Happy New Year! We hope you had a joyful holiday season and your 2018 is off to a good start.

The Taxman Cometh for Sexual Harassment SettlementsAs you know, over the last few months, sexual harassment allegations have surfaced all over the place, from Hollywood to Capitol Hill to the Today Show. The hot topic of harassment in the workplace has garnered attention from employers and legislators alike, and it has prompted Senators to amend the new tax bill in an effort to curb nondisclosure agreements in sexual harassment settlements.

The Amendment Provides:

(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. — No deduction shall be allowed under this chapter for — (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.

The amendment’s proponents insist that it eliminates protection for sexual offenders in the tax code. Its critics, however, are skeptical that the amendment will make a difference, and they believe employers will still opt for the nondisclosure agreement. Additionally, another portion of the tax bill eliminates a plaintiff’s ability to deduct legal fees, so critics believe it penalizes accusers more than offenders.

This provision of the tax bill became effective on December 22, 2017, so employers (and individuals) that paid or incurred sexual harassment-related settlement payments prior to that date will generally still be able to deduct those payments as business expenses when they file tax returns in the next few months.

As new laws often do, the amendment raises more questions than it answers. It refers to settlements or payments “related” to sexual harassment or abuse. Employment lawsuits often involve kitchen sink claims—the same plaintiff may allege sexual harassment alongside medical leave interference or wage-and-hour violations. The amendment provides no guidance on deducting such expenses if only part of the settlement relates to a sexual harassment claim.

Regardless of the financial implications of the tax bill amendment, its inclusion in the tax bill marks a new era where sexual harassment claims are more prevalent and are getting closer attention from courts and the media. Rather than focusing on the tax write-off after a claim is raised, employers should focus on preventing these claims altogether by updating their policies, training, and reporting procedures.

The More You Know…Or Others Think You Know: Fifth Circuit Finds Decision-maker Had Knowledge to Constitute RetaliationThe Fifth Circuit has issued another opinion in the continuing saga of Jackson State University and its past athletic director, Dr. Vivian Fuller—this one about retaliation against a witness. To refresh everyone’s memory: A secretary at JSU filed an EEOC charge claiming that AD Fuller sexually harassed her and then fired her. During its investigation, JSU’s attorneys and the EEOC interviewed Fred Robinson, the Director of Sports Medicine, who witnessed some of the AD’s actions. A month after those interviews, AD Fuller terminated Robinson. He felt it was retaliation for his testimony; JSU said it was due to a reorganization of the athletic department and issues with Robinson’s daily availability.

The District Court Case and Verdict

Robinson sued JSU alleging retaliation under Title VII and the First Amendment. The case went to trial and the two big questions were: 1) Did Dr. Fuller actually know that the EEOC interviewed Robinson, and 2) were the reasons for Robinson’s termination simply pretext for retaliation? At trial, Dr. Fuller denied any knowledge of Robinson’s interviews. Without direct evidence, Robinson offered circumstantial evidence including: 1) He was fired not long after his EEOC interview; 2) JSU’s own attorneys knew about the interview and met with Fuller after the interview; 3) Dr. Fuller started avoiding him after the interview; and 4) JSU’s president had threatened to fire anyone who was against the AD (pretty strong one, there). JSU countered by claiming that Dr. Fuller had already decided to fire Robinson before the interview even occurred and also came up with some other incidents.

The jury sided with Robinson and awarded him just over $30,000 in compensatory damages and $75,000 in punitive damages. JSU moved to set aside the verdict claiming that there was insufficient evidence to show that the decision-maker, Dr. Fuller, had actual knowledge of Robinson’s EEOC interview, so she could not have retaliated against him for it. The court agreed with JSU and overturned the verdict. Robinson appealed.

What the Fifth Circuit Said

The Fifth Circuit narrowed the issue to whether there was legally sufficient evidence that Robinson’s EEOC interview (the protected activity) caused his termination (the adverse employment action). If Dr. Fuller had no knowledge of the protected activity, the termination could not be retaliation. The court noted that direct proof that a decision-maker had knowledge could be “elusive” — almost all of the people being accused of retaliating are going to feign ignorance of anything that could have given them a motive. For example, “I had no idea that Suzie had reported our slippery floors to OSHA! I terminated her only because we no longer needed an accountant.”

In the Fifth Circuit (Mississippi, Louisiana and Texas), for a successful retaliation claim you have to show that the actual decision-maker had knowledge — not just that the corporation had constructive knowledge (as it is in other federal circuits). In this case, JSU argued that all of Robinson’s evidence was merely speculative. However, as the Fifth Circuit noted, it obviously was enough for the jury. The indirect and circumstantial evidence, such as the president’s threat to fire anyone who opposed the AD and the JSU’s attorneys meeting with the AD after the EEOC’s interview with Robinson, were, according to the Court, the “prototypical circumstantial indicators of decision-maker knowledge.” In regular speak, it was enough to convince the jury, and ultimately the Fifth Circuit, that Dr. Fuller knew about Robinson’s interview, despite her denials. The Fifth Circuit reversed the lower court’s striking of the verdict.

What Does this Teach Us?

Just because you have a decision-maker who says he didn’t know about a complaint (or EEOC charge, OSHA report, ADA request, or whatever) before he terminated the complaining employee or one of her witnesses that may not get you off the retaliation hook. Before you pull the trigger, you need to look at all the circumstances surrounding the potential adverse employment decision. Is it close in time to the protected activity (e.g., complaint, testimony)? Who knows about the protected activity, and what access have they had to your decision-maker? Has your CEO or anyone else made any threats or other comments about the claim that could hurt down the road?

As we always say, retaliation can be tricky. You have to not only defend the complaint but also prevent the retaliation fallout. While filing a complaint doesn’t make an employee bulletproof, it should at least make the employer take a good look at any future decisions that may affect that person or his or her supporters.

Happy Thanksgiving and the Many Things for Which We Are ThankfulBefore everyone gets out of the office to their various homes and families to celebrate the holiday, we wanted to review the year and count our blessings. Not only are we thankful that our families and colleagues in our Houston and Tampa offices weathered the storms safely, we are also thankful for the following legal stuff:

1. The DOL is not about to change the wage and hour laws.

Does anyone else remember the panicked calls last Thanksgiving week when the Texas judge put the brakes on a regulation that was going to increase the salary basis test? We are all thankful that will not happen this year. Although we still don’t know what, if anything, will happen on that front we will keep you posted.

2. Finally a court has said the ADA is not about leave.

Despite the EEOC’s insistence otherwise, the Seventh Circuit stepped up to the plate and said extended leave is not a reasonable accommodation under the ADA. As we all know, you still need to consider if a limited amount of leave will get the employee back to work but we are thankful that we have some new case law on this front.

3. Harvey Weinstein doesn’t work for us.

This story has horrified many but given all employers a wake-up call. We are grateful for the opportunity to train more people and try to make America a better place to work.

4. The NLRB has a new direction.

Maybe the new Board won’t tell employees that it is okay to swear at your boss on Facebook or nitpick employer policies quite so much.

5. You’re not going to be the employer of someone else’s employees.

DOL has withdrawn its prior guidance on independent contractor and joint employer liability, and Alabama’s Rep. Byrne has introduced a bill to “Save Our Small Businesses.”

6. Legalized marijuana has made questions about drug policies so much more interesting.

Even though it isn’t legal in many states, the fact that employees can legally ingest marijuana many places (including Florida) and take their chances on the looming random drug screen has spiced up our lives. While the law will continue to develop in this area, we are grateful for the very interesting questions we have received.

7. People other than our mothers read this blog.

(Okay, some of our moms are reading and might boost the numbers a little bit.) Since 2016, we have published more than 130 articles and had more than 230,000 reads, according to aggregate reports from Lexology and JD Supra. We have received recognition in The Expert Institute’s Best Legal Blog 2017 competition, the ABA Journal’s Web 100 Ranking, and numerous quotations in other publications. We enjoy bringing you this information and love it when you tell us it is helpful or tweet it to someone else.

Happy Thanksgiving from the Labor & Employment Insights blog team!