Restaurants fight in Court... and Lose

SEXUAL HARASSMENT

In Lipphardt v. Durango Steakhouse of Brandon, Inc., 11th Cir., No. 00-11922, 9/28/01, the Eleventh Circuit Court of Appeals decided a case where a primary issue was whether a female employee involved in a relationship with a co-worker could be "sexually harassed" by her former boyfriend. The answer is "yes." Mary Hope Lipphardt was a restaurant server who had been romantically involved with Donald Knuth, a supervisor. After Lipphardt had attempted to break off the relationship, Knuth began to harass her at their workplace, Durango Steakhouse. Knuth's behavior included unwanted physical contact, threats of harm and blockage of Lipphardt's ingress and egress at work. After Lipphardt complained to management about Knuth's behavior, she was fired based upon Knuth's allegations that she was exchanging restaurant food for tanning salon benefits. The steakhouse did not initiate an investigation into Lipphardt's claims, nor did they seek to substantiate her ex-lover's allegations. At trial, there was evidence presented that it was another employee, not Lipphardt, that had exchanged free food for the tanning salon benefits. Lipphardt filed claims that included hostile environment sexual harassment and retaliation. A jury found for the employer on the sexual harassment issue, but found for Lipphardt on her retaliation claim. The 11th Circuit held that it was not necessary to prove that there was actual sexual harassment in order for the retaliation claim to stand. All that was necessary was that Lipphardt have a "good faith, reasonable" belief that she was the victim of hostile work environment sexual harassment when she reported the conduct to management. Frequently the action of an employer may create a "retaliation" claim, even where there is little or no basis to support an underlying sexual harassment claim. It is important to understnad that retaliation claims may stand independently of a sexual harassment claim. You should thoroughly investigate charges of workplace harassment and provide a remedy if such harassment has occurred. Siding with any employee's viewpoint without the benefit of an investigation will expose you to litigation and possible financial penalties. One of your best defenses arises when you conduct and document a thorough investigation and provide a remedy for the complaint. If your investigation is inconclusive, you may still want to accommodate the complaining employee through a transfer if this can be done and still preserve the business interests of the company. Many times an employee's perception of harassment, even if unfounded, can lead to work/life disruptions and lowered productivity. And adverse employment actions taken on the basis of "good faith, reasonable belief" of the employee may form the basis for a later retaliation claim.

ARBITRATION

The decision of the U.S. Supreme Court in Circuit City v. Adams makes it clear that the Federal Arbitration Act (FAA) supports the settlement of employment disputes through enforceable arbitration agreements. The Supreme Court encouraged the courts to accept the fairness of the employment arbitration process and emphasized that employers should utilize arbitration which incurs significantly reduced costs when compared with the courts. A recent case in the 7th Circuit emphasizes the need to review the terms and conditions of arbitration agreements if you expect a court to enforce the agreement to arbitrate such disputes. In the case of Penn v. Ryan's Family Steakhouses, Inc. (decided 10/17/01, obviously well after the Circuit City decision), the 7th Circuit Court of Appeals invalidated an attempt by an employer to impose arbitration provisions on its employees. An extremely unusual aspect of the case was that the "agreement" the the employee was required to sign was between the employee and the company which provided the arbitration services to employers, Employment Dispute Dervices, Inc. ("EDS"), not between the employee and the employer. The Court applied basic state contract law to find that there was not an enforceable agreement to arbitrate between the employee and the employer. Therefore, the Court refused to defer the matter to arbitration. The district court, which had decided the matters which were reviewed by the 7th Circuit, found numerous deficiencies in the arbitration scheme of the employer. These included the fact that the arbitration panels seemed to be stacked in favor of the employers, the fact that contract with EDS (to which employees were not parties) could be terminated at any time upon 10-days' notice. While the recent Circuit City case clearly provides a boost to the use of arbitration in the resolution of employment disputes, employers still need to bear in mind that agreements to arbitrate must assure basic levels of due process, or fairness, to all parties if they are to be enforced and recognized by the courts. And, it is equally obvious that agreements to arbitrate must be entered into by the individuals who will be the actual parties to the arbitration process, the employer and the employee. Finally, the arbitration entity (AAA, JAMES, etc.) must have established rules that assure impartiality to all parties involved in the process.