RETAILER. In This Issue:

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1 EXECUTIVE EDITOR Tom Davis, Birmingham, AL PUBLICATIONS EDITOR Robin Shea, Winston-Salem, NC MARKETING DIRECTOR Victoria Whitaker, Atlanta, GA In This Issue: Retailers Beware Four Trends About Which Retailers Should Take Note Supreme Court to Decide Employers Liability For Supervisor Bias Atlanta Asheville Austin Birmingham Columbia Fairfax Jacksonville Kansas City Lakeland Macon Nashville Tampa Winston-Salem By Toby Dykes and Tamula Yelling Birmingham, AL Retailers Beware Minimum Wage In January and February 2007, the U.S. House of Representatives and the Senate passed bills that would phase in, over a two-year period, an increase in the federal minimum wage from $5.15 an hour to $7.25 an hour. No final bill has passed, and President Bush has not approved the increase. However, it is expected that President Bush will approve an increase if the bill includes tax breaks for small businesses. In the November 2006 general elections, voters in Arizona, Colorado, Missouri, Montana, and Ohio approved state minimum wage increases that became effective on January 1, Nevada also passed a minimum wage increase in the November 2006 general election that became effective on November 28, Because there is no federal preemption for wage-hour laws, retailers are subject to both the state and federal wage-hour laws and must pay the higher of the federal or state minimum wage. Therefore, retailers must be aware of the changes to the federal minimum wage and any changes to applicable state minimum wages. (Retailers in the hospitality industry should also be aware of the impact of state minimum wages on tip credits. For a more in-depth discussion of this issue, click here (Missouri) and here (North Carolina).) Religion and Drug Testing Toll free More retailers are facing job applicants who say that they failed or will fail postoffer drug tests because they use illegal drugs for religious reasons. Title VII requires an employer to reasonably accommodate an employee s or job applicant s religious observances or practices unless it can demonstrate that doing so would constitute an undue hardship on the business. Typically, making an exception to a valid drug testing provision would be an undue hardship. However, retailers should be aware of state laws providing protection for certain drug uses as part of religious ceremonies, and retailers should at least discuss with the applicant

2 whether any accommodation can be made regarding the drug testing. For example, in Toledo v. Nobel-Sysco, Inc., the U.S. Court of Appeals for the Tenth Circuit (Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming) reversed dismissal of a Title VII religious discrimination lawsuit in which the employer refused to hire a truck driver based on his religious use of peyote. The court s finding that the employer had violated Title VII was based on two factors: (1) in the applicant s state, use of peyote by members of the Native American Church was not illegal, and (2) the employer did not make any attempt to accommodate the applicant, such as requiring him to take a day off after each ceremony in which peyote was used. NRA-Backed Florida Bill Would Protect Guns in Parked Vehicles Legislation that is currently pending in Florida would make it unlawful for most public or private entities to prohibit employees, customers, or other invitees from bringing guns or other undesirable-but-legal property onto the premises in their vehicles. The legislation, House Bill 1417/Senate Bill 2356, entitled Individual Personal Private Property Protection Act of 2007, is backed by the National Rifle Association but potentially has sweeping implications for other types of property carried in vehicles. To be protected, the property must be legal, rightfully owned by the individual, and locked in or locked to the vehicle. The legislation also prohibits vehicle searches for such property unless conducted by on-duty law enforcement personnel based upon due process and [in compliance with] constitutional protections. If the legislation passes, it will have a dramatic effect on all employers, but particularly those in the retail industry, who may have a heightened need to police their parking lots for employeeand customer-relations reasons. Arguably, the bill would protect not only legal weapons, but also material that is legal but might be considered harassing from a racial, sexual, or other standpoint, or even hazardous. The bill does authorize employers to require employees (but not customers or invitees) to keep such items in a closed trunk, glove compartment, or other area that is not open to public view. Most alarmingly, the bill prohibits termination of or discrimination against an employee, or expulsion of a customer or invitee, who exercises his right to bear arms or the right of self-defense as long as a firearm is never exhibited on company property for any reason other than lawful defensive purposes. (Emphasis added.) In other words, the bill seems to say that using a weapon in self-defense is protected activity, which puts businesses in the impossible position of determining who was the instigator and who was the defender before taking action. To read the bill, lick here. This is an evolving issue being debated in other states as well.

3 Four Trends About Which Retailers Should Take Note Fiscal Year Charge Statistics: 2006 and 2005 Top Ten States for Federal Court Employment Case Filings: 2006 and 2005

4 Top Ten States for Federal Court Case Filings by the EEOC on Behalf of Individuals:* 2006 and 2005 * Of the suits filed by the EEOC in 2005, sex discrimination (46.9%) and retaliation (35.8%) were alleged most often. Race discrimination (21.1%), disability discrimination (12.8%), age discrimination (11.2%) and national origin discrimination (7.8%) followed. The total exceeds 100% because the suits were sometimes based on multiple grounds. Similar data for 2006 is not available. Of the suits filed by the EEOC in 2006, 294 were for violations of Title VII, 42 were for violations of the ADA, 50 were for violations of the ADEA, 10 were for violations of the EPA, and 22 were for violations of multiple statutes. Top Ten States for FLSA Case Filings: 2006 and 2005 Click images to enlarge.

5 Supreme Court To Decide Employers Liability For Supervisor Bias The U.S. Supreme Court has agreed to hear a case involving an employer s liability for discriminatory discharge when it relies upon allegedly biased information provided by a supervisor. The case, EEOC v. BCI Coca Cola Bottling Co. of Los Angeles, has significant implications for retailers, who often have human resources management at centralized locations who must rely on information provided by remote front-line supervisors. Stephen Peters, who is African-American, worked as a merchandiser for BCI out of its Albuquerque, New Mexico, location. As the most senior merchandiser in his district, he had a preferred schedule of not working on weekends. Peters had two direct supervisors, one of whom was Cesar Grado. The human resources manager at the Albuquerque location reported to Pat Edgar, who worked at BCI's location in Phoenix, Arizona. In September 2001, the Albuquerque location faced a scheduling crisis during a busy promotional weekend, and Peters was scheduled to work on a Sunday. Peters claimed that he was ill and did not report for work. Grado reported this to the Albuquerque human resources manager, who reported it to Edgar, her superior in Phoenix. Based on Grado s information, Edgar decided to terminate Peters for insubordination. At the time that the termination decision was made, neither the Albuquerque human resources manager nor Edgar knew Peters or knew his race. Moreover, Peters personnel file noted that he had previously been placed on suspension and a final warning for insubordination by a different supervisor. Peters filed an EEOC charge alleging race discrimination, and the EEOC subsequently filed suit against BCI on his behalf. Even though the individuals who made the decision to terminate Peters had no known racial motive, the EEOC contended that the employer was nonetheless liable under a cat's paw or rubber stamp theory, in which an employer may be liable if it relies on information from or the opinion of a subordinate who has a racial motive. The EEOC claimed that Grado, who had provided the information about Peters to the decisionmakers, was biased against African-American employees. The agency argued that Grado s alleged bias was properly imputed to BCI because Grado was Edgar's sole source of information about the events surrounding the termination decision. In support of its argument, the EEOC presented evidence, including affidavits from Hispanic and African-American employees, indicating that Grado treated African-American employees less favorably than employees of other races. There was also testimony that, in a conversation about Peters legal action, Grado may have used the n word or another racial epithet to describe Peters.

6 The district (trial-level) court granted summary judgment in favor of BCI, but the U.S. Court of Appeals for the Tenth Circuit reversed, finding that Grado s alleged remarks and behavior suggested that there might be a pattern of racial bias that could carry over into disciplinary matters. To see a copy of the Tenth Circuit decision, click here. The appeals court said that a plaintiff needs only to establish that the biased supervisor s reports caused the adverse action. The employer can break that causal connection by conducting its own independent investigation of the supervisor s allegations. The appeals court found that Edgar failed to take even the basic step of asking Peters for his side of the story. As Edgar did not conduct her own independent investigation, she could depend only on Grado s report and her subordinate s review of Peters personnel file. Therefore, Grado s report caused Peters termination. Practical Advice: If the Supreme Court agrees with the Court of Appeals, employers can be held liable for relying on the information or advice of a biased supervisor. This can present difficulty for all employers, but especially for those in the retail industry, who often have multiple small locations with no onsite human resources manager. In any event, the case highlights the fact that employers should engage in at least some independent verification of the supervisor s report or recommendations. Simply reviewing an employee's personnel file may not be enough. At the very least, the accused employee should have an opportunity to present his or her side of the story to the decisionmaker. If possible, it is advisable to conduct a fuller independent review of the facts or provide an internal appeals process in which the employee will get his or her day in court before going to court. *** Note to Retailers in California *** Constangy has lawyers with offices in Los Angeles and Ventura counties that can provide workplace legal services throughout all of California, including Orange, Riverside, and San Bernardino counties. Phone toll-free, , for assistance. For More Information: If you would like further information, please contact Toby Dykes at , Tamula Yelling at , or your Constangy attorney.