EPLI Coverage is Governed by Definition

Although it’s probably only a matter of time, there are still not many EPLI coverage questions that have been decided. In fact, I can only remember one prior case that I have commented on, see Check Your EPLI Policy – When Coverage For Discrimination Doesn’t Mean The Most Common Type of Discrimination Claim.

And I would not have caught the latest one, Valley Imaging Partnership Medical Group LP v. RLI Ins. Co. (9th Cir. 3/5/08) [pdf] an unpublished decision, if it hadn’t been for the ever vigilant work of the folks at Alaska Employment Law.

There’s not a clear explanation of the underlying situation in the appellate decision. However, from the district court summary judgment opinion ($ Pacer) it appears that VIP was a doctor’s practice which performed imaging services for a hospital. The underlying suit for which the EPLI carrier was contesting coverage was a sexual harassment suit against VIP brought by Hernandez.

Hernandez was a registration clerk at a VIP office which was on the campus of the hospital. Pursuant to a Service Agreement between VIP and the hospital, she was actually paid by the hospital, but reported to VIP personnel and VIP reimbursed the hospital for her wages plus 26% (apparently to cover benefits).

VIP bought the EPLI policy, which defined employee as “any person who receives wages or a salary from the Entity (defined as VIP) for work that is directed and controlled by the Entity…”

Unfortunately VIP, which I am sure intended and thought it had EPLI insurance, learned the important lesson that the definitions in a policy are critical. Here the above definition, didn’t fit the actual situation since the registration clerk “received [her] wages or salary” from the hospital, not VIP, the Entity.

As the 9th Circuit wrote:

That VIP reimbursed [the hospital] does not change that fact that [the hospital] was the entity paying Hernandez’s salary and that, therefore, Hernandez was not a VIP employee as defined by the insurance contract.

Bottom line, no coverage. But the lesson is clear — make sure you have read the policy carefully to ensure that it covers your particular situation.

A Judicial Rarity – Circuit Court Decision on Collective Action

Since FLSA collective actions have been taking an inordinate share of my time recently, I am keenly aware that there is a scarcity of appellate decisions dealing with many of the interesting issues that can arise in these cases. Part of the problem is the nature of the cases.

Since every court that I am aware of that has ruled on the question has held the interlocutory certification of a class for notice purposes is not appealable, and a high percentage of cases in which the court conditionally certifies the case and permits notice settle before trial, there are very few chances for appellate review.

The downside of course is that means very little opportunity for the appellate courts to provide direction on key issues in what is one of the most burgeoning and certainly one of the more burdensome types of litigation.

Last week’s decision in M. H. Fox v. Tyson Foods, Inc. (11th Cir. 3/12/08) [pdf] was a procedural odd ball. Plaintiffs who had filed consents to join a donning and doffing collective action were dismissed when the Court refused to certify the collective action. Undaunted, they then sought to intervene. The district court denied the intervention and they appealed.

Although much of the opinion has to do with intervention (short answer, not an abuse of discretion to deny it), the Court also needed to address an issue that has more general implications to these cases — whether Tyson had a company wide policy about compensation for donning and doffing.

Unfortunately because of the unique procedural status, there were some things the Court specifically did not address, whether: the collective action order ignored the continuous workday rule, whether the plaintiffs should not have been required to prove individual claims with precision, and whether a single plan is not a prerequisite for a collective action. Guidance on those issues, particularly the last one would be helpful.

On the issue it did address however, was there a company wide policy, the Court upheld the lower court’s determination that there was not one. First the Court found that the evidence of how the time was treated varied among the plants:

Alison Maria Hayes, a group leader at the Wilkesboro, North Carolina, plant, for example, testified that “team members on the line get a few extra paid minutes each day” for donning and doffing. Theresa Grigsby, a supervisor at the Vicksburg, Mississippi, plant, testified that team members at her plant receive five minutes of paid time during breaks to account for time spent changing clothes and washing. Earnesto Felipe Ford, a supervisor at the Cleveland plant, testified that he allowed “team members [an] extra five to eight minutes each morning for dressing time.”

The manner in which the time was recorded also differed:

In some departments and on some production lines, all employees report to their workstations at the same time and leave their workstations at the end of mastercard time. Other departments or lines employ a staggered system in which team members arrive and leave at different times. This practice allows some employees to leave before the mastercard is punched, while others do not leave until the mastercard is punched. Director of Labor Relations Tim McCoy testified, “Tyson uses several different methods to ensure that employees are properly paid for all the time they work. The method used depends upon the plant, department, position, and shift.”

Those two areas of difference alone were enough to support the lower court’s decision that this was not suitable for a collective action.

Although it could reflect just the particular facts of this case and the courts involved, it could also be a signal that courts themselves are becoming weary of these large unwieldy cases. If that is in fact the case, it would be a welcome sign.

But I Didn’t Stay a Word — Case Still Dismissed

Now that major filings in two FLSA collective actions were made on successive Fridays, and SXSW has finally rolled out of town, maybe posting can return on a semi-regular basis.

And what better place to start with a reminder of why this job is never dull.

In an administrative proceeding under the whistle-blower provision of the Energy Reorganization Act, James F. Newport was appearing pro se. On a March 1, 2006 conference call, in response to complaints by counsel representing the respondent, the Administrative Law Judge “learned that Newport had threatened witnesses and counsel. He ordered Newport, who was pro se, not to threaten anyone again, and Newport agreed to refrain from doing so.”

Three weeks later at the hearing, on the third day of testimony:

Newport encountered Manny Misas, an FPL employee and witness at the hearing, in a hallway of the courthouse. The ALJ was told that Newport gestured toward Misas by drawing his finger across his own throat as if slashing Misas’s throat.

And Newport conceded that he did, but that the gesture was misunderstood.

Following a renewed motion for sanction after the close of the hearing, the ALJ dismissed Newport’s claim, finding it a direct violation of his order and an “exemplary basis for the sanction of dismissal. “

In Newport v. Florida Power & Light Co., ARB No. 06-110, ALJ No. 2005-ERA-24 (ARB Feb. 29, 2008), the Administrative Review Board agreed.

For those of us who have dealt with pro se plaintiffs over the years, Newport’s other grounds for challenge to the dismissal at the ARB will sound all too familiar. He was “was denied due process, prejudiced by the unethical conduct of opposing counsel, and denied his right to free speech.”

And while the result is also familiar, dismissal affirmed, there is no getting around the problems (and expense) that can be caused when a plaintiff either chooses or can not find counsel to represent them.

Of course, not all pro se representations turn out so bad, just look at today’s headline: Mills Awarded $48.6M From McCartney.

Update: Just to prove the point no sooner than I had posted, I read this from a pro se plaintiff’s complaint against a law firm that he alleged conspired with his former employer in keeping him from filing a discrimination claim. According to him:

Defendants abused their position of attorneys and held back the agreed-upon settlement to coerce plaintiff to sign the agreement, causing plaintiff to defraud his own self. Plaintiff signed the agreement and returned it, as this proves that the fraud reached its full fruition or justifiable reliance, damaging plaintiff even further.

See Morgan Lewis Faces Fraud Claim in Employment Case in today’s 360 Employment Law ($). Yep, yet another get him to “defraud his own self” case!

Supreme Court in a Deferential Mood in Employment Law Decisions

Yesterday, the Supreme Court gave deference to a trial judge’s decision on an evidentiary ruling, see “Me Too Evidence” – A Do Over“; today it’s the EEOC’s turn as the Court finds that the Commission’s decision to treat an unsworn intake questionnaire combined with an affidavit as a “charge” is within their discretion. Federal Express Corp. v. Holowecki (S.Ct 2/27/08) [pdf].

It did take quite a bit more explanation, a suggestion to the EEOC that it could do better, and lost two justices along the way. Justice Thomas dissented and was joined by Justice Scalia. Hopefully there wasn’t anything in Justice Thomas background as the former head of the EEOC that made him feel as if the agency was not deserving of deference.

To the extent that any hope remained that an employer could argue it was protected against a lawsuit because the EEOC failed to give it notice, it was extinguished. Here, the company only learned about the charge when a suit was filed, a fact Justice Kennedy described as “unfortunate” but obviously not irreparable.

Although this opinion could have some significance, I again don’t see it as a “sea change,*” to use a term recently in play in the current presidential contest, but I suppose time will tell.

*Since the phrase is almost always improperly used and is greatly over-used, it has suffered a swamp change into something dull and tiresome. Avoid the phrase; otherwise you will irritate those who know it and puzzle those who do not.