Outten & Golden: Empowering Employees in the Workplace

Archive for January, 2005

Discrimination Victims' Hopes Dashed With Supreme Court Decision on Taxes

Wednesday, January 26th, 2005

Late last year, when a measure to reduce the taxation of plaintiffs’ discrimination awards by eliminating taxation of attorneys’ fees was passed, those currently in legal battles against their employers, and the advocates who represent them, had a reason to celebrate. No longer would their victories run the same risk of being completely undone by taxation. Even then, however, the celebration was tempered by the measure’s lack of retroactivity, which meant that cases won or settled before the new law’s effective date still faced an excessive tax burden. Any hope of undoing that burden for those still subject to it faded considerably on Monday, when the U.S. Supreme Court issued its ruling in Commissioner v. Banks. In ruling unanimously against the plaintiffs in Banks, the Court essentially adopted a “tough luck” approach: if your case didn’t settle or go to trial after the new law went into effect, sorry, you’re out of luck.

As reported here, those who attended the oral argument before the Court in November were hopeful that the ruling would come down differently. Plaintiffs Banks and Banaitis, as well as other amicus (friends of the court) groups, had presented a variety of seemingly persuasive theories which appeared to have influenced the Court’s questioning, and the attorney representing the IRS was grilled about the impact of the law on plaintiffs such as Banks and Banaitis, as well as others such as Cynthia Spina, who faced losing the entire amount of her award and then some to the onerous tax laws governing her situation. (See Los Angeles Times article.) But it was not to be.

In an 8-0 decision (the Chief Justice, William Rehnquist, had previously announced that due to illness he would not participate in November cases where he was not needed to break a tie) written by Justice Kennedy for the Court, it held that: when a litigant’s recovery constitutes income, the litigant’s income includes the portion of the recovery paid to the attorney as a contingent fee. This ruling reversed rulings of the 6th and 9th Circuits which had previously ruled to the contrary.

In so ruling, it seemed that the Court was unwilling to overturn long-standing principles of tax law, even when those principles squarely undermine the purposes of the civil rights laws. The principle at stake in the Banks case was the “anticipatory assignment of income” doctrine, which is the basic principle that if you, the taxpayer, are slated to receive an economic benefit, you can’t avoid taxation on that economic gain by assigning it to someone else. So plaintiffs who receive settlements comprised of taxable income receive an economic benefit from their attorneys’ efforts, and can’t assign that benefit in advance to their attorney (even if it ultimately ends up in the attorneys’ possession.) The Court strongly believed this was a principle not to be tampered with, referring to prior cases where it had been referred to as “a maxim we have called ‘the first principle of income taxation.'”

Plaintiffs attempted to avoid the application of that principle by dwelling on the nature of the attorney-client relationship, hoping the Court would recognize the nuanced contours of that relationship as operating outside the basic rule. The key question triggering application of the rule is whether the plaintiff “exercises dominion” over the income-generating asset. Legal and ethical principles have firmly established that a lawsuit remains under the plaintiff’s control at all times: the plaintiff ultimately determines when a lawsuit is filed, and must approve any final settlement. Without a plaintiff’s cooperation, any lawsuit is doomed, despite an attorney’s best efforts to keep cases moving forward. So while plaintiffs found it difficult to argue that the lawsuit wasn’t an asset belonging to the plaintiff, instead of the attorney, they attempted to propose exceptions.

One exception, which was the rationale behind the lower court’s ruling in Banks, is that the value of plaintiff’s asset, the ability to file a winning lawsuit, is so speculative when it is initiated. Moreover, it is only through the attorney’s labor that its value is derived. This certainly sounds persuasive in the real world, as the dismal success rate of pro se (unrepresented) plaintiffs in our system surely reflects. However, the Court found that the anticipatory assignment doctrine was not limited to cases where the value of the asset was certain rather than speculative, and often encompassed principal/agent relationships where the skill of the agent meant a better outcome than the principal could achieve alone. (One example discussed in the oral argument was that of a sports agent representing an athlete: although the athlete is the one with the marketable talent, the agent’s involvement often means the athlete’s prowess commands a higher value.)

The Court disposed of several other theories proposed by others in the case, saying that these theories had not been raised by the parties before the Court, and were thus not appropriate for consideration. Hindsight is 20-20, of course, but it is noteworthy that at oral argument, Justice Kennedy expressed his belief that the deduction for legal fees taken by plaintiffs should be considered a “above-the-line deduction” for business expenses that does not trigger the taxation morass created by taking the deduction as a “below-the-line” miscellaneous itemized expense.

A small handful of cases had previously ruled that plaintiffs were not entitled to take the deduction above the line (dollar-for-dollar against what they received in income) because they were not in the “business” of suing their employer. However, a defensible argument can be made that plaintiff’s relationship with the employer is close enough in nature to a business relationship to be characterized that way, and then there’s the patent unfairness of the defendant (often the wrongdoer, whether adjudicated that way or not) being able to fully deduct legal fees when the plaintiff cannot. Kennedy, who authored the opinion, in this ruling opined that this issue was not before the Court, as it had not been advanced by the parties before the lower courts. Reading between the lines, Justice Kennedy may have wished that it had been, however.

The opinion concludes by disposing of Banks’ argument that application of the anticipatory assignment doctrine runs counter to the purpose of provisions in civil rights statutes which award plaintiffs an additional amount to cover their attorneys’ fees (an argument advanced in the NELA amicus brief as well.) Since Banks ultimately paid his attorneys not with a fee awarded by a court, but through the operation of a contingency arrangement where his attorneys received a percentage share of his award, the Court held that he did not have standing to pursue this point, without precluding the ability of others who did receive court awarded fees to raise this point in the future.

However, the Court acknowledged that the number of people likely to do so in the future would be minimized by the passage of the American Jobs Creation Act, which meant that plaintiffs who win or settle cases after the law’s effective date of October 22, 2004, would not be burdened with the same high level of taxation faced by Banks, Banaitis, and thousands of others. In reading the opinion, one is left with the impression that the last few sentences were the rationale behind the entire opinion: since the law has been changed, we’re not going to work too hard to help the smaller number of people who missed out.

Ultimately, the Court opted for the administrative convenience of maintaining, rather than opening the door to undoing, long-existing tax principles, especially since the Court seems to consider the problem fixed now. That’s no small comfort to the thousands of plaintiffs who fought very hard to get the legislation passed, only to find that their efforts weren’t able to protect themselves after all. It’s hard to say what the Court would have done had the AJCA provision not been passed: perhaps they would have taken a closer look at Banks’ arguments. But the outcome might still have been the same, and all plaintiffs would still be paying a much higher tax burden.

The only ray of hope is either that a plaintiff who was awarded attorneys’ fees causing his or her award to be completely undone through taxation will still be able to bring their case, hopefully to be considered at some later point by the Court. That won’t help all those who settled their cases, but could conceivably help those most severely affected–those subject to negative post-litigation balances.

Or perhaps this will lend impetus to a legislative effort to create more retroactivity in the AJCA provision. There’s probably a slim-to-none chance of that happening, given Congress’ hostility to retroactive tax provisions, but any who justified the bill’s ultimate lack of retroactivity by rationalizing that the Court would take care of the others can no longer rely upon that rationalization.

Now, the messy part: what about all those plaintiffs in the 5th, 6th, and 11th Circuits (and Oregon only in the 9th) who didn’t pay taxes on their attorneys’ fees when they were received, relying on the decisions in those circuits which said that they didn’t have to do that. Those plaintiffs, and their advocates, should seek tax advice immediately on how to proceed. It’s too soon to tell how far back (and how aggressively) the IRS will go to recover unpaid taxes on damage awards, but given their efforts thus far, I think it’s fair to conclude they will be aggressive.

As a taxpayer, it will be important for you to know, from a knowledgeable expert familiar with your personal situation, how the IRS is likely to proceed. Giving that advice here is far beyond the scope of this blog (and I’m no tax attorney), but if you have tens or hundreds of thousands of dollars at stake (or any amount that you could not afford to pay back), then it’s worth it for you to spend some time and money on sound tax advice.

Unfortunately, the Court’s decision didn’t end the uncertainty faced by virtually everyone who has received a damage award in the last decade or so, unlike an opposite ruling might have done.

More Information:

New York Times: Justices Back Full Taxation of Awards

Law.com: Supreme Court: Contingent Fees Taxable to Client

SmartPros.com: U.S. Supreme Court Issues Anti-Taxpayer Ruling

Special-Interest Groups, Stop Picking on Poor Wal-Mart

Wednesday, January 19th, 2005

Did you know that: Wal-Mart offers affordable health care benefits to its associates? Or that Wal-Mart does not encourage its associates to apply for public assistance? Or that currently, 74 percent of Wal-Mart’s hourly associates in the United States work full-time? (See walmartfacts.com for similar juicy tidbits) If this does not match your understanding (or personal experience) of Wal-Mart’s labor practices, then you’ve been listening to too many “special-interest groups…spread[ing] misinformation” according to Lee Scott, President and CEO of Wal-Mart. (See Ad Copy.) You can count us among them, but is it really misinformation?

On January 13, Wal-Mart took the unprecedented step of placing an ad in 100 major newspapers around the country. (See Press Release.) This ad was not designed to tout the company’s “always low prices,” and it didn’t come armed with the company’s trademark smiley face (although there were some smiling Wal-Mart associates at the bottom of the page, seemingly happy with their career choices). If this ad had a face, it was that of the angry and frustrated President and CEO Scott, who said,

For too long, others have had free rein to say things about our company that just aren’t true. Our associates are tired of it and we’ve decided it’s time to draw our own line in the sand. We understand that, as one of the most visible corporations in the world, we will be a target for criticism. When it is valid, we try to learn from it and become a better company. But we have made a commitment to our associates, customers and suppliers that when false allegations are made about Wal-Mart, we will actively correct the record.

While Scott was not more specific about who these “special-interest groups” are, it is clear that many groups are targeting Wal-Mart right now, and specifically taking aim at how the company treats its workers. Here’s just a little bit of the point/counterpoint:

Wal-Mart and Wages

Wal-Mart says:

Currently, 74 percent of Wal-Mart’s hourly associates in the United States work full-time. That is well above the 20 – 40 percent typically found in the retail industry. Our average hourly wage for regular full-time associates in the U.S. is $9.68 an hour, almost double the federal minimum wage. Wal-Mart’s average full-time wage in urban areas is slightly higher than the national average. For example: Chicago, $10.69; Austin, TX, $10.69; Washington D.C./Baltimore, $10.08; Atlanta, $10.80; and in Los Angeles, $9.99.

The United Food and Commercial Workers (UFCW) union begs to differ:

Based on employee contacts across the country and the U.S. Bureau of Labor Statistics pay averages between $7.50 and $8.50 an hour for non-supervisory employees. An average Wal-Mart associate makes about $8.00 an hour with about 32 hours a week–a monthly gross of barely $1,000. A Wal-Mart spokesperson told USA Today on 1/29/03 that their pay is close to or equal to union wages, but grocery workers are paid an average of $10.35/hour based on Bureau of Labor Statistics data.

In reading Wal-Mart’s assertions, one has to wonder, what does Wal-Mart consider full-time employment? And don’t you wonder why Wal-Mart selected the urban areas that it did for comparison’s sake, when it’s common knowledge that Wal-Mart has historically concentrated its stores in rural areas and the poorest sections of urban areas? As Betty Dukes, the lead plaintiff in a sex discrimination class action against Wal-Mart, remarks: “They don’t put Wal-Mart in Piedmonts. They don’t put Wal-Mart in those high-end parts of the community. They plant themselves right in the middle of Poorville.” (See Seattle Post-Intelligencer article.) And they keep their workers in Poorville as well.

Wal-Mart and Women:

Wal-Mart says:

Wal-Mart’s commitment to diversity starts with our board of directors and extends throughout the organization. Our 14-member board of directors includes a female, two African Americans and two Hispanics. Wal-Mart is a leading employer of Hispanics in the U.S. with more than 128,000 Hispanic associates; a leading employer of African Americans with more than 206,000 African Americans; and an employer of more than 220,000 seniors who are 55 and older.

In the U.S. District Court’s opinion which allowed the sex discrimination class action against Wal-Mart to go forward (now under appeal by Wal-Mart), U.S. District Judge Martin Jenkins says,

In sum, Plaintiffs have exceeded the permissive and minimal burden of establishing commonality by providing: (1) significant evidence of company-wide corporate practices and policies, which include (a) excessive subjectivity in personnel decisions, (b) gender stereotyping, and (c) maintenance of a strong corporate culture; (2) statistical evidence of gender disparities caused by discrimination; and (3) anecdotal evidence of gender bias. Together, this evidence raises an inference that Wal-Mart engages in discriminatory practices in compensation and promotion that affect all plaintiffs in a common manner.

The National Organization for Women says,

The Wal-Mart model sacrifices workers, especially women, through low wages, unattainable promotions and unaffordable benefits, in order to drive down costs and boost profits. Former Wal-Mart employees told NOW activists that while employed they complained about unequal wages and failed attempts at promotion to management. For example, store managers, responsible for their stores’ performance and results, are said to freely express the view that women can afford to make less, since they are not breadwinners, and accordingly pay them wages lower than male counterparts. Women comprise 70 percent of all employees at Wal-Mart, so paying them 4.5 to 5.6 percent less than male counterparts results in significant savings that add profit to their bottom line.

While Scott’s press blitz was notably silent on the issue of how Wal-Mart’s female workers are treated (on the advice of his lawyers, perhaps?), it’s clear that Wal-Mart’s day of reckoning cannot be forestalled much longer, as this and other lawsuits progress.

Wal-Mart and Overtime Pay:

Wal-Mart says:

Currently, there are more than 40 pending wage-and-hour cases seeking class certification status. All of these cases are equally important to Wal-Mart. These allegations go against our three basic beliefs – respect for the individual, service to our customers and strive for excellence – and we take these allegations very seriously. Wal-Mart’s policy is to pay hourly associates for every minute they work. However, with a company this large, there will inevitably be instances of managers doing the wrong thing.

Just today, CNN/Money reports:

Three Wal-Mart Stores Inc. hourly workers in California have sued the company for failing to pay them for all the time they worked. The lawsuit, filed last Friday in Alameda County Superior Court, seeks class action status…[and attorneys estimate] there are more than 200,000 potential class members. The suit charges that Wal-Mart “deleted thousands of hours of time worked from employees’ payroll records” by erasing overtime hours and by penalizing employees who forgot to punch in after their meal breaks by denying them pay for the remainder of those days, according to court documents….

Issues related to Wal-Mart’s compliance with labor regulations have dogged the Bentonville, Ark. company. Last year, three assistant managers sued the company in Los Angeles for forcing them to work overtime without pay and denying them breaks. Also, a Washington state court last year gave the go ahead to a large class action accusing Wal-Mart of violating the state’s wage and hour laws. In 2002, a jury in Oregon found Wal-Mart forced employees to work unpaid hours between 1994 and 1999.

Special interest groups or not (and just why is it that groups representing business interests are never characterized as “special interest groups?”), the number of lawsuits now pending against Wal-Mart, as well as the unionization campaigns, will shed increasing light on Wal-Mart’s business practices. There’s already enough evidence out there that Wal-Mart’s actions have created a vicious economic circle: Wal-Mart’s employment practices and competitive effect on other employers in a community drive down wages, which creates a larger class of low-income workers, who, you guessed it, have to shop at Wal-Mart because they can’t afford to shop elsewhere (like the other businesses who pay their employees higher wages.)

The question is what will it take for the American public to fight back? Do these mean “special-interest groups” exposing what’s really going on stand a chance at educating enough folks to stop this massive force? Or will Wal-Mart’s dogged adherence to its values, along with its sheer size and strength, trigger an irreversible decline in the status of American workers?

More Information:

UFCW Wal-Mart Workers Campaign

Wal-Mart Class Website

Wal-Mart versus Women (featuring Miss America 1992 Carolyn Sapp)

NOW’s Wal-Mart Campaign

Miami Herald article: Wal-Mart defends its labor practices in media campaign

Much Ado About Nothing? Just Look at Your Next Paycheck

Tuesday, January 11th, 2005

Regular readers of this blog are well aware of the ongoing battle to prevent new overtime regulations from going into effect. You may have noticed, however, that Workplace Fairness, as well as other groups working in opposition to the new regulations, have not been focusing so much on this issue lately. Now we are hearing the latest spin from those on the defense side, which is that the whole battle was “much ado about nothing”– one that was engaged in for political rather than substantive reasons. Once the white flag has essentially been waved, one might expect a little more graciousness (and intellectual honesty) from the victors. Or maybe not.

The battle was furious, if not often fast: not in several decades had the Fair Labor Standards Act (FLSA) been amended to take away rights from workers. Yet this was precisely the end result of regulations first proposed by the Department of Labor (DOL) in March 2003. “The law hadn’t been touched in years, and needed to be updated and modernized,” we were told. There are few that wouldn’t admit the truth of that statement, but the agreement doesn’t extend much further than that. Much of the modernizing did not go nearly far enough: for example, the outdated salary test (which makes many of the most low-paying jobs subject to overtime requirements), has been increased. But it still not scaled to inflation, so it will be rendered meaningless in a few years just as its predecessor was, especially if political differences keep new regulations from being enacted for decades like they did before.

After the “Notice of Proposed Rulemaking,” which alerted the public of the Labor Department’s intent to make regulatory changes, was issued in March 2003, groups geared up for battle, once the pro-employer slant of the proposed regulations was revealed. By the comment deadline in June 2003, pro-employee and pro-employer groups submitted long and detailed comments, while a grassroots letter-writing campaign spearheaded by the AFL-CIO netted 75,280 comments–more than the Department of Labor (or perhaps any government agency) had ever received in response to a regulatory proposal.

While everyone who cared about this issue waited with bated breath for months, the DOL worked to incorporate some of the changes and further refine the proposal. It was not until the following April (of 2004), that the final regulations were issued. (See the Preamble for a detailed account of the revisions.) As reported here at that time, the changes were a mixed bag. From the employee perspective, there were some improvements from the first round proposal, while employers were lukewarm to some of the changes. Yet, the final assessment from groups representing workers was that there were certain aspects of the proposal that were still quite objectionable, and still likely to result in workers who earned overtime under the old regulations who would not be eligible for overtime under the new regulations.

The battle played out before Congress in 2004 as well. Once the regulations were issued in April 2004, with an effective date of August 23, 2004, the only way to stop the regulations was for Congress to take action. And take action it did: on six different occasions, either the House or the Senate, through a majority vote in chambers with Republican majorities, voted to oppose the Administration’s overtime proposal, by withholding funds for its implementation. (Some of these votes are listed at the Workplace Fairness Action Center.) However, the leadership of both houses of Congress caved into the demands of the Bush Administration, who vowed to veto (for the first time in President Bush’s first four years) any bill that contained a restriction on implementing the new regulations. Not surprisingly, no version of the restrictions passed by Congress made its way into a bill headed to the President for his signature. This meant the regulations went into effect in August.

There was still hope, however, that the regulations might be revoked if John Kerry won the presidential race, as Kerry during his campaign vowed to do so, just as one of the first acts of the Bush Administration was to revoke the ergonomic regulations, more than a decade in the making, that finally went into effect in the waning days of the Clinton Administration. Well, we all know how that turned out. The President was reelected to the White House, Secretary of Labor Elaine Chao, a strong proponent of the overtime changes, was one of the few members of Bush’s Cabinet to stay on for a second term, and the overtime regulations were here to stay. There were a few efforts to keep the battle going, but the momentum had clearly shifted.

So as the battle-scarred opponents lick their wounds and assess what comes next for workers and overtime pay, here comes the defense spin. Business and Labor Reports (BLR), a legal publisher whose publications are oriented toward employers, recently issued a press release with the following provocative title: New Overtime Regulations Brouhaha – What Was the Fuss All About? The release’s header says “During the election there was enormous controversy over these changes, with some parties claiming that overtime was being destroyed. Now, it seems the controversy was overblown,” while BLR’s commentator, Susan Prince, says “it seems like the overtime changes are a nonevent.”

Their basis for this conclusion? BLR ran a Google search on the words “controversial overtime regulations,” and nothing came up after the election date. (Not to question their methodology, but perhaps omitting the word “controversial” would net more results. I’m sure I’m not the only one that continued to hear about this issue after the presidential election, from the AFL-CIO and other groups maintaining the fight.)

Fellow blogger Michael Fox, who represents the defense perspective in his blog “Jottings of an Employer’s Lawyer,” jumps on the bandwagon by calling “the fuss over the new white collar regulations…really much ado about nothing. ” At least Fox acknowledges that the initial onslaught of protests by employee advocates led to significant changes. (Of course he considers those changes to have spawned a “milquetoast” version of what the regulations could have been.)

The faulty leap in logic that both authors make is the following: the extent to which the forces opposing the changes have quieted, post-election, indicates that the battle was largely political, rather than substantive, to begin with. Let’s put this logic to another test: when employers, upon the advice of their attorneys, decide to concede defeat and either settle cases on less-than-favorable terms, or pay the judgments against them, does this mean that their opposition was frivolous and never should have been mounted in the first place? I suspect that would be a very rare concession indeed, yet that’s essentially the conclusion they draw when the shoe is on the other foot.

These commentators just don’t get it: It’s over. Their guy won. The new regulations aren’t going anywhere for a while. And if commanding a majority in the House of Representatives, considered to be the more conservative of the two chambers at present, doesn’t mean anything in terms of the outcome, then there’s not much else that can be done at present.

First, before continuing any kind of fight, employee advocates have to assess the impact. While there’s a few in every bunch who just want to “chase the money,” my perception of this battle based upon the attorneys I know is that nothing would make everyone happier than to be proved wrong, and for more workers to benefit from these changes than to be harmed. It’s just too soon to tell whether that’s the case or not. Even employers are still assessing the new regulations, and not necessarily rushing to implement them until they and their lawyers feel 100% comfortable with how they are likely to be interpreted. So until the instances of harmed workers start to surface, opposition in the courts may be premature (and it’s already been proven that opposition in Congress is more or less futile at this point.)

Most importantly, however, it’s important for workers and their advocates to conserve energy for the battles to come. Even though employee advocates were not ultimately successful in preventing the new regulations from going into effect, their opposition did make a significant impact in terms of blunting the worst of some of the proposed changes, and was thus hardly futile. Moreover, it’s important not to keep beating a dead horse or banging one’s head against a brick wall (whichever you prefer) in order to stay refreshed for the battles ahead.

For example, yet another chink in the overtime armor is an effort to substitute compensatory time for overtime. While proponents claim this will be “voluntary,” tell that to an employee dependent on overtime pay, whose wages are inadequate in the first place. It may be said that “time is money,” but that’s just not true in this situation. A comp time proposal was introduced in the last session of Congress, but didn’t move forward. With an Adminsitration emboldened by the overtime victory, this may very well be the next level of “overtime reform” to which we have to look forward–and fight.

We hope that workers will join us in the battles ahead to erode their interests, because there will certainly be some in the next four years. We promise that when we ask you to do something–to write Congress or otherwise take action–that it won’t be “much ado about nothing,” but because we need every last person who will fight the very real threats to workers.

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Have They Ever Shared a Bathroom with a Woman?

Monday, January 3rd, 2005

I realize that I, and many of the readers of this blog, manifest some bias in favor of workers who take on their employers in the legal system. After all, it’s why we do what we do. However, even recognizing this bias, every once in a while, a case comes along that makes even a cynical employee advocate ask “what planet are these judges from?” when reviewing their ruling against an employee. One such case is that of Jespersen v. Harrah’s, decided last week by the 9th Circuit Court of Appeals. Let’s hope this case is another one that the Supreme Court will champ at the bit to overturn, or even better, that there will be enough wisdom found amongst a larger (en banc) panel of the court, that Jesperson, and justice, will prevail.

Darlene Jespersen was a bartender at Harrah’s Reno for nearly 20 years. One thing upon which everyone agrees: she was a really good bartender. According to the 9th Circuit, it is “undisputed” that

[o]ver the years, Jespersen’s supervisors commented that she was “highly effective,” that her attitude was “very positive,” and that she made a “positive impression” on Harrah’s guests. Harrah’s customers repeatedly praised Jespersen on employee feedback forms, writing that Jespersen’s excellent service and good attitude enhanced their experience at the sports bar and encouraged them to come back.

(See Jesperson v. Harrah’s 9th Circuit decision.) According to a Mother Jones article which praised her as a “hellraiser,” the tall, soft-spoken 45-year-old woman was an unlikely candidate to receive such a designation. (See Mother Jones article.) She had not been an activist or rabble-rouser during her tenure at Harrah’s, until the casino’s “Personal Best” policy came along.

Put simply, Harrah’s policy is “women must wear makeup; men can’t.” The policy requires women to wear foundation, concealer, or powder, blush, mascara, and to make sure that they have lip color on at all times (a challenge which has earned cosmetics manufacturers millions from women tired of constant reapplication after eating or even talking.) Not only do women have to wear all these types of makeup, but they were required to have a “makeover” by an “image consultant.” Once the employee and the image consultant had devised the employee’s “personal best” look, then the employee’s picture would be taken, and the employee’s appearance would be expected to conform to the picture each day she or he came to work. (See Barbwired for Jesperson’s Personal Best photo, sans makeup, and yes, she looks just fine without it.)

It seems like an awful lot of trouble just to get people to spend money in a casino (which we know can be difficult, right?) As Jespersen commented, “I never had anyone push a drink back because I didn’t have red lips.” (See Associated Press article.) However, Harrah’s deemed it important enough to make it a company-wide policy.

It may be hard to believe in the age of Extreme Makeover and The Swan, where radio stations give away boob jobs for Christmas rather than help needy children (see Associated Press article), but Darlene Jesperson didn’t want a makeover. She thought she looked just fine as she was. And she most emphatically didn’t want to wear makeup. When she started working for Harrah’s back in the 1980s, company policy encouraged, but not required, wearing makeup. She tried it, but found that

wearing makeup made her feel sick, degraded, exposed, and violated. Jespersen felt that wearing makeup “forced her to be feminine” and to become “dolled up” like a sexual object, and that wearing makeup actually interfered with her ability to be an effective bartender (which sometimes required her to deal with unruly, intoxicated guests) because it “took away [her] credibility as an individual and as a person.”

(See Jesperson v. Harrah’s 9th Circuit decision.)

The policy, on its face at least, doesn’t make any exceptions for women who don’t need a particular type of makeup, so it would seem that female employees with clear skin still have to wear foundation, women with long eyelashes still have to wear mascara, and women with naturally rosy cheeks still have to wear blush. (Nothing is more guaranteed to detract from one’s appearance than wearing more makeup than necessary, but perhaps the “image consultant” would make individualized exceptions. Or Harrah’s really does want its female employees to be “dolled up,” regardless of how that looks.) For her part, Jespersen thought makeup made her look like a clown, and given that those who have personally interviewed her have commented on her clear skin and naturally attractive appearance, she may be right. (See Christian Science Monitor article.)

Employers, however, can impose all kind of arcane and senseless requirements on their employees without violating the law. If you don’t like it, you can always find another job, employees who challenge the status quo (especially if they’re not members of a union, which most workers in Reno are not) are told. What made Harrah’s conduct illegal, or so Jesperson and her attorneys thought, was the difference between how female employees and male employees were treated under the Personal Best policy.

While a female employee must spend however long it takes to put on makeup in the morning, men were not required, and in fact forbidden, to wear makeup. While a female employee had to tease, curl, or style her hair every day, men only had to show up with hair trimmed above the shirt collar that was “well-groomed.” Women had to paint their fingernails with clear, white, pink or red polish (very practical for employees who handle ice and must frequently wash their hands), while men were not allowed to wear colored polish. The result of Harrah’s policy was that women had to spend a significant amount of time, money, and effort to meet the company’s standards, while men only had to follow basic grooming and hygiene guidelines without having to “do” anything extra in order to show up for work. (See Jesperson v. Harrah’s 9th Circuit decision, pages 17363-4, for the full text of the Personal Best policy.)

So why isn’t that sex discrimination? Because two men on a three-judge panel of 9th Circuit judges says it isn’t, in an opinion which defies all logic in a world comprised of more females than males. In order for Harrah’s appearance standard requirements to violate the law, they must be an “unequal burden” on female employees. The law around appearance standards and dress codes has been rather slow to catch up with other areas of discrimination law; put simply, self-expression through one’s appearance has little to no weight when compared to the employer’s interest in maintaining conformity amongst its employees. Even sex-specific differences in appearance standards (including those affecting men) seem to rarely violate the law: women can wear long hair, while men cannot; women can dye their hair, while men may not be allowed to; and women can have their ears pierced, while men may not be allowed to wear earrings on the job.

It seemed like, however, that Jespersen’s case might be different, given the greater burden placed on female employees. However, here’s what the 9th Circuit has to say about that:

Jespersen contends that the makeup requirement imposes “innumerable” tangible burdens on women that men do not share because cosmetics can cost hundreds of dollars per year and putting on makeup requires a significant investment in time. There is, however, no evidence in the record in support of this contention. Jespersen cites to academic literature discussing the cost and time burdens of cosmetics generally, but she presents no evidence as to the cost or time burdens that must be borne by female bartenders in order to comply with the makeup requirement. Even if we were to take judicial notice of the fact that the application of makeup requires some expenditure of time and money, Jespersen would still have the burden of producing some evidence that the burdens associated with the makeup requirement are greater than the burdens the “Personal Best” policy imposes on male bartenders, and exceed whatever “burden” is associated with ordinary good-grooming standards. Because there is no evidence in the record from which we can assess the burdens that the “Personal Best” policy imposes on male bartenders either, Jespersen’s claim fails for that reason alone.

Have these judges never lived with or shared a bathroom with a woman? This seems like an issue that even Justice David Souter, the U.S. Supreme Court’s perennial bachelor, could understand. The lone judge voting in Jespersen’s favor recognizes the absurdity of this argument:

[A] reasonable jury could easily conclude that having to wear approximately as much makeup as one was wearing post-makeover, in addition to teasing, curling, or styling one’s hair every day, constitutes more of a burden than having to keep one’s hair short and cut one’s fingernails. All of these activities are ones with which factfinders have everyday familiarity….

(See dissent by J. Thomas, Jesperson v. Harrah’s at page 17478.) Even if, as the majority requires, the legal basis of comparison is all of the requirements applicable to female employees vs. those applicable to male employees, instead of the female makeup policy vs. the male makeup policy, it seems beyond obvious that women going to work at Harrah’s will spend more time in the bathroom every morning before work than their male counterparts (whether they want to or not). And they’ll definitely be spending more money, even on the cheapest Maybelline and Cover Girl cosmetics at Wal-Mart or Target (never mind Clinique or MAC at Macy’s or Nordstrom), than their male coworkers (even metrosexual devotees of Queer Eye for the Straight Guy) ever will, even those men forced to visit their local barber more often than the women do. (It should also be a proper subject for judicial notice that men’s haircuts always cost less than women’s haircuts.)

One also wonders whether Harrah’s weight policy, not at issue in Jespersen’s case, would survive legal scrutiny. Officially, it says

[Beverage Service Personnel] must be well groomed, appealing to the eye, be firm and body toned, and be comfortable with maintaining this look while wearing the specified uniform. Additional factors to be considered include, but are not limited to, hair styles, overall body contour, and degree of comfort the employee projects while wearing the uniform.

According to those familiar with the policy, the language about “firm and body toned” and “overall body contour” means that an employee cannot get a new uniform, even if she or he gains weight, unless, get this, the employee has had a boob job (referred to by the company as “positive body enhancement.”) New mothers, even those who are nursing, are expected to fit in their uniforms within 12 weeks of giving birth. (See Barbwire article: Bill Harrah’s back and boy, is he pissed.) While the majority’s decision seems to have missed the point that women shouldn’t have to conform to sex-based appearance stereotypes to which men do not have to conform, given how the majority seemed slightly more sympathetic (based of course on prior 9th Circuit precedent) to weight-based distinctions that affect one sex more severely, perhaps the case might have turned out a little differently if Jespersen had been a non-makeup wearing new mother. Or maybe not: this panel’s obliviousness seems to have few boundaries.

Jespersen has been blackballed from the gaming industry–hardly insignificant when you’re a unskilled worker in Reno, and now works in retail. (See Barbwire article: The true face of Nevada gambling.) She still doesn’t wear makeup, but also probably doesn’t take home nearly as much as she used to. Even though Oprah got involved (see Barbwire link), Harrah’s still enforces personal appearance policies (although it’s unclear whether they still enforce the actual Personal Best policy. (See Providence Journal article.) Harrah’s did offer Jespersen her job back at one point, but the policy would still apply to other employees, and the offer didn’t include the back wages Jespersen lost while unemployed. So Jespersen rejected the offer. (See Newsday article.)

She will continue her fight, first to ask a larger panel of 9th Circuit judges, called an en banc panel, to reconsider the case, and then to the U.S. Supreme Court, if needed. The U.S. Supreme Court loves to take every opportunity it can to slap down wayward 9th Circuit decisions (see this analysis), but hopefully the en banc panel (hopefully with a few of the circuit’s eight female judges or those married to women who know better, like Stephen Reinhardt, involved), can fix this one before it gets to the Court.

Her lawyers (of Lambda Legal, led by Jennifer Pizer) are “surprised and deeply disappointed by [the] decision,” which is probably an understatement compared to how Darlene Jespersen feels. She told Mother Jones, long before this latest decision came down, “I don’t see why I have to paint my face to do that job when I’ve been doing it for 20 years.”

Neither do we.

More Information:

Barbwire by Andrew Barbano: Barbano has followed this case closely for several years now; this site contains a number of links related to Jespersen’s case.


Op-Ed by Darlene Jesperson: Case Is About Civil Rights and Sex Bias

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