Former employees alleging age discrimination have the burden to prove the employment decision in question hinged on their age. In a recent case arising in Nebraska, the U.S. 8th Circuit Court of Appeals (which has jurisdiction over employment claims arising in the state) found the federal trial court in Omaha had properly dismissed the age claims raised by a 51-year-old woman. While restructuring its financial department, the employer demoted the employee because she lacked accounting experience, after which she ultimately resigned.
Facts
Lana Starkey worked for Amber Pharmacy from September 2001 until August 2015. In 2014, her position changed from enrollment director to financial services director. The change coincided with the acquisition of Amber by Hy-Vee, a supermarket chain.
After the acquisition, Amber’s accounting and financial department was found to be “in complete disarray,” a situation exacerbated when the pharmacy implemented a new operating system in February 2015. The company retained a “third-party implementation consultant” for the new operating system, who reported the biggest obstacle to implementing the system was because the financial team was “understaffed” and “potentially not the right skill level” and lacked “management in the financial area.” The consultant recommended restructuring the team.
At about the same time the consultant delivered the report, Starkey reported to others that Amber was being overpaid by Texas Medicaid, incorrect billing codes were being used for the payments, and some employees were engaged in e-mail practices that raised concerns about violating the Health Insurance Portability and Accountability Act (HIPAA).
The company considered various plans for restructuring the financial department, ultimately determining Starkey’s position would be eliminated. According to the company, the decision was based on accounting expertise, which Starkey lacked, and her struggles in adapting to the new operating system.
Starkey was told her job was being eliminated and was offered a choice of two new positions, both of which were demotions with a pay cut. In June 2015, she reluctantly accepted one of the positions but questioned whether the demotion was caused by her report of the Medicaid and HIPAA issues.
In August 2015, Starkey resigned, after which she didn’t receive a timely COBRA notice about her right to elect temporary continuation of health insurance coverage.
Legal Action
Starkey filed suit in Nebraska state court, claiming her resignation was caused by discrimination, retaliation, the demotion, and a hostile work environment, asserting various federal and state claims against Amber, Hy-Vee, and Mike Agostino, Amber’s president. The defending parties moved the case to federal court and promptly asked for summary judgment (dismissal without a trial), asserting no material facts were in dispute and that they were entitled to judgment as a matter of law.
The federal court granted summary judgment on each of Starkey’s federal charges, including her Age Discrimination in Employment Act (ADEA) claims. It also dismissed all state claims except for a particular portion of her claim under the Nebraska Fair Employment Practices Act (NFEPA). It remanded the retaliation claim based on her reporting of the Medicaid discrepancies to state court.
The federal court also found Hy-Vee and Agostino weren’t proper parties and dismissed all claims against them.
8th Circuit’s Decision
Starkey appealed the trial court’s decision on all claims except for one filed under Title VII of the Civil Rights Act of 1964, which she abandoned on appeal. Amber appealed the district court’s partial denial of summary judgment on the NFEPA claim.
Age bias claims tossed. The 8th Circuit upheld the trial court’s summary dismissal of Starkey’s age discrimination claims. After noting there was no direct evidence of age bias and assuming she could establish an initial prima facie (or minimally sufficient) case, it found Amber articulated a legitimate, nondiscriminatory reason for eliminating her position in the newly restructured financial department and demoting her, specifically the need to put a stronger emphasis on accounting and more effectively implement the new operating system.
In addition to the fact the company needed to prioritize accounting skills and experience to operate the new system, Starkey had candidly admitted “(a)ccounting is not for [her].” The court noted it would not second-guess the employer’s business judgment, particularly when it was based, at least in part, on the third-party consultant’s recommendations.
Therefore, to prevail on the age claim, Starkey would’ve had to show the stated reasons were a mere pretext (or cover-up) for age discrimination, i.e., “but for” her age, she would not have been demoted. The court quickly rejected her assertion that since other employees over the age of 40 were terminated and younger employees absorbed her job duties, she was a victim of age bias. The court found all the accused parties were entitled to summary judgment on her age-based claims.
COBRA claim fails. The 8th Circuit likewise upheld the dismissal of Starkey’s COBRA claim since she hadn’t pointed to any facts showing an interference with her attainment of benefits or that she was harmed in any way by any lack of notice. Starkey admitted she (1) knew about her COBRA rights, (2) wouldn’t have elected the coverage anyway, and (3) had enrolled in her husband’s less expensive employer plan in which she had no out-of-pocket medical expenses.
Hostile environment, emotional distress charges also thrown out. Finally, the 8th Circuit found the trial court had properly dismissed Starkey’s claims for hostile environment and intentional infliction of emotional distress based on the demotion. She hadn’t alleged sufficient facts to establish outrageous conduct and severe emotional distress, as Nebraska law requires.
Retaliation claims survive. The 8th Circuit found all of Starkey’s retaliation claims under the NFEPA should be remanded (or sent back) to state district court to analyze and determine whether her activity was “protected conduct” and whether it would apply the “manager rule” in the context of a retaliation claim under the state statute. The manager rule has become an emerging trend in many courts. It provides that a management employee who, in the course of her normal job performance, disagrees with or opposes her employer’s actions doesn’t engage in protected activity. Lana L. Starkey v. Amber Enterprises, Inc., et al., Case No. 19-3688 (8th Circuit, 2021).
Lesson for Employers
Starkey’s case underscores the importance of developing a well-reasoned plan for any company or department restructuring that will involve the elimination of certain positions. You should develop and apply clear criteria for executing the restructuring.
Mark M. Schorr is an attorney with Erickson│Sederstrom, P.C., in Lincoln, Nebraska. You can reach him at schorr@eslaw.com.