Weakening the Faragher/Ellerth Defense, The Fifth Circuit Holds an Employer Strictly Liable for Sexual Harassment When the Harasser is "Proxy" for the Employer

The normally conservative United States Court of Appeals for the Fifth Circuit narrowed the parameters of the Faragher/Ellerth affirmative defense in Ackel v. National Communications, Inc., 339 F.3d 376 (5th Cir. 2003), holding that the defense is unavailable when the harassing employee is the "proxy" for the employer. In Ackel, four female plaintiffs asserted Title VII sexual harassment claims against their former employer, National Communication. The plaintiffs alleged that National's president engaged in sexually harassing behavior and that National retaliated against them for engaging in protected conduct.

Although the district court granted summary judgment on all claims, the Fifth Circuit reversed on the sexual harassment claims. While accepting National's argument that the four plaintiffs had not established a tangible job detriment, the Fifth Circuit panel held that an employer may not avail itself of the Faragher/Ellerth affirmative defense in two distinct circumstances: (1) when a tangible job detriment (e.g. termination, suspension, demotion, transfer, etc.) has occurred, or (2) when the harassing employee holds a sufficiently high position in the management hierarchy so as to speak for the corporate employer.

If the Ackel decision survives en banc review by the Fifth Circuit and scrutiny by the United States Supreme Court, it will represent a dramatic expansion of an employer's potential liability for the sexually harassing behavior of a senior manager. The affirmative defense announced by the Supreme Court in its Faragher and Ellerth decisions shielded the employer from strict liability when the sexually harassing behavior did not result in a tangible job detriment. If not overturned or limited, the Ackel decision will create a new battleground in which claimant attorneys seek to exalt the alleged harasser's job duties to that of "proxy."
 

The Wages of Sin: Private Litigants Demonstrate Renewed Zeal for Fair Labor Standards Act Collective Actions

Inventive plaintiffs' attorneys have demonstrated an increasing affection for "collective action" suits brought pursuant to Section 216(b) of the Fair Labor Standards Act ("FLSA") (29 U.S.C. § 216(b)). Section 216(b) collective actions differ from Fed.R.Civ.P. 23 "class actions" in one major respect. In a Rule 23 proceeding, the putative class is described. If the action is sustainable as a class action, each person within the description "is considered to be a class member and, as such, is bound by the judgment, whether favorable or unfavorable unless he has 'opted out' of the suit." LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288 (5th Cir. 1975). In a Section 216(b) FLSA action, no person can become a party plaintiff "...and no person will be bound or may benefit from judgment unless he has affirmatively 'opted into' the class" via written, filed consent. LaChapelle at 288.

The "opt in" procedure was implemented by Congress to limit the burden on employers in circumstances where the "opt out" rule could financially jeopardize a company. Nonetheless, media advertising and the Internet have dramatically increased the ability of the filing attorney to reach potential Section 216(b) "opt in" plaintiffs. The January 10, 2004 Business Section of The Dallas Morning News reported that 3,300 of 7,000 past or present Radio Shack store managers had opted into a Section 216(b) action. The collective action upon behalf of the store managers argues that the managers should be paid overtime for work beyond 40 hours because they devote most of their time to sales rather than managerial duties. As noted in The Dallas Morning News article, retailers Wal-Mart, Bombay Co., Victoria's Secret, Pep Boys, and Starbucks have been hit with similar suits.

The proliferation of Section 216(b) collective actions counsels wise employers to audit compliance with Fair Labor Standards Act requirements. In particular, employers should review the job duties of employees classified as "exempt" to ensure compliance with the exemptions. Similarly, employers should determine if they are vulnerable to Section 216(b) suits arising from claims by hourly workers that they have not been properly compensated for "off the clock" hours devoted to reconciling paperwork.
 

Under the "Deemed Export Rule," Your Foreign National Employees and Agents May Cost You $1,000,000 In Fines

The "deemed export" rule is designed to protect the national security of the United States against the "virtual" export of controlled software or technology to foreign nationals, including employees and agents, when the "physical" export of that same controlled software or technology would require a license if shipped to the country of permanent residence of that foreign national. Under the Deemed Export Rule of the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce, exposure of controlled technology or software to both foreign nationals in the U.S. and foreign nationals engaged by foreign subsidiaries, affiliates, branches, and divisions of U.S. companies is "deemed" the equivalent of the physical export of the goods. Violations of the Deemed Export Rule may result in significant civil and criminal penalties.

For purposes of the Deemed Export Rule, a foreign national is any person who is not a U.S. citizen, lawful permanent resident, political asylee, or "protected individual" such as political refugees and political asylum holders. Holders of H1-B visas and other temporary visas are considered foreign nationals. If the foreign national will be exposed to controlled technology or software, then an export license must be obtained before the foreign national commences work. Importantly, if an export license has already been obtained and the scope of the foreign national's exposure to controlled technology is expanded, an additional license may be required.

Violations of export control laws carry potentially severe penalties. Administrative penalties include mandatory export compliance programs, suspension or denial of export license privileges. Deportation of the foreign national may also occur. Civil penalties include fines of up to $11,000 per violation and $120,000 per violation of national security controls. Criminal penalties include fines of the greater of 5x the value of the export or $50,000, and corporate fines of $1,000,000 for willful violations. Penalties for individuals could reach $250,000 or imprisonment of up to 10 years for willful violations, or both.

For more information about the "Deemed Export Rule," contact Jules Brenner at Jules.Brenner@Strasburger.com.

     
STRASBURGER & PRICE, LLP  •  DISCLAIMER
This publication provides information on general legal issues and is not intended to provide advice on any specific legal matters.