company’s ‘Personal Appearance’ policy states that employees ‘should not chew gum or eat/drink, except during breaks (which should not be taken on the sales floor, at registers, etc.).’ Just as a jury could find that the company prohibited employees from drinking orange juice at the register, so too could it find that it prohibited them from consuming glucose tablets, cough drops, candy and honey packets at the register.”

Atkins asked for an exception to the policy “and got nowhere,” the court added.

Further, Dollar General had a duty to explore the nature of Atkins’ limitations, if and how those limitations affected her work, and what types of accommodations could be made, the court said. “Had Dollar General followed this route, it might well have told Atkins that she could consume glucose pills at the register and perhaps that would have resolved the matter. But that’s not what it did. The store manager categorically denied Atkins’ request, failed to explore any alternatives, and never relayed the matter to a superior. That was Dollar General’s problem, not Atkins’—or at least a reasonable jury could so decide.”

“Ample evidence” supported the jury’s conclusion that Dollar General failed to provide Atkins with reasonable alternatives to keeping orange juice at her register, the panel found.

With regard to the claim of discriminatory discharge, the court explained that whether a policy is neutral on its face doesn’t matter when an employee presents direct evidence of discrimination.

“[A] company may not illegitimately deny an employee a reasonable accommodation to a general policy and use that same policy as a neutral basis for firing him,” the court wrote. “Imagine a school that lacked an elevator to accommodate a teacher with mobility problems. It could not refuse to assign him to classrooms on the first floor, then turn around and fire him for being late to class after he took too long to climb the stairs between periods. In the same way, Atkins never would have had a reason to buy the store’s orange juice during a medical emergency if Dollar General had allowed her to keep her own orange juice at the register or worked with her to find another solution.”

The Sixth Circuit affirmed the jury’s verdict and damages award.

To read the opinion in Equal Employment Opportunity Commission v. Dolgencorp, LLC, click here.

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CAFA’s Amount in Controversy Includes Future Attorneys’ Fees

Why it matters

The amount in controversy required for jurisdiction under the Class Action Fairness Act (CAFA) should include future attorneys’ fees recoverable by statute or contract, the U.S. Court of Appeals for the Ninth Circuit ruled in a wage and hour class action, reversing a district court’s order that had sent the case back to state court. When Grant Fritsch sued Swift Transportation Company in state court, the employer filed a notice of removal, arguing that future attorneys’ fees (in addition to recovery for overtime, meal periods and appropriate wage statements, as well as statutory penalties) in the case tipped the potential recovery over the $5 million benchmark required for a removal under CAFA. The district court disagreed, refusing to include attorneys’ fees that had yet to accrue, and remanded the case to the state court. But the Ninth Circuit reversed, holding that a court must include future attorneys’ fees recoverable by statute or contract when assessing whether the amount in controversy requirement is met under CAFA. If the law entitles the plaintiff to future attorneys’ fees if the action succeeds, then there is no question that future attorneys’ fees are “at stake” in the litigation and should be included in such a calculation, the panel ruled.

Detailed discussion

A driver for Swift Transportation, Grant Fritsch filed a wage and hour class action in San Bernardino Superior Court. According to his third amended complaint, Fritsch alleged that Swift denied him and other employees proper overtime pay, meal periods and appropriate wage statements. The complaint sought wages and premiums owed, prejudgment interest, statutory penalties, attorneys’ fees pursuant to the California Labor Code and costs of suit. He also asked for equitable relief under California’s Unfair Competition Law and statutory damages under California’s Private Attorneys General Act (PAGA).

As part of a mediation brief, Fritsch provided Swift with a damages chart that listed, as of Oct. 18, 2017, a total of $5,924,104, exclusive of PAGA penalties: $1,806,080 for unpaid overtime wages, $361,216 for unpaid double-time wages, $531,404 for interest on unpaid overtime wages, $948,192 for unpaid meal period premiums, $948,192 for unpaid rest period premiums, $515,000 for wage statement penalties, $664,020 for waiting time penalties and $150,000 for attorneys’ fees and costs.

Subtracting the interest payments but adding an estimate for future attorneys’ fees, Swift informed the court that the amount in controversy was $6,553,375. The district court deducted the amount for unpaid rest period premiums (because the complaint did not list such a claim) and refused to include future attorneys’ fees. This left the total amount of damages in controversy at $4,778,475, causing the court to rule that it lacked jurisdiction as a result. The court then remanded the case to the state court.

Swift appealed. While the petition was pending, the Ninth Circuit issued a decision in Chavez v. JPMorgan Chase & Co., where the federal appellate panel held that “the amount in controversy is not limited to damages incurred prior to removal,” but rather “is determined by the complaint operative at the time of removal and encompasses all relief a court may grant on that complaint if the plaintiff is victorious.”

Tackling the question of whether the amount in controversy requirement was met, the court explained that it is the “amount at stake in the underlying litigation,” including damages (compensatory, punitive or otherwise), the costs of complying with an injunction and attorneys’ fees awarded under fee-shifting statutes or contract.

“We conclude, in light of Chavez and our precedents, that a court must include future attorneys’ fees recoverable by statute or contract when assessing whether the amount-in-controversy requirement is met,” the panel wrote. “We have long held (and reiterated in Chavez) that attorneys’ fees awarded under fee-shifting statutes or contracts are included in the amount in controversy. As explained in Chavez, when we assess the amount in controversy at the time of removal, we must include all relief to which a plaintiff is entitled if the action succeeds. Accordingly, if the law entitles the plaintiff to future attorneys’ fees if the action succeeds, ‘then there is no question that future [attorneys’ fees] are ‘at stake’ in the litigation,’ and the defendant may attempt to prove that future attorneys’ fees should be included in the amount in controversy.”

Applying this rule to Fritsch’s complaint, the Ninth Circuit vacated the district court’s order. “Because the law entitles Fritsch to an award of attorneys’ fees if he is successful, such future attorneys’ fees are at stake in the litigation, and must be included in the amount of controversy,” the court held. “Accordingly, we must remand to allow the district court to determine if Swift can carry its burden of proving that the amount in controversy (including future attorneys’ fees) exceeds the jurisdictional threshold.”

The panel disagreed with Fritsch’s argument that future attorneys’ fees are inherently speculative and can be avoided by the defendant’s decision to settle an action. District courts are “well equipped” to determine whether defendants have carried their burden of proving future attorneys’ fees by a preponderance of the evidence, the court stated, and to determine when a fee estimate is too speculative because of the likelihood of a prompt settlement.

To read the opinion in Fritsch v. Swift Transportation Co. of Arizona, LLC, click here.

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California Appellate Court Considers Fraud in Employment Contract

Why it matters

An employer that induces an employee to enter into an employment contract by intentionally promising compensation terms the employer never intended to honor may not avoid tort liability for fraudulent inducement of contract, a California appellate court has ruled. David Lacagnina worked for Comprehend Systems as director of business development for about one year until he was terminated. Lacagnina alleged he was fraudulently induced to enter into an employment agreement because of false representations made by Comprehend’s founders. A jury awarded the plaintiff a total of $556,446 in damages, including $226,446 for fraud and $75,000 for emotional distress. But the trial court then granted the employer’s motion for judgment notwithstanding the verdict (JNOV) on the fraud claim, throwing out that part of the award. The appellate panel reversed, ruling that including an at-will provision in an employment contract that allows the employer to fire the employee at any time, for any reason, does not permit an employer to avoid tort liability for fraudulent inducement of contract where the employer induces the employee to enter into the contract by intentionally promising compensation terms it never intended to honor. However, the panel refused to accept Lacagnina’s argument that an employee who recovers a judgment against an employer for lost compensation has suffered a “theft” of “labor” for which he or she is entitled to recover treble damages and attorneys’ fees under the state’s Penal Code.

Detailed discussion

In 2010, Richard Morrison and Jud Gardner founded a company called Comprehend Systems. After selling Comprehend’s software product as an independent contractor with his own company, David Lacagnina was asked by Morrison and Gardner to work full time for Comprehend.

Although interested, Lacagnina had concerns, which resulted in the parties engaging in extensive negotiations. Lacagnina’s initial salary was low because Comprehend wasn’t making a lot of money, but he was promised that he would receive commissions “on all accounts.” Morrison emailed Lacagnina that the hope was to hire additional salespeople and split up some accounts, writing that “you will obviously be involved in all of these decisions and help us figure out how best to navigate.”

Lacagnina thereafter signed a written employment agreement with Comprehend and joined the company as director of business development. Over the next year, he made some key sales, and during his review, Morrison and Gardner told him “we love what you’re doing” and had nothing negative to say about his performance.

Not long after that, the three met to discuss a new employment contract for Lacagnina that was required in order to close a deal with an investor to secure more than $5 million in financing for Comprehend. The amended contract contained preconditions for Lacagnina to obtain commissions and omitted any reference to the repayment of a $250,000 investment Lacagnina had made in the company.

Concerned about the terms, Lacagnina reached out to Morrison and Gardner. Morrison told Lacagnina that he didn’t have time to have an attorney review the contract because the financing deal needed to close and told Lacagnina, “You’ve got to trust me.” Lacagnina signed the contract. But the next month, a new vice president of sales was hired without Lacagnina’s knowledge or input, and Lacagnina was instructed to “transition” his accounts to the new hire.

When Lacagnina resisted, he was terminated. He sued, asserting fraud, violation of California’s Penal Code and breach of contract, among many other claims. Following a ten-day jury trial, jurors found in favor of Lacagnina and awarded him damages due to fraud and deceit in the amount of $226,446, economic damages due to breach of contract for $5,000 (which included stock options in Comprehend), $250,000 in economic damages due to breach of the covenant of good faith and fair dealing, and emotional distress damages in the amount of $75,000.

The trial court granted the defendant’s motion for JNOV as to the fraud claim, agreeing with the company that Lacagnina was an at-will employee entitled to commissions only on sales he closed and that, therefore, he suffered no harm by signing the employment contract, reducing the judgment to $255,000.

Lacagnina appealed, arguing that the jury verdict in his favor was supported by substantial evidence and should not have been reversed. The California appellate panel agreed.

“Here, viewing the facts in the light most favorable to the jury’s verdict, there was substantial evidence from which the jury could have found that Lacagnina was harmed as a result of misrepresentations or concealment by respondents,” the court wrote. “In particular, the jury could have found that Lacagnina was induced to join and remain at Comprehend, and to execute the amended offer letter, by respondents’ representations that he would be fairly compensated for sales for which he was responsible, and that they would ‘revisit’ the terms of that letter, which stated that Lacagnina would not be entitled to commissions unless he remained employed by Comprehend. It could also have found, as Lacagnina argued, that respondents had a concealed plan to replace Lacagnina with [the new vice president of sales], at which point he was compelled to ‘transition’ his accounts … thereby depriving him of the opportunity to earn commissions on sales to those customers, and was then summarily terminated.”

Thus, there was substantial evidence for the jury to find that Comprehend had engaged “in actionable fraud or concealment resulting in harm to Lacagnina,” the panel held. The court found no merit in the company’s position that the agreements prevented Lacagnina from recovering any damages on his claims.

An employer that induces an employee to enter into an employment contract by intentionally promising compensation terms the employer never intended to honor may not, as a matter of law, avoid tort liability for fraudulent inducement of contract because the contract contains an at-will provision that allows the employer to fire the employee at any time, for any reason, the court stated.

However, the court was not as impressed by Lacagnina’s attempt to recover damages under Section 496 of the California Penal Code, which permits treble damages and attorneys’ fees, based on his argument that Comprehend and its executives engaged in the “theft” or “receipt” of “stolen property” in the form of his labor.

Although the novel theory was creative, “we find it inconsistent with the plain language and structure of the Penal Code, the legislative purpose, and the likely consequences of Lacagnina’s interpretation,” the panel explained. Section 496 makes no reference to labor; instead, it is limited by its terms to property, the court said, adding that “significant adverse consequences would likely follow from Lacagnina’s proposed interpretation of the statute.”

“If every plaintiff in an employment or contract dispute could also seek treble damages and attorneys’ fees on the ground that the defendant received ‘stolen property,’ such claims would become the rule rather than the exception, parties would more frequently assert claims for ‘theft’ in run-of-the-mill commercial disputes, and cases would be harder to settle,” the court wrote. “We cannot believe the Legislature contemplated, much less intended, those consequences when it enacted [S]ection 496.”

To read the opinion in Lacagnina v. Comprehend Systems, Inc., click here.

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Eleventh Circuit Reverses, Allowing ADA, FMLA Claims to Move Forward

Why it matters

The U.S. Court of Appeals for the Eleventh Circuit gave a plaintiff another chance at her Family and Medical Leave Act (FMLA) and Americans with Disabilities Act (ADA) claims, finding that the evidence of pretext was sufficient to reverse summary judgment in favor of the employer. An auditor for The Salvation Army (TSA) for more than a decade, Ebonie Batson was diagnosed with multiple sclerosis (MS) in 2010. She took her first two-week leave under the FMLA in January 2013, and intermittent leave followed. She met with human resources (HR) to discuss accommodations and provided medical documentation, but she was denied her request to occasionally telecommute and have her travel schedule adjusted. When she returned from her FMLA leave, her job had been eliminated. She interviewed for her former job, but, despite having been told the position was hers, she was instead fired. Batson filed suit, and the district court granted summary judgment on all her claims. The federal appellate panel reversed with regard to her claims for FMLA interference and retaliation under both the FMLA and ADA. Questions from the company’s decision maker during the interview, which focused on Batson’s health, combined with her excellent performance history were sufficient evidence of pretext with regard to the company’s stated reason for her termination, the court held.

Detailed discussion

For more than a decade, Ebonie Batson worked for TSA, consistently receiving positive performance reviews and a promotion in 2006 to senior auditor. Batson was diagnosed with MS in January 2010 and informed her supervisors; around the same time, she was again promoted to audit manager. In 2012, she requested a meeting with her new supervisor to discuss her need for an accommodation because of her MS. Although the meeting was scheduled, it was canceled and rescheduled several times and was never held.

In January 2013, Batson took her first FMLA leave, lasting two weeks. Later that month, she requested intermittent FMLA leave, and her request was granted. Batson also met with the head of HR, requesting adjustments to her travel schedule and the ability to telecommute on occasion, and provided an ADA interactive process questionnaire on her behalf. Those requests were denied.

Not long after, the company made the decision to eliminate Batson’s audit manager position, although the understanding was that Batson would be allowed to resume her former senior auditor position. When she returned from her leave, Batson was told the application process for the senior auditor position was just a formality. Batson was the only person to apply for the position, which was posted internally.

Batson’s supervisor thereafter retired, and her new boss expressed concern about hiring Batson for the senior auditor position. During the interview, this supervisor asked Batson a number of questions related to her health. Frustrated, Batson replied that she knew federal law and believed the supervisor was not permitted to ask about her medical condition. The supervisor then refused to hire Batson based on her “performance in the review,” and Batson was terminated.

In her complaint, Batson included claims under the ADA and the FMLA. The district court granted summary judgment in favor of the employer on every issue, and Batson appealed to the Eleventh Circuit.

The panel first affirmed summary judgment for the defendant on Batson’s ADA failure to accommodate claim, concluding that she advanced no evidence establishing that TSA failed to accommodate her disability.

“The problem for Batson is that she has offered no evidence that before her FMLA leave and her termination she needed either of the accommodations she previously had requested generally,” the court said. “We agree with Batson that the record establishes TSA’s intent to deny her accommodation, but without evidence of a specific instance in which she needed an accommodation and was denied one, she cannot establish a failure to accommodate.”

However, the panel reversed with regard to Batson’s FMLA and ADA retaliation claims, finding that Batson had successfully rebutted the company’s reasoning for its termination of her such that a reasonable juror could find that its explanation was pretextual.

Even prior to the interview, the new supervisor indicated that she did not want to hire Batson, the court noted, demonstrating that her reason for not hiring Batson was not entirely based on the interview performance. During the interview, the supervisor repeatedly asked questions about Batson’s health and its impact on her ability to meet the demands of the job, with multiple questions about doctors’ appointments and her ability to travel.

The court also pointed out conflicting evidence about Batson’s interview performance. Batson testified that she was not loud or argumentative, but quiet and hurt, because she felt like she was being interrogated about her medical condition. The other interviewer testified that Batson answered the questions satisfactorily and that he understood her confusion and frustration about the interview. “A reasonable jury could infer from these contrasting descriptions of the interview that [the] failure to hire Batson based on her interview performance was pretextual,” the panel said.

Adding to the possibility of pretext: a decade’s worth of “excellent” performance reviews and her former supervisor’s recommendation that she be hired for the senior auditor position. The court also focused on an email from the new supervisor after the interview in which the supervisor stated that she “need[ed] to think through the rationale” of declining to hire Batson, which could be interpreted to mean that the new supervisor was trying to think of an alternative justification than Batson’s illness.

“Viewing all of this evidence in Batson’s favor … a reasonable jury could infer that [the new supervisor] decided against hiring Batson because of Batson’s illness, not because of her interview or job performance, and that [the employer’s] explanations to the contrary were pretextual,” the panel concluded.

The court also reversed summary judgment with respect to the plaintiff’s FMLA interference claim, finding that Batson raised “a genuine dispute of material fact as to whether she would have been terminated regardless of her request for FMLA leave.”

To read the opinion in Batson v. The Salvation Army, click here.

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