Second Circuit Issues Landmark Decision that Title VII Prohibits Sexual Orientation Discrimination

Overruling its own precedent, the United States Court of Appeals for the Second Circuit became the second federal appeals court to hold that Title VII of the Civil Rights Act of 1964 prohibits workplace discrimination on the basis of sexual orientation.

Zarda v. Altitude Express, Inc., decided on February 26, 2018, arose from the claims of a Long Island sky-diving instructor, Donald Zarda.  Zarda was fired after revealing to a female client, whose boyfriend then revealed to Zarda’s boss, that Zarda was gay.  Zarda alleged that his termination was discriminatory on the basis of his sexual orientation and sex in violation of Title VII, whereas the company attributed it to his behavior.  Title VII expressly prohibits workplace discrimination “because of . . . sex.”  The Second Circuit had previously declined to recognize that sexual orientation is inherently a sex-based consideration and, thus, it held that sexual orientation discrimination claims were not cognizable under Title VII.  Applying that precedent, the federal trial court dismissed Zarda’s case on summary judgment, concluding that Zarda had failed to show he had been discriminated against on the basis of his sex and declining to recognize sexual orientation discrimination as a cognizable claim under Title VII.  Zarda appealed, and the Second Circuit affirmed.  Thereafter, the Second Circuit granted rehearing en banc, which is a mechanism allowing judges to rehear a case upon a majority vote.  This is significant because en banc review rarely happens and is often saved for cases that present a “question of exceptional importance.”

Years after the Second Circuit originally ruled that sexual orientation is not covered by Title VII, the U.S. Equal Employment Opportunity Commission and the Seventh Circuit oppositely held that discrimination on the basis of sexual orientation is a form of sex discrimination barred by Title VII.  Emphasizing the evolving nature of Title VII, the Second Circuit in Zarda overruled its prior caselaw to hold that Title VII prohibits discrimination on the basis of sexual orientation as discrimination “because of . . . sex.”

In dispensing with its prior rulings, the Second Circuit reasoned that sexual orientation is defined by one’s sex in relation to the sex of those to whom he/she is attracted.  Discriminating against an employee because he/she is homosexual means discriminating against him/her because of a) his/her sex, and b) his/her sexual attraction to those of the same sex.  Thus, “because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.”

The Second Circuit disagreed with the United States Justice Department, which argued in a friend-of-the court brief, that Title VII does not cover sexual orientation discrimination.

For now, the ruling that Title VII bars employers from discriminating based on sexual orientation applies to those in the Second Circuit, which includes New York, Connecticut, and Vermont.  However, this decision sharpens the divide among courts, setting the stage for a potential fight in the United States Supreme Court.  The Supreme Court could reverse the Second Circuit, or it could affirm, thereby extending Title VII’s prohibition on sexual orientation discrimination to the rest of the country.

For more information about the potential impacts of this Second Circuit ruling or what steps your company can take to effectively prevent and address complaints of sexual orientation discrimination, please contact John C. Petrella, Esq., Chair of the firm’s Employment Litigation Practice Group, at jpetrella@nullgenovaburns.com, or Dina M. Mastellone, Esq., Chair of the firm’s Human Resources Practice Group, at dmastellone@nullgenovaburns.com, or 973-533-0777.

Union Fund Uses NY False Claims Act to Blow Whistle on Prevailing Wage Violator and Recover $33,750

In the first reported case of its kind in New York, in February a union fund received a five-figure settlement payment from a Harlem-based general contractor that worked on a New York City affordable housing project after the fund blew the whistle on the contractor’s failure to pay prevailing wages. The fund filed a whistleblower complaint under the N.Y. False Claims Act, which allows a whistleblower to file a qui tam lawsuit if it knows of and reports violations of the Act. The Act makes liable entities that knowingly present to the state or local government false or fraudulent claims for payment or avoid their obligations to pay the state or a local government. State of New York v. A. Aleem Construction, Inc.

A whistleblower that files a successful claim under the Act can recover 15 to 25 percent of any recovery if the State intervenes in the matter and converts the qui tam action into an attorney general enforcement action. If no State intervention, the whistleblower can recover between 25 and 30 percent of the total recovery. New York is among 29 states, including New Jersey, plus D.C. that offer an incentive payment or “bounty” to persons who blow the whistle on prevailing wage violators. A whistleblower who plans or initiates the violation that is the basis of the action can recover but in a reduced amount.

The union fund’s whistleblower complaint caused the State to investigate and determine that the general contractor violated prevailing wage laws by failing to pay laborers working on the project the required prevailing wages and benefits and failing to maintain proper payroll records. Under the settlement, the general contractor agreed to pay $225,000 to resolve the Action, $33,750 of which, or 15%, was paid to the fund.

The bounty paid to the union fund for reporting to the State violations of prevailing wage laws serves as another wake-up call to the employer community that claims for violations of prevailing wage laws can come from various sources including even the unions and their funds that negotiate and benefit from the wages and benefits, and the added incentive of a bounty in exchange for blowing the whistle is likely to encourage more unions and their funds to follow suit. In addition, on February 21 the U.S. Supreme Court reversed the 2nd Circuit Court of Appeals’ dismissal of a 2011 suit brought under the federal False Claims Act by two former Wells Fargo employees who sought damages on behalf of taxpayers for fraud occurring during their employment with the bank. The Court vacated the dismissal of the lawsuit and in the process endorsed broader support for whistleblower claims at the federal level. Bishop v. Wells Fargo & Co. The federal False Claims Act provides similar encouragement, not limited to employees, to blow the whistle on violators of the Davis-Bacon Act.

If you have any questions or would like to discuss how these state and federal whistleblower protections apply to your employees and your business, please contact Patrick W. McGovern, Esq., Partner in the Firm’s Wage and Hour Compliance Practice Group and  at 973-535-7129 or at pmcgovern@nullgenovaburns.com.