No dismissal of fiduciary duty claim for failure to mention COBRA investigation

An HR director who contended that she was discriminated and retaliated against when she was fired from her job will be unable to proceed with her claims after summary judgment, a federal district court in Texas ruled, although her employer’s counterclaim for breach of fiduciary duty will proceed. The HR director, was fired while she was on medical leave, for allegedly failing to send out COBRA notices, which led to a Department of Labor investigation.

Background. The defendant is a management services provider that works with clients in the health care field. Services provided by the defendant include human resources and payroll services. The plaintiff worked as the defendant’s Director of Human Resources for approximately two years until her termination in 2014. She was responsible for administering the health, life, disability, and COBRA insurance plans for employees, as well as developing and implementing policies and procedures for its clients. In late 2013 she received a complaint from one of the client’s human resources employees regarding racist and homophobic comments by the client’s CEO. In speaking with that employee, she told him that she, too, felt that she had “reached a ceiling” with her employer because of her race. Her employer’s CEO learned about her comment and confronted her. In that conversation she also complained that the employer was allowing a blatantly racist CEO to run the client corporation.

Employer learns of COBRA investigation. In January 2014, the employee began to suffer from severe headaches and in mid-February she requested leave based on her doctor’s advice. However, while she was on leave the employer learned that it was under investigation by the Department of Labor for problems with its COBRA notices. The employer alleged that the employee had been aware of that investigation and had not informed her supervisors. According to the employer, it also learned that deposits had not been made in a timely manner into employees’ retirement accounts. In a letter the employer informed the plaintiff that she was being dismissed because of performance failures related to COBRA benefits and 401(k) deposits. Although she was requested to appear at the office in early March to exchange belongings, she did not appear. The employer filed two million-dollar lawsuits in state court, both of which it nonsuited. Then, when the employee filed a lawsuit in federal district court asserting claims under Title VII, Section 1981, and the FMLA, the employer reasserted its earlier causes of action as counterclaims. Included in the employer’s claims were claims for breach of fiduciary duties, tortious interference, misappropriation of trade secrets, and negligence. Both parties filed motions for summary judgment.

Employer’s breach of fiduciary duty claim. Of the counterclaims brought by the employer, the one that survived the employee’s summary judgment motion was the claim for breach of fiduciary duty. According to the employer the employee, who conceded that she was an agent of the employer, breached her duty by failing to disclose the DOL investigation to it, even though the employee had been in contact with a DOL agent for over one month. In fact, the employee attested in her affidavit that she was trying to handle the matter on her own. The employer also adduced evidence that this failure resulted in damage to the employer, in the form of fees paid to attorneys for assistance with the investigation. Thus, summary judgment was denied on that claim. However, the court concluded that the employer’s negligence claims were duplicative of its breach of fiduciary duty claim. It also concluded that the employer’s tortious interference claims could not survive because of a lack of sufficient evidence.

Likewise, the employer’s claim of conversion against the employee failed, in large part because it failed to keep records of its assignment of computers. Its trade secret misappropriation claim failed because it failed to identify a secret either acquired or used by the employee. And, finally, its claim against the employee for violation of the Computer Fraud and Abuse Act failed because there was no evidence that the employee accessed a protected computer without authorization.

Pretext is a problem for the employee. With respect to the employee’s claims for race discrimination, retaliation, and violations of the FMLA, the court granted the employer’s summary judgment motion, thus dismissing all of her claims. The downfall for the employee with regard to both the discrimination and retaliation claims was her inability to rebut the employer’s legitimate, non-discriminatory reason for ending her employment. The employee argued that the explanation given by the employer had shifted and was inconsistent. First, she argued, they told her she was fired for poor performance related to 401(k) deposits and COBRA benefits. Later, she argued, they contended that she was fired for tax and payroll errors or for stealing from the company, breaching her fiduciary duties, and misappropriating trade secrets. However, the court explained, proof that the employer’s reasons became “more detailed” and less generalized upon commencement of litigation was “insufficient to create a jury question regarding pretext absent an actual inconsistency.” In this case, no such inconsistency existed and the employee’s attempts to manufacture one failed.

Nor did the employee’s argument that the employer failed to follow its normal disciplinary procedures create a triable issue because there was no evidence establishing that the employer actually had a regular practice. Finally, although the employee argued that white employees were treated more favorably, the employees she identified were not similarly situated, nor were the circumstances “essentially identical.” Likewise, although the court rejected the employer’s argument that the employee’s statements to the CEO did not constitute protected activity, it held, again, that her inability to raise a genuine fact issue regarding pretext was fatal to her retaliation claims. Temporal proximity, standing alone, was not sufficient to create a fact issue, the court explained.

FMLA claims fail. Finally, with respect to the employee’s FMLA claims, she was unable to raise a genuine fact issue regarding whether the employer was a covered employer based on the number of people it employed. Although the employee attempted to establish coverage through both the integrated single employer and joint employer tests, she was unsuccessful.

SOURCE: Clarke-Smith v. Business Partners In Healthcare, LLC, (DC TX), No. 3:14-CV-2732-M, January 22, 2016.

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