State Specific Developments: February 2013

Iowa: Iowa taxpayers will pay approximately $448,000 to settle an age discrimination lawsuit that an 81-year old doctor filed against a state home for the disabled. The doctor was fired after working eight days at the state home. The doctor claims that he was asked age-related questions during his job interview, was not provided adequate training when he was hired, and was paid thousands less than his posted pay grade. In June, a jury awarded the doctor $480,000 in lost wages, damages, and attorney fees. The state considered appealing, then decided to settle the case for less than the jury award. The state will pay the doctor $147,012 for past lost wages; $1,464 to settle an equal pay claim; $157,357 for compensatory damages for past emotional stress; and $142,422 to the doctor’s attorneys.

Kansas: A former semi-nude dancer recently obtained a favorable ruling from the Kansas Supreme Court over her former employer, Club Orleans in Topeka, Kansas. The dancer argued that Club Orleans exercised so much control over her that it could not contend she was an independent contractor and deny her unemployment benefits after her tenure as a dancer ended. The Kansas Supreme Court agreed that Club Orleans exercised enough control over the dancer to create an employment relationship, writing: “Ample substantial competent evidence in the record before us … demonstrates that Milano’s possessed such a right of control over the dancers at Club Orleans. Most telling, the house set various rules, and dancers’ violations of those rules were punishable by fines and termination.” The decision is not necessarily a novel one, but it stands as a firm reminder that businesses must carefully manage their relationships with independent contractors to avoid transforming them into employees.

Minnesota: On January 14, 2013, in Jancik v. Subway of Buffalo, Inc., the Minnesota Court of Appeals ruled that it was reasonable for a fast food restaurant to ban smoking on its premises “to ensure that its food is not contaminated by tobacco smells.” The court’s decision implies that, depending on an employer’s line of business, a policy banning smoking on the premises may be reasonable and approved on this basis. The court’s decision also suggests that if an employee knowingly violates her employer’s reasonable “no smoking” policy, she has engaged in misconduct, which may disqualify her for unemployment benefits.

Missouri: In January, Representative Doug Funderburk introduced HB 286 in the Missouri House of Representatives, which would prohibit employers from asking current or prospective employees to provide specified information to gain access to a social networking website where such employees maintain an account or profile. “Social networking website” is defined in the bill as an internet-based service that allows individuals to construct a public or semi-public profile within the website, to create a list of other users with whom the individual shares a connection, and to view and navigate their list of connections and those made by others within the system. “Social networking website” does not include electronic mail.

Montana: This month, the Montana federal district court granted a motion to dismiss a defamation claim brought by a former employee which alleged that his former employer defamed him by statements made in an unemployment proceeding and during a workplace investigation. The employer allegedly told employees during an investigation that the employee was operating equipment dangerously, terminated him for this reason, and then reported the rationale in the unemployment hearing. Ultimately, it terminated his employment for this reason and integrity. The court reasoned that because the statements were made during the investigation that led to termination, the alleged defamatory statements were inextricably intertwined with the discharge, and therefore, the Wrongful Discharge from Employment Act preempted it. Moreover, the court noted that the statements in the unemployment proceedings would be also be preempted because they would not have been made “but for” the discharge. Finally, the court observed that statements in an unemployment proceeding are privileged as statements made in an official proceeding.

North Dakota: A convicted sex offender brought a Section 1983 claim against a state contractor that evaluated and treated inmates and probationers in the state’s care. The petitioner claimed that the contractor and its employees deprived him of his liberty by testing him in an unfair manner and mischaracterizing his statements to establish a stronger basis for his civil commitment. The court dismissed the claims against the contractor and its employees on grounds that they were engaged to perform official duties, performed those duties under color of state law, and therefore were shielded by qualified immunity.

South Dakota: The Eighth Circuit Court of Appeals upheld the district court’s summary judgment decision holding that the University of South Dakota (“USD”) Sanford School of Medicine lacked the capacity to be sued under state law and Federal Rule of Civil Procedure 17(b). Rule 17(b) defines when a party has the capacity to sue or be sued in federal court. The Rule provides that the capacity of an unincorporated unit of government, like the USD School of Medicine, is determined in most cases “by the law of the state where the court is located.” The South Dakota legislature created USD and later its School of Medicine but did not give USD the power to sue or be sued. Instead, USD was placed under the control of the Board of Regents. Thus, only the Board of Regents has the personal capacity to sue or be sued under South Dakota law.

Wyoming: The Wyoming House and Senate have passed legislation that specifically excludes accrued vacation leave from payout on termination of employment. Accrued vacation may be forfeited upon termination of employment as long as the employer has adopted such a policy in writing and the written policies are acknowledged in writing by the employee. HB79 will now go to Governor Matt Mead for his consideration.

Read the Full Newsletter: Labor & Employment Law Alert February 27, 2013