Last month, the Alabama Supreme Court allowed a dubious case to proceed against Austal, USA, LLC, even though it appeared to be barred by provisions of the Longshore & Harbor Workers’ Compensation Act (“LHWCA”).  Ex parte Austal USA, LLC, No. 1151138, 2017 WL 836567 (Ala. Mar. 3, 2017).  Austal is a ship-builder in Mobile, and makes littoral combat ships for the United States Navy.  The following article from AL.com provides some insight on the nature of the dispute:  Austal Widow Maker Article

The employees in Ex parte Austal claimed that they were each injured by a “Miller saw.”  According to AL.com, the Miller saw injured dozens of employees, and management began referring to it as the “widow maker.”  But, claims against employers for employment-related injuries in the shipbuilding industry are usually barred by the LHWCA.  There is an exception to that general rule:  If an employer intentionally injures an employee, the claim is not barred by the LHWCA.

So, in an attempt to avoid the LHWCA, the employees claimed that Austal supplied them with the Miller saw “with the specific intent that it would cause injury” to them.  The employees further claimed that Austal wanted to build its ships “without having to incur costs associated with finding a safer alternative method to perform the work.”  Austal moved to dismiss the employees’ complaint, but a circuit court in Mobile found that those allegations were sufficient to fit within the LHWCA exception.

Austal appealed to the Alabama Supreme Court.  Unfortunately, the Court found that it was constrained by the Rules of Civil Procedure.  At the motion to dismiss stage, which occurs at the very beginning of a law suit, the rules require that the Court accept as true everything alleged in the employees’ complaint.  Thus, the Court was forced to accept as true the allegation that Austal intentionally injured its employees.

The Court found the allegation “that a company would deliberately injury multiple specific employees … so shocking that it invites skepticism.”  The Court also found that “a specific intent or desire to cause injury to its employees is not particularly consistent with the alleged cost-saving motivation for causing such injuries.”  Nevertheless, the Court refused to dismiss the complaint, because “there is at least some possibility that those allegations are true.”

As a result of the Supreme Court’s ruling, the case will proceed in Mobile County Circuit Court.  The employees will be required to produce evidence of an actual intent to injure each of them.  If they fail to produce such evidence, the trial court will most likely dismiss the case at the summary judgment stage.  At that stage, the court is not required to believe the employee’s mere statement of facts.  Instead, the employee must provide actual evidence of an intent to injure.  If that evidence is lacking, the court can dismiss the case.

Yesterday, a federal judge in Texas issued a preliminary injunction halting the Department of Labor’s new overtime regulations.  Those regulations changed the threshold for salary exemption under the Fair Labor Standards Act from $23,000 per year to $47,476 per year.  Importantly, this is not a final decision.  Instead, it is a preliminary ruling and there is still some chance that the judge could later uphold the new regulations.  Nevertheless, employers have received a reprieve from the December 1, 2016 deadline for compliance.

Generally, FLSA regulations exempt an employee from receiving overtime if he or she: (1) performs executive, administrative or professional duties; (2) is paid on a salary basis; and (3) meets a minimum salary level.  The DOL cannot create an exemption that is based on salary alone.  Instead, the employee must also perform executive, administrative or professional duties.  The judge enjoined the new overtime regulations because he found that the new $47,476 salary level essentially created a de facto salary-only test.

Right now, under the old regulations, approximately 4.2 million employees are exempt from overtime because they perform executive, administrative or professional duties and their salary is greater than $23,000 per year.   Under the new regulations, those employees will automatically become eligible for overtime even though their duties will not change.   The judge halted the overtime regulations because Congress did not intend salary to categorically exclude employees with executive, administrative or professional duties from the exemption.

As I watched another dominating performance by the Alabama Crimson Tide defense on Saturday night, a question occurred to me:  “I wonder what Nick Saban’s employment contract looks like?”  Thanks to the wonders of the internet and the Alabama Open Records Act, that question was easily answered.  If you want to see it for yourself, here’s a link:  Nick Saban’s Contract.

Obviously, Nick Saban possesses much greater bargaining power than the typical employee who negotiates an employment contract.  If he doesn’t get the terms he wants from Alabama, there are plenty of other schools that would practically do anything to secure his services. Nevertheless, there are at least three lessons from Coach Saban’s contract that employers can apply to their employees.

1.  Clearly Define Job Duties.  Section 2.02 of the contract sets out Coach Saban’s job duties and responsibilities.  That section is almost three pages long.  Most employers won’t need three pages to describe the duties of a position.  But,  a clear statement of job duties is important because it ensures that both parties know the expectations associated with the position.  Moreover, a clear statement of duties can help if litigation later becomes necessary over whether the employee adequately met his or her responsibilities.
2. Protect Your Business Information.  Nick Saban’s contract has numerous provisions which protect the University of Alabama’s business.  Section 4.04(g) protects materials and works created by the University. Section 4.05(c) protects the University’s trademarks; and, Section 5.01(k) contains a broad confidentiality provision.  Private employers should also carefully consider the nature of the information that will be provided to employees.  If your employee takes that information when they leave, could they use it against you?  If so, you will want to include provisions in the contract to protect your business both during and after an employee’s tenure.
3. Include a Termination Provision.  Section 5.01 of the contract contains extensive grounds for termination and provisions which apply depending on whether the termination is with, or without, cause.  Most employers don’t need to implement such extensive procedures, but all employment contracts should include a termination provision.  This is where bargaining power can really come into play.  If the employee is filling a position that is easily replaceable, the employer might utilize a very strict “without cause” termination provision.  But, if the employer really needs the employee, the employee might be able to negotiate more favorable terms.

We can’t all coach national championship teams, or receive a huge “talent fee,” like Nick Saban.  But, Alabama employers can use some of the strategies from his employment contract when dealing with their own employees.

 

An employer’s response to an EEOC charge of discrimination can dramatically impact future litigation.  One Alabama employer learned that lesson the hard way in Equal Employment Opportunity Commission v. Outokumpu Stainless, USA, LLC, No. 15-0473-WS-N, 2016 WL 4708484 (S.D. Ala. Sept. 8, 2016).

In Outokumpu, 21 employees applied for 6 available promotions to “Team Leader.”  5 of the applicants were African-American and the remainder were white.  All six of the successful applicants were white.  The 5 unsuccessful African-American applicants sued with the assistance of the EEOC.

The employer used a “grading” system (“A” to “C”) to judge the merits of each applicant.  8 applicants received an “A” rating:  the 6 successful white applicants and 2 of the African-American plaintiffs.

It appears that the employer relied upon its Human Resources Manager to respond to the employees’ EEOC charge.  One of the African-American applicants who received an “A” grade was Wallace Dubose.  The trial court found that Outokumpu’s reasons for refusing to promote Dubose changed from the time of the EEOC charge to the time of litigation:

Because his case sets the stage for the other plaintiffs, the Court looks first to Dubose. As noted, Dubose received an “A” rating, which placed him in the top eight candidates. As also noted, the defendant in this litigation has identified four problems with Dubose that prevented him from being in the top six: poor self-control, lack of initiative, unreliability and bad work attitude. However, and as the EEOC notes, (Doc. 87 at 38), this is not the list the defendant provided in its response to Dubose’s charge of discrimination. Instead, the defendant (through Wells) told the EEOC that Dubose was not promoted “based on [his] lack of exhibited leadership and initiative within his team.” (Doc. 86-22 at 5, 6). That is, of the four reasons the defendant now gives for not promoting Dubose, only one was asserted in the administrative proceedings, and one reason given in the administrative proceedings has vanished in this litigation. In consequence, the defendant’s current position on why it did not promote Dubose bears little resemblance to that it presented to the EEOC.

Outokumpu, 2016 WL 4708484 at *5 (emphasis added).  The court found that changing reasons between the EEOC charge and the litigation were evidence that the employer possessed a discriminatory motive.  Moreover, the extensive nature of the response to the EEOC charge was indicative that the newfound litigation position was merely made-up:

The inference of pretext is only strengthened when, as here, the defendant’s response to the charge of discrimination is a lengthy, finely crafted work that appears to be the product of much time and deliberation, making it unlikely that ¾ of the employer’s true reasons for not promoting Dubose were accidentally omitted. And strengthened further when the author of the response is, as here, one of the decision-makers, who could not easily fail to be aware of the reasons for the employment decision.

Outokumpu, 2016 WL 4708484 at * 5.

So, the trial court found evidence of discrimination with regard to Wallace Dubose.  The court then allowed the other African-American applicants to proceed to trial on a “me too” theory of discrimination.  “[A] properly functioning jury could find that the defendant discriminated against Dubose based on his race. From such a finding, a properly functioning jury could infer that the defendant likewise discriminated against all black applicants for Team Leader based on their race; indeed, it seems unlikely that the defendant would discriminate against Dubose based on his race while simultaneously ignoring the race of the other plaintiffs.”  Id. at *6.

The lesson for employers from the Outokumpu case is the critical importance of the response to the EEOC charge.   I am frequently asked to assist employers in responding to EEOC charges, and I strongly recommend that you utilize your attorney if you receive a charge of discrimination.  In virtually every case, the facts that are initially provided to me by a client are more complex than they initially appear.  As a result, I usually keep my clients’ responses to EEOC charges as brief and as broad as possible.  If a law suit is filed later, we can expound upon those facts.  But, in Outokumpu, the Human Resources Manager provided an extensive response, and the court found that any deviation from that extensive response was evidence of discrimination.