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HB2 eliminates cause of action for workplace discrimination

A new state law that was hurried through the General Assembly on March 23 has drawn national controversy over the way it regulates the state’s public bathrooms, but some employment law attorneys worry that a lesser-noticed provision in the law will significantly curtail the legal rights of workers who believe they were fired due to racial, gender, or other types of discrimination.

The Public Facilities Privacy & Security Act, more commonly known as HB2 or “the bathroom bill,” was intended primarily to overturn a Charlotte ordinance that sought to prevent discrimination against LGBT residents. But a provision tucked away beneath the law’s headline-inducing elements eliminates an avenue by which sacked workers could pursue their claims in state court.

Since 1977, the state’s Equal Employment Practices Act has articulated a state public policy to safeguard the rights of all workers to hold employment without discrimination based on race, religion, age, sex or other factors, although sexual orientation was never among them. North Carolina is an “at-will” employment state, meaning that employers can sack employees for any reason or no reason at all—unless the discharge would violate some tenet of public policy. (For instance, companies can’t fire workers for refusing a boss’s order to commit a crime.)

Since the state’s courts began recognizing the claim more than 30 years ago, lawyers have used the language of EEPA to bring suits for wrongful discharge based on a violation of public policy when workers believed they’d been discriminated against. But HB2 amends the EEPA to provide that it does not create, and shall not be construed to create or support, a statutory or common law private right of action, and no person may bring any civil action based upon the public policy expressed in it.

“Here’s the analogy I give,” said Mathew Flatow, an employment law attorney with SeiferFlatow in Charlotte. “It would be like if the Legislature said it’s against the law to drive over 65, but if you do, there will be no repercussions, and we won’t give you a ticket or anything like that. A lot of people would probably consistently drive over 65 in that scenario. The Legislature has said companies shouldn’t discriminate, but if you do, we won’t do anything about it.”

Federal claims face more obstacles

The new law does not affect the ability of employees to file discrimination claims under federal laws like Title VII of the Civil Rights Act. But attorneys who represent workers say that federal lawsuits face a series of procedural obstacles that often keep workers from pursuing otherwise viable claims. The change in state law, they argue, will in practice leave many employees who’ve suffered discrimination with no recourse to the courts at all.

Before plaintiffs can file a federal lawsuit for discrimination, they first have to file a charge with the U.S. Equal Employment Opportunity Commission. The deadline for filing a charge is 180 days from the day they were discharged. Attorneys for employees said that workers who have been fired are typically most immediately concerned with finding a new job, and often don’t know about the deadlines anyway, and so often by the time they contact an attorney, the window for filing a federal charge has closed. The statute of limitations for a state law claim, conversely, is three years.

In addition, the EEOC will investigate a claim to determine whether it wants to take action. Typically, it dismisses the claim, at which point the worker has the right to sue. But investigations can sometimes take well over a year, during which time evidence can become lost. Federal court also tends to be a more time-consuming and expensive process than state court. Unlike state court, it does allow workers to recoup attorneys’ fees, although punitive and compensatory damages, excluding back wages, are capped at $300,000 or less, depending on the size of the defendant company. State law has no cap.

“A state law claim allowed us to get into state court faster while the claim was still fresh, and if we later got a letter from the EEOC, we would add that to our claim,” said Rick Rutledge, an attorney in Winston-Salem. “We could begin the process of discovery, and the discovery that we did under the state law claims was often the same evidence we would use when the federal claims were added. In a situation where the employee has no state law claims to bring, we have no real power to investigate it.”

Attorneys caught off-guard

The change caught attorneys by surprise, both in the plaintiffs’ bar and the defense bar. None of the attorneys Lawyers Weekly spoke to had any inkling that a change was even being mooted. HB2 was passed during an emergency session of the Legislature with minimal debate, and signed by the governor within nine hours of the bill’s text being filed. The legislature was hurrying to pass a law before the Charlotte ordinance would have taken effect April 1, but it’s unclear why the employment law provision was rushed through in the emergency session.

Some attorneys speculated that the change might have been a response to a verdict handed down by a Buncombe County jury on March 9 awarding $3.6 million in a wrongful termination case, believed to be the highest jury verdict ever awarded in the state—although that case was not based on claims of discrimination. The new law would not affect wrongful discharge claims brought on grounds other than discrimination.

The sparse language of the amendment does not make clear whether it was intended to apply retroactively. Attorneys said they were unsure whether it would apply based on the date when the alleged discrimination occurred, or the date the lawsuit was filed, or whether the new law might lead to the dismissal of discrimination suits that had already been filed.

Eric Doggett, a Raleigh attorney and chair of the North Carolina Advocates for Justice’s employment law section, said that he doubts that many legislators fully understood the import of the changes, and would not have included it in the law if they had. He said he hoped that the Legislature might reconsider the matter.

“For the past few decades we’ve had a strong statement of anti-discrimination public policy, and there have been teeth to enforce that, and it’s served to vindicate employees’ rights and help set an example to deter than kind of behavior,” Doggett said. “That’s gone now, and in many cases employees will have no recourse, under state law or federal law. And even if they do have recourse under federal law, the remedies are different.”

Law being challenged

A coalition of civil rights organizations has already announced that it will challenge the more prominent aspects of HB2 on constitutional grounds, and Attorney General Roy Cooper has said that he will decline to defend the law in court. The changes to the EEPA are not part of that lawsuit, however, and lawmakers specified in the law that those changes will remain law even if other parts of the law are struck down. Some attorneys expressed concern that the law’s ostensible core might prove short-lived while the employment law provisions survive.

Employment law attorneys who represent employers, while equally surprised by the new law, disputed whether it would really have that significant of an effect in practice, however, noting that many plaintiffs had pursued federal and state law claims concurrently in federal court.

Mason Alexander, managing partner of the Charlotte office of Fisher & Phillips, said that it appeared that the intent of the Legislature was perhaps to leave employment discrimination lawsuits to the federal courts. He noted that the now-eliminated cause of action applied only to wrongful discharges and not other types of discrimination, and that state law lacked any agency like the EEOC to investigate the merits of claims before suits are filed.

“The impact of this is very, very limited because federal laws are in place and they cover these situations,” Alexander said. “There’s been far, far more litigation under federal law, and so there’s a lot more case law construing it and it’s more of a known quantity. Federal judges may be better suited to hear those cases because they hear more of them.

“I see this as a change that’s not going to have a big impact on most people, whether employer or employee, but it does certainly clarify and clear up the situation a bit.”

Flatow predicted that the law’s impact would be significantly greater and may have unintended consequences, some of which might have negative effects for employers, including possibly more EEOC investigations. He also said that lawyers may now look for more creative ways to keep cases in state court. There are other statutes with statements of public policy that might support a lawsuit under the public policy exception, at least as it relates to the protection of female workers.

“I know a lot of my colleagues have been doing a lot of work to find other statutes that might apply, but it’s a hard road, and I wouldn’t want my client to be the guinea pig,” Flatow said. “I would think courts would look at the new law and say that the legislative intent is to get rid of this cause of action.”

Follow David Donovan on Twitter @NCLWDonovan

2 comments

  1. Unless you are English please stop saying “sacked” when you mean “fired.” It indicates your political leanings/biases in the same way when American NPR announcers say: “Going to hospital”

  2. Ironic that attorney Dan Bishop did not know the law he was the principal author of wouldn’t send a message that all local ordinances have no enforcement validity except through the authority of the state. I guess those high rise condos now planned for the mountain tops of North Carolina are fair game too!
    What a stinking legislative train wreck for our state!
    Fox Watson

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