Recently, in Allen v. Pinnacle Healthcare Systems, LLC, No. 4855 (July 27, 2011 S.C. Ct. App.), the S.C. Court of Appeals found two individuals personally liable to an employee under the South Carolina Payment of Wages Act.
In that case, Allen, a neurologist, signed an employment contract with Pinnacle Healthcare Systems, which provided that Allen was being hired for a term of five years. When Allen stopped receiving paychecks before the end of the term, he filed a complaint alleging that Pinnacle owed him $780,000 in back wages. After a trial, a jury found that the Appellants were jointly and severally liable for the alleged amount. An appeal followed.
Appellants consisted of Robert Gunn, Rick Joyce and Timothy Gunn. Robert Gunn was the executive manager of Pinnacle, while Rick Joyce and Timothy Gunn were members of the Limited Liability Company and testified that they handled the finances and payroll for Pinnacle. In light of Dumas v. InfoSafe Corp., 463 S.E.2d 641 (S.C. Ct. App. 1995), appellants were subject to individual liability if they were determined to be agents or officers of a corporation who knowingly permitted their corporation to violate the Act. Appellants argued that when they transferred their interest in Pinnacle to another party during Allen’s term of employment, they were no longer members of Pinnacle and no longer responsible for the payment of Allen’s wages.
After analyzing Appellant’s close involvement with Pinnacle, the Court of Appeals affirmed the lower court’s conclusion that Appellants had an “obligation to advise the employees who were working and not getting paid that they may not get paid so they would not continue working without the payment of wages.” However, the appellate court disagreed with the lower court regarding Timothy Gunn’s liability. The court held that, because there was no evidence that 1) he was an officer or agent of Pinnacle, 2) he was involved in the operation of the company or 3) he had any knowledge or contact with Allen, there was no evidence that Timothy Gunn knowingly permitted Pinnacle to violate the Act. Thus, Robert Gunn and Rick Joyce, but not Timothy Gunn, were held personally liable to Allen for the unpaid wages.
Judge Pieper concurred in part and dissented in part in a separate opinion where he agreed with the majority regarding Robert Gunn and Timothy Gunn, but dissented as to the decision regarding Rick Joyce. Judge Pieper argued that because Joyce would merely enter payroll as he was directed, he was not “permitting” Pinnacle to violate the Act. Further, Judge Pieper noted that because Joyce lacked the authority to make any decisions regarding payroll, Joyce was not an “agent or officer” of the company.
This case demonstrates how critical it is for employers to keep employees informed regarding their paychecks during a time of transition for a business, especially with regard to the seven-day notice requirements, even if the employer believes that someone else may be handling such notice.
Over the last few years, employers have struggled to weather the economic downturn while facing a significant increase in wage and hour litigation, including class and collective actions. Recently, the increase in wage and hour litigation has outpaced all other workplace-related litigation. New initiatives announced by the U.S. Department of Labor, as well as the hiring of more than 300 new wage and hour investigators over the last two years, have signaled that there is no rest for wage and hour litigation weary employers. However, employers scored a victory in a recent Fourth Circuit opinion wherein the Court of Appeals found that a store manager who spent extensive time performing nonmanagerial tasks was nonetheless properly classified as exempt and affirmed the district court’s order granting summary judgment. Grace et al v. Family Dollar, 637 F.3d 508 (4th Cir. 2011).
Overview of the executive exemption
In particular, the following four criteria must be met:
29 C.F.R. § 541.100(a)(1)-(4)(2004)(emphasis added).
Focus on the “primary duty” of the employee
The parties’ briefs and the Court’s decision, however, centered on whether the plaintiff’s primary duty was management. The plaintiff testified that she spent up to 99 percent of her time performing nonmanagerial tasks including running registers, stocking shelves and unloading freight. The defendant conceded that store managers, including the plaintiff, spent an extensive amount of time performing nonmanagerial tasks. The plaintiff contended that this testimony alone created an issue of fact sufficient to survive summary judgment. The Court, however, disagreed and found sufficient evidence that the plaintiff’s primary duty was the performance of managerial functions because when the plaintiff was performing nonmanagerial tasks, such as running the register, she was concurrently performing managerial tasks.
The Fourth Circuit based its decision on the fact that time alone is not determinative of an employee’s primary duty. Rather, an employee’s primary duty may be management even if a majority of his or her time is spent performing nonmanagerial tasks. The evidence in the Grace case established that as store manager, the plaintiff was responsible for the profitability of the store and was the most senior employee at the store at all times except when the district manager visited every two to three weeks. As a result, the plaintiff was responsible for running the store and ensuring it was profitable by controlling inventory, managing payroll and scheduling, and monitoring shrinkage and breakage.
The Court found, therefore, that “while Grace performed nonmanagerial tasks around the store as she found necessary, she concurrently performed the managerial duties of running the store” and such “multi-tasking – doing management jobs while doing nonexempt work – is explicitly recognized as a managerial duty by the Department of Labor’s regulations….” The plaintiff’s exercise of independent discretion on a daily basis led the Fourth Circuit to affirm the district court’s order granting summary judgment to the employer notwithstanding the plaintiff’s testimony that 99 percent of the time she was in the store she was performing nonexempt duties.
Lessons of the Grace decision
On August 1, 2011, the S.C. Supreme Court addressed the scope of wrongful termination claims under the public policy exception to at-will employment. Barron v. Labor Finders of South Carolina, No. 27018, 2011 WL 3273596 (S.C. Aug. 1, 2011). Following this decision, practitioners are left to ask themselves if the Supreme Court has now expanded an area previously thought to be limited.
Factual and procedural background
Petitioner filed a lawsuit claiming a violation of the South Carolina Payment of Wages Act (SCWPA), breach of contract, breach of contract accompanied by fraudulent act and wrongful termination in violation of public policy. At no time prior to or after filing her lawsuit did Petitioner file a complaint over her unpaid wages with the S.C. Department of Labor, Licensing and Regulation (LLR) or indicate to Respondent an intention to file such a complaint. The circuit court granted Respondent summary judgment on all claims. The S.C. Court of Appeals affirmed. See Barron v. Labor Finders of South Carolina, 682 S.E.2d 271 (S.C. Ct. App. 2009). Petitioner appealed her claim for wrongful termination in violation of public policy to the S.C. Supreme Court. As detailed below, the Supreme Court affirmed the grant of summary judgment, but found the Court of Appeals erred in its analysis to reach that result.
Rules of law
The Court of Appeals in Barron found that the above two instances limited any wrongful termination in violation of public policy claims and, finding neither exception applied here, granted summary judgment. The Supreme Court disagreed and explicitly stated that “the public policy exception is not limited to these situations.” Barron, 2011 WL 3273596, at *2; see Garner v. Morrison Knudsen Corp., 456 S.E.2d 907 (S.C. 1995); Kieger v. Citgo, Coastal Petroleum, Inc., 482 S.E.2d 792 (S.C. Ct. App. 1997). The Supreme Court additionally reiterated its prior case law that “the public policy exception does not … extend to situations where the employee has an existing statutory remedy for wrongful termination.” Id. (citing Dockins v. Ingles Markets, Inc., 413 S.E.2d 18 (S.C. 1992)).
The Supreme Court still found summary judgment in this case appropriate despite having overruled the Court of Appeals’ analysis. Relying on Evans v. Taylor Made Sandwich Co., 522 S.E.2d 350 (S.C. Ct. App. 1999), Petitioner argued that her public policy claim arose from being fired in retaliation for complaining internally about unpaid wages—i.e., something owed to her under the SCWPA. The Supreme Court had not previously addressed the findings in Evans and took this case as an opportunity to do so. Evans was overruled to the extent it permitted a jury to decide what grounds for termination was a violation of public policy; instead, that is a question of law. Only after a public policy is established may the question of termination be submitted to the jury. On the flip side, however, the Supreme Court agreed with Evans on its finding that the SCWPA provided a remedy for wage recovery only. Since there was no statutory remedy for wrongful termination within the SCWPA, an employee would not be barred from bringing a claim under its provisions for violation of public policy.
Looking to the future
Despite agreeing with Evans, the Supreme Court in Barron “decline[d] to address whether the public policy exception applies when an employee is terminated in retaliation for filing a wage complaint with the Department of Labor.” Barron, 2011 WL 3273596, at *4. The reason for this was because Petitioner never implicated the SCWPA by filing a claim with LLR, nor had she indicated to Respondent an intention of doing so. By not availing herself of the protections of the SCWPA, the Supreme Court explained there was no genuine issue of material fact and summary judgment was appropriate.
Notwithstanding its declining to address the issue in Barron, the Supreme Court specifically stated that it “do[es] not foreclose the possibility that a claim for wrongful termination in violation of public policy may exist when an employee is terminated in retaliation for instituting a claim under the [South Carolina Payment of Wages] Act.” Thus, although the Supreme Court opted not to definitively address the issue here, its analysis provides a roadmap for what may be required of similar cases in the future (whether under the SCWPA or another statute having no statutory remedy for wrongful discharge). Pursuant to Barron, a claim for wrongful termination in violation of public policy appears to be preserved when employees take some action to avail themselves of the applicable statute—whether that is filing a formal complaint with the relevant agency or perhaps simply voicing an intention to file a complaint. Taking no action, however, clearly bars such claim.
By now you all probably know that, last year, a federal court in Florida upheld the validity of a wellness program that imposed a $20 bi-weekly surcharge on employees who did not participate in the wellness program. Seff v. Broward County, 2011 U.S. Dist. LEXIS 44807 (S.D.Fla., April 11, 2011). The program only required participants to provide a blood sample for glucose and cholesterol tests without regard to the outcome of those tests. The court held that the wellness program, designed to mitigate risks so that employees could get involved in their own health care, was permissible under the ADA. Would the Florida court have come to a different conclusion if the surcharge were imposed for failing to satisfy a goal related to weight loss?
The EEOC has informally commented that mandatory participation in a wellness program violates the ADA, while voluntary participation does not. EEOC Informal Discussion Letter: ADA: Health Risk Assessments, August 10, 2009. (http://www.eeoc.gov/foia/letters/2009/ada_health_risk_assessment.html). The EEOC reasoned that mandatory participation would require a disabled employee to share information of his or her medical condition, something that employers are not permitted to do unless the health-related questions are job-related and consistent with business necessity. The EEOC has also commented that surcharges for nonparticipation or reward for participation commute a voluntary program to involuntary status. EEOC Informal Discussion Letter: ADA & GINA: Incentives for Workplace Wellness Programs, June 24, 2011 (http://www.eeoc.gov/eeoc/foia/letters/2011/ada_gina_incentives.html). However, the ADA contains a safe harbor provision, 42 U.S.C. §12201(c), for bonafide benefit plans based on underwriting, classifying or administering risks as long as the safe harbor provision is not used as a subterfuge to evade the purposes of the ADA. The purpose of the safe harbor provision is to permit development and administration of benefit plans using accepted principles of risk assessment.
Is it not an accepted principle of risk assessment for a wellness program to reward employees who participate so as to mitigate the insured risk? If acceptable and not meant as a subterfuge for discrimination against the disabled, then the practice of imposing surcharges on nonparticipants or rewards for participants should not violate the ADA. The ADA is meant to protect employees who are disabled by requiring employers to accommodate their disability, assuming the employee can perform the essential functions of the job. The ADA does not pertain to the type of health care coverage an employer offers to its employees. In fact, the U.S. Supreme Court has spoken, stating that employers are free to design employee welfare benefit plans as they choose. Black & Decker v. Nord, 538 U.S. 822 , 832 (2004), cert. denied, 543 U.S. 815 (2004)(“[E]mployers have large leeway to design disability and other welfare plans as they see fit”).
Nothing in the ADA prohibits an employer from including a mandatory wellness program in its welfare benefit plan because the inclusion of such a program in no way impacts the employee’s job or any accommodation the employee may need to perform that job. The medical questions prohibited by the ADA are those associated with employment decisions about an employee’s ability to do a particular job, not an employee’s participation in the employer’s health care coverage. Furthermore, those same employees have likely already provided the same medical information required by a wellness program in order to participate in any health care offered by the employer. The confidentiality tied to information provided by an employee for purposes of health care coverage also applies to information provided for the purpose of participating in a wellness program, and the employer does not have access to that information. Employers, especially self-funded plans, could build a wall between the two functions (employment hiring, placement and promotions separate from benefit plans and enrollment) to avoid further ADA scrutiny.
So then, aren’t employers legally permitted to design and implement wellness programs imposing surcharges and rewards without violating the ADA as long as the program complies with HIPAA?
Fourth Circuit Provides Guidance on What Constitutes a Hostile Work Environment in Okoli v. City of Baltimore
Fred A. Williams, Esquire
Gignilliat, Savitz & Bettis, LLP, Columbia
In hostile work environment cases, where a determination must be reached as to whether the conduct a plaintiff has alleged was “severe or pervasive” enough to create an abusive work environment, courts must frequently “distinguish between those situations that indeed present serious impediments to minority and female workers and those situations when human nature simply is not at its best.” Ziskie v. Mineta, 547 F.3d 220, 229 (4th Cir. 2008). The recent Fourth Circuit decision in Okoli v. City of Baltimore, No. 08-2198 (4th Cir. Aug. 8, 2011), provides additional guidance to parties seeking to define where exactly the line between those two lies.
In June 2004, Katrina Okoli—an African American woman—was hired as an executive assistant to John Stewart, the director of Baltimore’s Commission on Aging and Retirement. Stewart and Okoli got along well for several months, but in September, Okoli alleges Stewart began to engage in frequent inappropriate behavior, including:
Okoli made several attempts to complain about this behavior, the most forceful of which was an April 1, 2005, letter to the mayor and other officials which read, in part, “Mr. Stewart displayed unethical and unprofessional business characteristics, e.g., harassment, degrading and dehumanizing yelling and demanding, disrespect, mocking and gossiping about other colleagues
District Court Judge William M. Nickerson found the behavior Okoli alleged “does not clear the ‘high threshold’ of actionable harm under a hostile environment theory.” Okoli v. City of Baltimore, No. 1:06-cv-03025-WMN, 25 (D.Md. Sept. 22, 2008). In reaching this determination, the Court found that the verbal comments made by Stewart ended when Okoli objected to them, and the physical conduct alleged consisted of just three or four incidents over a five month period. The District Court concluded Okoli was not subject to quid pro quo sexual harassment in relation to her termination because the City presented a legitimate, non-discriminatory reason for her firing—poor attitude, insubordination and numerous performance issues—which Okoli failed to rebut. Finally, the District Court found two major faults with Okoli’s claim that she was retaliated against for her multiple complaints, including the April 1, 2005, letter to the mayor. The first was that no complaint Okoli made specifically mentioned sexual harassment, and though her letter mentioned “harassment,” it was more akin to a general complaint about Stewart and the agency as a whole than a sexual harassment complaint. Secondly, the metadata associated with Stewart’s termination letter to Okoli showed the document was created on March 23, 2005, in advance of any complaint of which Stewart was aware, although it was edited multiple times following its creation.
On appeal, a panel of the Fourth Circuit Court of Appeals reversed the District Court’s ruling on all of Okoli’s claims. The Fourth Circuit found that the District Court badly misjudged where the line between actionable conduct and simply sub-optimal human nature lies: “Okoli presents a strong claim for hostile work environment” involving incidents which “span fondling, kissing, propositioning, describing sexual activities, and asking intimate questions. Some of the incidents may have been severe enough to be actionable in and of themselves.” Okoli, 8-9. The Court found the behavior described by Okoli to be at least as severe as conduct the Fourth Circuit has previously deemed to be actionable, especially in light of the power disparity between Stewart as an agency director and Okoli as his executive assistant.
The Fourth Circuit panel’s majority and concurring opinions differed on Okoli’s quid pro quo harassment claim, with the majority finding that the City’s proffered legitimate, nondiscriminatory reason for terminating Okoli failed because it appeared deeply suspicious in light of Okoli’s being fired the day she sent her letter to the mayor complaining of harassment. The concurring opinion disagreed, but found Okoli successfully presented a genuine issue of material fact about whether the city’s reason was pretextual. In relation to Okoli’s retaliation claim, the Fourth Circuit found, “[t]he City surely should have known that Okoli’s complaints of ‘harassment’ likely encompassed sexual harassment,” in light of the fact that “harassment” is a term of art. Okoli, 15. The Court also found that the District Court’s reliance on the metadata in Stewart’s termination letter to Okoli to “infer that Stewart necessarily intended to fire Okoli for legitimate reasons on March 23 was clear error.” Id.
The most significant aspect of the Okoli decision appears to be the forceful and unequivocal labeling of the behavior alleged by Okoli as severe, and some of the incidents possibly severe enough to be actionable in and of themselves. In the eternal search for what exactly constitutes “severe or pervasive” conduct, the Fourth Circuit has provided additional guidance in Okoli.
Have you ever wondered what you have to do to be certified as an Employment and Labor Specialist? If you have, check out the Employment & Labor Law Specialization Webinar on the S.C. Bar website and find out exactly what is involved.
In conjunction with the Bar’s CLE Division, the Employment & Labor Law Section is sponsoring a series of one-hour online distance learning programs for members at a discounted rate. Volunteers are needed to serve as presenters. The CLE Division will assist with topics, taping dates and locations. We welcome any employment or labor law related topics ranging from intermediate to advanced level.
If you are interested in volunteering or have suggestions on potential topics, please contact the Section’s Distance Learning Education Committee Chair, Chuck Thompson, at email@example.com or (803) 254-3300.
Equal Employment Opportunity Committee
Immigration Law Committee
Labor Management Relations Committee
Occupational Safety & Health Committee
Employment & Labor Law Section Seminar: “How Date of Birth Affects Employment Law Perspective”
Congratulations to David Dubberly and Stephen Savitz. They will receive a complimentary full registration to the 2012 Bar Convention!
For additional information, please visit www.scbar.org/convention
The following slate for the 2012 Employment & Labor Law Section Council was approved at the Section Annual Meeting that was held on October 21, 2011. Terms beginning January 1, 2012.
In addition to your proposed article, please include your name, firm and e-mail address.
This is a newsletter for the South Carolina Bar’s Employment and Labor Law Section. The South Carolina Bar and the Section council members reserve the right to refuse to publish any submission which is not consistent with their goals and standards. Articles that are published reflect only the opinions of their authors; they do not represent or reflect any positions held by the South Carolina Bar or the Section officers and council members. It is the policy of this newsletter that on all submissions of original articles, the authors assign their copyright in the work to the South Carolina Bar. Publisher may reprint, or authorize other entities to reprint, the material as deemed appropriate. The publisher has the right to authorize the reproduction, adaptation, public distribution and public display of the article as a contribution to this newsletter in electronic media, computerized retrieval systems and similar forms; such authorization includes use of the article anywhere in the world by means of public display, conversion to machine readable form and reproduction and distribution of copies. The South Carolina Bar is not required to secure the consent of the author before exercising the above named rights. In addition, the Bar has no duty or responsibility to negotiate, collect or distribute any royalties in connection therewith.