Supreme Court Report

Court Takes Cases Out of the Office

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Decisions about employees–whom to hire or fire, to promote or not tend to be group affairs. A supervisor may manage a few workers. An office manager or site manager may, in turn, oversee those lower level supervisors. In most companies and agencies, the human resources department oversees the process of hiring and firing employees. And at the top of the pyramid, the ultimate supervisor can decide or at least sign off on the decision to hire or fire someone.

So what happens if a fired employee says he was the victim of racial bias by one of the lower level supervisors? That question comes before the U.S. Supreme Court on April 18 in BCI Coca Cola Bottling Co. of Los Angeles v. Equal Employment Opportu­nity Commission, No. 06 341, a case that could have a broad impact on employers and how they handle serious discipline problems.

Nashville, Tenn., lawyer Todd Presnell, who represents the employer, says the decision in this case “will have a tremendous impact on the scope of employer liability. It is particularly important for large employers who have a centralized process for their employment decisions.”

Lower Level Culpability

Presnell, whose client is not the internationally famous soft drink company based in Atlanta but a regional bottling company independent of Coca Cola, says his defense relies heavily on the fact – apparently undisputed – that the human resources manager who fired Stephen Peters did not know he was black.

But EEOC lawyers who represent Peters say there is ample evidence that racial bias played an important role in the decision to fire him. For six years, Peters worked as a merchandiser in Albuquerque; his duties involved working with grocery stores and other retail outlets to make sure the BCI products were available and on display. The majority of 200 employees in the region were Hispanic. Only 2 percent were black.

Since retail stores are open seven days a week, the company needs some employees to work on weekends. On a Friday in late September 2001, Cesar Grado, the regional manager, told Peters via Peters’ supervisor that he must work on Sunday. “I can’t do it. I have other plans,” Peters was reported to have replied. He also said he might call in sick. Frustrated, Grado, who is Hispanic, called Pat Edgar, the company’s human resources manager who was 450 miles away in Phoenix. She said it was “unacceptable” and insubordinate for an employee such as Peters to refuse an order to work on Sunday. Afterward, Grado and Peters had an angry phone exchange in which Grado warned that not coming to work as ordered “could lead to termination.”

But, in fact, Peters was sick. He went to an urgent care clinic and was diagnosed with a sinus infection. He phoned his direct supervisor, Jeff Katt, to let him know he would not be back until Monday. The supervisor said he “didn’t have any problem with that.” Katt paged Grado to inform him of the new information but was unable to reach him over the weekend.

By Monday, however, Edgar and Grado were moving forward to fire Peters. A human resources officer working for Edgar checked the personnel file and found that Peters had been disciplined two years earlier for refusing to work on a weekend. By Monday evening, Edgar decided to fire Peters, and she and Grado told him on Tuesday that he was terminated for “insubordination” for failing to work on Sunday.

Only then did both of them learn Peters had called in sick to his supervisor, Katt, and been given the clearance to stay home. And only then did human resources officers learn that Peters was black.

When he sued, alleging a violation of Title VII of the Civil Rights Act, Edgar filed a reply saying “race played no part whatsoever in my decision to terminate the employment of Stephen Peters.” But the EEOC obtained sworn statements from several employees contending that Grado made racially charged jokes and treated black employees worse than others. One low level supervisor pointed out that when a Hispanic female was told to work the weekend, she said she was planning to celebrate her birthday instead. “You can’t make somebody work one of their days off,” Grado reportedly replied, casually dismissing the same conduct that led to the firing of Peters.

Nonetheless, a federal judge ruled for the employer, concluding that Peters was fired for insubordination and that Edgar, who made the decision, did not act out of discriminatory motive.

But the Denver based 10th U.S. Circuit Court of Ap­peals, in an opinion by Judge Michael McConnell, revived the suit, saying employers may be “held accountable for the actions of biased subordinates.” A jury could conclude that Grado’s report to Edgar was “tainted with racial discrimination,” he wrote. McConnell, recently appointed by President Bush, also criticized Edgar for having failed to conduct an independent investigation, including asking Peters for his version of the events.

The Supreme Court took up the case because judges have been split on how to handle such disputes. Some have shielded employers from “subordinate bias” claims by ruling that only the motives of the decision maker count. Others have opened a wide door to such claims by saying the “influence” of any illegal bias among subordinates is enough to win a claim.

University of Washington law professor Eric Schnapper says he hopes the court does not allow employers to immunize themselves by showing the top supervisor was not biased. “Typically, the person at the top is not the source of the problem,” says Schnapper, who has represented plaintiffs in employment discrimination suits. “But there are many ways that a low level supervisor can inject race and gender into the process and start the ball rolling toward a decision to fire someone.”

Health Care Affordability at Risk?

Meanwhile, the court on April 16 will look to decide the employment status of hundreds of thousands of workers in the fast growing industry of home health care. Long Island Care at Home v. Coke, No. 06 593.

The outcome could affect the wages of some of the nation’s most poorly paid employees. However, some city officials warn that a ruling in favor of these workers could make home health care unaffordable for the elderly and infirm.

The 1938 Fair Labor Standards Act requires that employers pay a minimum wage and overtime pay for those who work more than 40 hours a week. In 1974, Congress brought “domestic service” employees under the protection of the law, but it exempted those who provide “companionship services” to the old and sick. Lawmakers did not want to extend the overtime rules to people who were hired to sit at home and at night with those who could not care for themselves.

But most home care workers now are not hired directly by elderly or sick people. They are instead employees of home care businesses, which in turn assign them to care for clients in their home. Many are paid through contracts with Medicaid, with states and cities sharing the cost with the federal government.

Since 1975, the Labor De­partment has maintained through regulations that all employees providing companionship services are exempt from the minimum wage and overtime rules. But the New York City based 2nd U.S. Circuit Court of Appeals rejected those regulations and held that employees of home ­care companies were to be treated as domestic service employees. As such, they were entitled to minimum wages and overtime pay. The decision was a victory for Evelyn Coke, formerly a health care aide who worked for a New York based company.

“This is really about overtime, not minimum wages,” says William Dombi of the Center for Health Care Law in Washington, D.C., who filed an amicus brief on behalf of the home care industry. “We agree that these home care aides don’t always get the benefits and the respect they deserve, but these are businesses that can’t easily raise prices. The vast majority of it is funded by Medicaid or Medicare.”

New York City officials told the court that requiring overtime pay could increase its costs by as much as $280 million a year and force a cutback in services to the poor and elderly. But lawyers for Coke noted that at least 10 states have their own minimum wage and overtime rules for these employees. “It simply cannot be the case,” they say, “that employers in Illinois, Colorado and elsewhere can pay companions a minimum wage and premium pay for overtime while in New York respecting such minimum standards threatens a serious dislocation of care.”


On the Docket

Employment Law

BCI Coca Cola Bottling Co. of Los Angeles v. EEOC

Does a company discriminate when an employee fires a worker without knowing the worker is a minority?

Long Island Care at Home v. Coke

Is a regulation that governs wages and overtime pay for home care workers valid?

David G. Savage covers the U.S. Supreme Court for the Los Angeles Times and writes regularly for the ABA Journal.

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