I. FIRM NEWS

We are please to announce that Thomas F. Gallagher, Esquire, has joined our firm. Mr. Gallagher was formerly with Cozen O'Connor, P.C. for 20 years (member since 1995). He is a graduate of Dickinson School of Law (J.D. 1989); Drexel University (M.S. Taxation 1989) and St. Joseph's University (B.S. Accounting 1982). He has extensive litigation experience in the state and federal courts of Pennsylvania and New Jersey.

II. EMPLOYMENT LITIGATION

Disparate Treatment vs. Disparate Impact: Violations of One In the Name of Compliance with the Other Allowed in Certain, Narrow Circumstances

On the final day before the summer recess, the Supreme Court issued its long awaited decision in the case of Ricci v. DeStefano, 129 S.Ct. 2658 (June 29, 2009). The Court ruled that the city of New Haven, Connecticut, violated the civil rights of white and Hispanic firefighters when it refused to certify the results of a promotion exam after no African-Americans had passed it. The Court's holding reversed the Second Circuit's decision validating the original test results. This case made front headlines in recent months due to the involvement of Supreme Court Justice nominee Judge Sonia Sotomayor. Sotomayor was one of the three judges on the appellate panel who ruled in favor of North Haven.

The suit brought by white and Hispanic firefighters, who would have been promoted based on their test performance, alleged that, by discarding the test results, the City and the named officials discriminated against them based on their race, in violation of both Title VII of the Civil Rights Act of 1964, and the Equal Protection Clause of the Fourteenth Amendment. The City and the officials defended their actions, arguing that if they had certified the results, they could have faced liability under Title VII for adopting a practice that had a disparate impact on the minority firefighters. The District Court granted summary judgment for the City, and the Court of Appeals affirmed.

The case presented the Supreme Court with the need for an interpretation and reconciliation between two provisions of Title VII. One which prohibits intentional discrimination (known as "disparate treatment") and the other which prohibits practices that are not intended to discriminate but in fact have a disproportionately adverse effect on minorities (known as "disparate impact").

The Supreme Court began its analysis with the premise that the City's actions would violate the disparate-treatment prohibition of Title VII absent some valid defense. All the evidence demonstrated that the City chose not to certify the examination results because of the statistical disparity based on race-i.e., how minority candidates had performed when compared to white candidates. The Court found that without some other justification, this express, race-based decision making violates Title VII's command that employers cannot take adverse employment actions because of an individual's race.

The Court considered whether the purpose to avoid disparate-impact liability excuses what otherwise would be prohibited disparate-treatment discrimination. The parties each proposed a means of reconciling the statutory provisions. Petitioners argued that under Title VII, avoiding unintentional discrimination cannot justify intentional discrimination. The Court held that this assertion ignored the fact that, by codifying the disparate-impact provision in 1991, Congress has expressly prohibited both types of discrimination and, therefore, the Court must interpret the statute to give effect to both provisions where possible. Petitioners also suggested that an employer in fact must be in violation of the disparate-impact provision before it can use compliance as a defense in a disparate-treatment suit. The Court found this argument overly simplistic and too restrictive of Title VII's purpose.

At the opposite end of the spectrum, respondents asserted that an employer's good-faith belief that its actions are necessary to comply with Title VII's disparate-impact provision should be enough to justify race-conscious conduct. The Court rejected this assertion finding that allowing employers to violate the disparate-treatment prohibition based on a mere good-faith fear of disparate-impact liability would encourage race-based action at the slightest hint of disparate impact.

The Court searched for a standard that would strike a more appropriate balance and adopted the strong-basis-in-evidence standard as a matter of statutory construction to resolve any conflict between the disparate-treatment and disparate-impact provisions of Title VII. This standard was adopted from cases interpreting the Equal Protection Clause of the Fourteenth Amendment where the Court held that certain government actions to remedy past racial discrimination-actions that are themselves based on race-are constitutional where there is a "strong basis in evidence" that the remedial actions were necessary.

The Court found that "applying the strong-basis-in-evidence standard to Title VII gives effect to both the disparate-treatment and disparate-impact provisions, allowing violations of one in the name of compliance with the other only in certain, narrow circumstances." The Court felt that "the standard appropriately constrains employers' discretion in making race-based decisions by limiting that discretion to cases in which there is a strong basis in evidence of disparate-impact liability, but it is not so restrictive that it allows employers to act only when there is a provable, actual violation."

As such, the Court held that under Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action. In this case, the City threw out the exams even though officials had no "objective, strong basis" for deciding that the exam was inadequate or biased. The Court found that without that evidence, the city could not reject the exam just because of the racially disparate results. As such, the Court held that the city's action was based on race and amounted to a "disparate treatment" violation of the same civil rights law.

Because the respondents did not meet their burden under Title VII, the Court did not decide the constitutional issues.

This decision will have the most impact on employers who utilize tests in making employment decisions. The Court suggests that as long as an employer can demonstrate that tests used are "job related for the position in questions and consistent with business necessity" and that no other less discriminatory alternative exists, an employer will be able to avoid a disparate impact claim.

Attorney-Client Privilege Outweighs Company Electronic Communications Policy Allowing it to Pry Into Employee's Private Emails

In Stengart v. Loving Care Agency, Inc., --- A.2d ---, 2009 WL 1811064 (App. Div. June 26, 2009), Plaintiff Marina Stengart was Executive Director of Nursing at Loving Care, Inc. until her resignation on January 2, 2008. The following month, she filed an action against the company alleging, among other things, violations of the Law Against Discrimination. Prior to her resignation, plaintiff communicated with her attorneys, Budd Larner, P.C., through her personal, password protected, Yahoo email account on her company provided laptop. These communications pertained to plaintiff's anticipated suit against the company.

After plaintiff filed suit, the company extracted and created a forensic image of the hard drive from plaintiff's computer. In reviewing plaintiff's Internet browsing history, an attorney at Sills Cummis discovered numerous communications between plaintiff and her attorney from the time period prior to her resignation. Sills Cummis did not advise Budd Larner that the image extracted from the hard drive included these communications.

Many months later, in answering plaintiff's interrogatories, the company referenced and included some of plaintiff's emails with her attorneys. Plaintiff's attorney requested the return of the originals and all copies of all such communications. Sills Cummis refused and plaintiff applied for an order to show cause with temporary restraints. The judge denied temporary restraints but scheduled the application as a motion. In support of its claimed right to pry into and retain plaintiff's communications with her attorney, the company relied upon the electronic communications policy allegedly contained in the company handbook. In seeking the return of her emails with her attorney, plaintiff argued that the company failed to demonstrate it had ever adopted or distributed such a policy and, that she was unaware of an electronic communications policy that applied to executives such as herself. The trial judge denied plaintiff's motion finding that the emails were not protected by the attorney-client privilege because the company's electronic communications policy put plaintiff on sufficient notice that her emails would be viewed as company property. Plaintiff appealed.

On appeal, the court found that there was a factual dispute regarding the application of the company policy that was not resolved by the trial court. The court, however, did not resolve the factual issues regarding the application of the company policy. Instead, the court chose to focus on the enforceability of such a company policy, which purports to transform private emails or other electronic communications between an employee and the employee's attorney into company property. The court noted that this required a balancing of the company's right to create and obtain enforcement of reasonable rules for conduct in the workplace against the public policies underlying the attorney-client privilege.

The court weighed the company's ebbing interest in enforcing its regulations, as the means of prying into an employee's private affairs, against the employee's considerable interest in maintaining the confidentiality of her communications with her attorney. The court provided that, absent the impact of the company's policy, the attorney-client privilege applies to the emails and would protect them from the view of others. The court provided "[e]ven when we assume an employer may trespass to some degree into an employee's privacy when buttressed by a legitimate business interest, we find little force in such a company policy when offered as the basis for an intrusion into communications otherwise shielded by the attorney-client privilege."

The court reversed the order of the trial court and remanded for the entry of an order requiring the turnover of all emails exchanged by plaintiff and her attorney in possession of the company, the company's attorneys, or their agents or employees. The court also ordered the deletion of all these emails from any computer hard drives upon which they were stored and demanded a hearing to determine whether Sills Cummis should be disqualified from further representing the company.