Third Party Retaliation Claims Get a Little Help From the Supreme Court

Eric and his fiance, Miriam, work for the same employer.  Everyone in the workplace knows of their relationship. One day, Miriam files a charge with the EEOC alleging that she has been discriminated against on the basis of her gender.  After the employer is notified of the charge, Eric is fired.  Does Eric have a claim of retaliation against his employer even though he was not the one who complained about the discrimination?  Well, until recently Eric would not have had a claim of retaliation if he was not engaged in a protected activity at the time of the retaliatory action. However, this year the United States Supreme Court decided that he did.

Prior to the Supreme Court's decision in Thompson v. North American Stainless LP earlier this year, "third-party retaliation" claims were analyzed by reviewing the language of the anti-retaliation provision at issue. And, generally speaking, denial of the claim was based on a conclusion that the person retaliated against must be the same person who had engaged in a protected activity (like Miriam, who had complained about gender discrimination).

Lo and behold the Supreme Court now says that a person aggrieved under Title VII is one who is "within the zone of interests" protected under Title VII, and it concludes that Eric was within the "zone of interest," was aggrieved by the employer's actions, and had standing to sue.

Of course, this holding raises the obvious question: how big is this "zone of interest"? Do we include husbands and wives? Siblings? Cousins?  What about non-familial relationships?  What about a family member who is not employed by the same employer, but whose employer is somehow induced to fire him or her? 

While no New York court has specifically ruled on the question of third-party retaliation claims, recent New York federal court cases decided in the past few weeks seem to have applied the broad intention of the ruling in Thompson.  The Second Circuit, for example, in Tepperwien v. Entergy Nuclear Operations, Inc., (observing the Thompson court's dicta) stated that  “[g]iven the broad statutory text and the variety of workplace contexts in which retaliation may occur, Title VII's antiretaliation provision is simply not reducible to a comprehensive set of clear rules.”

EEOC Expands Definition of Disability

The Equal Employment Opportunity Commission has issued final rules, effective May 24, 2011, interpreting the Americans with Disabilities Act Amendments Act of 2008. The new rules broaden coverage under the Act and change the focus from whether an employee has a disability to whether the employer has satisfied its obligation to accommodate a disability.

Until now, it was generally accepted that the determination of whether a particular condition constituted a legal disability was dependent upon an “individualized assessment.” Under the new regulations, however, the EEOC lists a number of conditions that will “virtually always” constitute a disability, including, for example, cancer, diabetes, HIV infection, bipolar disorder and schizophrenia. The rules also specify that a disability of any duration may be a covered disability, which would include episodic conditions and conditions that are in remission.

Greater protection is also afforded employees who are “regarded as” disabled. These employees are protected if the employer has a perception that the employee has an impairment—regardless of whether the impairment is perceived as an actual disability.


The Amendments Act of 2008 and the new EEOC rules are an attempt to reverse a series of relatively recent Supreme Court decisions that placed greater restrictions on the rights of individuals with disabilities. There is no question that now employers should interpret the concept of “disability” broadly, and that the focus of the employer should be less on whether or not the employee is disabled and more on whether it has policies and procedures in place to reasonably accommodate the disability.

Change in Employer Wage Notification Requirements

Effective April 9, 2011 the New York Wage Theft Protection Act of 2010 has substantially modified the existing wage notification requirements under New York Labor Law Section 195.

Under prior law, an employer had to simply notify an employee at the time of hiring of the rate of pay and pay date, and obtain a written acknowledgment from the employee. Employers were also required to provide written notification of any changes at least seven days in advance and provide an employee with every wage payment: a statement listing gross wages, deductions net wages. Payroll records were to be maintained for not less than three years.

Now, however, all employers in New York State, regardless of size, must provide written notice to each employee upon hire and annually thereafter, by no later than February 1 ,of the following:

• The rate of pay, both straight time and, if applicable, the overtime rate
• The basis of pay (e.g., hourly, salary, shift, day, week, month)
• Any allowances claimed as part of minimum wage (e.g., tip allowance, meal allowance, lodging allowance )
• The employer's regular pay date
• The name of the employer, including any d/b/a's
• The physical address of the employer and, if different, the mailing address
• The employer's telephone number
• Any "other information" deemed "material and necessary" by the NYS Commissioner of Labor

Further,

• The notice must be written in English and in the employee's primary language as defined in the statute.
• The notice must be provided in duplicate so that the employee may retain a copy.
• The employer must obtain a signed and dated acknowledgement from the employee of receipt of the notice and that it was in the employee's primary language. The acknowledgements must be obtained each and every time an employee is provided with a notice (for example, raises, annual February notices, etc.). The acknowledgements must be retained by the employer for six (6) years.

The penalties for non-compliance and non-payment of wages have also drastically changed. Employers that fail to pay wages as required are subject to a civil fine of $500 for each such failure. Employers failing to pay wages as required are guilty of a misdemeanor and can be fined from $500 to $20,000, or imprisoned for up to one year plus one day OR BOTH. An employee who is not provided the required notifications within ten business days of his first day of employment may recover in a civil action damages of $50 for each workweek that the violations occurred or continue to occur, to a maximum of $2,500, plus costs and reasonable attorneys' fees.

Moreover, in any action brought against the employer, if the employee prevails, the court will allow the employee ordinary costs, expenses (not to exceed $50), plus reasonable attorneys' fees. An additional amount, equal to 100% of the wages due, will also be awarded as liquidated damages.

Employers are well-advised to comply with the new law or risk very substantial penalties.

When Your Private Social Networking Site Isn't So Private

One day, Kathleen Romano fell off her chair at work. As a result, she claimed that she sustained "serious permanent personal injuries." She alleged that the chair was defective and sued the manufacturer and the distributor of the chair.

Of course Kathleen also somehow felt compelled to show on her Facebook and MySpace pages just how active her lifestyle was, and where she had recently traveled to--all during the time that she claimed her serious injuries prohibited such activity!

So, based on what it saw on Kathleen's public pages, the defendant manufacturer naturally subpoened Facebook and MySpace to obtain copies of her profiles, including those portions that were not publicly available and marked as "private" using the sites' privacy settings. Although Facebook attempted to object to the Subpoena, it was ultimately compelled to produce not only the current and historical Facebook and MySpace pages, but also the deleted pages and the pages designated by Kathleen as only available to "friends" and connections.

The trial court recently decided in Romano v. Steelcase, Inc. that the production of such information was not a violation of her privacy because the publicly available information, namely the photos of her active lifestyle, supported the belief that the information sought by the Subpoena might be relevant to Kathleen's inconsistent claim of serious injury.

This appears to be a case of first impression. As the trial court pointed out, to date, there does not appear to be a case in New York directly addressing the privacy issue raised. Citing instead a Canadian court case also involving a Facebook page, the court explained that "to permit a party claiming very substantial damages for loss of enjoyment of life to hide behind self-set privacy controls on a website . . . risks depriving the opposite party of access to material that may be relevant to ensuring a fair trial." Well, now there is case precedent in New York and I am sure we will be seeing other cases on this issue soon.

Second Circuit Certifies Question of Improper Solicitation of Business Clients

On August 24, 2010, the Second Circuit Court of Appeals certified the following question to the New York Court of Appeals: "What degree of participation in a new employer's solicitation of a former employer's client by a voluntary seller of that client's good will constitutes improper solicitation?" The question is a good one because it comes up frequently enough in business transactions . . . and litigation . . . to warrant clarification from New York's highest court.

In Bessemer Trust Company, N.A. v. Branin, decided by the Second Circuit on August 24, 2010, an investment firm commenced an action against one of its former executives because he solicited the firm's clients after he left the firm. The investment firm argued that the solicitation was improper because the former executive, and his partners, had sold their firm to the plaintiff, and the sale included the executive's firm's clients and goodwill.

Following a trial on the merits, the federal appeals court held that the former executive was liable under New York's Mohawk doctrine, which prohibits a seller of a client's good will from improperly soliciting business from that client after the client's business is transferred to the purchaser.

In posing its question to the New York Court of Appeals, however, the Second Circuit was concerned about how its decision or the analysis would be affected if (a) the seller was actively developing and participating in a plan whereby others at the seller's new company solicit the client in response to inquiries from the client, and (b) the seller participates in solicitation meetings, but the seller's role is "passive."

It will be interesting to see how the Court of Appeals decides. Stay tuned.

Gain on Sale of House Not Excluded . . . New House Not the Same as Old House

The Federal Tax Code allows a married couple to exclude the first $500,000 of capital gain upon the sale of a home if they have occupied the home as a principal residence for at least two out of five years preceding the sale. But what if the homeowners decide to one day build a new house on the same property, are they still entitled to the capital gain exclusion? Apparently not, according to the IRS. And that is exactly what happened in Gates v. Commissioner of Internal Revenue where the U.S. Tax Court sided with the IRS on July 1, 2010.

Mr. Gates resided in his home for the requisite period of time before he married Mrs. Gates. When they married, they moved out, demolished the old house and built a new one. The problem was that they never lived in the new house after it was built. They sold it eventually for $1.1 million, and realized a gain of $591,405 from the sale.

The IRS ruled that the Gates were not entitled to the capital gain exclusion because they should have lived in the house that was sold in order to be entitled to the exclusion. It is not enough to sell just any structure on the same parcel of real estate.

The problem with the decision and the IRS ruling is that it begs the question: how much renovation, reconstruction or remodeling can you do to your home before the house is considered a "different" structure? Given the recent construction boom of the past few years, the decision will significantly impact thousands of taxpayers.

Until there is further clarification from the IRS or the courts, it may be wise to live in a newly renovated or constructed dwelling for at least another two years before selling . . . if possible.

Faragher-Ellerth Defense No Longer Available to Employers Under New York City Human Rights Law

In May 2010, the New York Court of Appeals in Zakrzewska v. The New School held that an employer’s defense to a claim of harassment when the employer is able to demonstrate that it took reasonable steps to prevent or correct the harassment and that the employee unreasonable failed to take advantage of the corrective opportunity to avoid the harm, commonly known as the Faragher-Ellerth Defense, is not applicable under the New York City Human Rights Law. NYC Admin Code 8-107.

New York’s highest court determined that the language of the statute imposes liability on an employer where (1) the offending employee exercised managerial or supervisory responsibility, (2) the employer knew of the offending employee’s discriminatory conduct and acquiesced in it or failed to immediate corrective action, and (3) the employer should have known of the conduct, and failed to exercise reasonable diligence to prevent it. The statutory language being clear, the court said, the fact that an employee who has not suffered any adverse employment action did not avail herself of an opportunity to avoid harm after an employer took steps to prevent the harassment, is irrelevant.

This is not the first time the courts have interpreted the New York City anti-discrimination laws differently from the New York State and federal laws.