Northwest Business Litigation

Oregon Court of Appeals upholds arbitration clause in employment contract

The Oregon Court of Appeals has again enforced an arbitration clause in an employment contract, rejecting the employee's claim that the clause is unconscionable.  In Livingston v. Metropolitan Pediatrics, LLC, the plaintiff, a pediatrician, took issue with the conduct of his employer and other doctor members and employees related to an investigation of the clinic's child vaccine program.  He alleged he was ultimately terminated because of the concerns he expressed to his employer and government authorities. 

Plaintiff filed common law and statutory employment claims against his employer and the others in court.  The employer moved to abate the claims and compel arbitration, citing a clause in the employment agreement that required arbitration of "[a]ny controversy, dispute or disagreement arising out of or relating to this Agreement, or the breach thereof."  The trial court denied the employer's motion, ruling that the arbitration clause is "unconscionable" and, therefore, unenforceable.  The employer appealed, and the Court of Appeals last week agreed with the employer and sent the case back for arbitration of all claims.

The test for "unconscionability" in Oregon has two parts, one procedural and the other substantive.  A contract is procedurally unconscionable, and therefore not enforceable, if there is "oppression" or "surprise" in the "conditions of contract formation," but unequal bargaining power alone is insufficient for a finding of procedural unconscionability.  A contract is substantively unconscionable if the "terms" of the contract are "unreasonably" one-sided, such that their "effect" makes the parties' respective obligations "so unbalanced as to be unconscionable."

In this case, Plaintiff did not contend that the agreement was procedurally unconscionable; the Court of Appeals noted that, in any event, because plaintiff is a highly educated physician, any inequality in bargaining power was minimal.  The trial court, however, had found these aspects of the agreement substantively unconscionable:  (1)  the possibility that plaintiff would have to pay defendant's attorney fees and costs if plaintiff is unsuccessful on his "blacklisting" claim; (2)  excessive arbitration fees assessed against plaintiff; (3)  ambiguity about which set of American Arbitration Association rules would govern the arbitration; and (4) a requirement of confidentiality.  Before the Court of Appeals, plaintiff asserted these and other grounds for a finding of unconscionability and further argued that the arbitration clause should not apply to intentional torts, statutory claims, and claims against non-signatories to the employment agreement.  The Court of Appeals addressed the trial court's findings as well as the other arguments put forth by plaintiff, and held that none of the concerns arises to the level of substantive unconscionability or otherwise requires court litigation of the parties' disputes.  Central to the ruling of the Court of Appeals is the very broad language of the arbitration clause allowing for arbitration of "any controversy, dispute or disagreement."

Ninth Circuit: Tip pooling does not violate Fair Labor Standards Act.

Last month in Cumbie v. Woody Woo, Inc., the Ninth Circuit addressed whether a restaurant violates the Fair Labor Standards Act (FLSA) when, despite paying a cash wage greater than the minimum wage, it requires its wait staff to participate in a "tip pool" that redestributes some of their tips to the kitchen staff. 

Judge O'Scannlain, writing for the court, began with the default rule that an arrangement to turn over or redistribute tips is presumptively valid, unless such arrangement is forbidden by statute. The plaintiff, a server at a Portland restaurant, argued that tip pooling violates section 203(m) of the FLSA, which provides that restaurants must allow employees to keep all of their tips, except when the employee participates in a tip pool with other "customarily tipped employees."  The plaintiff argued that members of the kitchen staff are not "customarily tipped employees," thus rendering her tip pool "invalid."  The Ninth Circuit rejected the plaintiff's interpretation, finding that the FLSA "imposes conditions on taking a tip credit and does not state free standing requirements pertaining to all tipped employees."  (Emphasis in original.)

While rendering judgment for the employer here, the court hinted that the outcome may be different in situations where a restaurant pays its wait staff less than the minimum wage and utilizes a "tip credit" to make sure the employees' wages exceed the minimum wage.

Employee may be forced to arbitrate employment claims under FAA

In 2007, the Oregon Legislature amended Oregon's arbitration statute to impose an additional requirement on employers that sought to require employees to arbitrate employment-related disputes: the employer must either provide notice of the requirement at least two weeks prior to the time employee starts work, or have the employee sign the agreement in connection with a bona fide advancement. See ORS 32.620(5).  The amendment was of questionable validity because it imposed additional requirements on arbitration agreements that did not apply to contracts generally, something arguably prohibited by the Federal Arbitration Act (FAA), 9 USC § 2.  Judge Brown recently put this issue to rest in Bettencourt v. Brookdale Senior Living Communities, Inc.

Deanna Bettencourt challenged the enforceability of an arbitration agreement based on the fact that she signed it after she started work and not in connection with any advancement.  She argued that under ORS 32.620(5), the agreement was void. The defense argued that the FAA preempts Oregon law and, therefore, prohibits Oregon from imposing any additional requirements on arbitration agreements that do not apply to contracts generally.  Judge Brown agreed, finding that the FAA places arbitration agreements on the same footing as any other contract. Consequently, ORS 32.620(5), which "only renders unenforceable arbitration agreements that would otherwise be enforceable under the FAA" is invalid.  While Judge Brown's ruling eliminated one obstacle to arbitration, she ordered the parties to go to trial on whether the parties agreed to arbitrate.

Judge Brown's ruling is good news for Oregon employers who favor arbitration over going to court.  However, employers should keep in mind that there are many issues to consider before committing to arbitration - one being that the agreement to arbitrate will likely be litigated as a preliminary matter, before the parties ever get to the underlying claims.  Therefore, before running headlong into arbitration, it is a good idea to go over the pros and cons with counsel.

Oregon Court of Appeals tackles defamation claim against a clergy member

Last week, the Oregon Court of Appeals addressed a First Amendment issue that had been untouched by both the United States Supreme Court and the Oregon courts. In Tubra v. The International Church of the Foursquare Gospel, the Oregon Court of Appeals determined that the First Amendment did not divest a lower court of jurisdiction to consider a defamation claim against a church pastor.

Plaintiff was the interim pastor of Vernonia Foursquare Church.  He was appointed by Pastors Cooke and Swor, the district superintendent and supervisor.  After a permanent pastor was hired for Vernonia and plaintiff was released, Cooke and Swor drafted a letter that Swor read aloud to the Vernonia congregation regarding the circumstances surrounding plaintiff's departure. The letter accused plaintiff of misappropriation of church funds and dishonesty during his tenure as interim pastor.  Plaintiff sued Cooke, Swor and the International Church of the Foursquare Gospel for, among other things, defamation based on the letter.

After a trial on the merits, during which the jury found for plaintiff, the defendants moved for a judgment notwithstanding the verdict, arguing that the First Amendment operated to deprive the court of jurisdiction over the defamation claim.  After a hearing, the trial court agreed and overturned the jury's verdict.

The Court of Appeals reversed, concluding that church pastors are not per se exempt from defamation claims.  The court announced that the same test guiding courts in fraud cases against religious institutions should guide courts dealing with defamation claims against church pastors. Jurisdiction hinges on whether the representation at the heart of the fraud or defamation case is "purely religious as a matter of law."  If so, the First Amendment deprives the court of jurisdiction; if not, the court may hear the case. 

Determining whether a representation is purely religious involves three inquires.  First, is the defendant organization of a religious nature?  Second, does the representation itself relate to the religious beliefs and practices of the organization?  If the answers to these first two inquires are "yes," the First Amendment deprives the court of jurisdiction unless the statements were made for a "wholly secular" purpose.  Some ideas, such as "the nature of a supreme being" and "the value of prayer and worship" must always and in every context be purely religious as a matter of law.  Other ideas, however, can be religious only because the one espousing them is doing so for a religious purpose.

Here, the Court of Appeals determined that the alleged defamatory statements --that plaintiff had misappropriated money and demonstrated a willingness to lie -- did not relate to the religious beliefs and practices of the International Church of the Foursquare Gospel, and as such, were not purely religious as a matter of law. 

It's time to update your leave policies...again

In 2009, there were a myriad of changes to both federal and Oregon laws applicable to leaves of absence.  Employers that haven't done so already should be updating their leave policies to incorporate changes that are now in effect, including:

• Changes to FMLA that provide protected leave for a qualifying exigency or serious ilness or injury incurred or aggravated in the line of duty
• Changes in FMLA forms
• Changes to Oregon's Domestic Violence Leave that require employers to provide "safety accommodations"
• Oregon's enactment of a Military Family Leave law

In addition, BOLI's proposed regulations pertaining to OFLA, Military Family Leave and Domestic Violence Leave are expected to become final in the near future.

We have prepared updated policies and forms that comply with all of the new laws.  Please contact one of our employment lawyers for more information.

Washington domestic partnership law may complicate employee benefits

Washington's domestic partnership law, which went into effect on December 3, 2009, provides that for all purposes, registered domestic partners must be treated the same as married spouses, unless doing so would conflict with state law.  "Registered domestic partners" include same-sex domestic partners, and also opposite-sex domestic partners, provided one of them is at least 62 years old.

For employers, this means that employment-related benefits must be extended to the registered domestic partners of employees on the same basis as spouses -- that is, unless the benefit is governed exclusively by federal law.  FMLA is one such law; ERISA is another.  This means that employers subject to FMLA and the corresponding state leave laws (the Washington Family Leave Act,  state pregnancy disability laws, and state military leave laws) cannot count against an employee's annual FMLA entitlement any leave that is covered by state law but not FMLA.  One such example is leave taken to care for a registered domestic partner or his/her family member with a serious health condition.  A complication resulting from that difference is that employers covered by the FLSA (federal wage and hour law) cannot make deductions for partial-day absences for leave that qualifies under state law but not under FMLA.   

Another area of conflict between state and federal law exists with respect to group health plans.  To the extent group health plans are regulated under state insurance law, which is the case when the plan is funded by insurance, the benefits must be made available to the registered domestic partners of employees on the same terms as they are made available to employees' spouses.  However, self-funded plans are governed exclusively by ERISA, under which there is no requirement to provide benefits to registered domestic partners.

In practice, administering benefits in light of these differences can be complicated.  Questions should be reviewed with employment counsel.

Ninth Circuit: No jury trial and no money damages for ADA retaliation claim

In a case decided earlier this month, the Ninth Circuit held that a plaintiff claiming retailiation under the Americans with Disabilities Act is limited to equitable remedies.  In Alvarado v. Cajun Operating Co., plaintiff filed several claims against his former employer, including a claim for retaliation under the ADA.  Defendant immediately moved the court to bar plaintiff from seeking a jury trial or compensatory or punitive damages for his retaliation claim.  The district court granted the motion and the Ninth Circuit affirmed.

Remedies under the ADA are provided by the statute itself, and through the remedies assigned to it by the more general Civil Rights Act, 42 USC sec. 1981(a).  The Ninth Circuit noted that amendments to the Civil Rights Act extended compensatory and punitive damages to certain claims under the ADA, not including retaliation.  Relying on the plain language of the ADA and the exclusion of retaliation claims from those specified in the Civil Rights Act, the Ninth Circuit concluded that plaintiffs continue to be limited to equitable relief for retaliation claims. 

Ater Wynne employment law seminar: The top ten of 2009

Join Ater Wynne's Labor and Employment Group for a seminar on the year's top 10 developments in employment law  The seminar will be held at Bridgeport Brewing Company on Thursday, December 10, 2009, 8 to 11 am.

More details are available here, and at the Ater Wynne LLP web site.

EEOC issues new anti-discrimination poster

The EEOC has long required most employers to provide information to employees about federal employment discrimination laws that prohibit job discrimination based on characteristics including race, sex, and religion.  To help with compliance, the EEOC for some time has provided a poster for employers to use.

Recent law changes have caused the EEOC to release an updated version of the poster.  Among the changes contained in the November 2009 version are a revised "Disability" section that includes the Americans with Disabilities Act Amendments Act of 2008 (effective January 1, 2009), and a new "Genetics" section summarizing the employment nondiscrimination requirements of the Genetic Information Nondiscrimination Act of 2008 (GINA) (effective November 21, 2009).

The EEOC will release posters written in Spanish, Chinese and Arabic in the next few days.  Employers should replace the existing poster with the revised version immediately.  Note that the EEOC has rules regarding where the poster must be located in the work site.

Join us for a seminar on employee benefits, September 17 at Bridgeport Brewing

Ater Wynne's next Roundtable session, entitled "20/20 Benefits Planning for 2010," will be held on September 17 at Bridgeport in the Pearl.  For more information, go here.