A Little History
A. Military Care Giver Leave
B. Qualifying Exigency Leave
Taken from the Office of the Governor in pertinent part:
An eligible employee may be granted up to a total of 12 workweeks, 60 workdays, 450 hours for employees who work 7.5 hours or 480 for employees who work 8 hours per day, of FMLA leave in each calendar year on a continuous or intermittent basis, for any of the following reasons:
Qualified exigencies that are the result of a covered service member being called to active duty in the Armed Forces.
In addition, an eligible employee may be granted up to a total of 26 weeks, 130 work days, 975 hours for employees who work 7.5 hours or 1,040 hours for employees who work 8 hours per day, of FMLA leave during a single 12-month period on a continuous or intermittent basis, for the following reason:
Military caregiver leave to care for a covered service member (spouse, son, daughter, parent, or next of kin) who is injured or becomes seriously ill while on active duty.
In addition, David McCormack of Womble Carlyle Sandridge and Rice LLC has been kind enough to share his suggested handbook revisions in relevant part:
In accordance with the Family Medical Leave Act (FMLA), employees who have been at the company for at least twelve months, and who have worked at least 1250 hours during the preceding twelve months are eligible to take leave under the FMLA for the following reasons:
Because of any qualifying. exigency arising out of the fact that the employee's spouse, child or parent is on active duty or has been notified of an impending call to active duty in the Armed Forces in support of a contingency operation.
Eligible employees are granted up to twelve weeks of unpaid FMLA leave per twelve month period. However, an eligible employee may take up to twenty-six (26) weeks of unpaid leave to care for a spouse, child, parent or next of kin who is a member of the Armed Forces undergoing medical treatment, recuperation or therapy due to a serious injury or illness incurred in the line of active duty.Employees desiring to utilize FMLA leave must provide the Human Resource Department with at least thirty days advance notice. If thirty days notice is not possible, notice must be given as soon as practicable.
The U.S. Supreme Court is poised to answer this question after hearing oral argument on November 26, 2012, in Vance v. Ball State University, 646 F.3d 461 (7th Cir. 2011), cert granted, 133 S. Ct. 23 (U.S. 2012). Specifically, the question before the Court is: Who is a “supervisor” for purposes of an employer’s liability for workplace harassment under Title VII of the Civil Rights Act of 1964.
The significance of the issue
Conflicting definitions and standards
On the one hand, the Second, Fourth, Ninth and 10th Circuits have taken a broad view of who should be considered a “supervisor.” For instance, in Whitten v. Fred’s Inc., 601 F.3d 231 (4th Cir. 2010), the Fourth Circuit explained that an employee who lacks the power to hire, fire, demote, promote, transfer or discipline an employee could still be considered a supervisor. The critical question, according to the Fourth Circuit, is whether the employee’s alleged harassing conduct “was aided by the agency relation.” Whitten, 601 F.3d at 244. Furthermore, the Fourth Circuit has made clear that “employees with only some measure of supervisory authority” could be aided by the agency relation such that they should be considered “supervisors,” and imposing vicarious liability on an employer for their conduct would be proper. Id. at 245. Thus, courts in the Second, Fourth, Ninth and 10th Circuits have indicated that any individual who has authority to direct another employee’s work on a daily basis is a “supervisor” for purposes of Title VII. This position is essentially consistent with Equal Employment Opportunity Commission guidance, which provides that an individual qualifies as an employee’s supervisor if: (1) the individual has authority to undertake or recommend tangible employment decisions affecting the employee; or (2) the individual has authority to direct the employee’s daily work activities.
The First, Seventh and Eighth Circuits, on the other hand, have taken a narrower view of who should be deemed a “supervisor.” In Vance, for example, the Seventh Circuit held that to be considered a “supervisor” for purposes of imposing vicarious liability on an employer under Title VII, an employee must have the “power to directly affect the terms and conditions of the plaintiff’s employment,” which “primarily consists of the power to hire, fire, demote, promote, transfer, or discipline an employee.” Vance, 646 F.3d at 470. Thus, in these circuits, an employee who directs and oversees another employee’s job duties on a regular basis likely would not be considered a “supervisor” unless she has the power to make significant, primarily economic, decisions about that employee’s terms of employment.
The facts in Vance
Oral argument before the Supreme Court
How will the Court’s decision affect employers?The Supreme Court is expected to release its opinion in Vance any day now. If the Supreme Court approves the broader standard articulated by the EEOC and several circuit courts, this will likely expand the scope of employer liability for harassment. Such a broad standard could mean that lower-level employees, whom employers may not traditionally think of as “supervisors,” may nonetheless qualify as “supervisors” under Title VII. Thus, if a broad standard is adopted, employers should review their operations, reevaluate job descriptions for certain employees, and think more carefully about hiring and promotion decisions. Employers should also consider conducting additional and expanded training on harassment prevention and reporting harassment in the workplace if the Supreme Court adopts a broad definition of “supervisor.”
The S.C. Court of Appeals recently upheld the validity of a noncompetition agreement and provided some interesting guidance to the bar. The overall tenor of the opinion demonstrates the court’s clear dissatisfaction with the actions of the physicians who left one practice to compete a mere 300 yards away from their former practice.
Dr. Baugh and Dr. Feldman had been shareholders and directors of Columbia Heart Clinic, P.A., which provided comprehensive cardiology services. The two doctors specialized in interventional cardiology, a subspecialty focusing on open-heart surgery requiring a full service hospital.
All shareholders of Columbia Heart had executed employment agreements that included covenants against competition with Columbia Heart in Lexington and Richland counties. In 2004, the shareholders of Columbia Heart, through a separate limited liability company, began construction of a medical office building in Lexington County, the anchor tenant of which would be Columbia Heart. As a result of the additional investment by its shareholders and the recent departure of several of its physicians, Columbia Heart and its shareholder physicians entered new agreements for the protection of the practice. These new agreements contained the noncompetition provisions at issue.
In Article 4 of the new agreement, each physician agreed that: “In the event at any time during the twelve (12) month period immediately following the expiration or termination … of this Agreement Physician continues or commences the active practice of medicine in the field of cardiology with a twenty (20) mile radius of any Columbia Heart office in which Physician routinely provided services during the year prior to the date of expiration or termination of this Agreement, then Physician shall forfeit any monies payable to Physician pursuant to this section 4.5.” In Article 5, the physicians agreed that: “During the twelve (12) month period immediately following the date of termination or expiration of this Agreement, [he] shall not compete … with Columbia Heart.” “Compete” was defined to include assisting any person to engage in the practice of medicine in the field of cardiology.
In December 2005, Columbia Heart opened its new office. In April 2006, Baugh and Feldman left Columbia Heart and, within a month, opened a new practice approximately 300 yards from Columbia Heart’s office. Through the new practice, Lexington Heart Clinic, Baugh and Feldman hired a number of Columbia Heart’s administrative and support employees.
Baugh and Feldman then filed suit against Columbia Heart seeking a declaratory judgment that the noncompetition provisions of the agreement were unenforceable and treble damages under the wage payment act for compensation allegedly due them. The trial court ruled that the covenants were not enforceable and awarded the plaintiffs unpaid compensation. Columbia Heart appealed.
The Court of Appeals first reviewed the restriction on activity under Article 5, which the trial court had determined was too broad and unenforceable. The Court of Appeals reviewed the restriction under Article 5 against the “in any capacity” standards of Preferred Research, Inc. v. Reeve and Faces Boutique, Ltd. v. Gibbs andconcentrated on the language prohibiting a departing physician from assisting another in the practice of cardiology. It found that the restriction was necessary to protect Columbia Heart’s legitimate interest, because otherwise the departing physician could provide care to Columbia Heart’s patients and benefit from Columbia Heart’s goodwill by staying a step away from the actual hands on care. Although it recognized that the issue of whether a physician had assisted another might be a question of fact in other situations, the court noted that these plaintiffs had not contested whether they breached the agreement, but only claimed that the agreement was not enforceable.
The Court of Appeals next looked to the issue of whether the covenants were supported by new and valid consideration. Although the physicians were compensated under the same plan as had been in place before this agreement, Section 4 provided new and sufficient consideration. Under that provision, the physicians would be paid $5,000 per month during the noncompetition period “so long as the physician is not in violation of Article 5 of this agreement.” The plaintiffs argued that the promise to pay $5,000 a month was elusory, since they received none of that compensation. The court rejected that argument and found that “a promise is not elusory merely because its enforceability depends upon the performance of a reciprocal promise.”
The court then reviewed the territorial restriction protecting a 20-mile radius from the office at which they had routinely provided services. Relying on Stringer v. Herron, the Court of Appeals found no evidence that a large number of Columbia Heart patients were located within a distance significantly smaller than the 20-mile radius. The Court of Appeals further rejected the physicians’ argument that because interventional radiology required access to a full service hospital, the 20-mile radius effectively became a 55-mile radius—the distance to the next closest hospital capable of supporting interventional cardiology. The Court rejected that argument, finding that the physicians could still practice within their area of specialty—cardiology services not involving the subspecialty of interventional cardiology—outside the 20-mile radius.
The court then addressed the issue of whether the forfeiture provisions imposed a penalty rather than a reasonable assessment of the damages. The court undertook a detailed analysis of the revenue figures and determined that the forfeiture was a reasonable estimate of the probable damages caused by the departed shareholders. The court also noted that this was an agreement between sophisticated shareholders after an arms’ length negotiation and determined that: “Considering the agreements as a whole and the circumstances surrounding the their entry, especially the millions of dollars Columbia Heart incurred in opening the new practice, the forfeiture in Article 4 could reasonably be intended to compensate Columbia Heart for part of the probable damages resulting from the shareholder-physician’s departure and competition and contravention of Article 4.”
The court further rejected the physicians’ claim under the Wage Payment Act. The trial court had found that the forfeiture provisions of Article 4 were not enforceable because the noncompetition provisions were not enforceable and awarded the physicians competition for their claim but declined to award treble damages or attorneys’ fees. The Court of Appeals held that the forfeiture provision was enforceable and that, therefore, the physicians had no shares of accounts receivable, unpaid draws or directors’ fees that were due to them under the agreements.Although the opinion provides a comprehensive analysis of the various issues to be considered in determining the enforceability of noncompetition agreements, its strongest lesson may be that in counseling clients we remind them of what Judge Sol Blatt once told a litigant in a settlement conference, “Pigs get fed and hogs get eaten.”
Fourth Circuit Rejects Breach of Contract Claim: Employer’s Promise Not to Retaliate Did Not Modify At-Will Employment
Kiosha H. Dickey, Esquire
Littler Mendelson, PC, Columbia
On November 27, 2012, in Scott v. Merck & Company, Inc., the Fourth Circuit reversed a Maryland district court’s decision to permit a plaintiff to argue that her former employer’s non-retaliation policy included an enforceable promise not to terminate her employment. Specifically, the appeals court ruled that the former employee could not reasonably have believed that the non-retaliation policy included a promise of continued employment, given the express at-will disclaimers contained in the employee handbook in which the non-retaliation policy appeared.
Scott was hired as an at-will pharmaceutical sales representative for Merck and worked from 1992 to 2008. In 2005, Scott’s supervisor instructed her to charge business expenses incurred by another employee on her credit card. Scott, believing the arrangement would be temporary, reluctantly agreed. As the requests continued, Scott took her concerns to her supervisor. Scott’s supervisor allegedly told Scott that she would be demoted if she did not continue allowing the charges. Over the next year, Scott raised additional concerns to her supervisor relating to other practices she believed to be contrary to policy and federal regulations. In July 2007, Scott reported her supervisor’s actions to Merck’s Ombudsman’s Office of Ethics. Shortly thereafter, she was placed on a performance improvement plan for reasons that Merck maintained were non-retaliatory. In late 2007, Merck concluded that Scott’s supervisor had violated several policies and transferred him to a new position. Despite its findings, Merck allowed him to conduct Scott’s 2007 performance evaluation. She was fired in January 2008.
Despite two at-will disclaimers in Merck’s employment application, Scott argued, and the federal district court agreed, that two of Merck’s policies modified the at-will employment relationship and created a binding contract. Essentially, Merck’s Code of Conduct and Corporate Policy provided that the Company would not tolerate retaliation against any employee for raising a business practice issue in good faith and that the fact that an employee raised such concerns could not be a basis for the denial of benefits, termination or demotion.
Under Maryland law, the general rule is that statements of policy in an employee handbook or other publication do not create an enforceable contract as long as they are not “offers” by which a company intends to be bound. An exception exists, however, if the policy statements expressly limit the employer’s discretion to terminate an individual’s at-will employment and the employee justifiably relied on those representations.
In reversing the district’s court’s finding that Merck’s policy statements were sufficiently definite and specific to create a binding offer, the Fourth Circuit held that an at-will employee must show both that the policy statement upon which she relied limited the employer’s discretion to terminate her employment and that she was justified in relying on that statement. When the promise not to retaliate exists alongside an unambiguous at-will disclaimer, the Fourth Circuit concluded that the at-will statement precludes justifiable reliance on the more specific policy statement, not the other way around.Similar to Maryland law, South Carolina law requires an “unambiguous disclaimer” of any intent to create a binding contract, but once such a clear disclaimer is made, reliance on written policies appearing to promise more will be unjustified. The Merck case highlights the importance for South Carolina employers to draw their at-will employment policy to their employees’ attention, and to obtain acknowledgments whenever possible.
Employment & Labor Law Section Committees/Updates
Equal Employment Opportunity Committee
Immigration Law Committee
Occupational Safety & Health Committee
Please make plans to attend the Employment & Labor Law Midyear Meeting, “Recent Developments in Employment Law,” scheduled for Friday, May 17, at the Bar Conference Center, 1501 Park St., Columbia. The program is also available at two video-CLE sites (Charleston and Greenville) and via live webcast. This seminar has been approved by the S.C. Supreme Court Commission on CLE & Specialization for 6.0 MCLE credit hours, including up to 1.0 LEPR credit hour and 6.0 Employment & Labor Law Specialty credit hours. During lunch, the Section’s Distinguished Lawyer of the Year Award for 2013 will be recognized.
To register and for additional information, click here.
The 2013 NC/SC Joint Conference is scheduled for October 25-26 at the Francis Marion Hotel in Charleston. Additional information is forthcoming.
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