Let’s Talk Pay Transparency
Over the past few years, a number of states and municipalities have enacted pay transparency requirements, opening yet another front in the compliance battle for multi-state employers. Proponents argue that pay transparency helps narrow the gender pay gap, increases employee trust in their organization’s fairness and leads more qualified candidates to apply for jobs. To date, at least eight states and 10 municipalities require some form of pay transparency. Requirements vary, but typically involve disclosing the wage or salary range for a position in a job posting or upon request by an applicant or current employee. For example, California, Colorado, New York and Washington have all passed legislation requiring that job postings by covered employers include salary range disclosures. Colorado and Washington also mandate a description of benefits and other compensation in the posting. Some laws specify that a job posting cannot use open-ended ranges such as “$50,000 and up,” and that employers cannot avoid the posting requirements by excluding job candidates from the state. Posting requirements also often apply to job advertisements made on behalf of an employer by a third party, such as a recruiter.
How should employers respond to this emerging trend? First, determine whether the employer is covered by any pay transparency laws. This includes a review of both state and local laws. Jobs that could be performed by remote workers should be scrutinized carefully for possible application of pay transparency mandates. Next, find out when salary or wage range disclosure is required, what must be disclosed and to whom. Does the law require disclosure in job postings, only after an interview, or to any applicant upon request? Are current employees entitled to request information about salary range? Does information about benefits have to be included? How much detail is required? Every law is different on these points, requiring careful consideration. Finally, employers should also proactively evaluate their compensation practices to identify and correct inequities or other problems.
A final note on transparency relates to the right of employees to talk about their pay. From time to time, we encounter the misconception that employers can limit such discussions to avoid the workplace friction the topic may generate. On the contrary, the National Labor Relations Act gives workers in both union and non-union workplaces the right to discuss their pay and other terms and conditions of employment with each other. Employers must take care to avoid restricting or infringing on the exercise of this right or risk an unfair labor practice charge at the National Labor Relations Board. Employers with questions about pay transparency requirements and related employee rights should consult experienced employment counsel.
Texas Federal Court Upholds Eye-Popping Jury Verdict in Retaliation Case
A federal judge in Texas recently ordered FedEx Corporation to pay a staggering $366 million jury verdict to a former employee who claimed she was fired in retaliation for a race discrimination complaint. Jennifer Harris worked for the company for more than 12 years and says she had a successful performance record, including six promotions. After her manager asked her to take a demotion, Harris complained to Human Resources that she was being treated less favorably than white colleagues. Harris asserts that after her complaints, she received negative feedback, including a written warning, and eventually was fired. Her lawsuit alleged that FedEx failed in several duties, including hiring competent HR staff and training and supervising managers to avoid discrimination and to respond properly to complaints. A jury determined that the company’s treatment of Harris was retaliation violating both Title VII of the Civil Rights Act of 1964 and § 1981 of the Civil Rights Act of 1866, awarding her just over $1 million in compensatory damages alongside $365 million in punitive damages.
FedEx argued that the evidence at trial showed that FedEx acted in good faith, and that Harris’s termination was due to poor performance. The company noted it did not terminate Harris’s employment until after FedEx had investigated her concerns. (Harris counters that the investigation was not genuine and did not include important witnesses and documents.) FedEx asked the court to scrap or reduce the jury’s verdict on the grounds that the amount was unconstitutionally excessive, and that Harris failed to prove her complaint caused her termination. FedEx’s arguments did not appear to resonate with Judge Kenneth M. Hoyt, who issued an order early this month summarily rejecting FedEx’s arguments and ordering the company to pay the judgment. FedEx immediately appealed to the Fifth Circuit Court of Appeals, and says it is confident it treated Harris properly under the law.
Whatever the ultimate outcome, the case serves as an important reminder that what an employer does after receiving a discrimination complaint is every bit as critical as the events that led to the complaint being made. Missteps are often very costly, and the verdict in this case illustrates that juries are often eager to send a message to employers with high-dollar punitive damages awards.
UALD Shares 2022 Statistics
In recent years, various media reports have focused on Utah’s Anti-Discrimination and Labor Division (UALD), the state agency charged with handling complaints of discrimination and retaliation. Under a work-sharing agreement with the Equal Employment Opportunity Commission (EEOC), the UALD investigates and resolves discrimination complaints under both Utah’s anti-discrimination law and the federal civil rights laws. News stories about the UALD have centered on a backlog of cases and allegations of a pro-employer bias, sometimes suggesting that the EEOC is a more favorable venue for Utah discrimination claimants. In connection with an annual presentation to Utah HR professionals by the authors of these updates, over the last several years, we have requested and received statistical claims-processing information from the UALD. Recently, the UALD provided its numbers for 2022. We believe the numbers provide important context for discussions about the agency’s work.
The UALD reports that in 2022, it received 735 intake questionnaires and filed 579 charges of discrimination. (A charge is filed when the UALD determines that the intake questionnaire meets filing requirements.) Mediation or conciliation resolved 122 charges, and another 16 cases were withdrawn because the parties settled them, meaning that nearly a quarter (23.8%) of filed charges were resolved at this stage, before the UALD issued a determination on the merits of a charge. After investigation, the agency issued determinations in another 305 cases, concluding in 10 cases that there was cause to find discrimination had occurred. Excluding cases still pending and those that were resolved voluntarily, the UALD reports that 3.3% of the determinations issued resulted in a finding of cause (i.e., a finding against the employer). A recent local news report asserts that the EEOC sides with workers in about 3.5% of cases.
Without more context, this low percentage of cause determinations may wrongly suggest that workers succeed in only a small fraction of cases at the UALD, but when one factors in the roughly 24% of cases that were resolved through mediation and other settlements before the UALD issued a determination, a clearer picture emerges. Voluntary resolutions virtually always involve the worker getting something of value, whether it is a monetary payment or workplace changes like reinstatement. Moreover, competent employment counsel will often advise employer clients to resolve charges that present risk in the early stages, weeding out some possibly meritorious charges from the pool of cases investigated and decided by the UALD. All of these factors should be weighed in any analysis of the agency’s performance.
Third Circuit Holds Farragher/Ellerth Defense Not Available When Alleged Harasser Is Employer’s Alter Ego
In an important decision for sexual harassment law, the Third Circuit Court of Appeals recently held that the affirmative defense established by the Supreme Court in Farragher v. City of Boca Raton and Burlington Industries v. Ellerth is not available to an employer where the alleged harasser functions as the alter ego or proxy for the company. The Farragher/Ellerth defense allows an employer to avoid vicarious liability for harassment if no tangible adverse employment action was taken; the employer took reasonable steps to prevent and correct harassment; and the plaintiff unreasonably failed to take advantage of the preventative or corrective measures.
In O’Brien v. Middle East Forum, the plaintiff was a former employee of a think tank. She had served as its controller, with responsibility for HR functions. In this role, she was directly supervised by the company’s Director and Chief Operating Officer. She asserts that he made repeated sexual advances toward her and other women at work. At trial, she presented evidence that the COO was “the face of the organization,” and “the man in charge.” He wrote articles and made media appearances on behalf of the think tank. The plaintiff asked the trial court to instruct the jury that if the COO was “found to be a proxy or alter ego of” the think tank, “the inquiry ends there. The liability is automatic,” and the Farragher/Ellerth defense is not available. The court declined to provide the instruction, and a jury ultimately concluded that the plaintiff did not prove sexual harassment.
On appeal to the Third Circuit (the federal appellate court over Pennsylvania, New Jersey, Delaware and the U.S. Virgin Islands), the plaintiff challenged the trial court’s decision on the requested jury instruction. The Third Circuit agreed that the trial court should have issued the instruction, explaining: “A review of the Supreme Court’s reasoning in Farragher and Ellerth makes clear that the Supreme Court did not intend for the Farragher/Ellerth defense to be available where the supervisor responsible for harassment was a proxy for the organization/employer.” The court distinguished between supervisors who merely have “some amount of control over a subordinate,” and officials “high enough in the management hierarchy that [their] actions ‘speak’ for the employer,” and they can be considered the alter ego of the employer. Moreover, the court emphasized that only officials with “exceptional authority and control” in an organization will meet this proxy/alter ego standard. Ultimately, the court concluded that the error was harmless in this case, given that the jury concluded the plaintiff had not proven harassment occurred. Nevertheless, the case establishes the unavailability of the Farragher/Ellerth defense where the alleged harasser is a proxy or alter ego of the employer organization.
The actions of top management are always critical in creating a culture in which harassment does not take root. This decision provides yet another powerful incentive for top executives to “walk the walk.” If a high-level employee engages in harassment and is found to be a proxy/alter ego of the organization, strict liability will result in the Third Circuit.
