March 2018 – Vol. 20, No.3 The Employer E-Letter: Labor and Employment Law News from the Duluth, Minnesota law firm of Hanft Fride, PA

March 2018 – Vol. 20, No.3

The Employer E-Letter:  Labor and Employment Law News 
from the Duluth, Minnesota law firm of
Hanft Fride, A Professional Association.

Co-Editors, Scott A. Witty, and Richard R. Burns,, or 218-722-4766. Please feel free to forward this e-mail or share it with others.  If there are other topics of interest to you or any other suggestions concerning this newsletter, please let us know.

This Month’s Topics:

  • 2nd Circuit Rules sexual orientation Discrimination is Sex Discrimination
  • 6th Circuit Rules Title VII Bars Discrimination Based on Transgender Status
  • Tip Of The Month

2nd Circuit Rules sexual orientation Discrimination is Sex Discrimination

The Manhattan-based 2nd Circuit Court of Appeals recently ruled that discrimination based on sexual orientation is covered by Title VII’s ban on gender bias, becoming only the second court to do so.  Siding with the estate of a deceased skydiving instructor who alleged he was fired for telling a client he was gay, the court overruled prior decisions within the Circuit and held that a worker’s sex is necessarily a factor in discrimination based on sexual orientation. Zarda v. Altitude Express, No. 15-3775 (2nd Cir. Feb 26, 2018).  Last April, the Chicago-based 7th Circuit Court of Appeals became the first court to find that Title VII bans gay bias in the workplace.  The U.S. Supreme Court in December declined to take up a different case out of Georgia that posed the same question.  Minnesota and Wisconsin employers, located in the Eighth and Sixth Circuits, respectively, should be aware that this growing trend to expand applicability of Title VII to include sexual orientation may extend to other circuit courts before the U.S. Supreme Court rules on the issue.

Settlement of a Sexual Harassment or Abuse Case and New Tax Consequences

The recent tax reform passed by Congress and signed by the President includes a provision prohibiting employers from deducting costs related to sexual assault and harassment settlements that are subject to nondisclosure agreements. The apparent intent of this provision is to deter companies from entering into nondisclosure agreements. The new law also contains some ambiguity and may have unintended consequences. In reviewing the plain language of the law, the provision also would apply to Plaintiffs. This would limit a plaintiff’s ability to deduct their attorney’s fees and costs and may also require plaintiffs to pay taxes on settlements they receive. In addition, there are concerns with the new law because it does not specify what is to occur if multiple claims are included in the suit and not all are related to sexual harassment or assault. Whether the deduction would still be available in such cases remains an open question. Due to the ambiguities and potential unintended be attempts to clarify the law in the near future.

Joint-Employer Standard Reverts to Browning-Ferris

We recently reported that the NLRB had overruled the a-friendly joint employer rule established in the Browning-Ferris Industries case of 2015 in favor of a more relaxed rule for determining when two entities are considered a joint employer.  The NLRB’s December 2017 decision in Hy-Brand Industrial Contractors, Ltd.was lauded by employers since the Browning-Ferris decision reversed longstanding precedent that companies had grown accustomed to.  In an unexpected turn of events, however, the Hy-Brand decision was vacated after the NLRB Inspector General reported that a recent Trump-appointee on the Board should not have participated in the Hy-Brand decision because the law firm he worked for prior to being named to the Board had represented a contractor of Browning-Ferris when the Browning-Ferris case was proceeding through the NLRB.  As a result, the joint-employer rule set forth in Browning-Ferris is back in effect.  This means that a company that maintains the right to “direct and immediate” over control workers of another entity, even if that right is not actually exercised, renders a joint employer relationship when determining liability under the National Labor Relations Act.  This remains the case at least until the NLRB or Congress revisits the joint employer standard.                                                                                                                         

6th Circuit Rules Title VII Bars Discrimination Based on Transgender Status

The United States 6th Circuit Court of Appeals, which has jurisdiction over Michigan, Ohio, Kentucky and Tennessee, recently held that discrimination on the basis of an employee’s transgender status is unlawful under Title VII of the Civil Rights Act of 1964’s bar against sex discrimination.  In EEOC v. R.G. & D.R. Harris Funeral Homes, Inc., a transgender employee was terminated from employment shortly after disclosing to her employer that she intended to transition from male to female.  No. 16-2424 (6th Cir. Mar. 7, 2018).  The EEOC sued the employer funeral home alleging violation of Title VII’s provision barring discrimination based on sex.  The employer asserted that transgender status was not a protected status under Title VII, and, alternatively, the employer’s actions were protected by the Religious Freed  Restoration Act , which prohibits the government (here the EEOC) from taking action (i.e. enforcing a religiously-neutral law) that “substantially burdens” an individual’s exercise of his or her religion and there are less restrictive ways to achieve a compelling government interest.   On appeal from a district court ruling in favor of the employer, 6th Circuit Court of Appeals held that discrimination based on transgender status is protected under Title VII’s ban against sex discrimination, stating that “discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex.”  As to the employer’s RFRA defense, the Court held that the “burden” caused by the EEOC’s enforcement of Title VII was not “substantial” upon the employer, noting that knowledge, or tolerance, of an employee’s sexual identity is not “tantamount to supporting it.”  The Court further noted that even if the employer’s tolerance of the employee’s gender transition status was a “substantial burden,” RFRA did not block the claim because the EEOC had a compelling interest in eliminating unlawful discrimination in workplace, and Title VII was the least restrictive means toward that end.  Thus, the defense did not bar the employee’s claim under Title VII, and the case should proceed to trial.  The Court’s decision also renders RFRA’s application to employment discrimination suits very limited in that jurisdiction.  The 8th Circuit, under which Minnesota employers are located, has not ruled on this issue. 

TIP OF THE MONTH:  The importance of exit interview notes is highlighted in situations where an employee resigns, but claims that it was a constructive discharge as they were, for example, subjected to sexual harassment.  In cases of resignation, it is important to keep resignation letters as well as notes about what the former employee told management on his/her way out the door.

Hanft Fride’s business and trial lawyers are located at 1000 U.S. Bank Place, in Duluth, Minnesota.  Visit our website at for general information on the firm and our attorneys. Our employment lawyers include Tom Torgerson, Rob Merritt and Scott Witty.  Richard Burns is now of Counsel.

The information provided in this E-letter is general in nature and should not be used as a substitute for professional services and advice.  The communication and receipt of this information is not intended to create an attorney-client relationship.  Readers should consult with their legal counsel  before taking any action on matters covered in this E‑letter.

To subscribe or unsubscribe to Employer E-Letter, e-mail your request to or call Scott Witty at 218.722.4766.

Copyright 2018 by Hanft Fride, P.A.  All rights reserved.  Hanft Fride, A Professional Association, 1000 U.S. Bank Place, 130 W. Superior Street, Duluth, MN 55802.  Phone 218.722.4766; Fax 218.529.2401.