Does Size Matter When It Comes to Title VII Sexual Harassment Suits?

The issue of civil rights has always been hotly contested in this country. Heated debates resulted in the passage of the landmark Civil Rights Act of 1964. Originally intended to secure the rights of African Americans, it was later amended to safeguard women’s rights.

Title VII of this law prohibits discrimination in employment on the basis of race, national origin, gender, or religion. In the late 1970s courts began ruling that it applied to sexual harassment as well. Though Title VII only applies to employers with fifteen or more employees, it is how the definition of employee bears on the case that is the center of the most significant controvery regarding discrimination suits.

Consider the case of Jenifer Arbaugh vs. Y&H Corp. The suit involves an employee of the Moonlight CafГ(c) in New Orleans who alleged she was victimized by a sexually hostile work environment while employed as a bartender and waitress. Y&H Corp., a corporation with two individual owners, owned the Moonlight CafГ(c). The case was tried in the U.S. District Court for the Eastern District of Louisiana, and in 2002, a jury awarded Arbaugh $40,000 in damages.

Y&H Corp filed a motion, arguing the action should be dismissed because the federal court had no jurisdiction as the company had less than 15 employees, which meant Title VII didn’t apply. The methodology they used in determining the number of employees involved excluding the two owners, their wives, who also worked for the business, and their delivery truck drivers.

In 2003, the district court agreed with Y&H Corp and dismissed the case on the grounds of subject matter jurisdiction. That is they agreed that given the number of employees was less than 15, the court had no authority to decide on the case. A year later, a three-judge panel of the U.S. 5th Circuit Court of Appeals upheld the district court’s 2003 decision.

However, Arbaugh made an appeal to the Supreme Court and it began hearing arguments on January 11, 2006. The basis of the appeal is that Section 701(b) of Title VII does, in fact, state that the prohibition against employment discrimination applies to employers with fifteen or more employees. The question is whether this provision also limits the subject matter jurisdiction of the federal courts as was previously decided, or does it only raise an issue about the merits of a Title VII claim? Arbaugh’s attorney argued that the number of employees went to the merits of the case, rather than to the question of whether or not the court had the right to rule.

What stands at the heart of this case is whether the definition of an employee is decided as one of the facts of the case or as determination of the court’s authority. This decision has profound implications for employers. If the definition of an employee is a deciding factor in the court’s right to rule, an employee can postpone raising the question of who are the legitimate employees of the company being sued until after he/she knows the outcome of a trial on the case’s merits. This means a suit of this type can drag on costing the company being sued millions of dollars in legal fees. If the definition of an employee is determined to be part of the merits of the case, than a jury would decide on that factor along with the rest of the case’s merits, which would expedite litigation.

The Supreme Court is expected to decide on this issue as part of their ruling in the Arbaugh case.

Research Shows Side Air Bags Can Save Lives

In a recent study, The Insurance Institute for Highway Safety estimated that side air bags offering head protection could save the lives of about 2,000 drivers a year if every vehicle were properly equipped. The study was based on federal crash data involving 1997-2004 model year cars involved in crashes from 1999-2004 and 2001-2004 SUVs involved in crashes from 2000-2004.

The agency’s conclusion is based on insurance industry research that shows driver deaths in side-impact collisions dropped by more than 50 percent in SUVs equipped with head-protecting side air bags. The study also found that the risk of death dropped 30 percent in side collisions involving SUVs with side air bags that only offer protection to the chest and abdomen.

In passenger cars struck on the driver’s side, the risk of the driver being killed dropped 37 percent in autos with side air bags that have head protection. The risk of driver death fell 26 percent for cars with side air bags providing just chest and abdomen protection. The researchers discovered that fatality risks were lower across the board in vehicles with side air bags, whether the crash involved older or younger drivers, male or female drivers, and drivers of compact cars or larger passenger vehicles.

The side air bag was introduced in the mid-1990s, and has been credited for allowing motorists to escape serious injuries and death when struck in the side. In a head-on crash, the vehicle’s front-end absorbs most of the impact. However, a motorist struck in the side has very little protection without the side air bags.

Side-impact crashes are a major concern. In 2004, the government estimated that 9,270 people were killed in these types of crashes, which amounted to almost 30 percent of traffic deaths reported that year.

Although federal regulations don’t require side airbags in passenger vehicles, more and more manufacturers are installing them as standard equipment. This is due primarily to a 2003 voluntary agreement among automakers to improve occupant protection in side impacts for SUVs and pickups. The agreement is supposed to result in all cars, SUVs, and pickups having side airbags with head protection by 2010.

The auto industry has been keeping pace, and almost four of every five new car and SUV models already have standard or optional side airbags that include head protection. This is a significant increase since side airbags were introduced in the mid-1990s. If you would like model-by-model information on side airbag availability in 1996-2006 models, log on to iihs.org/ratings/ side_airbags/side_airbags.aspx.

Show No Disparity When Dealing with an Aging Workforce

When employers think diversity, most think in terms of sociological factors such race or religion. But there is another type of diversity that’s becoming increasingly more prevalent in today’s workforce and that is age diversity. As Baby Boomers continue to work well past normal retirement age, the phenomenon will become more widespread.

Having the wisdom and experience of a graying workforce population comes with a price. Under the ADEA, it is unlawful to discriminate against a person because of age with regard to any term, condition, or privilege of employment, including, but not limited to, hiring, firing, promotion, layoff, compensation, benefits, job assignments, and training.

This aging law was given a new lease on life with a recent Supreme Court decision. In the landmark case of Smith et al. v. City of Jackson, Mississippi, No. 03-1160, a divided Court, by 5-to-3, held that the ADEA authorizes disparate impact claims. The doctrine of disparate impact means that even where an employer is not motivated by discriminatory intent, Title VII prohibits an employer from using a seemingly neutral employment practice that has an unjustified adverse impact on members of a protected class. Of course, employees 40 and older are a protected class. The real Pandora’s Box that was opened by this decision actually lies in the nature of the disparate impact suit itself because unlike disparate treatment claims, disparate impact claims don’t require proof of discriminatory intent. Their emphasis is on whether or not a company’s policies and practices adversely affect a protected group. The claimants must have substantive proof that the disparate impact exists; they cannot just allege that there is the possibility that there may be a disparate impact resulting from the policy or practice. The downside here is that even though there may have been no discriminatory intent on the employer’s part, the fact that the disparate impact exists makes that employer legally liable.

What should employers be doing as a result of this heightened employment practices liability? The first response should be to review benefits, compensation and employment policies and practices to determine if there is any disparate impact on older workers. You will also need to perform a statistical analysis to prove the inaccuracies in the data of any potential claimant. A current statistical analysis will also evaluate whether there is the potential for disparate impact on older workers from a particular workplace policy or procedure in the future.

The next step you need to take is to talk to your agent about Employment Practices Liability Insurance (EPLI). Most comprehensive general liability policies exclude employment-related claims. Although a directors and officer’s policy may offer some form of protection, it won’t cover the business entity itself. Other forms of insurance, such as fiduciary liability coverage, usually want cover these types of claims either.

What an EPLI policy does is provide coverage for the cost of defending against and/or settling various types of claims, including discrimination, sexual harassment and wrongful termination. The majority of EPLI policies require the insurer to defend an employer against covered claims. The insurance company usually has the right to select the defense counsel. EPLI insurers typically have pre-approved, panel counsel hired to defend their clients. The cost of defense lessens the amount for settlement, so having an EPLI policy will actually encourage out of court settlements.

Is Your Homeowner's Coverage a Mystery to You?

If you feel in a quandary when you look at your homeowner’s insurance, take heart; you are not alone. In fact, a recent study conducted by Harris Interactive for Travelers Insurance shows that a large number of American homeowners are unsure of their coverage specifics. Many of these homeowners are underinsured and the smallest disaster could send them into a financial hardship.

The researchers questioned more than 1,300 homeowners to determine exactly what they knew about their coverage. They also asked the study participants how often they reviewed their policy to ensure they maintained appropriate coverage and how they conducted their review.  According to the survey data, more than 44 percent of those surveyed had not examined their insurance coverage in the past year. Some respondents had not reviewed their insurance policy in the last 10 years.

The “Travelers In-synch Homeowner’s Insurance Study” also indicated that nearly 27 percent of these homeowners weren’t sure whether their policy would cover the cost of rebuilding their home. Thirty-six percent didn’t know whether their policy would cover damage caused by a hurricane. Forty-two percent were unsure if they had earthquake coverage. Twenty-six percent didn’t know if they had coverage against flood damage, and 37 percent didn’t know whether their policy would cover a prolonged hotel stay if their home were damaged.

Many items impact the amount of homeowner’s coverage you need. That’s why it is important to review your coverage frequently. Here are some criteria to use in your review:

• Have you recently remodeled your home?

If you’ve improved your home, chances are you’ve increased its estimated replacement cost.

• Has the inflation rate increased since your home was last appraised?

Certain conditions, such as severe weather, can increase the demand for labor and materials, which raises costs beyond the normal inflation level. It is important to update your coverage each year to account for changing inflation.

• What factors influence building costs in your area?

Replacement costs are directly proportionate to factors, such as the availability of labor, the current demand for labor, and the cost of construction materials. Adjusting your coverage regularly can ensure your policy will provide the money you need to rebuild.

To determine whether you have adequate coverage you should know your home’s estimated replacement cost. Keep in mind that your replacement cost could be higher or lower than your home’s market value. You should also consider the building materials used to construct your home. The more difficult the building materials are to find, the higher your replacement cost. Your coverage needs to reflect these increased costs.

The best way to stay ahead of changing costs is to contact your insurance agent annually to discuss your current coverage and your changing needs. They can help you manage risk by updating your coverage so there won’t be any surprises should your home be damaged.

Risk Management Provider Reveals Data Concerning Top Construction Defects

The 10-year housing and real estate boom in this country has been a double-edged sword for the construction industry. While the top 100 U.S. homebuilders were reported to have sold an estimated 1,000 new homes a day in 2002, such performance isn’t without a downside.

In the January 2004 issue, Consumer Reports noted that approximately 15 percent of all new homes built each year have serious problems. They place this startling statistic right at the doorstep of the building boom. The construction industry has been bombarded from all sides because of this phenomenon. Building defects have resulted in lawsuits costing the industry millions of dollars, general liability insurance costs are rising, and increasingly knowledgeable consumers are more critical of the finished product and more likely to sue.

On the heels of all of this, comes a survey of quality assurance data tabulated for the construction industry that proves leading construction defects are mostly the result of failure to follow building code requirements or installation instructions. And as if to add insult to injury, the survey goes on to show most of these defects are preventable.  The survey completed by Quality Built, a provider in risk management and quality assurance services, used data gathered by their field inspectors during inspections of 31,995 completed homes and condominiums across 27 U.S. states for the 12-month period ending Oct. 1, 2005.

Single-family homes averaged $5,398 in corrected defects per home while multi-family homes and mixed commercial use construction averaged $4,556 in corrected defects. The survey also identified the leading risk items for each housing type. With regards to single-family housing, the top defects included:

• Building paper and house wrap installation flaws
• Improper framing around windows and doors
• Missing structural straps and connectors

Multi-family and mixed commercial use construction were most frequently cited for:

• Unprotected penetrations in life-safety assemblies
• Missing fire-rated materials at electrical device boxes

None of these defects are visible to a homeowner or building owner upon completion, but can lead to serious consequences and legal battles down the road. However, all of them can be easily corrected during construction if identified early through a quality assurance inspection.

Construction firms should take the following precautions to prevent a defect lawsuit:

• Hire a lawyer to get your contracts tightened up.
• Include Right-to-Cure, mediation and arbitration clauses as stopgap measures to prevent lawsuits.
• Find a set of national construction standards that you back and include them up front in your contract.
• Spend time going over the contract with the potential home buyer before they sign to make sure they understand what they’re signing, and agree to the construction standards you’ve specified. If your attorney agrees, consider allowing clients three days to review the contract before signing, or three days after signing to cancel the deal.
• Create a small fact sheet or brochure for your clients that remind them of the key points of the contract - that you have the right to be notified first and granted the opportunity to fix the problem, the acceptable method for repair (included in the construction standards), and that mediation and arbitration are the next opportunities to resolve the issue prior to a lawsuit.