2nd Cir. Reverses Judgment in Favor of Bank Employer on ‘Remote Work’ Pregnancy Discrimination Claims

In a case involving allegations that a bank employer violated state and federal laws by not allowing an employee to work remotely from home when she became pregnant, the U.S. Court of Appeals for the Second Circuit recently vacated in part the trial court’s judgment adopting the jury’s verdict in the bank’s favor and the trial court’s disqualification order in the bank’s favor, and dismissed the appeal in part as to the employee’s claim under the New York State Human Rights Law (NYSHRL), remanding for further proceedings.

A copy of the opinion in Sheng v. M&TBank Corporation is available at:  Link to Opinion.

The plaintiff employee began working at a bank in Buffalo, New York in the bank’s information technology department. She worked with a team which did “system testing of computer programs for bank applications.”

The plaintiff employee resigned and moved to Los Angeles because her husband obtained a new job there. Her supervisor suggested that she continue to work remotely through the bank’s “Alternative Work Arrangement (AWA)” policy, which provided in relevant part that “[a]n employee’s failure to resume [a] traditional work schedule or location upon revocation of an AWA will be considered a voluntary resignation of employment.”  The plaintiff employee accepted and began working remotely from Los Angeles.

As part of an overhaul of the bank’s online banking system, the bank’s management reorganized the team with which the plaintiff employee worked and gave notice that all AWAs would be reviewed. The next day, the plaintiff employee notified her new supervisor that she was pregnant.

Shortly thereafter, management decided that team leads must be physically present at least two days per week in Buffalo and so notified the plaintiff employee.  The plaintiff employee asked that her commute be delayed until after she gave birth, but her request was denied.

The plaintiff employee sent her supervisor a doctor’s letter recommending that the plaintiff employee refrain from travel during her pregnancy for health reasons, but management concluded there was not enough work that did not require her presence in Buffalo on a special project to keep her occupied.

The bank gave the plaintiff employee notice that she must “either permanently relocate to Buffalo within 30 days or apply for and, if eligible, take early short-term disability leave, allowing her to remain in California through the end of her pregnancy. If she chose neither of these options, she would be terminated and given eleven weeks of severance pay.”

The plaintiff employee rejected the offer and hired an attorney, who sent a demand letter to the bank. The bank held a telephone conference with the plaintiff employee’s counsel, which both agreed at the onset was subject to Federal Rule of Evidence 408, which provides that offers of settlement are inadmissible in later proceedings under certain conditions.

During the phone call, the bank agreed to reinstate the plaintiff employee and allow her to work remotely from Los Angeles for the remainder of her pregnancy, but an “explicit statement was made that the reinstatement offer was conditioned upon the execution of a release of [the plaintiff employee’s] claims for monetary damages.”

The plaintiff employee filed both a proceeding charging discrimination before the Equal Employment Opportunity Commission (EEOC) and a lawsuit in federal court. Her amended complaint alleged that the bank “(i) engaged in unlawful interference under the Family Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq., the California Family Rights Act, Cal. Gov’t Code § 12945.2, and the California Pregnancy Disability Leave Law, Cal. Gov’t Code § 12945(a); (ii) unlawfully retaliated under the FMLA, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., the [Americans with Disabilities Act] ADA, 42 U.S.C. § 12101 et seq., and the NYSHRL, N.Y. Exec. Law § 290 et seq.; (iii) unlawfully discriminated under Title II, the ADA and the NYSHRL; and (iv) failed to provide reasonable accommodation under the ADA, the NYSHRL, and the California Fair Employment and Housing Act (FEHA), Cal. Gov’t Code § 12940.”

Prior to trial, the plaintiff employee filed a motion in limine pursuant to Federal Rule of Civil Procedure 408 seeking to exclude the bank from offering in evidence any settlement offer it made to reinstate the plaintiff employee in return for settling the case. In opposition, the bank “argued, first, that the reinstatement offer was admissible to show that appellant failed to mitigate damages and, second, should not be excluded under Rule 408 because the offer was unconditional, i.e., not contingent on [the plaintiff employee] releasing [the bank] from liability.”

The trial court denied the motion after an evidentiary hearing, concluding “that there was ‘no evidence to suggest that the offer of reinstatement was conditioned upon the compromise of the plaintiff’s claims,’ and, therefore the evidence of the reinstatement offer was admissible to show that [the plaintiff employee] had not attempted to mitigate damages.” In addition, the trial court disqualified both of the plaintiff employee’s attorneys from continuing as trial counsel based on the “advocate-witness rule because they were the only witnesses who could testify before the jury as to whether [the bank] extended an unconditional offer and whether appellant unreasonably rejected that offer.”

The case went to jury trial, and at the close of the evidence, the trial court granted the bank’s motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(a) “on a number of appellant’s claims, including the failure to accommodate under the NYSHRL. The court also declined to instruct the jury that the ADA imposes an affirmative duty on employers to engage in an interactive process with all employees who have requested accommodations.”

The jury returned a verdict in the bank’s favor on the four remaining claims of “interference under the FMLA, retaliation under the FMLA, failure to accommodate under the ADA, and failure to accommodate under the California FEHA.” The plaintiff employee appealed the verdict.

On appeal, the Second Circuit first addressed the admissibility of the reinstatement offer and attendant attorney disqualification, concluding that the trial court committed an error that was not harmless by admitting evidence of the reinstatement offer and, because the plaintiff employee’s counsel’s disqualification was based on the improper admission of the evidence, they could resume their role as trial counsel.

The Appellate Court reasoned that Federal Rule of Civil Procedure 408 “prohibits, inter alia, the admission of ‘evidence … to prove or disprove the validity or amount of a disputed claim …: (1) … offering valuable consideration in … attempting to compromise the claim.’”

The Second Circuit pointed out that during the telephone conference in question, counsel started the call “by agreeing that Rule 408 would govern the conversation. Of course, such an agreement by itself does not preclude a party from making an unconditional offer, but it does suggest that parties here were hoping to take advantage of Rule 408’s protection—protection available only for conditional offers.” In addition, the Court reasoned that the bank’s testimony before the EEOC was an admission that “the reinstatement offer was conditioned upon dropping the lawsuit and its monetary demand, eliminating, as a matter of law, any factual issue as to whether the offer was conditional.”

Accordingly, the Court vacated the judgment “insofar as it adopted the jury’s verdict” and “insofar as it adopted the [trial] court’s order … disqualifying [counsel], because that order rested on the erroneous admission of evidence relating to [the bank’s] reinstatement offer.”

The Second Circuit then rejected the plaintiff employee’s argument that the trial court erred by failing to instruct the jury that “a defendant’s failure to engage in an interactive process is alone sufficient to support a failure-to-accommodate claim under ADA [, holding,] however that the district courts may admit an employer’s failure to engage in an interactive process as evidence of discrimination under the ADA.”

The Second Circuit agreed with its sister courts that “failure to engage in an interactive process does not form the basis of an ADA claim in the absence of evidence that accommodation was possible.”

The Court then addressed the plaintiff employee’s final argument that the trial court erred in granting the bank’s motion for judgment as a matter of law on her failure to accommodate claims under the NYSHRL.  The Second Circuit reasoned that the plaintiff employee appealed “from the jury verdict entered in this action …, not from the district court’s prior judgment as a matter of law,” and therefore the plaintiff employee did not properly preserve the issue for appeal.

Accordingly, the trial court’s judgment was vacated “in part, insofar as it adopted the jury’s verdict and the district court’s disqualification order.” The Second Circuit also dismissed “the appeal in part, insofar as it pertains to claims under the NYSHRL” and remanded for further proceedings.

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D. Sharmin Arefin is based in Maurice Wutscher’s Atlanta office. She focuses her practice in the areas of consumer protection defense, regulatory compliance and employment litigation. Sharmin has substantial litigation experience regarding claims arising under federal and state consumer protection statutes. She also has significant experience in the areas of automobile advertising and sales practices, mortgage related repurchase demands and litigation, contested foreclosures, and employment related investigations and litigation. Sharmin served as a Deputy Attorney General for the State of New Jersey where she represented the state in both litigation and non-litigation matters, including mediation, on behalf of the New Jersey Division of Youth and Family Services (DYFS). She was the first Deputy Attorney General assigned to lead the Essex County Family Drug Court Pilot Program. Sharmin then served as a Staff Attorney for the Georgia Governor’s Office of Consumer Protection where she directed investigations and enforcement actions under the Georgia Fair Business Practices Act. For several years before joining Maurice Wutscher, she practiced in the mortgage lending litigation and regulatory compliance fields with a well-known mortgage lending law firm. Sharmin is a frequent speaker and author on topics relevant to business law and regulatory compliance. She is a member of the Automotive Resource Network, serving as a committee chairperson in 2015. She currently serves the American Bar Association as a committee director and member of the Editorial Board for Business Law Today. In addition, she is a member of the ABA’s Young Lawyers Division and is Vice Chair of the Diversity Task Force for the Business Law Section’s Consumer Financial Services Committee.