Supreme Court Holds That Only Employees Who Have Authority to Take Tangible Employment Actions Constitute Supervisors for the Purpose of Vicarious Liability Under Title VII

Our colleague Julie Saker Schlegel at Epstein Becker Green recently posted “Supreme Court Holds That Only Employees Who Have Authority to Take Tangible Employment Actions Constitute Supervisors for the Purpose of Vicarious Liability Under Title VII” on the Retail Labor and Employment Law blog, and we think hospitality employers will be interested. Following is an excerpt:

In a 5-4 decision the dissent termed “decidedly employer-friendly,” the Supreme Court held on June 24, 2013 that only employees who have been empowered by the employer to take tangible employment actions against a harassment victim constitute “supervisors” for the purpose of vicarious liability under Title VII. Per the holding in Vance v. Ball State University, employees who merely direct the work activities of others, but who lack the authority to take tangible employment actions, will no longer be considered supervisors under Title VII.

Under long-standing precedent (Faragher and Ellerth), whether an employer can be found vicariously liable for harassment perpetrated by its employees is dependent on whether the harasser is a supervisor or merely a co-worker of the victim …

Read the full post here.

Employment "At-Will": What UK Companies Doing Business in the US Need to Know

By Matthew Sorensen and Dana Livne

One of the major ways in which American employment law has traditionally differed from its British counterpart has been its entrenched employment “at-will” doctrine. The “at-will” employment doctrine provides employers with the right to terminate their relationships with their employees at any time, with or without notice or cause.  UK companies doing business in the US are often relieved to be advised that they become “at-will” employers to their US-based employees. In the US, unless an employer has entered an employment contract or collective bargaining agreement that expressly limits the employer or employee’s rights to terminate the employment relationship, employment is considered “at-will.” 

In the UK, on the other hand, under the Employment Rights Act 1996 (ERA), every employee must be provided with a written statement of the terms and conditions governing their employment within two months of commencing work. In fact, under the Common Law, some changes to working conditions cannot be made without the employee’s consent.  The controversial Beecroft Report, commissioned by the UK government, has recently called for changes in the dismissal procedures in Britain to mimic the American “at-will” doctrine.  The theory is that if employers are permitted to terminate workers with more ease and less “red tape,” it will encourage the UK’s financial growth, support business, and boost the economy. Indeed, according to the Institute of Directors, the UK business community is supportive of these measures, with a third of companies surveyed claiming that it would lead them to hire more workers.

However, the experience of “at-will” employers in the US has been not without its challenges. Although employers in the US who are not parties to employment contracts or collective bargaining agreements have a significant amount of discretion in determining whether and how to discharge an employee, the freedom afforded by “at-will” employment has been eroded in many respects by robust anti-discrimination laws.  Even in the context of “at-will” employment relationships, employers must remain cautious when disciplining and terminating employees.  A misstep can potentially lead to costly discrimination claims.

The US has developed a comprehensive body of law that places a number of limitations on employers’ rights to terminate “at-will” employees.  Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits employment discrimination on the basis of the individual’s race, color, sex, religion, or national origin (the “protected classes”).  The Age Discrimination in Employment Act (ADEA), prohibits discrimination against individuals that are older than 40 years old on the basis of their age.  Individuals with disabilities are protected under the Americans with Disabilities Act (“ADA”), and the Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits discrimination on the basis of genetic information. In addition to the protections established by these federal laws, many US states have also enacted their own state-specific statutes that provide additional protections to employees, such as prohibiting discrimination on the basis of sexual orientation, political affiliation, and physical appearance.  Enforcement of these statutes has led to a long line of cases in which state and federal courts in the US have found that employers wrongfully terminated “at-will” employees based on protected characteristics.  Even layoffs or termination policies that seem neutral on their face have been found to be discriminatory when they had a disproportionately negative impact on a “protected class” of employees. 

Charges of discrimination can be damaging to workplace morale, public relations, productivity and the company’s bottom line.  Indeed, even in cases involving baseless claims of discrimination, employers may be forced to expend significant resources to defend themselves in administrative and court proceedings.  Employers in the US must implement creative strategies to thwart potential claims of discrimination before they arise, and to best position themselves to defend any claims of discrimination that do arise. The first step in protecting against claims of discrimination related to termination decisions is to ensure that the employer has a clear policy governing employee conduct and discipline that specifically reminds employees that their employment remains terminable “at-will.” The policy should provide a uniform and fair manner to respond to performance failures and misconduct by employees. For example, it may be appropriate to implement a progressive discipline policy.  Such policies typically establish a schedule of progressively severe disciplinary sanctions for performance failures or acts of misconduct, often beginning with oral warnings and ending in termination. However, entities that establish progressive discipline policies should reserve their rights to short-circuit the progressive disciplinary process and immediately terminate the employment relationship or take other appropriate disciplinary action as they deem necessary.

In addition, employers must ensure that they follow their discipline and termination policies consistently.  Those companies that do not consistently apply their rules to similarly situated employees can frequently encounter problems in discrimination lawsuits where it can be essential to have evidence that a worker was treated the same as other employees holding his or her position who are not members of the worker’s “protected class.” Companies are advised to maintain clear and consistent documentation of all disciplinary actions. A trail of properly documented disciplinary actions is always the best evidence to defend against allegations that an employee was terminated or subjected to other disciplinary action for discriminatory reasons. Employers should also conduct periodic anti-discrimination training for their employees and managers. For managers, particular attention should be given to reinforcing the need for consistent and non-discriminatory application of the company’s disciplinary policies.

In a competitive economy, the benefits to an “at-will” employment setting are clear.  Employers can quickly dismiss workers who fail to comply with the company’s disciplinary rules or who do not add the expected value to business operations.  However, to protect against charges of discrimination, companies operating in the US should carefully craft their discipline and termination policies and ensure that their managers are properly trained in the application of those policies. A proactive approach to planning and implementing uniform and fair procedures governing discipline and discharge will help companies avoid costly discrimination claims and focus on the continued success of their business in the US.

For Private Clubs, a Little "Discrimination" (in Membership) Can Go a Long Way!

By:      Mark M. Trapp

In these challenging economic times, many private clubs are finding it increasingly difficult to attract new members, or to retain existing members.  Over the last few years many clubs have lost members, and many more are facing substantial drops in revenues due to a decline in money spent by members on activities such as golfing or dining out.  Many golf, country and social clubs are finding it difficult to sustain their amenities and level of service. 

Because the economic situation is decreasing the potential membership pool, many clubs are offering incentives to join, such as reducing initiation fees, while some are even exploring other more drastic options to generate revenue, such as opening their doors to the general public, moving toward a semi-private status or creating public/private hybrid clubs.

Economically, such decisions may or may not make sense. But allowing virtually anyone into an ostensibly “private” club can have other than strictly economic ramifications. In addition to making the club’s members wonder just how exclusive the club really is (which could itself lead to loss in membership and decreased revenues), a decision to accept virtually anyone as a member could actually open up a private club to potential legal liability for discrimination from which it would otherwise be exempt.

This seemingly paradoxical result stems from the fact that under both Title VII of the Civil Rights Act of 1964, as amended (which prohibits discrimination based upon race, color, religion, sex and national origin) and Title I of the ADA (Americans with Disabilities Act), private membership clubs enjoy an exemption from liability.  Both the ADA and Title VII expressly state that the definition of “employer” found in each statute “does not include” a bona fide private membership club which is exempt from taxation under section 501(c) of the Internal Revenue Code.

In order to qualify for this statutory exemption, a club must be tax exempt and it must be “a bona fide private membership club.” Because tax exempt status is relatively straightforward, the court battles over this exemption usually hinge on whether or not the club meets the criteria of being a bona fide private membership club. 

Generally, courts have defined a private membership club as “an association of persons for social and recreational purposes or for the promotion of some common object (as literature, science, political activity) usually jointly supported and meeting periodically, membership in social clubs usually being conferred by ballot and carrying the privilege of use of the club property.” Quijano v. University Federal Credit Union, 617 F.2d 129, 131 (5th Cir. 1980). While country clubs, fraternal lodges, swim clubs and the like usually fit comfortably within this definition, the decision to open the use of the club’s facilities and/or membership to anyone from the general public could lead to the loss of the otherwise-available statutory exception.  In deciding whether a club is private, the EEOC and courts consider how selective it is in choosing its members. See EEOC Compliance Manual § 2-11(B)(4)(a)(ii) (among the three factors considered is whether there “are meaningful conditions of limited membership.”); and Quijano, 617 F.2d at 131 (noting that “in order to be exempt” a private club “must require some meaningful conditions of limited membership.”). 

In construing whether a club meets the requirement of “meaningful conditions of limited membership,” courts have commonly focused on factors such as:

  • whether the club allows members of the public full access,
  • whether the club limits its total membership and how restrictive or stringent its requirements are for membership, and
  • whether applicants for membership must be personally recommended, sponsored or voted on by other members. 

See e.g. EEOC v. University Club of Chicago, 763 F.Supp. 985 (N.D. Ill. 1991)(concluding that a club was not private because it gave both members and guests essentially the same privileges); and Bommarito v. Grosse Pointe Yacht Club, 2007 U.S. Dist. LEXIS 21064 at *30-31 (E.D. Mich. 2007)(finding requirements of a written application, sponsorship of three current members, posting of the candidacy at the clubhouse, consideration by the board of directors, and a secret ballot to constitute “meaningful limitations on membership.”).  As stated by one leading opinion, “selective membership practices are the essence of private clubs.”  EEOC v. The Chicago Club, 86 F.3d 1423, 1436 (7th Cir. 1996).

Based on the foregoing, it should hardly come as a surprise that a “private” club which opens itself up to the public, or which accepts virtually every applicant meeting minimal criteria or without recommendation or some form of personal screening may be placing its statutorily-afforded exemption in jeopardy.  Because a carefully structured and properly run private club should be able to meet the requirements for exemption from the ADA and Title VII, clubs should be careful that in their push for additional revenues and/or members, they do not open themselves up to potential forms of liability.  It should be noted that depending upon the jurisdiction, there may be applicable state, local or municipal discrimination laws which provide similar protections, and which may be construed as covering private clubs.

Simply stated, in the private club industry, a little “discrimination” can go a long way in avoiding potential lawsuits based on discrimination!