Stick to Your Story: Employer’s Shifting Termination Justifications Can Cause Employer to Have to Explain Its Discharge Decision to a JuryIf you want to avoid potential liability from a former employee, remember a key maxim: Stick to your story about why you made the employment decision. If an employer shifts rationales for its decision or tries to pile on by adding new reasons after the fact, it will likely have to explain itself to a jury or pay to settle the case. A recent decision from a federal court in Tennessee, Rikita Bonner-Gibson v. Genesis Engineering Group, illustrates this principle.

Avoiding Pretext Is the Name of the Game

The issue boils down to whether the employer’s reason for termination was the true reason or a pretextual one to disguise an illegal motive. If facts suggest that an employer’s reason may be pretextual (because it has changed over time), then the case will likely go to a jury.

In this case, Genesis Engineering claimed it terminated Bonner-Gibson after she returned from maternity leave because she “unilaterally alter[ed] her work schedule and . . . respond[ed] to a supervisor in an insubordinate fashion.” Both reasons are unrelated to Bonner-Gibson’s pregnancy or leave. Bonner-Gibson, however, argued that the reason was a pretext and she was really terminated because of her pregnancy and in retaliation for complaining about her treatment during her pregnancy.

Reviewing the fact in the light most favorable to Bonner-Gibson, the court concluded Genesis Engineering had not been consistent in its rationale for terminating her. The “most notable” example came from an inconsistent statement during an unemployment hearing. During that hearing, the company’s HR representative testified that Bonner-Gibson was terminated because she forwarded a final written warning email she had received to family members. However, the HR representative did not have any personal knowledge of why Bonner-Gibson was terminated. She was speculating regarding the reasons why she was terminated based on her review of Bonner-Gibson’s personnel file. The forwarding of the email, however, was not one of the reasons for Bonner-Gibson’s termination. When Genesis Engineering abandoned this reason in litigation, the court opined that it called their entire decision-making process into doubt.

Don’t Pile On

In addition to shifting justifications, the court found that Genesis Engineering tried to “pile on” during the lawsuit to add additional reasons for terminating Bonner-Gibson that did not actually motivate its decision. Piling on of justifications for termination is also potentially evidence of pretext.

Genesis Engineering’s shifting rationales and piling-on tactics contributed to the court’s denying the motion for summary judgment on Bonner-Gibson’s pregnancy discrimination and retaliation claims. (The court granted summary judgment on other claims Bonner-Gibson did not contest.) The court held that Genesis Engineering’s shifting justifications and piling-on strategy helped create credibility determinations that only a jury could decide. Now, Genesis Engineering will either have to explain itself to a jury and seek a favorable verdict or pay a potentially costly settlement.

Key Takeaways

To avoid a similar plight, employers should remember the following takeaways:

  • Stick to your story. Once you terminate an employee for a reason, that is the reason. Don’t try to shift your justification later for discharging the employee.
  • Don’t pile on additional reasons after the fact. One true and documented reason for termination is better than five reasons that did not really motivate the termination.
  • Make sure that employees who represent the employer at administrative proceedings, such as unemployment hearings or responding to EEOC charges, actually know why an employee was terminated. It is, of course, much easier to prevent mistakes on the front end than to try to clean them up later.

Not a Bad Place to Be: Fifth Circuit Addresses the “Highly Compensated” Exemption Under the FLSASometimes employment laws can make the common person’s head spin. That certainly could be the case for a recent Fifth Circuit opinion examining the “highly compensated” regulatory exemption from the overtime requirements of the FLSA.

A Thousand Dollars a Day – Is It Fair Compensation?

Jeff Faludi used to practice law but began working as a consultant for U.S. Shale Solutions, an oil and gas company. He had an independent contractor agreement, under which he was paid $1,000 per day for every day he worked in Houston and $1,350 per day for every day he worked outside of Houston. Those rates applied regardless of how many hours he worked, and the proof showed many days where he charged that rate even though he did not work a full day and other days for which he charged a half-day rate. His annual compensation was about $260,000. After about 16 months, the company reorganized, and Mr. Faludi left. He subsequently filed an FLSA suit against the company, claiming he should have been paid overtime.

U.S. Shale filed for summary judgment claiming that Mr. Faludi was an independent contractor. In the alternative, it said that even if Mr. Faludi was an employee, he was exempt under the “practice of law” or “highly compensated employee” exemptions. Mr. Faludi also filed for partial summary judgment on the grounds he was an employee (not an independent contractor) and was not exempt. The lower court granted summary judgment in favor of the employer on the “highly compensated” exemption. Mr. Faludi appealed.

What It Means to Be Highly Compensated

The FLSA includes several types of employment that are exempted from the payment of overtime: executive, administrative, professional, computer or outside sales. In examining the exemptions, the Fifth Circuit looked to the Department of Labor’s regulations — especially those on “highly compensated employees.” An employee is exempt from the overtime requirements as a “highly compensated employee” if he or she:

  • Receives total annual compensation of at least $100,000, and
  • Customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.

Mr. Faludi argued that he did not fit the exemption: His salary wasn’t paid in a regular manner, it was subject to a reduction due to the amount of work performed, and there was no connection between his pay and what he actually did. The Fifth Circuit did not give credence to any of those arguments. Instead, the Fifth Circuit focused on the fact that his $1,000 per day rate guaranteed him at least $455 per week and he regularly received that amount on a weekly or less frequent basis. Therefore, he was a highly compensated employee under the regulations and was exempt from overtime.

Does This Matter Even If I Don’t Employ Highly Compensated People?

The highly compensated exemption is likely a narrow one, and not one that would usually generate much litigation. However, this case does point out that employers should look to the DOL’s regulations for guidance on the nuances of the FLSA. Courts are using the regulations to enforce the overtime requirements, and it is worth looking at them. Also, don’t forget that there has been much talk about revising these exemptions, which will likely result in an increase of the $100,000 salary threshold.

The EEOC’s revised EEO-1 form, which now includes employee pay data, must be filed for covered employers for calendar years 2017 and 2018 by September 30, 2019. Remember that EEO-1 forms are required of all employers with 100 or more employees, as well as federal government contractors who have 50 or more employees and contracts of $50,000 or more. The EEOC posted updates for the new reporting requirements here.

What Is Required

The EEO-1 now must include W-2 earnings for all employees within an EEO-1 job category by placing those employees within 12 “pay bands.” For example, when using “pay band 4,” an employer would place a number within each EEO-1 job category representing the total number of employees in that category who made between $30,680 and $38,999 gross for the prior 12 months, all sorted by gender and race of course. On a later page of the form, the total number of hours worked for each category must be included. An example of the form is below and can be downloaded from the EEOC website portal.

Don’t Dally on Your Data: Pay Data Required on EEO-1 Forms by September 30, 2019

How this Happened

Employers may recall that the new pay reporting requirements were first introduced in 2016. Much has happened since our original post, including a stay of the new requirements, but we basically are back to where we started, with new requirements for including pay data now in effect.

The way “we got here” related to the change in administrations in 2017. After the EEOC issued its new rule, it was approved under the procedure of the Office of Management and Budget (OMB) in 2016 before the presidential election. About a year later though, in August 2017, the OMB reconsidered its decision, announced that the new rule was overly burdensome and lacked utility, and stayed its prior approval. Lawsuits by interest groups quickly followed challenging the OMB’s reconsideration. Federal District Judge Tanya Chutkan in D.C. sided with these groups and found the OMB’s new decision to be “arbitrary and capricious.” The court thus vacated the stay from 2017 and ruled that the new reporting requirements should go into effect immediately. That judicial decision was issued on March 4, 2019. Readers may recall that, during this time frame, the federal government underwent a “shutdown” which resulted in the EEO-1 submission date being extended to the end of May 2019. The EEOC again extended that deadline until the end of September 2019.

And, yes, an appeal has been filed, so stay tuned. However, Judge Chutkan’s order has not been stayed, so her decision is the current state of the new reporting requirements.

What this Means

The burden related to filing EEO-1s has obviously increased significantly and the time frame is short. Employers have a lot more data to gather. This data no doubt comes from different sources within a business. The ultimate information provided could be used against the employers submitting it. So, regardless of what may happen in the future, companies should begin compiling this data immediately and double checking to ensure that it is very accurate.