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2013 Labor and Employment Law Update

There are a great number of Michigan and federal anti‐discrimination laws that affect townships in their role as employers. Of course, the details of these laws fill volumes of legal treatises. This E-Letter highlights a few important points—and recent developments—for the benefit of township officials.

 Whistleblowers Protection Act Claims

The Whistleblower statute has received a lot of attention from the courts, lately. This law prohibits employers from firing or retaliating against an employee because the employee reports (or is about to report) a violation or suspected violation of a law or regulation. The employee must be reporting this alleged violation to a public body like a regulatory agency, law enforcement, the attorney general’s office, etc. Under this law, the employee must show a court three key things (at a minimum) before the employer is obligated to explain its actions:

  1. The employee was actually reporting or intending and planning to report unlawful activity—not merely refusing to do something the employee believed violated the law or calling around to get other people’s opinions about something; and
  2. The employee was fired or discriminated against; and
  3. There is some sort of causal connection between the actual or planned “whistleblowing” and the employee’s termination or discipline.

The employee’s primary motivation in reporting (or intending to report) has long been a key consideration in whistleblower cases. Since the Shallal case in 1997, courts have required a primary motive to inform the public on matters of public concern, largely because this law was designed to assist individuals who are attempting to fight corruption and criminally irresponsible behavior in government or large businesses. In other words, things that are important to the public—not based on personal vindication or vindictiveness. This required inquiry into the employee’s motive is not written in the statute itself, but was implied by the courts.

However, a case just decided by the Michigan Supreme Court has changed this inquiry. A police chief claimed his contract was not renewed because he had previously threatened to report the city’s failure to pay him for accumulated, unused leave time as required by local ordinance. The city did pay as demanded, but three years later decided not to renew the Chief’s contract.  Lower courts had dismissed the police chief’s whistleblower case, because his primary motive in threatening to report the violation of local ordinance was to advance his own benefit. The Supreme Court disagreed strongly, holding that an employee’s motivation is not relevant to recovery under the law, and there is no such requirement for an altruistic motive of protecting the public. Whitman v City of Burton, Michigan Supreme Court (May 1, 2013).

Although this decision does signal a big change in whistleblower analysis, we suspect courts will now focus more heavily on the third required element of these cases: the causal connection between the “whistleblowing” and the allegedly discriminatory act. Stay tuned for more developments, since the Michigan Supreme Court recently granted leave to appeal in another whistleblower case involving a failure to renew an employment agreement.

Hostile Work Environment Claims

Recently, we have seen an increase in employee “hostile work environment” claims of discrimination. It is important it is to distinguish between a “bad” work environment, due to offensive, intimidating behavior by coworkers or supervisors, and an unlawful “hostile work environment,” where the “bad” conduct is tied to some protected class or activity (race, sex, weight, age, disability, etc). A “hostile work environment” is something more pervasive, to the point that the conduct substantially interferes with the employee’s employment. A single comment or instance of improper conduct does not meet this test, nor does simply having a “bad,” “mean,” or “rude” supervisor or coworker.

The employer’s criticism of an employee’s job performance does not itself create an actionable hostile work environment, particularly when the employer can show that the discipline or counseling—even yelling in an allegedly demeaning and insulting manner—was directly related to the employee’s unsatisfactory job performance, resulting in partial operation shut downs or losses.  In one recent case, the Michigan Court of Appeals made it clear that even if the sporadic use of abusive language or discriminatory jokes did substantially interfere with the individual’s employment, she was still required to report or notify the employer about the problem. Simply claiming that she was being treated unfairly did not properly notify the employer that there was unlawful discrimination or harassment taking place. Courts typically will not hold an employer liable for failure to address a hostile work environment unless the employer knew— or due to the pervasive nature of the harassment, should have known—such a situation existed. Douglas v Ford Motor Co, Michigan Court of Appeals (June 6, 2011).

Your township should certainly encourage professional, courteous work environments, but also be assured that the anti-discrimination laws are not general civility codes. So teasing, an out of line comment, an unfriendly supervisor or coworker do not typically open your township up to claims for significant money damages. Where the events complained of occur only sporadically over a number of years, the court may apply the three year statute of limitations in the township’s favor, as it did with a hostile work environment claim based on one incident in 2003 and others in 2008. Tate v Plastomer Corp, Michigan Court of Appeals (May 30, 2013).

Similarly-Situated Claims

Many of the anti-discrimination laws require the employee to show that the employer treated another “similarly situated” employee differently. This is a way for employees to show that all other things being equal, the employer treated different classes of people differently.  This requirement can be helpful to an employer defending against a discrimination claim.For instance, the Court of Appeals recently determined that a department-wide layoff negated a laid off employee’s claim that she was treated differently from her coworkers. She could not justifiably demonstrate unlawful discrimination when everyone else in the department was laid off, too.  Tate v Plastomer Corporation, Michigan Court of Appeals (May 30, 2013).

 The Federal Sixth Circuit Court of Appeals recently held that “similarly situated” does not necessarily refer to employees under the supervision of the same individual. In that case, an employee took an approved leave of absence to visit family in Israel, but was stranded there when Israel closed its borders for security reasons. The employer extended the original leave for an additional four weeks, but ultimately terminated the employee for failure to return to work. In that case, it was important to look at multiple supervisors and employees to determine who was similarly situated to the plaintiff employee, because he was one of 5,000 product engineers reporting to more than 300 managers and even fewer supervisors. Focusing solely on one supervisor, in the Court’s view, would make it virtually impossible for the employee to demonstrate his prima facie case before he even started.  Louzon v Ford Motor Co, Sixth Circuit Court of Appeals (June 4, 2013).

This decision certainly makes sense in the context of a multi-national employer with thousands of employees working under numerous supervisors. Depending on the total number of township employees and supervisors, however, townships may still benefit from arguing that employees are not similarly situated unless they work under the same supervisor or Department Head. 

We commonly advise townships to consider these anti-discrimination laws before, during and after employment decisions. If your township is facing a discrimination complaint or lawsuit, it is important to carefully review the facts of the case with your township labor attorney to begin distinguishing or analogizing employment decisions for the employee and any other arguably similar individuals. This tactic worked very well for one public employer who terminated a 37- year-old provisional police officer for allegedly similar performance issues, but retained his 22-year-old colleague who had been hired at the same time into the same program. The employer was able to demonstrate that the younger officer simply remedied the performance issues after just one counseling session, but the 37-year-old was counseled numerous times and failed to correct the behavior despite being warned that termination would result if the unsatisfactory conduct continued.  The two were not similarly situated and thus the 37-year-old did not have a viable age discrimination against the employer. Dervisi v City of Saginaw, Michigan Court of Appeals (May 21, 2013).

Race Discrimination Claims

The Michigan Court of Appeals recently confirmed that it takes more than an employee’s own subjective belief that discrimination occurred to prove racial discrimination. A canine unit command officer’s explanation that a Hispanic canine handler applicant did not get the assignment because he was “different” did not constitute direct evidence of discrimination. The applicant, a long-time patrol officer, and frequent applicant for special assignment to the canine unit, interpreted the comment that he was “different” as a comment on his Hispanic race, but offered absolutely no other evidence to support his own interpretation.Rivera v City of Battle Creek, Michigan Court of Appeals (June 11, 2013).

The Michigan Court of Appeals has also reiterated that in a racial discrimination case based on the employer’s judgment of the employee’s qualifications, the question is whether discriminatory motive was the basis for a particular decision, not whether the decision itself is “wise, shrewd, prudent or competent.” This means that as employers, townships must evaluate employees on their merits, while considering the nature of the township’s operation and business at the time of the evaluation. Doing so will help insulate the township from liability under anti-discrimination laws, even if the township makes the wrong call between two employees for a promotion, transfer or raise. Douglas v Ford Motor Co, Michigan Court of Appeals (June 6, 2011).

Disability-Based Claims

Employers are prohibited from discriminating on the basis of an individual’s disability. This includes failing to make a reasonable accommodation to an otherwise qualified individual with a disability—someone who, with or without reasonable accommodation, can perform the essential functions of the job.  In a recent Court of Appeals case involving a 64 year-old male technically employed as a corrections officer (and paid through Corrections Officer funding). The employee reportedly worked on a daily basis in the vocational trades department with prisoners, instead of physical management and supervision of inmates like a corrections officer. As is fairly standard practice, the employee was required to submit a medical certification that he could perform his duties before he could return to work after calling in for an additional day off due to a pre-existing back injury. The employer, however, required medical clearance to return to the position of corrections officer—not his vocational trades department job. Ultimately, the employee retired when he could not supply this certification based on the job description of the corrections officer, which were arguably not descriptive of the job duties that he actually performed in the vocational trades department. 

Upon learning of the employee’s back pain and request for a single sick day, the employer prohibited the employee from returning to work without 100 percent clearance to return as a corrections officer. By requiring medical clearance to return to work for a single sick day—and 100 percent clearance to the corrections officer position instead of a position in vocational trades—the employer did not engage in an interactive process to attempt to make a reasonable accommodation to the employee. An attempt to make a reasonable accommodation, in this case, would have meant permitting the employee to return as a vocational trades department employee, or at least with that set of revised duties, which he had been performing successfully for a great number of years.  Howard v Mich Dep’t of Corrections, Michigan Court of Appeals (May 21, 2013).

Age Discrimination Claims

Although federal law protects persons ages 40 and over from discrimination based on age, and Michigan’s civil rights statute protects persons of all ages, a “wronged” employee must demonstrate that the employment decision or discrimination was motivated by age. A 37-year-old provisional police officer was unsuccessful in demonstrating that he was terminated based on his age, where the employer presented substantial evidence that the officer was unable to control his physical and mental emotional stress, possessed deficient physical fitness and attitude and required significant counseling and disciplinary follow-up during his police academy training and after. Police academy coordinator and director statements about expectations based on his “life experience” did not alter this conclusion, because the coordinator and director did not have authority to hire or fire plaintiff and were employed by an entirely different employer. Dervisi v City of Saginaw, Michigan Court of Appeals (May 21, 2013).

In the case of the 64 year-old corrections officer, the Court was persuaded that the warden’s consistent references to the employee as old, inquiry into when the employee was going to retire and allegedly referring to him in a derogatory fashion was sufficient to establish at least the minimum evidence of age-based discrimination and proper issues for a jury to review.Howard v Mich Dep’t of Corrections, Michigan Court of Appeals (May 21, 2013).

Classifying Employees Improperly Can be Costly

There are many good reasons to use an independent contractor in township government, just as there are many good reasons to have employees. Some townships rely on independent contractors for information-technology services, appraiser services, zoning enforcement and even maintenance. It is absolutely vital that independent contractors not only perform work in that capacity, but also are treated like independent contractors, and not employees, lest a court or government agency consider your “independent contractor” an employee. The stakes are extraordinarily high with this kind of classification error—not just when it comes to inquiries from Wage and Hour Investigators or the IRS.

A recent Michigan Court of Appeals case really brings this point home. The case involved a dispute between insurance carriers over which company was responsible for paying benefits to an individual who was injured while occupying a vehicle owned by a company for which he was doing work. The determination as to which insurance company was properly liable for the claim for benefits hinged entirely on whether the person was an employee or an independent contractor.  The court painstakingly considered each of several factors to determine whether the individual was an employee or independent contractor, ultimately concluding that the factors showed there was an employment relationship. The employer’s insurance company was required to reimburse the employee’s insurance company for benefits it paid out for the injury. Dairyland Ins Co v Amerisure Ins Co, MichiganCourt of Appeals (April 23, 2013).

The practical impact of this is clear. When your insurance company pays out a benefit, your insurance premiums will rise. If you do not properly classify your employees, you could not only face high wage and hour claims or IRS issues, but also higher insurance rates and premiums. Improper classification of employees could also open the township up to liability for the unlawful or negligent acts of an employee when it is least expected. We strongly recommend that townships regularly review their employees and their relationship with independent contractors to ensure that each is classified correctly, even if it seems too involved or too difficult to review the multi-factor test we have discussed in previous E-Letters.

Modifying and Bargaining Pension Actuarial Standards

The Michigan Supreme Court recently resolved an unfair labor practice charge against a public employer that, on the advice of its audit firm, decided to adopt a different mortality table for calculating pension benefits. The employer’s decision was based on the determination that the female mortality table the employer had used for the past 24 years had actually resulted in higher pension benefits for those employees selecting one particular pension option and the fact that a local Retirement Ordinance required that the pension benefits be the “actuarial equivalent.” The Court determined that collective bargaining agreements incorporated the Retirement Ordinance, that the public employer satisfied its obligation to bargain over the calculation of retirement benefits, and the proper forum for challenging the employer’s decisions was a grievance—not an unfair labor practice.  The Court also determined that a 24-year practice of utilizing a female actuarial table did not create a past practice—a term or condition of employment over and above the collective bargaining agreements—that would otherwise bind the employer. Macomb County v AFSCME Council 25, Michigan Supreme Court (June 12, 2013). 

In times of ever-tightening budgets, public employers are forced to creatively budget and plan for the future.  We see many townships considering the impact of unfunded pension or retiree health benefits and planning changes to pensions as a way to more accurately fund their liabilities.  This is certainly a viable negotiation strategy when it comes to bargaining with represented employees, too, with proper consideration for the township’s bargaining obligations under bargaining laws.  We recommend discussing possible pension changes with financial and legal consultants before making that leap, so your township does not end up in litigation.

The Employee Handbook Matters–and so does How it's Enforced!

We consistently advise townships to carefully and regularly review their employee handbooks and policy manuals. It is critical to review and update these handbooks or manuals to be sure they satisfy and comply with recent changes in the law and actually match the townships current practices. In a recent case, the Federal Sixth Circuit cemented the idea that the language of a policy, and how it is enforced, are both very relevant. An employee was discharged when he could not return to his job after being stranded out of country on an extended leave of absence. The employer relied on its unpaid personal leave policy to argue that any employee who does not return on time from leave is automatically terminated, but the policy itself included discretion regarding termination: “Failing to return on or before the ‘Leave Ending Date’ may result in termination as voluntary quit effective the leave ending date.” (This case also highlighted that it is critical that the proper supervisor or authorized individual make employment decisions, so that the employer can be assured its policy is being upheld.)  Louzon v Ford Motor Co, Sixth Circuit Court of Appeals (June 4, 2013).

In a case involving a 64-year-old corrections officer, the court also clarified that properly understanding and enforcing policies is just as critical as establishing policies in the first place. The employer appeared to have applied the wrong standard for requiring medical clearance to return to work, despite clear policies regarding specific types of injuries or circumstances and the related employee demonstration of ability to perform the job. Howard v Mich Dep’t of Corrections, Michigan Court of Appeals (May 21, 2013). We recommend revising employment policies for clarity and carefully training supervisors in their application so your township does not fall victim to this same problem.

We Can Help

Fahey Schultz Burzych Rhodes PLC’s team of experienced attorneys is especially qualified to assist townships with labor and employment issues. If you have any questions about employment issues or wish to discuss any of the matters in this E-Letter, please contact us.

Helen (Lizzie) Mills – hmills@fsbrlaw.com

Click here for a copy of this publication.

Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 130 years of experience in township law, and have represented more than 130 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law, and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

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