Stirrings on Smith v. Xerox in 5th Circuit Internecine Squabble

More than two years ago, I expressed my hopes that the 5th Circuit would undertake an en banc review of the panel decision in Smith v. Xerox, a decision that answered whether a mixed motive was available in a retaliation claim after the Supreme Court's Gross decision. See 5th Circuit En Banc Request on Smith v. Xerox, Please!   Alas, it was not to be as the case settled before there was any further review.

But this week, in another request for en banc review, a relatively rare dissent to the denial of a petition for such review proved that there are at least some judges on the Court who feel that the case was wrongly decided and wish to have the entire court revisit it.  Although in Nassar v. University of Texas Southwestern Medical Center (5th Cir. 7.20.12), the Court by a vote of 6 to 9 voted not to hear the case en banc, it seems possible that it was because the defendant in that case may have waived the argument. Much of the discussion was about that issue and why panel did not directly address it. At least one member of the panel, Judge Elrod, specifically said that was her basis in an unusual concurring opinion to the denial.

But it is Judge Smith's dissent to the denial of the en banc review that really caught my attention. Joined by Chief Judge Jones and Judges Jolly and Clement, Judge Smith wrote:

The panel decision in Smith should be overruled. It is an erroneous interpretation of the statute and controlling caselaw and created an unnecessary circuit split. The problems wrought by the Smith panel majority are convincingly explained in Judge Jolly’s panel dissent, to which I defer. See Smith v. Xerox Corp., 602 F.3d 320, 336-40 (5th Cir. 2010) (Jolly, J., dissenting). Unfortunately, shortly after the panel issued its majority opinion and dissent, and before a petition for en banc rehearing was filed, the parties settled. That mooted the case and deprived the en banc court of the chance to correct the error in the panel’s misapplication of Gross v. FBL Financial Services, Inc., 557 U.S. 167 (2009).

If nothing else, it would be good to see the en banc court have a case to consider where waiver was not an issue, so we could get a determination whether or not Smith really is good law, as opposed to just being the current controlling law in the 5th Circuit.

A Decade in the Making - Jottings By an Employer's Lawyer

It is unlikely when I put down some thoughts about the EEOC's failure to use certified mail in sending out right to sue letters (For lack of a green card .... ), 10 years ago today that I gave any thought as to whether I would still be (at least occasionally) making such public comments a decade later.

But I am.

There were some other practice specific blogs when I began, but to my knowledge Jottings was the first that focused on labor and employment law. Two other pioneers,  Michael Fitzgibbons and George Lenard joined shortly after.  Now, to use some computer industry jargon, there are a large number of individuals and groups who occupy this space.

In the initial days, I must admit I enjoyed the thrill of being the first to post about a new decision or other development. Oddly enough, I even felt some sort of responsibility (for what was probably my readership of less than a dozen) to provide the information as carefully as possible.

Although the title of the blog denotes the perch from where I observe the world of work, I have tried to at least make sure that I took into account that on almost any topic I might post about, there is a different perspective, that deserved if nothing else my serious consideration and treating it (and those who hold it) with respect.

For those who might consider embarking on a similar adventure, and view it primarily as business development tool, you would be hard pressed to utilize me as an example of how well that works. On a cost benefit analysis, if I had put as much time into other forms of business development as I have spent on the blog, I would probably have developed more business.

But more importantly, I think writing the blog has contributed to keeping me abreast of the developments that have occurred over the past decade, and made me a better lawyer, one who happens to represent employers.

And in a world where the legal profession too often seems to me more about business and less about lawyering, I remain comfortable with the choice I have made.

Obamacare Decision: The Perils of Instant Analysis and Related Thoughts

I have not and will probably not read today's Supreme Court decision holding that the Affordable Care Act is (for the most part) constitutional any time soon.

But I did have a couple of thoughts on what has happened so far.

First, my first notice of the results came from a CNN email at 9:09 a.m. (CDST)

The Supreme Court has struck down the individual mandate for health care - the legislation that requires all to have health insurance.

Nine minutes later, I received the following from CNN:

Correction: The Supreme Court backs all parts of President Obama’s signature health care law, including the individual mandate that requires all to have health insurance.

And just to be fair, at 10:04, CNN seems to have finally gotten the basic result down:

Chief Justice John Roberts led the Supreme Court’s 5-4 decision upholding President Obama’s sweeping health care law.

The president is expected to speak later today on the ruling that supports the core legislative accomplishment of his administration.

The court decided that the individual mandate that requires all Americans to have health insurance will stand and is considered a tax by the court, making it constitutional.

Chief Justice John Roberts wrote about the individual mandate, citing the taxing clause: “It is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without insurance. Such legislation is within Congress’ power to tax."

The court also ruled that the federal government may not remove Medicaid funding from states that refuse to take part.

Voting to uphold the Affordable Care Act were R oberts and Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan. The dissenters were Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito.

Now besides a little temporary embarrasment on the part of CNN, which I would imagine is already gone, the errors they made in their initial reporting matters not.  My guess as to what happened, is they wanted to be first, they read the opinion and saw that the Administration had lost on the Commerce Clause issue and assumed that meant the mandate had fallen. When they figured out that the Administration had prevailed under the taxing clause on the mandate, they rushed to correct that, and mis-stepped again because they had not made it to the part where the Court held Congress over-reached in its putting conditions on states for the receipt of Medicaid funding.

But this brief interplay, reminded me once again that the speed with which our world now operates often times does a great disservice to the quality of advice that is given.  When we operate at hyper speed, the time for reflection and discernment is often a casualty. It didn't really matter here, but when giving advice as lawyers do every day, operating at that speed can easily cause serious error.

Secondly, although we are all told on appeal to limit our number of arguments and focus on our strong ones, today's decision points out the importance of having a Plan B. While everyone focused on the commerce clause and the hope that Justice Kennedy would be the 5th vote to support its use, who ever insisted that the fall back position of the taxing clause be there, should be getting large pats on the back by the supporters of the bill.

Having recently won an appeal (at least so far) where there were 3 separate opinions, and the two judges who voted in the favor of our position did so for different reasons, I personally know how important that Plan B can be.

On the political note there has been and will be even more analysis of how this impacts the Presidential race. Although President Obama is no doubt happy with today's outcome (except for the Medicaid portion) I doubt that much thought had been given to how it would be to run when the healthcare law was supported only because it was a "tax." Justice Roberts may have given President Obama a substantive victory, but my guess is that he at least gave Romney and the Republicans a rhetorical boost.

Two Sacred Cows - Performance Appraisals and Job Descriptions - Time for the Scrap Heap?

I don't always appreciate non-trial lawyers telling me how to try a case (although I try to listen, because often I can learn something that is helpful), and so I am also leary of getting too far into the realm of HR advice.

But I have long been a skeptic on both annual performance reviews and job descriptions. In defending employers over the last 35 years, I would say I have seen both types of documents end up as Plaintiff's Exhibits, not Defendant's exhibits more often than not.  Since the employer is in control of both, even if it were 50/50, that's a pretty poor ratio.

The problem is that for the most part they are either rushed through as after thoughts (performance reviews) or done in a vacuum and put on a shelf (job descriptions).

About job descriptions I have often said if they are accurate and up to date then they are good; unfortunately that does not describe very many job descriptions I have seen. That basic premise holds true for performance appraisals as well.

It's one thing for lawyers who see these documents through the admittedly cloudy filter of litigation to make those kind of comments, but it seems those who actually do specialize in HR advice are having some of the same thoughts.

Today's comment was sparked by the recent Harvard Business Review posting by Eric Mosley, Crowdsource Your Performance Reviews, which was inspired by a study of HR leaders where 45% said they "did not think that annual performance reviews are an accurate appraisal for employee's work." 

So to HR professionals, just a thought from the cheap seats, have an open mind about whether these rituals of HR are still worthwhile as they are, or even at all.

Jury Duty, An Obligation Sure, But Also a Large Reward

I just happened on this post today by Adam Rich, talking about his 5 Lessons From Jury Duty that was posted on an American Express Forum for small businesses. I think his points are valid, although frankly, my role is more as a consumer of juries than as a participant.

So perhaps it is a little stretch for me to claim how large a reward jury service can be, but from jurors I have talked with or heard talk about their experiences, even those who thought a case was silly or a waste of time, have never the less come away with a renewed respect for the judicial process.

We are all binded by our own biases, but from my seat in trial representing employers, I am always amazed at how it is the individuals we would typically identify as those most likely to share the employer's perspective who are the least able to serve because they are too busy (an excuse that never works by the way) or because they just can't set aside their long held beliefs about the frivolousness of laws suits or whatever and listen to the evidence and be fair and impartial.

Call me cynical, but I am inclined to think that much more often they have figured the "out" than that they are any less able to be open minded jurors than all the other folks who seem to be able to put aside their past experiences and be fair.

Which if you are an employer type, you might think about when you hear that time honored phrase in reference to your particular law suit being tried by a "jury of your peers. " What that often means is a jury panel where all those who will at least understand the context in which the decisions you are defending were made, are the most likely to be gone well before the time that peremptory strikes are made.

Texas Supreme Court Advisory on Attorneys' Fees in TCHRA Cases

A short message to plaintiff's attorneys in TCHRA cases from the Supreme Court: join your defense brethren in "measuring out your life with coffee spoons," i.e. keeping contemporaneous time records of what you do.

Actually Justice Medina's opinion did not reference T. S. Eliot's The Love Song of J. Alfred Prufrock, that was my literary spin, but the message from today's decision El Apple I, LTD. v. Olivas (TX 6.22.12) makes just that point.

Thus, when there is an expectation that the lodestar method will be used to calculate fees, attorneys should document their time much as they would for their own clients, that is, contemporaneous billing records or other documentation recorded reasonably close to the time when the work is performed.

The Court also cast a doubtful eye on the lower court's doubling of the lodestar amount. Although the majority found that because in this case there was no appropriate lodestar, it was too soon to address the validity of the doubling, it gave a general standard to be applied:

We accordingly accept the premise that [a] lodestar presumptively produces a reasonable fee,

but that exceptional circumstances may justify enhancements to the base lodestar. 

But by noting that while state courts are not bound by federal standards, that they "may appropriately consider them," it seems clear that the Court was signaling that such adjustments should be rare.

All of this came about because an award of just over $100,000 to the plaintiff had resulted in an attorneys fees award of $464,000 for the trial of the case with another $99,000 for defending post-judgement motions and appeals.

Function Over Form: The Supreme Court's Realistic View of the FLSA

For those who think that one of the travesties of the recent history of employment law has been the explosion of FLSA collective action litigation, today's 5-4 decision by the Supreme Court holding that pharmaceutical representatives are in fact exempt employees under the outside sales exemption is a re-affirmation that common sense can in fact prevail.  Christopher v. SmithklineBeacham Corp. (6/18/12).

Although a critical decision for the pharmaceutical industry in its own right, the case has generally been viewed more importantly for its insight as to the weight the Supreme Court would give to agency views of the laws they enforce. Here the DOL had weighed in as amicus in a series of law suits arguing that the pharmaceutical sales reps were not exempt, although the DOL had given differing views as to why that was so.

The majority opinion begins with Justice Alito's description of why the DOL's position is not entitled to deference. Perhaps more significantly, the dissent written by Justice Breyer, the member of the court with the most claim to administrative law expertise, agrees. In fact, on this key point, it would be fair to say that this is a 9-0 decision. Justice Breyer writes:

In light of important, near-contemporaneous differences in the Justice Department’s views as to the meaning of relevant Labor Department regulations, I also agree that we should not give the Solicitor General’s current interpretive view any especially favorable weight.

Although casting the blame on the Department of Justice, not the Department of Labor, it is clearly a rebuke to the DOL.

Having jointly rejected the DOL's view, the two wings of the Court still reach a different outcome on their own independent review of the exemption.

The problem is that we have a 1938 statute designed for a very simple economic model which existed at the time was adopted.  The FLSA was designed for an even pre-Leave it to Beaver world, where a factory was divided between the white collar workers in the front office and the blue collar workers in the back, whose product was sold by the Willy Loman's of the world, who packed their sales bag and left on Monday through Thursday and returned to do their paper work on Friday.  Trying to use regulations written for that world, in today's workplace results in often ludicrous results.

It seems clear to me that the Supreme Court understands this historical fact, at least as relevant to the outside sales exemption, as it noted that the DOL had been authorized by the statute to issue regulations, and that those regulations were issued in 1938, 1940 and 1949, and in 2004 "following notice-and-comment procedures, the DOL reissued the regulations with minor amendments." Although they limit that historical reference to the outside sales exemption, I think a review would indicate that it is applicable for much of the remainder of the FLSA and its regulations as well.

The points relied on by the majority in rejecting the formalistic view of the minority are significant and could be utilized by other courts to rein in what has been an overly mechanistic view of the FLSA:

• that until 2009, the pharmaceutical industry had "little reason to suspect that its longstanding practice of treating detailers as exempt outside salesmen transgressed the FLSA."
• that the DOL had never initiated any enforcement actions or otherwise suggested that it thought the industry was acting unlawfully.
• the realization that pharmaceutical sales reps, whose average income is $90,000 a year according to the opinion,  "typically earn salaries well above the minimum wage" and enjoyed other benefits that "set them apart from the nonexempt workers entitled to overtime pay." Hardly the kind of employees the FLSA was intended to protect.
• That it would be "challenging, to say the least" for pharmaceutical companies to compensate reps for overtime going forward without significantly changing the nature of that position.
• Rejecting a legalistic argument, that requires title to pass, to instead taking a more "realistic approach" of what the outside salesman exemption is meant to reflect.

Let me be clear what my argument is. At least with respect to mis-classification cases, in the last 10 years plus, the FLSA has been used to extract tremendous sums from employers, who had no intent to cheat or abuse their workers. The beneficiaries of that extraction have been employees, who generally knew what their job involved and knew what they were going to be paid for doing it. In other words, the true economics were already baked in, and an after the fact application of a formalistic approach, with its accompanying lack of "fair warning" discussed by Justice Alito, is not a good economic use of resources.

The biggest beneficiaries of course have been the repeat players, lawyers who represent the plaintiffs in those cases, who of course have taken their share of the extraction, and lawyers who represent the defendants (including me and my firm) in those cases. 

In a world where there are many issues that call out for righting, for the most part mis-classification under the FLSA has not been in my mind a worthy fight. Today's decision is by no means the end, but it is at least a bright and correct light.