An employer entered into identical employment agreements with two employees. Both employment agreements stated that they would establish "the terms and conditions of the employee's employment and further committed to arbitrate "any dispute, which arises under the terms of this agreement." After taking many actions in making many efforts to stem what they believe to be fraudulent activities, the employees were terminated. They filed suit under the anti-retaliation provisions of the False Claims Act, 31 USC 3730. The employer, BAE Systems Technology Solutions & Services, sought to compel arbitration, a motion the district court granted. The Sixth Circuit reversed in U.S. ex rel. Paige v. BAE Systems, No 13-2237 (May 22, 2014).
The employment agreement committed the employees to arbitrate "any dispute, which arises under the terms of this agreement." The Sixth Circuit ruled that the agreement did not reach the relator's retaliation claims under the False Claims Act for three reasons:
(1) the "claim is purely statutory and exist independent of" the employment agreement;
(2) "the employment agreement nowhere refers to the False Claims Act, retaliation or statutory claims; and,
(3) the arbitration provision in the employment agreement is narrower than those in cases where broadly-worded arbitration clauses applied to claims "related" to the agreement or that arise out of the employment relationship between the parties.
Keith Russell worked from 2004 to 2009 for Citicorp at a call center. In January 2012, Russell filed a class action against the company seeking unpaid wages and overtime relating to time employees "spent logging into and out of their computers at the beginning and end of each work day." There existed, at the time, an arbitration agreement between Russell and Citicorp, but it did not apply to a class action lawsuit. Later in 2012, Russell applied to work again at Citicorp's call center. He was hired and signed an updated arbitration agreement that covered class claims as well as individual ones. When the lawyers representing Citicorp in the class action discovered the newly-entered arbitration agreement with Russell, they moved to compel arbitration of the pending class-action. The district court denied the motion for arbitration, and Citicorp took an interlocutory appeal authorized by 9 U.S.C. 16(a).
The Sixth Circuit affirmed denial of the motion to compel arbitration. First, the court noted that the agreement applied to employment claims that "arise", a present-tense usage suggesting "that the contract governs only dispute that began – that arise – in the present or future. The present tense usually does not refer to the past." Second, the "common expectations of the parties reinforced the point" that the agreement applied only prospectively, the court explaining that "Russell's behavior – signing the contract without consulting counsel and carrying on with the lawsuit as before – would make little sense of Russell understood the contract to cover the case at hand." Also, the court observed that the retroactive application of the arbitration agreement would raise ethical issues for Citicorp's counsel as it had presented Russell with the new arbitration agreement without going through Russell's counsel in the class action case. As the court put it: "Did Citicorp expect the contract to bear a meaning that would even raise these [ethical] issues? Again, not likely."
Third, the Sixth Circuit discussed how the expectations of parties to a contract determine its meaning:
... Citicorp offers no evidence that it did expect the contract to govern pending lawsuits. In the final analysis, that leaves a situation in which one party (Russell) certainly and the other party (Citicorp) likely expected the contract to govern only lawsuits still become. This common understanding fixes the meaning of the contract. See Restatement (Second) of Contracts sec. 201(1).
Finally, the court disposed of Citicorp's reliance on the axiom that "any doubts concerning the scope of arbitrable issues must be resolved in favor of arbitration":
In arbitration contracts, "as with any other contract, the parties' intentions control."
A court must interpret a provision in a contract not in isolation, but against the backdrop of "the contract as a whole, ... the situation of the parties and the conditions under which the contract was written." The Federal Arbitration Act's presumption of arbitrability does not cut this process short. It is a presumption, not a clear-statement rule. That is why one of two things – either "an express provision excluding a specific dispute" or "forceful evidence of a purpose to exclude the claim" – may take a case beyond the domain of an arbitration clause. "Forceful evidence" describes just what we have here.
Under the Family Medical Leave Act (FMLA) a violation can leave a defendant-employer liable to the employee for a sum of liquidated damages equal to the amount of other damages (lost pay and benefits) awarded. An employer can avoid this liability by showing that it acted in good faith and had "reasonable grounds for believing" it was not violating the FMLA. But there is a "strong presumption in favor of liquidated damages" as the Eighth Circuit explained recently in Jackson v. Hot Springs, Nos 13-1772, 1875 (May 12, 2014).
Wayne Jackson worked for the city as a welder/machinist. In January 2010, he underwent surgery and used his accrued paid sick leave while he recovered. When he ran out of accrued leave, Jackson requested FMLA leave, which the city granted. Jackson then ran out of FMLA leave, but requested and was granted an additional 30 days leave under city policy. But Jackson was not ready to return to work when the 30 days lapsed so he was fired.
Two months later, Jackson applied for his former job. He and two other candidates were interviewed, and Jackson was recommended for hiring. But Jackson's former and would-be supervisor, a Merriman, who had previously expressed skepticism about the legitimacy of Jackson's FMLA leave, fabricated a reason to scuttle the hiring. The position remained open, another application process was gone through four months later, but this time Jackson was not interviewed. The city's explanation for not interviewing Jackson – that it interviewed only two far better qualified candidates – fell flat, when it was forced to admit at trial that those two interviewees could not operate some of the job's basic machinery.
So, the city made up what the jury could find fairly was a lie as to why it did not initially rehire Jackson, and it could find fairly that it made up another lie for not interviewing him during the second hiring process.
The Eighth Circuit ruled that "the district court abused its discretion when it denied liquidated damages." First, the court observed that there is a "strong presumption in favor of liquidated damages" under the FMLA. This presumption follows logically since "showing good faith when a jury has determined intentional retaliation is a very high bar to clear." Second, the city did not offer any evidence of its good faith beyond its explanation for not rehiring Jackson. But this could not suffice, since "a good faith finding based on Hot Springs' alleged reasons for its decision not to rehire Jackson would be an abuse of discretion because such a finding would disregard the jury's non-advisory finding of intentional retaliation." Accordingly, the Eighth Circuit reversed the denial of liquidated damages and remanded the case.
Employees with supervisor job titles or who have some supervisory authority are often misclassified as exempt from overtime pay. Usually applied to them is the "executive," "supervisor" or "manager" exemption to overtime pay requirements. The Sixth Circuit recently considered application of this exemption in Bacon v. Eaton Corp., No 13-1816 (6th Cir., May 1, 2014).
Plaintiffs were "front line" shift supervisors for more than 20 hourly employees. In turn, the plaintiffs were under the supervision of second-level managers. Their employer, Eaton Corporation, refused to pay plaintiffs overtime claiming the "executive" exemption applied to them. Plaintiffs sued, the district court granted summary judgment to Eaton, and plaintiffs appealed. The issue on appeal was whether the executive exemption applied to plaintiffs.
The executive exemption to overtime pay requirements has a four-part test:
the employee must be compensated on a salary basis of at least $455 per week;
the employee's primary duty must be management of the enterprise or of a customarily recognized department or subdivision of it;
the employee must customarily and regularly direct the work of two or more other employees; and,
the employee must have hire or fire authority or their "suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees [must be] given particular weight."
The Sixth Circuit reversed the summary judgment finding that plaintiffs had created a fact issue regarding whether the executive exemption applied to them based on the following:
although plaintiffs completed probationary evaluations for employees they supervise, Eaton did not place great weight on those evaluations;
sometimes the plaintiffs submitted their evaluations after the probationary employees' probation had ended, a reality showing they had no influence on whether or not the probationary employee was hired;
the plaintiffs' job descriptions did not include providing suggestions as to hiring and firing or other changes in employment status;
Eaton did not follow their disciplinary recommendations and sometimes ignored them completely.
In essence, the Sixth Circuit ruled that the plaintiffs had presented enough evidence showing that Eaton did not pay much if any attention to their evaluations or other inputs to the personnel process for a jury to find that the "executive exemption" did not apply to them. The court also stated that: "As a matter of law, an employee who merely carries out the orders of a superior to effectuate a change in status is not performing exempt executive duties." Therefore, the case was remanded for trial.
