After-Acquired Evidence Could Limit State Employees’ Relief in Contested Cases

By Trey Ferguson 

Since the U.S. Supreme Court adopted the after-acquired evidence rule in McKennon v. Nashville Banner Publishing Co., employers have relied on this doctrine to limit former employees’ remedies in wrongful termination cases.

Suppose an employer terminates an employee because he is 60 years old. That discharge would clearly violate the federal Age Discrimination in Employment Act and many state fair employment practices laws. However, suppose the employer discovers six months after the termination that the 60-year-old employee embezzled $100,000 from the company. Embezzlement would be a legitimate reason for an employer to terminate an employee. Three years after the discovery of the embezzlement, the employee’s age discrimination case goes to trial. The employee argues that he is entitled to a full recovery because, after all, he was terminated because of his age. The employer argues that the employee is entitled to nothing because he is a criminal who deserved to be fired, even though the employer didn’t realize it at the time.

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Fight Hunger, Help Others in the COVID-19 Pandemic – Participate in the Legal Feeding Frenzy and Support Your Local Food Bank!

Michele Livingstone

Will Quick

By Michele Livingstone and Will Quick

Our section membership has a strong tradition of supporting and participating in pro bono and community service activities—both those planned and sponsored by the NCBA and those that you undertake on your own or with other organizations. We are in unprecedented times with COVID-19 (Coronavirus), and I am confident that each of you is doing your part.

Even in the best of times, however, over 1.5 Million North Carolinians struggle with hunger—of those nearly half a million are children. With public schools and many religious and nonprofit organizations that traditionally serve the food insecure in our communities being closed for indefinite periods and government leaders calling for social distancing to help limit the spread of Coronavirus, that need is never more pressing than now.

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DOL Implements New Joint Employer Rule

By T. Cullen Stafford 

The U.S. Department of Labor’s final rule clarifying the joint employer standard took effect on March 16. The final rule, first announced on January 12, narrows the definition of joint employment and contains several practical examples of scenarios where joint employer status would or would not exist. The rule is a positive development for employers, as it should assist employers in structuring their relationships with suppliers, contractors, and staffing agencies.


The new rule applies only to the DOL’s interpretation of the Fair Labor Standards Act, which governs federal minimum wage, overtime, hours worked, among other things. Under the FLSA, an entity can be considered a “joint employer” if it exercises sufficient control over the terms and conditions of another entity’s workers. The existence of a joint employer relationship is a frequently litigated issue in the FLSA context, as joint employers are jointly and severally liable for FLSA obligations, such as the failure to pay overtime.

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Appellate Update

By Joe Murray

The court opinions have been sparse lately, and none of them are earth shattering. But here they are:

Davis v. NC Dep’t of Health & Hum. Servs., No. COA19-449 (N.C. App. Dec. 17, 2019) (unpublished) (Human Resources Act): DHHS terminated Davis for manually lifting a patient from his wheelchair to his bed in violation of specific medical orders. While Davis’s actions provide the just cause needed for discipline, DHHS previously suspended a similarly situated employee for the same conduct. Due to the different treatment of similarly situated employees, the court of appeals upheld the ALJ’s ruling to reinstate Davis and suspend her for two days.

Brown v. Fayetteville State Univ., No. COA19-13 (N.C. App. Jan. 7, 2020) (Human Resources Act): The court of appeals holds that the after-acquired-evidence doctrine first announced in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352 (1995), may be used in contested cases under the Human Resources Act. The McKennon rule does not eliminate liability; it only limits the remedy of an employee who was wrongfully discharged.

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Appellate Update

I hope y’all appreciate that I read these opinions so you don’t have to. The employment decisions over the past several months have been fairly pedestrian.

Clehm v. BAE Sys. Ordnance Sys., Inc., No. 18-2010 (4th Cir. Sept. 30, 2019) (unpublished) (Title VII): Clehm was sexually assaulted by a coworker, who BAE terminated and who was ultimately sent to jail. Clehm claimed that after the coworker’s termination she endured workplace harassment from co-workers, including what the 4th Circuit described as “shocking evidence” of a “generally sexualized work environment.” However, the evidence showed that BAE disciplined the harassers and provided support for Clehm. Clehm filed suit against BAE alleging, among other claims, Title VII hostile work environment and retaliation. The 4th Circuit upheld the grant of summary judgment on both claims in favor of BAE due to Clehm’s inability to impute liability to BAE for her co-workers’ conduct. Specifically, there was no evidence that BAE “knew or should have known about the harassment and failed to take effective action to stop it.” Clehm’s retaliation claim also failed since BAE had not taken any adverse action against her.

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Department of Labor seeks to clarify compatibility of bonuses with fluctuating workweek method

By Michael B. Cohen

Among the alternatives for calculating overtime under the Fair Labor Standards Act, the fluctuating workweek method is perhaps one of the least familiar and used techniques. The fluctuating workweek method enables employers to pay overtime to certain non-exempt employees at one-half their regular rate, rather than one and one-half times their regular rate, if certain conditions are met:

(1) the employee’s work hours must fluctuate from week to week;

(2) the employee must be paid a fixed salary each workweek, regardless of the number of hours worked;

(3) the fixed salary must be large enough to compensate the employee at a rate of not less than the minimum wage for all hours worked;

(4) there must be a “clear mutual understanding” between the employer and the employee that the employee’s fixed salary is compensation for all hours the employee may work in a particular week; and

(5) the employee must receive additional pay at one-half the regular rate for all overtime hours worked.

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Shooting the Messenger: Villainizing Whistleblowers Makes Us All Less Safe

By Kevin Murphy

Retaliation subverts the aims of anti-discrimination laws, fair pay rules, safety regulations, accounting requirements, environmental safeguards, and many other laws. Employees cannot invoke the rights provided by these laws or help the government stamp out fraud if they know they will be retaliated against for speaking up or reporting misconduct.

Retaliation is deeply rooted in our culture. Since the Hammurabi Code, the rule has been that one should return whatever harm was done to them with equal vengeance. As the Old Testament decrees, “fracture for fracture, eye for eye, tooth for tooth, shall he repay. Whatever degree of blemish he has inflicted, so shall he be compelled to suffer.” Leviticus 24:19-20; see also Exodus 21:24 (“An eye for an eye, a tooth for a tooth, a hand for a hand, a foot for a foot”). The Greek historian Plutarch tells of kings beheading the bringer of bad news rather than facing the underlying issue itself.

Even the President has suggested executing those that report misconduct (“You know what we used to do in the old days when we were smart with spies and treason, right? . . . We used to handle it a little differently than we do now.”). Maggie Haberman and Katie Rogers, Trump Attacks Whistle-Blower’s Sources and Alludes to Punishment for Spies, New York Times, (Sept. 26, 2019).

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Appellate Case Roundup

By Joe Murray

It’s our semi-regular roundup of appellate decisions:

Dawson-Murdock v. National Counseling Group, Inc., No. 18-1989 (4th Cir. July 24, 2019) (ERISA): National Counseling Group (NCG) made a nifty argument to get this case dismissed at the district court level: Despite the summary plan document stating NCG was the plan administrator and a named fiduciary of the group life insurance plan, NCG argued it was not a fiduciary for the purposes of plaintiff’s ERISA claims. The 4th Circuit found this argument unpersuasive and, while not quite a bench slap,[i] used terms like “logic” and “common-sensical understanding” to find that a plaintiff is “not required to allege that the plan administrator and named fiduciary also satisfies the functional fiduciary test in order to state a plausible fiduciary breach.” Once the 4th Circuit found that NCG was a plan administrator and fiduciary, it had no problem finding that plaintiff’s two claims against NCG could proceed.

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Timing may not be everything, but it’s definitely something with Title VII claims

By Zack Anstett

In a published opinion filed August 27, 2019, U.S. Circuit Court Judge A. Marvin Quattlebaum of the Fourth Circuit affirmed the District Court’s grant of summary judgment brought under Title VII. Judge Quattlebaum’s decision in Perkins v. International Paper Company is another feather in the defense attorney’s cap and illustrates the importance of timely filing at the EEOC and how the Fourth Circuit continues to cling to the adage that “Title VII is not a general civility code.” Specifically, Perkins alleged race discrimination and brought claims for disparate treatment, hostile work environment, constructive discharge, and retaliation.


According to the lawsuit, Perkins, a black male, was hired in 1984 as a technician at the Eastover Paper Mill until he retired in 2014. An important interjection of procedural history is that Perkins did not file with the EEOC until January 8, 2015, which put a time bar on any allegation of deliberate discrimination that occurred more than 300 days before (March 14, 2014). The Fourth Circuit consolidated Perkins’ allegations into three categories: (1) mistreatment in various ways compared to white employees; (2) improper denials of requests for promotions; and (3) racially offensive conduct and statements at work.

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Oral argument scheduled in hospital-physician “unfair trade” case


By Tara Muller

Heads up, North Carolina hospitals and doctors! On Wednesday, September 30, the North Carolina Supreme Court will hear oral argument in Hamlet v. Hernandez. The Court’s decision may have a significant impact on the way physicians work and negotiate with hospitals in North Carolina, and could have ripple effects extending to employment practices in other industries.


A hospital system hired Dr. Pedro Hernandez as an independent contractor and gave him hospital privileges. The contract had a 36-month term and provided that Dr. Hernandez could choose to become an employee of the hospital 18 months into the contract term.

When his private practice failed, Dr. Hernandez tried to exercise his option to be hired as an employee. The hospital did not send him a new contract of employment but apparently believed that his original agreement encompassed the “employment” option. However, Dr. Hernandez began looking for work elsewhere and shut down his practice more than a year before the end of his contract period with the hospital.

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