Fourth Circuit Establishes New Test for Joint Employer Liability Under the FLSA

In Salinas v. Commercial Interiors, Inc. , 848 F.3d 125 (4th Cir. 2017), the United States Court of Appeals for the Fourth Circuit established a new test for determining whether two or more persons or entities constitute a joint employer under the Fair Labor Standards Act (“FLSA”).

When it was in existence, J.I. General Contractors, Inc. (“JI”), directly employed the plaintiffs in Salinas . JI performed framing and drywall services. JI, and thus the plaintiffs, worked almost exclusively for Commercial Interiors, Inc. (“Commercial”), a general contractor that offered interior finishing services. The only exceptions where JI did not perform services for Commercial was when Commercial did not have any work for JI and that apparently happened only twice.

With some limited exceptions, JI generally was responsible for hiring and firing the plaintiffs. Commercial, however, played a role in determining the plaintiffs’ daily and weekly schedules. In this regard, Commercial decided the start and stop times at each job site, required plaintiffs to work additional hours during the week or on weekends, and determined on-site staffing needs. Additionally, Commercial was the entity that required the plaintiffs to sign in on timesheets, which bore Commercial’s logo. Commercial required the plaintiffs to attend meetings, including weekly safety meetings, and instructed plaintiffs on what work needed to be completed. The work was generally performed with tools and materials that were provided by Commercial as well. The plaintiffs wore hardhats and vests with the Commercial logo when working on job sites and JI supervisors wore sweatshirts branded with Commercial’s logo. Plaintiffs were even instructed to tell anyone who asked that they worked for Commercial.

In July 2012, the plaintiffs filed a collective action under the FLSA, Maryland Wage and Hour Law, and Maryland Wage Payment and Collection Law, alleging that JI and Commercial (and certain individuals) willfully failed to pay wages, including overtime, required to be paid by the FLSA and Maryland statutes. The plaintiffs alleged that they were jointly employed by Commercial and JI, thereby making them jointly and severally liable for the statutory violations. The United States District Court for the District of Maryland granted summary judgment to Commercial, applying a five factor test that led it to conclude Commercial was not a joint employer. The trial court ultimately entered judgment in the plaintiffs’ favor against JI and the individual defendants (who owned JI). The plaintiffs appealed the district court’s grant of summary judgment to the Fourth Circuit.

The Fourth Circuit acknowledged that the FLSA does not expressly reference joint employment, but noted that Department of Labor regulations recognize a “single individual may stand in the relation of an employee to two or more employers at the same time . . . since there is nothing in the [FLSA] which prevents an individual employed by one employer from also entering into an employment relationship with a different employer.” The Fourth Circuit explained that the regulations distinguish between “separate and distinct employment” and “joint employment.” Separate employment exists when “all the relevant facts establish that two or more employers are acting entirely independent of each other and are completely disassociated with respect to the” individual’s employment. Joint employment on the other hand exists when the “employment by one employer is not completely disassociated from employment by the other employer.”

The United States Supreme Court has long recognized the concept of joint employment (since 1947), but, according to the Fourth Circuit, courts have been unable to develop a coherent test to distinguish separate employment from joint employment. The Fourth Circuit attributed much of the confusion to a decision by the United States Court of Appeals for the Ninth Circuit in Bonnette v. California Health & Welfare Agency , 704 F.2d 1465 (9th Cir. 1983), where the Ninth Circuit identified four, non-exclusive factors to determine whether a joint employment relationship existed – “whether the alleged employer: (1) had the power to hire and fire the employees, (2) supervised and controlled work schedules and conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.” The Fourth Circuit observed that, over time, courts applied variations of this test to take into account the FLSA’s expansive definition of “employee” and the Ninth Circuit now applies a non-exclusive thirteen factor test when evaluating whether joint employment exists. The Fourth Circuit then devoted several pages to explaining why the Bonnette factors do not work and that no coherent test has been established yet to determine joint employer liability under the FLSA. In establishing its own test for joint employer liability, the Fourth Circuit explained that its new test is guided by the Supreme Court’s direction that the FLSA “must not be interpreted or applied in a narrow, grudging manner” and “because the [FLSA] is remedial and humanitarian in purpose, it should be broadly interpreted and applied to effectuate its goals.”

The Fourth Circuit turned to the FLSA regulations that identify three non-exclusive scenarios in which joint employment generally exist: (1) where there is an arrangement between the employers to share the employee’s services; (2) where one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or (3) where the employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee. In answering these questions, the Fourth Circuit determined that courts should consider the following six factors: (1) whether formally or as a matter of practice the putative joint employers jointly determine, share, or allocate power to direct, control, or supervise the worker; (2) whether formally or as a matter of practice the putative joint employers jointly determine, share, or allocate power to directly or indirectly hire or fire the worker or modify the worker’s terms and conditions of employment; (3) the degree of permanency and duration of the relationship between the putative joint employers; (4) whether one putative joint employer controls, is controlled by, or is under common control of the other putative joint employer, whether through a direct or indirect ownership interest or through shared management; (5) whether the work is performed on the premises owned or controlled by one or more of the putative joint employers; and (6) whether formally or as a matter of practice the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer (e.g., payroll, workers’ compensation insurance, paying payroll taxes). The court emphasized that this list is non-exhaustive of all potentially relevant factors that should be considered. As a general “catch all” factor, the court stated that, to the extent any facts not captured by these six factors “speak to the fundamental threshold question that must be resolved in every joint employment case – whether a purported joint employer shares or codetermines the essential terms and conditions of a worker’s employment – courts must consider those facts as well.” The court then further emphasized that the ultimate determination regarding joint employment “must be based upon circumstances of the whole activity.” To this end, because the Department of Labor regulations focus on whether the entities are “entirely independent” or “not completely disassociated,” one factor alone may form the basis for finding that two or more entities are “not completely disassociated” with respect to a worker’s employment.

The court then explained over several pages why this new test makes sense and should be applied. The court also applied the test to the facts of the case and determined that Commercial was a joint employer with JI and the individual defendants. In finding that Commercial was a joint employer, the court noted that “nearly all of the factors we identified above support such a finding.” Thus, even though not every factor pointed in favor of joint employment, the court found joint employment existed nonetheless.

The Fourth Circuit’s decision in Salinas is significant for obvious reasons, as it sets forth a new test for determining joint employer liability under the FLSA. Whether this test is adopted by other appellate courts remains to be seen, but, for now, at a minimum, companies operating in Maryland, Virginia, West Virginia, North Carolina, and South Carolina will need to adhere to this new test when evaluating contract relationships with other entities and whether a joint employment relationship exists for FLSA purposes.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Does a Company Waive the Attorney-Client Privilege When it Forwards Emails to Other Company Employees, Employees of a Subsidiary, or Former Employees?

When dealing with communications protected by the attorney-client privilege, companies face an added challenge that does not apply to most individuals. As we all know, emails can and are forwarded rather easily within and outside of companies. The sharing of such communications raises a host of potential issues for companies, including the potential waiver of the attorney-client privilege. A couple of recent decisions addressed these very issues and shed some light on when the attorney-client privilege may be waived by a company.

In AU New Haven, LLC v. YKK Corp. , No. 1:15-CV-3411-GHW, 2016 WL 6820383 (S.D.N.Y. Sept. 28, 2016), the United States District Court for the Southern District of New York reviewed a variety of communications to determine whether they were protected by the attorney-client privilege. Many of the communications involved circumstances where the communications were circulated beyond the attorney-client relationship, specifically non-attorney employees within the same company or employees of another company under common ownership. While the court noted that the attorney-client relationship is automatically waived when a privileged communication is disclosed to a third party or a litigation adversary, there are some exceptions to this general rule.

One of those exceptions concerns communications between clients and non-lawyer agents or contractors of the attorney, as communications to an attorney’s agent or contractor at the behest of the attorney can be for the purpose of obtaining legal advice. The court in YKK explained that this exception applies differently in the context of corporations. To this end, the court noted that the United States Supreme Court in Upjohn Co. v. United States , 449 U.S. 383 (1981), rejected the “control group” test for the attorney-client privilege, which applied the privilege only to a company’s top executives, finding that an “attorney’s advice will also frequently be more significant to noncontrol group members than those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation’s policy.” Based on this principle, courts have determined that “the distribution within a corporation of legal advice received from its counsel does not, by itself, vitiate the privilege.”

Another exception the court discussed concerns the common interest rule. To protect a privileged communication under the common interest rule, a party must show that “(1) the party who asserts the rule must share a common interest with the party with whom the information was shared and (2) the statements for which protection is sought [must have been] designed to further that interest.” The common interest must be legal in nature, not commercial. The court went on to hold, however, that the common interest need not be “identical,” as such a stringent test would “unduly hamper the purpose of the common interest rule.” In reaching this conclusion, the court noted that it is “commonplace that parties may engage in a ‘common legal strategy’ without having an exactly identical interest in the outcome of the litigation” and the “joint endeavor is not diminished solely because, in the final instance, the remedies that they derive from the litigation differ.” The court concluded that “[t]he key question is whether the parties are collaborating on a legal effort that is dependent on the disclosure of otherwise privileged information between the parties or their counsel.”

The court then proceeded to evaluate whether the attorney-client privilege applied to a number of documents, only some of which will be addressed here.

One email the court examined was from the Stuart Press, President of Uretek, to an employee of the company (not described or otherwise identified as an executive) concerning a patent application. The email from Press had forwarded an email from the company’s attorney to Press that described the patent application, which the court found to be a privileged communication. In this instance, without much explanation, the court found that forwarding the email to the company employee did not waive the privilege.

Another email the court examined was from a non-attorney to eight non-attorney recipients that contained primarily non-privileged business information. Item number six of the document, however, referenced prior advice by an attorney regarding whether a certain product could be used in light of a certain patent. The court found that the advice was legal, not business, in nature, and, thus, it could potentially be privileged. The plaintiff in the litigation challenged the claim of privilege, however, on the ground that the entities with which the communication was shared did not share a common interest that was sufficient to apply the attorney-client privilege. In this regard, the attorney that gave the advice in the email represented YKK Corporation of America (“YCA”), not YKK Corporation (“YKK”), and the email was forwarded to employees of YKK. The defendants countered that YCA and YKK shared a common ownership, as YCA was a wholly owned subsidiary of YKK, and entities under a common ownership sharing privileged information are always considered a single entity for purposes of the attorney-client privilege. The court rejected the per se standard the defendants advocated, noting that privileges should be narrowly construed and, “in certain circumstances, commonly owned subsidiaries simply do not have the common purpose in litigation necessary for the invocation of the doctrine.” Although the court rejected the per se rule advocated by the defendants, the court ultimately found that the common interest doctrine applied in this case and the forwarded email remained privileged. In reaching this conclusion, the court, based on its in camera review of various documents, found that the legal departments of each member entity (meaning YCA and YKK) worked collaboratively with each other and the court credited the testimony of YCA’s Chief Legal Counsel, who testified that the two legal departments “essentially function[ed] as a single unified department which provides legal advice to all members of the YKK Group.”

Separately, in Newman v. Highland School District No. 203 , 381 P.3d 1188 (Wash. 2016), the Washington Supreme Court, in a case of first impression in that state, held that the United States Supreme Court’s decision in Upjohn did not “justify applying the attorney-client privilege outside the employer-employee relationship.” Although the court in Newman recognized that the Supreme Court’s decision in Upjohn advocated a flexible approach to applying the attorney-client privilege, which necessarily involved non-managerial employees, the court determined that the flexible approach advocated by Upjohn “presupposed attorney-client communications take place within the corporate employment relationship.” The court in Newman declined to “expand the privilege to communications outside the employer-employee relationship because former employees categorically differ from current employees with respect to the concerns identified in Upjohn .” The court in Newman declined to apply the privilege after the employer-employee relationship terminates because, according to the court, “this generally terminates the agency relationship.” In reaching that conclusion, however, the Washington State Supreme Court acknowledged that courts in other jurisdictions have recognized the attorney-client privilege extends to former employees in circumstances where a continuing agency duty exists, but the court in Newman did not make any effort to distinguish those circumstances from the one before it or to recognize any exceptions to its holding that the attorney-client privilege cannot apply to former employees.

The decisions in YKK and Newman are important for companies and their respective legal counsel. First, YKK gives some guidance as to when communications forwarded to other employees within the company may remain privileged. Second, YKK establishes some guidelines for companies with parent-subsidiary relationships to follow when trying to determine whether communications between the parent and subsidiary may remain privileged. Notably, even though there may be common ownership, the court in YKK did not recognize a blanket rule that allowed the common interest doctrine to apply in every instance where there is a parent-subsidiary relationship. Third, the court’s decision in Newman sets forth a rather restrictive application of the attorney-client privilege, as it appears to establish a blanket rule that the privilege can never apply to former employees. While this strict application of the rule governs communications in the State of Washington, it is important for companies to understand the limits and reaches of the privilege in each state where they operate, as the restrictive approach taken by the Supreme Court of Washington does not apply in every state and other states do permit the privilege to apply to communications with former employees in some circumstances.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Employee’s Failure to Mention Nature of Grandfather’s Relationship Was Not Sufficient to Deny Employee’s Request for FMLA Leave

In Coutard v. Municipal Credit Union , 848 F.3d 102 (2d Cir. 2017), the United States Court of Appeals for the Second Circuit held (1) that an employee met the eligibility requirements for leave under the Family and Medical Leave Act (“FMLA”) to care for a seriously ill grandfather, even though the employee did not mention the in loco parentis nature of his relationship with the grandfather, and (2) that the employer had an obligation to specify any additional information it needed to determine whether the employee was entitled to FMLA leave.

In Coutard , Frantz Coutard requested leave under the FMLA to care for his grandfather, Jean Manesson Dumond. Dumond had raised Coutard as his son since before Coutard was four years old until he was approximately 14 years old. In January 2013, Dumond was 82 years old and suffered from a number of chronic medical conditions. One evening that month, he was taken to the hospital by ambulance, diagnosed with bronchitis, and discharged the next day. Coutard believed Dumond was seriously ill and should not be left unattended. Coutard sought FMLA leave to take care of Dumond. When asking for leave, Coutard did not notify his employer, Municipal Credit Union (“MCU”), that Dumond raised him as his father; he merely asked MCU if he could take FMLA leave for his grandfather. MCU denied Coutard FMLA leave because the statute does not apply to grandparents and terminated Coutard’s employment when he took off from work to care for Dumond. Coutard sued MCU under the FMLA, alleging that MCU interfered with and violated his right to take leave under the FMLA. The district court granted MCU summary judgment, even though the district court found that Dumond “acted in all respects as [Coutard’s] father – feeding him, clothing him, paying for his education, taking him to school, providing emotional and social support.” Coutard appealed.

The Second Circuit began its analysis by covering the eligibility requirements for leave under the FMLA and the notification requirements for eligible employees under the statute. With respect to the notification requirements, the Second Circuit noted that an eligible employee must give notice to his/her employer of his/her intent to take FMLA leave, but the court has not previously considered what constitutes sufficient notice under the statute. When examining the applicable regulations regarding the content of the notice an employee must give to his/her employer, the court noted that 29 C.F.R. § 825.303(b) requires an employee to “provide sufficient information for an employer to reasonably determine whether the FMLA may apply to the leave request” and the “employer will be expected to obtain any additional required information through informal means.” The court also examined the type of notification required of the employer to give to employees. In this regard, the regulations require a covered employer to post a notice on its premises and provide each employee notice by including notice in employee handbooks or other written guidance that explains the employees’ benefits and rights to leave.

The Second Circuit examined a number of other regulations as well, and ultimately concluded that the district court incorrectly imposed a greater obligation on Coutard than the FMLA requires when giving notice to an employer of the need for leave. In this regard, the Second Circuit concluded that the FMLA does not require an employee “to provide the employer with all of the necessary details to permit a definitive determination of the FMLA’s applicability at or before the time of the request.” The court further conclude that, “in the absence of a request for additional information [from the employer], an employee has provided sufficient notice to his employer if that notice indicates reasonably that the FMLA may apply.” In reaching this conclusion, the court focused on the language in Section 825.303 that requires an employee only give his/her employer sufficient information to reasonably determine whether the FMLA “may” apply. The court proceeded to find that “[t]here can be no serious question that an employee’s request for leave to care for his seriously ill grandfather seeks leave that ‘may’ qualify for FMLA protection.” In response to MCU’s argument that it should not be required to inquire into the “unique” relationship between Coutard and his grandfather, the court determined that “a grandparent raising a child in loco parentis is hardly unique.” The court further supported its conclusion by noting that the FMLA expressly defines parent to include “an individual who stood in loco parentis to an employee when the employee” was “under 18 years of age.” The court explained that this broad language was included in the statute to “reflect the reality that many children in the United States today do not live in traditional ‘nuclear’ families with their biological father and mother” and are “increasingly raised by others including ‘their grandparents.’”

The court’s decision in Coutard is significant in that it expressly places an obligation on companies to delve further into facts and circumstances regarding potential eligibility under the FMLA when it is not apparent based on the facts presented that an employee is indeed eligible for FMLA leave. Companies, particularly in jurisdictions covered by the Second Circuit (New York, Connecticut, and Vermont), should train their human resource departments and other employees who handle FMLA requests to understand how to respond to inquiries for leave and when it is appropriate to request additional information regarding eligibility for leave.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

When is a Staffing Agency Employee an Employee of the Company to Which He/She is Assigned to Work?

In Interstate Fire & Casualty Company v. Dimensions Assurance Ltd. , 843 F.3d 133 (4th Cir. 2016), the United States Court of Appeals for the Fourth Circuit was asked to determine whether a nurse employed by a staffing agency also was an employee of the hospital where she performed her work activities. The determination in this case dictated the outcome of which insurance company owed the nurse coverage in connection with a medical malpractice claim. The Fourth Circuit held that the nurse was an “employee” of the hospital as well as the staffing agency.

In Dimensions Assurance , Favorite Healthcare Staffing (the “Staffing Agency”) assigned nurses and other health care professionals to perform work at Laurel Regional Hospital (the “Hospital”). According to the staffing agreement between the Staffing Agency and the Hospital, all practitioners assigned to work at the Hospital were employees of the Staffing Agency, not the Hospital. The staffing agreement also provided that the Hospital was responsible for “orient[ing]” practitioners to their “job description responsibilities and all policies and procedures necessary to meet [the Hospital’s] performance standards.” In addition, under the staffing agreement, the Hospital had the right to “float” practitioners assigned by the Staffing Agency “to areas to which they were not originally assigned and to immediately terminate any practitioner who refuses to float.” The staffing agreement further provided that the Hospital had the right to “dismiss any Practitioner at any time if [the Hospital] determines that a Practitioner is unsatisfactory.” The type of care provided to patients was dictated by the Hospital and, if a practitioner assigned by the Staffing Agency refused to comply with a Hospital directive, the Hospital had the authority to terminate the practitioner’s work with the Hospital immediately. No Staffing Agency employees supervised employees when they performed services at the Hospital.

Interstate Fire & Casualty Company (“Interstate”) issued a professional liability policy to the Staffing Agency that provided insurance coverage to doctors and nurses who were employed by the Staffing Agency and assigned to work at medical facilities. Dimensions Assurance Ltd. (“Dimensions”) issued an insurance policy to the Hospital that included general liability coverage, hospital professional liability coverage, and group physicians professional liability coverage. The Dimensions policy provided coverage to “protected persons.” In the professional liability section of the policy, “protected persons” was defined to include the Hospital’s “present and former employees, students and authorized volunteer workers” “while working or when they did work for [the Hospital] within the scope of their duties.” The general liability section included a similar provision, but the provision ended by stating, “[p]ersons working for [the Hospital] on a per diem, agency or contract basis are not protected persons.”

A former Hospital patient brought a medical malpractice claim against the Hospital and several doctors and nurses, including Nurse Cryer who had been assigned by the Staffing Agency to perform services at the Hospital. Dimensions refused to defend Nurse Cryer on the basis that she was not a “protected person” under its policy. Interstate undertook Nurse Cryer’s defense, incurring nearly $500,000 in defense costs, and settled the case for $2.5 million. Interstate subsequently filed suit against Dimensions, asserting an equitable contribution theory while claiming that Nurse Cryer was an “employee” of the Hospital and, thus, a “protected person” under the Dimensions policy. The United States District Court for the District of Maryland granted summary judgment to Dimensions, finding that Nurse Cryer was not an employee within the meaning of the policy. Interstate appealed to the Fourth Circuit.

Interstate argued that, although the general liability section of the Dimensions policy excluded by its terms Staffing Agency employees from those defined to be “protected persons,” the definition of “protected persons” in the professional liability section of the policy did not include a similar exclusion from the definition of “protected persons.” Interstate further argued based on legal principles governing contract interpretation that the insurance policy’s distinction between agency-provided employees in different sections of the policy required the court to find that Nurse Cryer was a “protected person” under the professional liability section of the policy. The Fourth Circuit agreed with Interstate, finding that the differential treatment in the different sections of the policy “must be understood as an intentional decision[,]” otherwise the court would not be able to give full effect to each provision of the policy.

Apart from the principles governing contract interpretation, the Fourth Circuit examined the professional liability section of the policy on its own. It noted that the policy provides coverage to Hospital “employees” without defining who is an employee. The court gave credence to Interstate’s argument that the term “employee” is an unambiguous term whose ordinary meaning can be determined from the common law “right of control” test that is applied when examining whether there is a master-servant relationship. In Maryland, the “right of control” test looks at a variety of factors, including “(1) the power to select and hire the employee, (2) the payment of wages, (3) the power to discharge, (4) the power to control the employee’s conduct, and (5) whether the work is part of the regular business of the employer.” When applying the “right of control” test, although the Fourth Circuit did not conduct a factor by factor analysis, the court concluded that “[t]here can be no question that Nurse Cryer qualifies as an employee of the Hospital.”

In reaching this conclusion, the Fourth Circuit rejected Dimensions’ argument that relied on the distinction between a “general employer” and a “special employer.” Dimensions had argued that, when a company loans an employee (the “general employer”) to another employer (the “special employer”), liability for the employee’s acts turns on whose work is being done and who can control that work, but, if the general employer and special employer have entered into a contract that assigns liability to one of the parties, courts will give effect to the terms of the contract. In this case, Dimensions had argued that the staffing agreement stated Nurse Cryer was an employee of the Staffing Agency and the Staffing Agency was liable for her acts. The court rejected this argument, however, because, to accept this argument would require the court to reject principles of law governing contract interpretation. In this regard, the insurance policy used the unambiguous term “employee” and the ordinary meaning of “employee” under Maryland law is governed by the “right of control” test. According to the court, when applying the “right of control” test to the facts of this case, Nurse Cryer clearly was an employee of the Hospital.

Dimensions Assurance is an important case in a few respects. First, although this case was decided in the insurance context and terms of the relevant policy provisions enabled the court to reach a decision without addressing employment law principles, the court still proceeded to apply employment law principles, namely the “right of control” test, which is applied in various forms in many jurisdictions. The application of the “right of control” test is an important reminder to companies in employee leasing situations that a “borrowed” employee may still be an employee of the borrowing company that creates various risk exposures for the company. Second, even where there may be attempts to allocate risk between the leasing and borrowing company in the contract governing that relationship, it may not be enough to overcome liability for the borrowing company where the “right of control” test establishes that the borrowed employee is an employee of the borrowing company.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585.

DISCLAIMER: This Blog/Website is for educational purposes and to provide readers with general information about developments in the law. This Blog/Website is not intended and should not be relied on for legal advice. This Blog/Website does not constitute an advertisement for legal services and it does not endorse, promote, or recommend the products, services, or websites of any third party. Reading, reviewing, or any other use of this Blog/Website does not create an attorney-client relationship between the reader and the firm or any attorney at the firm.

Appellate Court Answers Whether Reassignment to a Vacant Position Without Competition Constitutes a Reasonable Accommodation Under the ADA

In E.E.O.C. v. St. Joseph’s Hospital, Inc. , 842 F.3d 1333 (11th Cir. 2016), the United States Court of Appeals for the Eleventh Circuit addressed several issues concerning a former employee’s claim of discrimination under the Americans With Disabilities Act (“ADA”), including whether a reasonable accommodation under the ADA requires reassignment to a vacant position without the disabled individual competing with others for the job. The Eleventh Circuit held the ADA does not require the reassignment without competition.

In St. Joseph’s Hospital , Leokadia Bryk was a nurse who worked in the psychiatric ward of the hospital from January 1990 until her employment was terminated in November 2011. In 2002, Bryk was diagnosed with spinal stenosis, which caused back pain. She later developed arthritis and had hip replacement surgery in 2009. She started using a cane to help ease her back pain and to help her walk around, as she could only walk short distances and she often needed to stop to realign herself. By 2011, the hospital determined that Bryk could not use a cane in the psychiatric ward because patients could use it as a weapon and, thus, it posed a safety risk. The hospital offered Bryk the opportunity to identify and apply for other positions at the hospital. Ordinarily, the hospital did not allow internal candidates to apply for a transfer, except in limited situations that Bryk did not satisfy. The hospital, however, waived its restriction on transfers for Bryk and allowed her to compete with other internal applicants, but did not include her in the general applicant pool. Bryk applied for a variety of jobs, three of which were the focal point of the trial – Educational Specialist, Care Transition Coordinator, and Home Health Technician. The hospital did not interview Bryk for any of these positions and, without any jobs on the horizon for Bryk, the hospital terminated her employment on November 21, 2011.

The Equal Employment Opportunity Commission filed suit on Bryk’s behalf. The EEOC argued numerous issues, including that the hospital violated the ADA by not reassigning Bryk to a vacant position and having her compete with other job applicants. The trial court ruled that providing Bryk 30 days to identify vacant jobs for which she was qualified was reasonable as a matter of law, but, with respect to the issue of competition, the court stated that it “does not hold that the [h]ospital had an obligation to reassign Leokadia Bryk to the vacant positions for which she qualified without competition as a matter of law.” The court further explained that requiring competition is “one factor out of many, that the jury may consider regarding the reasonableness of the accommodation.” Following a jury verdict, the trial court entered judgment in favor of the hospital. The parties filed cross-appeals on a number of issues, but, for purposes of this post, the only issue we will address concerns the requirement of competition when seeking reassignment as a reasonable accommodation.

The Eleventh Circuit framed the issue on appeal as “the district court’s holding as a matter of law that the ADA does not mandate reassignment without competition” and noted that the EEOC took the position that the ADA “mandates noncompetitive reassignment and that had the jury been so instructed, it would not have found that the [h]ospital acted in good faith.”

Looking at the text of the statute, the court noted that the ADA simply requires that an employer must provide a reasonable accommodation to a disabled employee, but the statute “does not say how an employer must do that.” The court further noted that the statute includes a non-exhaustive list of examples that “may” constitute a reasonable accommodation and the statute “does not say or imply that reassignment is always reasonable.”

The Eleventh Circuit relied on the text of the statute and case precedent to determine that reassignment without competition was not mandated by the ADA. First, the court determined that the statute’s use of the term “may” when describing reassignment as a possible accommodation suggested that reassignment will be reasonable only in some circumstances and not others. Second, the court noted case precedent held that “employers are only required to provide ‘alternative employment opportunities reasonably available under the employer’s existing policies.’” The court proceeded to examine a Untied States Supreme Court decision that held the obligation to examine potential reassignment did not trump an employer’s established seniority system. In other words, reassignment was not guaranteed or required.

The Eleventh Circuit then analogized the hospital’s “best-qualified applicant policy” to the seniority system in the Supreme Court case. The court held that “[r]equiring reassignment in violation of an employer’s best-qualified hiring or transfer policy is not reasonable ‘in the run of cases.’” The court explained that “[p]assing over the best-qualified job applicants in favor of less-qualified ones is not a reasonable way to promote efficiency or good performance.” The court further found that in the case of hospitals, which was the case before it, “the well-being and even the lives of patients can depend on having the best-qualified personnel” and undermining that objective could “impose[] substantial costs on the hospital and potentially on patients.” Accordingly, the Eleventh Circuit concluded that the “ADA only requires an employer [to] allow a disabled person to compete equally with the rest of the world for a vacant position.” The court noted that this determination is consistent with the ADA’s intent of requiring employers “only to provide meaningful equal employment opportunities” and that “[t]he ADA was never intended to turn nondiscrimination into discrimination” “against the non-disabled.”

The Eleventh Circuit’s decision in St. Joseph’s Hospital is significant in that it clarifies employers only need to give disabled employees an opportunity to compete for vacant positions; they are not required to reassign disabled employees to vacant positions when they are not the most qualified for the position. The court may have left some wiggle room on the issue, however, in that it noted the hospital had a “best-qualified applicant policy.” Thus, if employers do not establish a “best-qualified” policy or practice, they may arguably remain vulnerable to a noncompetition argument in the future, although it would seem odd and counterintuitive for a court to require an employer to hire an applicant who the employer determined was not the best-qualified for the position simply because it did not have an established written policy or practice stating that it seeks to hire the “best-qualified” applicants.

If you have any questions regarding this post, please contact Stephen B. Stern at sstern@hwlaw.com or (410) 260-6585.

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Welcome Chris Buck & our new Maritime Practice!

Hyatt & Weber is pleased to welcome attorney Christopher D. Buck to our Business, Real Estate and NEW Maritime Law practice groups. Chris’ work in maritime and admiralty law has included cases from the Northeast to Florida and nationwide.

About Chris:

• Admitted to the Maryland, New York and D.C. Bars

• Member of the prestigious Maritime Law Association

• Named an Anne Arundel County “Leading Lawyer” multiple times

• Dedicated community leader serving 2nd term as Board President for Anne Arundel County CASA

Contact Chris for your real estate, business and maritime legal needs:
cbuck@hwlaw.com
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