By Lorene D. Park, J.D.

The increase in court battles over franchisors’ liability as “joint employers” when franchisees violate Title VII, the Fair Labor Standards Act, or other labor laws could reflect the ongoing search by plaintiffs for deep pockets, or increased efforts by businesses to skirt labor laws—depending on your point of view. Many believe it reflects our political divide and the uncertainty of a changing “patchwork” of tests for joint-employer status issued by courts and agencies.

Changes are coming . . . It appears lawmakers are making headway toward a uniform standard, given the July 12 hearing before the House Committee on Education and the Workforce and its introduction on July 27, 2017, of the Save Local Business Act. The Act would amend the NLRA and the FLSA to restore what the bill’s sponsors called “the commonsense definition of what it means to be an employer.” The bill (H.R. 3441), which has bipartisan support, would toss the standard articulated in the NLRB’s recent Browning-Ferris Industries decision and clarify that two or more employers must have “actual, direct, and immediate” control over employees to be considered joint employers. As we await the outcome of these efforts, and regardless of your point of view, it’s worth looking at recent court decisions on when franchisors may be liable under a joint employment theory—for the moment, at least.

First, the patchwork. To provide some context for the court decisions, it helps to understand the tests for joint employer status—they vary by statute and jurisdiction. As noted in a now-withdrawn interpretation by former WHD administrator David Weil, joint employment is defined more broadly under the FLSA and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) than under the common law relied on by courts in the context of Title VII and other statutes. The common law focuses on the control a franchisor exercises over franchisee employees on a day-to-day basis, including how and where the work is done. Courts consider the terms of the franchise agreement or policies; mandatory training; mandatory recordkeeping; whether the franchisor inspects or audits; and the right to terminate, among other things.

In FLSA and MSPA cases, courts look broadly at an individual’s economic dependence on the company (the “suffer or permit to work” language), but the right to control is still important; increased control signals economic dependence. Other factors include: control of employment conditions (method of pay, power to fire); the permanency of the relationship; the skill required (little training indicates greater dependence); whether the work is integral to the business; and whether the franchisor performs administrative functions (e.g., payroll, workers’ comp, taxes).

There is also a “hybrid” test used by the Fourth and Fifth Circuits, among other courts, with respect to Title VII, ADEA, and other statutes. The hybrid test considers elements of both the common law and the economic reality tests. In the Fourth Circuit, for example, nine factors are considered, but three are most important: authority to hire and fire; day-to-day supervision and control of the putative employee; and where and how the work takes place.

Recent cases on franchisor liability. Clearly there is overlap in the various tests. Thus, while employers should focus on cases in their jurisdictions, much can be learned from other as well:

• Fourth Circuit has nine factors for ADEA, six for FLSA. In one case, a federal court in Maryland found that a pizza restaurant manager sufficiently alleged that franchisor Ledo Pizza Systems was his joint employer. As to his ADEA claim that he was fired in retaliation for refusing to terminate an older worker, the court looked to the nine-factor hybrid test from the Fourth Circuit in Butler v. Drive Automotive Industries of America, Inc. The allegations suggested Ledo, acting through its corporate employee, had control over hiring and firing, day-to-day supervision, and formal or informal training. Also refusing to dismiss the FLSA retaliation claim, the court found joint employer status well-pleaded through allegations of significant ties between the franchisor and franchisee, suggesting a long-lasting relationship and control by the franchisor. The plaintiff claimed Ledo had at least some power to control and supervise workers and to hire, fire, or modify employment conditions. For example, Ledo required him to provide daily and weekly reports, told him what to stock in the bar, set employee schedules, hired a bartender, and told the plaintiff he was fired. To the court, at least the first four of the six factors set forth by the Fourth Circuit in Salinas v. Commercial Interiors, Inc., could weigh in the plaintiff’s favor (Lora v. Ledo Pizza Systems, Inc.).

• Functional control indicates employer status. A federal court in New York refused to dismiss an FLSA collective action by servers, housemen, waiters, housekeepers, and other employees of a hotel franchisee who plausibly claimed the franchisor defendants asserted “functional control” over hotel staff to be liable as joint employers (formal control was not addressed). To establish functional control, they alleged the franchisor defendants: (1) imposed mandatory training programs for hotel staff; (2) maintained the right to inspect the hotel; (3) imposed mandatory recordkeeping requirements; (4) established “standards, specifications[,] and policies for construction, furnishing, operation, appearance, and service of the Hotel;” (5) required that a particular software be used to track hotel revenue and operations; (6) retained the unlimited right to change the manner in which the hotel was operated; (7) performed audits and inspections of compliance with franchisor standards; (8) maintained the right to terminate the franchise, which could cause the termination of staff; and (9) knew the plaintiffs were not paid gratuities but failed to stop the unlawful practices. To the court, this was enough to plausibly allege that the franchisor defendants were joint employers under the FLSA and NYLL (Ocampo v. 455 Hospitality LLC).

• Logos and uniforms showed control over franchise, but not workers. An employee of a landscaping franchisee could not show the franchisor exercised enough control over her employment or that other factors suggested it should be held liable as a “joint employer” or “single, integrated employer” under Title VII for the alleged unlawful acts of the franchisee. She relied on the franchisor’s control over logos, uniforms, letterhead, and vehicle color, but a federal court in Virginia explained that control over the franchisee was not relevant and it was control over the plaintiff’s employment that mattered—which was lacking here. The court reviewed the nine factors set forth by the Fourth Circuit in Butler and noted that while not one factor is dispositive, the “common-law element of control remains the principal guidepost’ in the analysis.” (Wright v. Mountain View Lawn Care, LLC).

• Franchisor’s training program not enough for joint employer status. In a suit by a Church’s Chicken employee in Alabama who claimed she was not paid proper minimum wages and overtime, a federal court concluded that her general assertion that two franchisors had a management role in a franchisee’s restaurant operations did not render those entities her “employer” under the FLSA. Although a franchise agreement required the franchisee to send its employees to attend a “manager training” program conducted by the franchisors, the training program alone did not turn the franchisors into the employee’s employer. The employee did not allege any facts showing that the franchisors had the power to hire or fire, or make personnel decisions, supervise work schedules, determine pay rate, or maintain records of the franchisee’s employees (Rodriguez v. America’s Favorite Chicken Co. dba Church’s Chicken).

• “Ministerial functions” of payroll not enough for liability. In a suit filed under the FLSA and Oregon wage and hour law, a federal court found that Jack in the Box was not the plaintiffs’ “joint employer” after the date it franchised several corporate-owned restaurants to franchisee Northwest Group, Inc. Applying the “economic reality” factors outlined by the Ninth Circuit, the court found that Jack in the Box established that it did not have the power to hire and fire franchisee employees, and it was not involved in franchise employee work schedules, salaries, insurance, fringe benefits, or hours. Although the franchisee was required to use Jack in the Box’s payroll system, such “ministerial functions are insufficient to support plaintiffs’ argument that [defendant] controls labor relations.” Summary judgment was granted for Jack in the Box on this issue (Gessele v. Jack in the Box, Inc.).

• Recommending personnel policies not enough. A window cleaning franchisor did not become a joint employer of its franchisee’s employees merely by recommending personnel policies, held a federal district court in Wisconsin, granting summary judgment in favor of the franchisor on employee wage-hour claims. To prove the franchisor was their joint employer, the employees had to show more than that they received a copy of the franchisor’s employee manual and that the franchisee followed the franchisor’s recommendation to pay them on a commission basis. The “critical issue” was that the franchisee was not obligated to follow the manual as drafted. In addition, the franchisor did not have the power to hire and fire them and did not maintain employment records for them. In sum, the court found the minimal control exerted by the franchisor here “nothing like” what would be necessary to demonstrate employer status (Pope v. Espeseth, Inc.).

• Creating master franchise plan not enough absent day-to-day control. A national franchisor that created a master franchise plan for commercial cleaning businesses was not the employer of unit franchisee owners under California law, ruled a federal district court in California. The unit franchisees failed to offer any evidence of the franchisor’s actual control over their day-to-day activities, or that it reserved the right to exercise such control. Nor was there evidence that the franchisor controlled their wages or had the authority to stop them from working. Consequently, the court granted the franchisor’s motion for summary judgment (Roman v. Jan-Pro Franchising International, Inc.).

• Jani-King cases. Cleaning service franchisor Jani-King is defending suits in several jurisdictions, the main dispute being whether it misclassified franchisees as independent contractors. In one, the Third Circuit affirmed that whether the franchise agreement and manuals gave Jani-King sufficient day-to-day control to make franchisees “employees” will be determined on a class-wide basis. Rule 23’s commonality and predominance requirements were met because the dispute could be resolved by common evidence, including the agreement and manuals, which put controls on franchisees including: where to solicit business, how often to communicate with customers, what to wear, what records to keep, how to advertise, and more. The documents also addressed the nature of the work, tools, and termination (Williams v. Jani-King of Philadelphia, Inc.). Jani-King did score a win in Oklahoma, though, when a DOL enforcement action was dismissed with prejudice because in claiming that all franchisees were “employees,” the agency lumped together the franchisors who were individuals and those franchised through corporate entities, which cannot be “employees” as defined by the FLSA (Acosta v. Jani-King of Oklahoma, Inc.).

Minimizing liability. These decisions suggest steps franchisors can take to decrease the chance of being liable, as a joint employer of franchisee workers, for employment law violations:

• Make intent clear. Put it in the franchisor agreement that the franchisor is not the employer, does not have the power to hire, promote, or fire franchisee employees. Have franchisees state in job applications that individuals are hired by the franchisee, not the franchisor.

• Stay true to franchise model. Stick to controlling product and service standards on a general level. It is okay to require the use of certain templates or to maintain the brand (e.g., logos, uniforms, letterhead, typical customer greetings, and the like), but don’t micromanage. Remember, courts look to control over an individual’s employment, not over the franchisee.

• Leave HR functions to franchisees. In practice, leave to the franchisees the typical human resources and employer functions, such as: hiring/firing, wage rates, scheduling, payroll, staffing levels, performance evaluations, promotions, workers’ compensation insurance, taxes, employee complaints, discipline, and recordkeeping. To the extent template personnel policies are provided to franchisees, make clear that the policies are optional.

• Train judiciously. Train your franchisee owners and managers on policies and provide resources for training, but otherwise leave training and rule enforcement to franchisees.

(Reuters) – Electronics manufacturer Foxconn will announce plans to build a multi-billion dollar flat panel screen plant in Wisconsin at a White House event later on Wednesday, a source briefed on the matter said.

By Lisa Milam-Perez, J.D.

A staffing agency employee who was sexually harassed while working for a client company, and then sued that company for directing the staffing agency to terminate her assignment after she complained, could not be compelled to arbitrate her sexual harassment and retaliation claims against the company based on her arbitration agreement with the staffing agency. Affirming a district court’s order refusing to compel arbitration of her Title VII suit against the company, the Seventh Circuit rejected the company’s contention that equitable estoppel principles entitled it to rely on her arbitration agreement with the staffing agency—a contract that the company didn’t even know about until it was unearthed during discovery (Scheurer v. Fromm Family Foods LLC, July 17, 2017, Hamilton, D.).

Sexual harassment. About a year into her employment with the staffing agency—which, importantly, was not a defendant in her Title VII suit—the employee was placed at Fromm Family Foods.She alleged that her supervisor at Fromm obtained her personal phone number via her personnel file, then repeatedly harassed her, including making sexually explicit comments to her in front of coworkers.According to Fromm’s chief operating officer, the company immediately investigated her harassment complaint and took action against the supervisor. He also asserted, though, that Fromm tried to separate the employee from the supervisor, and when that solution proved “impossible,” Fromm asked the staffing agency to assign the employee elsewhere. On these facts, and assuming the employee can establish that Fromm and the staffing agency were her joint employers, a reasonable inference of retaliatory intent could be established, the appeals court observed.

Motion to compel denied. The merits of her claim were not at issue here, though; it was the company’s attempt to compel her to arbitrate her Title VII suit based on her arbitration agreement with the staffing agency.Fromm had learned about the arbitration agreement during the course of discovery in the case, and it argued that the employee should be compelled to arbitrate her claim against Fromm. It cited an equitable estoppel theory, and also argued that it was a third-party beneficiary of the arbitration agreement with the agency.

The district court denied Fromm’s motion, relying on Wisconsin contract law. It found equitable estoppel did not apply because there was no basis for finding that Fromm relied on the arbitration agreement, especially since Fromm didn’t even know about it until the litigation began to unfold. It also rejected Fromm’s third-party beneficiary argument. The Seventh Circuit took up the case (a denial of a motion to compel arbitration is immediately appealable) and, reviewing de novo, affirmed. (Fromm dropped its third-party beneficiary theory on appeal; Fromm tried now to assert an agency theory as well, but the appeals court rejected the late attempt as waived.)

No estoppel here. As the Supreme Court has directed, ordinary contract principles apply to disputes over who may enforce arbitration agreements. Applying Wisconsin law on equitable estoppel, the appeals court found a clear-cut resolution. For equitable estoppel to apply, one must show reasonable reliance to one’s detriment, and nothing in the record suggested that Fromm relied on (or even knew of) the arbitration agreement it sought to enforce. “Fromm could not have relied upon an agreement it did not know about,” the appeals court said. “At bottom, this case is that simple.” The defendant had no legal basis for seeking to compel arbitration.

Staffing agency not a party. The Seventh Circuit distinguished two circuit court cases cited by Fromm, including the Second Circuit’s 2010 decision in Ragone v. Atlantic Video at Manhattan Center, a sex discrimination case. The key difference there, though, was that the plaintiff was suing both the client employer and the staffing agency with whom she had an arbitration agreement. “Once a court knows a dispute is going to be arbitrated, the reasons for requiring claims against affiliated parties to be arbitrated become more powerful,” the appeals court acknowledged. Here, though, the employee didn’t assert a claim against the staffing agency with whom she had contractually agreed to arbitrate. And the Seventh Circuit wasn’t inclined to extend Ragone’s holding to circumstances in which the party to the arbitration agreement is not a party in the case.

By Lorene D. Park, J.D.

Reversing summary judgment on a former Walgreen employee’s retaliation claim, the Seventh Circuit held that, despite the fact that years had passed since she filed EEOC charges of race discrimination, the plaintiff offered sufficient circumstantial evidence of a causal link to support her Section 1981 and Title VII retaliation claims. This included evidence that the district manager who handled her earlier EEOC charges intervened in the 2014 decision not to rehire her, and did so in ways that inexplicably deviated from Walgreens’ standard procedures. Walgreens also failed to explain how the plaintiff’s application materials went missing (Baines v. Walgreen Co., July 12, 2017, Hamilton, D.).

Three EEOC charges. The plaintiff started working for Walgreens in 2005 as a pharmacy technician. In July 2007, she filed an EEOC charge claiming she was discriminated against because she is black. Walgreens managers met with her to discuss the issue and the meeting was tense. She testified that one supervisor said she “messed up” and that “what I had done was bigger than me, and that I didn’t know what I had done.” The District Manager (DM) for the Milwaukee store asked what she wanted and she said a promotion and transfer. When she got neither, she filed a second EEOC charge in October 2007, alleging retaliation. In 2008, the plaintiff transferred to Atlanta, Georgia, but there was “no work” there. She filed a third EEOC charge alleging retaliation. She later moved back to Wisconsin.

Failure to rehire. In 2014, the plaintiff applied for a pharmacy technician job at a Walgreens in Wauwatosa, Wisconsin. She discussed the job with the pharmacy supervisor, who generally had the sole discretion to hire pharmacy techs. The supervisor said she would review the plaintiff’s application and get back to her if she did well enough on her assessment. The next day, the plaintiff was interviewed by the supervisor and another Walgreens employee. However, a day later, the supervisor left a message saying someone else had been hired.

Several days later, the supervisor hired a different candidate who had less experience than the plaintiff. In fact, the plaintiff was the only applicant with prior Walgreens experience. It turned out that it was the plaintiff’s cousin who was hired and, according to her, the supervisor said in February 2015 that she didn’t hire the plaintiff because the DM (the same one that oversaw the Milwaukee store) intervened and said not to hire the plaintiff, though she did not know why.

Missing records. The plaintiff filed a fourth EEOC charge and, during the investigation, the agency asked for Walgreens’ records from the hiring process. Though Walgreens uses hiring software and the supervisor testified that she enters interview scores right away, all the information on the plaintiff was missing, with no explanation. Her name was not even on the list of interviewees and her interview scores were gone.

District court finds no causation. Granting summary judgment against the plaintiff’s retaliation suit under Title VII and Section 1981, the district court held that she failed to establish a causal connection between her prior EEOC charges and Walgreens’ failure to rehire her in 2014. The court assumed her cousin’s testimony about what the pharmacy supervisor said was admissible but explained that the testimony fell short of showing the supervisor knew about the 2007 or 2009 charges and didn’t hire the plaintiff because of those. The court also noted that the number of years that had passed between the charges and the failure to rehire weakened any causal inference.

DM’s interference, missing records suggest causal link. Reversing, the Seventh Circuit found that the lower court “strayed off course” by finding the cousin’s testimony insufficient to show retaliatory intent simply because she did not testify that the prior EEOC charges were the reason the plaintiff wasn’t hired. The absence of such testimony did not preclude the plaintiff from meeting her burden with circumstantial evidence and there was plenty of that here.

After rejecting Walgreens’ hearsay-within-hearsay objection to the cousin’s testimony (the DM’s command to not hire the plaintiff was not hearsay and the supervisor’s statement was an admission by the agent of a party opponent), the appeals court found it admissible. With that testimony, the plaintiff presented substantial evidence of retaliatory intent because it provided a link—through the DM’s interference in the hiring process—to the prior EEOC charges. The DM was personally involved in the prior handling of the EEOC charges, and the evidence suggested it was highly unusual for the DM, who managed over 20 stores, to interfere in the hiring of pharmacy techs. She normally hired managers and the managers hired other employees. Moreover, her primary responsibility was retail operations, not pharmacy management.

There were also other indications that “something was amiss” in the hiring decision, including that the supervisor said she liked the plaintiff, that the plaintiff was more experienced that the individual who was hired, and that the plaintiff’s application and interview scores mysteriously went missing.

Walgreens did not explain the substantial deviation in the hiring process or the missing records. It simply insisted on its own set of facts, claiming the DM did not intervene at all. Walgreens also tried to undercut the plaintiff’s evidence by emphasizing the length of time between the EEOC charges in 2007 and 2009, and the failure to rehire the plaintiff in 2014. However, passage of time is not dispositive if there is other evidence of retaliation, and this may have been the DM’s first opportunity to retaliate. For all these reasons, summary judgment was reversed.

By Kathleen Kapusta, J.D.

In a case the concurrence called “a mess” that “has gone on far too long,” the Seventh Circuit affirmed the decision of the court below granting Rule 23 class certification for Wisconsin opt-ins at four Waupaca foundries located within that state and partially granting the defendant’s motion to decertify the FLSA class for opt-ins outside of Wisconsin. As noted by the court, however, the end of this protracted litigation, which began almost nine years ago, is not yet in sight and the district court has yet to determine whether time spent changing clothes and showering by plaintiffs covered in foundry dust is work time compensable under the FLSA or, if it is, what damages the class members are entitled to, to compensate them for Waupaca’s failure to have paid them for that time. In a concurring opinion, Judge Manion cautioned “against overreading today’s majority as an endorsement of a novel sever-and-transfer procedure not before this court” (DeKeyser v. ThyssenKrupp Waupaca, Inc. dba Waupaca Foundry, Inc., June 22, 2017, Posner, F.).

This class action was brought against Waupaca on behalf of workers it employed in six foundries that manufacture ductile and gray cast iron parts for use in the automotive and other industries. Four of the foundries are located in Wisconsin and the remaining two are in Indiana and Tennessee. The plaintiffs alleged that Waupaca violated the FLSA by its longstanding practice of not treating the time its foundry workers spend changing clothes and showering on-site at the end of a shift to be compensable work time. They claimed they end their shifts covered in a layer of “foundry dust,” which can irritate the skin and cause lung disease if inhaled and that changing clothes and showering immediately after a shift is indispensable to reducing the risk that foundry work poses to their health. In addition to the FLSA claim, they alleged violations of Wisconsin wage law.

Conditional certification. In 2008, the district court conditionally certified the FLSA collective-action class, which consisted of current and former Waupaca founder employees at any of the six foundries, and several hundred employees from all three states opted in. Waupaca then moved to decertify the class and, at the same time, the plaintiffs, deciding to proceed with only the Wisconsin employees, moved to certify a Rule 23 class just for their Wisconsin state-law claims and so didn’t oppose the decertification of those Indiana and Tennessee employees who had previously opted into the FSLA class.

The district court then certified a Rule 23 class, denied Waupaca’s request to decertify the entire FSLA class, and divided the FLSA class into three subclasses, one for each state. The court then severed the claims of the Indiana and Tennessee plaintiffs and transferred them to courts in those states.

Individualized analysis. On appeal, Waupaca argued that the plaintiffs haven’t met Rule 23’s requirement of identifying questions of fact common to the class because showering and changing precautions do not reduce the risks of foundry work to the health of all the workers by the same amount. To prevail, it contended, a plaintiff must provide an individualized analysis of the chemicals he is exposed to in the foundry and information about his personal medical background that will demonstrate that changing clothes and showering on-site would significantly reduce his health risk.

Expert witness. Noting that Waupaca described the plaintiffs’ evidence as “evidence demonstrating that [the plaintiffs’] claims could not be proven individually,” the court found this “misunderstands both the plaintiffs’ evidence and their evidentiary burden.” Their expert witness presented evidence that changing out of work clothes and showering immediately reduced an employee’s “foundry dust” skin contamination 12-fold. And while Waupaca argued that the health risks vary across workers because of different exposures to chemicals and different medical histories of different workers, it did not identify any workers or challenge the expert’s testimony as inadmissible under Daubert. Observing that whether a jury would credit his report was a separate question, the appeals court found the district court did not err in concluding that the plaintiffs produced common evidence tending to prove their common assertion as Rule 23 and Section 216(b) require.

Severed claims. As to whether the district court erred in severing the FLSA claims of the Indiana and Tennessee plaintiffs and transferring them to their respective home districts, the court noted that “the non-Wisconsin plaintiffs had been conditionally certified, so in a sense the district court ‘decertified’ them from the FLSA class.” Observing that Waupaca wanted the claims of the non-Wisconsin plaintiffs dismissed, the court explained that the district court’s plan to sever and transfer the non-Wisconsin plaintiffs to their home districts did not bear on the soundness of the class certification decision for the Wisconsin plaintiffs, so Waupaca could not challenge it on a Rule 23(f) appeal and it did not obtain certification to appeal under 28 U.S.C. § 1292(b). In any event, said the court, there was nothing wrong with what the district court did as it had discretion to transfer a civil action to any other district or division where it might have been brought if the transfer is “for the convenience of parties and witnesses, [and] in the interest of justice.”

Concurrence. In a separate concurrence, Judge Manion agreed that it was not an abuse of discretion to certify the Wisconsin plaintiffs under Rule 23 or to partially decertify the Indiana and Tennessee plaintiffs under the FLSA. The judge cautioned, however, against overreading the decision as an endorsement of an endorsement of a novel procedure for avoiding local bars to relief.

By Marjorie Johnson, J.D.

Employees who developed mesothelioma after being exposed to asbestos over 30 years ago while working at a plant that produced fire doors failed to revive claims against their former employer for “public and private” nuisance. In this consolidated appeal, the Seventh Circuit rejected their bid to escape the exclusive remedy provision of Wisconsin’s Worker’s Compensation Act by recharacterizing their injuries as being caused by “household or community” asbestos exposure since they failed to show that non-occupational asbestos exposure was a substantial contributor to their respective injuries. The court also held that their claims against the doors’ patenting company were frivolous, thereby affirming multiple rulings of the district court dismissing their claims against both defendants (Pecher v. Owens-Illinois, Inc., June 6, 2017, Manion, D.).

The case initially involved many defendants, but only two remained: Weyerhauser Company and Owens-Illinois. The appeal was brought by six employees (or their representatives), who developed mesothelioma after having worked at a Weyerhaeuser plant that produced certain fire doors that used asbestos as its thermal insulator prior to 1978, and were constructed pursuant to a patent assigned to Owens-Illinois. Three of the employees appealed the dismissal of their claims against Weyerhauser (the Weyerhauser plaintiffs), while all six appealed the dismissal of their claims against Owens-Illinois.

Non-occupational claims against employer failed. Since the Weyerhauser plaintiffs had each worked at the plant for years in close contact with asbestos, their recovery would ordinarily be limited to Wisconsin’s Worker’s Compensation Act as it was the exclusive remedy against the employer for work-related injuries. However, in an attempt to circumvent the Act, they brought public and private nuisance claims contending that their asbestos-related injuries were not caused on the job, but at home and in the community.

However, the district court had rejected expert testimony in support of their claims as unreliable, since none of them lived close enough to the plant long enough to suggest that non-occupational exposure contributed significantly to their injuries. Thus, the expert testimony could not, by itself, support a legal finding of proximate causation for such non-occupational exposure. Their public and private nuisance claims were properly dismissed since, as the district court noted, a jury could not reasonably conclude that non-occupational asbestos exposure was a substantial contributor to their respective injuries.

No interference with real property interest. The private nuisance claims also failed because the plaintiffs failed to provide any individual proof of a “current possessory interest in land tainted by asbestos.” Instead they claimed that their “use and enjoyment” of the property they owned decades ago was limited by the mesothelioma they recently developed. Under Wisconsin law, however, a private nuisance is an interference with a real property interest, which the plaintiffs did not contend. Rather, they attempted to argue that they were harmed by “ambient” asbestos during their prior use of their property, but had no idea until they developed mesothelioma years later. These claims were not only unsuccessful, but also fell outside of the six-year statute of limitations.

Claims against patent-owner. The appeals court also refused to revive the employees’ claims against Owens-Illinois, which related to its having licensed the patent for the particular fire doors to Weyerhauser during the relevant time period. Specifically, they alleged that because Owens-Illinois designed the doors, and Weyerhauser happened to use asbestos in producing them, Owens-Illinois should be liable for asbestos-related injuries to Weyerhauser employees. Their claims shifted from failure-to-warn related to the design, to a negligence related to the design, to a strict liability based on the unsupported contention that Owens-Illinois produced some of the asbestos cores contained in the doors.

Mere licensing of a patent not enough. Finding that the claims against Owens-Illinois were frivolous, the Seventh Circuit agreed with the district court that “there is unanimity among courts that product liability cannot attach to the mere licensing of a patent.” Rather, for tort liability to attach to a non-manufacturing licensor of intellectual property, an additional factor for attributing liability always exists. Such was not the case here.

Due process concerns. The court rejected the employees’ reliance on the “complex statutory scheme” of the Hatch-Waxman Act, which allows manufacturers of branded drugs to face liability for mislabeling on their generic counterparts. Applying that theory here would hold a patent licensor liable for the injuries caused by “nonessential features” of the final product produced by the licensee that they “in so sense could be considered to have ‘caused.’” This raised serious due process concerns. The court also rejected their contention that in designing a door, Owens-Illinois opened itself up to negligence liability when workers produced the door. “The patent system is designed to facilitate innovation, to disseminate useful technology far and wide. It is not a substitute for a worker’s compensation system.”

Seeking to keep Owens-Illinois a party to this litigation, the plaintiffs went “so far as to suggest without any evidence” that the company itself manufactured some of the asbestos cores contained in the fire doors at issue. Moreover, they had previously agreed to dismiss these very claims with prejudice, yet re-raised them on appeal in clear contravention to federal civil procedural rules and the joint stipulations. Thus, in addition to affirming dismissal of the claims against Owens-Illinois, the Seventh Circuit ordered plaintiffs’ counsel to show cause as to why this portion of the appeal was not frivolous under Rule 38.

By Pamela Wolf, J.D.

In the EEOC’s first lawsuit directly challenging an employer’s wellness program—filed in 2014—Orion Energy Systems has agreed to pay $100,000 and provide other relief to resolve allegations that the Manitowoc, Wisconsin, lighting company’s program violated the ADA and the company unlawfully retaliated against an employee who objected to the program by firing her.

Wellness plan. In 2008, Orien switched from a fully insured health plan to a self-insured plan. In 2009, to reduce costs by improving employee health, it began a wellness initiative with three “incentives” whereby employees who enrolled in Orion’s plan: (1) had to certify they did not smoke or pay a surcharge ($80 per month for single coverage); (2) had to exercise 16 times per month or pay a $50 monthly surcharge; and (3) had to complete a health risk assessment (HRA) or pay the entire monthly premium, which was $413.43 for single, $744.16 for limited family, and $1,130.83 for family coverage.

Health risk assessment. The HRA included a health history questionnaire and a biometric screen involving a blood pressure check; height, weight, and body circumference measurement; and blood draw and analysis. Orion did not receive personally identifying information; instead the questionnaire and samples were collected and compiled by outside vendors and sent back to Orion as anonymous, aggregated data, which allowed it to see the percentage of participants who had certain health risks such as high cholesterol. The goal, according to Orion, was to identify common health issues and offer educational tools and assistance to improve employee health.

Employee who objects is fired. The employee raised concerns about the wellness initiative and HRA, questioning confidentiality and how the premium was calculated, believing it excessive in light of the service fee Orion paid its third-party administrator (she knew the amount because she paid invoices). She sent a letter to the HR director electing not to participate and signed the opt-out form on April 24, indicating she understood she had to pay the monthly premium of $413.42. She was the only employee to opt out of the wellness program that spring. Meanwhile, her supervisor and the HR director spoke to her about comments she made to coworkers about the premium, telling her such negativity was not welcome, and to keep her opinions to herself. She was terminated May 18.

EEOC challenge. In August 2014, the EEOC filed this first lawsuit to directly challenge an employer wellness program. The suit asserted that Orion’s wellness program violated the ADA as it was applied to the employee and that the company unlawfully retaliated against her because of her good-faith objections to the wellness program.

Case narrowed at summary judgment. In September 2016, the district court rejected the employer’s summary judgment argument that the insurance safe-harbor provision in the ADA immunizes wellness plans from ADA scrutiny. The EEOC’s recently issued regulations on the ADA’s safe-harbor provision were within the EEOC’s authority, according to the court, and the safe-harbor provision did not apply even without regard to the new regulations. The court nonetheless found that Orien’s wellness plan was lawful because the employee’s decision whether to participate was voluntary under that law existing prior to the regulations, which were not applicable in the case.

However, the court found issues of fact as to whether the employee was fired because of her opposition to the wellness plan—and those issues would be resolved at trial.

Retaliation consent decree. The consent decree resolving the suit settles the retaliation allegations. In addition to the monetary relief to the employee, Orien will refrain from maintaining any wellness program in the future that poses disability-related inquiries or seeks a medical examination that is not voluntary within the meaning of the ADA and its regulations, according to the EEOC. The company also agreed to refrain from engaging in any form of retaliation, including interference or threats, against any employee because he or she has raised objections or concerns as to whether the wellness program complies with the ADA. Employees will be told that any concerns about Orien’s wellness program should be sent to the HR department.

Further, Orion will train management and employees on the law against retaliation and interference under the ADA. The company also will conduct an additional training meeting with its chief executive officer, its chief operating officer, its chief financial officer, its HR director, and all employees responsible for negotiating or obtaining health benefits coverage or selecting a wellness program. This training will include an explanation of the provisions of the consent decree and the requirements of the ADA and its regulations as they pertain to wellness programs.

“The EEOC has always maintained that wellness programs, done right, are a good thing,” EEOC Regional Attorney Greg Gochanour. “But they have to be voluntary. Through this settlement, Orion Energy agrees that its future wellness programs will be done right.”

The commission filed its lawsuit in the Eastern District of Wisconsin; the case is No. 14-CV-1019.

By Kathleen Kapusta, J.D.

This tragic case, said the Seventh Circuit, which ended in the death and rape of a pregnant employee at the hands of her supervisor, “tests the scope of Illinois employers’ tort liability for intentional torts committed by their supervisory employees against other employees where the employer has been negligent.” Finding that Illinois law permits recovery from employers whose negligent hiring, supervision, or retention of their employees causes injury, and predicting that intentional torts committed by the abuse of a supervisory employee’s authority satisfies the requirements of the Restatement (Second) of Torts, and that the complaint here stated a claim for negligent hiring, supervision, or retention, the appeals court reversed the dismissal of the negligence claim brought on behalf of the deceased employee against three joint employers. This, said the court, was “an old story that has been told too many times. Its ending is both shocking and predictable. Alisha’s family is entitled to prove its truth” (Anicich v. Home Depot, U.S.A., Inc., March 23, 2017, Hamilton, D.).

The employee began working for Home Depot as a teenager, working there seasonally until her death six years later. Her supervisor, who had a history of harassing young female subordinates, called her his girlfriend, swore and yelled at her, and called her names like “bitch,” “slut,” and “whore” in front of customers. He would also call and text her outside of work and pressured her to spend time with him alone. When she became pregnant, he reacted angrily.

Murdered, then raped. The employee complained to other supervisors and managers and while they admitted they knew about his behavior, he remained her supervisor. At one point, he was required to take anger-management classes but did not complete the course. When the employee was about seven months pregnant, he asked her to go with him to his sister’s wedding in Wisconsin, telling her he would fire her or reduce her hours if she refused. She went and after the wedding, he took her to a hotel room where he murdered her and then raped her corpse.

Her mother, as the administrator of her estate, sued Home Depot and the companies that managed its garden centers, alleging that as joint employers their negligence caused the employee’s death. Finding that the defendants did not owe her a duty of care, the district court dismissed the complaint.

Employers’ duty. While employers have a duty under Illinois tort law to act reasonably in hiring, supervising, and retaining their employees, the defendants argued they had no obligation to fire or demote employees for their use of inappropriate language or sexual misconduct. Rejecting their contention that creating this obligation would result in intolerable burdens, the court pointed out that employers already have this obligation as both Title VII and the Illinois Human Rights Act impose liability for failing to discipline harassing employees. The plaintiff did not ask it to impose any new obligations on employers, said the court, nor did it “do so by allowing this case to proceed.”

Supervisory authority. Section 317(a) of the Restatement (Second) of Torts, which Illinois has adopted, provides that employers have “a duty to exercise reasonable care” to control employees who are acting outside the scope of their employment if the employees are on the employers’ premises or using the employers’ chattels. In this case, the supervisor was not on the defendants’ premises when he killed the employee, nor did he use their chattel. But, the court pointed out, he used something else they gave him: supervisory authority over the employee.

His threats to fire her or reduce her hours if she did not go with him were “what the Supreme Court calls ‘tangible employment actions,’” the court explained, stating that he could do that only because the defendants made him her supervisor. “We believe,” said the court, “that § 317(a) should be satisfied by a tortfeasor’s use of supervisory authority. We predict that the Illinois Supreme Court would agree, for two reasons: because supervisory authority is in this respect analogous to a chattel, and because other grounds support holding employers liable in tort for misuse of supervisory power.”

Finding no principled reason to hold employers liable for the tortious abuse of their chattels but not for the tortious abuse of supervisory authority, the court reasoned that formalistic adherence to the literal terms of Section 317(a) would produce odd, even arbitrary results. Injuries caused by using a chattel and injuries caused by abusing supervisory authority both occur by virtue of the tortfeasor’s employment and not because they merely know each other through their work, the court stated.

Ground for liability. Citing Burlington Industries, Inc. v. Ellerth, the court noted that the law has moved toward holding employers vicariously liable for their supervisory employees’ intentional torts committed outside the scope of their employment but by abusing their supervisory authority, subject to an affirmative defense. It discussed this, it explained, to show its holding was part of a broader trend toward recognizing employer liability for supervisors’ intentional torts committed outside the scope of employment and only an incremental shift, when there are good grounds to go much further. The court then confined itself to predicting that intentional torts committed by the abuse of a supervisory employee’s authority satisfies the requirements of Section 317(a) and that the complaint stated a claim for negligent hiring, supervision, or retention.

Foreseeability. To succeed on a claim for negligent hiring, supervision, or retention, a plaintiff must demonstrate that the employee’s “particular unfitness … rendered the plaintiff’s injury foreseeable to a person of ordinary prudence in the employer’s position,” and here the supervisor’s “particular unfitness” was his harassing, controlling, and aggressive behavior toward his female subordinates. The defendants argued the employee’s injures were not foreseeable from that conduct because his violent attack was a radical break from even his most offensive prior behavior, and a reasonable employer could not have predicted violence at all since he had not made explicit threats and had not yet hit anyone. However, the court found these arguments presented fact issues that could not be decided on a motion to dismiss.

Some harm. In order to satisfy the foreseeability component, the court observed, it is not necessary that a defendant must have foreseen the precise nature of the harm or the exact manner of occurrence. Rather, it is sufficient if, at the time of the defendant’s action or inaction, some harm could have been reasonably foreseen. Thus, the magnitude of harm the supervisor inflicted on the employee did not by itself render the harm unforeseeable.

Left with the question whether “some harm” was foreseeable to a person of ordinary prudence, the appeals court noted that the district court said as a matter of law, the answer was no. Reiterating that this is a question of fact, the court reversed that decision. “If the plaintiff can prove her allegations at trial, a reasonable jury could find that ‘some harm’ was foreseeable,” it reasoned, observing that the complaint recounted how the supervisor’s behavior escalated: from private inappropriate comments and touching, to workplace retaliation, to continual harassment and monitoring, and finally to public outbursts, verbal abuse, and physical intimidation.

“Hearing such evidence, a reasonable jury could easily find that the employers could and should have foreseen that [the supervisor] would take the small further step to violence,” said the court, reversing the decision of the court below.

By Joy P. Waltemath, J.D.

Affirming summary judgment for the Board of Regents, the Seventh Circuit found that a professor’s retaliation claims under Title IX failed for lack of a materially adverse action and her Title VII claims failed for lack of causation. As to the professor’s Title IX claim, her reporting of an allegedly harassing in-class note written by another professor to a student was protected, but increased criticism and scrutiny of her, and the withdrawal of support for her cybersecurity initiative, were not materially adverse. And while she demonstrated both protected Title VII activity (in filing charges with the Wisconsin state agency and then the EEOC) and adverse actions (a “letter of direction” which identified seven events that the dean considered examples of the professor’s inappropriate behavior and the dean’s complaint to the chancellor, asking for a formal reprimand, still apparently unresolved), the professor could not show causation between her last protected activity six months earlier and those actions (Burton v. Board of Regents of the University of Wisconsin System, March 17, 2017, Manion, D.).

The note. It all began for the criminal justice professor when a student brought her a note from another professor that read “call me tonight!”, which the student interpreted as sexually harassing. The professor reported it to the dean first, and then her department chair, who learned from the allegedly harassing professor that this was part of a “breach experiment,” or an intentional provocation designed to display to the class social norms by violating them. The following week, the department chair sent a memo explaining that student complaints should come to the chair first, later commenting that someone had “overreacted,” ostensibly referring to the profession. Their relationship became markedly less collegial, and the dean and the department chair withdrew their support from the professor’s cybersecurity curriculum initiative. There was greater scrutiny and criticism of the professor, although they supported her grant proposal and, a few months later, her tenure application, which was unanimously granted.

Escalating tensions. The department chair stepped down, but the tension continued to grow, and the professor filed a charge of discrimination with the appropriate state agency, after which the new department chair and others pressured her to drop her case, telling her she “could not expect to advance if she continued to engage in litigious behavior.” Eight months later, she filed suit; six months after that, she completed an EEOC intake questionnaire. Four days later, she received a letter of direction from the dean detailing seven instances of inappropriate behavior, which the professor disputed and rejected, so the dean filed a complaint against the professor with the chancellor. A couple of months later, the dean accused the professor of cancelling class without permission. In response, she engaged her students to prove the class had occurred, filed her EEOC charge, and filed a second amended complaint, against which the court granted summary judgment.

Waived arguments. After noting that the professor was attempting to argue facts involving both protected activities and materially adverse actions that she had not argued to the district court, the appeals court found them waived. What was left to discuss on appeal were her concededly protected actions under Title IX and Title VII, as well as adverse actions under Title VII.

Title IX adverse actions. When the professor reported the note that the student brought her, that was protected activity, the Board of Regents conceded, but it contested whether any of the actions that followed were materially adverse. The professor’s claim that the criticisms were materially adverse was unconvincing. The department chair never expressly denounced the way she handled the note; he merely presented a new policy for handling similar problems in the future. Even if the new policy could be construed as an implicit reprimand, that would not be materially adverse either—indeed, the professor received tenure a few months later. Nor was the withdrawal of support from the cybersecurity program materially adverse. Eventually the professor received a grant for it, which the university publicly celebrated, and again, she received tenure a few months later.

Title VII retaliation. Agreeing with the district court that the professor had established Title VII activity when she filed charges with the Wisconsin state agency and then with the EEOC, as well as materially adverse actions in the dean’s “letter of direction” complaining about the professor’s allegedly inappropriate behavior and the dean’s subsequent complaint to the chancellor, the court also agreed she could not show causation, however. The professor raised the repeated pressuring by her new department chair and others to drop the discrimination charges and the dean’s threat of discipline in retaliation for the allegedly canceled class, but the “pressure” did not cause any injury, nor did the unfulfilled threats of discipline.

Moreover, the professor’s last protected activity was six months before the letter of direction, and she had no direct evidence linking the adverse actions with her protected activity. The timing of the letter of direction was not suggestive of retaliatory motive because no one at the university knew of the timing of her EEOC intake questionnaire four days earlier. Additionally, there was no evidence linking the dean’s complaint to the chancellor with her protected activity—but there was evidence that the professor disputed and disregarded the “direction” in the letter of direction that preceded the dean’s complaint.

The appeals court was sympathetic to the professor’s belief that she had been treated unfairly by some of her superiors at the university because she reported alleged harassment and proceeded with this case. But the record did not support her claims of retaliation under either Title VII or Title IX.

Mr. Garvey led two strikes in an effort to loosen teams’ grip on players. He later became a progressive activist in Wisconsin.