Can’t Tell the Difference? Eighth Circuit distinguishes protected concerted efforts from employee disloyalty and malice

   Whether you employ unionized employees or not, Nebraska employers must be aware of the concept of protected concerted activity under the National Labor Relations Act. Employees who engage in concerted (i.e., joint) efforts with co-workers to address their working conditions or terms of employment, may be engaging in conduct protected by federal law. Terminating or disciplining because of that conduct can give rise to an unfair labor practice charge before the National Labor Relations Board. Recently, the Eighth Circuit Court of Appeals (whose decisions govern Nebraska employers) recognized the difference between protected concerted activity and employee conduct that is disloyal, reckless, or maliciously untrue—and not protected. Read on to better understand the important distinction!
    MikLin Enterprises (“MikLin”) owns and operates ten Jimmy John’s sandwich shops in the Minneapolis-St. Paul area. Michael Mulligan is the owner and co-owner and Robert Mulligan is the vice-president. MikLin workers started an organizing campaign, attempting to gain union representation by the Industrial Workers of the World (“IWW”).   
    As part of the campaign, employees demanded paid sick leave. The MikLin handbook stated that MikLin did not allow people to simply call in sick  ̶  they were required to find their own replacements for any time off. The IWW began posting on community bulletin boards in MikLin stores. These posters contained two identical Jimmy John’s sandwiches next to each other and stated above one sandwich:  “Your sandwich made by a healthy Jimmy John’s worker,” and above the other identical sandwich: “Your sandwich made by a sick Jimmy John’s worker.” Below the sandwich was the question, “Can’t tell the difference?” followed by:  “That’s too bad because Jimmy John’s workers don’t get paid sick days. Shoot we can’t even call in sick.” 
MikLin managers quickly removed the posters from the stores.   IWW dispersed a press release, posters, and a letter to over 100 media contacts.  It discussed “unhealthy company behavior” and concluded by threatening that if Robert and Michael Mulligan would not meet with the IWW supporters to discuss their demands, “dramatic action” would be taken and they would display their posters around the city. Within the letter, there was an assertion that MikLin stores committed health code violations daily. The letter went on to state that because of the sick leave policy, MikLin was jeopardizing the health of their customers.
    Four IWW organizers met with Mulligan, and he stated that MikLin was in the process of amending its policies. The new policy involved a point system for absences. If an employee received four disciplinary points in a twelve-month period, he or she would be terminated.  This new policy stated that employees were not allowed to work until any flu-like symptoms had subsided for a 24-hour period.
    After the implementation of the new policy, the IWW supporters followed through with their threat but this time created posters with Mulligan’s phone number on them, encouraging people to call him. Mulligan and store managers removed these posters and Mulligan fired six employees who organized the campaign and delivered written warnings to three others who aided in the attack.  This gave rise to charges of unfair labor practices.
NLRB Finds an Unfair Labor Practice
    The Administrative Law Judge with the National Labor Relations Board, ruled that MikLin violated Sections 8(a)(1) and 8(a)(3), of the National Labor Relations Act, which protects concerted  activities of employees  ̶   “Section 7 of the NLRA protects employee communications to the public that are part of and related to an ongoing labor dispute.” Employee communications are not protected if they are “disloyal, reckless, or maliciously untrue.” To lose protected status, the employee communications must have been made with a “malicious motive” or have been “made with knowledge of the statements’ falsity or with reckless disregard for their truth or falsity.”
    The ALJ determined that the posters, press release, and letter were all related to the ongoing labor dispute as they dealt with the sick leave issue. Although the posters were not literally true (employees could call in sick; they just had to find coverage for their missed shift), employees were disciplined if they failed to find a replacement.  Therefore, it was a “protected hyperbole,” or somewhat exaggerated truth.
    The ALJ also found that, even though MikLin had only been investigated twice by the Minnesota Department of Health for food borne disease, it was possible that MikLin’s sick leave policy could increase the risk of food borne disease.  Again, that statement was considered to be true or hyperbole.
    The ALJ ruling then went to the NLRB.  A divided NLRB affirmed the ALJ’s conclusions. It determined that the posters were clearly related to the ongoing labor dispute over the sick leave and the statements were not “so disloyal, reckless, or maliciously untrue so as to lose the Act’s protections.”
The Eighth Circuit Declines to Enforce Much of the NLRB’s Ruling
(1)    “Sick Day” Poster Issues

The court noted that an employer commits unfair labor practices if it terminates an employee for engaging in activities that are protected under the NLRA, including  communications to third parties or the public that are utilized to improve their position as employees. But, Section 10(c) of the NLRA allows employers to terminate employees for cause.
    Courts have determined that disloyalty to an employer amounts to “cause” under Section 10 (c).  In determining disloyalty, the central question is “whether employee public communications reasonably targeted the employer’s labor practices, or indefensibly disparaged the quality of the employer’s product or services.” The former is protected and the latter is not. The court also stated that an employee’s disloyal statements can lose protection under section 7 of the NLRA without a showing that the statements were made with actual malice.
    Here the court agreed with the NLRB that the sick day posters, press release, and letter were related to other section 7 protected concerted activity intended “to improve the terms and conditions of their employ by obtaining paid sick leave.” However, the court determined that the posters, press release, and letter were not protected because they were a “sharp, public, disparaging attack upon the quality of the company’s product and its business policies.” This was evidenced here by the fact that the posters, press release, and letter were done to convince customers that they may get sick if they eat a Jimmy John’s sandwich, attacking the product itself.  An allegation that a food industry employer is selling unhealthy food is the “equivalent of a nuclear bomb” in a labor-relations dispute.  The nature of the attack was likely to outlive, and also unnecessary to aid, the labor dispute.
    The court also determined that claims about the sandwiches were “materially false and misleading.” The press release and the letter claimed that MikLin committed health code violations daily, putting customers at risk of getting sick. The court stated that these were not true statements, evidenced by MikLin’s record with the Minnesota Department of Health over ten years and requiring employees to call in sick if they have had any flu-like symptoms in the previous 24 hours.
    In sum, MikLin had cause to terminate and discipline the employees involved.  
(2)     Facebook Postings by MikLin Supervisors  
The Eighth Circuit considered other aspects of the NLRB ruling.  As the IWW began organizing, a MikLin employee created a “Jimmy John’s Anti-Union” Facebook page. On this page, MikLin employees posted disparaging comments about an IWW supporter. The ALJ determined that these posts violated section 8(a)(1) of the NLRA by encouraging harassment of the IWW supporter, which the NLRB affirmed.
    The appeals court determined that the public disparagement and degradation of the union supporter “restrained or coerced MikLin employees in the exercise of their section 7 rights” out of fear they would suffer similar treatment if they chose to support the IWW.  Thus, this aspect of the NLRB ruling was enforced.
(3)    Removal of In-Store Union Literature
After losing the first election, the IWW had filed unfair labor practice charges and objections to the election with the NLRB. MikLin and the IWW settled by stipulating to set aside the election and hold a re-run election.  After this, a MikLin employee posted a notice on a bulletin board to the employees (pursuant to the settlement) of the settlement and what it meant. A union supporter posted next to this notice an IWW “FAQ about the Union Election & Settlement.” The IWW post was taken down repeatedly.  The ALJ had determined that this was a violation of section 8(a)(1) of the NLRA, and the NLRB affirmed.
    The court enforced the NLRB’s order on this issue.  Section 8(a)(1) protects employees’ rights to “bargain collectively through representatives of their own choosing.” Removal of the IWW poster interfered with union supporters’ right to communicate about their organization in violation of section 7 of the NLRA. 
Miklin Enterprises, Inc. v. NRLB, Nos. 14-3099 & 14-3211 (8th Cir. July 3, 2017).
Bottom Line for Employers
    If you face efforts from employees that may deal with their working conditions or terms of their employment but believe they may be acting in a disloyal, reckless, or malicious way, contact your employment and labor attorney to fully discuss the issue.

Bonnie Boryca may be reached at (402) 397-2200 and

Bankruptcy Creditors Given Leeway to File Proofs of Claim Based Upon Stale Debts

In Midland Funding, LLC v. Johnson, 581 U.S. ___, 137 S.Ct. 1407, 197 L.Ed.2d 790 (2017), the United States Supreme Court held that creditors in Chapter 13 bankruptcy cases do not violate the Fair Debt Collection Practices Act if the creditor files a proof of claim based upon a stale debt in the bankruptcy case.  In other words, even if the statute of limitations set forth by state law has expired as to the creditor’s claim against the debtor, it is not a violation of federal law for the creditor to file a proof of claim in the bankruptcy case.  Once the proof of claim has been filed, the burden is on the debtor, through counsel, to identify the stale nature of the claim and object to the claim.  The Chapter 13 bankruptcy trustee may also object.  If no objection is made, the claim is likely to be allowed in the bankruptcy case.

Midland Funding has led to additional questions, including whether the same rule applies in Chapter 7 bankruptcy cases as well or is limited to Chapter 13.  Although Midland Funding was focused on Chapter 13, we believe the holding regarding stale debts would apply to Chapter 7 consumer bankruptcy cases.  Based on Midland Funding, creditors will in some cases be able to recover at least part of a debt that could not be pursued outside the bankruptcy court forum.  Creditors are now significantly more likely to file such claims in bankruptcy cases. 

Erickson | Sederstrom recommends that creditors planning to file a proof of claim that would be time-barred under state law first consult with counsel to ensure they do not violate the Fair Debt Collection Practices Act.

May an Insurer Depreciate the Cost of Labor in Determining the Actual Cash Value of a Covered Loss?

Recently, the United States District Court for the District of Nebraska certified this question to the Nebraska Supreme Court: “May an insurer, in determining the ‘actual cash value’ of a covered loss, depreciate the cost of labor when the terms ‘actual cash value’ and ‘depreciation’ are not defined in the policy and the policy does not explicitly state that labor costs will be depreciated?”. Today, the Nebraska Supreme Court found in the affirmative. 

Henn v. American Family Mut. Ins. Co. involves a current dispute over the interpretation of a homeowners’ insurance policy. At the crux of the dispute was whether labor costs can be depreciated in determining the actual cash value (replacement cost minus depreciation) of a covered damage under the policy. In its analysis, the Nebraska Supreme Court noted that Nebraska law has always generally allowed for depreciation in defining “actual cash value”. Despite the plaintiff’s argument that depreciating labor is illogical because labor does not depreciate, the court noted that such an argument is in contravention of the court’s prior reasoning that actual cash value must not equal the amount required to complete the repairs. Actual cash value is meant only to start repairs. 

The court also stated that Nebraska courts may still consider material and labor when determining actual cash value. This approach ensures that the insured does “not pay for a hybrid policy of actual cash value for roofing materials and replacement costs for labor” as the property is comprised of both materials and labor. Therefore, an insurer may depreciate labor in determining the actual cash value of a covered loss when not stated otherwise in the policy. 

“Reasonable Inference” All That Is Required To Find Sex Discrimination In Promotion Decision

If an employment discrimination case makes it way to a jury, and a jury finds discrimination and damages in favor of an employee, reversing that result on appeal is an uphill battle.  A recent Nebraska Supreme Court case involving Metropolitan Utilities District of Omaha (MUD) and allegations of sex discrimination in the denial of a promotion illustrate this point.  

Plaintiff Kristina Hartley was a long time employee of MUD. She had a bachelor’s degree and began in customer service at MUD in 1984. She was promoted in 1986, 1988, 1991, and in 1994 to senior engineering technician. After sixteen years in that position, she applied to become supervisor of field engineering.  The position was open to current MUD employees via an internal job posting. The position involved planning, directing, and supervising the work of 17 field engineering and utility locator personnel of the plant engineering division.  

The position required two years of college in an area related to engineering and utility locating experience in the last five years, preferably in an ongoing capacity. This posting was the same as a previous posting for the same position in 2003 except that the utility locating experience in the last five years was a new requirement. Stephanie Henn, Senior Plant Engineer, added the new requirement and made the decision of who to promote to supervisor of field engineering. She had been Hartley’s direct supervisor for many years. Shortly before Hartley applied for the supervisor position, Henn was a promoted and a new direct supervisor was put in place over Hartley and others.  Hartley applied to be supervisor of field engineering. Ten other people applied, two of whom were female.

The promotion was awarded to a male colleague, David Stroebele. Hartley’s discrimination claim proceeded to trial and the details of how the promotion was awarded to Stroebele over Hartley and the other two female applicants were put before a jury. The jury found in favor of Hartley, awarding her $61,293 in special damages and $50,000 in general damages. After trial, the court awarded Hartley attorney’s fees of $56,800.
On appeal
MUD appealed to the Nebraska Supreme Court, which was tasked with answering whether sufficient evidence supported the jury’s verdict. The familiar McDonnell Douglas standard applied to Hartley’s case. She had to first establish a prima facie case of discrimination in the failure to promote her by demonstrating: (1) she was a member of a protected group, (2) she was qualified for and applied for a promotion to an available position, (3) she was rejected, and (4) a similarly situated employee, not part of the protected group, was promoted instead.  

When an employee establishes these elements, an employer may try to rebut the prima facie case by producing “clear and reasonably specific” admissible evidence that would support finding that unlawful discrimination did not cause the denial of the promotion, i.e., by articulating a legitimate, nondiscriminatory reason for the decision.

Upon providing such a reason, a jury must decide whether the employer acted because of the protected characteristic (here, Hartley’s sex) despite the employer’s proffered reason. In other words, is the employer’s reason a pretext for unlawful discrimination in making the decision not to promote? If so, “[t]he trier of fact can infer that ‘the employer is dissembling to cover up a discriminatory purpose.’”  

The first two steps were met in this case: Hartley established a prima facie case and MUD offered a legitimate, nondiscriminatory reason. Its proffered reason was that Stroebele was the better qualified candidate compared to Hartley. Hartley’s new direct supervisor and her prior supervisor, Henn, had expressed issues with her communication skills on a review just before she applied for the supervisor position. Also, they claimed she lacked the five years of locator experience needed for the position.  The question on appeal was whether there was sufficient evidence for the final step: were MUD’s reasons pretextual?  The evidence was sufficient, according the Nebraska Supreme Court. It recited the following evidence that the jury had before it:

  • Hartley worked at MUD twice as long as Stroebele.
  • She had supervised his work.
  • She had more supervisory experience than him.
  • She had the requisite skills at locating, though not within the past five years.
  • She had no “chargeable hits” in locating, but Stroebele did in recent years (showing her locating skills were more accurate).
  • She had more education than Stroebele.
  • He had previously worked as a laborer and she had inspected his work while at MUD.
  • The only complaints about Hartley were tied to her emotionality rather than competency to perform her job.
  • Other female applicants were also more qualified than Stroebele.
  • Hartley’s only performance appraisal in the past seven months took place just after she applied for the promotion, as did the other applicants’ appraisals.
  • The appraisal was not conducted in month of the applicants’ hiring anniversary, contrary to MUD policy.
  • Hartley’s appraisal showed a dramatic decline compared to her past appraisals.
  • The appraisal was conducted by the new supervisor recently put in place over Hartley but referenced incidents before he was her supervisor, when Henn was her supervisor.
  • Hartley’s supervisors showed hostility towards her after she complained about the timing and content of the appraisal.
  • There was a question of whether the five years’ locating experience requirement was a legitimate and necessary requirement for the position.
  • Supervisors provided inconsistent or shifting explanations about Hartley’s skills at locating in explaining why she was denied the promotion.

In response to this evidence, MUD argued the jury could not have reasonably found pretext because Hartley admitted that certain events happened. It said she did not refute that in 2008 she had a bad interaction with then-supervisor Henn, which Henn thought was unprofessional. It also said she did not refute the truth of complaints about Hartley that she did not like to do utility locating.  

The Court rejected MUD’s argument. It “confuse[d] the falsity of an occurrence cited in support of the employer’s action with the falsity of the employer’s statement that the proffered non-discriminatory reason actually motivated the employer.” Regardless of the truth or falsity of the complaints against Hartley, the evidence could have led a jury to conclude those complaints were not the actual reason for denying Hartley the promotion. Viewing the evidence as a whole and in a light most favorable to Hartley, the Court found that there was sufficient evidence to support a reasonable inference that the employer’s promotional decision was because of Hartley’s gender.  Therefore, the jury’s verdict was upheld, including each amount for damages and attorney’s fees.  Hartley v. Metropolitan Utilities District of Omaha, 294 Neb. 870 (Sep. 30, 2016).

Takeaway for employers
The evidence put before the jury may have led jurors to conclude that policies were not followed with regard to the plaintiff that illegitimate job requirements were placed in the posting to exclude certain applicants, and that supervisors had improper justifications when excluding female applicants.

This case should show employers the importance of conducting job performance appraisal consistently and in conformity with written policies or past practices. Furthermore, job postings are important and should contain only the actual requirements and considerations involved in reviewing applicants for a position.  Bonnie M. Boryca is contributing editor of the Nebraska Employment Law Letter and can be reached at (402) 397-2200.

E|S assists client in obtaining a $1.59 million dollar judgment in a breach of contract action in the United States District Court for the Western District of Missouri, St. Joseph Division.

Erickson | Sederstrom’s Richard J. Gilloon and Nicholas F. Sullivan, together with Kevin D. Weakley and Leilani R. Leighton from the Kansas law firm Wallace Saunders Austin Brown & Enochs, obtained a $1.59 million dollar judgment for their client, Hassanin Aly, against Hanzada for Import and Export Company, Ltd. (“Hanzada”).

Connolly Joins Erickson|Sederstrom

Hon. William M. Connolly, who retired after serving twenty-two years on the Nebraska Supreme Court, has joined Erickson|Sederstrom as Of Counsel with a practice in Mediation and Arbitration.  

Judge Connolly will utilize his experience on the Nebraska Supreme Court and 29 years of prior experience as a trial lawyer to help parties reach just resolutions through the mediation and arbitration processes.  Judge Connolly will also offer appellate consulting services to firms and attorneys seeking assistance to develop appellate strategies, review and edit briefs, and prepare for oral argument.  

In Nebraska, Lenders Have Five Years to Pursue Deficiency Lawsuits after Judicial Foreclosures

In First National Bank of Omaha v. Scott L. Davey and Deborah Davey, the Nebraska Supreme Court held that a creditor has five years to pursue a deficiency action in situations where a piece of real estate has been foreclosed through judicial proceedings.

Nebraska law provides that, when real estate lending is secured by a deed of trust, the deed of trust can be foreclosed either through a non-judicial trustee sale of the property or a judicial foreclosure proceeding.  If the foreclosure, through either process, does not generate enough proceeds to pay off the underlying loan, the lender will be entitled to pursue the defaulted party for the remaining unpaid balance (the “deficiency”).  The Nebraska Deed of Trust Act, however, states that any legal action to secure a deficiency judgment must be brought within three months after “any sale of property under a trust deed…”

In Davey, a deed of trust had been foreclosed through use of judicial foreclosure proceedings which culminated with a sheriff’s sale of the property.  A deficiency resulted, but the lender did not file a deficiency lawsuit within the three month time frame.  The Douglas County District Court held that the lender filed its deficiency action too late and the action was dismissed.  The Nebraska Supreme Court reversed that decision, finding that the general five year statute of limitations for written contract matters applied instead.  The Court found that, notwithstanding the statutory language, applying the shorter three month time frame to filing of deficiency actions after a judicial foreclosure sale could produce absurd results in some cases and that it was more appropriate, given the overall statutory intent, to apply the five year limit instead.  Accordingly, lenders using the judicial foreclosure process have a considerable length of time to determine whether they wish to seek a deficiency judgment when the foreclosure did not produce enough funds to pay off the underlying loan.  
Davey reflects that, in Nebraska, despite the expedient procedure for foreclosure provided in the Deed of Trust Act, many situations can exist in which judicial foreclosure is more appropriate.  While the judicial process will take much longer, it is appropriate for use in situations in which competing liens need to be resolved, and can also be appropriate when the lender will need more time to evaluate its options.  

Erickson|Sederstrom attorneys are available to aggressively pursue both judicial and non-judicial foreclosure actions and any resulting deficiency suits.  Erickson|Sederstrom attorneys also provide a wide variety of additional real estate litigation services, including quiet title actions and landlord/tenant dispute litigation.


Differences Between Application of General Negligence and Professional Negligence Statutes of Limitation Clarified

In Churchill v. Columbus Community Hospital, Inc., the Nebraska Supreme Court attempted to provide clarification, in the context of services provided by a physical therapist, about how to determine when the two year professional negligence statute of limitation applies and when the four year general negligence statute of limitation applies.
In Churchill, a patient participating in aquatic therapy was injured after she slipped on a puddle of water while descending steps to leave a pool area located within a physical therapy clinic. The clinic’s policy was not to assist patients leaving the pool unless an initial evaluation indicated the patient had trouble walking. Churchill’s evaluation did not reveal any such trouble. On November 1, 2011, one day before the four year anniversary of her fall, Churchill filed an action in Platte County District Court against the clinic’s owner, claiming negligence in failing to clean the floor and failing to warn of the water hazard. The district court granted summary judgment in favor of the defendant, determining that the action was one for professional negligence, which Nebraska Revised Statute §25-222 states must be filed within two years after the act or omission occurred.
Churchill appealed the grant of summary judgment against her on the grounds that her claim was for premises liability, which is subject to a four year statute of limitation under Neb. Rev. Stat. §25-207. Addressing an issue it had not previously specifically determined, the Court concluded that physical therapists are considered professionals, taking into account that physical therapists are licensed by the state, are required to have a college degree, are subject to professional disciplinary authority, and are required to maintain certain educational requirements. The Court then stated that the alleged negligent act, directing Churchill to leave the pool without assistance, occurred within the scope of a professional relationship between patient and therapist. The Court reasoned that performing aquatic exercises was part of Churchill’s therapy, and her therapist evaluated her ability to walk. When the therapist directed Churchill to leave the pool without assistance, he was providing professional services. Thus, Churchill’s action was not allowed to proceed, as it was governed by the two year statute of limitation for professional negligence. 
Churchill thus clarified the analysis by which Nebraska courts evaluate whether a claim must be filed within two years as professional negligence, or within four years as required for other causes of action. The act or omission alleged must be essential and an integral part of the professional service rendered. Also, the profession addressed must exhibit factors similar to the factors set forth in Churchill.   This rule of law has been upheld in subsequent cases.
Churchill gives plaintiffs an incentive to file suit early if they have any question as to whether their claim is subject to the professional negligence statute of limitation.  Those defending against claims may argue for a broader application of the definition of “professional negligence”, as Churchill may broaden that definition in some situations.


Late Paycheck or Unpaid or Withheld Wages? Nebraska Laws Might Be on Your Side

Nebraska Revised Statute §§ 48-1228 to 48-1234 constitute the Nebraska Wage Payment and Collection Act. The Act applies to employees and a broad range of employers, including the state or any individual or entity that employs anyone in Nebraska as an employee. It defines wages as compensation for labor or services, including fringe benefits, when previously agreed to and conditions stipulated have been met by the employee, whether such wages are on a time, task, fee, commission, or other basis. Wages include earned but unused vacation leave. And wages include commissions on all orders delivered or on file with the employer at the time of an employee’s separation, unless the employer and employee agreed otherwise in an employment contract.

Fringe benefits include sick and vacation leave plans, disability income protection plans, retirement, pension or profit-sharing plans, health and accident benefit plans, and any other employee benefit plans or benefit programs regardless of whether the employee participates in such plans or programs.

The substance of the Act is its requirement that an employer designate and timely pay employees on regular paydays, and that an employer must pay a terminated employee all unpaid wages on the next regular payday or within two weeks of termination, whichever is sooner. See § 48-1230. If the wages consist of commissions, the employer must pay the employee any earned commissions on the next regular payday following receipt of payment for the goods or services on which the commissions were based. See § 48-1230.01.

The enforcement mechanism in the Act is it authorization of employee lawsuits for unpaid wages in § 48-1231. As an incentive to bring wage claims, which may consist of only a couple of week’s wages in some instances, the Nebraska Legislature has authorized awards of attorney’s fees to employees who prevail in court. If the employee prevails and he or she has employed an attorney to do so, the must award attorney’s fees in an amount not less than 25% of the unpaid wages. Courts can award more if they determine a higher fee is justified; 25% is the minimum required by the statute. In addition, if the case is appealed, and the employee wins on appeal, the employee can recover a 25% attorney’s fee for the appeal, as well. An employee cannot recover fees if the employer had tendered the unpaid wages within thirty days of the regular payday when they were due. 

If the employee prevails in the lawsuit, damages are equal to the wages owed. If nonpayment of wages is found to have been willful, then an employer may be held liable for twice the amount of unpaid wages (though the employee only recovers the amount of wages and the "doubled" amount is remitted to the Nebraska State Treasurer because it amounts to punitive damages, which may not be retained by private parties under the Nebraska constitution). 

The potential for the "double" damages and attorney’s fees can transform a wage claim seeking a couple weeks of unpaid wages into a much larger liability for employers who do not tread carefully. 

Whether you are an employee who is owed wages by his or her employer, or an employer dealing with wage issues, attorneys at Erickson | Sederstrom can assist you. Attorneys Bonnie Boryca or Paul Heimann can be reached (402) 397-2200.

Jury Confusion: What Happens When the Jury Makes a Mistake?

The Iowa Court of Appeals recently affirmed a district court’s denial of a motion for new trial based on juror misconduct. In Resetich v. State Farm, the Leanna Resetich was involved in a car accident in which she sustained injuries. Her and her husband eventually sued State Farm for underinsured motorist coverage and loss of consortium. The jury returned a verdict for $48,000, and assessed Ms. Resetich’s fault at 45%. Consequently, the judge reduced the plaintiff’s judgment to $26,500. 

The plaintiffs then filed a motion for a new trial alleging, among other things, juror misconduct. In support of the assertions, they produced a juror’s sworn statement attesting that the jurors had already considered Ms. Resetich’s fault in calculating the $48,000 verdict, an action prohibited by the jury instructions. The district court refused to admit the affidavit and denied the motion for new trial. Plaintiffs appealed. 

On appeal, the court noted that I.C.A. § 5.606(b) prohibits the use of juror testimony unless it refers to extraneous prejudicial information or outside influences that improperly affected jurors. In order to protect the sanctity of the juror room, any thoughts, emotions, or internal matters are not admissible. The court reasoned that jurors’ understanding or lack thereof represented the internal workings of the jury, which was barred by the evidence statute. Thus, the district court properly excluded the juror’s affidavit and denied the motion for new trial on the grounds of juror misconduct.

For any litigant, this result is upsetting. I.C.A. §5.606(b) is a statute used in different forms across the country to protect jurors. To avoid a confused jury, it is important to have an attorney that fights for clearly worded jury instructions and protects an appellate record in case unfair instructions are sent to the jury room. 

If you are considering suit or facing a complaint, attorneys at Erickson | Sederstrom may be able to assist you on a variety of legal topics. Attorney MaKenna Dopheide may be reached at (402) 397-2200.

Federal Appellate Court Rules that Obesity is Not a Disability (Most of the Time)

In a case of first impression for the United States Court of Appeals for the Eighth Circuit, the court ruled that, in most cases, the Americans with Disabilities Act (ADA) does not cover obesity alone. In Morriss v. BSNF Railway Company, Mr. Morriss sued the railroad when his offer of employment was revoked after a physical. The would-be employee failed a physical when his Body Mass Index (BMI) was found to violate company policy, even though he did not have any current health concerns or work restrictions. The company, concerned about health and safety risks to which an employee with a high BMI may be susceptible, had instituted a policy refusing to hire candidates with a high BMI for safety-sensitive positions. Mr. Morriss sued, arguing the company discriminated against him in violation of the ADA. The company was granted summary judgment, and Mr. Morriss appealed.
The ADA prohibits a covered employer from discriminating against any “qualified individual on the basis of disability”. Of the several definitions of “disability”, the Eighth Circuit focused on whether Mr. Morriss had an actual or perceived physical impairment. A physical impairment, as defined by the EEOC, means a physiological disorder affecting one or more body systems. As a result, the court concluded that an individual’s weight is considered covered when it falls outside the normal range and occurs as a result of a physiological disorder. Because Mr. Morriss had no evidence that his weight was the result of a physiological disorder, the court affirmed the district court’s decision. While this decision does not mean that ADA coverage is out of reach for claimants with obesity, it certainly excludes a substantial amount of claims. When conducting physicals, Iowa and Nebraska employers with similar policies should take care that the candidate does not have any underlying disorder causing obesity or a covered disability arising from obesity to avoid liability under the ADA.

Iowa Court of Appeals Issues New Decision on the Coming and Going Rule

The Iowa Court of Appeals recently reviewed several exceptions to the going and coming rule. In Seaman vs. Burgess Health Center, Mrs. Seaman died tragically on her way to work. The agency determined that she was not injured while in the course of her duties. Therefore, it barred her widower’s action for death benefits and funeral expenses. 

On appeal, the widower argued that there was a causal injury between her death and her work with Burgess Health Center. According to the going and coming rule, injuries occurring off the employer’s premises while the employee is on the way to or from work are not compensable. However, the court does make several exceptions. Of those, the widower argued that the special errand exception, dual purpose exception, and second business situs exception applied. 

The special errand exception applies when an employee is injured away from the employer’s premises during a special errand or mission for their employer. The dual purpose exception applies when an employee is injured off the premises while making a trip that serves both personal and business purposes. To apply this exception, the employee would have had to make the trip even if it did not coincide with the business purpose. The widower argued that both exceptions applied because his wife was on her way to work to deliver completed patient reports. He argued that the reports were time sensitive and she would be reprimanded if she did not deliver them. However, the court found no facts that would make the agency’s finding that she did not have to provide the reports that day illogical or unjustified. Therefore, neither the special errand exception nor the dual purpose exception applied. 

Finally, the widower argued that the business situs exception applied. The business situs exception applies when the employee’s home serves as a secondary office. While the Iowa Supreme Court has not officially adopted this exception, other courts state that it applies when it finds a large amount of work performed at home, continuing presence of work equipment at home, or special circumstances of the particular employment that make it necessary and not personally convenient to work from home. A great example of this occurs when a woman must work from home due to pregnancy. Although Mrs. Seaman did some work at home in the evenings to complete reports, she never saw clients at home, Burgess Heath Center never required her to work from home or paid for mileage to and from work. Mrs. Seaman did not have equipment at home. Based on these facts, the court could not find the agency’s finding that the exception did not apply wholly irrational. Therefore, the Iowa Court of Appeals affirmed the decision that Mrs. Seaman’s estate was barred from workers’ compensation benefits.

This case serves as a great review for employers in determining which tasks will invoke the exceptions to the going and coming rule. More importantly, while the court did analyze the case under the business situs exception, it still did not adopt it. As such, Iowa remains one of the twenty-eight states that still have not adopted that specific exception. 

The Search for “Bigfoot” Continues—The Iowa Court of Appeals Yet Again Finds Insufficient Evidence to Meet the Seemingly Unattainable Standard for Reversing for Workers’ Compensation Decisions

The search for the “Bigfoot” of the legal community continues, specifically the search for a case reversing final agency action on the ground that the agency’s action is unsupported by substantial evidence or is irrational, illogical, or wholly unjustifiable. In McComas-Lacina Construction v. Drake, McComas-Lacina, Mr. Drake’s employer, appealed the district court’s decision to affirm a workers’ compensation award in favor of Mr. Drake.  The employer argued that the determinations regarding Mr. Drake’s permanent total disability and date of last injury was “an abuse of discretion, irrational, illogical, unreasonable, unjustifiable, arbitrary and capricious, and error of law, and not supported by substantial evidence.”
In reviewing the case, the Iowa Court of Appeals recognized that the legislature granted the workers’ compensation commissioner the discretion to make factual determinations. Thus, district and appellate courts must affirm these factual determinations if they are supported by “substantial evidence in the record before the court when the record is viewed as a whole.” Substantial evidence is evidence of the quantity and quality that would be deemed sufficient by a neutral, detached, reasonable person to establish the fact at issue when the consequences of establishing that fact are of great importance. Iowa Code §17A.19(10)(f)(1). The court of appeals clarified that it would affirm a decision as having met the substantial evidence burden, even if the court would have come to a different conclusion as to the factual determinations. Because establishing the date injuries and deciding whether an employee is permanently and totally disabled are factual determinations, the Iowa Court of Appeals affirmed the lower court’s decision, concluding that there was little it could add the workers’ compensation court’s reasoning that supported these factual determinations.
As noted by the appellate court and evidenced through McComas, nearly all cases are won or lost in the workers’ compensation court. The Iowa Court of Appeals reinforced the widespread belief that a case reversing a final agency action on the ground that the determination was unsupportable by substantial evidence “is the Bigfoot of the legal community—an urban legend, rumored to exist but never confirmed.” Therefore, the search for "Bigfoot” continues.


Federal 2016 Budget Delays or Suspends Several ACA Funding Provisions

On December 18, 2015, President Obama signed the Federal Budget for 2016 (the "Budget") with several changes to key funding provisions of the Patient Protection and Affordable Care Act ("ACA"). 

The ACA’s so called "Cadillac Tax," a 40% excise tax on high-cost employer-sponsored health plans, is now delayed until the year 2020.  This tax had been the subject of much ACA criticism, particularly when considering that the ACA generally promotes choice of insurer and provider flexibility in health insurance offerings. 

The Budget also suspends the ACA’s medical device tax. This 2.3% tax on manufacturers and importers for sales of medical devices will be suspended for two years and will become effective again December 31, 2017.

Finally, the Budget delays the ACA’s health insurance provider’s fee.  This provider’s fee, which is treated as an excise tax, became effective in 2014. The collection of this provider’s fee is suspended for the 2017 calendar year in accordance with the Budget.  Supporters of the Budget are hopeful that the suspension this fee, which is imposed upon health insurance providers and allocated according to market share, will be one less fee or expense being rolled to employers on their health insurance rates.

While it is difficult to determine the future impact that these ACA tax provision delays and suspensions will have, it is clear that the ACA and its various provisions are valuable bargaining chips for both political parties. 

Corporate entities should follow this story as it continues to develop.  The regular changes to the ACA can make compliance a challenge for businesses of all sizes. For more information on the Patient Protection and Affordable Care Act, or other healthcare, labor, and employment issues, please contact Adam B. Kuenning with Erickson | Sederstrom.

Nebraska Strikes Employer’s Strategy to Keep Workers’ Compensation Plaintiffs from Dismissing Cases

Nebraska’s highest court recently ruled that employers in workers’ compensation cases cannot hold a counterclaim to keep a plaintiff from dismissing their case voluntarily. In Interiano-Lopez v. Tyson Fresh Meats, the plaintiff filed a case in Nebraska’s workers compensation court asking the court to determine his employer’s liability as to an alleged injury in October 2013. Tyson, the plaintiff’s employer, answered with a counterclaim asking that the court also determine its liability. Eventually, the plaintiff requested that the court dismiss the case without prejudice so that he could file the same case in the Iowa workers’ compensation system. (At the time, the plaintiff lived in Iowa, while the Tyson plant was located in Nebraska) The judge dismissed the plaintiff’s case, but Tyson’s counterclaim continued. Before Iowa could adjudicate the plaintiff’s claim, the Nebraska court ruled in favor of Tyson with regard to the October 2013 injury.

On appeal to the Nebraska Supreme Court, the court noted the alleged conflict in workers’ compensation statutes. Neb. Rev. Stat. § 48-177 allows a plaintiff to dismiss a case with the ability to refile if the case has not been submitted to the judge or if both parties agree. Meanwhile, Neb. Rev. Stat. § 48-173 allows both parties in interest to petition the Nebraska workers’ compensation court to resolve a dispute about an employee’s workers’ compensation benefits. While the court did not consider Tyson’s counterclaim to be a “petition” under Neb. Rev. Stat. § 48-173, it also noted that to allow counterclaims would interfere with plaintiffs’ right to dismiss a case under Neb. Rev. Stat. § 48-177. It stated, “[w]e will not construe an employer’s right to file a petition under § 48-173 in a manner which negates a plaintiff’s right to dismiss a case under § 48-177”.

This case represents a blow to a defense strategy to keep plaintiffs from increasing employer costs. In this case, the court noted that the plaintiff sought to refile in Iowa because the benefits and law were more favorable to him. The employer’s strategy sought to protect itself from last minute dismissals to save money and costs. After this opinion, plaintiffs will be allowed to dismiss a case voluntarily without regard to an employer’s right to file a petition. 

Is Your Small Business Ready for Nebraska’s Updated Data Breach Notification Law?

On July 21, 2016, new changes to Nebraska’s Financial Data Protection and Consumer Notification of Data Security Breach Act become effective. In the event of a breach, any individual or commercial entity that conducts business in the state of Nebraska and owns or licenses computerized data that includes personalized data is required to 1) conduct an investigation to determine the likelihood that the personalized information has been or will be used for an unlawful purpose, and 2) notice any affected Nebraska residents. If notice is necessary, the individual or commercial entity must also notify the Attorney General. Moreover, if the personal information is maintained by an individual or commercial entity, but not owned or licensed by the individual or entity, they must notify the owner or licensee of the breach. Failure to comply may result in suit against the individual or commercial entity for damages a resident incurred because of the breach.

New updates to the law include defining personal information to include “a user name or email address, in combination with a password or security question and answer, that would permit access to an online account”. Additionally, the law is now triggered when encrypted data is stolen in addition to the confidential process or key used to decrypt the data.

Any individual or commercial entity that maintains and follows its own notice procedures regarding data breaches is deemed to be in compliance with the law. However, many other laws or regulations also cover data breaches, such as HIPAA, HITECH, GLBA, and other states where a resident affected by the breach resides. Businesses large and small should contact their attorney to ensure that they have a policy that complies with all applicable laws and regulations and reduces the risk of liability after a breach.

U.S. Supreme Court Upholds Affordable Care Act’s Tax Credits – ACA Unchanged for Employers

The Supreme Court of the United States ruled in favor of the Patient Protection and Affordable Care Act’s (ACA) tax subsidies in States that utilize rather than a State operated health insurance market. The dispute in the case of King v. Burwell was viewed by many observers and healthcare professionals as one that could have crippled the ACA had the Court ruled differently.  

At the center of the dispute in King were the words “established by the State.” According to a strict reading of the ACA, it appeared that the tax credits, so important to helping people with income below a certain level attain health insurance, were only available in States that had established their own health insurance exchange. The Plaintiffs, four individuals from Virginia, argued that the ACA was written to encourage States to develop their own health insurance exchanges and that the exclusion of tax credits for States that refused to do so was intentional. The Defendants, Federal Government representatives from Health and Human Services, the Department of the Treasury, and the Internal Revenue Service, argued a strict interpretation should not be adopted because it would result in absurd results when applied in other parts of the ACA. 

In a 6-3 decision, the Court agreed with the Defendants. The Court mentioned that although the plain language was clear, a strict reading was untenable when considering the structure and function of the ACA as a whole.  

In a strongly worded dissent, Justice Scalia, joined by Justices Thomas and Alito, noted that the decision effectively means that the plain language of a statute can be molded to the whims of the Court. “Words no longer have meaning if an [e]xchange that is not established by a State is ‘established by the state,’” wrote Justice Scalia (emphasis in original). The dissent goes on to note that  the Court has effectively rewritten the law and that perhaps the ACA should be known as “SCOTUScare,” rather than “Obamacare,” as it is currently known to some.  

This has been a momentous session for the Supreme Court. Just one day after its ruling in King v. Burwell, the Court mandated that all states allow and acknowledge same sex marriage in the case of Obergefell v. Hodges.  

Corporate entities should follow the political path of the ACA as it progresses.  While many of the constitutional challenges to the ACA have now been resolved, more than one of the presidential candidates have mentioned seeking to completely repeal the ACA if they are elected.  For more information on the Affordable Care Act, or other healthcare, labor, and employment issues, please contact Adam B. Kuenning with Erickson | Sederstrom.