The Fourth Circuit Court of Appeals addressed this issue in Pueschel v. Peters, 577 F.3d 558 (4th Cir. 2009), in a unanimous decision written by Judge Roger Gregory in which Judges M. Blane Michael and Robert Bruce King joined.

The Fourth Circuit didn’t have much difficulty reaching the conclusion that, for any claim alleging a hostile work environment (including sexual harassment), you can’t succeed if all of the misconduct about which you complain occurred at work when you were not at work.

Twenty Eight Years of Litigation!!!

This case grows out of an incredibly long history of litigation (including several different lawsuits and appeals (some of which were successful)) filed by Ms. Pueschel against her employer, the Federal Aviation Administration ("FAA"). The litigation started in 1981 and ended with this Fourth Circuit decision in 2009 (I am not kidding, and I am not sure this decision marks the end of all of her litigation).

I’ll fast-forward past the first decade or so of litigation. In 1994, Ms. Pueschel went on leave without pay ("LWOP") from her job at the FAA after she claimed to suffer a "stress-related episode at work". She claimed that this required her to leave work permanently. She remained on LWOP until she was terminated in 1999 because of her inability to work, and she never returned to work at the FAA.

Ms. Pueschel filed a number of discrimination administrative charges between 1997 and 1999, and the key allegation that I will focus on in this article was that she was subjected to a hostile work environment in 1997 and 1998 (keeping in mind that she was not at work after 1994). Ms. Pueschel claimed that the hostile work environment was based on her gender and disability, and based on the fact that she had filed charges of discrimination against the FAA. These charges led to a lawsuit in which the trial judge granted the FAA’s motion for summary judgment on Ms. Pueschel’s hostile work environment claim under Title VII of the Civil Rights of 1964.

So the Fourth Circuit had to decide whether Ms. Pueschel had a viable hostile work environment claim based on her gender and her disability and her prior charges of discrimination.

I described Ms. Pueschel’s claim at the beginning of this article as "sexual harassment" for the sake of convenience to describe the issue, but her hostile work environment claim was more complicated than that. She alleged that co-workers were making ugly, profane, and degrading comments about her, and the comments were not "sexual" in a conventional sense. The insults were that she was a "fucking bitch", "nothing but a bitch", a "useless bitch", and other similar statements.

Fourth Circuit’s Analysis

The first important thing about the Fourth Circuit’s analysis is that it assumed that a hostile work environment claim can be predicated on any protected characteristic under the employment discrimination laws. It described the basic requirements (prima facie case) of a hostile work environment claim, and said the plaintiff must demonstrate that the alleged conduct:

• was unwelcome;
• resulted because of her gender, disability, or other protected activity;
• was "sufficiently severe or pervasive" to alter the conditions of her employment; and
• was imputable to her employer.

(my emphasis is added). Some courts have questioned whether hostile work environment claims can be based on any characteristics other than gender and race. But the Fourth Circuit’s language in element 2 above ("based on gender, disability, or other protected activity") clearly recognizes that a hostile work environment may be motivated by most or all of the protected characteristics under the employment discrimination laws. That means that hostile work environment claims in principle may be based on gender (conventional sexual harassment), race (racist comments), disability, age, national origin, and religion.

The second important thing about the Fourth Circuit’s analysis is that it concluded–perhaps stating the obvious–that Ms. Pueschel could not prevail on her hostile work environment claim because she left her FAA employment permanently starting in 1994, and all of the abusive conduct occurred at work in 1997 and 1998 after her employment ended. In other words, she was not present at work, so the insulting statements at work could not create a hostile or abusive work environment for her.

Lingering Issues

The holding in this case does not mean that the plaintiff-employee must always be physically present while offensive workplace behavior is occurring. Abusive conduct may be relevant and admissible in various settings where the plaintiff is not physically present, but these circumstances will generally require that the plaintiff still be employed at the time of the events. Here are the scenarios where the conduct may still support a hostile work environment claim (and I’ll use sexual harassment conduct as the example):

• Boss makes sexually offensive statements about female employee (plaintiff) while plaintiff is not present, but another employee later tells the plaintiff about the statements. Courts don’t have a lot of trouble concluding that this sort of after-the-fact knowledge about the harassing statements contributes to a hostile work environment.
• Boss makes sexually offensive statements about plaintiff, no one ever tells plaintiff, and boss denies ever making other sexually offensive remarks directly to the plaintiff. Under those circumstances, even though the boss’s statements did not contribute to a hostile work environment for the plaintiff, the statements outside of the presence of the plaintiff are likely to be admissible on the disputed issue of whether the boss ever made sexually offensive statements directly to the plaintiff.
• Boss sexually harasses other women (other than the plaintiff) outside the presence of the plaintiff. That harassment may be admissible in plaintiff’s case under 2 circumstances: (a) plaintiff claims to have been told about that harassment while she was still working for employer, and she credibly claims her after-the-fact knowledge contributed to the hostile work environment, and (b) even if plaintiff did not learn about it after the fact, the harassment of other women may be admissible on the disputed issue of whether the boss sexually harassed the plaintiff.

Prepared by Drew M. Capuder (contact information); Voice: 304-333-5261

This was an age discrimination case under the Age Discrimination in Employment Act of 1967 (ADEA). The plaintiff was a member of a union, and the collective bargaining agreement (union contract) required submitting age discrimination claims to binding arbitration.

The US Supreme Court had previously ruled, but not in a labor union setting, that arbitration agreements for ADEA claims were enforceable under the Federal Arbitration Act, 9 U.S.C. sections 3-4 (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26-33 (1991)). So the real issue in Penn Plaza was whether there would be a different result because of the union contract setting and the National Labor Relations Act.

The Supreme Court in Penn Plaza, in a divided decision (5-4), held that the arbitration agreement contained in the union contract was enforceable.

The enforceability of arbitration agreements for employment disputes has been a political hot potato, and The Arbitration Fairness Act of 2009 (H.R. 1020) was introduced in the US House on February 12, 2009. The bill has 36 co-sponsors, and has been referred to the House Committee on the Judiciary. If it passes, it would essentially overrule Penn Plaza and other cases which have held that employment dispute arbitration agreements are enforceable.

Written by Drew M. Capuder (contact information)

Clites Goes To Work For TeleTech And Signs An Arbitration Agreement

The plaintiff, Jill Clites, went to work for TeleTech in October 2004 as a Customer Service Representative. During new employee orientation, Clites met with a human resources representative for about 90 to 120 minutes, during which time Clites reviewed and signed a large number of documents related to the orientation. In the record before the West Virginia Supreme Court, there were disputes over whether individual documents were discussed with Clites and whether she was required to sing all the documents during the orientation session, but it appears that during that session Clites signed an arbitration agreement which TeleTech required of most or all new employees.

Clites remained employed at TeleTech until July 12, 2007, when she was terminated. She then filed suit for sexual harassment and retaliation. Clites alleged she complained about the sexual harassment, that TeleTech failed to take appropriate corrective action, and that TeleTech retaliated against her for the complaint by firing her.

Clites Files Suit In West Virginia Circuit Court

Clites filed suit in West Virginia Circuit Court in Morgantown. TeleTech then invoked the arbitration agreement by filing a motion to dismiss the lawsuit and by filing a separate lawsuit in federal court arguing that Clites waived her rights to a jury trial by signing the arbitration agreement. In essence, TeleTech argued that Clites gave up her rights to file suit and to a jury trial by signing the arbitration agreement, and that her only remedy was to file an arbitration proceeding (with the American Arbitration Association) pursuant to the arbitration agreement.

Judge Russell Clawges ruled that the arbitration agreement was a "contract of adhesion", which simply means that it was a "standardized form, containing no individual terms, offered [by the employer] on essentially a take it or leave it basis." Contracts of adhesion are usually described as contracts offered by the substantially more powerful party in a transaction as allowing for now negotiation–offered on a "take it or leave it" basis. Courts sometimes but not always scrutinize "adhesion contracts" more carefully, especially where they do in fact reflect substantial disparities in negotiation power.

Judge Clawges did not automatically conclude that the arbitration agreement was therefore not enforceable. He looked at the more controversial terms: requiring arbitration to take place in Denver, Colorado (instead of near the place of employment, Morgantown, West Virginia), and requiring the parties to pay their own expenses incurred in the arbitration (which would make the arbitration proceeding significant more expensive for the plaintiff, compared to the cost of filing suit in West Virginia Circuit Court). Those terms would make arbitration significantly more burdensome and expensive for the plaintiff, compared to filing suit and seeking a jury trial. Those results would have made it significantly more likely that a Court would decide the arbitration contract to be "unconscionable", which would make it unenforceable.

TeleTech, to address these more burdensome terms of the arbitration agreement, stipulated (agreed) before Judge Clawges that the location of the arbitration would be Morgantown and that TeleTech would pay for all arbitration costs which would exceed what Clites would have had to pay to file suit in West Virginia Circuit Court.

Judge Clawges, based on the TeleTech stipulation, concluded that the arbitration agreement was not unconscionable, and there concluded it was enforceable.

Clites then appealed to the West Virginia Supreme Court.

The Federal Arbitration Act Does Not Preclude Review

The first issue for the Supreme Court was whether the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), precluded any scrutiny at all over the arbitration agreement in question. The United States Supreme Court has held that the "FAA" established the policy of favoring arbitration of disputes. Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 24 (1983). The US Supreme Court also held that the FAA preempts state laws which "undercut" the enforceability of arbitration agreements. Southland Corporation v. Keating, 465 U.S. 1, 11 (1984); Perry v. Thomas, 482 U.S. 483 (1987). This rule also applies to claims specifically created by state legislatures, such as the discrimination claims under the West Virginia Human Rights Act. Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).

While the West Virginia Supreme Court in Clites recognized the fact that the FAA preempts state laws which would undercut the enforceability of arbitration agreement, it held that the "issue of whether an arbitration agreement is a valid contract if a matter of state contract law" and is "capable of state judicial review."

The Arbitration Agreement In Issue Was Not Unconscionable

So the West Virginia Supreme Court proceeded to review TeleTech’s arbitration agreement to determine whether it was enforceable under West Virginia law.

The standard for reviewing arbitration agreements was set out by the West Virginia Supreme Court as follows: An arbitration clause is "presumed" to be "bargained for" and is presumed to intend that the arbitration proceeding is the "exclusive means of resolving disputes arising under the contract". However, where a party alleges that the arbitration agreement was "unconscionable or was thrust upon him because he was unwary and taken advantage of, or that the contract was one of adhesion", then the question is whether the arbitration agreement was "bargained for and valid", and that question is a "matter of law for the court to determine by reference to the entire contract, the nature of the contracting parties, and the nature of the undertakings covered by the contract." (quoting Board of Education of the County of Berkeley v. W. Harley Miller, Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977) (Syllabus Point 3).

The West Virginia Supreme Court, like Judge Clawges at trial, concluded TeleTech’s arbitration agreement was a "contract of adhesion". But that did not "necessarily means that it is invalid, and to determine its validity we look to other factors"

The next step was to determine "whether the Agreement is unconscionable or was thrust upon [the plaintiff] because [she] was unwary and taken advantage of." An analysis of unconscionability "must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the existence of unfair terms in the contract." (quoting Art’s Flower Shop, Inc. v. Chesapeake and Potomac Telephone Company of West Virginia, Inc., 186 W. Va. 613, 413 S.E.2d 670 (1991)).

The Supreme Court then focused on the fact that TeleTech’s human resources employee had a meeting of substantial length (90 to 120 minutes) with Clites, and Clites was required, like all other new employees, to sign an arbitration agreement. Furthermore, apparently because of TeleTech’s stipulation, the arbitration agreement required arbitration in Morgantown instead of Denver, and TeleTech agreed to pay the costs of arbitration beyond the costs of filing suit in Circuit Court.

The Court therefore held that TeleTech’s arbitration agreement was not unconscionable and was therefore enforceable. The result of the decision is therefore that Clites will be required to pursue her claim before the American Arbitration Association, and will not be allowed to proceed to a jury trial in West Virginia Circuit Court.

Importance Of The Clites Decision

The first important aspect of the Clites decision is that the reasonableness of an arbitration agreement should be examined in terms of the agreement itself plus any stipulations (agreements) by the employer that might soften the burdensome effects on the employee/plaintiff. The fact that TeleTech’s arbitration agreement required the arbitration to take place in Denver, and required the employee to bear the substantially higher cost of arbitration, would likely have created problems for the enforceability of the agreement. But TeleTech’s stipulations essentially removed those issues.

Therefore, employers faced with troubling terms in an arbitration agreement, from the standpoint of enforcing it in court, may stipulate after the employee files suit to modify the arbitration agreement to make it more likely to pass judicial scrutiny concerning its enforceability.

The second important aspect of Clites is that the Supreme Court carefully limited its ruling to the facts of that case, and indicated that under other circumstances it would carefully scrutinize the arbitration agreements:

• There may be questions of whether "sufficient consideration was given in exchange for the" arbitration agreement. The Court noted that it had previously ruled that an employer’s "promise merely to review an employment application in exchange for a job applicant’s promise to submit employment-related disputes not associated with the application process to arbitration does not represent consideration sufficient to create an enforceable contract to arbitrate such employment disputes." (quoting State ex rel. Saylor v. Wilkes, 216 W. Va. 766, 613 S.E.2d 914 (2005)).
• The Court notes that its precedent has "historically given close scrutiny to adhesion contracts that abrogate a party’s constitutional entitlement to access to the courts."
• The court would be "troubl[ed]" by forum selection clauses, contained in contracts of adhesion, which would require an employee to arbitrate disputes "in far-away jurisdictions, remotely removed from the employee’s actual place of employment or residence."
• It would be "troubling" for an arbitration agreement to require the employee to be "subject to the substantive law of a far-away jurisdiction".

This Clites decision is discussed in my chart of West Virginia Supreme Court decisions.

Prepared by Drew M. Capuder (contact information); Voice: 304-333-5261

This was an age discrimination case under the Age Discrimination in Employment Act of 1967 (ADEA). The plaintiff was a member of a union, and the collective bargaining agreement (union contract) required submitting age discrimination claims to binding arbitration.

The US Supreme Court had previously ruled, but not in a labor union setting, that arbitration agreements for ADEA claims were enforceable under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26-33 (1991)). So the real issue in Penn Plaza was whether there would be a different result because of the union contract setting and the National Labor Relations Act.

The Supreme Court in Penn Plaza, in a divided decision (5-4), held that the arbitration agreement contained in the union contract was enforceable.

The enforceability of arbitration agreements for employment disputes has been a political hot potato, and The Arbitration Fairness Act of 2009 (H.R. 1020) was introduced in the US House on February 12, 2009. The bill has 36 co-sponsors, and has been referred to the House Committee on the Judiciary. If it passes, it would essentially overrule Penn Plaza and other cases which have held that employment pre-dispute arbitration agreements are enforceable.

Prepared by Drew M. Capuder (contact information)

The plaintiff was a pilot, Rao Zahid Khan, who alleged that his co-workers subjected him to frequent derogatory and insulting comments about his national origin and religion (he was Arabic). The West Virginia Supreme Court ruled that Colgan Air (a) was not liable for harassment because it had policies and procedures prohibiting harassment and took swift and decisive action after learning about the harassment, and (b) was not liable for retaliation because Colgan Air terminated the employee (Mr. Khan) for a legitimate and non-discriminatory reason–he failed to pass a mandatory FAA proficiency test for pilots.

Colgan Air was a 3-2 decision. Justices Davis, Maynard, and Benjamin joined in the "per curiam" majority opinion, and Justice Albright dissented and wrote an opinion, and Justice Starcher also dissented and wrote an opinion. Both Justices Albright and Starcher agreed with the majority that Mr. Khan properly lost his job because of his failure to pass the FAA proficiency test, but dissented because they believed that Colgan Air was properly held liable for the hostile work environment (based on religion and national origin).

Summary prepared by Drew M. Capuder (contact information); Voice 304-333-5261

Ledbetter’s Claims of Sex Discrimination and Lower Pay, and the Trial Result

Ledbetter filed a charge of sex discrimination with the EEOC in 1998 and then later in the year retired. She claimed that, years earlier in her career at Goodyear, male supervisors gave her bad performance reviews compared to what men received. She claimed that Goodyear awarded raises based on those performance reviews, so that her pay raises were reduced as a result of the discriminatory performance reviews.

Ledbetter went to trial and persuaded the jury that the performance reviews, years before she filed her EEOC charge, were discriminatory based on her sex, and the jury found her rights had been violated and awarded her damages based on her lower paychecks throughout her career. The trial judge entered a "judgment" in Ledbetter’s favor based on the jury’s verdict. So Ledbetter won at trial on her sex discrimination claim under Title VII. The Eleventh Circuit Court of Appeals threw out the jury verdict and trial court judgment for Ledbetter, and entered a judgment in favor of Goodyear, based on her failure to file her EEOC charge within 180 days of when the performance reviews had been conducted. The United States Supreme Court affirmed, meaning that Goodyear won.

The Problem for Ledbetter Under Title VII Limitations Provisions

Here was the problem for Ledbetter: Title VII of the Civil Rights Act, which governs sex discrimination in the workplace under federal law, says that an employee must file a charge of discrimination within 180 days (or, depending on the state, 300 days) after the discrimination occurred about which the employee is complaining. The Courts, in examining when the discrimination occurred (for purposes of figuring out when that 180 day "clock" starts to run), have focused on the "discrete" employment "decision" that caused some consequence (usually pay check-related) for the employee. Based on when Ledbetter filed her EEOC charge in 1998, for it to be timely, she had to be complaining about "decisions" which occurred within the 180-day window preceding the charge. But the discriminatory evaluations had occurred years before that, even though the reduced paychecks about which she complained continued into that 180-day window.

US Supreme Court: Ledbetter Loses Because She Didn’t File Her Complaint Quick Enough

The US Supreme Court held that, in a situation where a decision (such as a performance review) was made that discriminated against a female employee by paying her less, the employee was required to file a charge of discrimination with the EEOC within 180 days of when the decision was made and communicated to her. That, for Ledbetter, would have been within 180 days after the bad performance reviews were conducted and the results were communicated to her. Since she did not file EEOC her charge until years later, the charge was not timely under Title VII. The consequence is that she loses all rights under the EEOC charge process, and she loses all rights to file suit on the same claims in Court under federal law.

The US Supreme Court‘s decision was a 5-4 vote that illustrates the ideological divide on the Court. The 5 vote majority consisted of the "conservative"; block on the Court (Alito, Roberts, Scalia, Kennedy, and Thomas), and the 4 vote dissent consisted of the "liberal" block on the Court (Ginsburg, Stevens, Souter, and Breyer).

The Backlash, and Congress Overrules the Supreme Court

The decision got a great deal of press attention, being both praised (Kiplinger Business Resource Center) and condemned (New York Times Editorial). The criticism of the decision generated political movement for Congress to revise the law to undo the decision (NYT editorial and story discussing those efforts). On April 24, 2008, the bill that would have overturned the decision failed to receive the 60 votes required in the Senate to begin consideration of the bill (NYT Article), so the bill died for the time being.

But then after the November 2008 election, where the Democrats gained seats in the Senate, Congress passed, and President Obama signed into law (on January 29, 2009), the Lilly Ledbetter Fair Pay Act (Pub. L. 111-2, sec.1, 123 Stat.5), which overturns the US Supreme Court‘s decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). You can review the history of the law on the Library of Congress THOMAS site.

For Supreme Court Groupies

The US Supreme Court‘s decision in Ledbetter is a good opportunity to study the significance of and controversy generated by the US Supreme Court‘s decisions. Read the press accounts when the decision was issued from the New York Times and the Washington Post. You can also listen, on the Oyez site, to the oral argument in the case before the Supreme Court, and the announcement at the Supreme Court of the decision and dissent. Or read the transcript of the oral argument. You can also read the briefs in the case at FindLaw.com. Read a summary of the decision in the Harvard Law Review.

Summary prepared by Drew M. Capuder (contact information); Voice: 304-333-5261