Category Archives: Terminating Employees

Suspicious Timing of Termination Supports Retaliation Claim

Contributed by Debra Mastrian, December 12, 2016

A recent 7th Circuit Court of Appeals decision, Gracia v. Sigmatron, International, Inc., Case No. 15-3311, is a good reminder to employers to be careful in taking adverse action against an employee who recently engaged in statutorily protected activity. In Gracia, a longtime employee, who had complained of sexual harassment by her supervisor and filed a charge of sex discrimination with the Equal Employment Opportunity Commission (EEOC), was fired two weeks later for allegedly allowing a subordinate to make a production error on a customer order.  The employee sued her former employer for sex discrimination and retaliation. While Gracia was unsuccessful on her sexual harassment claim, a jury found in her favor on the retaliation claim, awarding $57,000 in compensatory damages and $250,000 in punitive damages.

39454888 - notice of employee termination with glasses and ballpoint pen.Gracia was highly regarded and had received a number of promotions. In her current role as assembly supervisor, she was responsible for production output, quality, and overseeing the work of her team members on the assembly line. Gracia’s male supervisor began sending her sexually graphic photographs through the company’s email system. Gracia did not complain because of her supervisor’s position and his friendship with the company’s president. The supervisor then began writing Gracia up for attendance issues, even though Gracia had not been previously written up for similar problems in the past and, in fact, had been told her attendance was “excellent.” Gracia alleged the supervisor began calling her at home and asking her out. She declined and was suspended a few days later for attendance problems.

Gracia then complained to HR about her supervisor. HR informed the company’s president, who ultimately told Gracia and her supervisor to ‘shake hands’ and get along. Gracia, unhappy with the company’s response, filed a charge with the EEOC. Two weeks later, she was fired after one of her subordinates made a mistake, even though others made similar mistakes and were not terminated. Perhaps of significance to the jury on the punitive damages award was evidence that the company never admonished the supervisor for sending the graphic photographs but rather simply told him to stop using the company’s email for non-business reasons. The company also refused to admit the photographs violated the company’s sexual harassment policy.

On the retaliation claim, the 7th Circuit reiterated the general rule that timing alone is rarely enough to support a retaliation claim; however, if there is other circumstantial evidence, it may raise an inference of retaliatory motive. Here, the suspicious timing of Gracia’s termination, coupled with evidence that others had not been terminated for similar mistakes, supported the retaliation claim.

Employers are reminded that before you take action against an employee who has recently engaged in protected activity (i.e., complained of discrimination, filed a charge), make sure you have, or would have, taken the same action against other employees for doing the same thing. Consult with experienced legal counsel before taking adverse action against a ‘protected’ employee.

Document, Document, Document – A Mantra Revisited

Contributed by Carlos Arévalo

Failure to document performance or conduct problems is a common mistake employers make. Typically, employee handbooks contain provisions requiring periodic performance reviews.  Similarly, handbooks contain discipline provisions that include procedures dealing with the issuance of warnings related to the violation of work rules.  How employers use and apply these provisions can make the difference in successfully defending claims.

A recent decision out of the United States Court of Appeals for the District of Columbia illustrates how critical it is to properly document an employee’s behavior and performance issues. This decision also underscores the importance of making sure that the reasons for termination are clearly and consistently stated throughout the life of a claim. In Giles v. Transit Employees Federal Credit Union, 2015 WL 4217787 (July 14, 2015), an employee suffering from multiple sclerosis (MS) sued her former employer alleging wrongful termination in violation of the American with Disabilities Act (ADA) and the Employee Retirement Income Security Act (ERISA).

Prior to her termination, the employee was involved in a couple of altercations with customers. In one instance, the employee was engaged in an argument with a customer over a pen. The employee was given a verbal warning.  On another occasion, the employee improperly confronted a customer for entering the building through the wrong door. In response, the employee was issued a written warning with a two day suspension. The employee was then assigned to a different position. As for performance, the employee was given a combination of satisfactory and poor ratings in the two positions she held. When a leadership change occurred, the new CEO terminated the employee.

Because premiums for the health insurance plan increased 57% over a period of two years during her tenure, the employee sued claiming that the cost of treating her MS caused premiums to increase and that she was dismissed to reduce the employer’s health care costs. As the employee’s case moved from administrative proceedings before the EEOC to the action in district court, the employee also attacked the employer’s “shifting and inconsistent justifications for her termination.” Initially, the employer stated that the employee was terminated based on the employee’s performance ratings and her altercations with customers. Later, her termination was the result of a “general organizational review” made for “business reasons.” Finally, the employer reverted to poor performance and added that substandard employees were being eliminated as part of a business strategy to cut costs and restore profitability. Fortunately for the employer, the appellate court affirmed the trial court’s finding of summary judgment in favor of the employer because there was no evidence supporting a claim that the cost of insuring plaintiff was a motivating factor in the termination decision. However, inconsistencies or shifting justifications for employment action often give employees a successful argument that the reasons given for termination were pretextual in nature.

Here are five simple and practical lessons from the Giles case:

  1. Behavior issues should always be documented, even if they only involve a verbal warning.
  2. Periodic reviews should clearly identify any deficiencies in employee performance.
  3. The basis of a termination decision should be clearly stated to the employee.
  4. Employee files should be clear and concise so even a change in management will not affect employment decisions.
  5. The basis of the termination decision should be consistent – shifting reasons may impact the outcome of litigation.

What is the OWBPA Again and Why Should We Care? Here Is A Quick Refresher

Contributed by Suzanne Newcomb

The Older Workers Benefits Protection Act (OWBPA) amended the Age Discrimination in Employment Act (ADEA) back in 1990 to specifically permit bona fide seniority systems and voluntary early retirement incentive plans.  Along with these allowances, the OWBPA mandated strict requirements for ADEA waivers and disclosures for group termination.  The provisions are very technical and have tripped up many unsuspecting employers.

To be effective a waiver must be “knowing and voluntary.”  That sounds straightforward, but the statute specifically spells out what “knowing and voluntary” means in this context.  If the situation involves an isolated termination – a single employee terminated for cause or let go as a result of a restructuring that impacts his position alone – an ADEA waiver is not “knowing and voluntary unless at a minimum,” the waiver:

  • is in writing and written in a manner the individual can understand;
  • specifically refers to ADEA rights or claims;
  • does not waive rights or claims arising after the waiver is executed;
  • provides consideration over and above anything to which the individual is entitled already;
  • advises the individual in writing to consult with an attorney prior to executing the agreement (advising the individual has the right to consult with an attorney may not be sufficient);
  • allows the individual at least 21 days (45 in the case of group terminations addressed below) to consider the agreement before signing; and
  • allows the individual at least 7 days to revoke following execution of the agreement.

The statute tacks on additional requirements for waivers “requested in connection with an exit incentive or other employment termination program offered to a group or class of employees.”  Legislators complicated matters by failing to define the key terms in this phrase.  Relevant regulations and considerable case law interpret them broadly to encompass any situation in which two or more employees are terminated at or near the same time under similar circumstances or are offered incentives which stem from a standardized plan.

Whenever a release is offered in conjunction with a reduction in force involving more than one employee or other group terminations, the employer must follow each of the requirements set forth above and must also disclose:

  • the “decisional unit” or class, unit, or group of individuals covered by such program – in other words, the pool of employees from which the employer chose those who would be involuntarily terminated or offered an incentive to leave;
  • the eligibility factors used to determine who was selected for termination or offered an exit incentive;
  • any applicable time limits; and
  • job titles and ages of all eligible or selected individuals and all individuals in the same job unit who are not eligible or selected.

If you are implementing a RIF or thinking about offering severance to a departing employee in hope of avoiding potential litigation, you should consult qualified legal counsel first.  It is important to make sure the ADEA waiver contained in your release is enforceable.

Regular Attendance Remains an Essential Job Requirement Notwithstanding Employer’s Work-At-Home Policy

Contributed by Jonathon Hoag

The 7th Circuit’s recent decision in Taylor-Novotny v. Health Alliance Medical Plans, Inc., 772 F.3d 478 (7th Cir. 2014) provides a reminder to all employers that in order for an employee to establish an ADA claim he or she must show they are a “qualified individual with a disability.”  That is, the employee must be able to perform the essential functions of the job with or without reasonable accommodation.  In this case, the 7th Circuit reiterated that regular attendance is an essential function of most jobs and the fact that an employer allows flexibility through a work-at-home policy does not automatically eliminate the essential nature of regular attendance.

Home OfficeNovotny began work in November 2005 and experienced almost immediate punctuality and attendance problems.  She was rated poorly in this area during  her January 2007 performance evaluation.  A few months later Novotny was diagnosed with multiple sclerosis.  The company adjusted Novotny’s start time and made other accommodations to Novotny’s physical work space.  Novotny was also approved for intermittent leave under FMLA.

In 2008, Novotny began working from home two days a week under a work-at-home policy.  The company required Novotny to adhere to an agreed-upon work schedule, to be available by phone, email, voice mail, pager, or modem during that scheduled time, to report absences, and to be available for staff meetings and other in-services.  Novotny continued to have difficulties with attendance and tardiness.  The company documented the ongoing issues and stressed that Novotny could use intermittent FMLA leave when applicable, but she would be subject to discipline if she failed to timely communicate the absence or tardiness and for absences and tardiness unrelated to FMLA.

In May 2010, the company issued a final warning due to Novotny’s ongoing late arrivals.  Following this final warning, Novotny logged in late on multiple occasions while working from home.  Novotny provided excuses for logging in much later than her start time, but there was no dispute that Novotny did not timely notify her supervisor when logging in late.  In July 2010, Novotny was terminated.  Novotny filed suit alleging disability discrimination, among other things.

While the court noted that Novotny’s claim would fail because she was not meeting the company’s legitimate expectations, it disposed of her claim by ruling that she cannot allege disability discrimination because she was not a “qualified individual” with a disability.  Novotny’s condition was a “disability” under the ADA, but the evidence was clear that Novotny had ongoing attendance and punctuality problems.  As such, Novotny could not perform an essential function of the job (i.e. maintain reliable and regular attendance) with or without accommodation.  Novotny pointed out that she was allowed to work from home arguing that attendance and punctuality standards were flexible and not an essential function of the job.  The court disagreed by emphasizing that the work from home arrangement was pursuant to a written policy that clearly articulated requirements for her to maintain a regular schedule and be available at scheduled times.

The company was able to defeat Novotny’s claim largely because it had clear documentation to establish that regular attendance and punctuality were essential job functions.  Employers should keep in mind that the courts give employers a fair amount of discretion in determining what aspects of a job are essential, but the employer’s policies, job descriptions, and other writings must be reviewed and updated to remain consistent with the employer’s expectations of what constitutes an essential job function.

Supreme Court Holds that Severance Payments for Departing Employees are Subject to Payroll Taxes

Contributed by Sara Zorich

On March 25, 2014, the Supreme Court in United States v. Quality Stores, U.S., No. 12-1408, 2014 WL 11168968, 3/25/14) overturned the Sixth Circuit and unanimously held severance payments made to terminated workers were subject to payroll taxes including the Federal Insurance Contributions because the payments constituted “wages” and were in connection to services employees provided to the employer.

The defendant, Quality Stores, had made severance payments to employees who were voluntarily terminated prior to a Chapter 11 bankruptcy.  Quality Stores paid and withheld taxes subject to the Federal Insurance Contributions Act (FICA) but later believed the payments should not have been taxed and sought a refund from the U.S. government on behalf of itself and the 1,850 employees for which payments and withholdings had been made.  The Sixth Circuit held that the severance payments were not wages under FICA and thus, Quality Stores and the employees were not responsible for FICA taxes.

The U.S. Supreme Court reviewed the matter and overturned the Sixth Circuit’s decision.  The High Court held that that term “wages” is interpreted very broadly under FICA.  The Court determined the severance payments were being paid for the employee’s “service” which is not only the work actually done but constitutes the entire employer-employee relationship.  Thus, under FICA’s broad definition of wages, Quality Stores’ severance agreements were taxable as wages under FICA.  The Court recognized there is an exemption to taxable wages for certain severance plans that are tied to the receipt of state unemployment benefits.  However, the Court found that the severance plans at issue varied based on employee seniority and time served, and were not linked to the receipt of state unemployment benefits so they were taxable wages.  It should be noted that the Court addressed the distinction for severance payments and plans that are tied to the receipt of state unemployment benefits which are exempt from income-tax withholding and FICA taxation, and made no comment on such plans since they were not at issue in this matter.

Based on this ruling, employers must be careful when drafting severance agreements and understand that the definition of such wages will be interpreted broadly when determining whether such wages are taxable under the law.

Seventh Circuit Finds that Employer’s Shifting Reasons for Termination Defeat Summary Judgment

Contributed by Sara Zorich

On June 11, 2013, in Hitchcock v. Angel Corps, Inc., 12-3515, 2013 WL 2507243 (7th Cir. June 11, 2013), the Seventh Circuit overturned Defendant’s motion for summary judgment granted by the Northern District of Indiana in Plaintiff’s pregnancy discrimination case.  The Court held that the multiple and shifting reasons proffered by the Defendant for its termination of Hitchcock precluded the granting of Defendant’s motion for summary judgment.

Hitchcock alleged that the Defendant terminated her because she was pregnant.  Shortly after discovering she was pregnant, Hitchcock’s supervisor allegedly asked her if she was quitting after giving birth and that he needed a decision as soon as possible if she was returning after the birth.  An affidavit of Hitchcock’s co-worker also claimed that the supervisor asked her to rethink having a third child because she seemed to already have issues with her attendance.  Hitchcock also alleged that her workload significantly increased and she encountered increased supervision after she and her supervisor discussed her pregnancy. 

Defendant is a non-medical home care agency that performs personal care services for its clients.  The Seventh Circuit took issue with what it perceived as Defendant’s evolving and inconsistent explanation regarding Hitchcock’s termination.  First, on May 3, 2010, Defendant stated that Hitchcock’s termination was for completing an admission on an expired client and that her actions compromised the health and safety of the client.  Then later in support of the motion for summary judgment the following reasons were offered for the termination: (1) Defendant’s supervisor indicated that Hitchcock would have compromised the health and safety of the client by failing to deal with dried blood on the patient’s mouth and failing to take other steps; (2) one of the owners of the Defendant Corporation stated that Hitchcock was terminated because she performed a deficient assessment of a potential client who already passed away; and (3) Defendant’s brief claimed that the firing was for Hitchcock’s failure to call 911 after leaving the client’s home.

Defendant’s motion for summary judgment was granted by the Northern District of Indiana, however, the Seventh Circuit reversed and remanded the case holding that Hitchcock submitted evidence that the supervisor who fired her had an animus toward pregnant women, treated Hitchcock differently after learning she was pregnant and Hitchcock was fired only weeks later.  Further, the Court held that the reasons Defendant proffered for Hitchcock’s termination shifted and were inconsistent, which could lead a reasonable jury to conclude that Hitchcock was fired because she was pregnant.

Take Away for Employers: Employers are reminded to carefully document the reasons for an employee’s termination.  If the reason for the termination is not clearly documented and employees recall different or varying reasons or bases for the termination during a later proceeding, this could lead a court to conclude that the reason proffered at the time of termination was not the truth and can be interpreted as evidence of pretext defeating a motion for summary judgment.

When Being Bad Is Not Enough

Contributed by Caryl Flannery

You’ve been putting up with the employee’s tardiness and mistakes for months and you finally tell him that it’s the end of the line.  You breathe a sigh of relief that you no longer have to pay someone to sleep in every day.  Or do you?  Odds are that your bad employee will be eligible for unemployment compensation and that your tax rates will rise as a result.  With the proper procedures and documentation, however, you may be able to convince your state unemployment agency that the employee’s actions disqualify him from receiving unemployment benefits.

In most states, an employee will be disqualified from receiving unemployment benefits if the employee was discharged as result of “misconduct associated with work.”  Many employers are surprised to find that a solid “for cause” termination does not necessarily support a finding of “misconduct.” Performing a job negligently, making an error in judgment, not showing up for work on a single occasion, or not getting along with co-workers are often not considered “misconduct.”  A first offense, unless particularly egregious in terms of safety or identifiable damage to the employer, seldom is the basis for a “misconduct” determination. 

To disqualify an employee on the basis of “misconduct associated with work” an employer must show that the employee engaged in a deliberate or willful act in the face of established and known rules and after a clear warning that such behavior will result in termination.  The following guidelines will assist you in establishing disciplinary procedures and maintaining records that will support a finding of misconduct:

  • Have clear policies setting out your expectations for employee conduct, attendance, and performance.  Identify offenses for which an employee is subject to immediate discharge.
  • If you have a progressive discipline policy, follow it consistently or make sure that the policy permits “skipping” steps for particularly serious offenses.
  • When an employee violates a rule: (1) give the employee notice of the violation; (2) reiterate the rule that was violated; and (3) communicate the potential consequences of any additional violations (i.e., termination).  Giving the employee a copy of the rule is also helpful.
  • Keep contemporaneous documentation of the employee’s actions and your response.  Even a verbal warning should be memorialized in a memo. 
  • Be able to articulate the reason for termination in a simple and straightforward way that can be understood by someone who doesn’t know your business.  Although employees are often terminated as the result of a number of problems, pinpoint and emphasize the “last straw.”
  • For an appeals hearing, present as few witnesses as possible.  Prepare them well.  Giving testimony in a telephone hearing is very different from explaining what really happened.  Being able to provide the key factual elements of your case in a concise and easily understandable way is crucial. 

Since laws vary from state to state and the appeals process is usually subject to many technical rules and procedures, it is always a good idea to check with your labor and employment attorney when protesting or appealing unemployment claims.