One of the most important reasons for businesses to incorporate is to shield individual shareholders from being held liable for the business’s debts. However, the importance for small businesses to keep the business’s “life” separate from the personal lives of the owners was driven home in a recent Idaho employment case that allowed the veil to be pierced not only to reach a shareholder but a non-shareholder spouse of the owner as well.

In Lunneborg v. My Fun Life, No. 45200, 2018 Ida. LEXIS 129 (June 28, 2018), the Idaho Supreme Court allowed, among other things, a former employee to pierce the corporate veil and hold a non-shareholder liable for corporate debts, which in this case included damages and attorney fees plaintiff was awarded in his lawsuit against his former employer.

My Fun Life (“MFL”) was a multi-level marketing company that sold memberships for access to discount travel accommodations. Dan Edwards was the sole shareholder and director of MFL and his wife Carrie was not a shareholder of MFL, but she had previously served as COO of the corporation, and thereafter as its Executive Vice President. In early 2014, Edwards wanted to hire someone to take over the day-to-day operations at MFL and also wanted to hire someone who could develop nutritional products that MFL members could purchase in addition to travel accommodations. Thomas Lunneborg worked at OxyFresh,  a multi-level marketing company that sold nutritional products, among other goods,  in sales and product development for over 20 years, had experience in marketing, distributing, and bringing nutritional products to market and, in early 2014, was OxyFresh’s Vice President of Logistics and Product Development. OxyFresh’s naturopath knew Edwards was looking for an executive level employee to run MFL, and introduced Edwards and Lunneborg to one another.

Edwards offered Lunneborg a position at MFL as its COO via a letter dated April 8, 2014, which the court later determined to be an employment contract. While the letter stated that his employment would be at-will, it also provided that Lunneborg would be paid six months’ salary if he was terminated without cause. Only three months later, Edwards terminated Lunneborg for what he claimed was cause, based on information that the trial court later determined to be erroneous. Because Edwards felt he terminated Lunneborg for cause, he refused to pay Lunneborg any severance.

Lunneborg filed a complaint against MFL alleging, among other things, that MFL breached its employment contract with him by terminating him without cause and not paying him the severance and that MFL’s actions violated the Idaho Wage Claims Act, entitling him to treble damages. Lunneborg eventually filed an amended complaint to add Edwards and Carrie as defendants, asserting that he could pierce MFL’s corporate veil and reach the personal assets of both Edwards and Carrie to satisfy any potential judgment against MFL.

The case was eventually tried to the bench, which determined that Lunneborg was terminated without cause and was entitled to his $60,000 severance pay under agreement, trebled to $180,000 under the Idaho Wage Claims Act. The trial court also pierced MFL’s corporate veil and found Edwards and Carrie were jointly and severally liable to Lunneborg. After the judgment, the defendants moved to alter or amend the judgment, arguing that the court erred when it found Carrie’s separate property (as a non-shareholder in MFL) could be subject to Lunneborg’s judgment. The court denied that motion and issued an amended final judgment, granting Lunneborg costs and attorney fees of over $160,000.00 in addition to the previous damages award, which defendants appealed.

Among the issues on appeal to the Idaho Supreme Court was whether the trial court erred when it pierced MFL’s corporate veil and also whether it erred when it allowed that piercing to reach Carrie Edwards’s personal assets?

In determining to pierce the corporate veil, the trial court found that MFL did not observe any corporate formalities and that the evidence showed that the Edwards’ financial activities created a unity of interest among their closely held businesses and their personal accounts. Among other things, the trial court found that MFL did not issue any stock certificates and it did not conduct regular corporate meetings. Furthermore, Carrie testified that her family, including the Edwards’ children, received over $100,000.00 in commissions and shares of membership fees, and that Edwards and Carrie also received approximately $360,000.00 in shareholder distributions to pay their family’s personal expenses. The court also found substantial evidence that corporate credit cards were routinely used to purchase personal items and to pay for personal expenses; commingling of funds without proper accounting and reconciliation; and transfers, characterized as “loans,” without any documentation, often made between their many businesses. In short, the trial court noted that “the lines between [the Edwards’] personal assets and the assets of all their businesses, including MFL, were heavily blurred” and found a unity of interest existed between the Edwards and MFL, thus permitting the court to pierce the corporate veil.

The supreme court began its analysis by noting that to pierce the corporate veil in Idaho, a claimant must demonstrate (1) a unity of interest and ownership to a degree that the separate personalities of the [company] and individual no longer exist and (2) if the acts are treated as acts of the [company] an inequitable result would follow. The supreme court noted that the trial court followed this standard, holding that Lunneborg only needed prove one factor in order to pierce the corporate veil and hold the Edwards personally liable. The supreme court noted that it had never expressly adopted a list of factors for consideration in these cases, and declined to do so in this case but stated that when determining whether to pierce the corporate veil, trial courts are free to consider many factors, including principles of fairness and justice, “without resorting to a formulaic recitation of elements that must be proven as if the exercise were akin to a criminal case wherein the ‘elements’ must be proven by the state beyond a reasonable doubt.” It determined that the trial court had not abused its discretion in weighing these factors and affirmed that court’s ruling.

As to Carrie’s personal liability, the trial court found that she once served as both Executive Vice President and COO of MFL; that she was also intimately involved in the day-to-day financial operations of MFL and the Edwards’ other four business entities; and that she was the one who took direct action in managing these businesses’ affairs. It also found that she also played a role in Lunneborg’s initial hiring, including attending meetings during his recruiting period and directly communicating with him in the days prior to his termination. The trial court ultimately concluded that Carrie exercised ample control over MFL to warrant piercing the corporate veil to reach her separate property despite her not being a shareholder. Specifically, the court found that Carrie’s actions in moving the money around were “the most important and most significant disregard of MFL’s corporate entity.”

In reviewing the trial court’s ruling regarding Carrie, the supreme court first noted that whether a non-shareholder can be liable for the debts of a corporation was a matter of first impression in Idaho and held that it was adopting the majority view in the United States that a non-shareholder can be held liable and stated “in these circumstances, when a claimant seeks to hold a non-shareholder liable for corporate debts, the court may look to a range of evidence to consider whether fairness dictates allowing recovery against a non-shareholder-officer, with the primary consideration being the element of control or influence exercised by that person in the affairs of the corporation.” It stated that the trial court had determined that despite the fact that Carrie was a non-shareholder, she had extensive financial control of MFL, and was an integral part of the corporation. It found that the trial court’s findings were supported by substantial evidence and its holding was consistent with other jurisdictions that have permitted piercing the corporate veil when an individual exercises sufficient control over the corporation, despite their status as a non-shareholder. As such, it determined that the trial court did not abuse its discretion in piercing the corporate veil to reach Carrie’s separate property and affirmed that court’s decision.

This ruling should be a cautionary tale to all small, closely-held businesses, especially family-owned ones, not just in Idaho but everywhere, to keep the lives of the business and the family separated to avoid potentially catastrophic consequences.


In Fiorentini v. Paul Revere Life Insurance Company, No. 17-3137, 2018 U.S. App. LEXIS 16741 (7th Cir. June 21, 2018), the Seventh Circuit determined that a business owner that had once been receiving total disability benefits but had since returned to work was not eligible for continued total disability benefits despite his argument that he was not able to perform all his job duties because he was unable to what it takes to generate new business.

In 1982, Henry Fiorentini founded Panatech Computer Management, Inc., a small information-technology company that specializes in providing customized software to small businesses. In 1998, he was diagnosed with invasive basal cell carcinoma of the right ear which required several surgeries, including the eventual amputation of the ear and replacing it with a prosthetic one. After the surgeries, he experienced permanent hearing loss, fatigue, migraines, dry mouth, tinnitus (a constant ringing sound), and an inability to localize sound. After the last of the surgeries, which occurred in 2008, Fiorentini submitted a claim for total disability benefits under an occupational disability insurance policy he had purchased from Paul Revere. The policy defined “total disability” as being unable to perform the important duties of his “occupation.” In his original application he listed his occupation as “President & Owner” of Panatech and said that his occupation entailed four “important duties”: sales (6–8 hours per week), consulting/meetings (7–10 hours per week), programming (15–25 hours per week), and administrative work (2–3 hours per week). Paul Revere concluded that he was unable to perform these duties, approved his claim and began paying Fiorentini total disability benefits in February 2009.

Five years later, Paul Revere notified Fiorentini that he no longer met the total disability requirements of his policy. He had been cancer-free since 2009 and was working regularly again. While he allegedly continued to suffer side effects from the surgery and worked fewer hours than he had before, the company determined that he was now well enough that he was exercising full control over Panatech. However, while it found him ineligible for total disability benefits, Paul Revere invited Fiorentini to apply for “residual disability” benefits under his policy. Coverage under that provision would have required Fiorentini to show that he was either unable to perform “one or more of the important duties” of his occupation or could only perform his important job duties for “80% of the time normally required to perform them” and that he earned at least 20% less than he did predisability.

Fiorentini did not submit that information. Instead, he let his policy lapse and sued Paul Revere, seeking damages for breach of contract, statutory penalties for unreasonable and vexatious conduct under Illinois law, and a declaratory judgment. The district court entered summary judgment for Paul Revere. On appeal, Fiorentini argued that the “total disability” clause covered him even though he could still do almost everything his occupation required him to do. In fact, he did not dispute that he was able to perform three of the important duties listed on his claim for total disability benefits: consulting with clients, programming, and administrative duties. He did however, claim that he was unable to perform the fourth, which he characterized as essential: sales.

He alleged that ever since his surgery, Panatech had survived exclusively on work from its existing clients; that he was the only one who can bring in new clients; and that he can do so only by meeting personally with prospects, giving presentations, and attending seminars. He claimed that that kind of face-to-face contact was now impossible for him because of his continuing symptoms, including tinnitus and fatigue. He also dismissed the suggestion that he could solicit new business through phone calls, emails, the internet, or a marketing company because he claimed that for his small business, only in-person contact will do.

The appeals court noted that Fiorentini’s claim that his inability to execute one task renders him “unable to perform the important duties of [his] Occupation” seized upon an opening in Seventh Circuit caselaw that suggests that the inability to perform one task might sometimes qualify under similarly worded policies. Fiorentini cited wording from another Seventh Circuit case that had noted that a shortstop who could no longer throw would be unable to do his job even if he could still run, hit, and catch and Fiorentini claimed that in-person solicitation is to him what throwing is to a shortstop—utterly essential. In other words, he claimed that because he couldn’t sell, he couldn’t do his job even if he could still program, consult with existing clients and do administrative tasks. The appeals court quickly dismissed this argument by stating “[a] shortstop who can’t throw can’t be a shortstop; Fiorentini, on the other hand, functions daily as Panatech’s president. While his capacity as Panatech’s president has been diminished by his inability to perform one of his important duties, he is not unable to continue his occupation.”  It further noted that under the plain language of the Paul Revere policy, a “diminished ability to perform his occupation” was not covered, only the inability to continue it.

The court further noted that Fiorentini’s ineligibility for benefits under the total disability provision of the policy was contained in his own testimony because he admitted that he met regularly with existing clients at their businesses or over lunch, visited job sites weekly to discuss and address computer problems and offered no explanation for why he could meet with existing clients but not potential clients. He further admitted that he renewed his pilot’s license and spent 75–80 hours a year flying around the Midwest, primarily to have breakfast with other recreational pilots and still played in a weekly adult hockey league. The court concluded by noting that while the record supported the inference that Fiorentini could not discharge his duties as Panatech’s president in precisely the same manner as he did before, such a reduced capacity to perform job duties was addressed by the policy’s “residual disability” provision, which Fiorentini chose not to apply for.


In Rooney v. Rock-Tenn Converting Company, No. 16-3631, 2018 U.S. App. LEXIS 494 (8th Cir. Jan. 9, 2018), the 8th U.S. Circuit Court of Appeals recently clarified that when explaining its reasons for termination during litigation under the McDonnell-Douglas burden-shifting framework, an employer may elaborate on its previously stated reasons and opined: “evidence of a substantial shift in an employer’s explanation for a decision may be evidence of pretext, but an elaboration generally is not.” It also reiterated that federal courts are not to act as a “super-personnel department with authority to review the wisdom or fairness of business judgments made by employers.”

Aaron Rooney was hired in March 2010 as an account representative in Rock-Tenn’s Bentonville, Arkansas office. Rock-Tenn was in the business of making packaging and displays for retail merchants and Rooney was responsible for developing and selling in-store displays. One of his primary responsibilities was Rock-Tenn’s account with Alcon.

Rooney reported to Dean Metter until September 2013, when Nancy Collom was hired and became Rooney’s direct supervisor. Rooney’s November 2013 performance evaluation was still completed by Metter however, who gave Rooney an overall rating of 3 out of 5 but he also criticized Rooney’s “collaborative team work skills” and noted that he did “not communicate effectively in the office.” The review also noted conflicts with Collom.

At least as far back as June 2014, there were ongoing problems with the Alcon account, including missed deliveries; delivering wrong or damaged products; and pricing mistakes. The problems with the Alcon account persisted throughout the fall of 2014 and Alcon’s representatives were consistently communicating with Rooney and his bosses complaining about both the problems and the lack of response from Rock-Tenn to persistent inquiries. Metter attempted to work with Rooney to fix the problems, but they continued into the new year and Rooney was fired on February 5.

Rooney claimed he was told he was fired because of “difficulties with interacting with coworkers and failure to support Alcon.” But he claimed that the real reason he was fired was because he was discriminated against by Metter and Collom for not being Jewish, and by Collom for being a man. Among his claims, Rooney asserted that Metter, who is Jewish, made remarks about networking with the “Jewish network” of potential customers. Rooney’s gender discrimination argument was premised on several remarks he attributed to Collom, including that after she was hired, Collom said that she could’t “wait until there’s more ladies in the office.” According to Rooney, he was replaced on two of his accounts by women before he was fired. After exhausting his administrative remedies, Rooney sued, alleging, among other things, violations of Title VII of the Civil Rights Act of 1964 but the district court granted Rock-Tenn’s motion for summary judgment, finding that although Rooney had established a prima facie case of discrimination based on religion and sex, Rock-Tenn articulated legitimate, nondiscriminatory reasons for firing him, and Rooney was unable to show that the reasons stated by Rock-Tenn were pretexts for discrimination. Rooney appealed that ruling.

On appeal, the court first noted that Rooney did not claim to have direct evidence of discrimination, so it then laid out the familiar McDonnell-Douglas burden-shifting framework, which requires the employee to establish a prima facie case for discrimination, shifting the burden to the employer to articulate legitimate, non-discriminatory reasons for the firing. If that occurs, the burden shifts back to the employee to establish that those reasons are a pretest. Rooney contended 1) that the trial court erred by expanding the non-discriminatory grounds given by Rock-Tenn beyond those offered at the time he was fired; and 2) that the trial court erred in finding his evidence insufficient to show that the reasons were pretextual.

In affirming dismissal of his first claim, the appeals court noted that Title VII does not require that an employee be given a basis for dismissal. An employer is also not bound to whatever reasons it might have provided and may elaborate on its explanation later. The court held that there was no contradiction between the explanation given to Rooney when he was fired and the non-discriminatory reasons for termination stated during the litigation because they consistently evidenced that Rooney interacted poorly with coworkers and that he failed to support the Alcon account.

Regarding his claim that he presented sufficient evidence to show that the reasons were pretextual, the court noted that pretext can be shown in two ways: by persuading the court that retaliatory animus more likely motivated his employer or that the employer’s explanation is unworthy of credence because it has no basis in fact and either route amounts to showing that a prohibited reason, rather than the employer’s stated reason, actually motivated the termination.

Rooney claimed that Rock-Tenn’s explanation was not credible because in June 2014 Alcon had stated in a customer satisfaction survey that it was generally satisfied with the account team’s performance and because shortly before he was fired, Metter said they had recently being doing better on the account. The appeals court noted that Rooney simply ignored all the problems on the account between June 2014 and January 2015.

The court also gave short shrift to Rooney’s claim that it was “unworthy of credence” that he was fired for poor interaction with coworkers because the court determined that Rooney focused only on Rock-Tenn’s identification of troubles with Collom at the time Rooney was fired but ignored the instances in the record in which he was criticized for his failure to communicate with colleagues and poor teamwork. The court noted “Rock-Tenn was not required to recite an office roll call to rely on those shortcomings as a basis for Rooney’s termination.” It further stated: “[t]he evidence must do more than raise doubts about the wisdom and fairness of the employer’s opinions and actions–it must create a real issue as to the genuineness of the employer’s perceptions and beliefs.” In other words, the court cannot act as a “super personnel department.” It held that Rooney’s claims that Collom was aggressive towards him, that she denied him permission to conduct a project review with a client during an open house, and that she should have consulted his Outlook calendar instead of asking him to keep her advised of his schedule–fell well short of creating such an issue. It similarly held that he had presented no evidence that “retaliatory animus more likely motivated his employer” than its stated reasons for firing him. His only “evidence” were claims that Jewish and female employees were treated more favorably than he was, and that his replacements were either Jewish or female. But the court discounted those claims because they appeared to be more conclusory statements than evidence.


In Williams v. Pennsylvania Human Relations Commission, No. 16-4383. 2017 U.S. App. LEXIS 16618 (3rd Cir. Aug. 30, 2017), the Third Circuit joined all the other circuits that have visited the issue and ruled that alleged violations of Title VII and the Americans with Disabilities Act (“ADA”), cannot be brought under 42 U.S.C. § 1983 based on Congress’s “comprehensive enforcement scheme” inherent to both Title VII and the ADA.

Williams was originally employed at the Pennsylvania Human Relations Commission (“PHRC”) in the early 1990s, and she returned to it in September 1999 as a Human Relations Representative in the Pittsburgh office where she investigated discrimination complaints, interviewed witnesses, negotiated settlements, conducted fact-finding conferences, and wrote reports and conciliation recommendations. She also served as chairperson of a union that represented PHRC investigators.  She was primarily supervised by Joseph Retort, a Caucasian man, from 2010 until her resignation in January 2014 and she was also indirectly supervised by the Executive Director of the Pittsburgh office, who at the time of her resignation was Adam Stalczynski, also a Caucasian man. Williams claimed that, between 2009 and 2013, she suffered discrimination at the hands of various PHRC personnel, primarily Retort and Stalczynski, specifically alleging that: (1) she was suspended without pay for five days in 2009 after she objected to the presence of PHRC attorneys at fact-finding conferences; (2) PHRC refused to accommodate her workstation needs when they moved offices in 2010; (3) Retort improperly placed her on a performance improvement plan for a few weeks in 2010; (4) she was struck by a PHRC attorney in 2011 while attempting to leave the former executive director’s office; (5) her co-worker overheard a PHRC attorney call Williams a “bitch” in 2012; and (6) she was wrongly reprimanded for insubordination in August 2013 following a confrontation with Stalczynski regarding her requests for leave. Williams contended that each of these incidents, both individually and in their totality, were not the result of common workplace strife, but were unlawful instances of discrimination based on her status as an African-American woman.

After leaving work in August 2013, Williams submitted a Family Medical Leave Act (“FMLA”) request seeking leave from PHRC because she had leg pain and diffuse muscle aches from fibromyalgia. She was granted FMLA leave through February 2014, but never returned to work and she resigned from PHRC several months later.

In November 2013, Williams lodged a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”). She subsequently received a right-to-sue letter from the EEOC and filed a four-count amended complaint with the district court, only two of which were relevant on appeal: (1) a claim against PHRC for discrimination, hostile work environment, and constructive discharge under Title VII; and (2) a § 1983 claim against Retort and Stalczynski, individually, based on alleged violations of Title VII and the ADA.

As to the Title VII claim against PHRC, the district court determined that, under the totality of the circumstances, the incidents were not severe or persistent enough to sustain a claim for hostile work environment or constructive discharge and the appeals court summarily affirmed the district court’s ruling stating “for substantially the same reasons expressed by the District Court, we will affirm the grant of summary judgment for the Commission on Williams’s Title VII claims.”

Regarding the § 1983 claim against her former supervisors, the district court held that Title VII and ADA claims cannot be vindicated through § 1983 because doing so would frustrate Congress’s statutory scheme. The appeals court began its analysis of the district court’s ruling by stating that it is well-settled law that § 1983 does not confer any substantive rights, but merely “provides a method for vindicating federal rights elsewhere conferred.” However, it also noted that even when an independent federal right exists, Congress may still choose to foreclose a remedy under § 1983, either by either expressly “forbidding recourse to § 1983 in the statute itself” or by “creating a comprehensive enforcement scheme that is incompatible with individual enforcement under § 1983.” As such, it determined that its analysis had to start with Congressional intent, noting “the Supreme Court has advised our primary inquiry is whether the statutes at issue require plaintiffs to comply with particular procedures and/or to exhaust particular administrative remedies prior to filing suit.”

The court stated that both Title VII—which prohibits employment discrimination based on an individual’s race, color, religion, sex, or national origin—and the ADA—which prohibits employment discrimination based on an individual’s disability—utilize the same comprehensive remedial scheme. In states with an agency authorized to grant relief for prohibited employment discrimination, like Pennsylvania, employees must resort to that state remedy and employees must also file a “charge” with the EEOC within 300 days of the alleged unlawful employment practice, or within 30 days after receiving notice that the analogous state agency has terminated proceedings, whichever is earlier. The court noted that the purpose of this exhaustion requirement is “to give the administrative agency the opportunity to investigate, mediate” and/or determine what, if any, action it will take. After the process is completed, the EEOC (or the state attorney general) may either bring suit in federal court, or, alternatively, notify the employee so that he or she may institute an employment discrimination suit within 90 days. The court stated that this extensive process was in stark contrast to § 1983, which has only a one-step “remedial scheme” that permits plaintiffs to file suits directly in federal court. It stated that unlike Title VII and the ADA, there is neither an administrative process to be exhausted nor any mechanism by which discriminatory practices may be informally resolved with an administrative agency. As such, the appeals court determined that Congress’s intent is clear; that is, allowing pure Title VII and ADA claims under § 1983 would thwart Congress’s carefully crafted administrative scheme “by throwing open a back door to the federal courthouse when the front door is purposefully fortified.” It also noted that every circuit to consider this exact question has held that, while a plaintiff may use § 1983 “as a vehicle for vindicating rights independently conferred by the Constitution,” Title VII and ADA statutory rights cannot be vindicated through § 1983. As such, the appeals court affirmed the district court’s grant of summary judgment on Williams’s § 1983 claims.


In a case that may be a precursor of things to come across the country as more and more states “legalize” the medicinal use of marijuana, in a July 17, 2017 decision in Barbuto v. Advantage Sales and Marketing, LLC, SJC 12226, 2017 Mass. LEXIS 504 (July 17, 2017) the Massachusetts Supreme Judicial Court determined that a plaintiff medical marijuana user had a cause of action for handicap discrimination under a Massachusetts law that prohibits employment discrimination based on, among other things, handicapped status.

Cristina Barbuto, who suffers from Crohn’s disease, was offered an entry-level position with defendant Advantage Sales and Marketing, LLC (“ASM”) in the late summer of 2014, and accepted the offer. After accepting the offer, she was informed that she was required to take a mandatory drug test. Barbuto then told the ASM employee who would be her supervisor that she would test positive for marijuana use because she was a qualifying medical marijuana patient under Massachusetts law whose physician had provided her with a written certification that allowed her to use marijuana for medicinal purposes because of the symptoms associated with her Crohn’s disease. She added that she did not use marijuana daily and would not consume it before work or at work. The supervisor told her that her medicinal use of marijuana should not be a problem but that he would confirm that with others at ASM, which he did and later telephoned her to relay that information.

On September 5, 2014, she submitted a urine sample and on September 11th she started in the ASM training program and completed her first day of work the next day. That evening, Joanna Villacruz, ASM’s human resources representative, and a co-defendant in the lawsuit, telephoned Barbuto to tell her that because she tested positive for marijuana she was being terminated and also told Barbuto that she did not care if her marijuana use was medicinal because “we follow federal law, not state law.”

Barbuto subsequently filed a charge of discrimination against ASM and Villacruz with the Massachusetts Commission Against Discrimination (“MCAD”). Which she later withdrew so she could file a complaint in Massachusetts Superior Court. That complaint included six claims: (1) handicap discrimination, in violation of  Massachusetts General Law c. 151B, § 4(16); (2) interference with her right to be protected from handicap discrimination, in violation of 151B, § 4(4A); (3) aiding and abetting ASM in committing handicap discrimination, in violation of 151B, § 4 (5); (4) invasion of privacy, in violation of 214, § 1B; (5) denial of the “right or privilege” to use marijuana lawfully as a registered patient to treat a debilitating medical condition, in violation of the Medical Marijuana Act; and (6) violation of public policy by terminating her for lawfully using marijuana for medicinal purposes. The second and third claims were brought against Villacruz alone and the rest were brought against both ASM and Villacruz. The defendants tried unsuccessfully to remove the case to federal court and then filed a motion to dismiss the complaint in the superior court, which was granted except as to the invasion of privacy claim. At Barbuto’s request, the judge entered a separate and final judgment on the dismissed claims and Barbuto filed a notice of appeal regarding the dismissed claims and the Supreme Judicial Court granted Barbuto’s application for direct appellate review.

Since the claims had not survived the motion to dismiss stage in the trial court, the Supreme Judicial Court’s review was limited to determining whether, taking the claims in the light most favorable to Barbuto, she had adequately stated a claim for relief. The court began its review by noting that, like many other states, Massachusetts had allowed limited possession of marijuana for medical treatment, while acknowledging that possession of marijuana remains illegal under federal law. It then noted that under G.L. c. 151B, § 4(16) it is an “unlawful practice … [f]or any employer … to dismiss from employment or refuse to hire …, because of [her] handicap, any person alleging to be a qualified handicapped person, capable of performing the essential functions of the position involved with reasonable accommodation, unless the employer can demonstrate that the accommodation required to be made to the physical or mental limitations of the person would impose an undue hardship to the employer’s business.” Barbuto alleged that she was a “handicapped person” because she suffered from Crohn’s disease and that she was a “qualified handicapped person” because she could perform the essential functions of her job with a reasonable accommodation to her handicap, that is, with a waiver of ASM’s policy barring anyone from employment who tests positive for marijuana use and the court agreed.

Since the court agreed she was handicapped, to state a claim for handicap discrimination, Barbuto had to show that the accommodation she claimed was necessary was “facially reasonable.” The defendants argued that it was not facially reasonable for two reasons: 1) she was not a “qualified handicapped person” because the only accommodation she sought, continued use of medical marijuana, is a federal crime; and 2) even if she was a qualified handicapped person, she was terminated because she failed a drug test that all employees are required to pass, not because she was handicapped.

As to the first argument, that is, that the requested accommodation was facially unreasonable because marijuana possession is a federal crime, the court stated that if an employee has a debilitating ailment that can be alleviated with medication and the employer had a drug policy that prohibited her taking that medication, the employer would have a duty to engage in an interactive process to determine if there were an equally effective medical alternative that would not violate the policy and if no such equally effective alternative exists, the employer would bear the burden of proving that the employee’s use of the medication would cause an undue hardship to its business in order to justify the refusal to make an exception to the drug policy as an accommodation. It also noted that under Massachusetts law the possession of medical marijuana is legal and if in the opinion of an employee’s physician it is the most effective treatment, an exception to the employer’s drug policy is a facially reasonable accommodation and further stated that the only person at risk of federal prosecution for possession would be the employee not the employer. Finally, it noted that even if the accommodation of the use of medical marijuana was facially unreasonable, ASM owed Barbuto the duty under applicable law to participate in the interactive process before it terminated her and its failure to do so alone would be sufficient to support a claim of handicap discrimination.

As to the defendants’ second argument, that she was fired for failing the drug test, not for being handicapped, the court summarily dealt with that argument by noting “where, as here, the company’s policy prohibiting any use of marijuana is applied against a handicapped employee who is being treated with marijuana by a licensed physician for her medical condition, the termination of the employee for violating that policy effectively denies a handicapped employee the opportunity of a reasonable accommodation, and therefore is appropriately recognized as handicap discrimination.”

Because it determined that Barbuto’s use of medical marijuana under the circumstances of the case was not facially unreasonable, it reversed the trial court’s dismissal of the claims. It should be noted though, that the Supreme Judicial Court did point out that just because the claims survived a motion to dismiss, it did not mean that defendants could not later prove that the accommodation was not reasonable because it would impose an undue burden on its business. However, it is clear that this is an issue that courts will have to grapple with in the states that have determined that medical marijuana use is permitted and it seems at least arguable that in Massachusetts, the use of medical marijuana away from work, may become a reasonable accommodation under certain circumstances.


The Tenth Circuit recently addressed whether an employer had failed to make a reasonable accommodation under the Americans with Disabilities Act, 42 U.S.C. § 2000e et seq., (“ADA”) regarding a temporary worker’s request for time off as a reasonable accommodation and although it affirmed the Colorado District Court’s grant of summary judgment in favor of the defendants, it held that the McDonnell Douglas burden-shifting framework was not applicable in a failure-to-accommodate case in the 10th Circuit because such cases do not require the plaintiff to demonstrate discriminatory intent by the employer.

In Punt v. Kelly Services, No. 16-1026, 2017, U.S. App. LEXIS 12046 (10th Cir. July 6, 2017), Kristin Punt, a temporary employee employed by Kelly Services and assigned to GE Controls Solutions, made claims under the ADA, among other statutes, after she was taken off the assignment after missing numerous shifts, allegedly because of a cancer diagnosis.

Punt was an at-will employee of Kelly and at the beginning of her employment there, she signed an employment application stating that the duration of any assignment she accepted depended on the needs of Kelly’s customer and that it could be cancelled at any time by Kelly or the customer. The application also stated that, upon completion of each assignment, she would notify Kelly of her availability for work. GE entered into an agreement with Kelly Services, under which Kelly provided and assigned temporary employees to GE as needed. Under the agreement, GE could ask Kelly to remove any of its temporary employees from their assignment at GE for any reason and Kelly also had the right to cancel any employee’s assignment on its own initiative.

Kelly assigned Paul to the receptionist position at GE, and she worked there from October 24, 2011 through December 5, 2011. When she began the receptionist assignment at GE, she was told she was to work a 40-hour work week, starting at 7:30 a.m. and ending at 4:30 p.m. each day. According to GE, the essential functions of the receptionist job included being “physically present at the lobby/reception desk during business hours” in order to “greet . . . and direct all visitors, including vendors, clients, job candidates, customers, etc.” Despite the 40-hour requirement, however, in the six weeks that she worked as a receptionist at GE, she never worked a full 40-hour work week. She was absent from work on six occasions, was late to work on three occasions and also left work early on three occasions. When Punt was not at work, another Kelly temporary employee, who was assigned to work as an administrative assistant for the general manager of GE, had to take over the receptionist duties as well as her own responsibilities. Punt blamed these absences on a recent breast cancer diagnosis.

On December 5th, Punt had an MRI appointment and that morning, she emailed Erin Wilgus—the Kelly employee who was the point-person for Punt’s temporary assignment to GE—and informed her that she, her husband and doctor had determined that it was in her best interest not to come to work that week at all and also expressed concerned that GE was not willing to work with her, that her medical issues, including a potential surgery, would require her to take time off and that because she felt that GE did not want her to take time off, the assignment might not be a good fit. After that, several emails were exchanged between Punt and Wilgus because Wilgus was trying to determine whether Punt was going to go to GE the next day. Ultimately, on that same date, GE’s general manager and HR director contacted Wilgus to end Punt’s assignment, telling Wilgus that Punt was not showing up for work and that GE “needed an employee that’s going to be able to show up and fulfill the needs of the position.” Wilgus then contacted Punt to inform her that her temporary assignment with GE had been terminated. After that, Punt never contacted Kelly to ask for another assignment and Kelly did not contact Punt with any additional job offers. In 2014, Punt filed a lawsuit against both GE and Kelly, raising both a somewhat ill-defined claim of disability discrimination under the ADA, which Punt claimed was a failure-to-accommodate claim, and a claim of genetic information discrimination under the Genetic Information Nondiscrimination Act, 42 U.S.C. § 2000ff et seq., (“GINA”) because she had allegedly told a GE employee that she had a family history of breast cancer. The district court granted summary judgment in favor of defendants on both claims.

The district court evaluated the ADA disability claim as a disparate treatment claim, subject to the McDonnell Douglas burden-shifting analysis, because it determined Punt had not presented direct evidence of a discriminatory motivation on the part of the defendants. Using the McDonnell Douglas analysis, the court held that Punt had failed either to establish a prima facie case of disability discrimination or to show that defendants’ legitimate, nondiscriminatory reason for her termination was pretextual.

The appeals court began its review by noting that the district court incorrectly concluded that what matters for determining the type of claim at issue in an ADA case is not the type of claim that is pleaded in a complaint, but rather the type of evidence that is presented to support the claim. The appeals court stated that this conclusion was based on a fundamental misunderstanding about the distinctions between different types of ADA claims and the evidence that must be presented to support them. The court stated that while in general, under the ADA there must be a nexus between the disability and the adverse employment action, usually proven by direct or indirect evidence of discriminatory intent, a failure-to-accommodate claim, does not require such a showing because any failure to provide reasonable accommodations for a disability is necessarily “because of a disability” and no proof of a “‘particularized discriminatory animus’ is required.” In other words, the court determined that the only reason an accommodation is required is because of a disability, and thus the failure to provide a reasonable accommodation to a qualified employee with a disability is inherently based on that disability. It then opined that failure-to-accommodate cases should not be classified either as direct-evidence cases or as McDonnell Douglas circumstantial evidence cases, but rather as a separate category of cases that require no evidence of discriminatory intent in any form.

As to Punt’s actual claim, the court stated that while Punt’s complaint was “far from a model of clarity on this point,” the ADA claim looked much more like a failure-to-accommodate claim than a disparate-treatment claim and that the record revealed that Punt and counsel for both GE and Kelly focused extensively in discovery on questions of whether Punt’s request for time off was a request for a reasonable accommodation, and no one ever attempted to elicit any evidence to support or defeat a disparate-treatment theory. Because it was a failure-to-accommodate claim, the court held that it should have been evaluated under the 10th Circuit’s failure to accommodate test, which requires the plaintiff to show that “(1) she is disabled; (2) she is ‘otherwise qualified’; and (3) she requested a plausibly reasonable accommodation,” which then requires the employer to show evidence that either (1) conclusively rebuts one or more elements of plaintiff’s prima facie case or (2) establishing an affirmative defense, such as undue hardship or one of the other affirmative defenses available to the employer.”

The court “began and ended” its analysis by examining whether or not Punt had “requested a plausibly reasonable accommodation,” stating that determination of whether a requested accommodation is reasonable “must be made on the facts of each case taking into consideration the particular individual’s disability and employment position.” It concluded that Punt’s request was not plausibly reasonable on its face because “an employee’s request to be relieved from an essential function of her position is not, as a matter of law, a reasonable or even plausible accommodation” and therefore, affirmed the district court’s decision. It also affirmed the district court’s decision on the GINA claim because it determined that Punt had offered no evidence to support the claim beyond conclusory allegations.


A fact of life in modern business is an employee’s use of social media, or, in some cases, a former employee’s use of social media, and how it fits in with any post-employment restrictions to which they may be subject. In Bankers Life and Casualty Co. v. American Senior Benefits LLC, 2017 IL App (1st) 160687- U (June 26, 2017), the Illinois Court of Appeals affirmed a lower court’s ruling that a former employee’s email communications sent to his ex-colleagues asking to connect on LinkedIn and whose LinkedIn profile contained a job posting from his new employer, was not a violation of his non-competition agreement.

Gregory Gelineau was hired by Bankers Life in 2004 as a branch sales manager in Warwick, Rhode Island and in 2006, he signed an employment agreement containing certain non-competition provisions that stated:

“During the term of this Contract and for 24 months thereafter, within the territory regularly serviced by the Manager’s branch sales office, the Manager shall not, personally or through the efforts of others, induce or attempt to induce:

(a) any agent, branch sales manager, field vice president, employee, consultant, or other similar representative of the Company to curtail, resign, or sever a relationship with the company;

(b) any agent, branch sales manager, field vice president or employee of the Company to contract with or sell insurance business with any company not affiliated with the company, or

(c) any policyholder of the company to relinquish, surrender, replace, or lapse any policy issued by the company.”

Gelineau’s employment with Bankers Life ended on January 15, 2015 and he went to work as a senior vice president at American Senior Benefits (“ASB”), which Bankers Life regarded a direct competitor and which, according to Bankers Life, had hired and retained many former Bankers Life employees. In August 2015 Bankers Life filed a complaint against Gelineau, among others, which included a breach of contract claim in which it alleged that after joining ASB, Gelineau recruited or attempted to recruit Bankers Life employees and agents from the Warwick branch by sending LinkedIn requests to connect to three Bankers Life employees. It alleged that the employees would then click onto Gelineau’s profile and see a job posting for ASB. Bankers Life also alleged that Gelineau directed his ASB subordinates to contact Bankers Life employees and agents to seduce them to leave Bankers Life and join ASB.

Gelineau moved for summary judgment, stating that he did not recruit any Bankers Life employees or agents in his area, did not direct subordinates to do so and did not use LinkedIn to send direct messages to Bankers Life employees or agents in the Warwick area for the purpose of hiring or offering them opportunities at ASB. Instead, he stated that all the people on his email contact list were sent LinkedIn generic emails asking them to connect. In response, Bankers Life offered two affidavits. One was from an employee who stated he had received invitations to connect on LinkedIn from Gelineau and one of his ASB subordinates and that he saw the job posting. The other was from a Bankers Life officer stating that Bankers Life needed more discovery to respond to the motion. Replying, Gelineau submitted an affidavit from that same subordinate, which stated that Gelineau had asked him not to recruit Bankers Life agents or employees in the Warwick area. The trial court granted summary judgment to Gelineau, stating that Bankers Life failed to identify any solicitation or other breach of contract by Gelineau, a ruling which Bankers Life appealed.

On appeal, Bankers Life argued that a material issue of fact existed regarding whether or not Gelineau induced or attempted to induce Bankers Life employees and agents to leave Bankers Life in violation of the non-competition provisions when he “affirmatively sent the LinkedIn invitation to the three employees, that the invitations directed its [sic] recipients to a job posting, and that it was Gelineau’s modus operandi to first utilize LinkedIn as a first step in recruiting Bankers Life employees.” The appeals court noted that the question before it was whether the emails sent through Gelineau’s LinkedIn account to the three employees and his other LinkedIn activity sought to induce or attempted to induce the employees in the Warwick office “to curtail, resign, or sever a relationship with Bankers Life,” in violation of his agreement.

To answer that question, the court looked at several cases from other jurisdictions that had weighed similar issues. It noted that in BTS, USA, Inc. v. Executive Perspectives, LLC, 2014 WL 6804545 (Conn. Super. Oct. 16, 2014), the defendant webpage designer updated his LinkedIn account when he left his former company and also made a LinkedIn posting that encouraged his contacts to “checkout” a website he had designed for his new company, BTS. The former employer claimed this violated his non-compete agreement but the court disagreed, noting that there was no evidence that any BTS customer actually viewed or visited the former employee’s LinkedIn page or did business with the new employer.

Conversely, it noted that other courts had ruled the opposite way, notably in a Michigan case, Amway Global v. Woodward, 744 F. Supp. 657 (E.D. Mich. 2010) where the defendant employee posted on his LinkedIn page “If you knew what I knew, you would do what I do.” He argued that his LinkedIn postings and other social media postings could not be considered solicitations because they were “passive, untargeted communications.” The court disagreed, and stated “it is the substance of the message conveyed, and not the medium through which it is transmitted that determines whether a communication is a solicitation” and held that this defendant’s message would easily be characterized as a solicitation.

Based on these cases, the court determined that Gelineau’s invitations to connect on LinkedIn were generic emails that did not contain any discussion of Bankers Life and did not mention ASB. It further determined that the Bankers Life employees had the option to connect or not and once connected their decision to click on Gelineau’s profile or to access a job posting on his LinkedIn page were not something for which Gelineau could be held responsible and that posting a job opening on his LinkedIn profile did not constitute an inducement of solicitation in violation of his non-competition agreement. In fact, it said “[t]o violate his contract, Gelineau would have to, directly recruit individuals working in the Warwick, Rhode Island area” and it found no such conduct.

While it appears that Bankers Life was facing an uphill battle in this case because the court essentially determined that Bankers Life had no evidence that Gelineau’s activity on LinkedIn was solicitation as defined in the non-compete agreement, it illustrates why employers should be careful in defining “solicitation” in their agreements and consider doing it in such a way that it encompasses at least the types of thinly-veiled solicitations on social media seen in Amway Global.


The Fifth Circuit, in Lay v. Singing River Health System, No. 16-60431, 2017 U.S. App. LEXIS 10758 (5th Cir. June 19, 2017), recently upheld the district court’s grant of summary judgment in favor of the defendant employer in an age-discrimination case because it agreed with the lower court that the plaintiff had failed to raise a material issue of fact that her termination, which was part of a reduction in force, was pretextual. This case is particularly instructive to companies facing a reduction in force when employees being considered for reduction are members of a protected class.

Virginia Lay began working as director of managed care at Singing River in 1999, a position in which she reported directly to the chief financial officer. In 2013, the managed care department was moved to the clinical-integration department and Lay began reporting to Chris Morgan, then age 50, the vice-president of clinical integration. In early 2014, the company discovered through an audit that it faced an $88 million shortfall caused by overstatements of its accounts receivables. This caused the company to renegotiate all its managed care contracts and reevaluate and restructure all its operations. Part of that restructuring included combining Morgan’s and Lay’s jobs into one position. Morgan decided to leave the company and Lay stated that she did not apply for the new position because it required a master’s degree, which she did not have. However, Lay was encouraged to retire but was permitted to stay on through June 2014 to maximize her retirement benefits. While there appears to have been some dispute about how the retirement option was presented to her and when she was told her position was going to be eliminated, it was undisputed that she retired from Singing River and eventually took a full-time job paying $3,000 per month, significantly less than the $160,000 salary she was making at Singing River.

Meanwhile, back at Singing River, a new CFO initially oversaw some of Lay’s former duties along with his own job responsibilities but in early 2015, Singing River hired Jason Rickley, then 32, to take over the newly-developed, combined position that replaced Morgan’s and Law’s positions. He was initially paid $110,000 and was enrolled in a master’s degree program in health administration at the time he was hired.

In April 2015, Lay filed an age discrimination suit under the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 632(a)(1), in the Southern District of Mississippi and the court eventually granted Singing River’s motion for summary judgment because it determined that Lay had not raised any genuine issues of material fact to rebut Singing River’s proffered legitimate, non-discriminatory reason for eliminating Lay’s position. Lay then appealed to the Fifth Circuit.

The appeals court began its analysis by stating that under the ADEA, Lay was required to demonstrate that but for the discriminatory act, she would not have been terminated and noted that its review required it to employ the “more than well-known burden-shifting analysis,” wherein the plaintiff must first state a prima facie case of discrimination, which then shifts the burden to the defendant to proffer a reasonable-non-discriminatory reason for the termination. Under the test, if such a reason is proffered, the burden then shifts back to the plaintiff who must then meet her ultimate burden of persuasion on the issue of intentional discrimination. As to Lay’s specific case, the court also noted that if a plaintiff is terminated during a reduction-in-force, as here, the elements of the prima facie case are “(1) that [s]he is within the protected age group; (2) that [s]he has been adversely affected by the employer’s decision; (3) that [s]he was qualified to assume another position at the time of the discharge; and (4) evidence, circumstantial or direct, from which a factfinder might reasonably conclude that the employer intended to discriminate in reaching the decision at issue.”

Both the district court and the appeals court presumed that Lay had met her initial burden. As such, the appeals court began its analysis by examining Singing River’s proffered reason for eliminating Lay’s position. The court noted that the record evidenced the multi-million dollar shortfall and then stated that it was not the court’s place to question how an entity handled a financial crisis and that the law does not require that a company’s decisions be proper, only that they are non-discriminatory. It then stated that because Lay’s job was not the only one eliminated and because the elimination was part of a restructuring in response to the financial hardship, Singing River had presented a legitimate, non-discriminatory reason for the negative employment action.

In response to Singing River’s proffer, Lay offered nothing more than conclusory statements and hearsay. She first claimed that she was replaced by someone “half her age” and that the new position “entailed 99.9% of her former job duties under a different title” but later admitted that she estimated that total from reading the job profile online and that she did not know the full responsibilities required for the new position. Further, the court noted that the person that filled the newly-created position was not, in fact, half her age. The court stated that because a reasonable fact-finder would not be “persuaded by pure conjecture,” she had not raised a genuine, material fact.

She also claimed that she was “forced” to retire based on her age and pension status but the appeals court quickly disposed of this argument by stating that the record evidenced that the discussion regarding her retirement took place after she had been told that her position was going to be eliminated and that at most, the discussion was made in “a helpful spirit.” As such, the court determined that she had not demonstrated that she had been “forced” to retire and therefore had not raised a genuine fact for trial on that claim.

Finally, the court determined that other claims made by Lay regarding alleged age-derogatory statements allegedly made by members of Singing River’s management were inadmissible hearsay that could not create a genuine issue of material fact. Based on its analysis then, the appeals court affirmed the district court’s grant of summary judgment to Singing River.


Employers investigating Title VII discrimination claims should take some comfort, based on a recent Fourth Circuit case, that if they terminate an employee for making a false claim after a good-faith investigation, they will likely not be held liable for a Title VII retaliation claim if the claim later proves to be valid. In Villa v. Cavamezze Grill, LLC, No. 15-2543, 2017 U.S. App. LEXIS 10112 (4th Cir. June 7, 2017), the Fourth Circuit determined that the plaintiff had no Title VII retaliation claim because her employer reasonably believed she had made a false harassment report when it terminated her, even though that report later proved to be somewhat true. In doing so, the court was required to examine the differences in Title VII’s “participation” and “opposition” clauses and determined under the applicable opposition clause that false reports are not protected so her termination could not, as a matter of law, have been caused by her “opposing” prohibited conduct.

Patricia Villa began working for CavaMezze Grill Mosiac, LLC (“Mosaic”) a wholly-owned subsidiary of Cavamezze Grill, LLC (“CMG”), in the spring of 2012 and by October 2013, she was a low-level manager reporting directly to Mosaic’s general manager, Marcelo Butron. In October 2013, she related to Rob Gresham, CMG’s director of operations, that she had been told by one employee, Judy Bonilla, that Bonilla had been offered a raise by Butron in exchange for sex and that she suspected that another, now former employee, Jessica Arias, had left because Butron had made her a similar offer. As part of an investigation into the allegations, Gresham spoke with both the alleged harassment victims, who each denied that any such offers were made. Gresham determined, based on his investigation, that Villa had fabricated the stories and made a false report regarding Butron. Based on the fabricated report, Gresham fired Villa.

Villa later filed a retaliation complaint with the Virginia Office of Human Rights, cross-filed with the EEOC, but the Office of Human Rights never reached the merits of the case and issued Villa a right-to-sue letter. She filed suit in the federal district court of Virginia against several of the CavaMezze related entities (collectively, “Cava”), alleging retaliation under Title VII. Bonilla’s deposition was taken in that case and in it, Bonilla changed her story and stated that she had, in fact, told Villa that Butron had offered her a raise in exchange for sex, even though she also testified that he had not actually ever made such an offer. At the end of discovery, Cava moved for summary judgment, contending that even if it had incorrectly determined that Villa made up her story, her termination did not constitute Title VII retaliation because the true reason for her firing was that Cava believed that she had made a false report.

Villa did not dispute that that was the true reason for her firing but argued that because she acted in good faith when she reported the story to Gresham, her termination constituted illegal retaliation, regardless of what Cava honestly believed. The district court rejected that argument, along with her alternative argument that Cava’s investigation was not thorough enough, because it determined that there was no factual dispute concerning whether Cava’s desire to retaliate against her was the but-for cause of her termination and granted Cava’s summary judgment motion, a ruling which Villa appealed to the Fourth Circuit.

The appeals court began its analysis by noting that Title VII makes it illegal for an employer to discriminate against an employee either because the employee “opposes any practice made an unlawful practice by” Title VII (the “Opposition Clause”) or “because he has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding, or hearing under” Title VII (the “Participation Clause”). It then noted: “[u]nder either clause, since the statute only prohibits an employer from discriminating ‘because’ the employee has engaged in a certain type of conduct, ‘Title VII retaliation claims require proof that the desire to retaliate was the but-for cause of the challenged employment action’” (emphasis in original) and went on to state “[i]f an employer, due to a genuine factual error, never realized that its employee engaged in protected conduct, it stands to reason that the employer did not act out of a desire to retaliate for conduct of which the employer was not aware.” It also noted that when an employer has acted for a reason not prohibited by the statute, the court will not judge the “correctness, fairness, or wisdom of the employer’s decision.”

In applying the facts of this case to the applicable Title VII rule, the court first stated that while the participation clause – not applicable here since Villa did not “participate” as defined in the statute – protects a person who testifies, even falsely, from being fired, the opposition clause does not protect the making of a knowingly false statement because an employee complaining of conduct she knows did not occur is not “opposing” an unlawful employment practice and that firing someone for making such a false statement does not run afoul of the opposition clause. In fact, in opposition clause cases, the court must employ a balancing test, weighing the purpose of the act to protect people engaging in reasonable acts opposing discrimination against Congress’s desire not to tie an employer’s hands “in the objective selection and control of personnel.” In other words, “[e]ngaging in knowing fabrications certainly does not amount to ‘engaging reasonably in activities opposing . . . discrimination’; and precluding employers from taking any action against employees who have engaged in such deceit obviously would create enormous problems for employers who would be forced to retain dishonest or disloyal employees.”

To prove her case, the court said, Villa had to show that she was fired because of Cava’s desire to retaliate against her for engaging in conduct protected by the opposition clause. It determined that when Cava terminated Villa, it did not know that she had engaged in protected conduct because it was under the good-faith belief, based on its investigation, that she had made up the story. As such, its reason for terminating her was not retaliatory. It noted that if Villa was fired for misconduct that did not actually occur, it was unfortunate “but a good-faith factual mistake is not the stuff of which Title VII violations are made.”

As such, the Fourth Circuit affirmed the trial court’s grant of summary judgment in Cava’s favor.


In a ruling that could have cost nonprofit religious-affiliated employers millions of dollars in compliance and other costs had it gone the other way, on June 5, 2017, the U.S. Supreme Court held, in a unanimous opinion authored by Justice Kagan in Advocate Health Care Network v. Stapleton, Nos. 16-74, 16-86, 16-258, 2017 U.S. LEXIS 3554, (June 5, 2017), that employee benefit plans established or maintained by church-affiliated entities are exempt from regulation under the Employee Retirement Income Security Act of 1974 (“ERISA”), even when they are not originally established by a church and in so doing, reversed the judgments of the Third, Seventh and Ninth Circuits.

The cases arose out of three class action lawsuits filed by employees of church-affiliated nonprofits that run hospitals and other healthcare facilities and the dispute hinged on the combined meaning of two separate ERISA provisions under 29 U.S.C. § 1002(33), which Justice Kagan boiled down to:

“Under paragraph (A), a “‘church plan’ means a plan established and maintained . . . by a church” and [u]nder subparagraph (C)(i), “[a] plan established and maintained . . . by a church . . . includes a plan maintained by [a principal-purpose] organization.'”

The employees claimed that their employers’ pension plans did not fall within ERISA’s church-plan exemption because, although subparagraph (C)(i), a 1980 amendment to ERISA, allowed so-called “principal-purpose organizations,” such as the defendant nonprofits, to “maintain” exempt benefit plans, ERISA still required that such plans must have been originally “established” by a church. In contrast, the hospitals claimed that subparagraph (C)(i) was added “to bring within the church-plan definition all pension plans maintained by a principal-purpose organization, regardless of who first established them,” a position long taken by the IRS, the Labor Department and the Pension Benefit Guaranty Corporation. The Third, Seventh and Ninth Circuits all agreed with the employees and determined that the plain language of the statute required that to be exempted, the plan must have originally been “established” by a church.

The Supreme Court granted certiorari based on its determination that the issues in the cases raised important matters and began its analysis by examining the statutory language. In determining that Congress was really creating a new exemption when it added subparagraph (C)(i), the Court phrased the issue as a simple logic problem with paragraphs (A) and (C)(i) as its first two steps, stating:

“Premise 1: A plan established and maintained by a church is an exempt church plan and Premise 2: A plan established and maintained by a church includes a plan maintained by a principal-purpose organization. Deduction: A plan maintained by a principal-purpose organization is an exempt church plan.”

As such, it stated that since Congress deemed that the category of plans “established and maintained” by a church “to include” plans maintained by principal-purpose organizations, then all those plans are exempted from ERISA. The Court further noted that had Congress wanted to accomplish what the employees claimed it intended by adding (C)(i), it could have simply omitted the words “established and” and allowed principal-purpose organizations to maintain previously established plans while still requiring that they be established by a church. The Court also restated its long-standing practice “to give effect, if possible, to every clause and word of a statute” and noted that following the employees’ claims would require it to treat “established and” as “stray marks on a page – notations that Congress regrettably made but did not really intend.”

By ruling this way, the Court essentially maintained the status quo, as the three previously mentioned federal agencies had been consistently interpreting the statute this way for more than 30 years. However, it will probably end, or at least severely curtail, the recent trend of class action lawsuits stemming from so-called “church-plan conversions” filed by employees of principal-purpose organizations.