Tag Archives: 5th Circuit

5th Circuit: Arbitration Agreement Unenforceable Because Employer Reserved Right to Modify It

Posted on
Reply

Several companies have mandatory arbitration programs, pursuant to which every employee must sign an agreement promising to submit every possible claim they might want to assert against the company to mandatory and binding arbitration. Much ink has been spilled in various court decisions concerning the circumstances pursuant to which these these types of agreements are enforceable.

But though the law on this issue can vary significantly from state to state, there is at least one universal principle that, one would think, should be pretty obvious: it must be an agreement.  A real, honest-to-goodness contract.

Which brings us to the Fifth Circuit’s new opinion in Carey v. 24 Hour Fitness USA, Inc.  Apparently, someone at 24 Hour Fitness thought that parachuting a mandatory arbitration “clause” in their handbook (but only the handbook) was a good idea, and that trying to enforce it against some employee who had the nerve to show up in court was an even better idea. The problem is that 24 Hour Fitness’s handbook – like most handbooks – had a disclaimer which emphasized that the handbook isn’t an “agreement” at all, and that the company is always free to change it:

I acknowledge that, except for the at-will employment, [the Company] has the right to revise, delete, and add to the employee handbook. Any such revisions to the handbook will be communicated through official written notices approved by the President and CEO …

Every first year law student knows that you can’t have a true contract if one of the parties isn’t really agreeing to anything–that’s called an “illusory” bargain. And that was the problem with this “agreement.”  24 Hour Fitness was trying to reserve for itself the right to monkey with the handbook (including the arbitration clause), even on a retroactive basis, while at the same time pointing to the arbitration clause as a binding, enforceable “contract.”

The Fifth Circuit was having none of it:

the fundamental concern … is the unfairness of a situation where two parties enter into an agreement that ostensibly binds them both, but where one party can escape its obligations under the agreement by modifying it. Requiring notice alone does not fully address this concern: … this [notice of modification] could still arguably allow [the company] to avoid its promise to arbitrate as to claims that were already in progress, unless there were some provision preventing changes from applying to in-progress disputes.

The Fifth Circuit did note a Texas Supreme Court case from 2002 (In re Halliburton Co., 80 S.W.3d 566 (Tex. 2002)), where that Court had enforced an arbitration agreement which also allowed the company to modify the deal–but that other arbitration agreement contained a “savings clause” which essentially allowed only prospective changes to the agreement, and banned the company from changing the rules concerning claims that had already matured or had been asserted by the time of the change. No such savings clause was present in this case.  Whoops.

Image: savit keawtavee / FreeDigitalPhotos.net

5th Circuit Revives Title VII Same-Sex Harassment Claim

Posted on
Reply

All Title VII sexual harassment claimants must prove (among other things) that the alleged harassment was done “because of” their sex, regardless of the genders of the various people involved. The Supreme Court told us that in Oncale v. Sundowner Offshore Services, Inc., 523 U.S. 75, 81 (1998).

But if the harasser is the same gender of the victim, how do you tell if the harassment was done “because of sex” — as opposed to some other reason (e.g., the harasser is just being a jerk). The Fifth Circuit, in its new opinion in Cherry v. Shaw Coastal, Inc., has set forth a handy test:

if a plaintiff presents evidence that he was harassed by a member of the same sex, and that the harassment was sexual rather than merely humiliating in nature, that evidence is sufficient to support a verdict in the plaintiff’s favor.

Seems simple enough.  In the Cherry case, the Fifth Circuit held that an explicit text message containing a sexual proposition, an invitation to stay overnight at the harasser’s house “and wear his underwear,” and the fact that the harasser “repeatedly physically touched and caressed Cherry’s body,” was way over on the “sexual” side of that balance (ya think???)

Cherry presented more than sufficient evidence to support the conclusion that Reasoner’s harassment was sexual in nature. The text message “I want c—” could be taken as an explicit sexual proposition, as could Reasoner’s invitation to Cherry to stay at his house and wear his underwear. Reasoner repeatedly physically touched and caressed Cherry’s body, which was apparently offensive enough that Thornton, having witnessed the behavior, felt compelled to complain to their supervisor. [Ed. note - expletive censored]

The court also held that this alleged harassment was pervasive enough to justify the claim and that there was sufficient evidence for the jury to conclude that the company didn’t take prompt and appropriate corrective action after learning what was going on.

Image: graur razvan ionut, freedigitalphotos.net

5th Circuit Resolves Statutory Whistleblower Claim in Federal Credit Union Act

Posted on
Ever heard of the Federal Credit Union Act? Did you know that it contains a provision protecting whistleblowers from retaliation?
Image: Robert Cochrane / FreeDigitalPhotos.net
Well, step back and take a gander at 12 U.S.C. § 1790b(a)(1):
No insured credit union may discharge or otherwise discriminate against any employee with respect to compensation, terms, conditions, or privileges of employment because the employee (or any person acting pursuant to the request of the employee) provided information to the [National Credit Union Administration] Board or the Attorney General regarding any possible violation of any law or regulation by the credit union or any director, officer, or employee of the credit union.
Courtesy of subdivision (b) and (c), victims get a private right of action, a 2-year statute of limitations, and – if they win – reinstatement, back pay, and “other appropriate actions to remedy any past discrimination.”  nice work if you can get it.
Which brings us to the Fifth Circuit’s new opinion in Schroeder v. Greater New Orleans Federal Credit Union., in which that court, for the first time, tackled the requirements for bringing claim made under this statute.
Mrs. Schroeder worked for a credit union, and began complaining that the credit union was engaging in fraud with respect to its lending practices. She was soon thereafter demoted, after which her complaints became more vocal.  She was eventually fired, ostensibly for performance reasons – and at about the same time she was fired, she (finally) sent a complaint to the National Credit Union Administration (NCUA) and to the FBI.  She sued the credit union, and one of the claims she made was a retaliation claim under the credit union whistleblower statute.
The Fifth Circuit held that claims under this statute would be analyzed as if they were Title VII retaliation claims – meaning that, in the absent of direct proof of retaliation, the whistleblower must prove that she engaged in protected conduct under the law, she experienced some adverse action, and that there was a causal connection between those two events. And, presuming that the credit union offers up a legitimate reason for what happened, the whistleblower must shoot down that legitimate reason and show it to be a contrivance designed to mask retaliation. Seems simple enough.
The fight in this case was over “protected activity.” Mrs. Schroeder insisted that  her internal complaints constituted protected activity under this statute, and that as a result, she should be able to sue for retaliation based on the demotion that happened after her initial internal complaints. Trouble is, the statute seems pretty clear that, to obtain protection, you have to complain “to the [National Credit Union Administration] Board or the Attorney General.”  The Fifth Circuit held that this language means what it says:
The statute narrowly prohibits retaliation based on the report of a possible legal violation to either the NCUA Board or the U.S. Attorney General. … Schroeder’s internal complaints are not relevant to this § 1790b appeal. The statutory text leaves us no ambiguity to resolve in this appeal.
Thus, the Fifth Circuit agreed with the lower court that Mrs. Schroeder’s retaliation claim based upon her demotion was without merit, and should be dismissed.
Different story, however, concerning Mrs. Schroeder’s separate claim that her discharge was retaliatory. By the time Mrs. Schroeder had gotten fired, she had managed to complain directly to the NCUA – a complaint that clearly was protected by the statute. Thus, the Fifth Circuit held that it was possible for a jury to find that latter decision to be retaliatory, and vacated the District Court’s decision to throw out the claim.