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Feature Article

FAIRFAX JURY AWARDS $3.5 MILLION AGAINST RAYTHEON IN EMPLOYMENT DEFAMATION CLAIM
A Fairfax County jury recently awarded a female employer of Raytheon $3.5 million on her defamation claim that she says resulted in her termination from the company after over 20 years employment. The employee participated in what she believed was a confidential critique session of her new boss. When some of her less flattering comments made it back to her boss, she claimed that he engaged in a personal vendetta that started with negative performance evaluations and eventually led to her being fired. The case is obviously noteworthy given the size of the multi-million dollar verdict. But it also is significant because defamation claims are not very common in the employment context, mostly because companies enjoy immunity from such claims raised by their employees in most situations. This case is the latest example of employees using novel theories and approaches to keep their cases in state court where it is often much easier than federal court to get before a jury.

The employee, Cynthia Hyland, had been with Raytheon and its predecessor for 21 years. Up until she made her critique of her boss, Hyland had received very positive feedback from the boss about her performance. According to Hyland’s case, it was only after her negative comments were revealed that the boss changed his tune about her and gave her bad reviews and eventually got her fired.

The biggest obstacle for Hyland in bringing her defamation claim was the legal rule that companies are generally immune from defamation claims when it comes to employee relations such as negative performance reviews. This notion, often referred to as the “qualified privilege defense”, in essence says that the law will generally allow companies to discipline their employees without fear of being sued for defamation. But if an employee can show that a supervisor acted with “actual malice” the immunity doctrine may not apply to protect the company.

That is precisely what Hyland was able to show in her case-that the supervisor was so mad after learning of her negative comments made in the critique session, that he acted out of malice to get back at her, rather than our of true concern for what was best for the company.

This case is reportedly on appeal to the Supreme Court of Virginia.
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The Court Report

FLIRTING BY FEMALE SUPERVISOR DID NOT AMOUNT TO SEXUAL HARASSMENT OF MALE EMPLOYEE
Trial courts in the Fourth Circuit are constantly wrestling with where to draw the line between flirtatious conduct in the workplace and unlawful sexual harassment. One recent federal judge from Newport News concluded that the flirtatious conduct complained of by a male employee against his female supervisor in the case of Byers v. HSBC Finance Corp. was not severe or pervasive enough to constitute actual sexual harassment, and dismissed the case. The judge recognized that a certain amount of flirting between co-workers is not uncommon in today’s workplace; hence the courts will only step in when the conduct is abusive to the point where it inhibits an employee’s ability to perform his or her job.

Byers was a male account executive for a consumer loan business located in the Newport News area. In his sexual harassment lawsuit against the company, Byers claimed that his female supervisor engaged in the following conduct, which amounted to sexual harassment: she asked if he was faithful to his girlfriend; she invited him to attend a concert or a play; she invited him to go on vacation to Aruba to visit her family’s home; she took a piece of food from his plate; she leaned over his desk while looking at loan documents, causing her breasts to touch his head on one occasion; she hugged him when he performed his job well on certain occasions; she massaged his neck once; she wore low-cut tops to the office; and she gave him preferential treatment over co-workers.

In dismissing the male employee’s sexual harassment lawsuit, the Newport News federal judge held that the female supervisor’s conduct was not severely or pervasively abusive enough to rise to the level of unlawful sexual harassment under Title VII. The judge stated that although the female supervisor’s interactions were impolite, she never propositioned her male subordinate for sex or even engaged in discussions of an explicit sexual nature. The judge also noted that the male supervisor seemed to benefit from his supervisor’s attention in terms of his sales production at the company.

The court’s decision here is consistent with the standard in this jurisdiction established by the Fourth Circuit as to what amounts to actionable sexual harassment. Before they will let a claim of sexual harassment get to a jury, the courts will usually require that an employee put forth evidence of pretty shocking conduct measured by an objective standard.
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15 EMPLOYEE RULE UNDER TITLE VII NOT JURISDICTIONAL, SUPREME COURT RULES
There has long been confusion in the employment law arena about how to treat the requirement under Title VII--that an employer must have 15 employees in order to be subject to that law’s anti-discrimination provisions. Some federal appellate courts have found that the requirement under Title VII is jurisdictional, which means that an employer can raise the lack of 15 employees as a defense at any time, including after trial, to defeat an employee’s Title VII claim. Other federal courts have attached a lower significance to it by saying it is merely one of the elements of proof in a discrimination claim, and therefore must be raised before a verdict is issued or it is waived by the employer. The United States Supreme Court recently stepped in to resolve the confusion in the case of Arbaugh v. Y& H Corporation, which ruled that the 15 employee rule is not jurisdictional. Therefore, because the employer did not raise the issue that it lacked the 15 requisite employees to be subject to Title VII until after a verdict was handed down against it, the argument was waived and the verdict for the employee stood.

Ms. Arbaugh sued her former employer, Y&H Corporation in federal court alleging sexual harassment in violation of Title VII and related state law violations. Title VII is a federal law that protects employees from an employer’s unlawful employment practices, including discrimination on the basis of an employee’s race, color, religion, sex or national origin with respect to the terms, conditions, and privilege of employment.

At the outset of the litigation, both Ms. Arbaugh and Y&H Corporation agreed that the federal courts had proper subject matter jurisdiction over the lawsuit, because under the express provisions of Title VII as well as the federal statute regarding subject matter jurisdiction (28 U.S.C. §1331), federal courts have the authority to decide cases arising out of federal laws and supplemental jurisdiction over related state law claims. However, after the jury returned a $40,000 verdict for the plaintiff, Y&H Corporation, for the first time, raised the argument that the federal court never properly had subject matter jurisdiction over this lawsuit because Y&H Corporation had less than fifteen employees and thus was not subject to Title VII. The term "employer" is expressly defined in the statute to include only employers who have "fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." 42 U.S.C. §2000e(b).

Y&H Corporation's challenge to subject matter jurisdiction, although after the conclusion of trial, was not improper since subject matter jurisdiction can be challenged at anytime. The district court ultimately found that Y&H Corporation did not meet the fifteen or more employee threshold and thus Y&H Corporation was not subject to Title VII. Given this finding, the district court, although recognizing the unfairness and waste that would result, vacated its prior ruling and dismissed both the Title VII and state law claims based on its conclusion that Title VII’s fifteen employee threshold rule was a jurisdictional requirement. The Fifth Circuit affirmed the lower court’s ruling based on prior precedent.

The Supreme Court granted certiorari to resolve the conflict among the nation's appellate courts on the question of whether the fifteen employee rule is a jurisdictional requirement or simply an element that the plaintiff must prove in order to make a claim for relief. The Supreme Court turned to the statute itself for the answer and concluded that Title VII has a separate provision that deals with jurisdiction, which does not include the fifteen employee threshold rule. Rather, the rule regarding fifteen employees is found in a separate provision that does not refer to jurisdiction. The Supreme Court, like the lower court, also recognized the unfairness and waste of judicial resources that would result if the fifteen employee rule was tied to subject matter jurisdiction.

The Court set forth the rule that courts should treat a statutory limitation as "nonjurisdictional in character" unless Congress, in drafting the law, makes clear that the limitation is jurisdictional. Applying this rule, the Court held that the fifteen employee threshold requirement for Title VII to apply is not a jurisdictional issue and remanded the lawsuit back to the lower court for adjudication consistent with its ruling.
Full court opinion(PDF)...
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VIRGINIA SUPREME COURT REINSTATES $5 MILLION JURY VERDICT FOR PLAINTIFF IN EMPLOYMENT DEFAMATION SUIT
Employment defamation claims are becoming increasingly common as plaintiff’s attorneys seek ways to have their disputes resolved in state court given the widely-viewed proclivity of this jurisdiction’s federal courts to dismiss employment claims on summary judgment. As a local company recently found out, these cases can be costly. The Virginia Supreme Court recently reinstated a $5 million jury verdict that was set aside by a lower court judge who ordered remittitur of $4 million, which means that the plaintiff’s damages award was reduced to $1 million. The lower court that presided over the case of Jackson v. Government Micro Resources, Inc. ordered remittitur after concluding that the verdict "was shockingly excessive" and that the jury "confused and commingled" elements of the plaintiff’s contract and defamation claims, which led to the excessive compensatory damages award. Both parties appealed. The Virginia Supreme Court reviewed the trial court’s order for remittitur under the generally deferential abuse of discretion standard, but nonetheless concluded that the trial court’s order must be reversed.

The plaintiff in this case, Alan Jackson, sued his former employer Government Micro Resources, Inc. ("GMR") for defamation and breach of contract after he was terminated for cause. His termination letter accused him of "gross mismanagement" of the finances. Following Mr. Jackson’s termination, GMR’s chairman of the board, Humberto Pujals, Jr., contacted a Seisint executive, Mr. Asher, and told him that Mr. Jackson was fired because his mismanagement cost GMR a "significant" or "exorbitant" amount of money. In addition, in a meeting between GMR and Seisint, Mr. Pujals stated to another Seisint executive that Mr. Jackson was fired because he lost the company $3 million. Around the time of these statements, Mr. Jackson was engaged in employment discussions with Seisint, which led to him being hired as a consultant and sales representative and later as a senior vice-president of government programs. But according to Mr. Jackson, these positions were not management level and were not at the level that he held in his previous employment.

At the conclusion of Mr. Jackson’s defamation and breach of contract trial, the jury awarded him $200,500 in compensatory damages for his breach of contract claim and $5,000,000 and $1,000,000 in compensatory and punitive damages, respectively, for his defamation claim. In response to GMR’s motion for remittitur, the trial court reduced the contract damages to $112,500, the defamation compensatory damages to $1,000,000 and the defamation punitive damages to the statutory limit of $350,000.

On appeal, GMR argued that the statement Mr. Pujals made to Mr. Asher was not properly pled, that both statements were opinion and thus could not be defamatory, and that Mr. Jackson did not prove malice and thus punitive damages were inappropriate. The Virginia Supreme Court affirmed the judgment of the trial court, stating that the statement to Mr. Asher was properly pled and that both statements were fact, not opinion, because whether or not mismanagement resulted in financial loss is a fact that can be proven. The Court also agreed with the trial court that Mr. Jackson provided clear and convincing evidence that the statements were made with actual malice because Mr. Pujals knew his statements were false and independently initiated both statements. Any defense of qualified privilege was defeated given this showing of actual malice.

Mr. Jackson argued on appeal that the order setting aside the jury verdict and remitting $4 million back to GMR should be reversed. The Virginia Supreme Court reviewed the trial court’s record and determined that there was not sufficient support for the conclusion that the damages award was excessive and resulted from the jury’s confusion. The high court found that the evidence on which the trial court relied for ordering remittitur was taken out of context and did not properly support its conclusion. In addition, the trial court failed to consider additional evidence offered by Mr. Jackson, such as injury to his reputation, his untarnished reputation prior to the defamation, humiliation, embarrassment, fear that members of the business community heard of the defaming remarks and impact on employment opportunities. Given this, the high court reinstated the $5 million jury verdict, holding that the trial court abused its discretion in setting the verdict aside.

As this case demonstrates, no good can come out of a company interfering with or otherwise impeding a former employee’s job search. In fact, there is evidence that many employees who might otherwise be inclined to sue their former employer choose to "move on" and not sue once they find another comparable job. Even if a former employee does sue, the subsequent employment compensation will serve to offset any lost wages damage claim against the former employer. Therefore, it is rarely if ever in the best interest of a company to interfere with an ex-employees reemployment efforts the way the company got itself into trouble in this case.
Full court opinion(PDF)...
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ELIMINATING POSITION CREATED TO ACCOMMODATE EMPLOYEE WAS NOT EVIDENCE OF GENDER DISCRIMINATION, VIRGINIA COURT RULES
The Federal Court for the Eastern District of Virginia holds that an employer’s decision to eliminate a new position created as a promotion for a female employee does not constitute evidence of sex-based discrimination. In Garrow v. Economos Properties, Inc., the plaintiff, Kathleen Garrow, worked as the Director of Sales in the Newport News hotel of the defendant Economos Properties, Inc. (Economos). When she learned that her husband had received a job offer in Florida in December 2002, Ms. Garrow asked to be transferred into a position as a general manager of one of Economos’ Florida hotels. While Economos did not have any general manager positions available, it agreed to promote Ms. Garrow into a newly-created position as assistant general manager of a Florida hotel.

In its decision, the Eastern District found that while Ms. Garrow was training for the assistant general manager position in January 2003, Economos became concerned about its financial situation due to a shortfall of income and recent financial reports showing that expenses were over budget. Because Economos expected tourism to decrease due to the impending invasion of Iraq, Economos decided to implement cost-cutting measures. These measures included: reducing the salary and eliminating the bonus of the general manager of the Florida hotel, reducing the salary of another male employee and several female employees, eliminating an accounting position, and eliminating Ms. Garrow’s new assistant general manager position. When the general manager threatened to resign, Economos did not reduce his salary but did reduce his bonus paid in 2003. In addition, Economos eliminated Ms. Garrow’s assistant general manager position and replaced her as Director of Sales with another female employee.

Ms. Garrow sued Economos claiming that her termination constituted discrimination on the basis of gender in violation of Title VII. The Eastern District found, however, that Ms. Garrow could not establish a prima facie case of discrimination because her former position as Director of Sales was filled with a person within her protected class, and because no gender-based discrimination could be inferred from the elimination of her new position. While Ms. Garrow argued that her termination was part of a reduction-in-force based on her performance, the court found that this analysis did not apply because Ms. Garrow’s performance was not a basis for her discharge, and because, even if her discharge was considered part of a reduction-in-force, the elimination of a position created to accommodate Ms. Garrow could not establish discrimination. The court further found that Ms. Garrow’s claim that the general manager of the Florida hotel was responsible for her termination could not withstand summary judgment because under the standard articulated in Hill v. Lockheed Martin Logistics Managements, Inc. 354 F.3d 277 (4th Cir. 2004), the general manager was not the ultimate decision-maker in the matter.
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DISABILITY DISCRIMINATION NOT SHOWN WHERE EXPERT TESTIFIES TO JOBS PLAINTIFF COULD PERFORM
The Federal Court of Appeals for the District of Columbia Circuit reversed a jury verdict in favor of a plaintiff on his disability discrimination claim against his former employer, because the plaintiff could admittedly perform many jobs despite his impairment. In Gasser v. District of Columbia, the plaintiff, Neal Gasser, was a supervisory police officer for the District of Columbia Police Department who was promoted to sergeant in 1994. In July 1996, Mr. Gasser suffered a blood clot in his abdomen and was diagnosed with an inherited disorder called "protein S deficiency" that causes the blood to clot. To treat this protein S deficiency, Mr. Gasser was prescribed the blood thinner Coumadin to prevent future blood clots.

After being prescribed Coumadin, Mr. Gasser went on a six-month limited duty status at the police department, which is provided to sick or injured officers as a period of time to receive treatment and recover before returning to full duty. Police department policy provides that, if an officer is not physically able to return to full duty at the end of this period, the officer must be involuntarily retired. At the end of his six-month limited duty period, Mr. Gasser returned to full duty. In December 1998, Mr. Gasser sprained his wrist and returned to the police department clinic, at which time a clinic physician determined that Mr. Gasser should not be serving on active duty status because he was taking Coumadin, which might cause him to bleed excessively if he experienced any "significant trauma" while performing his duties. Because police department policy requires that every officer - even the chief of police - be able to apprehend and detain a suspect if necessary, Mr. Gasser was unable to perform an essential function of the position. In December 1999, the police department initiated the process of involuntarily retirement.

Mr. Gasser filed a disability discrimination claim under the Americans with Disabilities Act against the District of Columbia, alleging that he was improperly "regarded as" disabled. At trial, Mr. Gasser presented testimony of an expert in the field of vocational rehabilitation to show that he was able to perform approximately 28% of 206,000 jobs in the Washington D.C. area for which he was qualified, or 57,680 jobs. The jury awarded Mr. Gasser a verdict of $64,179.71 in lost wages and interest, and the trial court denied the District of Columbia’s motion to alter amend the judgment. On appeal, the District of Columbia Circuit reversed the jury verdict and granted judgment to the District of Columbia because Mr. Gasser could not show that he was regarded as substantially limited in the major life activity of working. Rather, because Mr. Gasser admittedly could perform 57,680 according to his own trial expert, he could not show that he was unable to perform a class or broad range of jobs. Therefore, the District of Columbia Circuit held, Mr. Gasser could not show that he was ever regarded as an "individual with a disability" under the Americans with Disabilities Act.
Full court opinion (PDF)...
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ILLEGAL ALIEN NETS $750,000 SETTLEMENT FOR JOB INJURY
An undisputed illegal alien who was severely injured while working construction for a Northern Virginia construction company recently received a worker’s compensation settlement in the amount of $750,000. Virginia adheres to the approach most recently adopted by Maryland that illegal aliens, even though not lawfully permitted to work, are entitled to worker’s compensation benefits if they are injured on the job. According to the published statements of the injured worker’s attorney, the settlement will provide the worker and his family with a very comfortable standard of living upon his required return to his native El Salvador. Given the current political climate in which the status of illegal aliens dominates the public discourse, this case serves as a further reminder for employers of the inherent risks of employing illegal aliens in violation of federal work laws.
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SALES EMPLOYEE NOT ENTITLED TO COMMISSIONS FOR POST-TERMINATION SALE BOOKINGS
A Virginia Circuit Court in Loudoun County recently decided a dispute involving what, if any, commissions were due to an employee after termination. This has been a reoccurring issue for employees engaged in sales on a commission pay plan, and one that has caused quite a bit of confusion for both employees and employers. In this case, the former sales representative sought commissions earned under an employment agreement, and argued that the agreement provided for compensation to him based on sales of certain accounts. The interesting aspect of the case is that the employee claimed that he was also entitled to commissions on sale bookings to his accounts that occurred after his termination. In ruling that the sales representative was entitled to some payment but not on any modifications of those accounts after his separation of employment, the Court concluded that the employee had not carried his burden of proving that the additional post-termination sales on those accounts were attributable to his efforts.

The employee worked for Aeroastro as a sales representative and received a base salary of $102,500 plus commissions. The employment agreement set forth that the employee would receive a percentage of sale bookings on certain identified accounts. Several years into his employment, the parties amended the employment agreement to expressly provide that commissions would be earned on negotiated contract growth elements on existing accounts. The Court noted that this amendment reflected a desire by the company to redirect the employee’s sales efforts to spend part of his time on sold accounts.

However, the Court declined to find that the employee was due any percentage of sale bookings which occurred after he was no longer an employee of the company. Although the employee was awarded payment for certain, identified accounts, he did not recover any commissions for post-termination bookings to those accounts. Payment on a commission basis, whether exclusively or in conjunction with a salary, can be a great tool for employers to incentivize workers and increase productivity. However, computing the amount of commissions due to an employee is typically not as clear-cut as providing a straight salary or hourly rate. These types of arrangements vary in form, such as straight commission, commission with advances or draws, and quota bonuses. Therefore, it isn’t surprising that questions and litigation arise concerning an employee’s expectancy for such payments. The best way to head off a dispute with an employee is to prepare an unambiguous, definitive written agreement which lays out in detail when a commission is earned and paid out to an employee, and specifically address how this is handled after the employee leaves the company.
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© Copyright 2006   Albo & Oblon, L.L.P.,  All rights reserved.
David Oblon, Managing Partner, Albo & Oblon
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