3.24.2010

Ohio Supreme Court Upholds Law Limiting Workplace Intentional Torts

In two separate decisions issued on March 23, 2010, the Supreme Court of Ohio upheld the constitutionality of an Ohio law that limits the ability of workers injured on the job to sue their employers for “workplace intentional torts.” The statute at issue, Ohio Revised Code 2745.01, states that a worker bringing an intentional tort claim against his or her employer must prove that the employer acted “with a deliberate intent to cause injury” to the worker.

In Kaminski v Metal & Wire Products Co., the Court held in a 6-1 decision that R.C. 2745.01 did not violate the Ohio Constitution. The plaintiff asked the Court to consider her claim under the Court’s previous standard stated in Fyffe v. Jeno’s Inc., which held that an injured worker may sue for an intentional tort when she can prove that her employer knew about a workplace condition that was “substantially certain to cause injury” to the worker. The court rejected her argument, noting that the Ohio Constitution grants the legislature wide authority to enact laws regulating wages, hours and workplace conditions. As a result, the legislature did not exceed its authority by enacting R.C. 2745.01 and limiting workplace intentional torts.

In a separate decision, Stetter v. R.J. Corman Derailment Services, the Court answered a series of state law questions submitted by the U.S. District Court for the Northern District of Ohio. It found that R.C. 2745.01 does not violate the provisions of the Ohio Constitution that guarantee trial by jury, a remedy for damages, open courts, due process, equal protection of the laws, or the separation of powers between the legislative and judicial branches of government. The Court also held that while R.C. 2745.01 restricts the right of a worker to bring an intentional tort claim against the employer, it does not eliminate that right entirely.

Kaminski and Stetter are a resounding victory for R.C. 2745.01 and its limitation on workplace intentional torts. The decisions also bring Ohio in line with a large majority of states that apply standards the same as or similar to those contained in R.C. 2745.01. Additionally, the decisions preserve and strengthen Ohio’s “no-fault” workers’ compensation system by assuring that the system maintains a balance of sacrifices between employers and employees.

Author: Nathan Pangrace
            216.615.4825
            npangrace@ralaw.com

3.19.2010

Severance Payments Not Considered Taxable Under FICA

On February 23, 2010, the United States District Court for the Western District of Michigan, Southern Division, decided the case of In re: Quality Stores, Inc., et al., Debtors; United States of America v. Quality Stores, Inc., 2010 WL 679136, holding that severance payments made by Quality Stores to employees in connection with store closings are not taxable for purposes of Federal Insurance Contributions Act (FICA) taxation. Specifically, the court found that when severance payments are made because an employee involuntary left the company due to a direct reduction in workforce or the discontinuance of a plant or operation, those payments were not FICA-qualifying “wages.” The basis for the ruling is that severance payments fall within the exception found in 26 U.S.C. § 3402(o)(2) for “supplemental unemployment compensation benefits.”

In reaching this ruling, the District Court reasoned that as a general matter in enacting the FICA provisions of the Tax Code, Congress intended to impose FICA taxes on a broad range of employer-furnished remuneration; however, that purpose is not unlimited. Specifically, the Court pointed out that the statutory sections clearly designate that a line is to be drawn on the taxation of employee financial benefits; otherwise, such benefits become the basis of the very taxes collected to return to the employee as benefits. Ultimately, the Court was persuaded that the severance payments at issue were properly viewed as wage-replacement social benefits, not taxable remuneration for the employee’s services or wages and, therefore, they were not subject to taxation for FICA purposes.

Stay tuned. This issue can be appealed to the Sixth Circuit Court of Appeals by the United States.

Author: Aretta Bernard
            330.849.6630
            abernard@ralaw.com

3.11.2010

Religious School Teacher Does Not Qualify for “Ministerial Exception” Under the ADA

On March 9, 2010, the Sixth Circuit Court of Appeals issued its decision in EEOC v. Hosanna-Tabor Evangelical Lutheran Church and School, Sixth Cir. Case No. 09-1134/1135, vacating an award of summary judgment in favor of the employer.

This case arose out of the termination of Plaintiff Cheryl Perich’s employment as a teacher at Hossana-Tabor School. Hossana-Tabor School, which is affiliated with a Luthern Church, was advertised as providing a “Christ-centered education.” Ms. Perich taught both a religion class and secular subjects using secular textbooks. She also led each class in prayer three times a day. The court concluded that Ms. Perich’s activities devoted to religion consumed approximately 45 minutes of the seven-hour school day.

After Ms. Perich filed a complaint against Hossana-Tabor alleging retaliation in violation of the Americans with Disabilities Act (ADA), the United States District Court granted the employer’s motion for summary judgment, concluding that it could not inquire into the plaintiff’s claims because they fell within the “ministerial exception” to the ADA. The “ministerial exception” allows religious entities to give employment preference to individuals of a particular religion and to require that applicants and employees conform to the religious tenants of the organization. For the ministerial exception to bar an employment discrimination claim, (1) the employer must be a religious institution, and (2) the employee must be a ministerial employee.

The Sixth Circuit Court of Appeals, in a decision of first impression in the circuit, held that Ms. Perich was improperly classified as a ministerial employee. In making its decision, the court emphasized that Ms. Perich’s “primary duties” were secular. The court also concluded that in analyzing Ms. Perich’s ADA claim, the District Court would not improperly be required to analyze church doctrine. This decision serves as a reminder to employers to thoughtfully and carefully analyze any decision to rely upon exceptions to statutes such as the ADA. As demonstrated by this court’s decision, these exceptions are often narrowly construed to protect employees.

Author: Ryan Bonina
            614.723.2012
            rbonina@ralaw.com

3.08.2010

Supreme Court of Ohio Rules that Statutory Penalties for Employer’s Violation of Prevailing Wage Laws are Mandatory

On March 2, 2010, the Supreme Court of Ohio ruled that statutory penalties for an employer’s violation of Ohio’s prevailing wage statute are mandatory. In Bergman v. Monarch Constr. Co., Slip Op. 2010 Ohio 622, the Court considered an employee-initiated lawsuit against a contractor for failure to pay prevailing wages on a public improvement project for Miami University. The Court held that when judgment is rendered in favor of employees, courts must assess damages for the amount of unpaid or underpaid wages and also the financial penalties set forth in Ohio Revised Code § 4115.10(A). The Supreme Court’s decision reversed the ruling of the 12th District Court of Appeals.

Ohio’s prevailing wage laws generally require that workers employed on public improvement construction projects must be paid according to a wage scale approximating the hourly rates received by union workers performing similar work in that particular area of the state. In the case before the Supreme Court, the workers filed a private lawsuit. Ohio’s statute also permits workers to file claims with the Ohio Department of Commerce, which has investigatory powers.

The lawsuit considered by the Supreme Court was brought by masonry workers and named Miami University, Monarch (the general contractor), and the subcontractor that employed the masons as defendants. The trial court found in favor of the masons and awarded an amount of underpaid wages. The trial court did not assess penalties against Monarch in an amount equal to 25 percent of the underpaid wages pursuant to Ohio Revised Code 4115.10(A) or a penalty equal to 75 percent of the underpaid wages payable to the Ohio Department of Commerce. The workers appealed, and the 12th District Court of Appeals upheld the trial court’s decision and determined that court’s are granted discretion whether to assess the penalties set forth in Ohio Revised Code 4115.10(A).

The Supreme Court determined that courts do not have discretion to assess penalties; rather, the penalty provision of the statute is mandatory. The Supreme Court stated:
“To deny an underpaid employee the additional 25 percent penalty is contrary to the language of R.C. 4115.10(A). ... The statute is also clear in its direction with regard to the 75 percent penalty: it shall be paid to the director of commerce, and it is used for enforcement of the prevailing-wage laws. ... In this case, the 'clear and unequivocal legislative intent' as expressed in the statute is that the 75 percent penalty is to be paid whenever the director of commerce determines that there has been a prevailing-wage underpayment and the determination becomes final.”

Based on this decision, employers and contractors generally cannot avoid the penalty provisions of Ohio Revised Code 4115.10(A), which drastically increases monetary liability for violations of prevailing wage laws. There is, however, one exception to the mandatory nature of the assessment of penalties. Pursuant to Ohio Revised Code § 4115.13(C), if the Director of the Department of Commerce finds that an underpayment of wages was the result of a misinterpretation of the prevailing-wage statutes or an erroneous preparation of the payroll documents, no further proceedings will occur and no penalties are assessed if the employer also makes restitution in the amount of the underpaid wages.

Author: Jon Secrest
            614.723.2029
            jsecrest@ralaw.com

3.02.2010

Hiring over 40 doesn't mean they cannot sue for age discrimination

Many employers believe that one of the best defenses in an age discrimination case is the fact that the plaintiff was hired when he or she was over the age of 40. That is, the thought is that employers clearly could not be prejudiced against older employees if they are willing to hire employees already within the protected age class. The recent case of Hidy Motors from the second appellate district in Ohio warns otherwise, however. Subsequent conduct by the employer that shows a discriminatory intent against an individual based upon his or her age will still trump any prior decision to hire that individual when he or she was already within the protected age class, especially when there is evidence of discrimination directed specifically at the older employee. In Hidy Motors, the defendant, a 67-year-old salesman was initially sued for violation of a non-compete agreement. He then counterclaimed for age discrimination and hostile work environment. The court reversed a prior summary judgment rendered in favor of Hidy Motors on the plaintiff’s age discrimination counterclaim.

The Hidy Motors case also helps emphasize the fact that even though a supervisor or manager may be a jerk to everybody at the facility and may use vulgar language when addressing other employees, if that particular manager or supervisor still directs specific comments towards a person and references the person’s age, there may be sufficient evidence to go forward on an age discrimination/hostile work environment claim. Such contradicts the "equal opportunity offender" defense often employed by employers to avoid the harmful effects of an abusive manager.

Hidy Motors provides several good lessons to employers. You should always counsel and/or discipline any managers or supervisors that show aggressive and abusive behavior towards their employees. It does not matter that the behavior is pointed toward all employees if some of the employees fall within a protected class. It just takes one inappropriate comment as part of that abusive behavior to lead to litigation like that in the Hidy Motors case.

Author: Charlie Smith
            614.723.2025
            csmith@ralaw.com