On the Radar for General Counsel: October 2016

Practical Law Article w-003-7252 (Approx. 6 pages)

On the Radar for General Counsel: October 2016

by Practical Law Labor & Employment

Expanded Title VII Cat's Paw Liability for Employer's Negligence

A recent Second Circuit decision reminds employers that they must conduct workplace investigations carefully or risk liability for unintentional retaliatory acts influenced by low-level, non-managerial employees. Practical Law asked Frank Birchfield of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Thomas H. Wilson of Vinson & Elkins LLP, and Robert P. Lewis of Baker & McKenzie LLP for their takeaways on this case.

In Vasquez v. Empress Ambulance Service, Inc., Andrea Vasquez, an employee of Empress Ambulance Service, Inc., alleged that she received unwanted sexual advances and sexual photographs from another employee (Gray) and complained to her supervisor. Having learned of the complaint, Gray gave the employer false documents to show that Vasquez had sexually harassed Gray. Vasquez's superiors credited Gray's version of events, refused to consider Vasquez's contradictory evidence, and fired Vasquez for harassing Gray.

Vasquez sued Empress under Title VII and state law for retaliatory discharge. The district court dismissed Vasquez's suit, holding that Empress could not be held liable under the "cat's paw" theory where the individual acting with discriminatory animus was not a manager.

The Second Circuit vacated the district court's dismissal and held that any employee's discriminatory motives can be attributed to an employer if the employer acted negligently in making the adverse employment decision, even if the final decision-maker acted without discriminatory intent. This may make it more difficult for employers to win summary dismissals in cat's paw Title VII cases.

Vasquez reminds employers about the importance of thoroughly and carefully investigating workplace complaints and performance issues before taking adverse actions against any employees. Employers should:

Have well-crafted reporting and investigation policies and procedures.
Identify appropriate investigators, recognizing that:
- the investigator likely will testify in future proceedings; and
- a neutral third party investigator may be warranted.
Train investigators how to:
- interview witnesses and identify potential discriminatory animus in complainants;
- preserve forensic evidence; and
- document the investigation process.
Consult with the complainant to ensure that no relevant witnesses or documents have been overlooked.
Not rush to judgment and consider all versions of the events before taking any adverse action.

Employers should also consider:

Using alternative disciplinary measures such as suspension without pay while investigating a complaint.
Reviewing the initial findings before preparing a final report.
Whether the investigation may be privileged.

For more on discrimination claims, see Practice Note, Discrimination Under Title VII: Basics. For more on conducting employee investigations, see Practice Note, Handling Employment-Related Internal Investigations.

Increasing Agency Scrutiny of Settlement Agreements

Recent guidance by OSHA and other agency actions caution employers to revisit standard confidentiality and waiver provisions in their form settlement agreements. Practical Law asked John F. Martin of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Thomas H. Wilson, Vinson & Elkins LLP, and Celina Joachim and Jordan A. Faykus of Baker & McKenzie LLP to discuss what employers should know.

OSHA released new policy guidelines on September 15, 2016, stating that it will not approve settlement agreements that impermissibly restrict or discourage protected whistleblower activity. Offending provisions include those that:

Prohibit or inhibit employees from providing information to the government, including:
- filing a complaint;
- participating in an investigation; or
- testifying in proceedings.
Require either advance notice to their employers before communicating with the government or affirmation that they have not done so.
Waive the employee's right to receive a monetary whistleblower award.
Award disproportionate liquidated damages.

The OSHA guidance is the latest in a trend of recent challenges to similar confidentiality and waiver provisions by other administrative agencies, including the SEC, the NLRB, and the EEOC.

Given recent agency scrutiny, employers should:

Avoid a one-size-fits-all approach to settlement agreements and tailor language based on the type of claim being settled.
Examine waiver and confidentiality provisions in settlement and other agreements for overbreadth and advance notice requirements.
Consider specific carveouts from confidentiality provisions that allow employees to:
- provide information to government agencies, including OSHA and the SEC, without notice to the employer; and
- recover whistleblower rewards for providing information to government agencies, but still waive the employee's ability to recover damages or other remedies from the employer.

For more on whistleblower claims, see Practice Notes, Whistleblower Protections Under Sarbanes-Oxley and the Dodd-Frank Act and Whistleblower Complaints Under the Occupational Health and Safety Act.

For a sample settlement agreement, see Standard Document, Settlement and Release of Claims Agreement: Single Plaintiff Employment Dispute.

On the Radar for General Counsel: October 2016 | Practical Law