Yes, federal law prohibits employers from discriminating against employees and applicants based on their sexual orientation. Yes, employers who allow discrimination or harassment based on sexual orientation can be forced to pay a full range of damages, including punitive damages.

Employment and civil rights lawyers have struggled to find clear answers to these questions for years, and until last week, no federal court of appeals had ever answered them in the affirmative. That all changed, however, when the U.S Court of Appeals for the Seventh Circuit issued its decision on April 4 in Hively v. Ivy Tech Community College of Indiana.

Although the Hively decision is 69 pages long and discusses a number of important legal issues, the key holding is a simple one – Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on sexual orientation. The decision is being lauded as a “gamechanger” by civil rights and LGBT advocates, and is being characterized as judicial overreach by others. Regardless of which side is correct, the underlying issue will almost certainly end up before the U.S Supreme Court sometime in the foreseeable future due to the fact that two other federal appeals courts have ruled against Title VII coverage for sexual orientation discrimination.

Although some media commentators have been quick to attack the Seventh Circuit’s decision because its author, Chief Circuit Judge Diane Wood, was appointed by President Clinton, the decision was supported by strongly worded concurring opinions written by Circuit Judge Richard Posner and Circuit Judge Joel Flaum, both President Reagan appointees. In fact, Judge Posner went so far as to write that “The position of a woman discriminated against on account of being a lesbian is thus analogous to a woman’s being discriminated against on account of being a woman. That woman didn’t choose to be a woman; the lesbian didn’t choose to be a lesbian.”

The Hively decision technically only applies to employers within the Seventh Circuit, which covers Indiana, Illinois and Wisconsin. Nonetheless, employers elsewhere will be wise to take steps to protect their employees from discrimination on the basis of sexual orientation because the EEOC has made it clear that it will use the Hively decision to support its long-standing position that sexual orientation discrimination is a form of sex discrimination and is therefore illegal. Employers in many jurisdictions are also covered by state and local laws that already prohibit sexual orientation discrimination.

The Hively decision provides a good reminder to employers that they should review and update their anti-discrimination and anti-harassment policies with the employment counsel on a regular basis.

imagesBefore the expiration of the extended deadline last week, the U.S. Equal Employment Opportunity Commission received over 100 comments to its proposed Enforcement Guidance (“Proposed Guidance”) on workplace harassment. The revised guidance is the first revision to the EEOC’s workplace harassment guidance since the 1990s and the result of the July 2016 report by the EEOC’s Select Task Force, which notes that “During the course of fiscal year 2015, EEOC received approximately 28,000 charges alleging harassment from employees … This is almost a full third of the approximately 90,000 charges of employment discrimination the EEOC received that year.” See report here.

In addition to other aspects of the Proposed Guidance, certain commentators such as The Employment Law Alliance (“ELA”), the U.S. Chamber of Commerce (“The Chamber”), and The Society for Human Resources Management (“SHRM”) were particularly critical of the EEOC’s position on sexual orientation bias and harassment as inconsistent with existing law and outside the scope of the legislative intent of the statute.

The Proposed Guidance confirms the EEOC’s position that harassment based on gender identity and sexual orientation is prohibited under Title VII, and defines the two terms as follows:

Gender identity: Sex-based harassment includes harassment based on gender identity. This includes harassment based on an individuals’ transgender status or the individual’s intent to transition. It also includes using a name or pronoun inconsistent with the individuals’ gender identity in a persistent or offensive manner.

Sexual orientation: Sex-based harassment includes harassment because an individual is lesbian, gay, bisexual, or heterosexual.

Each of these definitions is accompanied in the Proposed Guidance by a footnote. As The Chamber noted in its comment, however, the single case referenced by the EEOC in its gender identity footnote is a case issued by the EEOC itself, not a Court. The EEOC’s footnote to its sexual orientation definition also highlights one of its own cases and contains an arguably one-sided and misleading representation of support for its own position.  As The Chamber notes, the Proposed Guidance fails to include several Court-issued rulings that explicitly reject the EEOC’s position. SHRM’s comment to the Proposed Guidance also expressed concern that the EEOC failed to clearly communicate in the body of the Proposed Guidance that its position is opposed to established law, as the EEOC did in other areas of the Proposed Guidance. The ELA similarly observed that the EEOC’s inclusion of “gender identity,” “transgender status,” an “individual’s intent to transition” and “sexual orientation” is beyond the plain language of Title VII and “reflects the commission’s impermissible trespassing into legislative rulemaking.”

While the EEOC has been similarly chastised by multiple other sources during the recent past for “legislating” and not regulating, the EEOC has continued to actively pursue its position on LBGT and gender identity issues and it is unlikely to take steps to substantially revise its position or the final Guidance.

President Donald Trump has nominated Tenth Circuit Court of Appeals Judge Neil Gorsuch to fill the U.S. Supreme Court vacancy caused by the death of Justice Antonin Scalia nearly one year ago. Known for his classical constructionist approach, Gorsuch is expected to restore the ideological balance that existed before Justice Scalia’s passing, with four conservatives, four liberals and Justice Anthony Kennedy (for whom Judge Gorsuch worked as a law clerk) serving as a swing vote.

If confirmed, Judge Gorsuch’s presence on the High Court will invariably impact the judicial landscape of labor and employment law. More than three dozen petitions are currently pending before the Court, seeking interpretation of laws such as the Fair Labor Standards Act (FLSA), the Employee Retirement Income Security Act (ERISA), Title VII of the 1964 Civil Rights Act (Title VII), the NLRA, the ADA and others.

Here are a few issues to watch:

Agency Fees

On March 29, 2016, the Supreme Court issued a 4-4 opinion in Friedrichs v. California Teachers Association, in which the Court summarily upheld the Ninth Circuit Court of Appeals’ decision allowing public sector unions to tax employees who decline union membership with “agency” or “fair share” fees similar to the cost of union dues. Justice Scalia, who engaged in lively questioning during oral argument in this case but died before the opinion was issued, was expected to cast the fifth vote in favor of the employees, who argued that the agency fees violated their First Amendment right to freedom of speech and association. But with Scalia’s absence, the Court was deadlocked. 

The Friedrichs case was expected to have critical implications on the continued viability of public sector unions. While the plaintiff’s petition for rehearing has been denied, more cases like this are bubbling up through the courts. Changes also have been made through legislative action, with “right to work” laws having been enacted in 27 states and Guam. Under the right to work laws, employees in union shops may maintain employment without having to pay union dues or other fees.

Arbitration Agreements and Class Wide Waivers of NLRB Claims

After several requests, the Supreme Court has agreed to review the ruling in D.R. Horton, Inc., 357 NLRB No. 184 (2012), in which a 3-2 majority of the National Labor Relations Board (NLRB) found that class action waivers in arbitration agreements violate Section 7 of the National Labor Relations Act. On January 13, 2017, the Supreme Court granted certiorari in three cases involving the validity of the D.R. Horton rule. One case, NLRB v. Murphy Oil USA, Inc., arises out of a Board decision finding that an employer had engaged in an unfair labor practice by entering into arbitration agreements with its employees, and the other two, Epic Systems Corp. v. Lewis and Ernst & Young LLP v. Morris, are private-party disputes in which employees invoked D.R. Horton to challenge their arbitration agreements.

The Supreme Court has historically favored arbitration agreements in other settings, and these concepts have been extended to the employment setting. With certain delineated exceptions, employers are generally able to implement arbitration agreements with class wide waivers to mitigate their litigation risk.

Now that the D.R. Horton issue has been accepted for review, Judge Gorsuch’s confirmation may provide employers with hope that the Court will extend the FAA’s footprint, honoring arbitration agreements in the union setting.

Joint Employers

Another recent NLRB ruling set for review this year is the board’s August 2015 decision in Browning-Ferris Industries of California, Inc., in which the Board found that a California waste management company (Browning-Ferris) jointly employed its staffing agency workers. The decision effectively rewrote the NLRB’s test for deciding whether two affiliated companies are joint employers that share bargaining responsibilities when workers organize and legal liability when they file suit. Before the decision, the joint employer standard rested on a business having “direct and immediate” control over terms and conditions of employment. The Browning-Ferris Board revised the standard to include “indirect control,” or even the “ability to exert” such control. When Browning-Ferris thereafter refused to recognize and bargain with the newly elected union, an unfair labor practice charge was filed, and the Board found another violation of the Act.

The Browning-Ferris cases are part of a growing body of litigation over joint employer liability that is anticipated to take a significant toll on employers in coming years. Employees have sought to apply the new joint employer standard outside of the NLRA, including in cases involving alleged violations of OSHA, the FLSA, the FMLA and other statutes.

The Browning-Ferris, currently on review before the D.C Circuit Court of Appeals, warrants close monitoring. Judge Gorsuch’s confirmation would restore hope that employers will regain some clarity into the now amorphous and overly expansive definition of joint employer liability.

Discrimination Based Upon Sexual Orientation

A final issue poised for review is whether Title VII bars employers from discriminating against employees because of their sexual orientation. Courts have long held that it does not. However, the Seventh Circuit may go against the status quo following a recent en banc rehearing of Hively v. Ivy Tech Community College. In that case, the plaintiff-employee claimed that the employer violated Title VII by failing to award her a full time position because of her sexual orientation. The issue is squarely one of statutory construction, and the en banc court has been tasked with determining whether Title VII can be interpreted as recognizing a discrimination claim based upon sexual orientation as a sub-segment of prohibited gender bias. During the en banc hearing, the Court challenged the notion of strict construction, pointing to other acts, such as the Sherman Act, that are interpreted far differently now than when they first were enacted. If the Seventh Circuit rules in favor of the employee, the resulting split in circuits may signify a need for High Court intervention, provided the legislature doesn’t get there first.

Conclusion

Judge Gorsuch has a reputation as someone who would follow the general judicial philosophy of Justice Scalia, but without some of the more acerbic oral argument commentary for which Justice Scalia was known. For an enlightening insight into Judge Gorsuch’s personal views on Justice Scalia and his legacy, this 2016 Canary Lectureship article by Judge Gorsuch is well worth reading.

Assuming no surprises, it is likely that Judge Gorsuch will be confirmed over strenuous Democratic opposition and will impact the Court for many years.

Workplace AccommodationOn Monday, December 12, the Equal Employment Opportunity Commission (EEOC) issued a resource document concerning workplace rights for individuals with mental health conditions under the Americans with Disabilities Act (ADA), entitled “Depression, PTSD, & Other Mental Health Conditions in the Workplace: Your Legal Rights.” This resource document is part of a series of resource documents issued by the EEOC explaining workplace rights for individuals with disabilities. Earlier in 2016 the EEOC released resource documents addressing the rights of employees with HIV infection and employees who are pregnant.

Through the document, the EEOC aims to educate employers, job applicants, and employees that mental health conditions are no different from physical health conditions under the ADA. Moreover, EEOC charge data shows that claims of workplace discrimination based on mental health conditions are on the rise, with preliminary 2016 data estimating 5,000 mental health discrimination charges within the fiscal year.

Individuals suffering from depression, PTSD, and other mental health conditions are protected from workplace discrimination based on their mental health condition. Thus, employers must be prudent not to rely on stereotypes or jump to conclusions regarding mental health. However, employers are not required to hire or keep employees in jobs they cannot perform or employ individuals who pose a “direct threat” to safety.

The document explains that generally employees with a mental health condition are able to keep their condition private in the workplace. Employers are permitted to ask questions about mental health in only four situations:

  • When an employee with a mental health condition asks for a reasonable accommodation.
  • After the employer has made a job offer, but before employment begins, if everyone entering the same job category is asked the same questions, and the questions are job-related in some way.
  • When the employer is engaging in affirmative action for people with disabilities, in which case the employee may choose whether to respond.
  • On the job, when there is objective evidence that the employee may be unable to perform the job or that an employee may pose a safety risk because of his or her condition.

Moreover, employees with mental health conditions have a right to reasonable accommodations at work. The document provides some examples of acceptable reasonable accommodations for employees with mental health conditions:

  • Altered break and work schedules to work around therapy appointments.
  • Quiet office space or devices that create a less stressful work environment.
  • Changes in supervisory methods, such as written instructions instead of oral.
  • Specific shift assignments.
  • Permission to work from home.

Employers are not required to provide a reasonable accommodation unless an employee requests one. However, if a reasonable accommodation will enable the employee to fulfill his or her job responsibilities, employers are advised by the EEOC to provide one, unless the accommodation involves significant difficulty or expense. Employers may also choose between reasonable accommodations if more than one accommodation is feasible.

Given the complex issues with mental health issues and accommodations for individuals suffering with them, employers should act prudently and engage in the interactive process with affected employees. Experienced employment lawyers can be of great help in this effort.

On October 28, 2016, the Supreme Court of the United States said that it would decide whether the Obama Administration’s interpretation of Title IX as requiring schools to allow students to utilize restrooms that correspond to their gender identities is proper. The case of Gloucester County School Board v. GG, involves the claims of a biologically female high school student, who identifies as a transgender boy, seeking access to the boys’ bathroom at school. While the school board initially allowed the student to use the boys’ bathroom, it later adopted a policy requiring students to use bathrooms that correspond to their biological sex or a separate single-stall restroom.

Although the Gloucester County case relates to students, the Supreme Court’s decision should also have a significant impact on employers. Recently, both the EEOC and OSHA have taken new positions with regard to LGBT rights, including restroom access. The EEOC has taken the position that Title VII’s prohibition of sex discrimination protects lesbian, gay, bisexual and transgender applicants and employees against employment bias. The EEOC has aggressively enforced its new position. Recently, the EEOC announced that it had entered into a settlement with a West Virginia hospital requiring the hospital to make same-sex spouses eligible for employer-sponsored benefits. Similarly, both the EEOC and OSHA have issued guidance indicating that all employees, including transgender employees, should have access to restrooms that correspond to their gender identity.

Presumably, the Supreme Court’s decision in the Gloucester County case will provide clarity as to whether the courts will show deference to these agencies’ interpretations of the law. Employers seeking guidance regarding LGBT issues in their own workplace should contact any of the attorneys in the Frantz Ward Labor and Employment Practice Group.

Texas courts continue to be the focus of anti-regulation filings as the next election approaches. In August, a U.S. District Court for the Northern District of Texas issued a nationwide injunction barring the enforcement of Department of Education guidance requiring schools to allow transgender students to use bathroom and changing facilities consistent with their gender identity. In September, 21 states and the U.S. Chamber of Commerce filed two lawsuits in the U.S. District Court for the Eastern District of Texas to enjoin the implementation of the new Department of Labor rules on overtime compensation and classification practices under the Fair Labor Standards Act.

Keeping pace in October, hours before the Fair Pay and Safe Workplaces rule was set to take effect last week, the Eastern District issued a preliminary injunction halting its enforcement. The rule, promulgated through a 2014 Executive Order, would require government contractors and subcontractors to disclose mere allegations of labor law violations, including alleged violations before the NLRB, EEOC, OSHA and the OFCCP, when bidding for contracts over certain dollar amounts, with a goal toward disqualifying contractors or requiring that they enter into premature labor compliance agreements in order to obtain or retain federal contracts.

The nationwide injunction—issued by Judge Marcia A. Crone—resulted from a complaint and emergency motion for a temporary restraining order and preliminary injunction filed by three national and local trade associations representing construction industry employers. Judge Crone found that the Executive Branch exceeded its rule making authority in enacting the rule, focusing primarily on the potential disqualification of federal contractors for alleged (rather than proven) violations of federal labor laws. To that issue, Judge Crone wrote:

In a majority of the labor laws cited in the Executive Order (specifically NLRA, FLSA, OSHA, Title VII, ADEA, and ADA), Congress spelled out in precise detail what agency or court would be empowered to find a violation, how such a finding would be determined, and what the penalty or remedy would be. None of these laws provides for debarment or disqualification of contractors for violations of their provisions; none of them provides for such determinations to be made by unqualified agency contracting officers (or ALCAs); and certainly none of these laws provides for any such action to occur based on non-final, unadjudicated, “administrative merits determinations.”

Judge Crone also found merit in the trade associations’ argument that the disclosure requirements will cause contract bidders to “suffer an infringement of their First Amendment rights in the form of ‘compelled speech.’”

While Judge Crone’s decision provides the beginning of what may become a reprieve for federal contractors, an appeal to the Fifth Circuit Court of Appeals is certain. In addition, the injunction does not relieve federal contractors from the requirement to provide wage statements and notice of independent contractor status, a portion of the rule that is now scheduled to go into effect on January 1, 2017.

The Equal Employment Opportunity Commission (EEOC) is working to check off another initiative from its Strategic Enforcement Plan, having released for public comment an updated draft of its “Enforcement Guidance on National Origin Discrimination.” The enforcement guidance frames out the agency’s policy for addressing national origin claims under Title VII of the Civil Right Act of 1964, 49 U.S.C. §2000e et seq., which prohibits unfair treatment of employees and applicants based upon a number of defined characteristics including national origin.

The applicable law, according to the enforcement guidance, prohibits “discrimination because an individual (or his or her ancestors) is from a certain place or has the physical, cultural, or linguistic characteristics of a particular national origin group” and “prohibits employer actions that have the purpose or effect of discriminating against persons because of their real or perceived national origin.” The enforcement guidance addresses a wide range of topics including intersectional discrimination, human trafficking, harassment, accent and fluency, national security requirements, and citizenship issues.

National origin discrimination is counted among several other high priority items identified in the EEOC’s Strategic Enforcement Plan, including LGBT and transgender protections, criminal background checks, equal pay and accommodations for religion and pregnancy. The draft guidance is available for review here. The EEOC has allowed a comment period of only 30 days, and that closes on July 1.

On January 29, 2016, the Equal Employment Opportunity Commission (“EEOC”) published a proposed revision to the Employer Information Report (EEO-1). The proposed revision to the EEO-1 would require employers to report data on the EEO-1 regarding their employees’ W-2 earnings and hours worked.

Currently, employers report on the EEO-1 their employees’ race, ethnicity and sex by job category. The proposed regulations would require employers to also report W-2 earnings by pay bands. The regulations provide for 12 pay bands for each job category. Under the proposed revisions, employers would also report on the EEO-1 the number of hours worked in each pay band. The EEOC encourages employer comments on how the hours worked should be collected.

The EEOC believes that the proposed wage information will assist it and other government agencies in identifying pay discrimination and also assist employers in promoting equal pay in their workplaces. However, the aggregation of multiple job classifications into job categories and the use of W-2 earnings means that the information will not correspond to the standards for violation of the Equal Pay Act or Title VII. It is therefore likely that the data will give misleading impressions of employer compliance and result in costly proceedings where no violation exists.

Under the proposed revisions, the first EEO-1’s with pay information would be due on September 30, 2017.

Members of the public have until April 1, 2016, to comment on this change. Frantz Ward LLP will continue monitoring this proposed regulation.

On January 21, 2016, the Equal Employment Opportunity Commission (“EEOC”) issued proposed enforcement guidance concerning retaliation claims. This guidance is intended to replace the 1998 Compliance Manual on Retaliation, and, not surprisingly, the guidance takes a broader view than many of the cases that have been decided since then.

The guidance makes clear that the anti-retaliation provisions that the EEOC enforces apply to prospective, current, and former employees. The guidance provides examples of prohibited conduct, including negative evaluations, refusing to provide references, advising prospective employers of the former employee’s discrimination claims, as well as the standard claims of demotion or discharge. Retaliation against third parties somehow linked to the employee is also prohibited.

Pursuant to the anti-retaliation statutes, protected activity may be established by demonstrating that an individual either “participated” in equal employment opportunity activity, or otherwise “opposed” discrimination. The proposed guidance attempts to limit the extent in which the individual must be acting in good faith. According to the guidance, “opposition” may have a good faith and reasonable belief component, while “participation” does not require good faith, truthfulness, or reasonableness. The EEOC is considering more and more complaints to be in the “participation” category, for example, by treating them not as opposition, but as participation in an internal EEO procedure. The guidance also provides examples of best practices that employers should follow to minimize the likelihood of retaliation violations. These best practices include:

  1. Establishing written policies against retaliation;
  2. Ensuring that all employees are properly trained;
  3. Providing anti-retaliation advice and support for employees, managers, and supervisors in order to improve practices and responses to retaliation complaints;
  4. Proactively following up with the complaining employees during any pending dispute; and
  5. Reviewing adverse employment actions with Human Resources and/or company counsel before implementing them.

The comment period ends on February 24, 2016. Because retaliation claims constitute the single most alleged category of violation of all EEOC claims, this proposed guidance will have important ramifications, and Frantz Ward LLP will continue monitoring if and when these proposed changes are implemented.

The U.S. Supreme Court’s June 1, 2015 decision in EEOC v. Abercrombie & Fitch Stores, Inc., 575 U.S. __ (2015), signals to employers that employment decisions based upon neutral policies may run afoul of Title VII, where the policy’s application limits an individual’s religious beliefs or practices. Such is the case even when the individual has not specifically requested or otherwise discussed the need for a religious accommodation. The ruling places the onus on the employer to initiate the interactive accommodation process even when there is very little reason to believe that a religious accommodation may be needed.

Abercrombie & Fitch Stores, Inc. (“Abercrombie”) declined to hire Samantha Elauf, a practicing Muslim, because the hijab (or headscarf) that she wore for religious reasons conflicted with Abercrombie’s “Look Policy” that governs its employee dress code. While Elauf received an interview rating that qualified her to be hired under Abercrombie’s ordinary system for evaluating applicants, the retailer determined that the headscarf, like all other headwear, was prohibited under the policy.

The Equal Employment Opportunity Commission (“EEOC”) filed a lawsuit on Elauf’s behalf, claiming that Abercrombie discriminated against her in violation of the religious accommodation protections set forth in Title VII. The primary issue before the Supreme Court was whether an applicant could establish disparate treatment discrimination where the employer lacked “actual knowledge” of the applicant’s need for an accommodation.  

In an 8-1 opinion authored by Justice Scalia, the Supreme Court held that actual knowledge was not required. Rather, according to the Supreme Court, “an applicant need only show that his need for an accommodation was a motivating factor in the employer’s decision.” In so holding, the Supreme Court drew a distinction between “knowledge,” which is not required under Title VII, and “motive,” which is.

Justice Scalia wrote:

[T]he intentional discrimination provision prohibits certain motives, regardless of the state of the actor’s knowledge. Motive and knowledge are separate concepts. An employer who has actual knowledge of the need for an accommodation does not violate Title VII by refusing to hire an applicant if avoiding that accommodation is not his motive. Conversely, an employer who acts with the motive of avoiding accommodation may violate Title VII even if he has no more than an unsubstantiated suspicion that accommodation would be needed.

Thus, the Court concluded, “an employer may not make an applicant’s religious practice, confirmed or otherwise, a factor in employment decisions.”

While Justice Scalia presented the issue as a straightforward matter of statutory interpretation, the ruling seems to whittle away the long standing rule that “intent” (at least at some level) is necessary to support a claim of “intentional discrimination,” protecting even unconfirmed religious practices.

Because an employer’s lack of knowledge may no longer provide a defense as it once did in Title VII religious discrimination matters, employers are best served by initiating open dialogue around an employee’s or applicant’s perceived or suspected religious needs. Such a dialogue is particularly important where an employer is planning to take an adverse action against an employee or applicant. This strategy best positions the employer and employee or applicant to agree upon an accommodation that is reasonable for both parties.