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Tennessee and Sixth Circuit Appellate Update - Fall 2017

Tennessee Federal District Court Update

Tennessee and Sixth Circuit Appellate Update: Fall 2017

This year, I’m beginning a feature on my website which provides a quarterly employment law update of appellate decisions in Tennessee and the Sixth Circuit. As there will be several cases posted in this update each calendar quarter, I’ve tried to be brief but yet provide sufficient heading and case information (including Westlaw citation) to allow the reader to check the case in more detail if a case is pertinent to the reader’s particular need. This is the first installment from Fall 2017.

Title VII and ADEA Retaliation: Watford v. Jefferson County Public Schools, 870 F.3d 448 (6th Cir. 2017)

Watford sued the Jefferson County (KY) Board of Education (“JCBE”) and the Jefferson County Teachers Association (“JCTA”) alleging they retaliated against her for filing an EEOC charge. The trial court granted summary judgment against Watford. The Sixth Circuit reversed. With the parties’ collective bargaining agreement (CBA) providing for abeyance of grievance procedures if the employee opted to pursue a complaint using another agency, the court identified the central question as whether JCBE and JCTA’s conduct amounted to an adverse employment action – i.e., was it a materially adverse action if a CBA required grievance proceedings be held in abeyance upon the filing of an EEOC charge?

The court noted that Watford filed a grievance based on race, sex, and age discrimination on the day she was discharged and those proceedings were still in abeyance. The court cited to its precedent and that of other federal courts which have characterized the termination of grievance proceedings as an adverse employment action. The court held that there was not a material difference between terminating a grievance and holding it in abeyance. The court determined that Title VII and the ADEA protect employees from employers and labor organizations who would restrict the employee’s ability to file EEOC charges, and because the CBA did just that, the court held it violated the antiretaliatory provisions of those statutes.

A dissent disagreed with the weight of authority placed on precedent, the conclusion that Watford suffered an adverse action, and the finding that the CBA was facially retaliatory. The dissent would affirm by finding that staying a grievance when an employee filed an EEOC charge or discrimination lawsuit did not constitute retaliation under Title VII or the ADEA.

FMLA Interference: Mullendore v. City of Belding, Michigan, et al., 872 F.3d 322 (6th Cir. 2017)

Mullendore served as the City Manager for the City of Belding, Michigan. In January 2015, she notified the members of Belding’s City Council–all five of whom were defendants in this case–that she would be taking time off due to surgery and indicated that she would be able to work remotely while recovering. While she was away from the office, the City Council voted to terminate her employment, citing her role in causing political strife in the community. She sued under the FMLA.

The trial court granted summary judgment to the defendants, holding that Mullendore had not given sufficient notice that she would be taking FMLA leave, and that, in any event, the defendants provided a non-discriminatory reason for the termination. The Sixth Circuit affirmed. The court found that even assuming that Mullendore had notified the City Council that she was taking FMLA leave, the City Council could terminate her without violating the interference provision of the FMLA, as long as the reason for termination was not because she was on leave. The court held the City demonstrated a legitimate reason for terminating her, and she could not show it was pretext.

FLSA – Draw/Commission Compensation: Stein v. HH Gregg, Inc. and Gregg Appliances, Inc., 873 F.3d 523 (6th Cir. 2017)

The employer had a uniform compensation policy whereby their retail and sales employees, who are paid solely on the basis of commission, are advanced a “draw” to meet the minimum-wage requirements whenever their commissions fall below minimum wage. The amount of the draw is then deducted from future earnings in weeks when the employees’ commissions exceed the minimum-wage requirements. Stein and Beck, on behalf of themselves and all other former and current employees sued the employer claiming violations of the FLSA and state law, to include that they worked off the clock without compensation and failed to pay overtime.

The trial court found that the employer’s compensation policy was legal, and that plaintiffs therefore could not state a claim on which relief could be granted. The trial court dismissed all of plaintiffs’ federal claims, and declined to exercise supplemental jurisdiction over their remaining state-law claim. The Sixth Circuit reversed and remanded.

The court found that: (1) the retail or service establishment exemption did not apply; (2) plaintiffs alleged sufficient facts to demonstrate that the draw policy violated the FLSA; (3) plaintiffs alleged sufficient facts to support a claim that the employer’s policies and practices encouraged employees to work off the clock without compensation; (4) plaintiffs alleged sufficient facts to support a claim that the employer failed to pay overtime properly; and (5) the trial court erred in dismissing plaintiffs’ remaining claims.

FLSA – Administrative Exemption: Perry, et al. v. Randstad General Partner (US) LLC, 876 F.3d 191 (6th Cir. 2017)

Perry, in a putative class action, sued the employer alleging violation of the FLSA for improperly classifying them as exempt employees not entitled to overtime pay. The trial court granted the employer’s motion for summary judgment. The Sixth Circuit affirmed in part and reversed in part. The plaintiffs contended the trial court erred in both finding the employer eligible for the good-faith reliance defense and in finding the FLSA’s administrative exemption applicable.

The court observed neither it nor any other U.S. Court of Appeals had addressed the question whether staffing company employees fell within the administrative exemption; although several federal trial courts and the Department of Labor Wage and Hour Division (“WHD”) had addressed the question, with the WHD issuing an opinion letter in 2005 about whether “Staffing Managers” at a particular “temporary staffing agency” qualified for the administrative exemption.

With respect to the positions at issue, the court found:  (a) talent acquisition specialist – the employer conceded this position was not covered by the administrative exemption; (b) account manager/senior account manager – the primary duties as account managers involved the exercise of sufficient discretion and independent judgment such that the administrative exemption applied; (c) staffing consultant/senior staffing consultant – a reasonable trier of fact could find the primary duties were the non-exempt sales and routine recruiting tasks, not the exempt matchmaking duties, the administrative exemption did not apply; and (d) assistant branch manager – the duties primarily consisted of exempt work for which the administrative exemption applied.

With respect to the good-faith reliance defense, relating to employee Lane’s time as a talent acquisition specialist, employee Dooling’s time as a staff consultant, or employee Perry’s time as a staff consultant and senior staff consultant, the court found the employer’s reliance was not “in conformity with” the 2005 WHD letter because certain “specified circumstances and facts” cited in the 2005 letter were absent, at least as to talent acquisition specialists and staffing consultants/senior staffing consultants. Additionally, the employer had not shown its reliance was in “good faith” as a matter of law because the employer arguably had “knowledge of circumstances which ought to” have caused it to inquire further.

The Sixth Circuit affirmed the trial court’s grant of summary judgment to the employer as to: (1) Dooling’s claim arising out of her time as an account manager; (2) Lane’s claims arising out of her time as an account manager and senior account manager; and (3) Lane’s claim arising out of her time as an assistant branch manager. The court reversed the trial court’s grant of summary judgment as to: (1) Lane’s claim arising out of her time as a talent acquisition specialist; (2) Dooling’s claim arising out of her time as a staffing consultant, and (3) Perry’s claims arising out of her time as a staffing consultant and a senior staffing consultant.

One dissenter agreed that the sales duties fell outside the administrative exemption, but disagreed the matchmaker duties fall within the exemption; and the other agreed the match-making duties fell within the administrative exemption, but disagreed that the sales duties did not.

FLSA – Highly Compensated Employees/Salary Basis Test: Hughes v. Gulf Interstate Field Services, Inc. 878 F.3d 183 (6th Cir. 2017)

Hughes, a welding inspector, sued the employer for violation of the FLSA and state law asserting overtime claims. The trial court granted the employer’s motion for summary judgment on the basis the employees were exempt as highly compensated employees under the governing regulations. The Sixth Circuit reversed.

Under the circumstances of this case, the sole issue was whether Hughes met the “salary basis” test. Hughes introduced evidence that he was paid a “day rate” and his salary was calculated at the rate of “$337.00/day worked.” The text of 29 CFR § 602(a) did not tell the court what to do when an employee’s salary was not clearly calculated “on a weekly, or less frequent basis.” Hughes pointed the court to a neighboring provision, § 541.604(b), which stated:

“An exempt employee’s earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned.”

The court distinguished cases cited by the employer and those decided by sister circuits. The court simply ruled that the threshold question of whether there was a guarantee – not at issue in those cases, but very much disputed here – mattered for determining whether employees whose pay was at least arguably calculated on a daily basis qualified as exempt.

The court observed that the operative idea behind a guarantee was in the context that the employer was contractually obligated not to change its mind and reduce whatever amount it previously determined to provide. Because a reasonable trier of fact could conclude that Hughes received no such guarantee from the employer, the court determined that the employer could not prevail on summary judgment.

Retaliation: Lawrence, et al. v. Chattanooga-Hamilton County Hospital Authority, 2017 WL 4476858 (Tenn. App. 10/06/2017)

Lawrence and other employees of the hospital employer’s Security Services Department (“SSD”) sued the employer for employment discrimination based on age, race, and retaliatory discharge for filing unpaid wage claims. The trial court granted the employer’s motion for summary judgment. The Tennessee Court of Appeals, Eastern Section, affirmed. The underlying context was outsourcing and layoffs in the SSD.

The court found: (1) the plaintiff claiming racial discrimination could not show that he was replaced or treated differently than a non-minority, as all the employees were terminated; (2) the plaintiffs claiming age discrimination could not show that they were replaced by younger persons or treated differently than younger persons because they were all terminated together; and (3) the plaintiffs claiming retaliatory discharge failed as to five plaintiffs because the complaints they cited as the basis for retaliation occurred after they were terminated; and the other two plaintiffs accepted severance agreements and signed releases.

Non-Competition Agreements: ADP, LLC v. Manchir, 2017 WL 5185458 (Tenn. App. 11/08/2017)

Manchir worked as a sales manager for ADP, LLC, a company that deals in human resources and business outsourcing matters. As a prerequisite to obtaining restricted stock options from ADP, Manchir consented to a restrictive covenant agreement. The Agreement contained, among other things, a non-competition clause extending to twelve months after Manchir left ADP. New Jersey law governed the Agreement.

Manchir later resigned from ADP and went to work for an ADP competitor, Paycor, Inc. ADP sued Manchir for breach of contract and sought specific enforcement of the Agreement. The trial court granted ADP summary judgment. The trial court also awarded ADP, pursuant to a provision in the Agreement, attorney’s fees and costs. The Tennessee Court of Appeals, Middle Section, held, inter alia, that the Agreement was reasonable and enforceable under New Jersey law, that Manchir breached the Agreement, and that specific performance was an appropriate remedy; and affirmed the trial court judgment.

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