Category Archives: Court Decisions & Legislation

WISCONSIN SUPREME COURT DEFINES “SUBSTANTIAL FAULT” STANDARD FOR UNEMPLOYMENT INSURANCE AND WORKER’S COMPENSATION MATTERS

By:  Daniel Finerty

On May 4, 2017, the Wisconsin Supreme Court released a long–awaited decision in Lela Operton vs. LIRC, 2017 WI 46, the first Supreme Court interpretation of Wisconsin’s “substantial fault” standard. Operton held that, as a matter of law, the employee’s eight accidental or careless cash-handling errors over the course of 80,000 cash-handling transactions during 21 months of employment were inadvertent and, therefore, met an exemption to the “substantial fault” standard. The substantial fault standard is used in unemployment insurance and worker’s compensation disputes.

Background

Operton worked for Walgreens in Madison until March 24, 2014, when she was terminated for the last of 8 separate errors when she failed to check identification during a customer’s $399.27 credit card purchase in violation of Walgreen’s policy. Because the credit card was later determined to have been stolen, Walgreens was out the $399.27. This error Operton made was not unlike the others she made during her 21 months of employment:

  • In October 2012, Operton received a verbal warning after she accepted a Women, Infants, and Children (WIC) check for $8.67 when the check should have been for $5.78, a mistake which costs Walgreens $2.89.
  • In February 2013, Operton received a written warning for two errors. First, she accepted a WIC check for $14.46, but did not get the customer’s signature on the check. In March 2013, she gave a $16.73 check back to a customer. Walgreens suffered losses of $14.46 and $16.73 as a result of these errors because it was unable to process these two checks.
  • A few months later, Operton took a WIC check for $27.63 before the date on which it was valid. Walgreens was unable to process the check, and Operton received a final written warning.
  • On January 1, 2014, Operton returned a WIC check for $84.95 back to a customer that the customer had tried to use to make a purchase, resulting in a loss of $84.95. Walgreens gave Operton the first of two final written warnings.
  • On January 29, 2014, Operton received the second final written warning (any additional cash-handling errors would lead to her termination) and served a two-day suspension after she accepted a check for $6.17 even though it was written for $6.00, thereby causing another loss. In addition, a customer attempted to pay for $9.26 worth of items but left the store without completing the debit transaction, which caused a second monetary loss that day of $9.26.

After hearing, an Appeal Tribunal found that Operton was disqualified from receiving unemployment insurance benefits because she was terminated for substantial fault, a finding the Labor and Industry Review Commission (Commission) affirmed, the Court of Appeals reversed the Commission’s finding. The Supreme Court accepted review.

Supreme Court Decision

The Supreme Court agreed with the Court of Appeals that the Commission had not provided a reasonable construction to support its conclusion that Operton was disqualified for “substantial fault,” defined by Wis. Stat. §108.04(5g) as:

For purposes of this paragraph, “substantial fault” includes those acts or omissions of an employee over which the employee exercised reasonable control and which violate reasonable requirements of the employee’s employer but does not include any of the following:

  1. One or more minor infractions of rules unless an infraction is repeated after the employer warns the employee about the infraction.
  2. One or more inadvertent errors made by the employee.
  3. Any failure of the employee to perform work because of insufficient skill, ability, or equipment.

While the Court conceded substantial fault existed because Operton exercised reasonable control over the cash handling transactions at issue and that Walgreens reasonably required her to handle such transactions, it ultimately found that the case turned on the Commission’s failure to examine the question of whether Operton’s errors constituted “one or more inadvertent errors,” which were exempt from the definition of substantial fault under (2.) above.

Examining that question, the Court found that Operton’s errors were not so egregious to warrant a conclusion that she behaved recklessly or intentionally but, instead, that her errors were inadvertent. While there was no testimony by Operton cited in support of its conclusion, the Court cited the length of her employment, the 80,000 transactions she processed, the period of time between errors and the fact that Operton was not making the same errors (even though they were similar in nature) in concluding the errors were inadvertent and, thus, outside of the definition of substantial fault. As further support for its conclusion, the Court cited the Commission’s finding that Operton had not been terminated for misconduct i.e., that there was no evidence Operton willfully disregarded her employer’s interests nor was she so careless or negligent as to be guilty of misconduct. Ultimately, the Court held that Operton’s 8 accidental or careless errors were, as a matter of law, “inadvertent errors” because the employee made these errors during a 21-month period during which she processed 80,000 cash-handling transactions and, therefore, substantial fault did not exists to deny benefits.

Analysis

The Court’s analysis to reach this result is rather interesting, especially considering its impact going forward. First, as a result of the Court’s numerical analysis, one must wonder at what level do employee errors cease being inadvertent and whether the answer to this question will have to remain for the next substantial fault dispute on which the Supreme Court grants review.

Second, the Court indication that an employer has the burden to establish substantial fault, while perhaps accurate, failed to allocate the burden of proof as to the substantial fault exceptions. In doing so, the Court’s opinion suggests that employers are responsible for proving a negative i.e., that the employee’s errors were not inadvertent. While proving this negative may be challenging, employers would be wise to gather statements and other evidence to show that an employee’s errors were not an accidental oversight or the result of carelessness will be critical going forward.

Third, with regard to the specific exception at Wis. Stat. §108.04(5g)(a)2, the Court held that, while discipline following errors may be dispositive in the application of Wis. Stat. §108.04(5g)(a)1 (“one or more minor infractions of rules [are not substantial fault] unless an infraction is repeated after the employer warns the employee about the infraction), an employer’s warning is not dispositive of whether the error was inadvertent. As such, while a prior warning may be relevant to this question, an employee who is warned about an inadvertent error is not necessarily terminated for substantial fault even if the employee subsequently makes another error, even the exact same error, for which s/he is terminated. As such, prior discipline will not carry the day on the “inadvertence” exception and employers must be prepared to address suggestions that an employee acted inadvertently by, again, showing any errors were not an accident or as a result of carelessness.

Conclusion

Operton shows that greater care may be required prior to hearing in order to determine whether any of the substantial fault exceptions may apply and what evidence can be presented to counter their application. It is likely that, going forward, Administrative Law Judges will question all parties about inadvertence, intent and related issues and employee-side counsel will be prepared to show inadvertence and highlight any facts which show a lack of any intent. Employers must be prepared to meet this evidence during an Appeal Tribunal hearing with preparation, testimony and documentary evidence.

If you have questions about Operton or unemployment insurance disputes or hearings, please contact Daniel Finerty or your Lindner & Marsack attorney at 414-273-3910.

Title VII Now Covers Discrimination Based on Sexual Orientation

By:  Kristofor L. Hanson

The Seventh Circuit Court of Appeals has determined that Title VII of the Civil Rights Act bars discrimination on the basis of sexual orientation.  On April 4, 2017, the Chicago-based court, which presides over federal matters in the states of Wisconsin, Illinois and Indiana, became the first federal court of appeals to determine that the protections of Title VII extend to sexual orientation.

The case, Hively v. Ivy Tech Community College of Indiana, No. 15-1720 (7th Cir. Apr. 4, 2017), was brought by Kimberly Hively, a lesbian and a part-time adjunct instructor at Ivy Tech, a public institution in Indiana with thirty campuses statewide. She alleged that the college refused to hire her for six full-time positions she sought over five years and then refused to renew her part-time contract because of her sexual orientation.

In its decision, the court held that consideration of sexual orientation centers on the issue of gender and sexual stereotypes, meaning that an employer who takes an adverse action against a homosexual employee is taking an action based upon that employee’s gender or sex, which are covered by Title VII, and the employee’s failure to conform to a particular gender stereotype.  Hively argued, and the court agreed, that had Hively been a man married to, dating, or cohabitating with a woman, Ivy Tech would not have taken the actions it did.  The court stated that while this decision may appear to write into the law the term sexual orientation, it actually does no such thing as the law already protects an individual from discrimination on the basis of sex, which cannot be separated from sexual orientation.

This decision, issued following oral argument before the full panel of Seventh Circuit judges, overruled the Circuit’s previous decision in the same case and the lower court’s decision which granted Ivy Tech’s motion to dismiss, both of which held that Title VII did not cover sexual orientation.  This decision means that Hively now has the opportunity to litigate her claims in the district court.  Whether she ultimately will prevail is to be determined, but now, in the Seventh Circuit at least, it is clear that she has a viable claim to litigate under federal law.

Twenty-two states have laws that bar discrimination based on sexual orientation, including Wisconsin, Illinois and Minnesota.  Employers in these states, therefore, have already been prohibited from discriminating against employees on the basis of sexual orientation.  The Seventh Circuit’s extension of federal protection to sexual orientation creates additional means for employees claiming such discrimination to seek remedies before the Equal Employment Opportunity Commission and in federal court.  In federal court, compensatory (i.e. emotional distress) and punitive damages may be available to plaintiffs where before state agencies such damages are generally unavailable.  Therefore, if this decision changes anything for those in states already prohibiting discrimination, it potentially increases the risk for employers who run afoul of the law.

Even though many employers have known that sexual orientation is a protected class in their states, this decision serves as a reminder that employers should make sure their handbooks, policies, and employee and supervisor training include reference to this protected class.

TEXAS COURT ISSUES NATIONWIDE INJUNCTION, BARRING THE DEPARTMENT OF LABOR’S PERSUADER RULE

By: Thomas W. Mackenzie

Yesterday (November 16, 2016), the U.S. District Court for the Northern District of Texas issued a permanent injunction barring enforcement of the U.S. Department of Labor’s “Persuader Advice Exemption Rule.”  As we have reported in previous E-Alerts, this rule would have required employers and their attorneys to report expenditures incurred in resisting union organizing efforts.  Historically, reporting was only required when a law firm engaged in active persuader activity such as giving a speech to the employer’s employees in a union organizing drive.  Under the new rules, an attorney would be required to report if he or she engaged in speech writing, letter drafting or supervisor training. The rule was unquestionably designed to discourage law firms from representing employers in union organizing campaigns.

In arguing that the law was unlawful, the plaintiffs claimed, in part, that the reporting requirements invaded the attorney-client privilege.  The Texas judge issued a preliminary injunction on June 27, 2016.  The injunction was made permanent by the decision issued yesterday.  The decision will unquestionably be appealed.  However, it is unlikely that a decision at the appellate level will be issued before President Elect Trump takes office and a new Secretary of Labor is appointed.

The new requirement was challenged in multiple court cases by business groups and, in a case currently pending in Minnesota, by the Worklaw Network, an association of management-side labor and employment law firms of which Lindner & Marsack is the Wisconsin representative.

Although it is impossible these days to predict anything with certainty, the so-called “Persuader Rule” would appear to be in critical condition and unlikely to be enforced in the foreseeable future, if ever.

NLRB Expands Appropriate Bargaining Unit to Include Temporary Workers

In a 3-1 decision issued this week, the National Labor Relations Board (“Board”) reversed current precedent that prohibited the inclusion of temporary employees along with permanent, or “solely employed,” employees in a bargaining unit absent employer consent, as it returned to the previous standard under M.B. Sturgis, Inc., 331 NLRB 1298 (2000), where no such consent was required.

In its July 11, 2016 decision, Miller & Anderson, Inc. and Tradesmen International and Sheet Metal Workers International Association, Local Union No. 19, AFL-CIO, the Board expressly overruled the 2004 decision of Oakwood Care Center, 343 NLRB 659 (2004), which had held that the National Labor Relations Act (“NLRA”) did not authorize the Board to direct elections in units encompassing employees of more than one employer, i.e. a company’s employees and other employees placed at the company via a staffing agency.  The Oakwood Board further held that combining such employees would lead to significant conflicts among the various employers and among groups of employees.

With the Miller & Anderson decision, the Board reversed course again, holding that the terms “employer” and “employer unit,” as used within Section 9(b) of the NLRA, were sufficiently broad to encompass temporary employees performing work for another employer.  The Board also reasoned that the Sturgis standard better effectuated the purposes of the NLRA.

Going forward, the Board will apply the traditional “community of interest” factors when determining if a bargaining unit is appropriate.  The Board will determine whether the temporary employees and solely employed employees have the same or substantially similar interests as to wages, hours or other working conditions.

While the Board described its decision as a return to Sturgis, the landscape has changed since 2004, when Sturgis was last the standard.  Last year, the Board issued the highly contentious Browning-Ferris decision, which overruled two other long-standing joint-employer decisions.

Under Browning-Ferris, the Board greatly expanded the joint-employment standard by abandoning the requirement that an employer exercise “direct and immediate” control over an employee’s terms and conditions of employment and instead including relationships where an employer merely exercised “indirect” control or even where an employer has simply reserved the authority to exercise control.   Thus, between 2000 and 2004, when Sturgis was the standard, the law was much clearer as to when a joint-employer relationship existed.  Now those waters are far murkier, and employers will have to navigate them to make best judgments as to whether a joint-employer relationship exists and, if so, whether a group of temporary employees and solely employed employees have sufficient interests in common in order to create an appropriate bargaining unit.

Employers and other amici cautioned that a return to Sturgis would create confusion and hinder meaningful bargaining.  We will see whether those concerns bear out.

WISCONSIN RIGHT TO WORK LAW REINSTATED

District 3 of the Wisconsin Court of Appeals issued a decision yesterday, May 24, reinstating Wisconsin’s right to work law pending appeal of a Dane County Circuit Court Judge’s decision finding the law to be unconstitutional.  The Court of Appeals held that the Circuit Court erred in not granting a stay pending the appeal of the decision.

The decision means that unions and employers are again unquestionably prohibited from entering into agreements requiring union membership as a condition of employment.  Wisconsin was the 25th state to enact a so-called right to work statute.  Under the law, as contracts expire, are extended or are amended after March 11, 2015, the parties are precluded from maintaining or agreeing to contract language requiring employees to be members of a union.

It is anticipated the case will find its way to the Wisconsin Supreme Court.  Given that Court’s 5 to 2 conservative majority, we expect the law will ultimately be upheld.

 

STATUS OF RIGHT TO WORK LAW

By: Thomas W. Mackenzie

We issued an E-Alert on April 13 addressing Right to Work. Since then, a number of clients have asked for further clarity on the status of Wisconsin’s Right to Work law following the issuance of the Dane County decision.

On April 8, 2016, a Dane County Circuit Court judge found unconstitutional the 2015 statute making Wisconsin the 25th Right to Work state.  The law, which took effect on March 11, 2015, prohibited an employer and union to agree in a collective bargaining agreement that employees must be union members.  The trial judge found that because federal law requires unions to represent all employees – union members or not – it is an unlawful taking of property to deny the union fair compensation in the form of union dues for the services the union provides to employees who would choose not to be union members.

The Wisconsin Attorney General (“AG”) appealed the decision to the Wisconsin Court of Appeals late last week. The trial court judge denied the AG’s request for a “stay” pending the appeal.  We here at Lindner & Marsack anticipate that the AG will seek and likely be granted a “stay” from the Court of Appeals.  We also join most experts in predicting that the Dane County court decision will be reversed on appeal.

In the interim, however, employers and employees are left in a quandary in how to proceed. In assessing the issue, employers fall into one of three camps.  If your contract has not expired since the law’s passage in March, 2015 – your union security provision remains lawful.  As your contract expires, you should seek legal counsel on how to approach the issue.  Pending final resolution, unions will resist any argument that mandatory union membership is illegal in Wisconsin.

If your contract already expired and you eliminated all forms of union security from your contract, you need to do nothing. You have no language requiring union membership and your employees are free to choose to be members or refrain from union membership.

If, however, you fall in the third camp and you agreed to so called “snap-back” language that nullified your former union security clause only to the extent prohibited by law, the Dane County decision has put you in a legal gray area. Until the circuit court decision is “stayed” or reversed, you will need a strategy.

First, start with your “snap-back” language and determine whether the union has a claim that the union security clause has been “reactivated.” Second, wait and see how your union reacts.  Some unions may elect not to push the issue until the judicial dust settles.  Third, if your union insists on compliance with the union security which would mean the employer could be required to terminate an employee who fails to meet his or her dues obligation, the failure to terminate could trigger a grievance or an unfair labor practice charge.  Delaying the matter while the grievance or NLRB charge is processed is one option.  There are strong legal arguments that the Dane County decision only applies in Dane County and only applies to the Machinists (IAM), Steelworkers and the AFL-CIO, the plaintiffs in that case.  The other option is to tell your reluctant union member employees that they should keep current on dues while the matter is resolved through the courts.  If the non-members elect to satisfy the asserted dues obligation they might want to pay the union directly rather than using payroll deduction (so called dues checkoff).  Signing a union dues authorization card would obligate the employer to deduct dues for up to a one year period, even if the Dane County decision is reversed.

Again, the issue is put on hold if the Court of Appeals or Wisconsin Supreme Court issues a “stay.” Likewise, it goes away altogether if the Court of Appeals or Wisconsin Supreme Court reverses the Circuit Court.  These are likely outcomes, but until they occur, some unions may push the issue and force some hard choices while the matter plays out in the courts.

If you have questions about anything in this e-alert, feel free to call Tom Mackenzie or any other Lindner & Marsack attorney at 414-273-3910.

 

Amendments to the Wisconsin Worker’s Compensation Act Effective March 2, 2016!

By: Chelsie D. Springstead

The much-anticipated changes to the Wisconsin Worker’s Compensation Act were signed by Governor Walker on February 29, 2016 and went into effect yesterday – March 2, 2016! Please see the Act 180 Statutory Language and Act 180 Plain Language Summary of the bill which is now in effect.   I have summarized a few of the major changes below:

  • Maximum weekly PPD rate for injury dates of 3/2/16 to 12/31/16 are increased to $342, and for injury dates of 1/1/17 or later are increased to $362
  • Reduce the statute of limitations for traumatic injuries with a date of injury of March 2, 2016 or later from 12 years to 6 years (please note that the statute of limitations for occupational injuries remains unchanged)
  • Allow apportionment of permanent partial disability for traumatic injuries based on causation (does not apply to occupational injuries). Practitioners (both treating doctors and IME doctors) shall address the issue of causation of the permanency to include a determination of the percentage of permanent disability caused by the work event and the percentage attributable to other factors
  • Minimum PPD ratings will be reviewed and updated every 8 years by a medical advisory committee
  • Eliminate indemnity and death benefits to workers who violate an employer’s drug and alcohol policy if the use of the drugs/alcohol are shown to be the cause of the injury
  • Allow the employer/carrier to deny temporary disability benefits if a worker is brought back to work on light duty while in a healing period and they are subsequently fired due to misconduct or substantial fault (please note that ‘misconduct’ and ‘substantial fault’ are defined in the Unemployment Compensation Act, Wis. Stat. Sec. 108.04)
  • Allow prospective orders for vocational retraining

The Lindner & Marsack Worker’s Compensation Defense Team is presenting more information on this topic at our upcoming half-day Spring Symposium being held on Thursday, March 10, 2016. Please see the 2016 Spring Symposium Invitation flyer for more information on this complimentary seminar. Register today!

Additionally, our Worker’s Compensation Defense Team is offering individualized training for employers and insurance carriers regarding the statutory changes and how they will affect your day-to-day handling of claims. Please contact us for more information or to schedule training.

SAVE THE DATE FOR OUR ANNUAL COMPLIANCE/BEST PRACTICES SEMINAR!

Please mark your calendar for Lindner & Marsack, S.C.’s Annual Compliance/Best Practices Seminar!

WHEN:         April 14, 2016

8:00 a.m. – 12:00 p.m.

WHERE:       Sheraton Milwaukee Brookfield Hotel

375 South Moorland Road

Brookfield, WI

This FREE half-day event will address current topics in labor, employment, benefits & worker’s compensation law and provide employers across industries with practical and creative solutions for addressing their toughest workplace legal challenges.

SESSION TOPICS INCLUDE: 

  • Labor Law Update: Including Recent NLRB Decisions, Right to Work and Collective Bargaining Trends
  • 2016 Employment Law Update
  • FMLA Update – A Best Practices Review
  • The Use of Temporary Workers in 2016 – A Panel Discussion
  • Update on Proposed Wisconsin Worker Compensation Act Reform
  • Winning Strategies in Defending Worker Compensation Cases – How to Avoid Early Mistakes in Investigating Claims

Watch your inbox as well as our Facebook, LinkedIn and Twitter pages for more detailed information about session topics and a link to register for this free seminar.

Lindner & Marsack Successfully Represents Local School District in Federal Court

As labor and employment attorneys, we often sound like broken records in counselling our clients on the importance of documenting the performance deficiencies of poor performing employees. It cannot be overstated how compelling strong and contemporaneous documentation can be to demonstrate the actual reason an employer disciplines, demotes or terminates an employee who is not performing to the employer’s legitimate expectations. A recent lawsuit filed by a former African American principal at the Oak Creek-Franklin Joint School District provides another vivid illustration.

The plaintiff was a previous principal at one of the elementary schools within the school district. Following her removal from her position, she filed a lawsuit in U.S. Court for the Eastern District of Wisconsin claiming that her removal from the district was motivated by her race, as well as in retaliation for her opposing discrimination in the workplace and raising concerns that she claimed were protected by the free speech guarantees of the First Amendment. While the federal district judge dismissed her race discrimination claim prior to trial, her claims of unlawful retaliation under both Title VII and the First Amendment were tried to a jury earlier this week.

At trial, Oyvind Wistrom represented the school district. Using the district’s detailed and contemporaneous documentation of the performance concerns, we were able to successfully show the jury that her complaints of discrimination and protected speech were not the reasons for the principal’s removal. We showed that her removal would have occurred regardless of her complaints and protected speech. After more than two days of testimony, it took the jury less than one hour to determine that the school district was justified in taking the steps it took to remove the principal. The successful defense of this case could not have happened without the testimony of several key district employees and the presence of clear and contemporaneous performance documentation by the school district.

With Same-Sex Marriage Permissible In Many States, Plan Sponsors Should Clarify the Rights Of Affected Children

By: Alan M. Levy and John E. Murray

Two years ago, in United States v. Windsor, the U.S. Supreme Court held that the Defense of Marriage Act (“DOMA”) is unconstitutional in its requirement that “marriage” be defined as restricted to heterosexual couples.  After that, regulations were issued which treated same-sex married couples as entitled to the same federal benefits and rights as opposite-sex couples, such as joint tax returns, classification of dependents for health and retirement benefits governed by federal law, and FMLA rights.  Now, either by legislation or judicial determination, 37 states and the District of Columbia permit the same treatment as the federal rule.

Recently, several ramifications of these rules have become apparent.  For example, if a health plan covers dependents of employees, the child of an employee’s same-sex marriage is a dependent.  Similarly, an employee’s same-sex spouse is entitled to a survivor pension, which includes both payment upon the employee’s death and the requirement of the spouse’s written agreement if the employee declines joint and survivor benefits to maximize the retirement benefit during his/her own lifetime.

Some plans may be able to provide these spousal and dependent benefits under their present language.  Others may require amendments to plan documents and summary plan descriptions.  While some issues about same-sex marriage are scheduled for Supreme Court consideration this term, that case will not affect the federal rules which limit the application of DOMA to ERISA plans.

Plan administrators and fiduciaries are encouraged to review their programs and make all necessary modifications to comply with these rules.  If there are any questions about the rules, existing benefit documents, or practices, please contact Alan Levy or John Murray here at Lindner & Marsack, S.C.  We will be happy to assist you in this activity.