The “Clearly Better Qualified” Standard for Discriminatory Denial of Promotion Appears Dead in the Fifth Circuit.

Ms. Roberson-King began working for the State of Louisiana as an eligibility examiner with the Office of Family Support in November 1989. She was promoted to Fraud Investigator in August 1993. She transferred to LRS in April 2001, initially as a Rehabilitation Counselor. On April 8, 2013, LRS promoted Ms. Roberson-King to Rehabilitation Counselor Master. (See Ex. 3, Ms. Roberson-King’s application for promotion to district supervisor, an exhibit to her affidavit).
LRS unlawfully passed Ms. Roberson-King over for promotion to the position of LRS District Supervisor based on her race, African-American, in favor of a less-well-qualified white candidate. On October 16, 2014, LRS Regional Manager John Vaughn announced the selection of Mara Lott Patten, Caucasian female, for promotion to the position of LRS District Supervisor. (Ex. 3, announcement attached as part of grievance, to Ms. Roberson-King’s affidavit). The selection of Patten was unlawfully based on discrimination against Ms. Roberson-King based on her race, African-American.

In  discriminatory denial of promotion cases, Title VII prohibits an employer from discriminating against an employee with respect to “compensation ,terms,conditions or privileges of employment” because of race. 42 U.S.C.§ 2000e-2(a) (1). Terms and conditions of employment include the opportunity to obtain promotions. See Munoz v. Orr, 200 F. 3d 291, 299 (5thCir.2000).  In our recent case, the plaintiff alleged that her employer discriminated against her on the basis of her race in failing to promote her to District Supervisor over rehabilitation counselors at Louisiana Rehabilitation Services, a division of Louisiana’s Office of Workforce Development.  The Fifth Circuit has applied the McDonnell Douglas framework when examining such claims.   Chim v. Univ. of Texas, 836 F.3d 467, 470 (5 Cir. 2016).  To succeed on a failure to promote claim, a plaintiff must ultimately show that (1) he belongs to a protected class; (2) he applied for and was qualified for a position for which applicants were being sought; (3) he was rejected; and (4) a person outside of his protected class was hired for the position.  Burrell v. Dr. Pepper/SevenUp Bottling Grp., Inc., 482 F.3d 408, 412 (5 Cir. 2007).  LRS conceded that the plaintiff had established her prima facie case.  “If he makes that showing, a presumption of discrimination arises, and the employer must articulate a legitimate nondiscriminatory reason for the adverse employment action.” Cannon v. Jacobs Field Servs. N. Am., Inc., 813 F.3d 586, 590 (5 Cir. 2016).  The burden then shifts back to the plaintiff “to produce evidence from which a jury could conclude that the employer’s articulated reason is pretextual.” Id. “A plaintiff may show pretext either through evidence of disparate treatment or by showing that the employer’s proffered explanation is false or unworthy of credence.” Jackson v. Cal-W. Packaging Corp., 602 F.3d 374, 378-79 (5 Cir. 2010).  “An explanation is false or unworthy of credence if it is not the real reason for the adverse employment action.” Laxton v. Gap Inc., 333 F.3d 572, 578 (5 Cir. 2003). “In the context of a summary judgment proceeding, the question is not whether the plaintiff proves pretext, but rather whether the plaintiff raises a genuine issue of fact regarding pretext.”  Thornbrough v. Columbus & Greenville R.R. Co., 760 F.2d 633, 646 (5 Cir. 1985).  LRS’ alleged “legitimate nondiscriminatory reason” for not promoting Ms. Roberson-King was “because she was not the most competitive candidate for the position” due solely to her possession of the Certified Rehabilitation Counselor designation, which is not a requirement for the position, nor was it identified as “desired” or “preferred.”  The Supreme Court has recognized that evidence of a plaintiff’s superior qualifications may establish pretext.  Ash v. Tyson Foods, Inc., 546 U.S. 454, 456-57 (2006) (per curiam).  In Burrell v. Dr. Pepper/Seven Up Bottling Grp., Inc., 482 F.3d 408, 412 (5 Cir. 2007), the Fifth Circuit recognized that a plaintiff may prove pretext by showing that he was “clearly better qualified than the person selected for the position.”  See also Runnels v. Texas Children’s Hospital Select Plan, 167 F3d.Appx. 377, 383 (5 Cir. 2006) (applying the “clearly better qualified” standard); Lara v. Kempthorne, 673 F.Supp.2d 504 (S.D. Tex. 2009) (same).

The District Supervisor Position: The job posting for the promotion to “Rehabilitation District Supervisor” sets forth minimum qualifications, which both Ms. Roberson-King and Patten possess. The posting describes the function of work as “To provide direction to and to assist professional Louisiana Rehabilitation Services staff within a specific geographic area in the provision of vocational rehabilitation services to individuals with a wide variety of severe disabilities to improve the quality of their lives and to help them achieve their goal of an employment outcome.” The “level of work” is stated as “supervisor.” The “supervision exercised” is described as “Direct-line over Rehabilitation Specialists, Rehabilitation Counselors, Rehabilitation Facility Supervisors, and clerical staff and may include Rehabilitation Evaluators and lower-level facility managers or supervisors.” Examples of work include “supervises subordinate staff in local offices, state community rehabilitation programs and area offices within a regional area”; “provides various training to include initial training of new staff on agency policies and procedures in the provision of services to clients, orientation training on counselor skills, relative in-house and field training on a regular basis, etc.”; “holds scheduled management meetings with subordinate staff to discuss agency matters such as policy and procedure changes, technology advances, area labor market data, agencies marketing plan, etc.”; “evaluates performance of staff, assists with setting goals, and develops appropriate work plans”; “counsels staff and recommends appropriate disciplinary action based on previous remedial action taken and consequences of action”; etc.
To be sure, this is a supervisory position, and it requires supervisory experience, a history of success, and leadership skills. Ms. Roberson-King was far better qualified than Patten to be promoted to LRS District Supervisor.
Employment: Both were currently employed as Rehabilitation Counselor-Masters (“Master Counselors”).  Patten’s application reflects that she had been a Master Counselor since 2008, in contrast to her deposition testimony, in which she testified she became a master counselor in 2011.
Education: Both had Master’s Degrees, but Ms. Roberson-King had earned an additional 15 hours of graduate credit in Assistive Technology, related to the provision of AT devices and services provided to LRS consumers (hearing aids, wheelchairs, home and vehicle modifications, etc.).
Seniority with state and LRS: Ms. Roberson-King had worked for the state of Louisiana since 1989 and with LRS since 2001; Patten had worked for the state and LRS since 2008.
Supervisory Experience: Ms. Roberson-King had supervisory experience, having been a First Sergeant of the 917th Medical Squadron, and then retired from the U.S. Air Force Reserves. While working in the Air Force Reserves for more than 20 years, Ms. Roberson-King supervised approximately ten enlisted personnel assigned to the 917th Medical Squadron. Patten’s supervisory experience was limited to supervising one rehabilitation counselor associate, Deviona Newsom, for about two years.
The decision maker, Vaughn, testified that he was previously selected over Bertha Gray for the district supervisor position notwithstanding Gray’s greater seniority with LRS, because he “had previous supervisory experience.” This supervisory experience was with a manufacturing company, AFCO Metals, and another named TSE International, and he had no supervisory experience working in LRS. Despite this testimony, Vaughn astonishingly testified initially that he considered that neither Ms. Roberson-King nor Patten had more supervisory experience than the other. Later in the deposition, Vaughn testified he was familiar with Ms. Roberson-King’s extensive supervisory experience within the military for many years before she applied for the district supervisor position; this time he changed his previous testimony to state that he took into consideration Ms. Roberson-King’s supervisory experience, and his knowledge of Patten’s lack of supervisory experience outside LRS, in making his decision.
Leadership Academy: LRS had a program known as Leadership Academy, described by Vaughn as “a program in which individuals could take training or be prepared to move up in promotional– move up in promotional opportunities within the agency.” He regards it as training in leadership skills and abilities. He knew that Ms. Roberson-King had been selected for and attended Leadership Academy.  Vaughn also knew Patten had not been selected for or attended Leadership Academy.  Vaughn testified that the focus of the Leadership Academy was not on the field of rehabilitation counseling, but in leadership training to gain leadership skills so that one could be a leader and supervise others. Vaughn stated that he counted Ms. Roberson-King’s Leadership Academy credential in her favor, and that doing so would be legitimate, given that he was looking for a supervisor and not just a rehabilitation counselor to be the district supervisor.
Production quotas: In LRS’ position statement submitted to the United States Equal Employment Opportunity Commission, LRS submitted “VR Performance Statistics,” which LRS also attached to Vaughn’s affidavit and which he discussed in his deposition. In his affidavit, Vaughn states, “The Closed-Rehab Objective is the factor/statistic that is directly referred to on the employees’ Performance Evaluation System (PES). It is the primary goal of LRS as it is the most measurable way to show that LRS is making effective use of funds and resources to actually put people to work.” The identical language appears in LRS’ Position Statement. Patten testified that the closed rehab objective is the most important because it tells how many people have been employed at least 90 days.
Vaughn acknowledged in his deposition that some of the numbers provided by LRS in its position statement to the EEOC are incorrect. He has not alerted the EEOC that the information that he provided is incorrect. LRS submitted a chart showing the original, incorrect numbers sent with the position statement alongside the accurate numbers for each relevant year.
In the year before the promotion process, Ms. Roberson-King achieved 104% of her closed-rehab objective; Patten achieved only 38%– less than half– of her production quota. In the year before that, Ms. Roberson-King achieved 125% of her closed-rehab objective, while Patten achieved 92%.
In an apparent attempt to make the numbers appear less lopsided, LRS prepared and examined less relevant performance statistics charts going back to the reporting year 10/1/08-9/30/09, which was the beginning of Patten’s employment. Clearly, it was impossible, due to Ms. Roberson-King’s relative seniority, to compare Patten’s records to Ms. Roberson-King’s records before that year. Even upon examining all years since Patten began employment with LRS, the actual numbers favored Ms. Roberson-King. On average, she achieved 94.67% of her closed-rehab objective, while Patten achieved 91.17% of her closed-rehab objective.
CRC: Patten had a Certified Rehabilitation Counselor certification. Vaughn explained that CRC is a national certification for rehabilitation counselors, requiring a certain level of education and then ongoing continued education to maintain the certification. He testified that the certification is not about supervision of employees or about management or about leadership training or gaining leadership skills. Patten testified that the CRC addresses primarily skills and competencies related to rehabilitation counseling and not to supervisory skills and those related to supervising other persons. York stated the CRC “basically says that you’ve acquired a certain amount of knowledge and skill as it relates to the delivery of services and to individuals with disabilities especially as it relates to rehabilitation. . . . I would imagine that theories of counseling, medical aspects of disability, those kinds of things.”
Ken York: LRS would make much of the fact that Ken York, LRS Assistant Director, was African American. In fact, York testified that he could not recall discussing with Vaughn the relative amount of supervisory experience between Patten and Ms. Roberson-King, and that relative seniority would be a relevant consideration, as well as supervisory experience, but he could not recall discussing those issues with Vaughn and was not aware of Ms. Roberson-King’s extensive military supervisory experience, nor could he recall discussing the fact that Ms. Roberson-King carried a specialty case load, which he stated would have been a relevant consideration, and he did not recall discussing production quotas, which he stated would have been a relevant consideration. York did not discuss with Vaughn the fact that Ms. Roberson-King had been selected for and had attended the Leadership Training Academy and Patten had not. York did not undertake any kind of a comparison or analysis of Patten’s qualifications vis-a-vis the other candidates, stated that this was not his role, and testified he could not recall ever not accepting a recommendation from one of his managers for a promotion. York testified that Martin had never failed to support a recommendation from him, nor could he recall Moore rejecting a recommendation that came to him from Martin.
Mark Martin: Martin, LRS Director, was out on extended sick leave at the time of the promotion process, and had no input into the selection of Patten. Martin testified that after he returned, Moore, the appointing authority was trying to re-do the promotion process, but he understood that such was not possible because of Civil Service and its rule preventing removal of someone out of a classified Civil Service position.
Ms. Roberson-King’s Grievance: Ms. Roberson-King filed a grievance concerning Vaughn’s selection of Patten to the position of LRS District Supervisor, pointing out many of the points made here and discussing white employees who had previously been promoted to district supervisor without the CRC credential, among other things.
Bryan Moore: LRS also seeks to capitalize on the fact that Moore was African American. On December 2, 2014, Moore, LRS’ “appointing authority,” wrote to Ms. Roberson-King in response to her grievance regarding the selection of the district supervisor position in the LRS Shreveport Regional Office, alleging race discrimination. Moore stated, “After careful review of your grievance, the decision has been made to overturn the selection process. This means that the position will be announced again and all interested persons will have to re-apply. . . . The individuals selected for interview will be scored according to objective criteria with established benchmarks.” Moore also promised “a thorough investigation” regarding Ms. Roberson-King’s allegations of race discrimination. Moore testified that he advised Ms. Roberson-King that he was rescinding Patten’s promotion “in order to try to stop the process, to look more deeply into it to find out if in fact everything was done clean and above board.” Later, however, in a March 5, 2015, letter to Ms. Roberson-King, Moore stated, “in my letter to you dated December 2, 2014, I informed you that I had made a decision to overturn the selection of Mara Lott and re-announce that position. At the time that I signed that letter, I was advised and understood that I had the authority to rescind the appointment of Ms. Lott; however, I have been advised and now realize that I do not have that authority.”  Moore testified, “I did make an attempt to pump the brakes, if you will, on this decision until such time that I could have some comfort level. People were going to go down to Shreveport and take a closer look at what’s going on. As I stated earlier, I take these types of allegations seriously.” He testified that later it was conveyed to him from Human Resources that he lacked authority to un-do the promotion process.  He testified that once he discovered that there may have been some mistake or unfairness he tried to rescind the promotion, he was unable to do so.
Moore testified that he did not compare the qualifications of Patten and Ms. Roberson-King before approving the recommendation of Patten, and after the recommendation he became aware, through Ms. Roberson-King’s grievance, that approving the recommendation may not have been the appropriate course to take. A comparison of the qualifications did take place after Ms. Roberson-King’s grievance. Moore tried to rescind the promotion so there could be some investigation and an increased comfort level for everyone, but to no avail. There was no rescission of the promotion and no ultimate possibility of reversing the process.
The appointing authority of LRS himself sought to rescind Patten’s promotion based on a comparison of the relative qualifications of Patten and Ms. Roberson-King. He was unable to do so, however, as he was advised by Human Resources that he lacked such authority. This case would seem to present genuine disputes of material fact as to whether Ms. Roberson-King was unlawfully discriminated against based on her race in LRS’ decision to promote Patten over her to district supervisor.

The Fifth Circuit, however, while paying lip service to the “clearly better qualified” standard, held that “The choice to value Patten’s CRC credential over Roberson-King’s strengths is within the realm of reasonable business judgments.”  The  court held that Moore’s attempt to rescind Patten’s promotion did not constitute evidence of pretext and that any difference in qualifications between the two candidates did not create a genuine issue of fact that Roberson-King was clearly better qualified for the district supervisor position.  If there were ever a case where one person was promoted over a clearly better qualified person, this is the case.  With this ruling, however, the Fifth Circuit has effectively scrapped altogether the doctrine that would allow a plaintiff to prove discriminatory denial of promotion on this basis.  Look for this case to be studied and cited by defendants and by the court to wipe out altogether any hope for clearly better qualified plaintiffs who have been passed over for promotions due to unlawful discrimination.

The case is Roberson-King v. St. of La. Workforce Comm’n, No. 17-30899 (5 Cir. 9/17/18).

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Notice of Right to Sue Is Not Jurisdictional

On October 26, 2017, the plaintiff filed his Complaint and Jury Demand. As an example of the federal courts’ zeal to move and clear their dockets at the expense of plaintiffs’ days in court, on the next day, the Court sua sponte entered an Order requiring the plaintiff to file a memorandum and evidence showing that he has “exhausted his administrative remedies before pursuing his claims in this Court,” such evidence to “include any Notice of Right to Sue received from the Equal Employment Opportunity Commission related to the claims raised in the Complaint.”
The plaintiff then filed the charge and notice of right to sue. He had filed his federal lawsuit October 26, 2017, 86 days after the EEOC mailed the Notice of Right to Sue, which is necessarily within 90 days of the date he received the Notice of Right to Sue.
Plaintiff’s lawsuit alleges claims of unlawful discrimination against him in violation of the Americans with Disabilities Act, for defendant’s failure to grant a reasonable accommodation; retaliation against him in violation of Title VII for plaintiff’s failure to provide useful statements that UPS wanted for its campaign to fire another employee based on unlawful sex discrimination; unpaid overtime compensation in violation of the Fair Labor Standards Act as a result of misclassifying him as an exempt employee; and liability under La. Civil Code art. 2315 for UPS’ breach of statutory duties owed to plaintiff. Some of these claims are not within the EEOC’s jurisdiction and not subject to any exhaustion requirement.
Steel Co. v. Citizens for Better Environment, 523 U.S. 83 (1998), clarified that a federal court generally may not rule on the merits of a case without first determining that it has jurisdiction over the category of claim in suit (subject matter jurisdiction) and the parties (personal jurisdiction). See id., at 93–102. “Without jurisdiction the court cannot proceed at all in any cause”; it may not assume jurisdiction for the purpose of deciding the merits of the case. Id., at 94 (quoting Ex parte McCardle, 7 Wall. 506, 514 (1869)). In our plaintiff’s case, however, exhaustion of administrative remedies is not jurisdictional, and is instead an affirmative defense that should have been left for the defendants to raise or else waive it.
Fifth Circuit case law contains some conflicting authority on the question of whether exhaustion of EEOC administrative remedies is jurisdictional in a Title VII case. Compare Tolbert v. United States, 916 F.2d 245, 247 (5th Cir. 1990) (“It is the well-settled law of this circuit that each [Title VII] requirement is a prerequisite to federal subject matter jurisdiction.”) with Young v. City of Houston, 906 F.2d 177, 180 (5th Cir. 1990) (“A failure of the EEOC prerequisite does not rob a court of jurisdiction.”). However, the Supreme Court has long held that “filing a timely charge of discrimination with the EEOC is not a jurisdictional prerequisite to suit in federal court, but a requirement that, like a statute of limitations, is subject to waiver, estoppel, and equitable tolling.” Zipes v. Trans World Airlines, Inc., 455 U.S. 385, 393 (1982); see Union Pac. R.R. Co. v. Bhd. of Locomotive Eng’rs & Trainmen, 558 U.S. 67, 82 (2009) (“[W]e have held nonjurisdictional and forfeitable the provision in Title VII . . . requiring complainants to file a timely charge of discrimination with the [EEOC] before proceeding to court.”); Pacheco v. Mineta, 448 F.3d 783, 788 n. 7 (5th Cir. 2006) (“The Supreme Court has held that the EEOC or EEO filing deadlines are not jurisdictional.”).
In Zipes v. Trans World Airlines, the Supreme Court explained that “[t]he provision specifying the time for filing charges with the EEOC appears as an entirely separate provision” from that granting district courts jurisdiction under Title VII, “and it does not speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts.” 455 U.S. at 393-94. The Fifth Circuit has repeatedly followed the holding of Zipes. See Phillips v. Leggett & Platt, Inc., 658 F.3d 452, 457 (5th Cir. 2011) (“The limitations period for filing a discrimination charge with the EEOC is not a jurisdictional prerequisite, and it may be tolled by equitable modification.”); Granger v. Aaron’s, Inc., 636 F.3d 708, 711 (5th Cir. 2011) (“[F]iling a timely charge of discrimination with the EEOC is not a jurisdictional prerequisite to suit in federal court, but a requirement that, like a statute of limitations, is subject to waiver, estoppel, and equitable tolling.” (quoting Taylor v. United Parcel Serv., Inc., 554 F.3d 510, 521 (5th Cir. 2008)); Harris v. Boyd Tunica, Inc., 628 F.3d 237, 238 (5th Cir. 2010) (equitable tolling applies to EEOC filing deadline); Munoz v. Aldridge, 894 F.2d 1489, 1494 (5th Cir. 1990) (“[W]e have held that the time limits in Title VII for giving notice or filing an administrative complaint are subject to equitable tolling.” (quoting Oaxaca v. Roscoe, 641 F.2d 386, 391 (5th Cir. 1981)). See generally Baker v. McHugh, No. 15-41439 (5 Cir. 12/2/16).
The weight of precedent demonstrates that administrative exhaustion is not a jurisdictional requirement; rather, it is merely a precondition of suit and, accordingly, it is subject to equitable defenses. The distinction has been effectively drawn by the Supreme Court. In Zipes v. Trans World Airlines, Inc., 455 U.S. 385 (1982), a group of flight attendants brought a class action alleging that TWA unlawfully discriminated against them on the basis of sex in violation of Title VII, id. at 388. Approximately 92% of the plaintiffs had not timely filed claims with the EEOC before the suit was brought in federal court. Id. at 390. After the Seventh Circuit Court of Appeals held that these claims were “jurisdictionally barred,” the plaintiffs appealed, asking the Supreme Court to address the “single question whether the timely filing of an EEOC charge is a jurisdictional prerequisite to bringing a Title VII suit in federal court or whether the requirement is subject to waiver and estoppel.” Id. at 390, 392. The Supreme Court sided with the plaintiffs, holding that “filing a timely charge of discrimination with the EEOC is not a jurisdictional prerequisite to suit in federal court, but a requirement that is subject to waiver, estoppel, and equitable tolling.” Id. at 393. According to the Court, this conclusion was dictated by “[t]he structure of Title VII, the congressional policy underlying it, and the reasoning of [its] cases.” Id. Particularly relevant here, the Court cited in support of its conclusion two cases in which at least some of the plaintiffs seeking relief in federal court had never filed an EEOC charge at all. See id. at 396–97 (citing Franks v. Bowman Transportation Co., 424 U.S. 747 (1976) and Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975)).
Moreover, the court’s sua sponte Order requiring proof of EEOC exhaustion cites Taylor v. Books A Million, Inc., 296 F.3d 376, 378-79 (5 Cir. 2002) and Dao v. Auchan Hypermarket, 96 F.3d 787 (5 Cir. 1996), both cases in which the Fifth Circuit squarely held that the filing of an EEOC charge is not a jurisdictional prerequisite. Inexplicably, the Court mentioned Miller v. Stanmore, which is distinguishable because it is not an employment discrimination case but arose under the Federal Tort Claims Act, pursuant to which exhaustion of administrative remedies is unquestionably a jurisdictional requirement.
Because exhaustion of EEOC remedies is not jurisdictional but is instead merely a precondition of suit, it should not be raised by the Court sua sponte, but left for the defendant to decide whether to raise it via a Rule 12(b)(6) motion or else waive it.

Good Faith in Lender Liability Cases

Perhaps the most talked-about theory of lender liability is the concept of good faith. Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. The covenant of good faith and fair dealing requires that neither party do anything to deprive the other of the benefits of the agreement. In the event of breach, general tort remedies may be available to the borrower. The obligation of good faith present in every contractual relation is not an invitation to the court to decide whether one party ought to have exercised the rights provided to it by agreement. Rather, it is an implied undertaking not to take opportunistic advantage in a way that could not have been contemplated at the time the agreement was made. When the contract is silent, the principles of good faith fill the gap. Some courts have held that the implied duty of good faith and fair dealing does not apply to commercial loan transactions negotiated at arm’s length. Obviously, there are many contrary cases holding that every contract implies a duty of good faith and fair dealing between the parties.
There are two standards of good faith, subjective and objective. Under the subjective standard, the lender must have a good-faith belief that its action is justified. The burden of establishing a lack of good faith is on the party against whom the lender’s power was exercised. This is not a “commercially reasonable” or “reasonable lender standard,” but rather a subjective standard of whether the lender had information that would have allowed it to honestly believe that its position had become insecure.
The objective standard is one of honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. To prevail, the borrower must present evidence that the lender acted in an arbitrary, capricious, or unreasonable manner and exceeded the borrower’s justifiable expectations. For example, in one case the borrower and lender operated for years under a line of credit loan secured by a blocked account into which all revenues were deposited and credited against the loan balance, giving the lender total control over the borrower’s cash flow. When the bank refused to advance additional funds, the borrower, unable to use the blocked account, collapsed. The court held that the lender must have a legitimate objective for cutting off funding and must give adequate notice of its decision. The borrower was awarded $7.5 million in compensatory and punitive damages. Most courts apply the subjective standard in lender liability cases.
When the loan documents give the lender discretion, the covenant of good faith and fair dealing will be implied so that the lender must exercise that discretion reasonably and not arbitrarily and capriciously. It is a breach of contract to act in bad faith in the exercise of the discretion conferred by the agreement. These issues arise when the loan documents give the lender approval or consent rights. To protect the lender from liability, the lender’s actions must be based on well-documented and commercially reasonable grounds.
Again, bad faith, or the absence of good faith, will not be found if the lender acts in the manner authorized by the loan documents and if the circumstances justify the lender’s action and the way such action was taken. Of course, because this theory allows the court to second-guess the lender, the lender must take great pains to make sure that both the action it takes and the manner in which it is taken are justified and reasonable.
The covenant of good faith and fair dealing does not impose a duty of reasonable forbearance or moderation in the enforcement of legal rights and the use of the creditor’s contractual remedies. The lender may enforce its remedies only if the default is material because the courts will consider whether the default is so substantial so as to justify the lender’s exercise of its remedies. Further, the court may enjoin foreclosure and limit a lender’s recovery by the amount of damages caused by the lender’s breach of the duty of good faith.
Generally, neither a course of dealing nor the implied obligation of good faith can modify the express terms of an agreement. There are some exceptions, however, and if the lender has historically accepted tardy performance, it cannot, without notice that it will henceforth insist upon timely performance, enforce its remedies upon the late performance of the borrower. The result may be the same even when the loan documents contain an antiwaiver clause.

Individual Liability Under the Fair Labor Standards Act and the Family and Medical Leave Act

The FLSA and the FMLA recognize the concept of “joint employment,” meaning that an employee may be deemed to have more than one employer at the same time. The Acts define “employer” as “including any person acting directly or indirectly in the interest of an employer in relation to an employee.” FLSA: 29 USC 203(d); FMLA: 29 USC 2611(4)(A).

That means that in certain situations, a court or the U.S. Department of Labor (DOL) may consider an individual to be an “employer” of someone filing suit under the FLSA — along with the business, agency, or enterprise “employer.” Owners, officers, managers, and HR personnel are the individuals most likely to be deemed joint employers under the Act.

Individuals can be “employers.” Any individual who is held to be an “employer” under the FLSA or FMLA will be jointly liable (along with the business and any other individual “employers”) for any back pay, liquidated damages, attorneys’ fees, penalties, or any other costs associated with a violation. That’s a situation of direct liability. Unlike in other contexts, someone filing suit under the FLSA or FMLa doesn’t need to “pierce the corporate veil” — such as by showing improper intermingling of personal and business funds — to reach individual defendants.

There may be a false sense of security among business owners and officers because they are so used to thinking of the business as a shield against any personal financial exposure, and that simply isn’t the case with the FLSA and FMLA. In a worst-case scenario, enforcement of judgments under these Acts could reach an individual employer’s personal assets, including bank accounts, homes, and other property.

That is very different from federal antidiscrimination laws (such as Title VII of the Civil Rights Act of 1964, ADEA, ADA, etc.), where individuals typically will not be liable for violations. Moreover, individual liability may apply to any and all FLSA and FMLA violations, even unintentional or technical violations.
Every owner, officer, or manager of a business won’t necessarily be deemed an employer. There is a threshold that must be met. It’s a complicated issue, with the determinative factors varying from jurisdiction to jurisdiction, but the nutshell version is that an individual must have a significant level of financial control within the organization and/or must play a significant role in making personnel decisions and setting pay policies to be held liable under the FLSA or FMLA.

Companies’ owners, officers, managers, and/or HR personnel have been sued individually (or at least threatened with suit) for FLSA and FMLA claims. The outcomes of these claims are very fact-specific and difficult to predict and frequently come down to the judge’s viewpoint on the issue.

Pursuit of individual defendants in FLSA cases seems to be a growing trend in this volatile economy because often the business being sued is on the verge of insolvency and more money is available from the individuals than from the company. Also, employees and their lawyers know that suing the owners and officers exerts more pressure on the company to settle the case.

Burden of Proof in Fair Labor Standards Act Overtime Cases

The burden of proof is on the employee in an action to recover overtime compensation to establish, by a preponderance of the evidence, the elements of a prima facie case entitling him to recovery, including: that his activities constituted an engagement in interstate commerce or the production of goods for interstate commerce; that an employment relationship exists or has existed on the relevant dates; and that the employee has performed work for which he has received inadequate compensation. After the employee makes out a prima facie case, the burden is cast upon the employer to come forward with evidence tending to prove that the employee’s activities were not within the protection of the Act, or that they were excepted from coverage under the Act. The burden of proof is also on the employer to show the “good faith” affirmative defenses (discussed below), which can limit the employee’s liability for liquidated damages.

In carrying his burden of establishing a prima facie case, the employee’s evidence must be sufficiently definite and certain. See, e.g., Johnson v. Blakenship, 152 F.2d 99 (8th Cir. 1945). If there is a question regarding whether the employee is covered by the Act, some courts require detailed, pertinent facts concerning the employer’s business and the employee’s duties. See, e.g., Castaing v. Puerto Rican American Sugar Refinery, Inc., 145 F.2d 403 (1st Cir. 1944).

Since the burden is on the employee to show that he has performed compensable work for which he was not properly paid, he must prove the number of hours worked, and that he was not paid according to the Act. In addition, to recover overtime pay, the employee bears the burden to prove that the employer knew or should have known of the employee’s uncompensated overtime work. For example, where an employee deliberately concealed the fact that he had worked “off the clock” hours so that he could meet production quotas, the employee could not carry the burden of proving that those hours constituted compensable time worked. Davis v. Food Lion, 792 F.2d 1274 (4th Cir. 1986).

Frequently one of the more difficult issues for private plaintiffs is proof of the actual hours worked. On the one hand, the employee’s burden of proof is not satisfied by evidence which is too uncertain or conjectural to permit a finding that the employee worked some definite number of hours or parts of hours. Ciemnoczolowski v. Q.O. Ordnance Corp., 119 F.Supp. 793 (D.Neb. 1954), aff’d, 228 F.2d 929 (8th Cir. 1955), cert. denied, 352 U.S. 927, 77 S.Ct. 226, 1 L.Ed.2d 162 (1956). On the other hand, as a general rule an employee is not required to prove with mathematical precision the exact number of overtime hours he worked. Burrell v. American Industrial Transit, 26 CCH LC 68693 (Tenn. App. 1954). Sometimes employees have kept informal records of time worked, but this raises a question of accuracy. Some courts have been reluctant to consider such informal records sufficient when they have not been compiled at regular intervals. Even absent informal records, it may be possible for an employee to carry his burden of proving the amount of hours worked as a matter of just and reasonable inference through the use of testimonial evidence and earnings projections or similar reports prepared for trial.

It is in this regard that an employer’s recordkeeping requirements may come into play. The burden of keeping proper records of wages and hours is upon the employer and not the employee. Norton v. Acone, 192 F. Supp. 46 (D.Mass. 1961). An employer’s failure to keep adequate records is a violation of the FLSA. Although the employer’s failure to keep proper records of wages and hours worked does not relieve the private plaintiff of the burden of proving improper compensation, where an employer has not kept adequate records, the plaintiff carries out his burden of proof if he demonstrates that the employee has in fact performed work for which he was improperly compensated and produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed, or evidence to negate the reasonableness of the inference drawn from the plaintiff’s evidence. If the employer fails to produce this evidence, the court may then award compensation to the employee, even though the result is only approximate. Handler v. Thrasher, 191 F.2d 120 (10th Cir. 1951). Further, even if an employer has kept records regarding hours worked, a court may not depend upon them in determining whether FLSA violations have occurred if they appear to be unreliable. See Mendez v. Brady, 618 F. Supp. 579 (W.D. Mich. 1985).

Once the employee has proved his prima facie case, the burden of going forward with the evidence passes to the employer. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946). If the employer claims that the employee actually reported all overtime worked, and was compensated for that overtime, the burden is on the employer to prove this fact. Brennan v. General Motors Acceptance Corp., 482 F.2d 825 (5th Cir. 1973). If the employer claims that the employee was not covered under the Act because he did not render service in connection with interstate commerce during particular workweeks, the burden of proof is on the employer. Gilreath v. Daniel Funeral Home, Inc., 421 F.2d 504 (8th Cir. 1970).

A separate good faith defense is found in 29 U.S.C. §260, which relieves the employer for liability for liquidated damages “if the employer shows to the satisfaction of the court that the act or omission giving rise to [the employee’s claim] was in good faith and that he had reasonable grounds for believing that his act or omission was not a violation of the Fair Labor Standards Act.” This “good faith” defense requires that the employer rely upon a reasonable, albeit erroneous interpretation of the FLSA. This good faith defense does not include computational mistakes made by the employer in determining overtime compensation, and an employer cannot escape liability for liquidated damages simply because of its good faith belief that the overtime compensation was being properly computed. Thomas v. Howard Univ. Hosp., 39 F.3d 370 (D.C. Cir. 1994).

To assert this defense against liquidated damages, the employer must demonstrate that it had an honest intention to ascertain what the FLSA required and to act in accordance with it. An employer cannot claim this defense if it blindly operates without investigating its responsibilities under the law. This requires an affirmative action by the employer to determine how an employee should be classified, and a consequent classification based on that determination.

An employee who brings suit under § 16(b) of the Act for unpaid minimum wages or unpaid overtime compensation, together with liquidated damages, has the burden of proving that he performed work for which he was not properly compensated. The remedial nature of this statute and the great public policy which it embodies, however, militate against making that burden an impossible hurdle for the employee. Due regard must be given to the fact that it is the employer who has the duty under § 11(c) of the Act to keep proper records of wages, hours, and other conditions and practices of employment, and who is in position to know and to produce the most probative facts concerning the nature and amount of work performed. Employees seldom keep such records themselves; even if they do, the records may be, and frequently are, untrustworthy. It is in this setting that a proper and fair standard must be erected for the employee to meet in carrying out his burden of proof.

When the employer has kept proper and accurate records, the employee may easily discharge his burden by securing the production of those records. But where the employer’s records are inaccurate or inadequate and the employee cannot offer convincing substitutes, a more difficult problem arises. The solution, however, is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work. Such a result would place a premium on an employer’s failure to keep proper records in conformity with his statutory duty; it would allow the employer to keep the benefits of an employee’s labors without paying due compensation as contemplated by the Fair Labor Standards Act. In such a situation, we hold that an employee has carried out his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negative the reasonableness of the inference to be drawn from the employee’s evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result be only approximate. See Note, 43 Col.L.Rev. 355.

The employer cannot be heard to complain that the damages lack the exactness and precision of measurement that would be possible had he kept records in accordance with the requirements of § 11(c) of the Act. And even where the lack of accurate records grows out of a bona fide mistake as to whether certain activities or nonactivities constitute work, the employer, having received the benefits of such work, cannot object to the payment for the work on the most accurate basis possible under the circumstances. Nor is such a result to be condemned by the rule that precludes the recovery of uncertain and speculative damages. That rule applies only to situations where the fact of damage is itself uncertain. But here, we are assuming that the employee has proved that he has performed work and has not been paid in accordance with the statute. The damage is therefore certain. The uncertainty lies only in the amount of damages arising from the statutory violation by the employer. In such a case, the court may then award damages to the employee, even though the result be only approximate. Anderson v. Mt. Clemons Pottery Co., 328 U.S. 680, 686-88 (1946)

“At Will” Employment and “Hostile Work Environment”

At-Will Employment and Wrongful Termination
Like most states, Louisiana is an at-will employment state, meaning that the employer is free to terminate any employee’s employment at will, without any reason or without a good reason. The only actionable claims for wrongful termination are those based on violation of a statute prohibiting termination based on the employee’s membership in a protected class (such as age, sex, religion, disability, national origin) or the employee’s having engaged in a protected activity (such as bringing a workers’ compensation claim or reporting the employer for violation of state law, etc.). It is not unlawful for an employer to fire an employee without providing a reason. It is not unlawful for an employer to fire an employee based on a personality conflict, or because a supervisor took sides in “office politics.” The courts will not look over the shoulders of the managers and supervisors of every business and ensure that all employees are being treated fairly. The courts get involved only when the employee claims violation of a particular statute, and it is the employee’s burden to prove that the employer violated the statute. If you believe you have been a victim of unlawful discrimination, you should contact the U.S. Equal Employment Opportunity Commission, 1-800-669-4000 or go to http://www.eeoc.gov.

Harassment and “Hostile Work Environment”
Garden variety, or routine, workplace harassment is not actionable. Many employees have lousy bosses who routinely harass their employees or perhaps single out one or two employees to harass. Unless the harassment is based on some protected characteristic or activity, the courts will regard it as mere office politics or personality conflicts. In addition, even where harassment is based on an unlawful cause, such harassment must be severe and extreme before it will be actionable. Merely ignoring an employee or passing someone over for raises in favor of another employee, or even criticizing the employee in harsh terms in front of his co-workers and others, generally will not pass muster. Even the use of profanity, reassignment to more difficult working hours, etc., will not create an actionable “hostile work environment” unless it is based on some discriminatory or retaliatory motive.

The Fifth Circuit May Overrule Pierre v. Connecticut General Life Ins. Co. and Give No Deference to Factual Determinations of Plan Administrators Unless Plan Contains Discretionary Clause

In Ariana M. v. Humana, No. 16-20174, the United States Fifth Circuit Court of Appeals entered a decision on April 21, 2017 (854 F.3d 753), including a special concurrence joined in by all three members of the original panel, calling into question the continued validity of Pierre v. Connecticut General Life Insurance Co./Life Insurance Co. of North America, 932 F.2d 1552 (5th Cir. 1991), in which the Fifth Circuit held that courts had to give deference to an ERISA benefit plan administrator’s factual determinations, even if the plan did not contain a discretionary clause.

The panel noted that the Fifth Circuit is the only circuit that applies deference to the factual determinations of ERISA plan administrators even if a plan does not grant deference to the administrator. The panel also acknowledged that Supreme Court cases decided after Pierre call into question the basis of the Pierre Court’s findings, including its interpretation of the Supreme Court case Firestone Tire & Rubber Co. v. Bruch. The concurrence found, “The pillars supporting Pierre may have thus eroded.” Because the standard of review applied in ERISA benefit determinations “potentially affects the millions of Fifth Circuit residents who rely on ERISA plans for their medical care and retirement security,” the concurrence found Pierre ripe for reconsideration.

Oral argument in the en banc consideration of Ariana M. has been calendared for the week of September 18, 2017.

What Is “Excusable Neglect”

Your opponents have filed a motion to dismiss for failure to state a claim, and you have filed an opposition and you like your chances. The defendants’ deadline– clearly set forth in the court’s Notice– to file a reply memorandum comes and goes, and they don’t file anything. Then, three days too late, they file a reply memorandum. You move to strike it.
What happened is, the Court’s Notice gave you 14 days to file an opposition, and made the defendants’ deadline seven days after you filed your opposition. The defendants’ lawyers, however, calendared the deadline as seven days after your opposition was due, but you filed it three days before your deadline. So they had the deadline wrong, because it was keyed to the filing of your opposition, not to the deadline to file your opposition. Your motion to strike points out that their reply is clearly too late, and that the defendants failed to move in advance of the deadline for leave to file it late.
The defendants file a motion after time has expired for extension of time to file their reply. Under Rule 6(b)(1)(B), the defendants must show “excusable neglect.” You do some research, and you find an interesting ruling on “excusable neglect” from less than nine months ago by the very judge who is hearing your case. In that case, the pro se plaintiff moved for an extension of time to file his Notice of Appeal late. He offered as excuses the fact that he had a medical appointment on one day and he forgot about a medical appointment on another day, and that he suffers from short term memory loss caused by taking a cancer medication; he attached documents showing that his statements were true. The Court stated that pro se litigants subject themselves to the established rules of practice and procedure, and that the “excusable neglect standard is a strict one.” It stated that “the party requesting the extension must make a clear showing that the circumstances causing the delay were unique and that the neglect was excusable,” and that only the “most compelling showing that the purposes of the rules are served” by granting an extension of time would justify granting such an extension. The Court refused to find excusable neglect in that case. You cite to the court his own recent ruling in this case and sit back to see what happens.
In their motion for leave, your defendants explain that they miscalendared their deadline, and then left town (one to Idaho, another to Oregon) to see the totality of the solar eclipse. Then they returned to their office and prepared and filed their reply memorandum, and they were surprised when you moved to strike it on lateness grounds. And both of these lawyers have been practicing for more than 30 years– one is a Harvard Law grad. Now compare your case to the one you read about by your same judge. You prepare and file an opposition to their motion to leave, arguing that the defendants’ neglect was not excusable.
How do you think the Court rules?
The Court grants defendants’ motion for leave to file late reply memorandum, and denies your motion to strike as moot.
So if you are in a bind and have filed something late, at least in one particular district, just know that garden-variety miscalendaring and vacationing to the totality of the solar eclipse trumps cancer-medication-induced short-term memory loss as an excuse for negligent lateness.

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