Employees Continue to Get the Shaft in GOP’s “Ownership Society”

In his speech last night, accepting the DNC nomination for the presidency, Barak Obama highlighted a constant refrain of the Bush GOP over the last eight years regarding the “ownership society”…

"For over two decades, [McCain has] subscribed to that old, discredited Republican philosophy: Give more and more to those with the most and hope that prosperity trickles down to everyone else. In Washington, they call this the 'ownership society,' but what it really means is 'you're on your own’. Well, it's time for them to own their failure.” (source)

The heart of the “ownership society” philosophy is that Americans need greater ownership – literally, not figuratively – in health care, home ownership, and retirement assets. (source). Many have attributed the current subprime mortgage crisis, in significant part, to the flawed rationale of encouraging “ownership” at any cost, and without an economic infrastructure that supports it. (source).

Another failure of the “ownership society” philosophy is highlighted today in a New York Times article, which reported that employees of Fannie Mae and Freddie Mac, the mortgage monoliths at the center of the subprime meltdown, have lost nearly $100 million in compensation assets paid out in Employee Stock Ownership Plans (ESOPs). The Times reports that at the end of 2006, Fannie Mae/Freddy Mac employees owned $116M in company stock. Today, the value of that investment is roughly $17.5M.

ESOPs have been a popular trend under the Bush administration, allowing companies to appear to offer rich compensation packages to employees while not having to actually reach into their pockets to pay employees more, and while reaping major tax benefits extended under the Republican tax scheme. Many employees, such as those at Fannie Mae/Freddy Mac, don’t read the fine print on these “benefit” packages, which frequently limit the employees’ ability to diversify their investments until retirement. Like their colleagues at Enron and WorldCom, Fannie Mae/Freddie Mac employees are learning that investing in one’s company also means that you’re investing in the political policies that impact the economy as a whole – and the political leaders who set those policies.

Signing an Arbitration Agreement Can Shorten Statute of Limitations for Employment Claims

More and more employers are requiring their employees to sign arbitration agreements as a condition of new or continued employment. The main advantage for employers is the gamble that an arbitrator is less likely to impose big punitive or emotional distress damages than a jury. In a decision issued on August 21, 2008, the California Court of Appeal issued a decision that highlights another advantage – a shortened statute of limitations period for employees to bring their claims.

In Pearson Dental Supplies, Inc. v. Superior Court (Turcios), the plaintiff employee (Turcios) brought a race discrimination suit against his employer, Pearson, under the California Fair Employment and Housing Act (FEHA). A year into his employment, Pearson asked Turcios to sign a “Dispute Resolution Agreement” which provided that all employment disputes would be submitted to binding arbitration, and that Mr. Turcios must raise any claims he has within one year of the adverse employment action. In 2006, Pearson terminated Turcios and he filed filed a civil suit. The employer filed a motion to compel arbitration, which was granted. The arbitrator then found that Turcios had not timely filed a petition to arbitrate (having instead filed a civil suit), and therefore his claims were time barred. Turcios asked the trial court to vacate the arbitrator’s ruling, arguing among other things, that the limitations shortening provision of the arbitration agreement is unenforceable. The trial court agreed.

Overturning the trial court, the Court of Appeals held that the arbitration agreement’s shortening of the time to bring the plaintiff’s claim is enforceable.

This decision comes on the heels of a string of litigation in California regarding arbitration agreements.

*In February of this year, in Metters v. Ralph’s Grocery Co. (2008) 161 Cal. App. 4th 696, the California appellate court held that a purported arbitration agreement is unenforceable where the agreement does not present as a contract, references policies not recited in the document signed by the employee, and is saturated with incomprehensible legalese.

*Mitri v. Arnel Management Co. (2007) 157 Cal. App. 4th 1164, held that an arbitration provision contained in an employee handbook is not enforceable as an agreement to arbitrate.

*Gentry v. Superior Court (Circuit City) (2006) 42 Cal. 4th 443, held that class action waivers in arbitration agreements are not enforceable if the court determines that the claims can best be adjudicated in a class arbitration.

Although it is tempting to read Pearson as a victory for employers, businesses should keep in mind that the whatever money they may think they’re saving by requiring arbitration can easily be spent litigating the enforceability of the agreement itself, and can often end in a ruling that the agreement fails to meet minimum due process standards. Arbitration agreements must be carefully drafted, and must be presented to employees in a manner that fully permits the employee to appreciate the gravity of what they are agreeing to.

Federal Government Doesn’t Want Transgendered Employee to Help Fight War on Terror

Trial concluded this morning in Shroer v. Billington (Library of Congress), a case that considers whether or not a transgendered job applicant is covered by federal antidiscrimination laws.

After more than 25 years as an Airborne Ranger with Special Forces training, after having served in combat operations in Panama, Haiti and Rwanda, and after having spent years advising top U.S. officials – including Vice-President Cheney – regarding terrorism issues, David Schroer was denied a terrorism specialist position with the Library of Congress because he had decided to finally make the change and live his (now her) life as Diane Schroer. Upon learning of Schroer’s impending switch, the Library rescinded its previous job offer, stating that “for the good of the service” Diane would not be a “good fit.” (source)

Schroer brought claims under Title VII, alleging that she was discriminated against based on her sex. Specifically she claims that (1) the decision to rescind her job offer was unlawful “sexual stereotyping” and (2) that Title VII’s prohibition of sex discrimination prohibits discrimination against transsexuals as transsexuals. The Department of Justice, defending the Library, contends that Title VII doesn’t protect Diane because gender-identity discrimination is not covered by the statute. Judge Robertson denied the DOJ’s multiple motions for summary judgment, noting that the definition of “sex” under the Civil Rights Act is broader than just chromosomal make-up, and extends to social, cultural and identity elements. (source)

Following the bench trial, which has been submitted to the court for a ruling, the court will determine whether or not the Library considered Schroer’s “failure to conform to masculinity stereotypes” in rescinding her job offer. In addition, the court will determine whether or not the “legitimate business reasons” offered by the Library were, in fact, legitimate.

The “legitimate business reasons” offered by the Library – that Schroer’s military and intelligence contacts will not be valuable once she completes the male-to-female sexual reassignment, and that military and government contacts will be reluctant to deal with Schroer – highlight the existence and insidiousness of the discrimination at issue in the case. Essentially, the Library contends that the fear of other people’s prejudice absolves the government from having to act in a non-discriminatory manner.

A video of Diane Schroer discussing her military background and her case can be found on the ACLU’s website (here).