Wal-Mart Prevails Against Sympathetic Reasonable Accommodation Plaintiff

Sophisticated employers are well-schooled in their obligations to engage in an interactive process to determine if a reasonable accommodation can be provided to an employee with a disability. And some employers will err on the side of providing an accommodation even if the employee cannot perform an essential function of the job.

While cautious practices for the purposes of avoiding risky litigation, or for more altruistic reasons, can be sound policy, a decision by the Tenth Circuit earlier this month demonstrates that some courts will side with an employer if it is clear that an employee cannot perform an essential job function.

In Mielnicki v. Wal-Mart Stores, Inc., 2018 WL 3046468 (10th Cir. Jun. 20, 2018), the employee was in her sixties, but had the mental capacity of a thirteen-year-old as a result of a developmental disability. She was employed by Wal-Mart for fourteen years, first as a shopping cart attendant, then as a maintenance worker.

An essential function of the maintenance position was cleaning restrooms. For the initial years the employee held the maintenance position, two other maintenance workers cleaned the restrooms, but the employee didn’t. After one of the maintenance workers left the job, a store manager directed the employee to clean the men’s room. The employee refused alleging that she was afraid a man would come in the bathroom and attack her. The employee sought an accommodation in the form of a different job supported by her doctor’s opinion that she could not handle certain social situations, including being in the men’s bathroom. Wal-Mart placed the employee on personal leave pending reassignment if a suitable position were to become available. The employee subsequently took a job with another employer, and Wal-Mart terminated her.

The employee sued Wal-Mart for discrimination under the Americans with Disabilities Act and the Colorado Anti-Discrimination Act. Wal-Mart moved for summary judgment arguing that cleaning the restrooms was an essential function of the employee’s job, which she could not perform with or without any reasonable accommodation. The District Court granted summary judgment for Wal-Mart and the Tenth Circuit affirmed. In reaching that decision, the Tenth Circuit held that it made no difference that Wal-Mart had not previously required the employee to clean the bathrooms holding that “[a]n employer that goes beyond what is required under the ADA to permit an employee to perform only some of the essential functions of the position is not then estopped from insisting that the employee perform all of the essential functions of her job.”

Supreme Court Opens Door For Employers To Require Employee Class Action Waivers

In a long awaited and hotly contested case, the United States Supreme Court has upheld an employer’s right to require employees to waive their right to commence or join class and collective action lawsuits against their employer. This decision, in Epic Systems Corp. v. Lewis, provides a powerful mechanism for an employer to reduce the risk of costly and time-consuming multi-plaintiff litigation.

It has been well-settled for decades that an employer can require its employees to submit disputes with the employer to arbitration as a condition of employment. More recently, employers have sought to secure in the arbitration agreement an employee’s waiver of the right to join or bring a class or collective action lawsuit against the employer. The vast impact of such waivers can be readily seen in the context of collective actions filed against employers for failure to pay wages, including overtime. The amount of these actions has increased exponentially over the past decade because liable employers are required by statute to pay the employees’ attorneys’ fees, and in many cases employees are entitled to a 100% penalty on top of the wages they recover. Now, as a result of the decision in Epic, employers can reduce the litigation expense risk of such wage and hour collective actions to a great extent.

Employers should take the opportunity provided by the Supreme Court to review their onboarding procedures, and consult counsel to analyze whether or not they should require class and collective action waivers as part of their business plan. As a proviso, we note that the New York State Legislature recently passed a law, effective July 11, 2018, which prohibits mandatory arbitration of sexual harassment claims. As such, New York employers should not include such provisions in any arbitration agreement, whether or not the agreement includes a class or collective action waiver. Much of the legal community believes that the New York law will be preempted by the Federal Arbitration Act. However, we will not have firm guidance on the preemption question until a court determines the merits of the first legal challenge to the New York law.

Employment Law Update

All employers should be concerned about the recently passed New York State Sexual Harassment Law. The law requires all employers to comply with the following new requirements by October 9, 2018:

  • Adopt the policy prohibiting sexual harassment in the form promulgated by the New York State Department of Labor (the “NYSDOL”) in consultation with the New York State Division of Human Rights, or adopt another policy that equals or exceeds the standards set by the NYSDOL; and
  • Provide annual sexual harassment training for all their employees.

Needless to say, the State has not provided the “form of policy” with which employers must comply. We will continue to monitor NYSDOL reporting in anticipation of further guidance, including potential penalties for noncompliance. We will notify you as soon as they become available.

The Labor and Employment Practice Group for Spolzino Smith Buss & Jacobs LLP consists of Jack Malley, Joanna Topping, Michael Mauro, Jacob Amir and Matthew Beyer. Our attorneys have broad experience counseling owners, managing agents and cooperative and condominium Boards regarding their rights and obligations as employers, including dealing with unions such as Local 32 BJ and other collective bargaining units. The Group also litigates on behalf of employers in federal and state courts, the federal and NYS Departments of Labor, New York State Division of Human Rights, New York City Commission on Human Rights, EEOC, and other governmental agencies.

Tenant deemed successful party in landlord’s “action to recover possession” seeking to reform lease to exclude tenant’s use of backyard of demised premises

Standard lease agreements include a provision that the successful party is entitled to recover attorneys’ fees and costs incurred on any action or proceeding brought for non-payment of rent or recovery of possession of the subject premises. Where the contract limits the attorneys’ fees provision for the benefit of the landlord (e.g., that landlord is entitled to recover), the law gives the tenant a reciprocal right to recovery of attorneys’ fees and costs if the tenant is successful in the action.

In one recent case before the Appellate Division, Second Department, the Court held that a landlord’s action to reform the lease to change the area occupied by the tenant constituted an action for “recovery of possession”, thereby permitting the tenant to recover attorneys fees and costs. Mulholland v. Moret, 2015-11977 (May 9, 2018)

Specifically, under the controlling lease, the tenant’s demised premises included exclusive use and possession of backyard space. For various reasons, the landlord brought an action to reform the lease to specify that the tenant would no longer be permitted to utilize the backyard. When the lower Court dismissed the action, the tenant moved under Real Property Law (RPL) § 234 for attorneys’ fees and costs, which is permitted where the lease entitles the prevailing party on a breach of lease claim to recover fees and costs. Here, no “breach” of the lease was claimed. Therefore, the tenant was not entitled to RPL § 234 damages.

However, because the lease gave tenant exclusive use and possession of the backyard, the landlord’s action to reform the lease to the extent of the backyard constituted an action for “recovery of possession”, thereby allowing the tenant to recover fees and costs incurred when the landlord did not prevail on its claims. The fact that the landlord sought only partial possession through a reformation of the lease did not negate the tenant’s right, under the terms of the lease, to claim attorneys’ fees and costs.

Court Rules that Non-Participating Brokers Do Not Owe a Fiduciary Duty to a Brokerage Firm’s Client

It is well-established that real estate brokers owe a fiduciary duty of loyalty and to act in the best interest of their clients. Where the brokerage firm is comprised of several brokers, the client may naturally assume that both the listing broker, and the firm at large, will work in the best interest of the client’s needs and desires. A recent decision from the Westchester County Supreme Court warns clients against making this assumption.

Specifically, in 106 N. Broadway LLC v. Houlihan Lawrence, et al, a client engaged a real estate broker to assist in the sale of property for development of senior housing. The broker introduced a and the parties entered into a purchase agreement that was subject to the issuance of municipal approvals required to develop the property for this purpose. However, other brokers in the same firm who lived in the vicinity of the property allegedly interfered with the transaction by voicing opposition to the project at municipal agencies and encouraging others to do so. According to the purchaser, such opposition made it unlikely the rezoning and development would be approved.

The Court granted the brokerage firm’s motion to dismiss the complaint. While the listing broker clearly had a duty of loyalty to the client, other “non-participating” brokers, i.e., brokers who did not participate in the transaction, were not bound by the same duty. This is particularly so where the brokerage contract identified other agents in the same firm as “outside brokers”.

Sellers and prospective purchasers of real property should be mindful not to assume that one agent’s duty is imputed to other brokers in the same firm unless, at the very least, the brokerage contract is drafted properly to address this point. While the facts in this case, may be unusual, they do give clients reason to address this issue in the terms and conditions of a brokerage contract.

Jury Awards Age Discrimination Claimant $200,000 For Retaliation

The verdict last month in Konsavage v. Mondalez Global, LLC, Case No. 3:15-cv-01155 (M.D. Pa.) provides another example of the difficulty in predicting the outcome of a retaliation claim – even where the underlying discrimination claims appear to be weak.

In Konsavage, the plaintiff employee had worked for Nabisco and its successor, Mondelez Global, LLC, for 30 years as of early 2013 when she was employed as an inventory manager. At that time, a new supervisor was assigned to oversee her work, and soon thereafter the plaintiff alleged age and gender discrimination against the supervisor. Among other things, the plaintiff alleged the supervisor told her: not to speak at meetings so younger people could speak; to step aside from some of her work so younger employees could shine and build their careers; that she had no further potential; and that he preferred that male employees handle certain matters rather than the plaintiff.

The plaintiff complained to human resources about the supervisor’s conduct. Subsequently, the plaintiff’s position was downgraded and she received a pay cut. According to the employer, the plaintiff was eventually terminated because a company investigation revealed she had instructed her subordinates to give her good ratings on a company survey regarding her job performance, and that she lied during the investigation.

The plaintiff commenced a lawsuit alleging age discrimination, gender discrimination and retaliation. After a five-day trial, the jury found for the employer on the age and gender discrimination claims, but found that the plaintiff’s termination was retaliatory. The jury awarded the plaintiff $200,000 for emotional distress even though three members of the plaintiff’s team had confirmed the company’s position that the plaintiff had tried to influence the results of the survey in her favor.

The take for employers is that when they are faced with a trial they must independently evaluate the employee’s retaliation claim separate and apart from the underlying discrimination claim(s). As the Konsavage verdict demonstrates, a weak discrimination claim does not negate the possibility of a bad outcome on the corresponding retaliation claim.

Fine Alert!

Everybody’s talking about the new smoking regulation, Local Law 147. Ken Jacobs tackles the subject in Habitat Magazine’s April Toolkit.

Jury Hits Hospital With $3.8 Million Verdict For Failing To Protect Employee From Harassment

On March 2, 2018 a Hawaii jury awarded a nurse $3.8 million on her claim that her employer, a hospital, ignored her reports of racial discrimination and harassment. The incidents occurred after the nurse reported a coworker for failing to safely care for patients in the intensive care unit. The nurse received a retaliatory note that contained racially charged language, including the “N” word. After the two people suspected of planting the note were interviewed by the hospital, a picture of a noose was taped to the nurse’s locker.

When the nurse reported the “noose” incident to the HR director and requested a security escort to her car, the director denied the request. At trial the nurse’s supervisor and the HR director minimized the bad intent of the note.

The verdict, which was comprised of $3.2 million in punitive damages and $630,000 in general damages, sent the message that the hospital did not sufficiently investigate the nurse’s claims and take action to protect her.

The verdict reinforces the employer best practice of investigating all claims thoroughly, and taking action when the investigation identifies an employee at risk.

Attorney’s fees, an offer for liquidated damages and the “prevailing party” under a commercial lease dispute

Lease agreements may contain an attorneys’ fee provision whereby the “prevailing party” is entitled to recover attorney’s fees. When owner and tenant settle their disputes before trial, that provision is waived or factored into the terms of settlement. Additionally, the civil rules allow a defendant to offer a liquidated amount as damages in the event plaintiff prevails on liability (i.e., all plaintiff has to do is prove liability). If plaintiff rejects the offer and recovers an amount less than what defendant offered, the defendant is entitled to recover attorney’s fees for the damages portion of trial.

What happens if one party prevails at trial, entitling it to attorney’s fees under the lease, but is awarded damages for any amount less than what was offered pre-trial? Who is the “prevailing party”? The New York County Supreme Court faced this query in Free People of PA LLC. v. Delsha 60 Ninth LLC. (Sup. Ct. NY Cty. 11/29/17).

Tenant and owner entered into a commercial lease requiring the owner to deliver the premises by a date certain. Delivery was delayed for 825 days and the tenant demanded a rent credit of $3,000,000.00. Before trial, the owner made two timely offers to settle at $1 million and $1.5 million, which tenant rejected. At trial, the tenant was awarded $650,000.00 in damages, far less than the liquidated damages offered by the owner.

The Court first determined that neither side “prevailed” as that term was used in the commercial lease where: (1) the tenant was awarded damages of an amount far less than what it pursued through trial but (2) owner nevertheless did cause damages resulting from the delay in delivering possession. Because neither party in “any practical sense” was the “prevailing party” where the tenant engaged in “unnecessarily expensive litigation”, the Court said the lease provision was unenforceable. However, because the owner had made a proper offer of liquidated damages of a greater amount than what tenant ultimately was awarded, owner was entitled to recover attorney’s fees for the damages portion of trial.

This was no small fee. Liability was a nominal issue such that the measure of damages consumed the bulk of legal work after the liquidated damages offers were made. Owner was entitled to reimbursement of costs and attorneys’ fees of $154,919.17, apparently caused by the tenant’s unrealistic or inflated expectations of recovery.

Owners (and tenants) should not assume the “prevailing party” language in a lease to be the beginning and end of analysis regarding the recovery of costs and attorneys’ fees. Moreover, the civil rules provide a valuable tool, when used, to buttress and counter a provision in the lease permitting recovery of attorney’s fees.